FairTax Page at Wikipedia
September 3, 2006 · Filed under: Education
If you haven’t already done so, check out Wikipedia’s page for the FairTax. It has grown over the months into a rather impressive introduction to the subject.
23 Responses to “FairTax Page at Wikipedia”
Morph — I just went on another rant on Wikipedia’s talk page on the FairTax. My apologies in advance if I have offended you once again.
All — Morph is one of the primary editors of the FairTax article on Wikipedia. Basically, it is very, very well done and (reasonably) balanced. Some of the citations seem a bit weak at times, however, and Morph doesn’t have time to chase down every citation himself. So, if any of you come across any good citations to studies or articles about the FairTax (both supporting the FairTax and criticizing it), I’m sure Morph would appreciate it if you’d take the time to edit the Wikipedia article on the FairTax to reference the citation.
If you are a technospaz like me, you can get on the “Discussion” page on the FairTax article and link to the citation and Morph (or someone) will probably find a way to reference it in the article.
Thanks Hayden
Morphh,
Having just read the basic Wiki article, I tend to agree with Hayden’s comments. Good job! I do have threee comments for your consideration:
(1) In the Legislative History section, it seems to read that either the House W&M or Senate Finance Committee can originate tax legislation. Only the House can originate Revenue bills-per the Constitution, Article I, Section 7.
(2) In the Sales Tax Rate section, you write that savings and investments are not taxed. This is in conflict with HR25, Section 801-806, Implicit taxation.
(3) When you write about the Prebate, you say that the Prebate makes the Fairtax progressive. I would argue that this just isn’t so. All sales taxes are regressive, and all the prebate does is move the starting point for regressivity from zero to an amount equal to the poverty level. Yes, the prebate untaxes millions of citizens, but it doesn’t change the fundamental regressive nature of sales taxes. (It was wrong to boo and hiss Rudy G. when he said that the Fairtax was regressive, and certainly didn’t reflect favorably on the Fairtax t-shirt wearers in attendance!)
I have to disagree on the progressiveness issue, Hank. It is perhaps fair to say the FairTax is less progressive than the current system (or at least less progressive than the current system is intended to be).
The amount of tax proportional to spending as a percentage goes up from the poverty level and approaches a limit of 23%. The curve doesn’t accelerate in slope, but that doesn’t make it regressive. It just makes it less progressive.
Let me also add that if anyone is interested in assisting, WikiProject Taxataion has about 650 tax related articles on Wikipedia. I do my best to keep on top of them but there is way too much to do. Particularly when you have Hayden buzzing in your ear about FairTax sources.
haha.. just kidding - Thanks for the plug
http://en.wikipedia.org/wiki/Wikipedia:WikiProject_Taxation
Hank, Thanks - I’ll look at rewording #1.
#2. I understand what your saying here and I’ll try to clarify it in the article. Savings and investment still would not be taxed here from my understanding. Your paying tax on a service, not on the savings or investment but on what you choose to do with it. Your bank or Investment broker can charge you FairTax on their service fees. If you roll this into the invesment, then it could appear like a portion of it is being taxed.
#3 I think that is says that it is “meant to” make the plan progressive, which I think is an accurate statement. I don’t think many would argue that this isn’t the goal of the rebate. How one may wish to define progressive or regressive and which base they apply it to consumption or income is certainly something that is disputed.
On a similar note and perhaps a new thread on this. I woudln’t mind discussing this regressive point in more detail. Here are some thoughts to get it started. Many charge the FairTax as regressive because they are using an income base to measure a consumption tax. They argue that since higher income families save a portion of thier income or invest it, they pay a lower percentage of their income in taxes. However, this example assumes that savings and investment are never taxed in the future (tax deferred). So the base of argument could be framed in taxing savings and investment. If either of these change to consumption, it is taxed at that time. So then aspects of regressive criticism lend the question - does it make sense to tax savings and investment before it’s used for personal consumption? Let’s get a little below the surface of the regressive question and clarify what is really being criticized.
