Why Not Start in the States?
In The FairTax Book, Boortz explains that for states without any current sales tax infrastructure, the FairTax won’t be a burden. He claims that states will see the value of the FairTax, and rush to emulate it locally.
I agree, but considering that a national FairTax is probably still several years out, why don’t we turn this around and go the opposite direction? Georgia, thanks to Neal Boortz, is one of the most FairTax-friendly states around. Wouldn’t it make sense to implement the FairTax here to show other states and our national legislatures how much of a difference it can make?
We’ve all seen how many small corporations choose to incorporate in Nevada, due to the very favorable tax climate. There is no state income tax, state corporate tax, and a 6.5% state sales tax. Of course, they have a certain “vice” tax they implement to help raise revenue, but if you’re not a casino, the tax climate is very, very favorable. But Nevada has a bit of a problem: it’s an empty desert. Outside of Las Vegas, Reno, and a few other smaller cities, there is not much there, both in livable land or in a workforce. Even so, Las Vegas is growing by leaps and bounds (rated as one of the nation’s fastest growing cities the last several years).
I think a state like Georgia could reap incredible benefits from implementing the FairTax. With an educated base of workers, businesses would be quite excited to set up shop here. Businesses bring jobs, jobs bring prosperity, and prosperity bring spending power to but items on which the FairTax would be charged. And given the smaller budget and tax footprint of individual states, we might be able to get a way with a state FairTax rate in the 10% range, barely higher than the sales tax rates of places like California and Rhode Island.
America was built upon the principles of federalism, for two reasons. First, it allows more local autonomy, such that individual states (used to) have wide powers to set their own policies. Second, it provides a built-in laboratory for testing competing government policies. Just as California has long been the testing-platform for liberal government policies, states like Georgia could take on the mantle of proving the worth of the FairTax. When we see how favorably Georgia– under the FairTax– competes against other states, and other states work to emulate Georgia, will it be any surprise to see a swell of national FairTax support?
I totally agree with using the Fair Tax in a state first to show everyone that it can work. Can’t think of a better way to show that ney sayers are just blowing hot air.
One major aspect of the Fair Tax is repeal of the 16th amendment. Ratification of a constitutional amendment will depend on the opinion of state legislators. Furthermore, formal state resolutions addressed to the state’s delegation could help drive the reform forward.
After receiving a request and reviewing the above reasons, the FairTaxScorecard.com quickly added support for tracking state senator and assembly member positions.
As we continue lobbying congress for a Federal Fair Tax, we can also begin building support in the state houses. Please write your state houses and send your representatives’ position to the FairTaxScorecard.com (FairTaxScorecard ‘at’ Gmail.com).
This is the logical next step for both national and state Fair Tax reforms.
I do not believe it is wise to start some other program ar get into other areas. We need to concentrate on the job at hand. The main objective, or so I was led to believe, was to abolish the IRS and to repeal the Income Tax. There is an old saying where I come from that says, YOU CAN NOT RUN TWO RABBITS AT THE SAME TIME.
It would be wise to stick to the most important one. I have been active in trying to do away with the Incone Tax and the IRS for the last 25 years. I know that we have never been this close to accomplishing that goal. We have national exposer and it is being discussed on national radio and national T V. This has never happened before. We need to strike while the iron is still hot.
Lets all stay the course and get this done. We owe it to our children, grandchildren and great-grandchildren. Yes I have all three!
I praise and thank God that I live in this great and wonderful land and still have the opportunity to help return our government back to a government that reflects th will of the people.
Rudy V. Minson
I like the idea. It stems back to original notion for the states to be experiments or laboratories in liberty. Having a state like Georgia implement all of the proposals for the FairTax would be very fascinating. I know that Georgia has been on it’s way to eliminating the property tax for some time now, this will simply be one more step forward.
My only caveat on this idea is that it won’t eliminate the embedded federal costs. The State costs will be able to be pretty much flattened due to it’s widely spread out positions under the FairTax, but how much will that affect prices?
