Yes,

But you've forgotten the group who will be MOST opposed to changes in the current tax structure: the people who don't pay.

Literally 10s of millions of Americans who make significant sums of money pay ZERO tax under the current system, but would be FORCED TO PAY under the Fair Tax plan.

Which, let me tell you, that's what MAKES it a Fair Tax plan in the first place; but what will ensure that it never sees the light of day.

That's why there's a 'prebate' in the FairTax plan. Spin it so that these folk see it as a 'GIFT' from the government and you'll get their support.

J.

I have two concerns with this plan:

1) If your income is from the US, but you live and purchase abroad which could be Canada or Mexico (usually from luck of geography or you're rich), you can dodge paying a large portion of these taxes. You benefit from the US economy but escape taxes.

2) The concept of a 'rebate' could be easily perverted into a wealth redistrobution program from the left.

Essentially the middle class gets boned again, possibly.

There's nothing inherently 'fair' about this proposal.... there's nothing inherently 'unfair' about it either.

For example, there are pros and cons to basing a tax system on consumption as opposed to income. Advocates of a progressive system would hate it as the rich - who spend less of a percentage of their income than the poor - would 'escape' tax on a significant portion of their income.

And a consumption tax can be made just as complicated and convuluted as our existing tax code, depending on how much Congress decides to fiddle with it to reward/punish certain behavior and/or interest groups. For example, they could exempt housing costs from the tax... which would lead to a thousand or so pages defining and/or limiting the definition of housing costs. They could exempt food purchases... but some Democrat would want to make sure that the rich Republicans who ate at fancy restaurants didn't have a 'subsidized' 3-martini lunch... so there'd be another 500 pages defining and limiting exempt food purchases. And what about investments, are they a 'purchase' on which tax should be levied?

Such a system can be gamed as well by those seeking to avoid tax. Just as barter is used now to avoid paying sales/income taxes, so too can it be used in a consumption tax to help escape taxes. Purchases can be made under the table to avoid taxes.

Finally, there would be all sorts of transitional problems. For example, I have already paid income tax on the money in my checking account - should I have to then pay a consumption tax when I decide to spend it? The housing market would take a hit as home prices would fall as a result of the loss of the mortgage deduction. The job market would be affected as all those currently engaged in the tax game needed to find themselves new jobs (all of you non-tax accountants reading this: what happens to your wage base when tax accountants start offering to do your job for less money than you now make?).

I'm not writing this to knock such a proposal... just to point out that it - along with every other system to amend/revise our tax code - isn't such a no-brainer as its advocates would like us to believe.

Just in the comments that have been submitted so far, we can see why tax reform is so hard: everybody's got a dog in the fight. Some people fear that one class will bear an "unfair" burden, while others want to make certain that some other group "pays its fair share".

The fat cats who created and profit by our current system must love to see this kind of fragmentation.

Whether it happens or not is entirely up to us. We can sit here a type all day about whether its not going to happen. If we gave a tenth of the amount of time to write our congressmen/women, they will not be able to ignore that. Just look at the pandering resulting from the illegal aliens having a couple block parties. Did you think that would ever happen?? All politicians need is to know where the voters are. The more you let them know where you are on this, the more likely it will happen. I think wizbang would do a great job starting such a campaign.

But you may be right. Let just continue to sit around and B(^CH about it, claiming they wont listen to us.

and JPM,
Your first concern is called smuggling, it already happens. The Fair tax would not create this behavior nor will it do anything to stop it. Besides, even if it did, the overall benefits of the fair tax far outweigh the costs of that loss. These rich people get around paying taxes anyway.

and the second is the left. Again, the left already uses federal programs as wealth distribution programs. Another big benefit of the fair tax is people will feel the cost of government. the liberals will have a much harder time raising taxes no matter how perverted they make the system look.

Another big benefit of the fair tax is people will feel the cost of government. the liberals will have a much harder time raising taxes no matter how perverted they make the system look.

Long before they try, they will have finagled so many loopholes and exemptions into the Fair Tax that they'll once again be able to portray the tax hike as "soaking the rich."

