The FairTax claims are preposterous on their face. Basically, embedded costs is about 21% and goods will fall by about this amount while the FairTax will be 23% so it’s a free ride give or take 2 or 3%.

Unfortunately, you are already paying that embedded tax when you buy a product now AND people and corporations are ALSO paying an ADDITIONAL $2.4 TRILLION in income tax!

If the FairTax is revenue neutral and it is set at about the same rate as prices of goods are expected to fall after it is implemented, where does the other $2.4 TRILLION come from?

When you get your next paycheck, look at the taxes that are withheld. Those are the embedded taxes in the goods you produce by working that the FairTax will do away with.
They are done away with because businesses are not paying them anymore. Your paycheck is going to go down by 23%. It has to for the FairTax to work. Otherwise, businesses cannot reduce the cost of their goods by the amount of the embedded tax!

When you go out to buy a product that is 21% cheaper, it will be with 23% less money from your paycheck and you will still have to pay the 23% FairTax on the product.

Look at what even the FairTax people are saying. A $100 product will still cost about $100 after the savings of the FairTax in embedded costs is included and the cost of the FairTax is paid.

Yes! But you will be paying for it with 23% less money in your paycheck!

Everybody is instantly in the 23% tax bracket! The wealthy make out like bandits while the middle class gets the shaft. Plus, people with debt are paying taxes on credit card interest, mortgages and school loans that they didn’t pay before. People who rent are paying a tax on their rent they didn’t pay before. People who have medical bills are paying taxes on medical bills they didn’t pay before.

The FairTax is a massive shift of taxes from the wealthy, who pay a substantial portion of the total taxes now, to the middle class.

You people are so gullible!

But if you want to have some fun, go to the FairTax.org website and try their FairTax Calculator and see if you can come up with any combination of data input that will result in somebody, anybody, paying more than they do now.

"When you go out to buy a product that is 21% cheaper, it will be with 23% less money from your paycheck and you will still have to pay the 23% FairTax on the product."

I would love to know where you got this idea. embedded taxes have nothing to do with ypur paycheck.

Many objections to the FairTax arise when people don’t know of or understand “embedded” or “hidden” taxes/cost.
Buried in the price of everything you buy is a portion of some else’s income taxes and their cost of complying with those taxes. Politicians constantly preach of raising corporate taxes to “stick it to the fat cats”. Without knowing the truth, we think it is a god idea to raise their taxes and not ours. Politicians are hoping you don’t know the truth.

The truth is businesses and corporations don’t really pay tax or compliance costs, they just pass it on to the consumer. Sure they write check and pay a tax. Economist s call this a tax incidence but the tax burden is passed on. Only the end user bears the tax burden. Think about it. When a corporate tax is raised, where do they get the money? A business must either raise prices, cut costs, or both in order to maintain market share and profit margin.

When a business tax is cut, companies can hire more, lower the price, or a little of both. The business tax under the FairTax Act is cut to 0. This will create the biggest boom to jobs and the economy ever. It frees the workers to get ahead and lays the burden on the big spenders.

The income tax equation is income – taxes - compliance dollars = spending
The Fair Tax equation is income = spending + taxes + compliance dollars, so here we are taxed as we spend and keep the compliance costs.
Now to expand on this a bit……IT. income- withholding tax – SS payment – Medicare payments - spent compliance dollars = spending……… Vs….. FT income = spending + FT tax + saved compliance dollars so here we are taxed as we spend and keep the compliance costs and SS and Medicare payments

Or, more simplified……..
Prices
IT is What I made - withholding tax – SS payment – Medicrae payments- spent compliance dollars = What I have left to spend………. Vs…….

FT is What I made = What I have left to spend less the FairTax + saved compliance dollars

NOW YOU PICK….. Do you want 23% stolen from your pay check before you ever get it… OR pay 23% only when you buy a new item?

