“Fair Tax” Offers Neither Fairness Nor Simplicity

iStock_ClockI would merrily accept a simple national sales tax as a replacement for the income tax—only if it followed the repeal of the Sixteenth Amendment. John Keel seems to misunderstand the purpose of my initial article about the so-called “Fair Tax.” I did not endorse the income tax over a sales tax; instead, I devoted my opening paragraph to denouncing the income tax, and I wrote that a sales tax “could be better or worse” than an income tax, “depending on particulars” of each. My purpose was to argue that “there is nothing about a sales tax that is inherently more fair than an income tax, and the Fair Tax would impose a new set of burdens on businesses and consumers.” While Mr. Keel disagrees with my article, he does not locate any errors within it. Instead, he mostly offers additional details about the points I made, and he argues that certain facts deserve greater emphasis. Unfortunately, he also makes a few mistakes in discussing the details of the tax, and he largely ignores my broader points.

The first problem with the “Fair Tax” is simply its name; a sales tax offers no more “fairness” than any other major sort of tax. If it is “fair” to add a 30 percent sales tax to every consumable good or service, then it is equally “fair” to tax people’s income or property. If an income tax is inherently unfair, then so is a sales tax. True, any given sort of tax can be more or less unfair depending on how it is set up. Other things equal, a tax that imposes higher compliance costs is thereby more unfair. However, there is nothing inherently simpler about a sales tax than an income tax; a sales tax could be made absurdly complex, and today’s income tax could be radically simplified. Taxes that impose unequal burdens on people are by that fact more unfair than those that don’t, but both the income tax and the sales tax invite such problems. Just as an income tax can set higher rates for top earners, so too a sales tax can impose higher rates on “luxury” and “sinful” items and lower rates for “essential” (and politically-correct) items. Usually the most important marker of fairness is a tax’s rate, which can fluctuate for any given sort of tax. Surely no one who values government limited to protecting individual rights would regard a sales tax of 50 percent as more “fair” than an income tax of five percent.

Overall Mr. Keel dramatically understates the complexity of the “Fair Tax,” though he does add useful detail about requirements to “register with the sales tax authority” and submit one’s books for government auditing. For example, Mr. Keel writes, “Sales tax returns are very simple (multiply your sales by 23 percent and send it in).” However, to calculate one’s total sales, one must first tack on the 30 percent tax to every sold consumable good or service, track each entry separately, and figure out which sales count as “intermediate” rather than final sales. (See page 6 of FairTax.org’s “Plain English Summary” of the Fair Tax Act of 2007.) An “intermediate” sale is one involving “property or service in the production, provision, rendering, or sale of other taxable property or services.” The huge list of goods and services that can serve both “intermediate” and consumable ends includes paper, cell phones, automobiles, clothing, computers, books, food, cleaning services, and so on. Mr. Keel also wrongly claims that under a sales tax one would no longer have to maintain “mileage records to substantiate your business trips.” Section 705 of the Fair Tax Act of 2007 provides for just such record keeping. FairTax.org helpfully summarizes, “There are detailed and, unavoidably, somewhat complex rules for calculating the business use portion of mixed use property.” See the 133 pages of the 2007 bill for a full description of exemptions, filing and reporting requirements, and tracking mechanisms.

The “prebate” deserves some clarification here, as it too adds complexity to the “Fair Tax.” Mr. Keel claims that “if you are under the poverty level, you’ll get a tax pre-bate (the poverty level multiplied by the tax rate).” But the proposal “provides every American family with a rebate of the sales tax on spending up to the federal poverty level,” regardless of how much a family actually spends in taxes (see the first page of the “Plain English Summary”). Sections 301–305 of the 2007 bill define the relevant family unit, identification requirements, requirements for annual registration, and mechanisms for the rebate.

