Is the FairTax Regressive?
Writing for the Ocala Star-Banner in Florida, Bill Hirsch penned this critique of the FairTax:
It works like this: Everyone would receive a monthly check from the government to reimburse them for taxes paid on the basic necessities of life.
For a married couple with one child, those necessities are estimated to cost $22,400 a year, the tax on which would amount to $5,152. So that amount would be sent to the taxpaying household in 12 equal payments disbursed each month. According to Boortz and Linder, that keeps the “FairTax” from being regressive — that is, one in which those with the lowest incomes pay the highest percentage of their income in taxes.
Here’s the sleight of hand. According to the U.S. Bureau of Labor Statistics, a household in the lowest 20 percent of wage earners surveyed in 2003 made an average of $8,201 in pre-tax income and spent $18,492 that year. You read that right. According to the BLS, the average household is in deficit until annual income reaches about $35,000.
With a 23-percent sales tax, that household would pay $4,253 in taxes. Under the “FairTax,” they would receive $5,152 in “prebate” checks. Presto! Not only did our family pay zero taxes, they actually came out about $899 ahead!
But that’s not how it would work.
Because the “prebate” comes in the form of a check from the government, it doesn’t exempt our family from paying the 23-percent sales tax on any of their spending, unless they buy second-hand goods.
It simply boosts their annual income by $5,152, giving them a real income of $13,353. But they’re still spending $18,492, and still paying $4,253 in “FairTax.” Taken as a percentage of their post-”prebate” income, that amounts to a tax rate of 31.85 percent.
In contrast, a household of three in the top 20 percent of wage earners surveyed made an average of $127,146 before taxes in 2003 and spent an average of $81,731, according to the BLS. Boosting their income by $5,152, then calculating the “FairTax” paid on their spending, yields a tax rate of only 14.21 percent.
That’s a textbook example of a regressive tax. And that’s not “fair.”
Responses, anyone? What’s he missing?
I believe Merrill Bender sums it up perfectly with this rebuttal.
The Ocala Star-Banner Editorial Page Editors, let one slip by big time! Bill Hirsch uses bad math and makes unfounded accusations. Their support of his malicious attacks to mislead the public is shameful. While an op. ed. is the opinion of the writer, the paper should conduct due diligence regarding the facts prior to publishing the article. To their credit, they have published a number of pro FairTax articles. Bill Hirsch was the only person to submit an anti-Fair Tax opinion.
Here are some of the facts. Neal Boortz is a renegade, he and Linder wrote the book without full cooperation of AFFT. In fact, AFFT was very uneasy about the book prior to it’s introduction because they did not know what was in the book. Bill Hirsch misrepresents their relationship and promotes Boortz as a pawn of AFFT. Boortz is a maverick. AFFT has no control over him. He makes them nervous. He makes a lot of people nervous—but that’s his job as a talk radio host.
Bill Hirsch goes further to show an entire lack of responsible reporting by proposing that the bottom 20% of workers earn $8,201 but spend $18,492 without providing any explanation for that discrepancy. Where does the other $10,000 come from? Here are some options:
1. The extra $10,000 is earned on the gray market or through illegal activities such as drug dealing. In any case, these people are guilty of tax evasion.
2. The extra $10,000 is provided as part of a public or private social program such as welfare, disability, or church support programs and as such it must be counted as other income.
3. The extra $10,000 is charged on credit for which they have no means or intent to repay. This really should be covered by the illegal activities listed above.
If you cannot comprehend the “Hirsch New Math,†don’t worry, your math skills are fine. There is never a way to comprehend bad math. This is what Hirsch did:
Hirsch had to do something with the Family Consumption Allowance (FCA or prebate) so he added it to income to drive down the high wage earners percentage. He improperly calculated the percentage as NST/(Wages+FCA). I do understand the point he was making but if he used the following proper calculations, his numbers would not support his conclusion—so he changed the numbers.
The percentage of tax paid versus income is calculated as (NST-FCA)/(Wages+Other Income). This, however, is still incorrect as it does not account for the tax that will be paid when the savings are spent in the future. The proper way to calculate the effective percentage is (NST-FCA)/(Spending) as shown below.