These research papers may help ypu understand:
Taxing Sales under the FairTax – What Rate Works?
http://people.bu.edu/kotlikof/BHI-LK%20Taxing%20Sales%20under%20the%20FairTax-%20What%20Rate%20Works%209-25-06%20FINAL.pdf by Paul Bachman Director of Research, Beacon Hill Institute, Suffolk University
Jonathan Haughton Associate Professor of Economics Senior Economist, Beacon Hill Institute Suffolk University
Laurence J. Kotlikoff Professor of Economics, Boston University
Research Associate, National Bureau of Economic Research
Alfonso Sanchez-Penalver Economist, Beacon Hill Institute, Suffolk University
David G. Tuerck Chairman and Professor of Economics
Executive Director, Beacon Hill Institute Suffolk University
September 2006

Comparing Average and Marginal Tax Rates under the FairTax and the Current System of Federal Taxation by
Laurence J. Kotlikoff Professor of Economics Boston University
David Rapson Doctoral Candidate Boston University Revised October, 2006
http://ideas.repec.org/p/nbr/nberwo/11831.html
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=875707
http://www.fairtax.org/PDF/Tax%20Notes%20article%20on%20FT%20rate.pdf

A Comparison of the FairTax Base and Rate with Other National Tax Reform Proposals
David G. Tuerck, Ph.D.
Jonathan Haughton, Ph.D.
Paul Bachman, MSIE
Alfonso Sanchez-Penalver, MSF
http://www.fairtax.org/site/DocServer/A_Comparison_of_the_FairTax_Base_and_Rate.pdf?docID=761

Tax Incidence, Tax Burden, and Tax Shifting: Who Really Pays the Tax? http://www.heritage.org/Research/Taxes/cda04-12.cfm
by Stephen J. Entin

Ashford Schwall

Geez. I would like to defend the FT, but I just can't see how it would work.

I like Mike Huckabee. He could get my vote. But I don't see how he can win with the Fair Tax thing as baggage. Even if it is a FANTASTIC idea, most people (I think) do not see it that way.

I think you are right: If Huckabee--with FT in tow--is nominated, there will be carnage.

I’ve heard the propaganda, can we move past that? I cited several specific objections: 23% tax on mortgage and credit card interest, 23% tax on medical expenses, 23% tax on insurance payouts, 23% tax on food, 23% tax on rent, etc. and you did not address a single one of them.

Not only that, some of the stuff you put in is simply not true. Specifically under item 4 you say: “Under the archaic Income and payroll tax a middle class family had to earn a gross pay of $148 to bring $100 Home. Under the Fair Tax you bring $148 dollars home…” and item 8: “Average working families take home 100% of their paychecks, no Federal income tax or payroll deductions. Average family of 4 making $50,000/yr takes home $5,000 to $7500 more.”

Look at the link I provided in my previous post to Boortz’s book:

FairTax Follies

Neal says:

“When the FairTax is implemented, and when business and personal income and payroll taxes disappear, your employer is going to have to make a decision. He will either take some or the entire amount he had been withholding for federal income and payroll taxes and add it to your weekly check, or he will readjust your pay figures so that your entire paycheck will be equal to what you used to call "take home pay" before the FairTax.

Now, let's elaborate on the "keep 100% of your paycheck" line that appears in The FairTax Book. It is certainly true that after the FairTax becomes law there will be no more withholding from your paycheck for any federal taxes. What you earn is what you get. This is not to say that your gross pay will equal what it was before the FairTax.

The "keep 100% of your paycheck" concept can more easily be applied to those who either change jobs or come into the labor force after the implementation of the FairTax. A new worker will negotiate a wage with an employer knowing that the amount negotiated will be the amount that worker receives every two weeks ... no deductions. Likewise, when you change employers you, too, will negotiate a wage that will not be subject to withholding, and you will get 100% of your wages in each paycheck.”

It is perfectly clear that you are not going to get 100% of your paycheck. It is going to be reduced by the FairTax amount of 23%

What do you think Neal is talking about when he says: “...or he (your employer) will readjust your pay figures so that your entire paycheck will be equal to what you used to call take home pay"?

Why do you think he has to “elaborate on the "keep 100% of your paycheck" line that appears in The FairTax Book.”