They'll have to re-define "rich," but Clinton once pushed a tax hike by defining "rich" as anyone making in the neighborhood of $60,000 a year.

1) If your income is from the US, but you live and purchase abroad which could be Canada or Mexico (usually from luck of geography or you're rich), you can dodge paying a large portion of these taxes. You benefit from the US economy but escape taxes.

The goods from Canada (or elsewhere) will cost no less than the goods here in the U.S. The taxes in our current system, as with most other system, are embedded in the cost of the item so it's easier to hide the cost of the tax or to delude yourself into believing its not there. So, what's the motivation for buying them there ?

Let's take an example... say you buy a new widget from the local store for $100. Let's say that the store's net cost for the item is $90, so there's $10 is net profit. (Assume a tax rate of 40% for round numbers). That means the store gets $6 and the government gets $4. The retail store bought the widget from a distributor for say which paid $80 for it. Again, the government gets $4 in taxes from the distributor. The manufacturer of the item has $70 in cost in the item. Again, the government gets another $4 in taxes from the item. The materials supplier has $60 in cost in the item. Again, another $4 in taxes from the item.. And so on....

The point is that the current system taxes an item along every step of the way... which embeds taxes in the cost of the item and embeds the cost of compliance at each step along the way. So while the sticker price doesn't break the price down into 'material & labor cost' and 'embedded taxes & cost of compliance', it's all there in 'price'. If you remove the 'cost of compliance' at every stage and simply incurr it at the final stage (retail), it removes a LOT of redundant costs and should therefore reduce the total cost of the item.

The job market would be affected as all those currently engaged in the tax game needed to find themselves new jobs (all of you non-tax accountants reading this: what happens to your wage base when tax accountants start offering to do your job for less money than you now make?).

If it's a good thing that these people who currently make a living because they know the intricacies of the current system, would it be a good idea to make the system more complex so that more people could make a living from this ? Obvoiusly, the answer is no. Why ? Because we need people working to _create_ wealth (e.g. advancing medicine, semiconductor technology, fuel technology, etc) not working as overhead. Besides, thanks to "No Accountant Left Behind" (aka Sarbanes-Oxley) the market for accounting/finance jobs seems to be booming.

There are certainly some logistical hurdles, but there are workable solutions.

- MikeB

I pay lots of federal taxes and probably would come out better under the fair tax system. However, I find the fair tax has several flaws.

Checking the FAQs, number 16 talks about retirement savings. The answer is definitely the output of a spin doctor. To be fair, after tax savings should be 100% exempt from the fair tax. You should get an exemption certificate in the form of a credit card equal to the value of any withdraw times the fair tax rate. You could use this credit to pay the tax portion on any purchases.

Number 21 of the FAQs is about the home mortgage deduction. One of the principles of the fair tax is that it applies only to new purchases, but there seems to be no application of this principle to home purchases. The original buyer should pay the tax on the full price of the home. Subsequent buyers should pay the tax only on the increased value, not the full price.

Number 22 of the FAQs is about charitable giving, but nothing is said about purchases made by churches. Under the 1st amendment, churches have been exempt from paying all taxes other than payroll taxes. Passing the Fair Tax law won't repeal the 1st amendment, so I smell a big loophole here. For example, a church can purchase a vehicle, have an employee drive it for a week and then sell it to one of its members as a used vehicle, and thus, free from the fair tax. Remember, the investigating and enforcing activities of the IRS will be gone. If they have to be implemented somewhere else, the benefits of riding ourselves of the IRS won't be realized.

Number 25 of the FAQs is about how are state tax systems affected. Most state income tax returns require sending a copy of the federal tax return. Without a federal return, state income tax returns are likely to get much more complicated. If states implement their own fair tax, the total tax on new purchases could be 40% or more.

Under the current system, it's difficult for employees to avoid paying taxes, but the fair tax is likely to spur the growth of a large black market with all kinds of schemes for avoiding or minimizing the consumption tax. The idea that the investigating and enforcing functions of the IRS can be done away with are naive at best, and without their investigating and enforcing functions no one would object to the IRS. The Fair Tax needs lots of work to make it both fair and effective.

