Linder Town Hall News
Pulled from discussion on Yahoo Groups...
Congressman Linder held a teleconference town hall meeting on April 28th 2008 (tuesday night) @ 7 pm on the FairTax. In the conference, he said that he would agree to add language to the bill to delay implementing the FairTax until after the 16th amendment is repealed. This was in the context of his meeting with Senator McCain, who said that we would have to repeal the 16th. Linder seemed to be implying that he was open to that idea, if that is what it took to get Senator McCain on board. He has no intention of withdrawing HR 25 from this session of congress and reintroducing it under a new bill # unless it would mean a major increase in support, such as getting Senator McCain. In the past, Linder has decided against making changes between sessions because of the difficulties surrounding informing all of the co-sponsors. Linder says that the bill will not come out of committee this year - while Chairman Rangel has been verbally supportive, he isn’t taking any action. He also said that the “flatter” tax proposal that Senator McCain has proposed isn’t revenue neutral.
It is quite common to hear the flat taxers object that we have to repeal the 16th first or else we would end up with both. In the past, Linder has also considered adding sunset language so that we would not have to delay implementation for several years until the 16th could be repealed.
So let Congress pass the FairTax and leave it up to the states to repeal the 16th Amendment and have the FairTax take effect. Considering the financial burden the FairTax would place on the states does he really think that’s a possibility?
R.I.P. FairTax
I realize I’m sounding like a broken record, but these “town hall meetings” are a farce. They are nothing but “rah rah campaign rallies.” Linder has never once debated the FairTax in a public (or, probably, a private) forum.
Not once. I wish someone would ask him at one of these “town hall meetings” just what he’s afraid of.
What if the fairtax commencement was tied to an amendment (repealing the 16th) being presented to the states, set to be phased in over five years, and finally removed from law if the 28th(?) Amendment was not yet ratified 2 or 3 years after phase-in was complete? I guess for that matter the fairtax commencement could also be tied to the ratification of the No Income/Payroll/Capital Gains/Corporate/Estate/Gift Tax Amendment.
Hayden,
Can you give more info on the Boortz/Linder Debate Issue? Are there some prominent people that want to debate them on the fair tax that they refuse to debate? Do we have some threads here that discuss that?
It is important to clarify the context of Congressman Linder’s reported statement. Congressman Linder apparently was not reporting on Fair Tax policy itself but on a conversation he had with McCain, indicating he, Linder, was open to such an idea if that is what it took to get Senator McCain on board. On reflection, Congressman Linder may reject the change or sponsor a modified one.
In the absence of getting a Presidential candidate on board, there would be no changes to the bill, if ever, until its re-introduction in the 111th Congress in January 2009. I have submitted my own set of proposed changes for Congressman Linder’s office to consider.
As fervent about the Fair Tax as I am, I would not support the Fair Tax if I thought we would end up with both a consumption tax and an income tax. That combination would be an economic perfect storm. Therefore I have proposed a “poison pill,” whereby the Fair Tax becomes law without the impediment of the prior repeal of the 16th Amendment. Such a precondition would assure that the Fair Tax never sees the light of day.
The bill would contain a provision, however, that if Congress should ever enact a Title I-type tax following the effective date of the Fair Tax, or if Congress and the States should fail to repeal the 16th Amendment within ten years after the effective date, the Fair Tax is vacated, and the Title I-type taxes are reinstated prospectively. This poison pill would leave Congress with enough of a mess on its hands that it will be loath to enact a Title I tax and would be diligent in repealing the 16th Amendment.
~Jim
Jim, I like your suggestions. I agree with both you and Fred that requiring the 16th be repealed before implementation would kill it.
Andrew — That’s a fair question. I’ve followed the FairTax for about 14 years since it was first introduced in Houston, where I was living. I attended one of the first “debates” they had when they rolled it out. Only, it was not a real debate in any sense of the word. It was just a “rah rah” session bashing the IRS and Democrats. No hard questions were permitted. No analysis was provided as to how they came up with the magic 23% number.
Since that time, I’ve followed the FairTax, partly because I keep hoping Congress would adopt some rational tax reform before it’s too late, and partly because of the fact that the FairTax had such an appeal to so many folks (mostly southern Republicans) even though, in my opinion, it was a case of the emporer having no clothes. During all that time, I note that the FairTax has had numerous “rallies,” but never any real debates (with the exceptions noted below).
