This consumption tax idea has been tossed around for many years and it will never pass, as it will now tax the 50% who never pay taxes. Our entitlement society will still want the rest of us to pull their wagon, while they sit and wonder how we can be foolish by not hopping in the wagon. I'm excluded those you worked and paid into Social Security, as I consider that a benefit, from a forced savings through FICA taxes and NOT an entitlement.

it simply wouldnt pass because it is the right thing for equality...since its right it has to be wrong

First of all, I think it's time we dropped the "Fair Tax" charade. Call it what it is, a 30% National Sales Tax. Nothing "fair" about that. And the answer is no.

If Fairtax were not a fraud, sure. But read fine print in Fairtax --

The problem is, Fairtax leaders sell it as a simple personal retail sale tax, Well, part of it is, but only a part. Only 1/4 of the revenue is from personal discretionary retail spending tax.

President Bush Tax Advisory Panel exposed the hustle in 2005, they weren't fooled by the fine print tricks.

Turns out, 3/4 of Fairtax would be their massive taxes on all city county and states, on TOP of, and in ADDITION to, the personal retail sales.

Texas state legislature, for example, would owe 14 billion or more. Dallas, the city, would over over 100 million. Fairtax is not just a tax on personal retail sales -- that is only part of it. They tax your city, your county, and your state on "all expenditures" other than education expenditures. All operating expenditures -- taxed. All wage, pensions expenditures, taxed. This is as goofy as goofy can get, because the fed gov can not tax city county and states a dime, much less 2-3 billion dollars.

Do you seriously believe Texas state legislature will see the fine print eventually, gather up 14 billion dollars because of the fine print and footnote tricks, and send it in? Really? And you think every city will do that, every state, every county?

I'd much rather pay taxes only on what I spend, and be rebated a portion of it back than be punished by a tax on what I earn. The IRS would be less invasive, actually they would disappear and be changed to work the FairTax model. The present tax structure is identical with the way taxes have been handled for millenia, time to change the model and be able to actually SEE what the structure is and how it's used.

fair tax is jus more balonee comin out NEIL BORE'US
the system is fine like it is only the border needs to be slamed shut and all the illegals rounded up and kicked out , then all these on that guberment cheese need to be workin all those jobs they have ! government entitlement programs need to end ,there the biggest drain on tha economy

Like any idea, the Fair Tax needs to be tested in some way. That is the problem with government, it never bothers to test its ideas.

These two members of Congress from Georgia should be very careful what they wish for! Provided the JCT makes necessary corrections to the Fairtax plan, they will likely drive a stake through the heart of Fairtax. It just won't work! The failure of AFFT to include a reasonable evasion factor in their rate calculations plus the inappropriate scheme to have the federal government tax State and Local government consumption, are fatal flaws. If the JCT makes those two corrections, the Fairtax exclusive rate would have to be increased to over 60%, and that just won't work. Stay tuned!

The "Unfair Tax" is fatally flawed as a mechanism to make our tax system fairer and easier. Everyone is in agreement that the tax system is too complicated. One solution could be a mixture/ hybrid of a "Flat Tax" and a progressive income tax that kicks in at a certain income level.H.L. Menchen once said that" For every complex problem there is a simple solution... and it is wrong." This seems to about sum up the Fair Tax.

A flat tax alone would be prohibitive on many since it would need to be 50.5% to equal current revenues based on current annual expenditures. This would cover federal and state income and would vary slightly by state based on actual state tax levels.

In order to maintain current levels of spending AND reduce the debt, the flat tax would need to be much higher, depending on how fast we decided to reduce the debt. The answer is we absolutely MUST reduce spending. Choose your poison, defense, welfare, infrastructure; expenses have to come down before debt reduction can take place regardless of the tax income structure.

Write your congressman. Tell him to STOP SPENDING!! Write every congressman. Tell them to STOP SPENDING!!