The biggest clue to his error is the 31.85% figure. Hirsch appropriately calculated the taxes inclusively. In such a case, the effective tax rate can never be higher than the 23% inclusive rate. I can only assume that he was attempting to dis-inform the public by providing another calculation similar to the 30% exclusive calculation.
Hirsch is opposed to a tax reform system wherein the overwhelming benefit is savings billions of dollars in compliance costs. Fair Tax is simple. For any item sold, 23% of the sale price is collected as tax. No income vs. expense wrangling like Enron used. Fair Tax is transparent, 23% of every dollar we spend on new items is tax—and such tax must be detailed on the sales receipt.
Fair, Simple, and Transparent. I’ll concede that Fairness is a judgment call, but the Fair Tax Act of 2005 still wins on Simple and Transparent. Bill Hirsch loses due to flawed reasoning and dishonest reporting.
Contacts:
Brad Rogers, brad.rogers@starbanner.com, Ocala Star-Banner Editor
Bill Thompson, bill.thompson@starbanner.com, Ocala Star-Banner Editor
The reason the FairTax is regressive should be intutively obvious without the need to do any calculations.
Those with smaller incomes tend to spend a higher proportiion of their incomes on goods and services than do those with higher incomes. Almost any family of four that makes, say, $60,00 probably spends virtually off of their income just to get by. In fact, they likely spend more than their income and have credit card debt.
On the other hand, a household with an income in excess of , say, $200,000 will spend a much smaller proportion of its income on goods and services (which are taxed), and has much more left over to put in savings and investments (which are not taxed).
Thus, a higher proportion of the income of the $60,000 a year is taxed than is the income of the $200,000/yr. family. When incomes go up even higher, the effective tax rate goes down even more. Sure, you can point to exceptions (such as where a high-income individual buys an expensive new house are car), but in general a high-income household will spend a much smaller portion of their income than a lower-income household. Believe me, I’ve been both places.
The rebate could conceivaly make the FairTax less regressive for the very poor, but that just shifts the burden up one rung on the economic ladder. That is, working class and lower middle class folks will suffer a double whammy — on the one hand they will be subsidizing the poor through higher tax rates than they would otherwise pay if there was not prebates and on the other hand they don’t have high enough incomes to take full advantage of the tax-free benefits of saving and investing. Thus, they’ll have the worse of both worlds.
Linder is now going around saying that the FairTax is actually progressive because it will tax the spending of wealthy folks who don’t have taxable incomes. But that ignores the fact that we already have a tax on accumulated wealth (i.e., the estate tax) which Linder and most of the other Republicans want to abolish.
Intuition is great to start with but if you don’t back it up with calculations, then it is just guesswork. Condemning an entire reform based on a single aspect also demonstrates extreme nearsightedness. After all, increasing the efficiency of the tax collection process by reducing the compliance costs will benefit all of the poor as well as most other Americans. Some tax accountants and lawyers will have to find new jobs or adjust their services to better serve their clients.
The Hirsh analysis is overly narrow as it does not address the most regressive aspect of our current tax system—the payroll tax. The combined rate is 15.3% as the employer and employee each pay 7.65%. The self-employed must pay both halves. The rate decreases to 2.9% when annual wages exceed $90,000. Furthermore, the rate is 0% for all investment incomes. Just in case you didn’t recognize it, this is a regressive tax. All aspects of tax reform must be considered. The Fair Tax is the only current reform that addresses the pending failure of Social Security funding by reforming the payroll tax.
Furthermore, assessing the fairness of a single aspect without addressing the associated ramifications can be deceptive. Consider an armored truck driver; during the day she appears to be a rich person—she is in possession of a lot of cash. But we have to follow the money all the way to the bank. When we save a portion of our wage, that money also goes to the bank. It works for the economy for many years. I agree, this is an extreme point, but making decisions for the nation based on a narrow interval of time such as one afternoon’s pickup or one years work is just as absurd as calling an armored truck driver rich. We must thoroughly account for all the benefits of savings, future spending, and the collection of future tax, not just this year’s adjusted gross income.