Last year I wrote an op-ed piece for the Atlanta Journal Constitution against the FairTax. It was published together with a pro-FairTax op-ed piece by Leo Linbeck (AFFT’s chairman). After I was trashed by Boortz (who said I was “liar” and therefore would not be allowed on his show to respond) and received a ton of hate-mail by FairTax fanatics, I suggested to Leo that public debates might be a good way to increase knowledge of the pros and cons of the FairTax. He said he knew of none that had ever taken place, but would give the idea some thought.
I know of a number of journalists and politicians who have challenged Boortz to debate the FairTax on his show. He’s always refused. Every election Linder’s opponents publicly challenge Linder to debate the FairTax. Linder always refuses. (He’s got a “safe seat,” so no reason to stick his neck out.)
Having said that, you could say that there have been three “debates” on the FairTax over the last several years. The first was with Boortz and Michel Graetz of Yale Law School in a sparsely attended function in NY, which was on C-Span. Except it wasn’t really a debate on the FairTax, as Graetz was proposing his own tax plan, which Boortz wasn’t familiar with. So Boortz would promote the FairTax, Graetz would make a few comments, then start explaining his tax plan, and Boortz would promote the FairTax some more. Like I said, not really a debate.
The second occured in the American Enterprise Institute, with William Gale and Larry Kotlikoff and was (and might still be) available on the AEI website. Except Kotlikoff spent an hour or so explaining the Beacon Hill study, Gale had like 10 minutes to respond, a Beacon Hill guy then spoke for 10 minutes, and a “neutral” economist spoke for about 10 minutes. So, again, not a read debate other than Gale saying that the Beacon Hill study was wrong, and vice-versa.
There’s a local community radio in Atlanta, and a guy named Phil Hinson does (or at least to do) interviews on the FairTax, and he was kind enough to have me on for half an hour a year or so ago. We didn’t really “debate,” and didn’t have much time to really discus anything in detail, but he did let me make my points. Joshua put a link to that interview here somewhere.
So, in 14 years, that’s about it in terms of “debates.” Below is a partial list of informed critics of the FairTax who would probably be willing to engage in a public debate if anyone would ever set one up.
William Gale, The Brookings Institution
Dale Jorgenson, Harvard University
James Poterba, MIT, and member of the President’s Tax Reform Panel
Lindy Paul, former chief economist of Joint Committee on Taxation
Bruce Bartlett, conservative columnist and former economist with the Reagan administration
Rich Lowry - National Review
Jay Bookman - Atlanta Journal Constitution
Allen Buckley - Attorney and Libertarian candidate for U.S. Senate
John Suggs — Editor, Creative Loafing Magazine
Robert McIntyre — Citizens for Tax Justice
Any editor of the Wall Street Journal editorial page
Hayden,
One point about Gale. Gale had access to the Kotlikoff/Beaon Hill paper challenging him months beofre the AEI debate. Gale, nevertheless wasn’t able to reconcile the differences between his rate and that of Kotlikoff/BHI. Had I been Gale, I would have been prepared with an answer before I came to the debate. Gale to this day still has not responded.
I would reject Bartlett, Lowry and Bookman as unqualified. Bartlett is a proponent of the VAT. In the Los Angeles Times on August 29, 2004 Bartlett wrote:
“The LACK OF TRANSPARENCY and the low economic cost of a value-added tax make it possible for this tax to raise substantial revenues relatively easily, both politically and economically.”
I don’t know Lindy, Buckley, Suggs or McIntyre.
I would specifically include Steve Moore from the WSJ.
~Jim
Jim,
Kotlikoff had access to Gale’s paper, too. He wasn’t able to reconcile the differences either.
Jim –
(I am genetically unable to let someone else get in the last word, so here’s my response.)
In defense of Gale, AFFT pays Kotlikoff and Beacon Hill to study and presumably to promote the FairTax. Obviously, these amounts are confidential, but might be a lot of money. On the other hand, nobody pays Gale to oppose the FairTax. His (poorly paid) job at the Brookings Institution is to examine and write studies on a wide range of economic issues, not just the FairTax. It takes hours and hours (if not weeks) to study these details, and I somewhat understand Gale’s reluctance to spend a bunch of unpaid time to review someone else’s study that they were paid for.
