Best Strategy for Getting the FairTax Passed?
From the mailbag:
I know there are a lot of efforts at education, promotion, and support of the Fair Tax. But are there any concrete strategies discussed or developed as to how to actually get it passed based on available modalities? This seems particularly appropriate since the FT must be passed by Congress yet the FT takes much of the power away from the very same Congress and lessens opportunity for individual enrichment of legislators and former legislators.
Considering the primary results to date, is a McCain-Huckabee ticket the best strategy? With Huckabee as VP, his influence in the Senate coupled with not having many other duties, will put him in a better position of stewardship of the FT through Congress than if he was President. As long as the President is supportive, this seems at first blush to be optimal.
With two years to lobby the American public from the White House, the mid-term elections in 2010 seem to present the best chance for the votes in Congress to pass the FT with a president in place who would sign it. This would also seem to be supported by the perception of McCain as the least-divisive of the candidates. While no president will likely ever repeat Reagan’s sweep of 48 out of 50 states and its resulting populist mandate, I think adoption of the Fair Tax can only occur under a president with significant popular support.
OTOH, is it still too early to discuss strategies? Will such discussions detract from general education and persuasion efforts by, in effect, putting too many eggs in a specific sequence of events? Or does lack of a specific strategy dull the point of the spear?
Thoughts?
A good question, I’ve been wondering the same thing. My personal opinion is that Huckabee as pres would have an opportunity to explain his tax proposal (FairTax) to the masses via a presidential address. Don’t know how realistic this is, but what better way to get the nation to start talking about it. If the masses know about the plan, they can influence the congress more than Huckabee could as VP. That being said, a pro-FT VP would certainly help.
2010 does sound like the best year to pass the legislation, though anytime sooner is certainly better.
Of course, I’m no politician, so there are bound to be many other issues that make strategy much more complex.
I agree there are many complex concerns and discussing them is a good idea. Different people will know about different “gotchas” to consider.
If Huck is at the top of the ticket, I think the FT will be used as a Red v. Blue campaign issue... so it will be tagged a republican cause, so democrats will oppose it. The general election will sow bad blood like it always does, so on any issue that has high profile in the election, it will meet opposition out the wazoo in Congress unless the presidential election is a landslide. That makes Huckabee as VP an arguably better strategy if the top of the ticket will use the White House to support the Fair Tax aggressively. In short, the FT stands a better chance if it is *not* a central issue in the general presidential election because if it is, it can engender intransigence on the FT by the defeated which will delay if not prevent passage of the necessary constitutional amendment by the 2/3 majority.
The OP has a big point that has concerned me for a long time. Congress will not willingly give up power — particularly congressmen who count on profiting from their position. Two years to the interim elections seems like a good plan to make existing legislators, as my granddad would say, “defecate or get off the pot.” Either sign on and support the FT, or we will support someone else who does to replace you. Even if the FT was passed before 2010, the constitutional amendment to repeal the 16th Amendment will not.
I think the most realistic and logical strategy is to see the 2010 election like the 1994 midterm elections where the “Contract with America” was the platform, with the Fair Tax heading the list.
Joshua,
It’s a little too soon to be worrying about strategy. While it’s exciting to have a presidential candidate that can spell Fairtax, Huckabee has also raised the level and quality of criticisms, and, having read all Fairtax related articles and blogs for the past couple of months, I’d have to say the critics are winning. The Fairtax plan tries to do too much too quickly and is easily demagogued (sp?).
Realistically, even Huck is now saying that it will take time. Seems like his staff wants to leave him a little wiggle room?
Congressman Linder has been working on HR25 for over ten years and there is still only one member on the 13 person W&M Revenue subcommittee who supports the Fairtax. And that committee is where the legislation has to begin. On the entire W&M committee, there are only two supporters out of 41, so it shouldn’t surprise that there are 70 cosponsors. It’s a free ride with no risk of having to actually have to vote on this tax revolution.
Lack of a strategy doesn’t dull your spear–there is still a lot of education and possible revision of HR25 ahead.
I think the best strategy would be to get states to start implementing the Fair Tax first. It seems some states would be more receptive to moving to just a sales tax then our federal government is. In fact, since most states have initiatives, the legislature wouldn’t need to be involved at all. Then after people got used to the idea, they would ask they’re federal representatives why we don’t do something like this on the national level. At least working both these angles could be useful.