The ultimate appeal of the NRST is that it’s national, and putting it into effect would affect all things produced and sold everywhere in the US. A State FairTax would most full apply to things made only within the State.
But I suppose that is the reason why you mentioned Nevada above. Businesses would definitely flood into Georgia to take advantage of the new tax situation, and people from around the country would flock to Georgia to take advantage of it’s (relatively) low cost goods.
Well, we’ll never know until it’s tried!
Here is some recent information I aquired about Houston’s thoughts on the 16th admendment…I know this discussion is on getting the FairTax done on the state level, but I saw Bill discuss this above!
Houston’s plan is to get the votes lined up for HR 25. Once that happens, they will include on the bill that the FairTax will go into effect in x amount of years contigent on the repeal of the 16th admendment. They stated that they do not want to allow Congress to have both powers of taxation as we all know it will probably be abused, and most citizens would believe the FairTax was the cause!
I definitely believe that a FairTax within the states would be great at getting the country comfortable with a large national tax change. However, we have to be careful and make sure each state does in properly, and that we don’t have horror stories to contend with when the FairTax issue is common among the people!
Though we’d love for the 16th Amendment to be repealed (it can be done in spite of the difficulties), the government would still retain the plenary power of taxation. Income taxes in America didn’t start with the 16th Amendment, the non-necessity of apportionment did.
The real advantage I see in eliminating the 16th would be that we could return to the primary example of the Founders, in what taxation should be like. Apportioned, and reps/population taken into consideration if a direct tax is to return.
Perhaps in America’s “Amendment repealing fervor”, we’ll eliminate the 17th as well. But maybe that’s just too much for people. I’d settle for John Shadegg’s Enumerated Powers Act in the mean time
One of the biggest advantages of the FairTax is the elimination of corporate taxes by placing taxation where it has always been, on the people.
But by having a much higher sales tax in just one state, you have the increased possibility of going outside of GA to purchase your goods.
A national FairTax would significantly reduce that becuase of border crossings and manufacturing that is located in the US, vs just maufacturing in GA (cost savings) and shipping to Alabama.
Combine the fact that a heavy GA push would take significant resources and energy from the national effort and not have as many positive results and you have a new tax system getting a poor shake in public opinion.
Moshe,
You bring up an interesting point. California, for example, could do a FairTax much easier because so few people live near Nevada or Oregon, the low-sales-tax states. Georgia’s biggest population center is Atlanta, which is only an hour+ drive from Tennessee, South Carolina, and/or Alabama. I could see that being a problem. A better starting state may be Michigan, Colorado, etc.
As for taking resources away from the national effort, I don’t know how damaging that might be. If we managed to make it successful in Georgia (or any other state), the payoff of successfully running it would make it a much easier sell in the rest of the country.
If we don’t focus on the National FairTax it will never happen. All resources are needed to counter balance the congressional level addiction to the 16th amendment and the insatiable interpretation by the IRS of what is taxable, there may be no more important goal than repealing the worst amendment ever enacted. Our country is slowly slipping in the world view due to taxed productivity and the lobby opportunities it enables. We need to lift this yoke from our necks to regain our leadership in the world.
Think about the pervasiveness of the income tax. Here’s an example: If you ask the IRS (or a utility) you will find that even digging a ditch yourself and allowing a utility to lay lines in it to serve your home is considered taxable income to the utility. The utility is forced to collect it either from you directly or via the developer if you by a new subdivision home – either way you pay it – even though you already pay your own income tax. There are hundreds of similar examples.
Too many distractions and one poor implementation at the state level will end any hope of the FairTax at the Federal level.