As Mr. Keel understates the complexity of the “Fair Tax,” so too he dramatically understates its potential for corruption. As I wrote before, under a sales tax “special interests would perennially plead for more exemptions, tax favoritism (as for ‘green’ energy), and higher taxes on ‘sin’ and ‘luxury’ items.” While Mr. Keel claims “There are no exemptions under the Fair Tax,” he quotes that line out of context, and he ignores language clearly exempting education. Page 5 of FairTax.org’s “Plain English Summary” states, “Tuition for primary, secondary, postsecondary education, and job-related training courses is not taxable.” While the idea behind the exemption is that education leads to production, obviously that is not always the case; for example, my college offered surfing classes. If surfing can be tax-exempt, no doubt an unlimited number of other service providers will send their lobbyists to Washington to plead for special treatment. Those skeptical about the reality of this problem are free to peruse the scores of sales tax exemptions in my home state of Colorado. Quite literally my state has been roiled in controversy over whether to tax bull semen. As for the “prebate,” it could easily morph into a program to intentionally subsidize the poor.

If advocates of a national sales tax would lead rather than follow with a proposal to repeal the Sixteenth Amendment, that would mitigate concerns about ending up with both taxes, each of which could be raised at any time. Mr. Keel offers little comfort when he states, “No current supporter of the Fair Tax would support the Fair Tax unless the entire income tax is repealed.” As I pointed out in my original article, Herman Cain already switched from advocating the sales tax to advocating a sales tax mixed with an income tax. Within the last couple of years, the sort of national sales tax to gain the most traction has been a Value Added Tax (VAT) added to the income tax. Whether the advocates of the “Fair Tax” want to abolish the income tax is basically irrelevant; politicians will prove more than happy to cherry pick from their proposals.

Mr. Keel argues that a national sales tax would reign in rather than expand a black market. But my point was not to compare the relative scope of illegal activity—an impossible task—but merely to point out that a national sales tax would in fact invite a robust black market. A sales tax of 30 percent added to the cost of every item would dramatically increase the incentive of miscreants to shoplift and break into warehouses, either for personal use or for illegal resale. (Remember that state sales taxes would be added on top of the federal tax.) Thus, in addition to incentivizing black markets, such a tax would increase security costs. Others would haul goods from Canada and Mexico for illegal sale. Services would prove particularly prone to tax evasion. Such problems could encourage Congress to replace a tax on consumable goods and services with a VAT on everything.

Mr. Keel offers no reason to think that Congress would accept his preferred rate of 30 percent (equivalent to a 23 percent “tax inclusive” rate), and current spending would require a sales tax substantially higher than that. The higher the tax, the greater the problems.

Mr. Keel reviews the strongest argument for a national sales tax on consumer items: “The Fair Tax eliminates impediments to investing because there is no tax on money not spent, thereby encouraging saving and investing.” However, an income tax could have the same effect by exempting proceeds plowed into investments. And, unfortunately, Congress could easily start taxing investments via a sales tax. However, it is true that a sales tax is more easily restricted to the taxing just of consumable items.

Advocates of the “Fair Tax” cannot fairly compare their ideal version of a sales tax to today’s income tax. Not only would Congress likely quickly corrupt the sales tax as proposed, but the enormous political effort that would be required to pass a sales tax also could be directed toward reforming the income tax to make it less unfair. The real question, then, is this: For a given amount of political effort, which is more likely to achieve the less-onerous tax: trying to pass the “Fair Tax” or trying to reform the income tax?

In my many years of political activism, I have joined many strategic fights over particular pieces of legislation. I have also run across many efforts that I began to call “silver-bullet strategies,” ideas touted as solutions to big problems but unlikely to actually change the political scene for the better because, like the silver bullets of lore, they depend on almost-magical properties to work. Silver-bullet strategies share several characteristics: they focus on passing narrow legal changes rather than educating the public about core philosophical ideas; they oversell the potential of a given proposal to expand liberty; they understate the inherent problems of a given proposal along with its potential for corruption; and they ignore alternative uses of activist time and resources. While replacing the income tax with a national sales tax remains something worth considering—especially in the context of a campaign to repeal the Sixteenth Amendment—in many ways the “Fair Tax” seems like a silver-bullet strategy.

