“Because American consumers are highly price-sensitive, and our current income tax system is relatively invisible when it comes to making day-to-day purchases. But if you start adding to the cost of an item at the checkout counter, people will think twice before buying a random geegaw or doodad.”

First, you’re ignoring that customers don’t *have* the money to begin with in the current system. A substantial portion of your paycheck is withheld to pay federal taxes, and while it may be “invisible”, you simply don’t have the money. Any sticker-shock would be offset by the equal shock at having 15-25% more in your bank account, plus the poverty rebate.

Second, prices are set, in most markets, by supply and demand, and it’s more likely to cut into corporate *profits* rather than drive up the cost, since they’ll have to continue selling. However, that will be offset by the reduction in taxation, since our corporate income tax, one of the highest corporate income taxes in the industrialized world, would be replaced by taxes collected at the cash register rather than upstream from the consumer.

Indeed, national sales taxes are quite common around the world, including in Canada and the European Union, and while their total tax burdens may be obstacles to growth (one Swedish study suggests the EU, if it were an American state, would be the fifth poorest after Arkansas), their use of a consumption tax to collect it does not appear to be.

While I may not have to pay a social security tax what happens to the approximately 8% of my social security payments that now come from my employer and is part of my pay package as an imbedded cost? Does anyone believe they will be getting an 8% raise from this?

A 30% tax on my food bill, a 30% tax on my water bill? They can’t my air yet.

Hetty Green would love this if she were alive today.

http://linderfairtax.house.gov.....=FAQs.Home

Competition will drive prices down.

FairTax will give the economy an immediate stimulus without the disasterous effect of Marxist socialism and government micro-management.

Government dabbling into the housing market has been a disaster already, and we are headed for something much more worse under an attempted socialist government control that has bogged down economies everywhere it has been tried.

Many commenters have latched onto my admission that I hadn’t read Boortz’s book, and have then gone on to immediately misconstrue my concerns and thump their chest about how great the Fair Tax would be for our country. Just so we’re clear, I’m not overly concerned about the long term effect on prices (go back and read what I wrote). But what about in the near term? Do you *really* believe that prices would instantaneously reflect these changes? Our tax system is hugely complex, so I don’t think it will be that simple. But perhaps I’m mistaken.

Are these short term concerns a valid reason to maintain the status quo? Perhaps not. But that doesn’t mean I don’t worry about them.

Between my rent and medical expenses alone, I will be completely soaked under the Fair Tax. Bare minimum, I’m looking at a $3000+ hike in my annual taxes. That would pretty much bring me to a subsistence-level existence (no ability to add to my savings account or retirement fund). I don’t believe for one second that my landlord, any of the landlords around me, my health insurer, or any of the hospitals or doctors they contract with are going to lower their prices/charges. I seriously doubt many other business will, either. They’ll simply pocket the extra profit. Why? Because they can. That’s how the economy works in the country and I’ve seen nothing about the Fair Tax that would address that reality.

Besides that one little problem, I think it’s a great idea. Too bad I can’t afford it.

A lot of you are misled as to how it works.

I have never seen price reduction due to competition or reductions in taxes or fees happen with my utilities, telephone, cable, cell phone, internet. I have not seen the cost of my food go down since the price of transport decreased. Besides gasoline, I have not seen any price hike go away in the last 4 months – and we’re on a deflationary roller coaster ride even as I type. Why would they be any more likely to reduce prices if their costs are lower than they are now?

I just don’t see how your idealistic notions of business practices translates into verifiable reality. And that’s my biggest concern about the Fair Tax. So much of it’s “neutral” effect on middle income earners depends on idealistic beliefs about free-market capitalism.

Under the FairTax you would pay $10.54 and your receipt would say:
Item: $7.70
FairTax: $2.30
Sales tax @ 7%: $0.54 (assuming the FT isn’t taxed)

This is how “prices will go down” under the FT, if the elimination of payroll tax doesn’t change anything. So if anything, eliminating that expense will allow businesses to lower prices in order to compete, if they so choose. If they choose not to, they will lose business to competitors who did lower their price.
Simple as that.

