Continued from previous post...
“The FairTax will make it easier for Congress to raise taxes.”
Answer: In theory perhaps, but not in practice. Because of the simplicity of the Fair Tax, any change will be highly transparent to the People, especially since it would translate to immediate out of pocket loss to the consumer. The whole idea of implementing payroll deductions was to make it less obvious how much each change to the tax code would really affect you in the long run. If you had to pay your entire tax bill in a lump sum, even a small change would be immediately apparent to you. Transparency is one of the big draws of the Fair Tax.
“Under the FairTax system, there are no longer any Social Security and Medicare taxes. However, this does not mean that Social Security and Medicare will be eliminated. The inclusion in the combined percentage of the old-age, survivors and disability insurance and the hospital insurance rates means that the Ponzi scheme known as Social Security will continue as is—only the way it is funded will change.”
Answer: Yep. Status quo, except that you won’t have that money mysteriously deducted from your paycheck every two weeks. It’s called “The Fair Tax Bill”, not “The Fair Tax and Social Security Reform Bill.” The bloated and broken SSN system will still need to be tackled. So?
The "underground economy" that income tax advocates complain about will certainly increase under the FairTax system. Even if the highly dubious claim that there will be an "average producer price reduction of 22 percent for goods and services in just the first year after the adoption of the FairTax" is true, not having to pay a 23 percent tax on an item is a tremendous incentive to make a purchase in the "underground economy."
Answer: The phrase “will certainly increase under the FairTax system” is unsupported by the author; i.e. it is his opinion. Tax evasion is rampant under the current system, simply because it is so complex. The author ignores the most obvious question: What is the motivation for businesses to sell “under the counter” under the Fair Tax system? Sure, the individual might like the idea of avoiding $23 percent of the cost of an item, but why would most businesses want to risk getting caught? Also, go back to the number of people/business the IRS must monitor and enforce right now, compared to what it would be under the Fair Tax system. Finally, one could argue that states should drop their sales taxes for the same reason. Obviously they haven’t.
“The claim that the IRS will be eliminated under the FairTax is bogus.”
Answer: No, it’s a fact that the IRS as a federal entity will in fact cease to exist. As the job of collecting federal taxes will be incredibly simplified and the number of collection points drastically reduced, a separate agency – with its attendant high cost – will be eliminated. A modest size, commensurate with its reduced monitoring and enforcement requirements, will be created within the Treasury department. This will come nowhere near the cost necessary to administer the current system. Plus, the huge burden to the economy of complying with the current system will be all but eliminated, a fact the author ignores.
The FairTax is progressive. What could possibly be fair about a progressive tax where some people have to pay a higher percentage than others merely because they are deemed to be "rich"?”
Answer: This one left me scratching my head. Under the current system, the top 50 percent of income earners pay 96 percent of the tax bill! The very lowest pays very little, and receives the Earned Income Credit, basically an income redistribution. I don’t hear him complaining about that. Under the fair tax, everyone, regardless of income receives the same prebate, and is taxed the same percentage on new goods and services. Will rich people pay more? In most cases, because they consume more. Do they pay more now? You bet.
“There is only one word to describe the fact that the federal government now spends almost $3 trillion a year: obscene. At least 90 percent of what the federal government spends is unconstitutional, wasteful, or against the limited-government principles of the Founders. The only thing the FairTax does is change the way the state confiscates the wealth of its citizens.”
Answer: Again the author is confused about the name, scope, or intent of the Fair Tax bill. It is not “Fair Tax and Government Spending Reduction Bill”, so his criticism here is irrelevant. Like the Social Security system, Government spending is in need of fixing, but the Fair Tax bill is not the vehicle to try to do so.
“As Congressman Ron Paul says: "The real issue is total spending by government, not tax reform."”
Answer: His real issue, but not the only issue. Let him push for SS reform and a balanced budget amendment if he wants (more power to him). Fixing any one of these major issues is hard enough; only a masochist would insist they must all be fixed with a single piece of legislation. Just fixing the tax system will be hard enough.
“Because the FairTax is a consumption tax, Murray Rothbard's conclusion about consumption taxes is apropos:
The consumption tax, on the other hand, can only be regarded as a payment for permission-to-live. It implies that a man will not be allowed to advance or even sustain his own life, unless he pays, off the top, a fee to the State for permission to do so.” “
Answer: If the Fair Tax did not have the prebate feature, this might be true. The current system is a much greater obstacle to advance your personal lot in life that the Fair Tax would be.
“The FairTax does nothing to tame the federal leviathan. The solution is nothing less than a drastic reduction or wholesale elimination of its revenue source. What is fair about allowing the government to confiscate 23 percent of the value of every new good and service? FairTax proponents may call it necessary legislation, but I call it highway robbery.”
Answer: Exactly what would the author suggest is fair about the current system? The Fair Tax is a lot fairer than the current system. It does not address federal spending (get your own bill to do that, buddy), as noted, but neither does it eliminate the source of federal revenue. It merely shifts how it collects it.