Having said all that, my impression from the AEI “debate” was that it was Kotlikoff and BHI were unable to adequately explain the differences between their study and Gale’s study. Many of the things they said, in fact, made no sense at all. It’s as if they didn’t even read Gale’s study. And they had no excuse for being unprepared, since they were being paid for this.
I personally was not very impressed with Bartlett’s report in TaxNotes, but I heard him on NPR or something, and he was very impressive and had some very intersting insights on the FairTax, including the prebate. Regardless of whether you agree with him or not, I think he points out some interesting things that most folks wouldn’t realize.
I wouldn’t say that Bookman is an expert on tax or economic issues, but whenever he writes about the FairTax, Boortz spends hours trashing the guy. My feeling, if you are a talk-show host and you trash someone on the air, you should at least give the guy a fair opportunity to defend his point of view. I mean, even O’Reilly does that, for goodness sakes.
I can’t stand Steve Moore or the Club for Growth. I don’t know their position on the FairTax, but I wouldn’t take stock in anything they said. I’d much prefer a debate between, say, Kotlikoff and Paul Krugman. Now that would be interesting.
Returning to the subject of this thread, there is another alternative to the “contingent upon repeal” and the “poison pill” proposals, neither of which makes much sense to me.
My suggestion is to forget about the 16th Amendment until the national sales tax is up and running successfully. Job #1 is to implement a sales tax plan, and when you raise the 16th Amendment in the same sentence, the whole thing collapses. The repeal of the 16th Amendment can be a clean up issue ten years down the way, but it can’t be allowed to dominate the current debate!
At the risk of repeating myself, here is a quote from the National Governors Association policy position on taxes:
“9.2 National Sales or Value-Added Tax
The nation’s Governors oppose a national sales or transactional value-added tax. Such taxes would intrude into a tax area that has traditionally been reserved for and relied on by state and local governments. If enacted, either of these taxes would seriously threaten the ability of state and local governments to maintain their tax base.”
There is nothing vague about that position! So, it becomes necessary to get off the State’s back in every way possible, or repealing the 16th Amendment would be just a pipe dream! It will still be an uphill fight, but at least remove the taxation of governments feature, and perhaps even get the States out of the collection business. What makes any of you think that the States would be willing to act as the Federal tax collector? That is not a proper relationship for two separate but equal sovereign powers that are operating under our Constitution!
Look, HR25 is going nowhere as usual. After ten years, only John Linder supports the Fairtax of the thirteen members of the House Revenue subcommittee, and only two members of the 41 on the full W&M Committee are cosponsors. The 72 Co-sponsors are therefore meaningless in terms of getting any Fairtax movement in Congress now or ever!
The best you can hope for is that McCain gets elected, and agrees with Linder to reestablish a new Tax Commission with perhaps different ground rules, and a better selection of academic and political members. Otherwise, I can’t see how Charlie Rangel will ever let daylight shine on HR25!
On that optimistic note(?), I’m going off the air and moving to the NC mountains for the summer.
Best wishes to all of you. This is still the best Fairtax blog in existence!!!
Fred,
Kotlikoff addressed all of Gale’s points.
~Jim
PS: I’ll let Hayden have the last word.
Jim,
Then why don’t we know where the difference is? They basically said “We used Gale’s method and came up with different results.” No details on why. And then they criticized Gale for not being able to explain the difference!!
Fred,
If you read Kotlikoff’s papers submitted in advance of the conference, he and BHI explained there and at the conference in detail what the differences were between his and Bill Gale’s results, starting with updated data. When it came Bill Gale’s turn, he said he couldn’t rebut the Kotlikoff/BHI study and validate his earlier one. Bill merely said the difference “must be in the weeds.” That statement was no rebuttal to the specific/concrete Kotlikoff/BHI study. Bill still hasn’t gone through the weeds.
~Jim
It’s obvious the results were different - that’s not the question. The question is why are the results different. I don’t believe Kotlikoff has ever answered the “why.”
[I would also say there are a lot of “weeds” in the Kotlikoff/BHI study for things to get lost in. It’s not the easiest to follow paper I’ve read. As I’ve said before, it’s almost as if they made it intentionally hard to follow.]
Actually in my mind the burden of finding the weeds shifted to Gale, not Kotlikoff/BHI. If and when Gale responds to the Kotlikoff/BHI study, which so far he has not, the burden then can shift back to Kotlikoff/BHI. I’m still waiting.
~Jim
PS: Kotlikoff/BHI were very specific as to why.