Perhaps the Fair Tax as currently written shouldn't be adopted but I think it makes sense to investigate how a flat consumption tax might be an effective substitute for the existing tax code which seems to be train wreck.

To dismiss it offhand isn't wise.

Folks, most of your comments seem to favor the "fair tax".

i have studied it in great depth.- it is neither "fair" nor rational and would bring economic disaster.

While the poor "might" pay a little tax, the PREBATE will give them huge NET welfare checks (3-4 times more than today's Refundable Tax Credits).

The 30% sales tax (plus State sales taxes) will rise closer to 60% when America develops the largest black market in the world. How would you like to pay 30-60% more for a new house (which you can't add to a mortgage - you need almost 50% down payment).

There are more federal and State taxes ON TOP OF THIS 30-60% tax, which are hidden within the "fair tax" !!!!!

I am working with this blog to bring you a 2 age Exec Summary.

All talking points with no factual foundation.

First, the prebate is *not* welfare. Welfare is specifically aimed at whatever subset of people the government thinks needs "assistance" (i.e. $$$). The prebate allows everyone who registers for it to be un-taxed on all pre-poverty level spending in the same fashion that the standard deduction on income taxes allows you to untax (i.e. exempt) a certain portion of your income from taxation. Only stipulation for registering is that you be a legal resident.

Also, black markets will not spring up left and right. Registered businesses (not individuals) will be responsible to remit the taxes collected to the government. Failure to remit these taxes on items sold for final consumption will incur monetary penalties and possible loss of their business license (putting them at a 23% competitive cost disadvantage). What sane business owner is going to risk that just to make a few extra bucks under the table?

Finally it's not a "30%" sales tax" as sales taxes are on all purchases (with exemptions on certain categories of goods that people lobby like "food"). The FairTax is only on *new* goods and services, not used. There would be *no* tax on purchasing a pre-owned home (i.e. not new construction). Even with new goods, pre-tax prices would drop due to no longer passing the burden of corporate taxes to consumers. With FairTax factored in the total, the overall cost is at most 1% or 2% more than current prices in the worst case.

Matthew,

You are way off in your claim that retail prices will only rise by 1-2%. Based on 2007 actual data, the most that businesses can save by eliminating income tax related costs averaged 10%. After adding the 30% (not 23%) sales tax at the cash register, the retail price goes up 17% on average. That is not an insignificant price increase.

You should stop espousing the long discredited "free lunch" Fairtax myth. If we all get 100% of our pay/pensions, retail prices have to rise. There is no free lunch!

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Jim said:
"I'd much rather pay taxes only on what I spend, and be rebated a portion of it back than be punished by a tax on what I earn. The IRS would be less invasive, actually they would disappear and be changed to work the FairTax model."
Jim, I think those opposed forget about the rebated part of it. the poor would get that rebate, and government would have less control. It's like giving it back to we the people where it belonged in the first place. Jut my opinion, so don't scream at me folks - lol

Let me state, however, that I don't think it's perfect, it does have its flaws, but we've got to do something besides what we're doing now, and this would at least be a starting point to look at both (fair and Flat).

In response to R's comment 3 his ago

No, R we object to FT because 1) it is Karl Marx on steroids - it greatly expands welfare, and 2) even if they get rid of the Prebate which does that, what's left of FT is a financial hoax that will destroy our economy. I make these statements after hundreds of hours of financial analysis. I will try to post my 2 page Executive Summary (post your e-mail address and I will e-mail it to you).

In response to R's comment 3 his ago

No, R we object to FT because 1) it is Karl Marx on steroids - it greatly expands welfare, and 2) even if they get rid of the Prebate which does that, what's left of FT is a financial hoax that will destroy our economy. I make these statements after hundreds of hours of financial analysis. I will try to post my 2 page Executive Summary (post your e-mail address and I will e-mail it to you).

in response to R's other comment hoursa ago;

R the Fed fov taxing the States is not only Un-constitutional it is part of the scam. Wher do yoy think your state will get the money to ay its FT - Answer: look in the mirror. This is just one of FT's sneaky hidden taxes ON TOP OF ITS 30% sales tax on virtually everything you buy.