I strongly feel the FairTax will really come to light IF the list of candidates is pared down to two and Huckabee is one of them. Regardless of who the other may be, he would have to defend his own tax plan rather than give a few sound bites about it. Debate between Huckabee and any other would allow for the FairTax to be openly compared to a VAT or Flattax on national TV.
A debate would be good. In fact, rather than a mish-mash debate, I’d like to see debates of the final general election candidates on specific topics. One on tax policy, one on foreign policy, one on domestic policy, and one of open topics.
#3 Hank Van Gieson wrote:
“...having read all Fairtax related articles and blogs for the past couple of months, I’d have to say the critics are winning.”
I’ve been reading and participating in many blogs and forums for quite some time myself and I have to say the opposite is true; the FairTax is catching on. Of course we are both presenting our observations which depends on which forums or blogs we’ve visited.
If you visit a site like the Wasingtonpost.com you’ll find an awful lot of people basically venting, rarely if ever backed up by facts. Bartlett and the President’s Panel on Tax Reform are widely quoted yet are extremely easy to refute. However there are many that take the word of them as gospel and wave off the considerable work of the AFFT as some sort of propaganda.
If you read the PPTR you’ll see that the President didn’t really tell the panel to analyze other tax reform plans, but to make recommendations on how to repair the current code. The vast majority of the PPTR report appears to be descriptions of and an attempt to sell the President on one of their plans.
Also there is no way to check their work since they did not release their methodologies. They produced a chart that is often used against the FairTax, but not the data used to make the chart. I thought we had the Freedom of Information act, why don’t they release the information that AFFT keeps asking for? Bartlett keeps using the PPTR to argue against the FairTax. Every one of his arguments that I’ve seen are faulty or based off of wild assumptions.
On the other hand we have the AFFT. At least 80 highly credentialed professional economists have worked on or reviewed the FairTax. There are dozens and dozens of papers fully explaining all assumptions, equations and calculations and these are easily available for anyone to scrutinize.
That one would prefer Bartlett’s and the PPTR opinions over the well documented work of the AFFT is simply irrational IMHO. There most certainly are many irrational people posting on the Interent, but I’m sure there are also many thoughtful critical readers that prefer to lurk and are learning from these arguments.
dculling,
“Sec. 3. Purpose. The purpose of the Advisory Panel shall be to submit to the Secretary of the Treasury in accordance with this order a report with revenue neutral policy options for reforming the Federal Internal Revenue Code. These options should:
(a) simplify Federal tax laws to reduce the costs and administrative burdens of compliance with such laws; (b) share the burdens and benefits of the Federal tax structure in an appropriately progressive manner while recognizing the importance of homeownership and charity in American society; and (c) promote long-run economic growth and job creation, and better encourage work effort, saving, and investment, so as to strengthen the competitiveness of the United States in the global marketplace.
At least one option submitted by the Advisory Panel should use the Federal income tax as the base for its recommended reforms. ”
I have difficulty understanding how any thoughtful person can read this portion of the Presidential Directive and conclude that the purpose of the Commission effort was to recommend ways to tinker at the margins of the current income tax law???
As for Bartlett, I’ve read his paper closely, and can find nothing faulty or nothing based on wild assumptions. He is entitled to his opinions, just as are every one of us, but I will say that his background certainly gives him a clearer understanding as to what tax changes are possible in the wonderful world of Washington, DC.
Rather than vilify BB, it might be more productive for us to address some of the key issues he identified? Taxing governments is #1 on my list, but I’d also like to debate whether the prebate is a cash grant entitlement or a tax refund? Makes a huge difference when calculating effective tax rates. There is also a relatively new BHI study September 2007) that deals with the Fairtax and the States. The study report again raises questions about “Who Pays” and adds some complexity by “taxing the tax”, and taxing federal consumption in the state of record. Lots of questions, not many answers.
Response to Hank
From the introduction of the report The President’s Advisory Panel
on Federal Tax Reform:
“President George W. Bush formed this Panel to identify the major problems in our nation’s tax code and to recommend options to make the code simpler, fairer, and more conducive to economic growth.”
