Stimulate the Economy with the FairTax
As part of a plan for economic stimulus, presidential candidate Mike Huckabee includes the FairTax:
#5 FAIR: Move Toward FAIR TAXation
- My short-term economic policies will move us toward our long-term economic goal: Simply put, America’s federal tax system is broken. What we have now is a system that is failing American families and businesses. Our tax system burdens low and middle-income families, robbing them of the chance for upward mobility.
- Our tax system encourages outsourcing of American production overseas and the dismantling of our industrial base. It wastes hundreds of billions in useless tax preparation, paperwork and confrontation. It pits industry against industry, class against class.
- My FairTax proposal allows American workers to keep their entire paycheck, allows American businesses to compete on a level-playing field with their foreign competitors, and brings jobs and investment that are currently parked off-shore back to the United States.
- However, I recognize that passage of the FairTax will not happen overnight. In the meantime, I will eliminate the Death Tax, and seek to reduce counterproductively high personal and corporate marginal tax rates.
Having a supporter be President of the United States would add tremendous momentum to getting the FairTax message out and ultimately build the support necessary to see change in our tax system.
We are all complete fools….we are truly the boiling frog. A brand new IRS “rule†is that your accountant is required to either flag your return with an IRS form or fill out a form saying that they advised you that the tax advice they gave you may get flagged for an audit and has a likely hood of losing in court. If they don’t do that they may have to pay a hefty fine and risk losing their CPA license. CPA’s in the piece acknowledge that this new rule makes your tax preparers an agent of the IRS and will cost the tax payer even more money since the preparer will want to do extensive research before giving advice. It’s in this months FORBES magazine. This is yet another reason why we need the fairtax now more then ever and sooner rather then later. If you were a conspiracy kind of person it may cause you to think that the IRS is turning up the heat for entertaining the thought of the FAIRTAX. STOP the madness work on making the FAIRTAX a true alternative.
Dream on. It’s doubtful Huckabee will even win the Republican nomination, much less the general election, as long as he talks like this: “I have opponents in this race who do not want to change the Constitution. But I believe it’s a lot easier to change the Constitution than it would be to change the word of the living God. And that’s what we need to do is amend the Constitution so it’s in God’s standards rather than trying to change God’s standards so it lines up with some contemporary view of how we treat each other and how we treat the family.”
(From a Jan. 14 stump speech in Warren, Mich.)
@Bill Hirschi: What does that stump speech have to do with the very real notion that the FairTax is getting national attention from front runners in a presidential race? While I do like Huckabee, I wasn’t promoting him here in this post, but rather promoting what he is saying about how the FairTax would add a much needed economic stimulus — one that would be more more real and long lasting than simply lowering interest rates and increasing inflation and public debt.
President Bush, Nancy Pelosi, and Harry Reid should hold a joint news conference today and announce that they support a stimulus package that is revenue neutral. Institute the Fair Tax for 1 year!
Instantly Corporations profits will soar, which will result in more jobs.
Everyone will receive the benefits of $0 in taxes on productivity.
Everyone will receive a prebate check.
IRA’s & 401k’s will become tax free giving a boost to the retired!
All three will have the legacy of elimanating the Tax Code, even if for a year.
It would be made permanant after the 1 year trial and could begin on MONDAY!
Instead of sending a Prebate check to each household could it all be done on a debit card?
Quote from the link:
“Now is the time to unleash the economic power of the United States of America.”
This is what I think is the main promise of the FairTax. The Reagan tax cuts approximately doubled revenues because of economic growth. This was proof that supply-side economics works. However, Democrats quickly started calling it trickle-down economics because they believed it helped the wealthy the most.
I think Democrats should look carefully at the data because they are in a great position to benefit politically. If they can accept that supply-side economics works then they should see that the FairTax has the possibility to cause effects like supply-side economics on steroids.
Since Democrats are the majority in congress and apparently will be for the foreseeable future, they will get the credit for the economic growth. I think we all know that much of discretionary spending is used for political gain. Imagine the advantage for Democrats if revenues double or maybe even triple.