In response to matthew Dirk's comment 3 hours ago:

Matthew, most deductions will only reduces taxable income to ZERO and most tax creits will reduce any INCOME TAX LIABILITY to ZERO. It bis onky the 2 "refundable Tax Credits (the Earned Income Tax Credit and the Child Tax Credit) that can produce a NEGATIVE TAX - i.e., the individual receives more $ from IRS than he paid in - THAT IS A WELFARE check, NOT a traditional tax credit. If he gets a check that wioes out his SS/Medicare tax and also gives him extra money, BOTH OF THOE ELEMENTS ARE WELFARE NT a tax credit.

EXEC Summary Part !

POLITICS: FT’s PREBATE - 2013 (overly-generous monthly checks to all households):

TRANSACTION M/M SMITH (NO KIDS) M/M JONES (+ 6 KIDS)
Spending (before adding FT) $ 100,000 $ 10,000
Add: FT - 30% * $ 30,000 (up to) $ 3,000
Less: PREBATE - Total $ (5,285) $ (10,833)
NET FT Paid or (REFUND) $ 24,715 $ (7,833+)
* Smith’s $30M FT (no dispute) is 30% of the pre-tax price of $100M - the normal “tax exclusive” view. FT tries to force us to view it as only 23% ($30M/$130M) - FT’s novel (bizarre) “tax inclusive” view.

Exec Summary part 1

POLITICS: FT’s PREBATE - 2013 (overly-generous monthly checks to all households):

M/M SMITH (NO KIDS): spend before FT $100,000 + FT $30,000 (Total $130,000).
Prebate 5,285 Net TAX ($30,000-5,285) = + $24,715

M/M JONES (+ 6 KIDS) spend $10,000 + $3,000 FT (maybe less = total $13,000)
PREBATE $ (10,833)
NET FT $3,000 - 10,833 = MINUS $7,833 and maybe $3,000 MORE (depends on how much he is able to spend in the "back market".

Exec Summary part 2

1) NET, Jones pays NOTHING, WE pay HIM $7,833 to $10,833 for 2013 (HI +15%, AK +25%)
2) Each year we give Jones a raise for CPI inflation.
3) Jones pays not $1 more, but gets free SS/Medicare - on $13,000 salary, he pays $995 ($1,990 with employer’s share) today, but nothing under FT - i.e., the rest of us pay for him.
4) For each new child Jones blesses us with, we give him an additional $925 yearly, increasing yearly, plus more food stamps and more of many other Fed/State welfare programs).

Exec Summary part 3

yearly, plus more food stamps and more of many other Fed/State welfare programs).

The Prebate ($2,643/”adult”, $925/”child”) derives from assumed levels of poverty spending even if actual spending is less. See Poverty Guidelines at aspe.hhs. FT incorrectly adds $7,470 in spending for a “spouse”, and then applies its deceptive 23% rate. The Joneses are assumed to spend (including FT) $47,100 (x 23% = $10,833). HHS’ high assumed spending (HHS ignores non-cash welfare on which Jones pays no FT) and FT’s gratuitous “spouse” addition, produce overly generous Prebate amounts.

Jones and others may well receive even more welfare from the Prebate than from today’s Refundable Tax Credits (“RTC’s”). NB: the Prebate effectively extends (and renames) RTCs to a whole new group (i.e., the non-working poor) who are not eligible to receive RTC’s, today, but would receive a Prebate. Instead, RTC’s must be REPEALED - it’s welfare not a tax credit and is substantially un-auditable fraud.

