Is the FairTax a NeoCon Conspiracy?
It never ceases to amaze me how the rhetoric of our opponents gets ratcheted up. I point you to James at The American Liberalism Blog, who not only doesn’t have any understanding of the plan, he couches every argument in class-warfare rhetoric so deep you can swim in it. His overall belief is that the FairTax is a conspiracy by NeoCons to destroy government.
I would like to point out that John Linder and Neal Boortz are both far from being “NeoCons”, and that the FairTax is a much more Libertarian plan than Conservative plan. Of course, the Libertarians do want to drown government in the bathtub, but our entire plan and goal is far different from the “NeoCon” agenda.
James first takes on the 23% vs 30% canard. We’ve covered that here plenty of times, so I’m not going to go into it, except to say that both numbers are technically correct, since they measure things completely differently. In fact, I’ll be willing to start quoting tax-exclusive if he’ll start quoting Kennedy-era tax rates exclusively. The top income tax rate was 91% (inclusive), so that would be a 1011% tax rate exclusively. All we, as FairTaxers, want is to quote this on a consistent basis. The FairTax is an inclusive tax of what you spend, just like an income tax is an inclusive tax on what you earn.
So we continue:
Obviously, the plan must be to reduce government! The plan is to remove various “social engineering” incentives from the tax structure and they do not just mean welfare, they mean the deduction that millions of families have for their home mortgage, for medical expenses, for business expenses, etc. You simply cannot make deductions for these kinds of programs at the cash register at WalMart … or at Nieman Marcus.
First, welfare is not a social engineering incentive of the tax structure. It is a spending program, not a taxation program. The FairTax doesn’t even touch welfare (although the Prebate may be additional welfare for the poor). The home interest deduction? How can you have a deduction when you have no income tax? The medical expense deduction? Since when can individual taxpayers write off medical expenses? The tax code is written to “engineer” it such that private medical insurance is hard to get, and tax incentives only exist for businesses to cover their employees. Of course, since a liberal is against personal insurance anyway, in favor of “someone else” paying for it, that shouldn’t be an issue.
What is at issue is the fact that the tax code is a matter of social engineering, and it’s a lot deeper than a home mortgage interest or charitable contribution deductions. The tax code is an instrument to enrich politicians’ campaigns and nothing more. It is so insanely complex that it is incomprehensible to anyone, including the IRS themselves, and thus becomes counterproductive. We want a tax structure that is as flat, as simple, and as fair as you can make. That way, people inherently know what they’re paying in taxes, and there is little to no waste caused by the process. If, as a result, it also screws over a lot of politicians, and removes their influence, that will only make the political process more honest!
But eliminating “social engineering” is not the only major goal. They want to put Social Security and Medicare out of business entirely. There are two ideas behind this, of course. The radical conservative notion is that, one, both Social Security and Medicare are properly expenses to be born by the individual people and families themselves, and two, they should be carried out by individuals and families negotiating with Wall Street and private medical enterprise.
No, we just want to force the government and people to realize that there aren’t three different governments, the “general fund”, the “Social Security” government, and the “Medicare” government. Right now the first one steals from the other two to pay for things it wants, and in the future, they’ll steal that money back. It’s a way for politicians to hide spending by deducting it from a “trust fund” that doesn’t exist.
Funding everything out of one tax will at least make the process honest. And in the FairTax plan, the rate is pegged to Social Security and Medicare spending, so funding is GUARANTEED (note: you have to read HR25 to find that, as it’s not covered in the FairTax Book).
Starkly, the heartlessness goes well beyond this to an out-and-out “survival of the richest” regime wherein a very large working class of formerly lower- and middle-middle class persons will join the present-day lower classes and toil at subsistence wages, paying less tax when they are below the poverty line and full taxes as soon as they creep into solvency, thus hovering perpetually at the break-even point, effectively removed from the competition for upward mobility opportunities.
Again, James has no understanding of the prebate. He is making the argument here that once you’re out of poverty, you no longer receive the prebate and thus get slammed with taxes. In fact, that’s the way it works NOW with the income tax: your rate is 0% below a certain income, and then 10% once you cross a certain threshold.
The prebate is different, it’s paid to everyone regardless of income. Now, to Bill Gates, it’s such a tiny amount that it is not a factor in his spending habits or taxation. But an income $1 below the poverty line or $1 above the poverty line are treated exactly the same. People below the poverty line will pay effectively 0% in taxes due to the prebate. People just above the poverty line will pay effectively single-digit tax rates, when you factor in the prebate. As your income and spending rise, your tax rate will rise in a roughly linear fashion, up to a maximum rate of 23%.
Meanwhile, of course, globalized corporations no longer fully accountable to any government, no longer have to shop for tax incentives from localities and can cherry-pick the lowest wage rates anywhere on the planet.
Um, sorry buddy, but that’s what they do now! Removing taxation on income will make our shores and our workers more competitive in the global market. Capital and investment will come to the US, providing incredible growth to our economy. As I mentioned before, we’ll never have the textile industry operating in the US, but IT, software engineering, some of the jobs who are just now fleeing the US for lower-cost countries will have much more incentive to stay here.
Your point is that they no longer have to shop for tax incentives is correct, because if they come to the biggest, most technologically advanced, and most stable economy in the world, the United States, they won’t be paying ANY taxes. That’s a good thing.