Is his statement that: “This is not to say that your gross pay will equal what it was before the FairTax” somehow unclear?

My favorite: “The "keep 100% of your paycheck" concept…”

Concept?

You also claim in item 9 that "Families have more Spendable income..." Now if the FairTax is revenue neutral (as you say in item 10)and businesses and corporations are not paying taxes anymore (item 3), just exactly who is making up the difference?

Huckabee for the Republican nominee ’08!

"It is perfectly clear that you are not going to get 100% of your paycheck. It is going to be reduced by the FairTax amount of 23%

What do you think Neal is talking about when he says: “...or he (your employer) will readjust your pay figures so that your entire paycheck will be equal to what you used to call take home pay"?
"

It is clear to most. Look at your paycheck. You see lines deducted from gross income that say Federal, Socail Security and Medicare. Add those up. Under the FsirTax, you keep that, it goes to the net income line of your check.

Ashford Schwall

Since you place such emphasis on it, please cite exactly where, when and how Alan Greenspan endorsed the Fair Tax plan.

This is a direct quote from Alan Greenspan.

"As you know, many economists believe that a consumption tax would be best from the perspective of promoting economic growth — particularly if one were designing a tax system from scratch — because a consumption tax is likely to encourage saving and capital formation," Greenspan said.

There is more just type in something like "Alan Greenspan on Fair Tax"
In to Google

Huckabee 08'

I thought that's what you'd say.

That quote comes from Greenspan's testimony to the President's Commission on Tax Reform, March 2005. The next sentence was: "However, getting from the current tax system to a consumption tax raises a challenging set of transition issues." No kidding, Al.

Mr. Barker, Did you read his full six-plus pages of testimony, as well as his answers to follow-ups? Or did you just clip from some fair tax site this single sentence out of that testimony about what "many economists believe" about the general theory of a consumption tax (though not necessarily about its usefulness in the real world)? If you'd done the former, you'd know that he spent most of it praising the '86 income tax reform that flattened rates; said nothing whatsoever about the Fair Tax plan specifically; and in general spoke in his typically opaque manner, recommending no specific path. You really, really have to be desperate to try to turn his statement into a Fair Tax endorsement. But then, that's what the whole thing is about -- layers of fantastic assumptions and wishful assertions, all of which have to come true just as predicted or the whole thing tumbles like the house of cards it is.

Mr. Barker, Have you read Chapter 9 of the Commission's final report, dealing with and basically dismissing the idea of a national retail sales tax? (Interestingly, I see no evidence on the internet that Greenspan has ever bothered to offer a rebuttal. You'd think if someone in his position thought it was such an economic cure-all he'd make it his mission.)

I urge all to go to the commission's web site, www.taxreformpanel.gov where you can read Greenspan's full testimony and the commission's final report and judge for yourself. But be advised: if you read Chapter 9 and are a middle-incomer like me, you'll want to hide your wallet the next time there's a Fair Tax rally in town.

Do your homework. The President's Commission on Tax Reform report was debunked. They did not evaluate H.R. 25 as written. They modified it to their desires. And why not? The President's Commission makes their living on the income tax..

What is your motovattion for hating it so much?

After truly understanding the FAIRTAX:
The only people who hate it are the "income tax profiteers".
Included are career politicians, lobbyists, tax lawyers, tax accountants, the non working rich, IRS agents, illegal aliens and rhe underground economy. Get ready for even more distortions and lies by those who profit from the income tax system.

Ashford Schwall

The President's Commission on Tax Reform report was debunked.
Excuse me, Schwall, it most certainly was NOT debunked. The commission injected some badly needed reality into the fairy-stardust wishful thinking of HR 25 that assumed 100% compliance with the tax law.

The 35 to 57% tax rate of the unFairTax creates a powerful incentive for businesses to cheat, particularly in under-the-counter cash sales, a fact that is never acknowledged by FairTax fanatics. The treasury indicates that in a BEST case scenario, at least 15% of businesses will cheat the system in one form or another, and they have case studies to back it up.