Mac -

Are the folks who are trying to evade the tax suddenly going to stop buying groceries? The tax is there if they do. Are they going to not buy consumer goods? The tax is there if they do. Go across the border and buy it? You'll pay tax when you bring it into the States.

As far as state tax being more complex - why would it? The state already sets a tax rate that's a percentage of the gross pay - why would that change?

You really ought to buy Boortz's FairTax book and READ it. FAQs are all well and good, but the book goes deeper.

I don't want to see the current tax system 'reformed' - that just means some SOB can get his fingers into it and twist it for his own advantage. Sometimes the best thing to do is scrap a badly-working system and start fresh.

J.

I think McGehee is right in his thinking. How many people here believe that the current tax code looked anything at all like the original tax code? As time passes, Congress will add more and more crap to right this wrong or that wrong or to pander to this group or some other group. Eventually, we will be right back where we started.

I'm not defending our current system. I'm just pointing out that there is no perfect, magical system where everyone else pays more taxes and you pay less.

You can call it "fair" or "flat" or "progressive" or "regressive" or anything else, but it will always be screwed up as long as the politicians can easily tinker with it. I personally prefer a flat tax, but I could live with a consumption tax if there is a constitutional amendment to tie congress' hands. That amendment would authorize either an income tax or consumption tax and outlaw the other. Then it would forbid any deductions, credits, or other changes that effectively changes the tax rate for any individual. Finally, the rate would be set by a normal bill in congress, but would take a simple majority (50% + 1 vote of a quorum) to lower the effective rate and a super majority (either 2/3 or 3/4) to raise the rate.

It's the most ridiculous proposal I've seen.

One major flaw (if somebody already mentioned this, I missed it) is that it would kill the economy! It creates incentives to hoard cash rather than re-injecting it locally.

I'm shopping for a 40 to 48-foot sail boat right now. If the US government is going to tax that purchase at a rate high enough to replace what they would have recieved through income tax, what am I going to do? What would the tax on a $400k boat be? $175k? Do you think I'll be coughing up that tax so I can purchase a Valiant from Texas or a Pacific Seacraft from California? Hell no! For the extra dough, I'll buy a Baltic or a Nautor Swan from Finland! Sorry US shipyard workers, but my self-interest is more important than yours!

Also, I really enjoy the bit about "reimbursement" for necessities. Anyone wanna think about the process by which "necessities" will be defined? How often will it be re-defined? Where will one go to look up those definitions? Will a $500-per-plate Japanese meal qualify?--how about Denny's? What about medical expenses? Boob jobs? Prescription drugs? Antibiotics following a facelift? Who will track all this? How onerous will it be to obtain "reimbursements?"

What about real estate? Is a house a "necessity?" What about a multi-million dollar house? Sure, we could cap a tax-free amount at... what? In Kansas, a decent house might be had for less than $100k. Here in Southern California, median house prices are probably in the low $400k's right now. In my modest neighborhood (3-bedroom, 2 bath homes around 1800 to 2200 sq. ft. on 75x120 foot lots) house prices have been hovering around $1,000,000, give or take $200k. So from a Federal perspective, my necessity would be outrageously excessive. How do we deal with that? Different scales for different zip codes? More decision-making processes? More regulations?

This "fair tax" farce would fuck the economy, it could potentially screw the low income people, it would screw those who live in areas with higher costs of living, and it could not possibly simplify the tax code, personal record keeping, or tax preparation. It is moronic.

JLawson,

It doesn't sound like you read my post, and least not in detail. What about taxing savings on which people have already paid the full income tax, do you think that's fair? Churches could abuse the system by purchasing expensive items and reselling them as used goods to members free from tax. Do you really think the supporters of the Fair Tax have enough clout to repeal part of the 1st amendment? How are you going to stop such abuse without recreating the investigative and enforcement functions of the IRS. If those functions are needed, then what was the point of getting rid of the IRS?

The reason state income (not sales tax) gets complicated, assuming states keep their income tax system, is that current state tax systems get most of their information from your federal tax return. If there is no federal tax return, then states will have to gather the same information you used to provide the federal government. There's no simplification here, just moving the burden from the federal tax return to the state tax return.