Exc Summary part 4

At the House Ways & Means Committee’s FT Hearings (7/26/11), Charles Rangel (Dem-NY, former W&M Chairman) nearly choked on FT’s giant new welfare entitlement (Prebate). US Treasury concluded a similar Prebate entitlement would result in a large number of Americans receiving much of their income from the Federal Govt. No Conservative can support FT’s major welfare expansion upon the indirect wealth redistribution of our progressive Income Tax (a minority pays for all general US spending), and the direct wealth redistribution of $900+B in welfare programs, plus $125B RTC’s.

The Tea Party’s Contract from America REJECTED the FT as one of its 10 core principles.

Exec Summary part 5

ECONOMICS: Even eliminating the Prebate, FT would bring economic disaster - it is a scam. FT asks you to “believe” in economic theories and miracles, none of which can be assured.

Independent economists, (not paid by AFFT) believe the 30% FT rate would have to be much higher (AFFT-paid BHI noted the FT rate needed is 35.1%). First, they believe tax avoidance will run rampant, requiring an increase in the FT rate to make up for lost revenue (incredibly, FT assumes no tax evasion). Second, the FT base is way too broad - no other state or nation has ever successfully employed such a broad based retail sales tax.

A National Retail Sales Tax is simply impractical. US Treasury studied FT and found the rate needed to be nearly double FT’s 30%. It also designed a more rational tax using a median State sales tax base (with exemptions targeted to the poor) and used both a 15% & 30% sample rate for tax avoidance. At 30%, the sales tax rate to achieve FT’s revenue target would need to be an astounding 150%.

Exec Summary part 6

Most States would likely conform their sales tax bases to the FT base. Even at “only” a 30-35% FT rate, we would be shocked by an in-your-face fed+state 30%-45% (at a MINIMUM but easily 60-75%) sales tax – these rates alone would inflame buyers. The ensuing tax revolt would destroy our very retail-sales-sensitive (70%) economy.

In addition to a 30-60% sales tax, FT adds more hidden taxes. State and federal govts need to raise taxes to pay FT on most of their purchases - FT’s original fantasy (retail prices remain the same) was later acknowledged to be false and prices may well rise by nearly the full 30% FT. Federal govt will also need to raise taxes for higher SS COLAs insured by FT. Also, there’s a likely add’l sales tax of 30% x a State’s sales tax rate. FT imposes a 2nd/3rd tax on savings on which Income/Estate-Gift taxes were paid.

Exec Summary part 7

Banks won’t lend on the FT, so buyers will need to produce nearly half the cost of a new home (which total cost will be higher by most, or all, of the FT). Banks can’t afford to take the risks that:
1) Congress repeals FT because of a taxpayer revolt - if Congress could repeal the Income Tax
after 100 years, it could certainly repeal FT after a few years, or,
2) The homebuilding industry will later lobby and get an exemption from FT for new homes,
because all of their members are going bankrupt (recall the 10% Luxury Tax on expensive cars and boats, born 1990 - died 1993), or
3) Congress wants more money (FT revenues fall short of sponsors’ overly optimistic estimates, or to close budget deficits, or simply to fund yet another spendthrift binge) and it repeals the FT exemption for “used” property, so that sales of existing homes become subject to FT.

Any one of these 3 events would reduce the value of the bank’s security and the mortgage would then be “under water”. We don’t need any more of such economic disasters.

Exec Summary part 8 (last)

The “IRS” may be gone, but in name only. To protect revenue, the new Sales Tax Administration Authority’s audits of sellers and buyers would need to be far more intrusive and extensive than the old IRS’s, despite proponents’ superficial claims to the contrary.

FT claims ($T’s overseas coming home, criminals paying tax, & others) wilt under proper analysis.

In response the Matthew Dirk comment of 5 hour agoin Response to Hank VG:

We thibk a 10% price drop before adding 30%+ FT is the outside MAXIMUM potential reduction (probably closer to 5% POTENTIIAL, i.e. not assured at all - owners may pocket any savings). That is several of us have made independant estimate in that range. AFFT thinks it will be a little over 10%, byt then again they re trying to sell FT and remember they 1st told us there would be a 22% pric decline before their owb=n paid economust explained that won't happen.