I read that as “fix the current code” which depends on how much of it is considered “major problems.” I certainly agree that the entire 67,000 pages of code could easily be considered as a “major problem.” My main point was that the President didn’t really tell them to analyze other tax reform plans.
So did you notice the colorful graphics? The fancy fonts? The cartoons! It’s a sales brochure! I guess I shouldn’t be surprised so many people bought it and didn’t bother asking for silly stuff like data to back up the claims.
As for Bartlett, which paper are you referring to? I’ll be happy to go through and point out all the errors. But that would be pointless if you are going to simply wave off the considerable well documented work of the AFFT as some sort of propaganda.
The federal government taxing itself I’ve already addressed: within the range of the tax it doesn’t matter how high or low prices may fall because the government gets it right back the next month. This assumes monthly government consumption is approximately 1/12 yearly consumption.
I really don’t intend to delve into all the minutiae of the tax laws of 50 different states, but I will be considering my own state of Nebraska. I’m assuming adopting a state version of the FairTax will be the easiest and most compatible thing to do.
The prebate is supposed to be a tax refund ahead of time. It doesn’t matter if they have income or not because everyone consumes and someone pays for that consumption. How does it matter if it’s considered a refund or entitlement?
With the current income tax it matters very much what one’s income is from year to year. A head of household could have high income and corresponding high taxes for one year then lose their income and have to live off savings the next year. If we all agree no one should have to pay taxes at or below the poverty level then that head of household was over taxed when you consider a two year time frame.
It appears it’s difficult for many to see that the current income tax is a discrete collection and refund system and the FairTax is a continuous one. The continuous FairTax system is superior in many ways because of its self-adjusting nature.
dculling,
If the President didn’t direct them to analyze other plans, how do you explain Chapter 9?
The Bartlett piece is the one in Tax Notes, which we all have been discussing. Tell you what, pick out three significant errors for me, and we will see if you are complaining about inaccurate statements or just a difference of opinion.
Your assumption about Nebraska adopting a Fairtax may be in trouble. Read the September 2007 BHI study report entitled: “Fiscal Federalism”. It seems that the Nebraska taxes would have to rise by over 1% under a Fairtax type plan. Sounds like a tough sell to me?
Afft has always held that the prebate is simply a tax refund in advance. The trouble is that the prebate isn’t based on consumption or taxes paid, just family size and the annual poverty level. The prebate is actually a cash grant entitlement, and will be treated by everyone as an income supplement to be saved, or spent and taxed. It makes a huge difference in calculating effective tax rates. For instance, when treated as a tax refund, the effective tax rate for someone grossing $10K would be zero, but if you add the prebate to the gross income, the effective tax rate would be over 21%. In fact, every one who has gross incomes under $100,000 would have a lower effective tax rate under current law if the prebate is just additional income. So, which is it, a tax refund or additional income?
Hank, your discussing perception with regard to the rebate, and in that sense it is a valid argument. I think it will be perceived as it is stated or issued, as a tax rebate, but that’s just my view (and a historical view). People have negative tax rates today with earned income tax credit and such. This is nothing new. Now, my point is that perception does not translate into economics. That’s why Kotlikoff called it psychology or political science. So I take issue with the statement that “it makes a huge difference in calculating effective rates” because effective rates are not calculated like this. This is a fabricated economic calculation for determining an effective rate. Effective tax rate is a standard economic term meaning the amount of tax an individual or firm pays when all other government tax offsets or payments are applied, divided by the tax base. The rebate is a government tax offset or payment. It is subtracted from the tax, not added to the base. Now you can call it what you will and perhaps we can give it a new name, but let’s be strait that this is not standard economics in defining tax incidence. I think we have enough legitimate arguments and criticism without having to make up new economic methodologies.
Morphh,
You are quoting Wiki, but there are several other online definitions that say that the effective tax rate is simply tax divided by income. Tell me, Morphh, how should I treat my SS income when calculating my effective tax rate? It’s a government payment, so do I ignore it for effective tax rate discussions? Are you contending that the SS payment is a tax offset? I don’t think so. It’s welcome income from where I sit.
The prebate is only a tax offset because AFFT says it is. I agree it is a government payment, but I’m still not sure how that plays. My point was that, no matter what AFFT calls it, a cash grant entitlement is supplemental income, it will be saved, or spent and taxed, and the amount of taxes paid is quite different from what most folks believe after reading the AFFT stuff.