States that do away with their income tax system in favor of a fair tax will likely see combined federal and state rates of 40% or more on the purchase of new goods and services. Such an high rate will spur the growth of a large black market where small producers will sell goods directly into the black market off the record and without tax being collected. Others will set up barter systems where no money changes hands. Every tax schemer in the current system will operate in the fair tax system. You will find that the full investigative and enforcement functions of the IRS will still be required along with the record keeping and reporting functions that go with the investigative and enforcement functions. It's just pie in the sky to think otherwise.

After a brief and topical review, my first impressions included very little positive aspects.

Initial thoughts are:

*Some states already pay sales tax. This could take the 23% well over 30%.

*Some states (NH) cannot pass sales tax legislation because of the role of cross border trade in the economy of the state.

*What about Roth investments? Seems like the plan gives a big windfall to traditional IRAs while crewing the ones that planned ahead.

*Do they expect that people will really pay 23% more for goods? Will this push a new car purchase beyond a person's approved finance limit?

I guess the important thing here is to make sure we talk ourselves out of making a change.

Look, these issues already exist. If they dont, The government can make them exist at any time they feel like. The fair tax simply replaces the existing system and, more importantly, the IRS and all its lousy forms and intrusions into our privacy.

The economic reason I'm am for this system is that it makes the people that really pay the tax anyway, know they pay the tax and know how much tax they paid. Then they can see if what they paid for is really worth it.

The rest of this whiney "I have a saving account" BS is just that. If you think you are in a tax shelter, think again. Just wait for the Hillary health care system. just wait for the Kerry... whatever the hell he said he would, would not, would do. Wait for the Gore Global Warming Defence Package... Not to mention having to fix the mistake of not telling George W that the LOWERING the natinal debt is what we are trying to do. See how long your tax shelter lasts then when these things start biting into federal revenues. I bet they dont give a hoot about your pre-tax savings what nots.

Lets not talk ourselves out of this because we are scared of what they might do. Lets move forward. lets make them know what we want. Lets make them know how we want it.

LJD,

Please read the book. These are covered in great detail. There are other more pressing reasons to be concerned than to be tripping over the easy stuff.

OK, I just read some of the FAQs, which would have had me slightly modify some of the things I said above. But overall, the FAQs strengthen my points. It is asinine!

Since only new goods are taxed, I think I'll postpone upgrading my home theater system this week because what I have is working fine. Why pay $230 tax on every $1000 item when it can wait another year?

I'd really like to buy a new car, but 23 percent of the $50,000 Volvo SUV I was eyeing would be $11,500! Hmmm, but there's a nice used one available for only $40,000 and no tax penalty! What would you do?

Getting back to my sailboat, a 5-year-old boat is as good, if not better, than brand new in many instances--especially with cruising boats. Should I pay $92,000 in taxes for a new one? --or avoid the tax and save another $20-$50k on the purchase price for a better-outfitted boat? Duh.

The poverty level/necessities thing is unworkable unless it varies geographically. The truly impovershed who pay $2000 rent in Los Angeles would get screwed, while those in Missouri who pay only $200 could live like kings.

This whole scheme is incredibly naive. I have dual degrees in Economics and Political Science. As an undergrad, I concentrated on public finance and expenditure, which essentially revolved around government revenue schemes. For years I was looking for alternatives to the income tax structure that was gouging me to death, and sought to replace or augment it with other forms of taxation. Following that, I went to one of the best tax law schools in the country, and I took every tax law class offered. While some of you might think the process indoctrinated me, that would just reveal a chunk of ignorance about the academic process. What my training and experience has prepared me for is to evaluate this plan with an open mind, and immediately conclude it is not only unworkable, but it would tank the economy rather than stimulate it as it naively claims. It is truly moronic.

I'm shopping for a 40 to 48-foot sail boat right now. If the US government is going to tax that purchase at a rate high enough to replace what they would have recieved through income tax, what am I going to do? What would the tax on a $400k boat be? $175k? Do you think I'll be coughing up that tax so I can purchase a Valiant from Texas or a Pacific Seacraft from California? Hell no! For the extra dough, I'll buy a Baltic or a Nautor Swan from Finland! Sorry US shipyard workers, but my self-interest is more important than yours!