I’ve been burned plenty badly by the Gotcha Capitalism of the last 15 years or so. I don’t have the same faith as the rest of you that businesses will reduce the prices of their products and services once the “embedded taxes” are removed. I’ve seen government-imposed taxes and fees removed on services like utilities, cell phones, DSL/cable etc., and in every single case I have experienced exactly zero effect on my bills because those companies just added some ridiculous charge that just so happened to equal the removed tax/fee. While the cost of fuel has gone way down, I sure haven’t seen any corresponding price reductions in the food I buy.

Clearly the supporters of the Fair Tax have more faith that companies will do what’s right than I do. Maybe there’s some sort of mathematical evidence that supports ethical business behavior that I know nothing about?

Other than all those messy human nature issues, I’ve got no inherent problem with the Fair Tax. I just don’t see how anyone could guarantee prices of goods and services will go down unless we were all robots whose programs could be updated.

But what I like about it is that it gives me the ultimate choice in where my tax dollars go. If I personally don’t support a particular foreign war, I could just buy used goods (untaxable, under the FairTax) until that war ends. If I DO support a particular administrative move, I can go out of my way to Buy New American.

Such flexibility is the stuff of legend. It’s also how the country USED to run, back when people were concerned about their freedom.

Several important things you forgot to mention:
-payroll taxes will also be gone which helps businesses as well as the employee to earn higher wages.
-with no fwt, employees take home $$ will be more…therefore more cash to spend.
-businesses will not have to pay income tax either (which will drive down “actual” cost of products because the embedded taxes in all goods will be gone)
-this will encourage businesses to stay in the US instead of sending jobs to other countries with less tax burdens
-and most important to me: people won’t be able to cheat on taxes. Drug dealers, illegal immigrants, strippers (and others that live off tips and don’t claim all of their income) will all pay taxes anytime they purchase a new product.

All that being said, don’t take my opinion or anyone elses. Read the book, do the research yourself, and then make your own decision.

Oh well, I’ll keep searching. It’s getting old, though.

It takes into account increased take home pay and all of that. Great. According to this calculator, I would pay $520 less under the Fair Tax than the current system.

However, this calculator does not take into account the $10,320 I pay annually for rent nor does it consider the $4300 I pay (based on 2008 expenses) for out-of-pocket medical care. I’m not even thinking about food or necessary utilities (like heat/electricity and water) here. But if we were to consider it, we can throw in about $1500 a year for food and about $2000 a year for non-optional utilities. (only water and electricity)

So, do you think all of the tax on all of the above come to equal to or less than my $520 savings from the calculator? This is what I am struggling with.

The thing is, these are predictions. You can’t be 100% sure that rents are going to go down enough such that people like me aren’t going to pay more in taxes. You’re asking me to take a pretty large gamble. I want to support the Fair Tax – I really do. I’ve even read the book. The reality is that every single “Fair Tax Calculator” I have encountered has me paying $2000-$4000 more per year than what I’m currently paying. The increased taxes are because of rent and my out-of-pocket costs for medical care.

As far as I can determine, the Fair Tax is great if you use very little health care or your insurance has no or very low out-of-pocket costs and if you’re a homeowner. That’s great for people who own their own home and don’t have any history of cancer, congenital illness, etc. And please don’t tell me I can choose to go without health care or that I can always find a cardboard box to live in. I’ve had Fair Tax supporters say that to me, and it really doesn’t help your cause any.

Yeah, if I made $5,000-20,000 a year more than I currently do, I’d probably be 100% behind this idea. But I don’t, I won’t be seeing a pay increase any time soon, and it’s hard to support something that’s going to really, really hurt financially.

(single & annual of $30,000 gross)

The income tax is already factored in by businesses when they price their products. Abolishing the income tax will decrease built-in costs by about 30%, and competition will ensure the prices actually drop.

Basically, prices stay the same…you just stop worrying about your federal taxes. Plus, we start to tax the nontaxable (illegal drugs, etc), no one escapes the system, the IRS is dethroned and on and on.

It’s brilliant, really.