Under the Fair Tax, if a family of three earns a very nice income but only spends $22,400, they don’t pay any net taxes. The Family Consumption Allowance (prebate) offsets 100% of the taxes paid on the first $22,400 spent. Their savings (unspent income) could grow to a substantial bank account balance. Now how does that benefit them—they are living like poor people. They could do this for 60 years and then drop dead. What good would their fortune in the bank do for them? Meanwhile, the economy was using the money. The bank does not just sit on the money. The bank will lend the money as investment capital—driving the economy forward. Some of the capital will finance home mortgages as well as the jobs to build the homes. The point is that the money works for the economy. We must follow the money to the bank and throughout the economy.
If they save and make more money from the investments, fine. When she or her heirs spend the savings, tax will be collected. Alternatively, she could leave the money to a charity in her will. In any case, either the government gets 23% via the consumption tax or a charity gets a donation.
I believe that the benefit of living in America is the standard of living that we have. If a person lives like a pauper because they spend like a pauper, then they have the same standard of living as the pauper. They should be taxed at the same lower effective rate. When a person improves their standard of living by spending at a higher level, they should get taxed at the higher effective rate. That makes the tax progressive. Not abusively progressive. Not regressive. Fair.
I encourage serious discussion on the Fair Tax, but arguments built of straw like Hirsh’s analysis don’t fly. His inappropriate allocation of the Family Consumption Allowance and exclusion of the futures taxes to be paid when savings are spent results in an invalid analysis and weak argument. Serious discussion utilizing valid facts will eventually result in fair and appropriate method of financing the federal government. I believe that such a method is here today, its call The Fair Tax Act of 2005.
Discussing tax reform at the philosophical level is an acceptable form of discussion; just don’t distort the fact to promote any position or philosophy. The FairTax is a consumption tax. Accordingly the effective rate is calculated against consumption, not income.
The figures I used are from the Bureau of Labor Statistics Consumer Expenditure Survey. While the numbers are averages, they do paint a realistic picture of the hardships faced by the working poor.
The fact is that low-income households — those making below about $35,000 a year — tend to deficit spend. Contrary to Mr. Rook’s opinion, most of those households don’t sell drugs or deal on the gray market. Nor do they have $10,000 in additional income from government or private support programs — the BLS survey’s income statistics include income from ALL sources.
Instead, the working poor spend more than they earn the old-fashioned way — by incurring a crushing level of debt. Even I was not aware of how bad this situation was until I saw the BLS numbers. You can view this survey for yourself at http://www.bls.gov/cex. The survey is downloadable in PDF format. The newest survey, from 2005, updates the numbers — the average income of the lowest quintile is now $9,676, with expenditures of $19,120. Incidentally, Mr. Rook may be correct in stating that the working poor have no means to repay the debt they incur (though I believe most are honest and DO intend to repay it), and he can argue that that should be illegal, but it isn’t. In fact, credit card companies rely on their cardholders being in perpetual debt, because they make most of their money off the interest they charge on that debt. I agree that this level of debt is not sustainable, which is why the rate of personal bankruptcies continues to explode in this country.
The average $10,000 in debt incurred, then, cannot be counted as income, because it is expected to be repaid.
The FairTax “prebate,” on the other hand, MUST be counted as income, because it comes in the form of a check from the government. Let’s say the FairTax is in effect, and you get your “prebate” check in the mail, take it to the bank, and cash it. You then go to the grocery store and buy $100 worth of groceries. You will presumably use the prebate cash to pay the entire grocery bill, not just the $23 in FairTax listed on the receipt. You are using the EXTRA INCOME provided by the prebate check to boost your buying power. But you’re STILL paying the 23 percent tax on everything you buy. This is not “New Math,” it’s really quite simple. What’s dishonest is the contention that the “prebate” exempts the poor from paying any tax on purchases up to the poverty level.
A few other points:
First, Mr. Rook says the effective tax rate can never be higher than 23 percent. That’s not true, because, as the BLS survey indicates, low-income households spend more than they earn by incurring debt. If spending can exceed 100 percent of income (and because credit is so readily available in this country, it can), then the effective tax rate can exceed the 23 percent sales tax rate.