Morph –
I’ll bite. You make an argument similar to that of Kotlikoff. To wit: in the long run, savings and investments are spent, and thus would eventually be taxed under the FairTax. Thus, the FairTax is an implicit tax on accumulated wealth. My rebuttal: As John Keynes famously said, “In the long run, we’re all dead!”
Seriously, the idea that ONE DAY either we or our heirs will spend our accumulated savings and thus be taxed under the FairTax strikes me as being nonsensical and flies in the face of reality. Once one has reached a certain level of wealth accumulation, the whole goal is to let the wealth continue to grow, and to live off a portion of the dividends or interest the wealth throws off, but never touch the capital. (I’m certainly trying my darndest to get there.) Thus, in the real world, under the FairTax, the great bulk of existing wealth will NEVER be taxed, because it will simply continue to grow and grow while becoming ever more concentrated in the hands of fewer and fewer families.
In all seriousness, don’t you see the potential for the incredible concentration of wealth in the hands of a few under the FairTax? I’m sure you realize that was one of the reasons the income tax and the estate tax came into being in the first place. (As well as why the French Revolution and virtually every Communist revolution occurred.) Extremed concentration of wealth is a really ugly thing and does not result in a dynamic economy. Go to any third world country (none of whom have an effective system for taxing the wealthy) and you’ll see for yourself.
Morph — Regarding tax articles on Wikipedia. You just gave me a good idea (which I will not have time to undertake, but I am throwing this out as an idea.)
One of my beefs about the FairTax is that I believe it takes steam away from other tax reforms ideas that I believe would have more merit, but which nobody ever heard of except for total tax geeks. For example, Dale Jorgenson of Harvard (who was formerly at least tangentally associated with the FairTax) has proposed a plan he calls the Efficient Taxation of Income. Michael Graetz of Yale Law School (who had a semi-debate with Boortz over the FairTax) has proposed an alternative consumption tax which would be combined with a simplified income tax for incomes over $100,000 per year.
I believe both of those tax reform proposals were very well thought out by serious economists/policy experts and would be a vast improvement over both our current system and the FairTax. But since they can’t fit on a post-card and dont have talk radio HOSTS (sorry, just an inside joke to Joshua) pushing them, they don’t have any traction. In fact, they apparently don’t even merit an article on Wikipedia.
But, Morph, you can change all that. You (or your minions) can contact Jorgenson and Graetz, have them send you a summary of their proposals, properly cited and all that, and you can post articles about them on Wikipedia, so those of us scoffers who dis the FairTax all the time will have something positive to promote as an alternative. How ’bout it? Who knows, maybe Joshua will even start a new thread called something like “Alternative Tax Reform Proposals.”
Morphh has minions?
On a side note, I don’t believe concentrations of wealth are themselves necessarily bad. In most historical examples, large concentrations of wealth were the end effect of socialism, warlords, or other tyrannies which were born of poor governments or perhaps the abuse of feudalist societies. The communist revolutions and other socialist revolutions against monarchies occurred because in those societies economic opportunity was basically non-existent for virtually everyone, and everybody knew it. In such situations it is easy to incite mobs to revolt against their rulers with the promise of plenty after the tyrants are deposed.
But there are no historical examples of a country being toppled by its citizens simply because there exist rich people among other free peoples. If the opportunity for economic improvement exists for everyone, then generally things go well and revolts don’t occur.
In addition most of the third world countries you mention have completely dysfunctional governments that hoard wealth to themselves by removing it from their people. This is not the same thing as there being rich citizens, rather it is a ruling class that imposes a tyrannical rule over people that accomplishes these concentrations of wealth by using force more often than not.
In short, it is not that they have a problem taxing the wealthy, they have a problem with their government taking all the money for themselves largely. And of course they don’t wish to tax themselves and redistribute it because they are thieves to begin with.
Hayden, that sounds like a good idea on the new tax reform articles. I’ll try to get started on it this week. On the aspect of concentrations of wealth, I’m sure Joshua could give us a proper John Galt speech about punishing wealth for what we perceive to be some good for society. To the thought, I wouldn’t mind a form of inheritance tax to prevent dynasties so long as it fit in the constitutional framework. The first man earned the money. I don’t feel the same obligations to the next generation. A little pressure to make them spend it.