Read my reply above. You're already paying a significant portion of those taxes... they're simply embedded in the 'price'.

Also, I really enjoy the bit about "reimbursement" for necessities. Anyone wanna think about the process by which "necessities" will be defined? How often will it be re-defined? Where will one go to look up those definitions? Will a $500-per-plate Japanese meal qualify?--how about Denny's? What about medical expenses? Boob jobs? Prescription drugs? Antibiotics following a facelift? Who will track all this? How onerous will it be to obtain "reimbursements?"

If you'd have read the details, you'd find that the 'reimbursement' is not based on specific expenditures, but rather set based on what a family of size X can expect to spend on basic necessities. Everyone then gets that same amount whether you're working at McD's or your name is Bill Gates.

What about real estate? Is a house a "necessity? ..snip

Newly constructed houses are taxed as they are new goods. There are no exemptions for housing.

This "fair tax" farce would fuck the economy, it could potentially screw the low income people, it would screw those who live in areas with higher costs of living, and it could not possibly simplify the tax code, personal record keeping, or tax preparation. It is moronic.

This is a good example of why we're screwed into sticking with the currently broken tax system. You've already put more thought into it than the average person would and yet without researching the topic enough to even reply coherently, you've already reached a verdict.

- MikeB

Starboard Attitude -

You missed the major point - that the 23% is NOT tacked ONTO the price, but already EMBEDDED in the price, the manufacturer's COST of which will be about 23% LOWER because of the elimination of taxes paid by the manufacturers. So - 23% cheaper for the manufacturer to produce at the same profit levels makes it possible to embed a 23% tax, and have the price come out the same.

If the price with tax were the SAME as what you were planning to pay anyway - and you had MORE money in your pocket - would you buy the boat you had your eye on? Or would you buy something larger? And all the bells, whistles and associated doo-dads?

(And perhaps you can remind everyone here what happened when the Luxury Tax was passed in 1990? What happened to the small aircraft industry? To Beechcraft and Cessna?)

If this were 23% ABOVE what we're paying now - I wouldn't support it. But it's not.

As far as the prebate goes... sigh. The last time I saw misrepensentation of the ideas like that, it was in the review columns on Amazon for Boortz's book. There isn't anyone stupid who posts on this blog, no matter what your persuasion politically. Throwing up things like boob jobs and facelift antibiotics shows that you not only haven't read about the Fair Tax, you don't have any real interest in finding out about it.

FairTax - Thumbnail Sketch
Americans take home their whole paychecks.
Not only do more Americans have jobs, but they also take home 100 percent of their paychecks (except where state income taxes apply). No federal income taxes or payroll taxes are withheld from paychecks, pensions, or Social Security checks.
No federal sales tax up to the poverty level means progressivity like today's tax system.
To ensure no American pays tax on necessities, the FairTax plan provides a prepaid, monthly rebate (prebate) for every registered household to cover the consumption tax spent on necessities up to the federal poverty level. This, along with several other features, is how the FairTax completely untaxes the poor, lowers the tax burden on most, while making the overall rate progressive. However, the FairTax is progressive based on lifestyle/spending choices, rather than simply punishing those taxpayers who are successful. Do you see how much freer life is with the FairTax instead of the income tax?

Mac -

As far as your objection about churches goes - I don't know. And I don't care. Do church exemptions amount to $350 billion? Or maybe $700 billion, which is an estimate of both compliance costs AND untaxed revenue from various sources?

FairTax - Thumbnail Sketch
Tax criminals - don't make criminals out of honest taxpayers.
Today, the IRS will admit to 25 percent noncompliance with the code. FairTax.org will be generous and simply take the position that this is likely a conservative estimate of the underground economy. However, this does not take into account the criminal/drug/porn economy, which equally conservative estimates put at one trillion dollars of untaxed activity. The FairTax does tax this - criminals love to flash that cash at retail - while continuing to provide the federal penalties so effective in bringing such miscreants to justice. The substantial decrease in points of compliance - from every wage earner, investor, and retiree, down to only retailers - also allows enforcement to concentrate on following the money to criminal activity, rather than making potential criminals out of every taxpayer struggling to decipher the current code.