Over the last few months I have seen several opinion pieces regarding the Fair Tax. In separate articles, both Amity Schlaes and Rich Lowry were opposed to the Fair Tax, but (it seemed to me) on the basis of wrong information. To give you one example, Lowry stated that the tax would be applied to the purchase of homes. Only partly true. Only on NEW homes would a tax be charged. Re-sale homes would not be affected. In fact the tax would not be applied on anything used: cars, boats, clothes, furniture, as well as re-sale homes.

But if you did buy a new home you would pay about the same–including the national sales tax–as you would now. Here’s why:

The Fair Tax eliminates federal payroll taxes, which are Income, Social Security, and Medicare. So the employee would take home a much larger paycheck. It replaces that revenue with a national sales tax, to be charged at time of purchase of goods or services. It also eliminates the income tax on businesses. These business income taxes are passed along to the consumer and make up about 22% to 27% of the price of goods we now buy. So if businesses no longer have to pay those taxes, competition will cause those prices to drop by about the same amount. If you are adding 23% sales tax to that lower product price, you end up paying about the same, but with much more money to spend because you had no federal payroll deductions on your paycheck.

Mr. Lowry also mentioned that the proposed 23% national sales tax is actually closer to 30%. He’s right, if you figure it that way: If you spend $100, $23 of that would be the Fair Tax and would go to the government. Taking $77 ($100 – $23) and then adding the $23, it would come out to be 30% of $77. But Mr. Lowry misses the main point. If you calculated the imbedded corporate taxes the same way, the 22% to 27% becomes 28% to 37%. The point is that the Fair Tax would replace the imbedded taxes that we already pay on all goods, and we actually would end up paying less on many items, even while including the Fair Tax.

Most people have a hard time believing that enough revenue would come in to replace the payroll deductions. But some of the best economists have done the math, and have found otherwise. Here are some reasons for their conclusions: Right now, you have 158 million workers paying income tax through payroll deductions. With Fair Tax, you would have 300 million Americans contributing through their purchases. Also, 50 million tourists a year would be supporting the US government through all of their purchases. There is a large amount of income in the US that is not taxed. You have the very wealthy, who can afford to do business offshore or overseas, so pay very little in taxes, but live here, and buy here. You have many who illegally avoid paying taxes on their income. And you have illegal businesses, like drugs, which pay no taxes. The government estimates that 3 trillion dollars a year of income is currently not taxed. But whoever makes that money probably buys cars, jewelry, yachts, etc. With Fair Tax, they will pay their fair share.

You might be wondering whether low income earners who pay little or no income tax will be harder hit under this plan. Actually, only after a certain level of income (approximately the poverty level) does the Fair Tax kick in. So, depending on the size of your family, you would get a monthly rebate to cover the taxes paid on purchases up to that level. Nobody pays the national sales tax until they spend more than the poverty level for their family. And that would apply to everyone. Those in the lower income brackets would do very well: even though they don’t pay Federal Income now, they would also have Social Security and Medicare deductions eliminated from their paychecks, prices on goods would be much lower, and they would pay no Fair Tax on used clothing, cars, furniture, jewelry, homes, or anything used. So, they could avoid paying taxes almost entirely, but still be receiving that monthly rebate check. Their earnings would go much farther than under the current system.

As soon as we switch over to the new system, the revenue from payroll taxes would be completely replaced by the national sales tax. But what happens after that is the truly amazing part of the story.

Because businesses are no longer paying income taxes themselves, they will have a huge advantage competing with foreign companies. Not only will they be super competitive overseas, but they will be able to capture more of the market here in the US which has been overrun by products from foreign companies. The estimates are that 10% growth of our entire economy will occur in the first year! And when the economy is growing, what happens to the working guy? More opportunity and better pay! If employees are getting paid more, guess what? They spend more and more revenue flows to the government.

On top of that, foreign companies will be racing to relocate in the US to gain the tax-free advantage. More jobs for Americans, more chance to move into better paying jobs, more money, and more revenue for the government. Within a few years our economy could absolutely explode, and money would pour into the government. At that point, we literally could be looking at eliminating the Social Security and Medicare crisis, and paying off the national debt. Remember, right now Social Security and Medicare are supported only by those who are working, who will be increasingly outnumbered by those collecting the benefits. But under the Fair Tax, those programs are supported by nearly everyone who is a consumer. And if the economy is doing great, the investments of many of those retired baby boomers will dramatically increase, so they will have more to spend which will, again, increase government revenue.