They could restore the Social Security trust fund and still have plenty for pork. I’m really surprised Democrats aren’t jumping on the FairTax bandwagon because they could be the heroes that saved Social Security and secure political dominance for years.
I wish fairtax would work. If you accept the premise that its voluntary, that companies will lower their prices 22%, that the military can pay 1/4 of a trillion dollars in sales tax, that its revenue neutral, its great.
Its just a shame — none of those are true.
Voluntary? Not for cancer patients — they must spend 100,000 to 2 million to stay alive. That’s 23K – 230K in sales taxes to them.
Its not voluntary for nursing home patients — they must spend 9,000 to 20,000 a month on their care. That’s 2100 – 4600 tax every month.
Its not voluntary for the parents of a brain damaged child, who need 400,000 a year care for that child.
You can say “oh, we wont tax those people†I know you wont.
Huge political pressure will force Congress to correctly exempt not just the hard cases, but of all of health care from the high sales tax. Two trillion dollars therefore will go untaxed, and the treasury will have 460 billion shortfall.
Fairtax rate just went up to 34% to be revenue neutral to accommodate the 460 billion dollar shortfall from not taxing health care.
The military and government cant pay 280 billion in sales taxes. Sorry. Sure, you can make them write a check. But that check for 280 billion wont be any net increase to the treasury, cause the treasury has to issue the check too. The result – a “wash” But not the wash Boortz an others claim. Its a “wash” as far as receipts. There wont be any addition the the Treasury.
And thats the whole point of applying the tax – to get the revenue in.
Fairtax rate just went up to 42% to be revenue neutral, to make up for loss of 280 billion.
You cant tax new housing — at least, you cant get the 110 billion the Fairtax expects to get for the treasury by taxing new homes. Since many people will simply avoid buying new houses, or buy less expensive homes, to avoid the high tax, this market segment will not contribute as expected to the treasury. Its impossible to tell how many people will avoid buying new homes, but since even small changes in interest rates effect housing sales, its very reasonable to assume a huge sales tax will change behavior.
Fairtax rate just went up to 46% to be revenue neutral to make up for the 110 billion shortfall from not being able to tax new homes as planned.
You wont be able to tax rent either. Few people even understand, Fairtax taxes rent. That’s a 190 billion dollar market segment. Fair tax was based on getting 42 billion from that into the treasury. Renters will scream bloody murder, and congress will exempt them to, or be voted out of office,and the next congress will grant the exemption.
Your tax rate just went up to 48% to accommodate loss of that 42 billion..
I’m sorry to say it, cause I wish FT would work. But it cant.
Furthermore, many people promoting this concept know it cant work.
My sincerest hope is, the Fairtax passes. The leaders of this movement will have a lot of explaining to do.
I would be in favor of a flat tax x % strait across the board for individuals not business.
If we had a flat tax there would not be a need for the IRS except for business.
The IRS complains they do not have the people to keep track of the tax payers.
This way every one wins individual no longer have to fill out a 1040 business can keep their lucrative tax laws the IRS will have the amount of people need to keep watch on companies.
Mark -you forgot foreigners like me who are expected to pay an increased share of the US tax burden if we are unwise enough to visit your fairtaxed country. A tourist always have choices – and value for money usually determines where I go.
Add in Americans who can earn tax free, fly to my country, and avoid the fair tax on their holidays and you can add another couple of percent to your calculation.
Mark,
You are conveniently forgetting that prices will end up about the same with the tax included.
I’ve shown a link in another thread from AFFT that lists a bunch of potential savings that the AFFT did not include in their calculations; compliance, tax gap and lost efficiency. I lately found reference to another study the AFFT apparently isn’t even aware of, here:
http://books.google.com/books?id=NtLrYVi6-u8C&printsec=frontcover#PRA2-PA12-IA2,M1
Professor Payne determined that an estimate for all these wastes equals 65% of revenues. So it averages out to pay a dollar of tax $0.65 of resources are wasted. I would like to see Professors Payne’s study, but I don’t feel like buying the book.