Mr. Keel appears to agree with me that the central goal should be to radically cut federal spending and return the government to its function of protecting people’s rights. If liberty activists can accomplish that, reforming the details of the tax code will be the easy part. In the context of out-of-control federal spending and the altruism that fuels it, no tax can possibly be simple or fair. Whatever we do as activists, and whether we agree on every detail, we should stay focused on the need to cut spending and on the ideas that pave the way.

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  • Anonymous

    Mr. Armstrong stated in his most recent installment
    regarding the FT, “Just as an income tax can set higher rates for top earners,
    so too a sales tax can impose higher rates on “luxury” and “sinful” items and
    lower rates for “essential” (and politically-correct) items.  The FT is designed to stop that from
    occurring – tax increases apply to everyone equally.  The plain English version at Fairtax.org of
    the FT Bill states, “There are no exemptions under the FT, meaning that no
    lobbyist, corporation, or individual can obtain tax advantages that are not
    available to the general public.”  We
    have to start with a new Bill to protect ourselves and it will require
    vigilance to protect it – everyday stuff of living in a free society.

    Mr. Armstrong stated, “Mr. Keel writes, “Sales tax returns
    are very simple (multiply your sales by 23 percent and send it in).” However,
    to calculate one’s total sales, one must first tack on the 30 percent tax to
    every sold consumable  good or service,
    track each entry separately, and figure out which sales count as “intermediate”
    rather than final sales.”  First,
    businesses already add on the state sales tax now, all computed by the point of
    sale device.  Programming the POS device
    to also calculate 23% would be easy as falling off a log.  I was a corporate accountant for over 30
    years and this stuff is simple.  Track
    each entry separately?  All entries are
    tracked separately now.  Every business
    already has a daily Sales Journal detailing each sale.   Regarding intermediate sales, supply chain
    entities prior to the final retail sale know when they are selling a truckload
    of goods that the sale is intermediate. 
    Buyers would also be required to show a valid government resale
    certificate . Besides if a consumer attempts to purchase as if he is a
    wholesaler to avoid the FT, he’d be buying much larger quantities than he could
    afford because wholesalers sale in bulk. 

    Regarding the list of items which Mr. Armstrong said could
    be either intermediate or consumer sales (paper, cell phones, etc.).  Under the FT, you would have to apply for and
    be issued an “exemption certificate” that you’d be required to present at point
    of sale in order to purchase as an intermediate buyer.  Some small business owners might try this but
    most people are employees without an exemption certificate.

    Mr. Armstrong stated, “Mr. Keel also wrongly claims that
    under a sales tax one would no longer have to maintain “mileage records to
    substantiate your business trips.”  I am
    correct on this.  First, Mr. Armstrong is
    talking about mixed used property – property essential to operating the
    business and also rented out to customers. 
    I estimate that less than ½ of one percent of all business property is
    mixed use making the issue entirely negligible. 
    Businesses track the mileage or time customers use this mixed use
    equipment in order to bill the customer. 
    All you have to do to calculate the business use is subtract customer
    use from total use and you’ve got business use – no need to track business use
    mileage and my statement stands true.

    Regarding Mr. Armstrong’s paragraph beginning, “The
    “prebate” deserves some clarification here, as it too adds complexity to the
    “Fair Tax.”  Keep in mind here when
    evaluating the FT you are comparing a 136 page FT Bill to a 60,000 page IRS
    Code. Enough said about complexity.  The
    purpose of the prebate is to eliminate taxes on the poor.  Yes, everyone gets it.  The government is not going to waste it’s
    time identifying poverty and non-poverty level people when it’s easier to give
    the prebate to all and make up for it in the 23% tax rate.  The government already has the infrastructure
    in place to issue these checks.

    Mr. Armstrong said that I “ignore language clearly exempting
    education”. Education and job training are intermediate goods that go into the
    production of goods and therefore are exempt from the FT just like all other
    such goods.  Mr. Armstrong acknowledged this
    but but objected because someone might take a surfing class tax free or
    politicians might use this to exempt a horde of items.  This is a repeat of the “politicians will
    corrupt what we accomplish so let’s not try it” approach.  Instead he advocates fixing the current 60,000
    page income tax code implying politicians won’t try to corrupt that effort when
    the alternative is to embrace the 136 page Fair Tax code which completely destroys
    the IRS tyranny.