It makes more sense to me than what we've got.

J.

Starboard Attitude.

First, people are not going to stop buying things. You say you will wait to upgrade your system, but you won't. I know, I just up graded mine and paid thousands for a television that was only 2 inches bigger than my last one. Call it stupid, sure... A great example of this is gas being at near 3 bucks and SUV sales are only slightly lower. Truck sales are actually higher. Three times the cost of fuel and people still buy the gas guzzlers. Honda is actually considering cancelling the accord hybrid model due to low sales.

What is important for everyone to look into is the embedded tax issue associated with the current tax system. Not only does the fair tax only tax new items, It also only taxes consumer goods at a retail level. That means businesses and corporations pay no tax at all. WHICH THEY DONT ANYWAY. As an economist, you know that businesses treat taxes as an expense that gets passed down to prices of their goods and/or services. This means YOU reimburse them for the taxes they paid when you buy their goods. As such, your 50,000 dollar Volvo is no longer 50,000 dollars. A 2000 dollar TV is no longer 2000 dollars. It is considerably less. I believe the current estimate is between 22 to 26% less. I.e. this is almost a wash. READ THE BOOK!!!

Also to your point about waiting. Would it not be a great thing that YOU get to decide how much you pay in taxes?? If you want to wait, then you pay less taxes. But you won't... Your an American. So am I and I bought a television that I only recently found out was made in France which is another point.

These embedded taxes are what make American goods too expensive to the international market. We cannot sell out cars to Europe, not JUST because they hate us and wont buy them, but because they are not cost competitive with the embedded taxation. Eliminate the taxation, and the US becomes an exporter again.... Goodbye to the days of tens of billions of dollers in trade deficits.

All this is in the book. The FAQ is ok, but your missing out on all the juicy details.

MikeB

Read my second post. I did do some belated research and changed some things. I was off on the details, but my conslusions are much firmer now than they were initially. The plan sucks.

As for the claim that "significant portions" of the taxes are already embedded in the price of new goods, we need to define "significant." Theoretically, prices could be reduced for some types of goods, but not all, and probably not by much.

The biggest impact would be from the immediate feedback received by the consumer--like a telephone pole up the butt! When you tax at the moment of purchase, especially at such a high rate, it's like aversion therapy--it's like hooking an electrical charge to a monkey's genitals, and zapping it every time he eats a banana. It won't take long for the banana industry to go belly up!

For the banana industry to survive, it's gotta jack the prices so high that revenue from the few slow learners will cover the fixed costs. More likely, that's not possible and the industry will die.

Since I've got bananas on the brain, I should mention that the banana industry would be more better off than other industries--primarily because there is no market for used bananas!

What happens to the electronics industry? Automobiles? Boats? Any durable goods? Manufacturing will die, workers will be unemployed, and the few manufacturers who survivve will have to jack prices through the stratosphere to cover R&D and fixed costs, since their market has shrivelled.

THE BOOK DEFINES SIGNIFIGANT... READ THE BOOK!!!

Also, you are underestimating the competitive side of business. You think that Best Buy will not lower their prices immediately to get an advatage over Circuit City, and Visa Versa?? and NEWEGG will just keep their prices the same and loose sales to the aforementioned?? People are more price conscience now than ever...

Also in the BOOK, is the idea of inclusive taxation. The consumer will not see a price with 23% tax added on to it. What they will see is a 2000 dollar tv costing 2000. The tax is included in the price and the seller sends 22% to the gov and keep 1% for it's trouble. So this monkey balls-banana with the zapping battery thingy is not going to happen.

This can go on forever... PLEASE READ THE BOOK. these things are covered in great detail. Is it perfect?? Nothing is. Is it astronomically better than the current system?? Absolutely... READ THE BOOK.

JLawson and schwerv:

Unless you're cherry picking from some bizarre portion of some obscure industry, I can assure you that embedded taxes to NOT comprise 23 percent of retail prices!