So adding up the impact of all this waste plus the business or corporate taxes plus payroll taxes all down the supply chain of any product or service, there is in fact every reason to believe prices will end up about the same.
This verifies something I happened to catch Neil Boortz say on the radio about 2 months ago. This was after his retraction of 100% pay. He said he had recently spoken to someone in upper management of a big chain store like Wal-Mart or Home Depot, but he was not at liberty to reveal which one. This person told him the day the FairTax goes into effect they will lower all their prices by the exact amount of the tax. I have a feeling that things like this will be in his new book.
This is what starting me reading everything I can about the FairTax. This was after having blow it off months earlier upon hearing the 23% rate.
Since all wealth is created by businesses, it makes complete sense to me to eliminate all these unnecessary wastes and allow them to spend every dollar and every minute then can to create as much wealth as they can.
Forigner,
Don’t worry prices will end up essentially the same. I don’t see how your country is going to be able to compete for US dollars value-wise since we will still have to pay your inefficient VAT + income taxes and other costs embedded in the prices of your goods and services.
Dsculling, I wouldn’t put too much stock in Payne’s results (BTW, he’s a political scientist, not an economist). His book is 15 years old and is based on the even older and flaw Arthur D. Little tax compliance study. This study was ridiculously simplistic in it’s methods. To estimate the time required for a business to fill a form, they counted the words in the instructions for that form! And this predates computers automating much of the reporting.
And even if this inflated 65% of revenues estimate was true, taxes on corporate income in 2006 generated ~$370 billion. At 65%, that would be about $240 billion in compliance costs for businesses. The FairTax base is ~$11,000 billion. This means the compliance costs were only ~2% of the base. Not much room for price reductions due to compliance costs there.
This also assumes no compliance costs or economic inefficiencies due to the FairTax. That’s obviously not possible.
Payne has a PhD in Political Science. Are you suggesting Economics has nothing to do with Political Science? Yes his book 15 years old, 15 years of the code growing ever larger and more complex.
In discussions of the FairTax opponents always digress to simply waving off the evidence. It is entirely valid to count the number of words to help determine how long it takes to read something. You still have to read the instructions even if you do use a computer. Here’s a link with charts about the growth of the number of words of the tax code and lot’s of other stuff.
http://www.taxfoundation.org/files/sr138.pdf
You did not provide a link of whoever it was that claims the Arthur D. Little study was simplistic. I suspect it was someone that is trying to please the culture of spending other peoples’ money that is the US congress. You should suspect any info coming from the government or government lackeys addressing government efficiency.
You are not counting small businesses which is supposed to be around 80% of all businesses. Regardless, only businesses create wealth. I’ve shown 2 separate sources that suggest huge wastes inherent with the current system. There is no good reason to make businesses or individuals waste such a potential huge amount of time and money. Businesses should be free to spend every dollar and minute they can creating wealth…wealth that helps us all.
The costs to business to send in the FairTax is orders of magnitude less. In appendix A of this link you’ll find the one page form business will use.
http://www.fairtax.org/PDF/PlainEnglishSummary_TheFairTaxAct2007.pdf
I think you expect to be safe no matter what changes there might be in the tax code. Did President Reagan prove to the citizens they would be safe before he reformed taxes?
It appears tax reform discussions always boils down to those who expect promises of safety and security and those who believe that liberty is always a better choice.
“Those who would give up Essential Liberty to purchase a little Temporary Safety, deserve neither Liberty nor Safety.” Benjamin Franklin
Mark,
You are very right many people will be concerned when they see how much tax they are paying to run our federal government and yes the FairTax puts it right out for all to see. But the truth is they are already paying those taxes right now in a form that is hidden from their view in higher prices for their rent, health care, food, etc. It’s your numbers that don’t add up because you add the FairTax on top of the embedded taxes of the current system. That’s why it’s so important to repeal the 16th amendment at the same time.