Second, I would point out that Boortz and Linder’s own table in “The FairTax Book” pegs poverty-level spending — the minimum a household must spend on the necessities of life — is a bit over $25,000. If that’s true, then households spending $18,000 (or, by the latest BLS statistics, $19,000) are actually living quite frugally.
Third, no discussion I have seen on the FairTax has addressed the cost of the “prebate” scheme. Again, the math is simple. There are about 135 million taxpaying households in the U.S., all of which would qualify for the prebate. Assuming the lowest possible “prebate” amount of about $2,000 a year, that means the MINIMUM cost of the “prebate” plan to the federal treasury will be $270 BILLION. And Boortz complains about the $35 billion cost of the Earned Income Tax Credit?
I agree with Hayden Kempner. The FairTax — or any other consumption tax — is regressive on its face. Those on the lowest end of the income ladder will ALWAYS spend a higher percentage of their income than the middle class, and the middle class will ALWAYS spend a higher percentage of their income than the rich. The base numbers may change under the FairTax because of the income boost provided by the prebate, but the basic math will not.
Finally, I must comment on Mr. Rook’s contention that the Star-Banner should have practiced “due dillegence” before publishing this op-ed piece, the implication being that it would not have passed fact-checking muster.
First of all, the Star-Banner’s “Other Voices” columns are basically extended letters to the editor — the space is open to anyone with an opinion on an issue to express that opinion. As such, the Star-Banner does not edit these columns for comments.
Has they wished to fact-check this piece, however, I am confident it would still have been published. The statistics I used from the BLS survey are sound, and so, I believe, is my math, despite Mr. Rook’s attempt to disprove it. I leave it up to the reader to compare Mr. Rook’s methodology to my own, and draw their own conclusions as to who’s right.
Finally, several letters in the Star-Banner criticized me for not offering an alternative to the FairTax, and said the fact that I offered no alternatives implies I support the current system exactly as it is.
Nothing could be further from the truth. While I believe a progressive income tax IS the fairest tax system possible, I also recognize the tremendous problems with our current system. But the complexity of the current system is NOT inherent in the structure of the income tax itself, but is instead the product of a century of special interests carving out loopholes and exemptions for themselves. Consider the fact that the first round of tax cuts signed into law by George W. Bush in 2001 added 10,000 PAGES to the tax code!
The fact is, and income tax can be very simple: Set progressive rates which are fair to all, then allow a minimum of deductions and NO loopholes. If that were implemented, everyone could do their taxes in about half an hour.
Bill Hirschi
Bill, I think you make a false assumption when you assume that consumption above income is funded by debt. It could also be funded from savings. There is a large group of people who have little or no income but significant consumption funded from savings. They are called “the retired.”
I’ll concede Mr. Johnson’s point that some of the consumption above income in low-income households can be accounted for by retirees spending their savings. However, you must also concede that many low-income households in which one or more persons work at low-paying jobs live from paycheck to paycheck (spending virtually 100 percent of their income), or live beyond their means by incurring debt.
The math of this is pretty simple. The minimum wage in this country right now is $6.15 an hour. (It will finally go up beginning next year.) Poverty-level spending (what it costs to acquire just the basic necessities of life) for a family of three is $22,400. A full-time (40 hours per week) worker works 2,080 hours a year. To earn enough to meet the poverty-level spending target, either the head of household must work at a job earning at least $10.77 an hour, or more than one person in the household must work. Any household of three with a net income below $22,400 must either do without some of the basic necessities of life or go into debt (and if the car breaks down, or one member of the household is hospitalized, the situation becomes REALLY desperate). And believe me, there are a LOT of people in my town (Ocala, Fla.) earning less than $10 an hour. The AVERAGE income in Ocala is just $14.60 an hour.
I will be the first to admit that the numbers in the BLS survey are probably not typical ($10,000 a year is undoubtedly not a sustainable level of debt for a household earning $9,000 a year or less). But common sense should tell you that households with less than $20,000 a year in income — which comprise a large (and growing) number of households in this country — have a very difficult time living within their means, and it seems to me you cannot deny the fact that many families are laboring under staggering levels of debt.