Fred — That’s an interesting observation (about the BHI paper). I thought the same thing. I’m not an economist, but after two or three readings, I could at least follow the Gale study. The BHI study, though, was so murky that a lay-person could not possibly follow it.
Moreover, if you listen to Kotlikoff’s criticsm of the Gale study at the AEI event, and compare it to what the Gale study actually says, it was as if he was talking about a completely different paper. Gale made that point himself in his ten-minute rebuttal. A lot of what Kotlifoff said just wasn’t in Gale’s study. And other stuff was in Gale’s appendix, which contained a number of sensitivity analyses (or “what-if” scenarios), but did not impact the results discussed in the study.
I tried to compare the baseline numbers that each study used. And it appeared to me that the biggest difference was that Gale did not include spending by the federal government in his analysis, while the BHI study did. Yet they each claim that the taxation of federal government makes no difference in determining the rate, so presumably this would not make any differnce.
Also, the Gale study was over a 10-year period (over which the budget would presumably balance), while the BHI study was for one year only (which assumed a budget deficit of $476 billion.)
Finally, the BHI study assumed that there would not be any tax evasion or tax avoidance other than any that was implicitly reflected in the NIPA numbers they used (even though they made no effort to quantify how much tax evasion or avoidance would be implicit in such numbers), while Gale’s appendixes showed the impact of tax evasion and tax avoidance at different rates (e.g. 10%, 20%, etc.)
Having said all that, I really would like to see a real discussion/comparison of the two reports, whether by Kotlikoff and Gale, or by some neutral economist who can communicate complicated analysis into plain English. As it is, we skeptics will continue pointing to the Gale study, while the FairTax proponents will continue pointing to the BHI study, and neither of us will budge.
Sorry, if someone publishes a paper and a second party later publishes another paper claiming to use the first’s methods but with different results, it’s up to the second party to explain why. You can’t hold Gale responsible for Kotlikoff’s results.
If that’s true, then it shouldn’t be hard for you to explain it to us. Have at it...
I actually just went back and reviewed the AEI presentations.
http://www.aei.org/events/eventID.1466/event_detail.asp
The biggest issue is that Kotlikoff claims that the Gale study left out state/local spending from the tax base, but this is flat out wrong, as Gale pointed out. Some of the other differences might be correct, though I assume that BHI assumed a far greater deficit in their “revenue neutral” calculation than did Gale.
But what was most interesting (to me) was when I reviewed the presentation by Jane Gravelle of the Congressional Research Service of the Library of Congress. She pointed out that the NIPA numbers had been “goosed up” by 8.4% to account for underreporting by folks trying to evade income taxes. If you assume the same 8.4% undereporting of sales under the FairTax, then — using BHI’s own numbers — the required “revenue neutral” rate of the FairTax would be 26% on a tax-inclusive basis, and 35% on a tax-exclusive basis.
And those numbers do take into consideration (a) tax minimizing behaviors by consumers, such as buying used goods, or (b) the inventory tax credit, which she estimated at $480 billion. And, again, they also assume a $476 billion deficit.
So, for the thousandth time, there’s just no way a 23% “tax-inclusive” rate would come close to doing the trick.
Hayden,
To me the sales tax compliance study results in the Gravelle presentation were interesting. The non-compliance rates were 3% for Washington, 10% for Minnesota and 21% for Idaho. What I found instructive was the studies for the higher evasion states were labeled “comprehensive”. I took that to mean a full review using other tools such as state income tax reporting. Washington state was labeled “registered businesses” indicating, to me, the review was of sales tax paperwork - Washington doesn’t have an individual income tax.
Kotlikoff said the evasion rate would be about the current 2% rate because there’d be a hundred thousand IRS employees for enforcement. That’s illogical: 1) there aren’t 100k employees specializing in enforcement work today; 2) the BHI study eliminates the enforcement budget from revenue needs; 3) the two comprehensive studies indicate a much higher evasion rate even with income tax and 3rd party reporting at the state level. Of course, other BHI papers conclude consumption will fall the first several years after implementation but that isn’t factored into the tax rate either. I’m not sure if additional government cost for employee insurance benefits are included in taxable consumption either. All these little things add up.
I understand the focus on long term impacts; but, the fact is a tax system has to operate successfully from day one to generate the anticipated revenue. That, to me, is where the FairTax fails.