The employers share of P/R taxes applies only to his Labor costs not all costs. they form an even smaller part of costs embedded in what he employer buys.

R, not only is IRS supposed to check on whether you bought insurance, but they also have to check monthly income to test eligibilty for lower rates on the Exchanges.

Also, there is an awful lot of auditing for them to di under FT.

Re" R's comment 34 min ago.

I did that and found the place to leave a note.

But, soea that space have room for more characters than this "Leave a Comment" space - the problem was twofold - first I had to beak it up into 8 comments and 2nd, i had to write out my chart (it didn't print out as it does in Word.

To Jim Armstrong;

Have you carefully read the 8 part Executive Summary that I was to post here?

Folks,

I was able to post my 2 page Executive Summary in a new blog, here.

I suggest that we move this discussion over to the new blog and continue from there.

Matthew,,

My calculations were "back-of-he-envelop" but are consistent with Hank van Giesen (who is trained as an economist) and is not much lowr than other econonists (including those paid by AFFT) estimate (Hank may provide a list and sources and I will start to look for those as well). I believe Hank has pointed out that AFFT-paid Hrvard Professor Dale Jrgenson ultimately explained that 2/3 of his initial 22% price reduction would come from employers reaping their empoyees' tax savings, leaving only 7% remaining for POTENTIAL price reductions - IMHO. the entire econony is not nealy as cometitive as the airline industry that AFFT used to justify its claims that any tax cost reduction would result in a dollar-for-dollar price reduction. BTW, to paraphrase Jogenson "The FT takes on too great a burden for it to bear by trying to replace those 3 taxes".

Incidentally, I quickly reviewed that GE financial staatement - the claims of the Left that GE paid no taxes is a typical use of ignorance to make a political point.
In short, a substantial part of their profits were overseas (and not remitted) and the current year's tax on income was almost eliminated because the had huge carryforward tax losses from prior years that they could not use (because the tax law only allows them a stingy 2 year carryback of losses).

Incientally, I have

Matthew,

Further to your comments about price reductions.

Corp taxes reprsent a very small % of SALES PRICES.
Payroll Taxes apply only to LABOR costs.
Suppliers' price reductions will be similarly small.

Matthew re your commnts on lat night at 11:06

I am going to try to copy and paste them into ye blog to which they relate Reforming our Tax System. and will respon to them there.

Thank you for the opportunity to explain. If you read my responses you will absorb the facts you need to truly understand.

To: Matthew Dirks

I have posted 2 responses to your last commnt, but I did so on the other blog, Reforming our Tax System.

Thank you for your comments and willingness to keep an open mind . I hope you will read my responses. I can try to explian even further.

To ALL,

I invite you all to move to the new blog, Reforming ourTax System.

Matthew,

I am trying to get you to move this discussion over to the new blog, "Reforming ur Tax System".

"Frank"??? (it's Hank). My, Hank's and other economists believe the POTENTIAL (not guranteeed) price reduction is up to 10% (including apparently Harvard Prof. Dale Jorgenson who was PAID BY AFFT). Kotlikoff & Tuerck are/were paid by AFFT and their claims thus SUSPECT.

I am free to challenge any economist, review their findings and analysis and make up my own mind thank you. I read (skimmed) most of their reports and found serious faults with their analyses. Do you analyz what they said or are you merely impressed that they are Phd Economists?

If you in fact watched their testimony at the House W & M Comm. 7./26/2011, you are aware that the FT did not do very well. Charlie Rangel almost chiked on the PREBATE. Chas. Pascarell (D-NJ) called it a "Fairy Tale"

Matthew,

I am having trouble quickly understanding your new 10% comments, I will study them when I return later today.