But anyway, I was not intending to get into class warfare. I was wanting to discuss the economic merits of taxing savings and investment. I guess that’s the point, critics don’t argue the economic aspects of if this is actually a positive thing - they jump right to class warfare. Is this the wrong way to look at it?
Who is John Gault?
Maybe the taxing saving and investment depends on whether you believe in supply-side economics verus demand-pull economics. Supply-siders would say that by untaxing savings and investments, you get more investment and thus higher economic growth. Demand-pullers would say that if you tax consumption, you get less of it, which must negatively affect business.
I’m not smart enough to know the answer, but I do know that we live in a global economy, where goods can be produced and sold anywhere, and investment capital can flow anywhere. For example, over the last five years, I’ve been fortunate to have most of my investments in emerging markets, whose stock prices have gone up far, far more than the U.S. stock market. I’ve certainly benefited from the cuts on capital gains taxes, but the bulk of my investment capital didn’t go to create any new U.S. jobs — it went overseas. So this argument that we should untax capital to spur economic growth doesn’t really hold much water for me.
By the way, I know full well who John Gault is. That was just a joke.
There was another point I would like to make on the concentrations of wealth thing. Most of the richest people in America today have not inherited their money, they have earned it through business, celebrity or investment. That is to say, most of it is new money.
The great wealthy family dynasties of the pre-Industrial revolution days have largely passed on and are no longer the economic powerhouses of old, as the great fortunes have been spread thin across their many descendants’ inheritances, and very few of the latter generations have achieved similar degrees of success to their forefathers. So these great concentrations of wealth have a natural tendency to fall apart, as the exceptional situations and people who created those concentrations are nearly never not sustainable from generation to generation.
This also speaks to how people in a mostly free economy are subject to ‘the slings and arrows of fortune,’ even if they are immensely wealthy. The rich can indeed (and sometimes do) fritter away their fortunes (hello Michael Jackson). The poor can indeed strike it rich (hello Steve Jobs).
In a society that uses money, wealth is not a zero-sum game in which the wealthy can only be wealthy at the expense of everyone else. Wealth in societies that use money is always growing (there is almost no way to stop it), and there is always more to go around as people produce for each other and buy from one another. But that is a long topic to explain, maybe another educational thread on how fractional accounting and fiat money began is in order. Let me know.
I can’t seem to edit my previous post... ‘nearly never not sustainable’ should just read ‘nearly never sustainable’.
You guys probably knew that.
Shutting up now.
James –
I am sure I’ll incur the wrath of the John Gault folks, but I always thought one of the reasons our economy was so dynamic in the 20th century was precisely because we were one of the few countries that actually taxed wealth — particularly the passing of wealth from one generation or the other. This has created a culture in which, unlike other countries where “aristocratic wealth” is revered, here “old money” is almost looked down upon. Instead, people admire new money created by the entrepreneurs.
I think this cultural difference, and the fact that — to a certain extent, at least — our tax policies force each generation of Americans to create its own wealth, has led to the constant innovation that has characterized the American economy. In other countries, wealth tends to stagnate in the hands of a few, who are more obsessed with “hanging on” to their existing wealth rather than taking risks to making it (and the wealth of the country) grow.
So, call me a Marxist, socialist, commie-pinko, but that’s sort of how I view things.
I wouldn’t go so far as to call you a commie-pinko, but I think you give taxes far too much credit for creating a dynamic economy.
Our tax system has never really effectively curtailed the building of wealth or the maintenance of wealth (except perhaps the estate tax). Most wealthy people, to the lament of poor people everywhere, seem able to pass on all or most of their wealth to their children in one form or another, by maintaining wealth in investments, businesses, etc. to avoid estate taxation and other tricks.
Our tax system has been playing catch-up for nearly a century in doing this and has never been as successful as it wishes to be.
Therefore, I don’t believe the tax system can be given credit for tearing down any large fortunes or for forcing any rich trust fund babies to create their own wealth. Life does that.