Furthermore, Mr. Root is dead wrong in assuming the $10,000 in deficit spending suggested by the BLS averages is income from other sources, such as private or government assistance or illegal activities.
The BLS survey defines “income” as the following: “The combined income earned by all consumer unit members 14 years old or older during the 12 months preceding the interview. The components of income are wages and salaries; self-employment income; Social Security and private and government income; interest, dividends, and rental and other property income; unemployment and workers’ compensation and veterans’ benefits; public assistance; Supplemental Security Income and Food Stamps; rent or meals or both as pay; and regular contributions for support, such as alimony or child support payments.” So public and private assistance is included in the income totals shown in the BLS survey.
As for the money coming from illegal sources, participation in the BLS survey is voluntary, and I doubt a drug dealer would voluntarily take part in a survey sponsored by the U.S. government which would require him to keep detailed records of his income and spending habits.
And don’t even try to argue that the low income figures shown would increase because the FairTax allows workers to keep every penny they earn with no withholding. The BLS uses pre-tax income figures.
So while you don’t have to buy into the idea of a family making $8,000 a year and spending $18,000, I challenge you to deny that there are MANY families in this country forced to live beyond their means by living in perpetual debt. If you can’t accept that fact, you need to come to terms with the reality-based community most of us live in.
Central to the pro-FairTax argument — and Mr. Rook touches on it — is the idea that the FairTax allows you to set your own effective tax rate by choosing how much or how little you spend. In Mr. Rook’s words, “If a person lives like a pauper because they spend like a pauper, then they have the same standard of living as the pauper.” But your spending choices are tied to your income. The more you make, the more you can choose NOT to spend. Again, this is common sense. If the basic necessities of life cost a family of three $22,400 a year, and the household earns only $23,000 a year, that family has just $600 a year which they can choose to spend or save. If another family of three has a household income of $50,000 a year, they have $27,600 a year which they can choose to spend or save. That’s why the basic fact that renders ALL consumption taxes regressive is true: That the poor spend a higher percentage of their income than the middle class, and the middle class spend a higher percentage of their income than the rich.
I personally believe those who designed the FairTax KNOW the tax is regressive, but don’t care. This is hinted at in Boortz’s book, where he talks about the Earned Income Tax Credit (in my hardcover edition, it’s in a footnote on Page 83): “The EITC was passed to relieve lower-income Americans of the tax they pay on Social Security and Medicare. They are already relieved of the responsibility of paying income taxes to pay for our defense, parks, courts, FBI, housing, education — well, everything. So why should they be expected to pay for their retirement programs?”
I work in a place where there are a large number of conservative Republicans, and they have often expressed to me the following worldview, which seems similar to Boortz’s:
“Rich people are rich because they’ve worked hard and made good financial decisions. Then the government comes along and confiscates a large portion of their wealth and gives it, in the form of social programs, to poor people, who are only poor because they’re lazy and lack the initiative to pull themselves out of poverty, preferring instead to live on government handouts.”
In other words, they see progressive taxes — which take the largest bite out of those with the greatest income — as an evil, Socialist-style redistribution of income. We can debate the merits of this argument if you wish — I happen to think it’s wrong. But this seems to be the philosophy behind the FairTax, which would eliminate not only all income taxes, but capital gains taxes, estate taxes, etc. — in other words, all the taxes which currently affect mainly the wealthiest people in our country — and replace them with a 23 percent consumption tax, which is the form of taxation which LEAST affects the rich, because they spend a smaller percentage of their income, and they have more discretionary income which they can choose NOT to spend.
However, to again quote Boortz, “The folks who wrote the FairTax plan knew that burdening the poor with a 23 percent retail sales tax would doom the plan from the outset.” Hence the creation of the Prebate, to win support for the FairTax by making you believe it would allow the poor to “spend all of their money up to the poverty level and not lose one penny in taxes.”
It sounds great on paper. But it’s an illusion. I’ll say this again (and again and again, as many times as necessary until it sinks in), the Prebate is NOT a tax credit or exemption, it’s a check from the government, which makes it INCOME. You’re NOT going to carry two wallets with you to the store — one with the money you earn to buy groceries with, and the other with the cash from your Prebate check to pay the taxes. You’re going to cash or deposit your Prebate check at the beginning of the month, and unless you’re rich or comfortably middle class (earning more than $35,000 a year), you’re probably going to have to spend it on stuff, all of which (unless you buy it used) will be taxed at 23 percent.