It sounds fantastic, I know. It’s difficult to convey the reality and possibility of such a dramatic change in a few short paragraphs. But the Fair Tax has been researched and developed for over 20 years, and is now supported by over 70 US congressmen. Rich Lowry is an editor at National Review magazine which was started by the late, great William F. Buckley, Jr. I don’t know if Mr. Buckley had any opinion on the Fair Tax, but I imagine it would have appealed to him: a plan of profound common sense, which would require courage to implement, and would be a blow to a tax monster that increasingly subjugates and impoverishes us. I challenge you journalists to get one of the short Fair Tax books to learn what it is really about, and form an opinion based on facts. You can order from their website, http://www.fairtax.org.

“Well Jim, that FairTax would be a great idea if I came up with it, but I’m afraid that the whole “prebate” idea and “no mortgage interest deductions” are not going to poll well with my constituents because I said so.”

You have it exactly right, my friend.

The point you make in post 138 is one of those truths thats seems so obvious to us supporters that we neglect to point it out, but –

Under the FairTax, if you don’t want to pay taxes, you don’t have to!

Let’s say you don’t support a particular policy. You can call up your Congressman and say, “Hey buddy, I don’t agree with this policy, and until it goes away, I won’t be buying any NEW items.”

Then the manufacturers of those items lose money, which gives them less to contribute to your Congressman’s next campaign, then he/she loses an election down the road.

See how much power that gives you?

That’s what the country used to be like until the IRS was created – during the Civil War, to INCREASE tax revenue by mandating it!

Hi. I think it may be time for you to re-address the (as of this writing) second-most talked about blog post you’ve ever written.

I have been reading your blog fairly regularly since that post brought me here, and I do agree with much of what you say. But there is a point where we differ.

I’m talking about the FairTax post. I noticed that you responded to comments exactly once – on the day the blog entry was written – and I would encourage you to take a gander at what has been written in response since then.

I was a bit hard on you in my first few posts, but you must understand. Your initial reaction to the FairTax is the equivalent of you calling me a big fat liar just because your buddy told you I was.

But if you got to know me, you’d see I wasn’t so bad. So it is with the Fair Tax. If you would just READ the thing, or even just the Plain English Summary (http://www.fairtax.org/PDF/Pla.....ct2007.pdf) you’d see it’s actually a pretty good deal.

Evan as a supporter though, I have to insist that they abandon all the “23% inclusive” rhetoric. Normal people just don’t know what that means. Hell, I have a journalism degree and I had to have it explained to me.
It is a 30% sales tax, plain and simple, but this distracts people from the even simpler fact that THE TOTAL PRICE YOU PAY FOR ITEMS WILL NOT CHANGE.

If something is 9.99 + 7% sales tax now, it costs 10.69 total.
Under the FairTax, this item STILL cost you 10.69, but the receipt will say something more like $7.12 + 30% sales tax = 10.69.

This, I think, is the single biggest fact that FairTax supporters are glossing over. But our opponents are certainly exploiting it to their advantage – even John McCain’s current position on the FairTax is based on this misinformation.

And it’s supposedly a conservative issue, despite the fact that it would completely untax the poor.

In fact it completely untaxes everyone on the basic essentials of life, and taxes us only on (excuse the language) shit we don’t need.

People call this regressive because the more money you make, you can afford a more disproportional amount of “shit you don’t need.”

But this is just whining, plain and simple. Under the FairTax, if you are poor, you are already NOT BEING TAXED! What more could you ask from your government? To complain about having a disproportionate amount of stuff that you would be taxed while buying is equivalent to saying “I envy rich people because they pay more taxes than me.”

This is all I have to say for now. I will also be posting this in the comments of the original blog post, so that further discussion may be stimulated.

Thanks,
Randy
===================

And I think John did a pretty good job of explaining the relationship between a 23% INclusive tax and a 30% EXclusive tax.