National AFFT is actually working on state level support as well…they just don’t have the volunteers yet to give it the focus it deserves. There are a few reasons to work the FairTax with your State legislator as well as the federal. First, their are members of the National Association of State Legislators which holds a convention once a year and passes resolutions for or against various legislation. Last year, a few of them opposed to the FairTax tried to pass a resolution against it. We wokred hard to make as many contacts at the state level as possible to keep this from happening. If that resolution passed, federal level legislators against the FairTax would use it in hearings as “evidence” that the FairTax wouldn’t work because “it would hurt the States.” State legislators are much easier to sit down with then those at the federal level and it can be very beneficial in preventing something like this in the future.
Once I get their support, I’ve begun asking state legislators to introduce a resolution of support at the state level that 1) calls on the federal level legislators to co-sponsor and work for passage of the FairTax and 2) calls for the repeal of the 16th amendment. This is the second reason it is good to do. Many detractors state they don’t support the FairTax because they don’t think we will repeal the 16th amendment. This paves the road to make it happen.
Thanks for the great efforts.
Why can’t we raise the poverty line to $25,000. I need all the money I spend for basic necessities. I would like some of the money over $25,000 to save for retirement.
Social security is not enough. Many Americans do not have a good investment portfolio.
The problem I see with the FairTax is that life after working hard will get boring if I can not invest in Real Estate.
I would like this thought be entered as a blog to see if others would like a bigger prebate check too.
James Russell
Let’s be very clear on something here:
Providing some sort of rebate system is key to providing a progressive sales tax. However, the poverty line was agreed to as a rebate position as the zero point for the specific reason of NOT engaging in tax-based welfare programs.
As much as possible, the FairTax aims to try to provide a 0% tax level for the poor, not a welfare program. Once you begin going down that road, it’s hard to go back. And every dollar provided in prebates is just more taxes for everyone to pay at the stores.
Another way to think of it is, gee, why isn’t the poverty line $50,000 or $60,000. Sure I can take care of my household and entertain them at that level, but sometimes we still have to micromanage our checkbook. Who wants that bother? Why can’t I simply have the government provide me with the funds I need to buy my house, or retire, or whatever?
The answer is that it is ridiculous to expect the government to give you security from ‘cradle to grave.’ The government can’t accomplish such a goal, because it is awkward and inefficient at providing for the myriad needs of society.
You know who does do well at providing for people? PEOPLE DO. Individuals provide best for themselves when the government just gets out of their way, and taxes them less.
Let’s not ask for bigger prebates. Instead let’s see if we can shrink government and lower tax rates across the board, making the prebates less necessary.
James,
I am in violent agreement with your last statement. Shrinking the bloated federal government ought to be our #1 priority. However, I fail to see where simply changing the way revenue is extracted from us all will in any way move us toward a smaller, less costly federal government. In fact, if the Fairtax works as advertised,(i.e.-an economic boom), all you will have done is provide more revenue for the feds to spend. And spend it they will!!
My concern with the prebate, a $600 billion entitlement program, is that under current law, at least every worker contributes 7.65% of payroll to their medical and retirement fund. Under the Fairtax, workers at the poverty level and below will pay nothing, zip, nada in federal taxes. That means that all of us with consumption greater than the poverty level will be paying the whole tab. If that isn’t a giant welfare plan, I don’t know what is. Why should I pay for the retirement and health insurance of a less fortunate person? What would be your reaction if I asked you to pay a share of my insurance premiums? Face it, the Fairtax completely untaxes businesses, untaxes the poor, lowers the tax burden on the wealthy, and the rest of us are left holding the bag. Is that really fair?
Is it really fair for Medical and Retirement funds to not really be trusts in the first place?
Is it fair that anyone who makes most of their money off of non-payroll sources doesn’t contribute anything to Medicare/Medicaid/SS?
Is it really fair for the government to be able to spend the money they say they are saving for you?
And is it fair for current tax welfare ‘entitlements’ to be more than twice the size of the prebate idea?
Today’s poor are effectively given a huge NEGATIVE tax burden in many situations. The FairTax tries to bring that number to zero or close, while remaining progressive.