"What is your motovattion (sic) for hating it so much?
After truly understanding the FAIRTAX:
The only people who hate it are the "income tax profiteers".

Grow up. The reason I despise your ridiculous plan is very plain and simple: it shifts the majority of the existing tax burden in America from those earning more than $200K per year to those earning between $30K and $200K per year.
_____________________________________________________
Wall Street Journal: FairTax,Flawed Tax
Unspinning the FairTax

It's not "my" homework that needs to be done.

When someone is attempting to 'sell me something' they better be able to answer all of my questions to my satisfaction.

When I go looking to purchase something, I do the 'homework' that is required on my end, like buying a car.

When 'peddlers' come to my place of business wanting to sell me something, they better have the answers I want or they wont make it past security at the front door.

From what I've seen the "Fair Tax" will create a bureaucracy far worse than the current IRS and force the entire nation into an entitlement program that couldn't be managed by all the programmers in India.

Don't get me wrong, the current system leaves much to be desired but the "Fair Tax" doesn't appear to solve many of the existing problems.

P.S. I'm not keen on wealth distribution.

Fair enough, I won't try to "sell" you anything. I have been studying as many research papers and books I can that go way beyond the Boortz / Linder. I was a skeptic too after reading the Fair Tax book. It seemed way to simple.

I now sse it as the economic plan ever.

Ashford Schwall

This stupid plan is screwy enough without your confounding the issue:

"go way beyond the Boortz/ Linder" (what is a Boortz/Linder?)

"I now see it as the economic plan ever" (what is an economic plan ever?)

You make a good "fair tax" salesperson! Better put those "way beyond" books up, somewhere!

By "Boortz/Linder" I mean the authors of the FairTax book.
Neal Boortz and congressman John Linder who sponsored H.R. 25.
and I meant "I now see it as the best economic plan ever"

Due in about 3 weeks is the new book:
FairTax: The Truth: Answering the Critics (Paperback)
by Neal Boortz (Author), John Linder (Author)

What makes this plan "screwy"?
After truly understanding the FAIRTAX:

The only people who hate it are the "income tax profiteers".
Included are career politicians, lobbyists, tax lawyers, tax accountants, the non working rich, IRS agents, illegal aliens and the underground economy. Get ready for even more distortions and lies by those who profit from the income tax system.

Good job Shelby, the cynics will come around sooner or later, and those that come around later will say they were with you the whole time.

A fellow Huckabee Supporter

They once said blacks will never vote.
They once said women will never vote.
They once said man will never fly.
They once said man will never walk on the moon.

“Those who say it can not be done, should get out of the way of those doing it.”
Ashford Schwall

There was an excellent turnout at the Gathering Place on Saturday for those in attendance to learn more about the Fair Tax.

If you oppose the Fair Tax, you either work for the IRS or you don't understand it.

This is a grass roots effort, and it is gaining big time momentum. It takes political guts to endorse the plan, which Mike Huckabee has done, which is the main reason I support Huckabee.

Keep on reading and asking questions, and if you still don't like it, keep happily paying income tax using an antiquated, unfair, absurdly complex and often times corrupt system. The politicians in Washington will love you for giving them a free ride.

Dan Tennant

I don’t work for the IRS or like the present system.

Consider this, a couple of years ago a member of my family incurred $30,000 in medical bills. That year I paid a little over $10,000 in insurance so I came out about $20,000 ahead in expenses. Under the FairTax, I would have had to pay 23% on that $20,000 or an extra $4600.

Assume the FairTax was in effect and my medical costs were reduced by 23% from $30,000 to $23,100 and my insurance remained the same; the absolute best case for the FairTax. Then I would owe 23% on $13,100, an extra $3013 in taxes.

What part of that am I not understanding?

The FairTax purports to be revenue neutral while doing away with corporate income taxes. Who do you think has to make up the difference? It fails the simplest test of logic.

I too am supporting Huckabee to be the Republican nominee precisely because he is supporting the FairTax.

Jeff, wrong again. You would pay 23% on your premiums, not on the $20,000.