Without the business acumen, celebrity or invention of their parents, the natural tendency will be for their fortunes to be dispersed across family generations. They will likely not create the kind of wealth their parents made, and will likely disperse it over a greater number of children and grandchildren, with similar occurrences happening each generation.
Can you name other countries where concentrations of wealth have occurred in free economies and/or the owners of that wealth are not monarchs, nobility, warlords, tyrants, or otherwise connected to government?
James — I am heartened to know that you don’t consider me a commie-pinko, so — in the spirit of forgiveness — I will no longer consider you a nazi-swine. (That’s a joke, Josha! Don’t ban me.)
You raise an interesting point regarding other countries, but honestly I don’t know how many other countires where the owners of great wealth were not monarchs, nobility, warlords, tyrants or otherwise connected to government. (I guess you could throw in organized cirme here as well, a la Russia.) Of course, my good buddy Karl and I would argue that the concentration of great wealth in the hands of a few goes hand in hand in CREATING and SUSTAINING monarchies, oligarchies, tyranies, etc., which we have so far managed to avoid in this country.
I would also argue that Western Europe and Canada, with their semi-socialistic models and high tax rates have done a pretty good job of keeping up with the U.S. in terms of prosperity over the last few decades. Yes, I know that France has 10% unemployment and all that, but overall I think most Europeans would prefer their economic systems (particularly health-care) over that of the United States. We’ll never know for sure, but in the past most of our immigrants came from Europe where the poor had no chance to suceed. We don’t have to many Europeans trying to immigrate here any more, so something must be working over there.
I think socialist practices can be made to work, but that they are far from optimal. Today in Western Europe and Canada economic opportunity is far greater than it was in the past, though not up to the level in the USA, and it has likely gotten things to the point where the vast levels of immigration have slowed.
However, it’s a two-part process as well. America was essentially a clean economic slate in the old days, with little government bureaucracy to tread through to come into the USA, which simply isn’t true anymore. The economic opportunities in America are still unmatched, but not quite as limitless as they no doubt seemed during the peak of immigration to the New World.
So ultimately I think the contrast between here and there is no longer as great and that is the thing to note.
However I would still argue that the concentration of wealth hasn’t historically created any tyrannies, but the other way around. Absolute concentration of wealth in a country is usually the symptom of tyrannical governance in one form or another, rather than the cause. When you can declare that all property, land and resources belong to (fill in the King, the State, the Godfather, or what have you) and back it up with force or law and/or arms, you get exactly what you describe as an extreme concentration of wealth.
James — Maybe you’re right. But eventually those tyrants who run those countries get so greedy that they start overreaching, even going so far as to pass laws abolishing the taxation of income and inheritances.
Over there, such actions would, of course, lead to revolution by the masses. Over here, we call it the FairTax!
I’ve started an article on Efficient Taxation of Income per Hayden’s request. I’ve also e-mailed Jorgenson.
http://en.wikipedia.org/wiki/Efficient_Taxation_of_Income
I’ll try to do the Michael Graetz one soon, once I find out more about it. I’ll also try to create something on the Freedom Flat tax and perhaps something under my userpage for the Kepner Income Tax ;-).
Kepner Income Tax on Wikipedia - http://en.wikipedia.org/wiki/User:Morphh/Kepner_Income_Tax
Hello everyone, I’m reaching out. I need your help. I tried to avoid requesting help as I did not want to unbalance the article with proponent content. But I’m at my ropes end. I can’t do this by myself anymore - I’m about to crack and walk away altogether. It’s hurting my work and family. The Wikipedia article needs more people in the discussion. I’m the only editor there that is for the FairTax and I’m being overrun with opponents wanting to distort the plan and bias the article. Please please - help out these FairTax and AFFT articles. I can’t keep this up. Wikipedia is one of the top search hits on “FairTax” so this is worth your attention and contributions. Create an account and participate. Thanks
I might oppose the FairTax, but I know Morph does a great job trying to present a balanced view of the FairTax on Wikipedia. (He even takes my suggestions at times, though he tempers some of my rantings.) So any help you can give him would be worthwhile. I might even go there and stick up for him some myself.