Please try to move this discussion over to the new log, Reforming our Tax System and lets try to review this FT in an orderly fashion, starting with the Prebate's exacerbation of welfare.

Mike.

I find your arguments confusing and difficult to discern.

Let's start out with the BIG PICTURE. Kotlokoff, et al or Hank, nor I can GUARANTEE any $ price decline. Even if Kotlikoff , et al wrte a FLAWLESS paper (they did not - it is full of holes) that does not translate to a CERTAINTY, it is only one possibility. You seem to trea a (paid-for) economists paper to be the equivalent of combinig 2 part Hudrogen with 1 part Oxygen, which will ALWAYS produce WATER.

So, whatever quibbles you might have with the details of the calculation, its still only a calculation of a possiblity, NOT A GUARANTEE. Yu seeem to be a "true believer" of AFFT's paid-for economic "conclusions". I find Kotokoff & Tuerck's work seriously flawed - you sem to accept it as gospel.

I do not artificially increase the base. RETAIL PRICES EQUAL SALES.
If corp profis equal (say) 5% of SALES and they pay 35% IT on PROFT, then they pay IT of only 1.75% of SALES.

Matthew,

You never rsponde after I responded to your criticism of ony the first part, i.e., the Prebate of my Executive Summary.

Please let me know if you now understand that while Jones may "spend" more than $13,000, but NOT IN CASH that HE EARNED, so that he will pay only between $0 and $3,000 FT ,while receining a Prebate check from all of us in the sum of $10,833 that was suppose to keep him whole from FT but actually OVERPAYS HIM GREATLY.

Please resoond on the new blog, Reforming our Tax System.

To add to Hank van Giesen's comment of 4 hours ago:

With all due respect to economics Phd's bless their hearts) we can submit nanalytical papers, find errors and shortcomings in them and hone those papers until we all agrre on the one proper projection.Yet is still only a PROJECTION, a mere THEORY because econoncs CANNOT PREDICT ANYTHING! No-one can say for vertail exactly how much prices will rise.

I make a totally independant point, an in-your-face MINIMUM sales tax rate of 38%-68% will precipitate the 2nd American Revolution. No-one will be placated by a slight reduction in pre-tax prices nor by not paying IT - they will be inflamed by those tax rates on virtually EVERYTHING THEY BUY.

Response to Matthew Dirks' commment at 11:00PM last night:

Yes, especially when a loobying group funds "research", one (who is not naive) must view such "research" with skepticism. Any such "research" should be thoroughly analyzed and challenged. All "research" should be challenged thoroughly.

Bruce Bartlett, among ohers, did challenge the FT and found significant flaws.
The FT response (in the article "Do the Math") was "corrected" ONLY IN YOUR MIND, thats your opinion, not a FACT - I find that Bartlett found some critical flaws in FT and then I discovered far more flaws than Bartlett did.

Charlie Rangel choked OVER FT's GIANT NEW ENTITLEMENT - amazing, a Democrat did not want to burden us with a giant new annual bill to pay (your dismissal of this as merely "political" is superficial, IMHO).

Charlie Pascarel's calling FT a "fairy tale" sounded to me like he performed financial analysis on the bill (after much analysis, I share his conclusion) - again, your dismissal of his opinion as merely "political" is itself superficiial, IMHO.

Matthew,

Further to my last respons to you about "correcting Bartlett's "math".

They id not find fault with Bartlett's math, they merely supplied the FT's propaganda math, which I find extremely faulty (why don't you join me on my blog, Reforming our ax System and we can discuss this in an orderly fashion, starting with the Prebate).

The eal point I wanted to re-emphasize is that you appear to be in awe of economists calculations, treating them as gospel that must be corrrect is the math is not faulty. I view those calculations are mrely interesting THEORIES - honest ecnomists will admit, the cannot predict anything with guaranteed accuracy - their predictions are not biblical.

An executive summary PDF has been uploaded at the request of Stephen Eldridge