Just published (in print and now online) is an interview I did with Atlanta Life Magazine (April issue) on this subject in the form of replies to three questions about the FairTax. Answering the same three questions, but in favor of the FairTax, is Ken Hoagland, the national communications director for FairTax.org.
Source link: http://archive.mises.org/7977/is-the-fairtax-fair/
Is the FairTax Fair?
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I am with Walter E. Williams on this “Fair Tax” crap: There is simply NO fair method to extract $3 trillion or 22% of GDP from the citizenry. The only real way to make it fairer would be to reduce the $3 trillion. I have several ways to do this:
1. Stop the ongoing wars.
2. Allow the young to opt out of Anti-Social Un-Security.
3. Cut by 1/2 all new defense projects.
4. Cut all soldiers from foreign countries by 40 countries per year for the next 5 years.
This scheme is very fair to estates and investors of capital. What about investors in Real Estate? What about Gold or Silver? What about derivatives?
And basic necessities are taxed? What about home owners in LA, NY and/or SF? Do they get taxed? Will their Pre-Pends pay for this? What about people living in expensive places like Hawaii or Long Island?
This really isn’t fair at all.
InDefinition.com attempts to identify the foundation of the concept “FAIR.â€
Many conflicts are the result of package deals and anti-concepts.
Taxation is an issue of enforced government policy.
Package deals of Tax Assessment, and Funding lead to disputes.
See: TaxJudas.com
Protective Tariffs on imports have been justified by the patriotic funding of National Defense.
Justice is the concept which applies to Taxation.
Justice is enforced by Government.
Government maintains peaceful relations and defends against foreign aggression.
Gasoline and Fuel taxes pay for highways.
Sales Tax is comparable to Fuel taxes: simple, proportionate to benefits of social co-operation.
Justice is the concept for enforced taxation— and the concept to authorize expenditure.
Taxation removes vitality from citizens—
Tax funded activities should arrest violent aggression and resolve disputes (civil courts).
McCARTER
So the violation of property rights is now known as “justice”? Interesting to know.
cutting defense will help only short term. The largest and fastest growing part of the budget is entitlements and debt servicing. I’ve heard that in 2060 or so, these two items will consume 100% of the federal budget and will STILL be growing, leading to an ever increasing tax rate.
We need to get beyond “all we have to do is cut defense sending”. And analyze the ENTIRE budget. (not saying defense spending can’t be cut, but we need to do more)
australia introduced a “goods and services tax”, (roughly similar to the uk’s vat) in 2000. this was a conservative government initiative, and was accompanied by a flashy media campaign, complete with joe cocker “unchain my heart” soundtrack! some mandarin at least had a sense of humour, because the overall tax burden has increased, and yet another layer of bureaucracy has been added.
the erstwhile treasurer even had the audacity to suggest it would hit the black economy hard, because of the paper trail. yet if you want a tradesman to make a service call, you’d better have cash. and i hope joe cocker cops a tax audit for his part. ruined a good song too.
australia introduced a “goods and services tax”, (roughly similar to the uk’s vat) in 2000. this was a conservative government initiative, and was accompanied by a flashy media campaign, complete with joe cocker “unchain my heart” soundtrack! some mandarin at least had a sense of humour, because the overall tax burden has increased, and yet another layer of bureaucracy has been added.
the erstwhile treasurer even had the audacity to suggest it would hit the black economy hard, because of the paper trail. yet if you want a tradesman to make a service call, you’d better have cash. and i hope joe cocker cops a tax audit for his part. ruined a good song too.
In case anyone’s forgotten by now, Laurence_M._Vance’s arguments against the FairTax can be summarized as:
1) Taxes are bad.
2) Something other than the FairTax is bad. (i.e. “it’ll get butchered in committee…”)
3) Voters will replace it with something worse later, based on this political science theory that I won’t mention or justify.
4) FairTax advocates are dumb and evil.
I’m not kidding. Every argument he has ever made is some variant on that. And in every discussion, someone brings up a different argument, that genuinely can’t be classified a one of those, and someone will claim he made that argument somewhere, even though he didn’t.
My problem with Laurence_M._Vance’s line of reasoning (beyond the obvious) is that you could say the exact same thing about any policy, including drastic reduction in the size or scope of government. Example:
“The LowTax would reduce all income taxes to 5% for everyone, with no deductions.”
Great policy, right? Wrong, at least by Laurence_M._Vance’s standard.
Laurence_M._Vance’s response:
The LowTax is bad because:
-It will raise taxes on people who currently pay no net income tax.
-Taxes are bad.
-These “LowTaxers” are deceiving everyone into believing that taxes are okay as long as they’re low.
-LowTaxers just want a giant federal government, those statist jerks.
-It will put the government deeper into debt, meaning more taxes later.
-Politicians will use this to justify massive taxes elsewhere and voters will approve.
And so on.
Look guys, if you find yourself arguing against a reduction in income taxes to 5%, it’s time to check some premises…
What I’m curious about is what is the point of a sales tax? Why not just have a flat income tax at 23%, say, with a negative income tax for the poor, or something along those lines? What advantages does it offer over and above a lower income tax? I am against all taxation, but surely the main consideration is that lower taxes are better?
A sales tax makes no sense whatsoever from an economic point of view. If government was organized as a private enterprise, it would price its services, insurance from violence, in order to reflect the cost of producing them. This means that one would pay based on how exposed to claims risk they are, which generally implies a straight property tax.