    Mr. Armstrong stated the Colorado sales tax exempts a large
    number of items from sales tax.  The FT
    explicitly states, “There are no exemptions under the FT, meaning that no
    lobbyist, corporation, or individual can obtain tax advantages that are not
    available to the general public.”  All we
    can do is pass good laws like the FT. 
    Any good law requires constant vigilance.  Under his logic above, why not just give up
    and do nothing since bad politicians will always try to pervert laws?

    Mr. Armstrong stated, “As for the “prebate,” it could easily
    morph into a program to intentionally subsidize the poor.”  Why? 
    It’s a tax prebate to people under the poverty level.  This is the same line of reasoning Mr.
    Armstrong repeats over and over amounting to saying, “let’s don’t support this
    because a politician may try to slip in an exception”

    I understand Mr. Armstrong’s desire that passage of the FT
    be dependent on the abolishment of the 16th amendment (filed as HJR 16 in the
    110th Congress).  I believe the FT
    supporters in Congress will not pass one without the other.  If citizens feel so positively regarding the
    FT to provoke enough congressmen to pass the FT Bill, those same citizens will
    pressure the state legislatures to garner the 2/3 supermajority to abolish the
    16th.  The outrage against legislators not
    voting to abolish the 16th would be enormous even if they didn’t originally
    support it.  Plus, the FT completely
    abolishes the IRS and the Gestapo IRS code so there would be no organization,
    law, or enforcement agency to collect an income tax.  The repeal of the 16th is the biggest risk
    with the FT but given the freedoms the FT offers, it’s worth the risk.  See below for a list of benefits provided by the
    FT and weight that against this risk.  I say
    it’s a risk  worth taking.

    Mr. Armstrong stated, “A sales tax of 30 percent added to
    the cost of every item would dramatically increase the incentive of miscreants
    to shoplift and break into warehouses, either for personal use or for illegal
    resale.”  Not at all.  The corporate income and payroll taxes
    embedded in the products you buy now constitute 22% of the costs – these go
    away!  That offsets the FT leaving the
    price of goods about the same as before. 
    Plus everyone gets the prebate which further offsets the 23% FT.

    Mr. Armstrong mentions that Congress might not accept the
    23% rate.  Consider that the FT adds $5.2
    trillion of income now sheltered from income tax back to the tax base creating
    and an enormous new tax base.  If
    Congress does raise the rate, that’s a spending issue, not a FT issue.  Voters would immediately see the full effect
    of any tax increase at the checkout – a much better deterrent to tax increases
    than now where new taxes are targeted at the richest two percent or hidden
    somewhere.

    Mr. Armstrong stated, “the enormous political effort that
    would be required to pass a sales tax also could be directed toward reforming
    the income tax to make it less unfair.” 
    Given the choice tomorrow, would you rather our country be facing a 136
    page FT or an IRS code exceeding 60,000 pages? 
    Make the current code less unfair? It’s been amended 16,000 times in the
    last twenty years – do you think it is fairer or more unfair as a result?  Trying to fix the current code is ridiculous
    compared to just passing the FT.  No tax
    should be based on your income.   In
    Marx’s list of the ten precursors to a worker’s paradise, the progressive
    income tax is number two just behind the abolition of private property!  All the research money to analyze the FT has
    already been spent.  The least costly
    part is what’s left – passing it as written.

    Mr. Armstrong’s “silver bullet” paragraph is vague and
    ambiguous not meriting a response.  I’ll
    also ignore his closing paragraph in which he repeats the “if we can’t cut
    spending let’s do nothing” approach.  If
    that objection is valid, I could make the argument “why waste time trying to
    cut spending – the real issue is individual rights”.

    Benefits of passing the FT:

    No longer would widowers have to sell the farm or family
    business they developed over the years with their spouse in order to pay the
    resulting inheritance tax.  The death of
    a loved one will never be a taxable event.