But a tax bill can’t fix big government (at least not all of it). But it can enhance personal liberty, privacy and add greater efficiency, while using far less government administration (smaller tax bureaucracy by a factor of ten very likely).
It is perhaps not what you are looking for, Hank. But I doubt any single measure will effectively shrink government. But I will take the things I think are useful in that regard, and I think the FairTax will at least shrink the size of government in at least one area (no more or greatly reduced IRS). It is at least a step in the right direction.
The biggest sections of our government are Medicare/Medicaid/Social Security. Taken together they represent more than half of all tax dollars spent every year. Forget about your pork barrel senators, forget about the war in Iraq, these programs virtually ARE the Federal Budget. You want smaller government? Then let’s start being serious about NOT having these programs anymore.
James,
“Is it really fair for Medical and Retirement funds to not really be trusts in the first place? ”
Yep! They are trust funds with Treasury IOU’s as assets. Under the Fairtax, there won’t be any trust fund’s at all. Everything will come out of the general fund— unless you think Treasury is going to put some of the sales tax revenue into an account in your name every month? I don’t think so!
“Is it fair that anyone who makes most of their money off of non-payroll sources doesn’t contribute anything to Medicare/Medicaid/SS?”
Absolutely fair, because the lucky folks who have never been on a payroll do not receive any SS/MM payments. That’s fair, it seems to me.
“Is it really fair for the government to be able to spend the money they say they are saving for you?”
Yep! And that won’t change under HR25.
“And is it fair for current tax welfare ‘entitlements’ to be more than twice the size of the prebate idea?”
It may not be fair, or even relevant, but it’s scary as hell when one projects the growth of entitlements as a share of the federal budget over the next ten years or so. There is a train wreck coming, and drastic action is needed. Changing the way revenue is generated isn’t going to help.
“Today’s poor are effectively given a huge NEGATIVE tax burden in many situations. The FairTax tries to bring that number to zero or close, while remaining progressive.”
James, the Fairtax produces even larger negative tax burdens on the poor than current law. Kotlikoff’s study clearly makes that case. As I wrote earlier, not only does HR25 completely untax the poor, they get a bigger handout than they do now under the income tax. Where is the data to show the Fairtax tries to bring the negative tax burden to zero?
“But a tax bill can’t fix big government (at least not all of it). But it can enhance personal liberty, privacy and add greater efficiency, while using far less government administration (smaller tax bureaucracy by a factor of ten very likely).”
James, reducing the $10 billion IRS cost by some percentage, even if it were possible, is miniscule compared to a $3 trillion federal budget. The coming train wreck requires much more drastic action. I’m no Boortz fan, but his latest book has a chapter on policy changes he would like to see, and I agree with most of them. Included are : repeal the 17th Amendment; appoint a 10th Amendment commission (similar to the BRAC committee and recently recommended by the new Fed Chairman); eliminate the Department of Education; reform health care; end the war on drugs; term limits; privatize social security; etc. etc. All aimed at reducing the size and power of the federal government and returning responsibilities to the States where the founding fathers believed they ought to be!
Time is running out, and unless your generation gets focused on the real problem, God help us all!
I don’t pretend the FairTax is a panacea to big government, but it is at least one reform that I think helps in many aspects, and could ease other reforms financially by providing an economic boost (and thus a revenue boost too).
We all do what we can here & there. This just happens to be my little piece of trimming government down.
Others are doing the following:
Advocating school vouchers as a transition to a fully privatized school system.
Advocating a cold-turkey end to Social Security or a transition to a new program funded under better rules.
Advocating Medicare reform and such (many varieties on this).
So let’s drop this ‘generation’ crud. It wasn’t my generation that created this problem, it’s my generation that will have to clean up. I am trying to do my part by promoting solvency and transparency in government and economic growth for America via a much better tax system. It doesn’t fix everything. I don’t pretend it does. But let’s not accuse anyone of having their priorities out of order.