Also remember, only when the middle class is large and prosperous have things been even close to acceptable. The government of and by the middle classes will serve all Americans. It will provide various safety nets and restraints. It will promote general prosperity and assure than no one is without food, shelter, or necessary medical care.
And removing the boot of income tax from the neck of the middle class will swell their ranks. Not only that, changing the method of taxation will not, in any way, stop the federal government from doing all those things that you think are so necessary for the government to do. In fact, the quickly growing economy will only help the federal government to accomplish all these things, while increasing the standard of living for all Americans.
I mean really, this is like shooting fish in a barrel.
Excellent post Mr. Warbiany!
I believe the Democrats will see that the FairTax will remove “class warfare” from their arsenal of attack weapons, and thus, they will oppose HR25 vehemently.
There is much talk of “cutting the pork” today. We need to use that concept in advancing the FairTax.
This proposed legislation is something that most Americans will support.
Our job is now to gain exposure to the masses.
We need to talk it up, write our legislators, editorialize in local newspapers, and give financially.
Rod Copeland
Abilene, Texas
I agree it was an excellent response, but was it really worth it? How influential is this Liberalism Blog? The fact that libs will complain is not surprising, as it is their natural state. The criticisms to really focus on are the conservative ones.
No matter what you may see on CNN, the NYT, or the alphabet channels this country is at it’s core conservative. The arguments that conservatives make, with the concerns that conservatives have, are much more likely to mirror what the American people think themselves. In my opinion I think we would profit more by addressing these points. As another argument, I’ll just say this: Of course libs will get this wrong, it’s economics.
ANY logical argument that has been (or might be) presented against the FairTax is worth addressing. If your premise is correct, then the FairTax will become law without us breaking a sweat.
Somehow, I don’t think so.
The key to getting this legislation written into law is to get the idea in front of the masses. They will love it. Most people I come in contact with do not even know there is pending legislation for it.
I do agree that we do not want to fall into the trap of completely nit-picking the proposal to the detriment of getting the idea exposed to the public.
We need advertising budgets and work at the grass roots level.
The flat tax is being pushed in an effort to divide the tax reform effort.
Hopefully, the superiority of the FairTax will quickly end Forbes’ “simplification” effort to divide the movement.
After all, how many times does it take simplification to become complication? Just try to read the tax code!
Nesta,
If you look at all the posts under the heading Criticisms, you’ll see that I’ve taken on quite a few conservative and libertarian criticisms to the plan. I just felt that I was avoiding my responsibilities to post here, and saw how silly the American Liberalism blog sounded. The FairTax as a “NeoCon” idea just had to be addressed.
I understand, and I agree with the above poster that any and all arguments against the FairTax need to be addressed. I just have a feeling for priority. It would be best to get all of these potential arguments squared away right now, when we don’t have the million dollar ad-machines coming out against this plan.
Lobbyists who make their entire living off of gaming the tax code are going to come out swinging, with ads in every conceivable fashion, joining together arguments from the left and the right. Let us bombard this plan with everything we can right now, so we know it will stand up to reality.
I think that’s a good suggestion, Nesta, and it’s one of the values that this blog can provide…
No, I see “class warfare” an integral part of the FairTax, as it creates two distinct Americas: the homeowning class (exempt from tax on their homes) and the renting class (cha-ching! pay up, sucker!). Those unable to buy homes (like myself) will become an entrenched underclass, paying a steep tax penalty for the privilege of renting the roof over their heads.
The vast tax benefits of homeownership under the FairTax constitute social engineering on a scale larger than that provided by the tax breaks homeowners currently enjoy.
Terry, the taxes you pay on rent will be reduced by the elimination of a variety of existing embedded taxes in the rent prices you already pay.
In addition, the monthly prebate you receive will more than compensate for all taxes you pay up to the poverty level — including the full cost of your rent.
In sum, you’re crying wolf over a non-issue.
You’ve made it clear previously, your your earlier postings, that you’re already as much of an “entrenched underclass” as a man can make himself — despite considerable education — and have no plans of trying to change it.
Eliminating the taxes on home buying (at least, for those buying a used home) is a very good thing. Who knows, it might even get you off your duff long enough to try getting a job that pays more than minimum wage.
Currently, landlords enjoy large tax breaks on rental property, including the expensing of phantom “depreciation” on their properties. This allows landlords to enjoy a tax loss – reducing their income taxes – while they enjoy positive cashflow and their properties actually appreciate in value. (Okay, depreciation writeoffs must be recaptured upon sale, but taxes are often deferred further through Section 1031 exchanges in which they buy replacement properties.) So if landlords are currently enjoying tax losses, there isn’t much in the way of embedded taxes to be reduced. The largest tax embedded in rent – the property tax – will not be affected by the FairTax. And even if landlords enjoy cost savings, there is no guarantee, and it is in fact quite doubtful, that rents will decline, as ample historical evidence involving large property tax cuts has demonstrated otherwise. Renters drank the tax reform Kool-Aid (TM) in voting for Proposition 13, but now they know better.
To paraphrase Yogi Berra, if employers don’t want to hire me, nobody’s gonna stop them. Employers not only want workers who speak and write well, they especially want those with specific needed skills. I have no career-related experience and apparently not much in the way of marketable skills, and no money to go to school to acquire those skills.