    No longer is Congress allowed to disguise spending or buy
    votes via tax cuts. These cuts, known in Washington as “tax expenditures”, have
    grown to almost $1 trillion annually. 
    Washington would not be able to spend money by inserting lines in income
    tax returns because there would be no income tax returns.  The result is transparency.  The income tax is both a revenue raising tool
    and a political behavior mod cattle prod based on the belief that people are Pavlovian
    dogs.

    The Fair Tax is not a spending reform project but with the
    transparency it achieves, the taxpayer would become more vocal against
    spending.

    The FT would eliminate class warfare from the tax code -
    Congress would raise or lower the rate on everyone. No more politicians
    pandering to the jealousies of people by punishing high achievers for their
    success.

    The U.S. would become the 800 pound economic guerilla by
    removing the 22% embedded tax from our products and FT would not be charged on
    exports leveling the playing field with the EU where the VAT has always been
    completely rebated on exports.  Expect
    foreign business to relocate production facilities here to take advantage of
    our tax friendly environment thereby creating such new demand for labor that
    labor shortages are expected.

    Interest rates would be dramatically reduced because of the
    liquidity infused into capital markets because savings and capital gains won’t
    be taxed.  Lower interest rates will play
    a major role in our economic transformation. 
    John Snow, past Secretary of the Treasury called the FT, “the biggest
    magnet for capital and jobs in history”.

    According to the IRS, $5.2 trillion escaped income tax in a
    recent year (that’s about half of all income) due to exemptions, deductions and
    credits. This money will be added back to the tax base.  A consumption tax base which comes from
    spending, borrowing and savings is steadier than a base on income alone.

    The FT is a deterrent to illegal immigration.  Illegal immigrants will now be paying the
    same tax as everyone else.  Plus
    immigrants will not receive the prebate. 

    Sales currently hidden in the black market will now be taxed
    at the point of retail sale.

    You’ll never receive a letter from the IRS, be audited
    personally, have your personal bank account frozen, or face jail time for
    personal income tax issues.

    All Americans will receive a combined tax cut immediately in
    the $265 – $500 billion range due to elimination of income tax return
    compliance costs.

    The economic growth the FT generates will raise more tax
    revenues and buy us some time to fight the spending problem before it destroys
    us.

    With the FT we would move from about 160 million workers
    funding Social Security to everyone funding it (about 300 million people).  People would no longer max out of paying FICA
    tax when reaching $97,500 in wages.  This
    is projected to provide huge additional funds to solve the social security
    funding crisis.

    The VAT is also a consumption tax, although not transparent
    like the FT.  The VAT has been adopted in
    more than 130 countries indicating the popularity and workability of a
    consumption tax.

    The FT incentivizes workers to work harder. A lot of
    Americans would be missing dinner because they know the extra money they earn
    by working longer will not be taxed if they don’t spend it.

    The income tax reversed our protections under Article IV of
    the Bill of Rights regarding unreasonable search and seizures.  The FT reestablishes this protection.

    Why try to save a 60,000 page income tax code when the FT is
    only 136 pages and all the expensive research has been done – we just need to
    petition Washington to pass it.

    The Fair Tax would constitute the largest transfer of power
    from government to the people in the history of the republic.  The economic boom alone is enough to demand
    passage – without even considering all the other liberty enhancing advantages!

    John Keel

    • luxurylandscapemanagement

      This is not even a debate. Mr. Keel in his clearly laid out plan has demonstrated the huge advantages of a single tax that is inherently fair because it affects every single consumer with the exception of those under the poverty line. His opponent argues against his position using straw dogs that would have no place in a taxing system sans politicians. I hope and pray that the groundswell of support for limited government we are seeing today will manifest itself in the adoption of the FAIR tax.

  • JohnKeel

    Mr. Armstrong stated in his most recent installment regarding the FT, “Just as an income tax can set higher rates for top earners, so too a sales tax can impose higher rates on “luxury” and “sinful” items and lower rates for “essential” (and politically-correct) items.  The FT is designed to stop that from occurring – tax increases apply to everyone equally.  The plain English version at Fairtax.org of the FT Bill states, “There are no exemptions under the FT, meaning that no lobbyist, corporation, or individual can obtain tax advantages that are not available to the general public.”  We have to start with a new Bill to protect ourselves and it will require vigilance to protect it – everyday stuff of living in a free society.