Inquisitor, one of the issues with a tax is where it first falls as opposed to where it ultimately ends up (impact or “legal incidence” as against incidence). The personal pain is always that much greater when a tax is a direct personal tax like an income tax, particularly if the money has been in the person’s hands or if the person has been directly subjected to its collection as with filling in a tax return and/or otherwise being forced to comply. With a sales tax, on the other hand, even when the buyer and seller are each natural persons, there is that much less personal connection; that is, neither develops as much sense of psychological loss.
Of course, none of this justifies indirect taxes, it merely shows the kind of additional harm done by direct ones – not harm of an economic kind, so most discussions tune it out, but as real and significant in its way as surgery without anaesthesia.
And there is the risk of “false dichotomy”, of supposing that the two alternatives are the only options. There are many other ways of skinning the cat, and often of not skinning it at all.
That is true. I suppose if one wished to adopt a different approach they could argue this would make the tax harder to bear, and thus less likely to be tolerated, keeping people alert to the government’s activities.
The Government only has two choices: inflation or higher taxes. The citizens only have two choices: go along with the government or a shooting revolution.
Eliminating the shooting revolution as against Libertarian principles, Libertarians only have two choices: a tax system which is more invasive to business or a tax system which is more invasive to big business.
I suggest replacing the income tax system with a VAT on any form of business that has a business license or its own federal tax number. This will at least minimize government snooping people’s private activities.
to billwald:
where’s your cut-off line separating “business” and “big business”? and how do you make this distinction?
Thanks for pointing out my typo. Should have been:
“Libertarians only have two choices: a tax system which is more invasive to business or a tax system which is more invasive to citizens.”
Is there any other choice? Harass everyone and every thing? I suppose “big business” is any business that files government paperwork.
For example, some small builders give two
estimates, with or without paperwork. If the home owner is willing to pay cash and get his own permits he gets a much lower bid.
As a lifetime low earner (single, childless, ~200 percent of poverty level) with no hope of buying a home, I am keenly aware of the unFair treatment of rent(ers) under the FairTax.
Also, in many states, rental property is taxed at higher (effective or nominal) rates than owner-occupied primary residences. Renters in these states pay embedded property taxes – including the excess tax attributed to the home’s rental status – making the FairTax for these renters a tax on top of a tax on top of a tax.
In addition, in those states cited above with higher taxes on rental property, the property tax structure distorts the market, reducing the supply of rental housing that would exist under a level property-tax field.
FairTax supporters in these states have a moral and ethical obligation to level the property tax field in their respective states.
Perhaps my concern is overly personal, but it’s quite a simple issue for me. As a single renter with no children, a gross income of $35,000, and a good chunk of discretionary income paying for medical expenses, all calculations point to me paying over $2000 per year in taxes than I presently do.
How exactly does that benefit me?
While I see why many think they would be paying more, I think you are leaving the best part of the FairTax out of the equation. The FairTax eliminates ALL other forms of federal taxation. No protective import taxes, employer paid taxes per employee, no federal fees of any kind; the only income for the Federal Gov. comes in ONE form. No hidden fees! Can you really calculate how much you pay in federal taxes by looking at your pay stub? Hell no, they are wrapped into every product you purchase and service you use.
How will that effect the price of the items we consume?
Would it not be simpler for ‘everyday Joe’ to know when taxes are being increased?
How hard would it be to pass legislation to PAY companies as opposed to tax cuts?
I may have missed something… Why does rent automatically increase?
On the positive side…
We are a nation swamped in debt, this at least gives workers access to all the fruits of their labor. To invest, save, or spend in a voluntary manner; rewarding the frugal quality necessary, for both individual and corporation alike to save money and survive in the hard times.
Businesses are forced to empty their profits at the end of every year or surrender a large portion of it to the government. Does this hamper quality investment?
Why would a libertarian would be against this system as an exponentially better practice. Not perfect, just a tremendous step in the correct direction of limiting government.
http://money.cnn.com/2011/10/07/news/economy/jobs_bill_obama/index.htm
When a good plan is proposed to fix or tax issues it is rejected by our congress men. The article above is about a bill Obama proposed that could make 600,000 to 1.9 million jobs. How? It would tax those who made an income of over 1 million dollars a year a miniscule 5.6%. This article was before the vote but just to ruin the ending incase you havent heard, congress men voted no. They want to hold on to their money. Wonder where the problem is in our government.
I am a student at Ivy Tech Community College doing some research on FairTax. From what I have read so far from many different sites, it would seem that there is still quite a bit to argue from the perspective of all the different taxes before a choice should be made. I have seen some good things and yet also some bad from the FairTax act. The most obvious advantage is the elimination of the annual income tax headache and cost of tax preparers. Government spending would be reduced by eliminating the IRS. Proponents argue that, since workers would keep 100% of their wages, the increased consumer spending would lead to an increase in GDP, jobs, productivity, and wages. Yet the Fair Tax could be unfair to those not earning an income, such as seniors. For the first generation of seniors, it will especially unfair as they have paid income taxes all their lives, and now must pay higher sales taxes as well. However, the advantage for seniors is that they won’t have to pay taxes on their withdrawals from savings. Although the IRS would no longer be needed, an agency would still need to send out the rebate checks, settle disputes, and collect taxes from the states.It would also need to enforce the tax, and go after cheaters. For example, business expenses that are used to create the final product would not be taxed. Small business owners could declare a purchase a business expense to avoid the sales tax. Compliance could become very expensive to monitor and enforce.
The Fair Tax Plan is a great idea. The issue is to keep Congress from adding and/or changing the tax structure without the approval of the tax payers. This is what got us in the mess we are in today. Our politicians in Washington have no limits to what or how much they can tax the voting citizens and when they run out of money for budgets, they rob from what is available or increase taxes or create new taxes to cover their spending habits.
Let’s get a check and balance system to control Congress from spending us into bankruptcy.
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