1. The percentage that you use 30% is correct because you calculated it exclusively. The FairTax is advertised as being 23%. This is because the FairTax is calculated inclusively. We can use the example that is mentioned in this posting: an item costs $1.30. The 30 cents is tax and therefore 30/100= a 30% tax. Now we can calculate this inclusively: 30/1.30=23% tax rate, which is exactly how the FairTax is quoted. Simply a difference of tax rate calculation. Now think about your payroll taxes. They are calculated inclusively, just like the FairTax. If income taxes were calculated exclusively, then we’d all be paying much higher tax rates!!! A family makes $100,000 a year and is taxed at a 25% rate. Their take home pay is then $75,000 is the tax is calculated inclusively. Calculated exclusively 25,000/75,000= 33% tax rate. There’s your difference in tax rates.

2. Where this blog post is also wrong is that prices would go up. Think about the taxes that a corporation pays to the government. The corporate tax is currently 35%. Therefore 35 cents out of every dollar you spend at Walmart goes to the government already. The FairTax eliminates the corporate taxes, and simplifies the process for corporations for filing their taxes. And think of how much simpler payroll will also be for corporations! Billions of dollars saved right there! Prices go down dramatically before the FairTax is added. Prices will definitely not go up anywhere close to 30%. Prices will probably go up but only 1-2%.

Taxes are an extremely complicated issue. This is why the push for tax reform has been so weak. The truth is, our current system is outdated, complicated, and needs to be dramatically reformed. The FairTax is the only comprehensive plan that can dramatically simplify the US tax system while producing a reliable source of income for our government. Just please research about the taxes you pay, how much time you spend per year preparing your taxes, and get the real facts about the FairTax. I highly recommend reading the books and going to FairTax.com. And did anyone mention that the 23% FairTax rate would be able to pay for the collapsing social security and medicare system? Think about it and research it. We need a grass roots support for this.

However, from what I read on fairtax.org I can stand side by side with Republicans and support this.

I did notice that a good portion of the detractors are the people with something to lose such as the people who aren’t paying taxes (either legally or illegally) or enjoying huge refunds or work in the tax field. Not to be mean but what’s fair to you is not fair to me. I didn’t force you to make your decisions and I don’t want to pay for them. I’m not saying to end all entitlement programs but I want to help the people who need help and not the people who play the system. Actually I have an idea that would fix that too, simply make anyone who wasn’t disabled help the community or get an education. The country would be better off and the people would be better off too.

And can you really claim to understand 65000 pages of tax code and pay the correct amount? I can’t even read the code without getting a migraine.

Maybe there will be a period of adjustment for the economy but there will always be people who spend every dollar and some who save and invest as much as they can so shouldn’t we reward good behavior?

I do not expect that a Windfall Tax would cause an oil company’s profits to decrease. I would expect them to increase the price of gasoline to cover that additional tax burden – thus passing the taxation directly to the consumer – and in fact, as an investor I would demand it.

And then we will all pay even higher prices at the pump regardless. So the Windfall Tax is not just a bad idea, it’s an exercise in futility.

Somebody should. That windfall profits tax scheme is one of the worst ideas I’ve ever heard. Worse even than the proposed Gas Tax Holiday, which is saying quite a bit.

This will be the first election I can recall where I am actually HOPING that the candidates can’t keep their campaign promises.

This tax break exemplifies the illogic of what’s called supply-side economics. If you reduce the cost of investing, so the thinking goes, you’ll get more investment. What’s left out is the demand side of the equation. Without consumers who want to buy a product, there’s no point in making it, regardless of how many tax breaks go into it.

Which gets us to the real problem. Most consumers are at the end of their ropes and can’t buy more. Real incomes are no higher than they were in 2000, while food and energy and health care costs are all rising faster than inflation. And home values are dropping, which means an end to home equity loans and refinancing.

Most of what’s being earned in America is going to the richest 5 percent, but the rich devote a smaller percent of their earnings to buying things than the rest of us because, after all, they’re rich — which means they already have most of what they want. Instead of buying, the rich invest most of their earnings wherever around the world they can get the highest return.