    Mr. Armstrong stated, “Mr. Keel writes, “Sales tax returns are very simple (multiply your sales by 23 percent and send it in).” However, to calculate one’s total sales, one must first tack on the 30 percent tax to every sold consumable  good or service, track each entry separately, and figure out which sales count as “intermediate” rather than final sales.”  First, businesses already add on the state sales tax now, all computed by the point of sale device.  Programming the POS device to also calculate 23% would be easy as falling off a log.  I was a corporate accountant for over 30 years and this stuff is simple.  Track each entry separately?  All entries are tracked separately now.  Every business already has a daily Sales Journal detailing each sale.   Regarding intermediate sales, supply chain entities prior to the final retail sale know when they are selling a truckload of goods that the sale is intermediate.  Buyers would also be required to show a valid government resale certificate . Besides if a consumer attempts to purchase as if he is a wholesaler to avoid the FT, he’d be buying much larger quantities than he could afford because wholesalers sale in bulk. 

    Regarding the list of items which Mr. Armstrong said could be either intermediate or consumer sales (paper, cell phones, etc.).  Under the FT, you would have to apply for and be issued an “exemption certificate” that you’d be required to present at point of sale in order to purchase as an intermediate buyer.  Some small business owners might try this but most people are employees without an exemption certificate.

    Mr. Armstrong stated, “Mr. Keel also wrongly claims that under a sales tax one would no longer have to maintain “mileage records to substantiate your business trips.”  I am correct on this.  First, Mr. Armstrong is talking about mixed used property – property essential to operating the business and also rented out to customers. I estimate that less than ½ of one percent of all business property is mixed use making the issue entirely negligible.  Businesses track the mileage or time customers use this mixed use equipment in order to bill the customer.  All you have to do to calculate the business use is subtract customer use from total use and you’ve got business use – no need to track business use mileage and my statement stands true.

    Regarding Mr. Armstrong’s paragraph beginning, “The “prebate” deserves some clarification here, as it too adds complexity to the “Fair Tax.”  Keep in mind here when evaluating the FT you are comparing a 136 page FT Bill to a 60,000 page IRS Code. Enough said about complexity.  The purpose of the prebate is to eliminate taxes on the poor.  Yes, everyone gets it.  The government is not going to waste it’s time identifying poverty and non-poverty level people when it’s easier to give the prebate to all and make up for it in the 23% tax rate.  The government already has the infrastructure in place to issue these checks.

    Mr. Armstrong said that I “ignore language clearly exempting education”. Education and job training are intermediate goods that go into the production of goods and therefore are exempt from the FT just like all other such goods.  Mr. Armstrong acknowledged this but but objected because someone might take a surfing class tax free or politicians might use this to exempt a horde of items.  This is a repeat of the “politicians will corrupt what we accomplish so let’s not try it” approach.  Instead he advocates fixing the current 60,000 page income tax code implying politicians won’t try to corrupt that effort when the alternative is to embrace the 136 page Fair Tax code which completely destroys the IRS tyranny.

    Mr. Armstrong stated the Colorado sales tax exempts a large number of items from sales tax.  The FT explicitly states, “There are no exemptions under the FT, meaning that no lobbyist, corporation, or individual can obtain tax advantages that are not available to the general public.”  All we can do is pass good laws like the FT.  Any good law requires constant vigilance.  Under his logic above, why not just give up and do nothing since bad politicians will always try to pervert laws?