Will $5,152 in additional income each year help a family of three earning $10,000 a year? No question. But if the basic necessities of life cost them $22,400, they’ll still have to come up with another $7,248 a year — probably by going into debt — or do without those basic necessities. And even though their income has increased by more than half, thanks to the Prebate, they’ll still lose 23 pennies of that income in taxes for every dollar they spend (with, of course, the exception of what they spend on used goods).
If you believe the income of the rich is being confiscated and given to lazy poor people who don’t pull their weight, and you favor a regressive tax to give the rich a break and force the poor to pay their share, then come right out and say that. But don’t try to pretend the FairTax isn’t regressive, because there’s no question that it is.
Made a boo-boo. The current minimum wage is only $5.15 an hour, not $6.15. It will begin going up next month.
I think I understand Bill’s point:
If a $100,000/yr earner (or whatever cut off rate we use) gets his monthly check he can put 100% of it in the bank to earn interest…it is discretionary money.
But if a $30,000/yr earner (or whatever cut off rate we use) gets his monthly check he has to spend it and does not have the luxury of saving. Thus, he can only use around 76% of it …because he has to pay out 23% of it for sales tax. (A 23% that will probably really be 30% ) Ergo …by its very nature this is a regressive tax system.
There are errors in the idea of the fair tax, and errors in the assumptions.
1. You forgot charities. Our church has a food bank that gives away food to low-income people. The money comes from church offering contributions made by others.
2. Why should government get 23%? Government should not get all the money it wants. There should be a constitutional limitation of 10 percent. Any official who wants more gets thrown in jail.
3. There should be user fees for nonessential non-required government services.
4. There should be no tax on necessities, used products, and services. This works better than a rebate check.
5. Art, sports, entertainment, recreation, beautification, and monuments are NOT necessary functions of government.
MidiMagic, With regard to #1, the FairTax does not tax donations and would not tax items purchased for business use by the religious organization. According to a study by the Beacon Hill Institute “Due to differences in preferences for type of charitable organizations between itemizers and non-itemizers, religious charities stand to gain disproportionately under the FairTax.” With regard to #4, defining what is a necessity opens up the door for lobbiest and decreases the tax base.
if you want to see the “Fair Tax” in operation just go to Europe where they have the “Value Added Tax” of 22% in France. that is 22 cents of tax on every Euro (dollar) you spend. The fair tax is a giveaway to the rich and a burden on the poor. I vote NO !
Joe, the FairTax is no comparison to the VAT.
Dragon,
On the contrary, the Fairtax and a VAT are both forms of a consumption tax. The major difference is that a VAT gets collected as a good or service moves up through the production chain, whereas the Fairtax gets collected at the retail cash register.
Some claim that with a VAT, it would be harder to monitor all businesses instead of just the retail merchants. But, the VAT has a self policing feature that makes evasion much less likely than the Fairtax. The VAT is just as transparent as the Fairtax provided the VAT percentage is printed on the final sales receipt. Over 135 countries around the world use the VAT, whereas not one country has ever successfully funded a central government with a sales tax.
Any discussion of tax reform needs to include the Fairtax, the VAT and a Flat tax, imho.
Hank you state “Over 135 countries around the world use the VAT, whereas not one country has ever successfully funded a central government with a sales tax”. Which is an interesting point and I think worthy of discussion; I don’t think it is grounds for dismissing the idea of a sales tax to raise revenue.
How many governments existed at the time the United States was founded that were structured the way our founding fathers structured ours? Yes, there have been republics where citizens were represented. But how many divided the powers as ours and provided so many checks and balances? I am not saying there were none or have never been any similar enough. I am, however, suggesting that the founding fathers embarked on something that had not been tried before.
As I understand it, the VAT was initially supposed to replace the income tax, but some how the politicians never were able to fully let go of the income tax.