The tax legislation calls it a rebate, with the express purpose of reducing the tax burden. Your social security payment is not part of the tax code for reducing your tax burden. It is issued as income and treated as income. Wiki uses a more global definition that applies to a broader set of tax systems, and not the limited income tax definition that your using. Income taxes use deductions, so your reducing your taxable income and getting returns for taxes paid (and not in some cases). The definition would still apply with a refund as it would subtract such from taxes paid. “Tax” being the implied word there, since what defines what you paid in tax per that definition - taxes minus offsets.
The best strategy to pass the FairTax is to get the American public soundly behind it. We can do that by removing the unfair, non-FairTax elements in HR 25.
HR 25 is not the FairTax as developed by AFFT - just an approximation. The FairTax principles it leaves out are what gives propagandists like Bruce Bartlett all the ammunition needed to dissuade the public from the FairTax.
There are at least eight major FairTax shortcomings in HR 25 that must be corrected if there is to be a sufficient groundswell to get it passed.
The prebate, mentioned earlier in this blogstream, is a good first example where HR 25 is wrong. It is fatal to have it given as a monthly cash stipend.
To work at all, it must be given as a credit - good against the FairTax only - and non-transferrable. That way, it won’t be squandered as cash for frivolous things, but be useful ONLY to pay the FairTax up to the poverty level of expenditures for services and new items.
The prebate must also be given, not to those with a Social Security number, but only to those with valid US state- or territory-issued Birth Certificates. Some 20 million illegal aliens have SSNs - many tens of thouands have the same SSN by one report I read. The SSN is one of the most readily falsified or stolen items.
Further, the Amish for example, now exempt from the SS system, do not have and will not get SSNs. They would begin paying that SS portion of the FairTax after transition, but would be compelled to enroll in the SS system - for them that is non different than lying, as they saw through the scam at its inception - simply to get the prebate.
It is preposterous for HR 25 to in effect say that a SSN is superior to the documents that underly it - namely, a Birth Certificate.
The Birth Certificate is the preeminently preferable prebate identification, particularly since it will be the same entity that issues them - the states - that collect and administer the FairTax.
Let’s try to have the prebate good for tax only, non-transferrable, and not tied to the SSN.
Thanks,
Bobby Chofters
I am not an economist but, rather, a flaky, arty type photographer however I do pay taxes and on that basis I would like to weigh in.
While the numbers bandied about for or against HR25 sometimes seem to sway far off into the the esoteric, one thing is clear from my perspective. The Federal Government’s present method of collecting taxes is far less about raising revenue than it is about providing a means for social engineering and for constructing power bases in Washington, DC.
A 67,000 page tax code document is obviously not intended to be read and understood by the average citizen. In a rational nation, any system which legally required full compliance by its citizens would be written so as to be understood by the lowest common denominator of reading comprehension.
Our federal tax code is purposely designed to obfuscate and on that basis alone it is unfair. Any tax code which would require taxpayers to provide financial support to a veritable army of accountants is a flawed tax code.
None of this is news.
But the question remains, how does one convince the American public, a public which views tax refunds as a net sum gain rather than as the return of money confiscated from their paychecks, that the system needs to be changed?
How do you explain HR25 to people who are convinced that a national sales tax would actually be in addition to the withholding taxes currently being collected, without regard to what they are being told by fair tax supporters?
The American people are woefully uninformed about the merits of Fair Tax and any attempt to educate them will certainly meet resistance from the those that benefit from the status quo.
“The Fair Tax Book” by Neal Boortz and John Linder, an easy read with a wealth of information which would help people understand HR25, has been remaindered.
Those of us who are interested enough to seek out information on our own are generally regarded, by our families and friends, as kooks or worse yet, some sort of anarchists.
The other side of the coin is the resistance, in Washington, DC, to anything that would erode the power base of our elected officials. No matter what happens in the House of Representatives, Charles Rangel, Chairman of the Ways and Means Committee has stated unequivocally that he will never allow a fair tax measure to come up for a vote.
Until the proponents of change to our tax code come up with a way for Mr. Rangel, et al, to control social engineering, add to their spheres of influence and fatten their financial warchests, without the services of the IRS and the current bloated tax code, I fear the entire subject will remain academic.