    Mr. Armstrong stated, “As for the “prebate,” it could easily morph into a program to intentionally subsidize the poor.”  Why?  It’s a tax prebate to people under the poverty level.  This is the same line of reasoning Mr. Armstrong repeats over and over amounting to saying, “let’s don’t support this because a politician may try to slip in an exception”

    I understand Mr. Armstrong’s desire that passage of the FT be dependent on the abolishment of the 16th amendment (filed as HJR 16 in the 110th Congress).  I believe the FT supporters in Congress will not pass one without the other.  If citizens feel so positively regarding the FT to provoke enough congressmen to pass the FT Bill, those same citizens will pressure the state legislatures to garner the 2/3 supermajority to abolish the 16th.  The outrage against legislators not voting to abolish the 16th would be enormous even if they didn’t originally support it.  Plus, the FT completely abolishes the IRS and the Gestapo IRS code so there would be no organization, law, or enforcement agency to collect an income tax.  The repeal of the 16th is the biggest risk with the FT but given the freedoms the FT offers, it’s worth the risk.  See below for a list of benefits provided by the FT and weight that against this risk.  I say it’s a risk  worth taking.

    Mr. Armstrong stated, “A sales tax of 30 percent added to the cost of every item would dramatically increase the incentive of miscreants to shoplift and break into warehouses, either for personal use or for illegal resale.”  Not at all.  The corporate income and payroll taxes embedded in the products you buy now constitute 22% of the costs – these go away!  That offsets the FT leaving the price of goods about the same as before. Plus everyone gets the prebate which further offsets the 23% FT.

    Mr. Armstrong mentions that Congress might not accept the 23% rate.  Consider that the FT adds $5.2 trillion of income now sheltered from income tax back to the tax base creating and an enormous new tax base.  If Congress does raise the rate, that’s a spending issue, not a FT issue.  Voters would immediately see the full effect of any tax increase at the checkout – a much better deterrent to tax increases than now where new taxes are targeted at the richest two percent or hidden somewhere.

    Mr. Armstrong stated, “the enormous political effort that would be required to pass a sales tax also could be directed toward reforming the income tax to make it less unfair.” Given the choice tomorrow, would you rather our country be facing a 136 page FT or an IRS code exceeding 60,000 pages?  Make the current code less unfair? It’s been amended 16,000 times in the last twenty years – do you think it is fairer or more unfair as a result?  Trying to fix the current code is ridiculous compared to just passing the FT.  No tax
    should be based on your income.   In Marx’s list of the ten precursors to a worker’s paradise, the progressive income tax is number two just behind the abolition of private property!  All the research money to analyze the FT has already been spent.  The least costly part is what’s left – passing it as written.

    Mr. Armstrong’s “silver bullet” paragraph is vague and ambiguous not meriting a response.  I’ll also ignore his closing paragraph in which he repeats the “if we can’t cut spending let’s do nothing” approach.  If that objection is valid, I could make the argument “why waste time trying to cut spending – the real issue is individual rights”.

    Benefits of passing the FT:

    No longer would widowers have to sell the farm or family business they developed over the years with their spouse in order to pay the resulting inheritance tax.  The death of a loved one will never be a taxable event.

    No longer is Congress allowed to disguise spending or buy votes via tax cuts. These cuts, known in Washington as “tax expenditures”, have grown to almost $1 trillion annually.  Washington would not be able to spend money by inserting lines in income tax returns because there would be no income tax returns.  The result is transparency.  The income tax is both a revenue raising tool and a political behavior mod cattle prod based on the belief that people are Pavlovian dogs.

    The Fair Tax is not a spending reform project but with the transparency it achieves, the taxpayer would become more vocal against spending.

    The FT would eliminate class warfare from the tax code – Congress would raise or lower the rate on everyone. No more politicians pandering to the jealousies of people by punishing high achievers for their success.

    The U.S. would become the 800 pound economic guerilla by removing the 22% embedded tax from our products and FT would not be charged on exports leveling the playing field with the EU where the VAT has always been completely rebated on exports.  Expect foreign business to relocate production facilities here to take advantage of our tax friendly environment thereby creating such new demand for labor that labor shortages are expected.

    Interest rates would be dramatically reduced because of the liquidity infused into capital markets because savings and capital gains won’t be taxed.  Lower interest rates will play a major role in our economic transformation.  John Snow, past Secretary of the Treasury called the FT, “the biggest magnet for capital and jobs in history”.

    According to the IRS, $5.2 trillion escaped income tax in a recent year (that’s about half of all income) due to exemptions, deductions and credits. This money will be added back to the tax base.  A consumption tax base which comes from spending, borrowing and savings is steadier than a base on income alone.