Add all this together and there’s just not enough consumer demand out there to keep the American economy going. We’re finally reaping the whirlwind of widening inequality and ever more concentrated wealth. Supply-siders who want to cut taxes on corporations and the rich just don’t get it. Neither does most of official Washington.

When people can not afford the essential needs to live they can not save. When the riches 1 % has more wealth than the bottom 95 %, it gets to the point that we have a society of people who have forked over all their wealth to the economy with no safety net.

Randy, maybe you can point out to these blogers that since businesses simply pass along the cost of their corporate taxes to consumers by including it in the MSRP as part of the embedded taxes, they essentially do not pay their “fair taxes” now, either.

Anonymous said…
What windfall profits? Exxon has about the highest net margin of any of the majors – yet only about 11%, low compared to many other industries. Thus, the large amount of profits of the oil companies is actually a function of the size of their revenues (great demand for their product), and not some “windfall” event. Increase the cost of producing oil (by raising taxes), and less projects will be profitable leading to lower supply and higher prices. Government meddling, as usual, will make things worse.

The whole concept of a windfall profits tax is so anti-capitalism and anti-American. Let us not forget that these “big bad oil companies” – as the politicians like to portray them – are publicly owned companies owned by shareholders like me and other regular folks. Bad policy directed at the “big bad oil companies” ultimately hurts the stockholders – savers, investors, and dividend receivers – and consumers who will face lower supply and higher prices.
8:36 AM
Anonymous Anonymous said…
“Let me repeat: The “energy giants” are you and me, and all our next door neighbors, all who hold the shares of these companies through mutual funds, pensions and direct holdings. Why promote a windfall tax on ourselves”?

Answer: To promote the public good; a novel concept in our way of doing things but well worth the sacrifice.
12:43 PM

And, by the way, WE THE PEOPLE are entitled to royalties on that oil. Jed Clampett and Exxon did not create that oil. They owe the rest of us for what they take from the earth. Collecting that debt will not lower or raise oil prices, but will allow us to rely less on dumb taxes.
10:55 AM

Anonymous said…
What does a oil windfall tax really do? Isn’t it a simple redistribution of wealth from one group to another? I would argue yes. Before you jump on the band wagon of this idea, you should think about who you are taking from. Obviusly, you take money from the oil companies. But who really owns the oil company and is the real stakeholders? Isn’t it the share holders? How many Americans are shareholders of American oil companies through either their pension funds or mutual funds that they own either outright or through their 401k plans. i would hope that someone would really dive into the numbers to see what the true benefit of this versus just trying to use it for poitical advantage.
7:17 AM
Anonymous said…
Yes, someone needs to explain to Clinton and Obama (& Dr Reich) that a “company” is made up of owners & laborers – people, and that is all. Their proposal to “go after the oil companies” is a proposal to go after the people who provide labor & capital in a joint effort that benefits everyone. A company is everyday people who make sacrifices to achieve a better life for themselves. Companies are people.
7:25 AM
Art A Layman said…
anon 7:25:

Slightly off base. Companies are made up of people, they are not people. If “companies” were concerned about their people, employees and stockholders, they wouldn’t be paying their CEOs outlandish earnings while the rest of their employees receive middlin wages. They would be paying out far greater dividends to their stockholders when they have astronomical profit growth.

When you have a “company” in an industry as vital as the energy industry the government must be ever vigilant to make sure that they are not profiting through the advantages of market manipulation. “Companies” exist because we the people, through our government, have licensed them to exist. That license was not intended to allow them unbridled control of assets and revenues that are injurious to the public welfare.

Keep in mind that they are making all this profit by extracting and selling a material that truly belongs to the American people. Due to our euphoria over capitalistism the government collects little in royalties for those materials.

All their protests to the contrary, corporate executives often make decisions to feather their own nests rather than looking out for their shareholders. Rising stock prices are merely a byproduct of the neverending search for more bonuses and higher salaries for those in control.
9:07 AM

However, I’ve got to point out that since businesses simply pass along the cost of their corporate taxes to consumers by including it in the MSRP as part of the embedded taxes, they essentially do not pay their “fair taxes” now, either.

