Perhaps if I insert the word “direct”, you would get a better understanding of the issue. You seem to be leaning on the embedded tax concept, which was discredited long ago as a source of direct taxation. Embedded taxes impact only one thing, and that is retail prices you and I pay. Embedded taxes do not add one dime to our direct tax burden. And, it is impossible to calculate anyone’s embedded tax burden.

There is no precedent for one government to tax another. However, if you want to nominate a candidate or two, go right ahead. Not an easy task, imho.

” These types of abuses of are nothing new,” said Dan Mastromarco, tax attorney and co-author of HR 25 / S 122. He added, “In 1819, Former Chief Justice John Marshall warned in McCulloch v. Maryland that, ‘An unlimited power to tax involves, necessarily, a power to destroy.’ The FairTax Act is the only way in which Congress can once and for all eliminate the harassment, political exploitation and selective enforcement against perceived dissidents. It levels the playing field and redistributes power to the citizens who pay the taxes.”

It appears that Mastromarco, a noted tax lawyer, fails to recognize that the Marshall quote could be the death knell of the very Fairtax scheme Dan fathered. If the “power to tax is the power to destroy”, then isn’t the Fairtax proposal to let the Federal government tax State and Local government consumption, the end of our republic? Should the Fairtax be approved, won’t that make Ben Franklin clairvoyant when he responded to a question from a lady “Sir, what have you created?” with the historic answer-” A republic, madam, if you can keep it!”

Folks, our Republic consists of two sovereign government powers, Federal and State. Sovereign government powers can not and should not tax each other. The Supreme Court doctrine of “intergovernmental tax immunity” has been chipped away at over the years, but never has there been a precedent for the sort of government taxation as proposed in HR25. Stay tuned.

Thanks for checking in–I had about given up on any substantive comments from what used to be the education center blog for unbiased Fairtax observers.

Your assignment, if you choose to accept it, is to make a case for the appropriateness of the federal government directly taxing State and Local government consumption as directed in HR25. It seems to me that you will have to prove that the USofA is not a constitutional republic, or that sovereign powers can and should tax each other. A single precedent for such taxation will be necessary to make your case, imho.

More generally, wouldn’t you have an easier task of selling the Fairtax if you could claim that the cost of governments at all levels would be reduced by 10% or so? That would be a one time saving of over $700 billion which is not chump change!

Cheers!

Hank

I’m out of pocket for the next few weeks, but I look forward to returning to this forum with a contribution.
~Jim

A great job on the introductory set up, and thanks for digging up the 2010 thread with 41 comments which are still applicable. My request to renew this discussion was based on Jim Bennett and I discussing a VAT on another forum, a discussion that somehow spilled over to the subject of State sovereign rights and the inappropriateness of the federal government taxing State and Local government consumption. The subject is broader than that, it seems to me, so Morphh kindly expanded the issue to the overall question of taxing governments.

In rereading all 41 comments from the 2010 thread, I need to make one significant correction. I used the term “unconstitutional” which is incorrect. Nothing in the constitution precludes the federal government from taxing S/L government consumption per se. The correct term, as used in the 2005 Bush tax commission report, is “inappropriate, not unconstitutional. I firmly believe that it would be inappropriate for such taxation as promoted in HR25 because our constitutional republic consists of two sovereign government powers, Federal and State, and sovereign powers can not and should not tax each other. We can discuss this further as we go along.

While not applicable to this discussion, I also want to add to the previous comments my current take on the need for Federal monetary policy as it pertains to retail price increases under the Fairtax. AFFT and BHI have maintained that the economic formula, MV=PQ applies, and they assumed that V and Q were constant, therefore, Prices can only go up if the Money supply is increased by the Fed. Upon further research, I now believe that V is not a constant, and will greatly increase under the Fairtax. Think about it this way. The velocity of money has to be much greater when comparing income tax and payroll contribution withholding which is sent directly to the Treasury versus giving those funds to all of us to spend as we see fit. No comparison, imho. Retail prices can rise without any action by the Fed. imho.

As for the Walby submission to the Congressional Record, I believe she was incorrect in her claim that the Supreme Court upheld federal taxation of other government units by approving FICA. Not true! The court approved the FICA plan only because it gave the States an option to either join the Federal plan or set up one of their own. Many government units did not join the federal plan. Where is the option for States to pay the tax directed in HR25? It isn’t there.

My simplified argument is that it is inappropriate for the federal government to directly tax State and Local government consumption. The “tax wedge” is taken care of by Sec. 704 of HR25. And, the total cost of all governments can be reduced by an estimated 10% if their consumption is not taxed. Such a deal!!!

I hope we get some comments from what used to be a very lively and informed group on this blog.

I do like the idea of a 1% “skin in the game” contribution.

I wonder if this differentiates between income and capital gains?

http://www.gwinnettchamber.org/chambliss-woodall-call-for-fairtax-consideration-send-letter-to-joint-committee-on-taxation

To reinforce Hank comment, “”Yes”, we all agree that the current tax is a disaster and must MUST GO. But many of you employ the faulty logic the erroneous rationale, that therefore we MUST adopt the FT. No, we can get rid of the IT and find something better than the IT – i.e., the FT is considerably worse than the IT, not in its complexity, but in it is outrageous expansion of Marxist wealth redistribution and in its disastrous impact on our 70%-retail-sales-sensitive economy.

Consider the disastrous impact on our economy of a 60% revenue neutral rate.

When the govts have to pay FT, yes they will/must [ass it on to theor citizens who would then pay not only much higher FT, but higher State & Local taxes

The economic Kool-aid you note in your last paragraph, does not hold up against the reality of the disastrous financial of the FT. It sounds good when you say it fast, but does not hold up under thoughtful analysis. Its a glib marketing line.