    The FT is a deterrent to illegal immigration.  Illegal immigrants will now be paying the same tax as everyone else.  Plus immigrants will not receive the prebate. 

    Sales currently hidden in the black market will now be taxed at the point of retail sale.

    You’ll never receive a letter from the IRS, be audited personally, have your personal bank account frozen, or face jail time for personal income tax issues.

    All Americans will receive a combined tax cut immediately in the $265 – $500 billion range due to elimination of income tax return compliance costs.

    The economic growth the FT generates will raise more tax revenues and buy us some time to fight the spending problem before it destroys us.

    With the FT we would move from about 160 million workers funding Social Security to everyone funding it (about 300 million people).  People would no longer max out of paying FICA tax when reaching $97,500 in wages.  This is projected to provide huge additional funds to solve the social security funding crisis.

    The VAT is also a consumption tax, although not transparent like the FT.  The VAT has been adopted in more than 130 countries indicating the popularity and workability of a consumption tax.

    The FT incentivizes workers to work harder. A lot of Americans would be missing dinner because they know the extra money they earn by working longer will not be taxed if they don’t spend it.

    The income tax reversed our protections under Article IV of the Bill of Rights regarding unreasonable search and seizures.  The FT reestablishes this protection.

    Why try to save a 60,000 page income tax code when the FT is only 136 pages and all the expensive research has been done – we just need to petition Washington to pass it.

    The Fair Tax would constitute the largest transfer of power from government to the people in the history of the republic.  The economic boom alone is enough to demand passage – without even considering all the other liberty enhancing advantages!

    John Keel

    • luxurylandscapemanagement

      This is not even a debate. Mr. Keel in his clearly laid out plan has demonstrated the huge advantages of a single tax that is inherently fair because it affects every single consumer with the exception of those under the poverty line. His opponent argues against his position using straw dogs that would have no place in a taxing system sans politicians. I hope and pray that the groundswell of support for limited government we are seeing today will manifest itself in the adoption of the FAIR tax.

  • http://pulse.yahoo.com/_IZ3RPI5YN63HVMQGLQALFNGZ5Q Mark C

    Fairtax is NOT, let me repeat NOT a retail sales tax to replace all other taxes.   That is their huslte, that is what they tell  you.

    Read the fine print.  Over 3/4 of Fairtax has nothing to do with retail sales.  
    http://fairtaxgoofy.blogspot.com/

  • http://pulse.yahoo.com/_IZ3RPI5YN63HVMQGLQALFNGZ5Q Mark C

    Fairtax is NOT, let me repeat NOT a retail sales tax to replace all other taxes.   That is their huslte, that is what they tell  you.

    Read the fine print.  Over 3/4 of Fairtax has nothing to do with retail sales.  
    http://fairtaxgoofy.blogspot.com/

  • http://www.facebook.com/paul.burgener.5 Paul Burgener

    I stopped reading as soon as I read that 30 percent will be added to all prices.  Our current income tax is hidden in all retail prices.  The FairTax simply replaces the hidden taxes in reatil prices with the same dollar value with the FairTax.  If prices go up, it’ll be because people have more money to spend, making it a wash.  What’s more, the prebate completely untaxes the poor.  The only people who would loose with the FairTax are people who “game” the current system.    

  • Paul Burgener

    I stopped reading as soon as I read that 30 percent will be added to all prices.  Our current income tax is hidden in all retail prices.  The FairTax simply replaces the hidden taxes in reatil prices with the same dollar value with the FairTax.  If prices go up, it’ll be because people have more money to spend, making it a wash.  What’s more, the prebate completely untaxes the poor.  The only people who would loose with the FairTax are people who “game” the current system.    

  • http://www.noriskinvestor.com/ George Michale

    i do completely agree with this post cause tax terms are so critical that it makes our Tax Deed difficult most of the time.thanks for sharing the post here with us.

  • http://www.noriskinvestor.com/ George Michale

    i do completely agree with this post cause tax terms are so critical that it makes our Tax Deed difficult most of the time.thanks for sharing the post here with us.