FairTax – The general premise of the FairTax is to tax every new good or service one time. So when you purchase health insurance, your premiums are taxed, but the charges billed to the insurance company by the doctor are not taxed. (Taxing both premiums and benefit payments would result in double taxation.) If the insurance benefit is paid directly to you, it includes the insurance credit to prepay any taxes due as the benefit is spent.
If you purchase health care services directly from the doctor (co-pays, deductibles) the charges are taxable. Of course, as noted above, the doctor’s cost of doing business is significantly reduced, thereby allowing for lower pre-tax charges.
Ashford Schwall

Is that y’all seem to be looking at the propaganda while I am looking at the HR 25 legislation.

Section 206 Insurance proceeds credit (b) (A) applies the tax to: “the amount of the payment made by the insurer to the insured” and paragraph (b) accounts for the premiums with a credit: “less any amount paid to the insured by the insurer”

Paragraph (e) applies this tax to: “For purposes of subsection (a), the term insurance contract' shall include a life insurance contract, a health insurance contract, a property and casualty loss insurance contract, a general liability insurance contract, a marine insurance contract, a fire insurance contract, an accident insurance contract, a disability insurance contract, a long-term care insurance contract, and an insurance contract that provides a combination of these types of insurance.”

These payments are clearly defined as taxable "financial intermediation services" in Section 2, (a), (8), (C) Insurance Payments.

You are confused about the doctors bills also. The insurance you buy is a "financial intermediation services" where as the doctor's bills are classified as a service. Two separate and individually taxable entities.

Hi guys, I wanted to pop in and tell you that you are both mistaken.

This exact subject (who pays the sales tax when you have health insurance) came up the last time we debated the unFairTax around here. I can't find the link but remember how it played out.

Requiring your insurance company to pay or not pay sales tax related to claims is determined at the state level. Currently 29 states require by law insurance companies to pay any sales tax accrued as part of a claim. 21 states require the consumer, not the insurance company, to pay the sales tax related to a claim out of pocket.

Georgia is in the former category, so a consumer will not have to pay the unFairTax related to a claim. However, since the insurance company will now have to pay an additional 30-57%, you should expect premiums to skyrocket and health insurance to become less affordable.

Bottom line: the unFairTax makes you sicker.
_____________________________________________________
Wall Street Journal: FairTax,Flawed Tax
Unspinning the FairTax

Doing away with corporate income taxes, Jeff? No, it does away with INCOME tax, most especially personal income tax.

I don't have the time to deliver a course in economics right now, Jeff, but there are no real corporate income taxes. You may THINK there are, but there are not in reality. Corporations include their tax liability in their cost of doing business, which means it is hidden in the price of the good or services. So, it is the consumer, and not the corporation that is ultimately paying the corporate income tax.

So much for socking it to those rotten corporations that created so much wealth in America.

Semantics. Why is it not just as valid to say that all taxes are paid by corporations or businesses, not people, since all of the money that people have, barring handouts, comes from business revenues in the form of income paid to workers? If you truly think corporations don’t pay taxes then stop paying your corporate taxes and see what happens.

Dan, I voted for you but I don’t have time right now for a lesson in politics. If you are for the FairTax, are you coming out now and stating unequivocally in this public blog that you are in favor of reducing everyone’s paycheck by 23% and that you are for another almost $1.00 per gallon tax on gasoline?

This will help you understand:

Tax Incidence, Tax Burden, and Tax Shifting: Who Really Pays the Tax? http://www.heritage.org/Research/Taxes/cda04-12.cfm
by Stephen J. Entin

Ashford Schwall

Hey Sniffles...need a kleenex?

Are you suggesting that reading a book is a poor decision for one to make when attempting to gain knowledge on a subject? Your mockery makes me question your motives.

"From what I can tell, the vast majority of the people supporting this unFairTax are the very rich and lower middle-class folks with a grudge against the IRS." Do you have data and the requisite associated charts and graphs, or is this nothing more than an opinion? I know we all have one, but yours smells.

Regards