John,
As I understand it, national sales taxes were tried and discarded by a couple of other nations? Can’t remember which. My point in raising that issue was aimed at the “cold turkey” implementation plan for the Fairtax. I’d have no problem with going to a VAT overnight, but I don’t have the same confidence with a national sales tax. A prolonged phase in over five to ten years might make much more sense, but Congressman Linder informed me he doesn’t agree. He wants the full benefit immediately???Frankly, if push came to shove, I doubt that any Congressman would vote for HR25 as written. Risking the whole economy just isn’t their style, imho.
It’s not grounds for dismissing the Fairtax scheme, just grounds for making haste slowly!!
I have no problem with having a VAT and an income tax. One taxing consumption and the other taxing income. Why is there such a hue and cry to place all the eggs in one basket?
To: OtisCprmer et. al.
Howard Johnson has done a supurb job ( http://www.fairtaxblog.com/20051202/bill-hirschs-criticism-of-the-fair-tax-is-flawed/ ) of answering Mr. Hirsch’s comments. But, let me add just a few comments.
First of all, the term Yellow Journalism comes to mind. Just like Cynthia Tucker in Atlanta, Mr. Hirsch has a history of leaving behind the principals of professional journalism and practicing yellow journalism. He makes the fact fit his pre conceived notions and ignores reality. If one relies only upon his math, one could believe his contentions. But, his math is not only flawed, it is bent into a form needed (by him) to support nonsensical positions.
The Fair Tax is, indeed, a flat tax. It is also a sales tax. And, it is a consumption tax. But, it is more. Try to keep an open mind and think. Don’t just listen to anyone, including me.
Some people are smarter than others. That is a fact. You may not like it. But it is a fact. Some people are less “nice”, but more “capable” than others. You, again, may not like it. But it is a fact. Some people are willing to throw the dice and take big risks than others. And, some of those people win big.
Again, you may not like it. But, it is a fact. These people are the rich whom you so easily criticize. They are also the people who are the engine which makes our country work. They create jobs. They create products. They create wealth.
This does not make them bad people. It also does not make them a public troth from which any “less fortunate” (read lazy, afraid, jealous, wealth envy, underachievers, and even less fortunate) persons may eat with impunity.
You may remember your father or grandfather saying “There is no such thing as a free lunch.” Well, that’s not a very popular saying these days. But, that does not make it any less true.
If you don’t like the “rich”, get off your ass and make something of yourself. Now, I am not one of your “rich.” But, I do OK. And, I do not envy others who have done better. You should not either.
Back to the Fair Tax.
There is NO more fair system of taxation than the Fair Tax. IF, and only IF, it is implemented as proposed by current bills. It must eliminate all other Federal taxes. It must eliminate the IRS. (We need to get rid of a bunch of other Federal Depts starting with Dept of Ed, Dept of Interior, HUD et al) It must be revenue neutral. And, it must STAY revenue neutral.
The Fair Tax will not solve all of our problems. But, it will solve the most urgent. Approximately Eleven Trillion Dollars would return to the US economy overnight (Fair Tax Book), Congress would lose its’ power to intimidate taxpayers. Obama would lose his extra-legal police force. And, confidence would return to the US economy.
I could go on and on. But, if this does not convince you, I fear your mind is closed. All I ask is that you Read, Think and then make rational decisions. If we disagree, all well and good. But, we should not disagree for emotional reasons.
Bruce Maynes
http://brucemaynes.wordpress.com
I just wandered in here and I’m way late to the party…
The FairTax is regressive at all levels of spending above FCA (poverty level).
The short reason this is true – which NOBODY in this thread has addressed – is that under the FairTax, some spending is more equal than others. Specifically, spending on home ownership (esp on existing or used homes) is largely tax-advantaged, and home ownership is NOT evenly distributed across the income (or spending) continuum. Low earners seldom buy homes. (A majority of ‘poor’ homeowners are retirees who bought their homes decades earlier, when they were employed and had higher incomes.)
Whenever a homeowner and a renter have equal consumption (or spending) the renter pays more FairTax EVERY TIME.
When a homeowner and a renter have equal spending, the renter pays more FairTax AND enjoys less consumption, because homeowners enjoy (at least partially) tax-exempt housing consumption