For 8 years in the '90's, I was the in-house General Counsel for a multi-national product manufacturer. During that period, I was emmersed in corporate strip searches by the International Trade Commission, Department of Commerce and the Department of Justice concerning international trade issues related to pricing. I've seen our numbers. I've seen our competitors' numbers. I've seen numbers for the industry as a whole. I've seen numbers from different industries. While taxes are *a* factor, they are no where near 23 percent--in fact, they're usually much closer to zero.

Every time you read some consumer publication, I suggest you pay attention when somebody says factor X comprises Y percent of the retail price of a good. Product liability costs are x percent. Real estate is x percent. Workers compensation is x percent. Compliance with environmental laws are x percent. It won't take long to recognize that the percentage points quickly add up to more than 500 percent--and that's before materials, labor, and R&D is factored in!!

Come on, get real.

Guys - I'm suggesting that instead of throwing up all sorts of objections (real or made up) to this that you go ahead and READ THE BOOK.

That's a dodge. If the Fairtax lobby want's to gain support, the complete details of their plan should be on their web site, not in some $30.00 book. In fact, it looks like the plan is fully documented on the web site.

It's disingenuous for Fairtax proponents to claim there will be no need for the IRS. The agency might be called by another name, but as I pointed out, the investigative and enforcement functions now provided by the IRS will still need to be done under the Fairtax. I have given the example of tax cheats using a church to avoid tax on large ticket items such as cars and there are lots more schemes to avoid this tax. In states that implement the Fairtax in place of their income tax the rate could be over 40%. With every consumer having the ability to cheat to a degree they never had as an employee paying income tax through payroll deduction, there will be a large black market. For example, every retail business writes off lost inventory. Some of that lost inventory is due to theft, but there's also damage and spoilage. The IRS keeps a close eye on these rates and investigates where there seems to be an excess. Under the Fairtax system as it's articulated, there is no IRS, so a business can simply sell some of it's goods at 20% over the marked price, but off the books. The consumer saves 20% and the business makes and extra 20%. It's not rocket science and without record keeping requirements, there's little risk of getting caught.

Under the Fairtax, the number of people with a real opportunity to cheat big will be many times what it is now. As a result, the compliance costs of the Fairtax will be higher than they are for the current Income tax and there will be no reduction in reporting or required record keeping, not on individuals and not on businesses. It's pie in the sky. The one true advantage of the Fairtax is that voters will see just how much of their money goes to the government and that likely will force a reduction in tax rates.

Is there a 30% markup on that book? :-)

O.K. here's another
What about the mortgage interest and property tax deductions? Are they included in the fair tax proposal? Without simulataneously restructing our state tax system, I would lose my house.

I understand the point that the price of goods will not change, and the consumption tax would simply replace imbedded corporate income (and payroll?) taxes at the existing rate. I disagree with that, but I understand the over-simplified concept. In theory, the consumption tax will not cause an additional hit to the consumer.

But what about revenue lost by abolition of the personal income tax? It seems the consumption tax only replaces the corporate contributions (which I've argued for years should be eliminated anyway). Surely the book doesn't suggest the economy would be so hyper-stimulated that revenues would be recouped through volume?

No, I will not pay $30 to read the book!

As for neutrality, this system doesn't have it. People who must consume a greater percentage of their income pay a disproportionately higher percentage of their income in taxes--and the "necessities" exlusion does not necessarily remedy that. This affects not only the impovershed, but young families who are buying their first cars, houses, furniture, etc. It also disproportionately hits those who keep the economy moving, while rewarding the slugs who do not.

The current income tax system is far from perfect, and I hate it (although it is much better for everyone since 2000). But I would hate the consumption tax far more. It has some superficial appeal if you buy into all the assumptions behind it (and so does communism for that matter), but the assumptions are whoppers, and the plan seems ill-advised and harmful (as were real-world attempts at communism).

Don't buy the book!

Its not a dodge. Its "Do you own research" All the concerns you have here are addressed in the book. The website is not the book because the book proceeds finance the movement. So if you dont want to help finance the movement, buy it used, read a friends, just read it. If you still dont like it, then fine