That 66.7% increase in personal taxes you are referring to is already paid by individuals through those very corporate taxes. The only effect the FairTax will have will be to make that fact obvious, so that people are able to decide for themselves how much money they will contribute to the Federal government.

Dave Wells suggests that the author LEARN SOMETHING about the subject. Hank says its obvious you people are commenting on the fair tax and know nothing about it. Hank thinks one should read the propaganda of fairtax.org and boortz.com and offers false information about embedded taxes. Randy says, “Every disagreement I’ve seen with the FairTax either cites the studies incorrectly or out of context – or without even reading it. Like this blog.”

People should make up their own mind by reading the plain English summary of the Fair Tax Act unless they cannot comprehend the Act by themselves. For example, there have been many comments about whether the tax is 23% or 30 %. The Fair Tax Act says “A retail business computes its national sales tax liability by multiplying the rate of 23 percent times the monthly gross payments received.” In order to do this; a retail business should mark up the sale price by 30 % to get the proper gross payment. I don’t need anyone to put his or her spin on this statement. The Act is very clear. This is a 30 % sales tax.

One should also examine the consequences of the Act. The Act says, “Taxable property or services purchased from a seller for a business purpose in an active trade or business, or for export from the United States for use or consumption outside the United States are not taxed provided the appropriate certificate is presented by the buyer to the seller.” The consumption tax will increase the tax on people about 66.7 %. Instead of individuals paying 60 % of taxes, they will pay 100% of the budget. That is 40/60 x100 or 66.7% increase in personal taxes. Under the “Fairtax plan,” businesses do not pay their fair taxes.

It is plain to me that the above complainers have never read “The Fair Tax Act of 2007 – HR 25/S 1025.” or the plain English summary. Personally, I think this is another example of the dumbing down of America.

Why do I mention Hong Kong? They’ve had such success with it that that they’ve been able to cut property taxes. Amazing, huh? My assertions, for some time, have been that we would be able to cut taxes after having the FairTax in effect.

BTW, I’d suggest that everyone read this book:
Fair Tax: The Truth: Answering the Critics
(Paperback)

I agree with you, Rick, that econ is an art. I agree that the FairTax is not THE answer. I am an advocate, however, because I believe it is better than any other idea out there.

I also agree with your point that “just because someone disagrees with fairtax doesn’t mean he or she hasn’t done his homework.”

However, in the context of this blog post, the author admits to not having done their homework – see my point a) above, or the original author’s second paragraph, first sentence – so such comments are entirely appropriate.

Every disagreement I’ve seen with the FairTax either cites the studies incorrectly or out of context – or without even reading it. Like this blog.

To a large extent, economics is a sort of art. There is no right answer. FairTax may or may not work, but contrary to its advocates, it is not necessarily the only right answer. Further, just because someone disagrees with fairtax doesn’t mean he or she hasn’t done his homework. You advocates of fairtax also need to do your own homework and realize that there may be other viable solutions out there. And maybe, just maybe, the statements you make, like “embedded taxes will be removed, the fair tax added, and your cost will still be the same” might not be 100% correct.

The biggest joke I have ever heard from the FED’s was, that price of oil = gas will not raise the price of food… Are you insane…!!!, how many electrified railways do you see, everything is on OIL… road, railroad, water and air… you start praying for miracle as soon will need one. BTW… dollar can tumble in less then a day… and all your savings will melt away, all diversified stocks and mutual funds…, CD’s, savings… just name it. 1000$ may buy you pair shoes. who know maybe even less, an apple, a cookie…

Good night dear friend and good luck, don’t forget to pray maybe pope and god will come to help.

It is the job of the FED to “get the economy back on track” and keep “the economy humming.” People commenting on this blog have shown an interest in changing the system so they should have an interest in how the economy works. If you are only interested in the dumbing down of America, so be it.

Why resurrect a 3-month-old thread with this information that is totally unrelated from the original blog post?

Friday, April 11, 2008
The Fed and Democracy

Former Fed chair Paul Volcker recently sounded off against the current Fed for toeing the edge of its authority, exercising powers that are, in Volcker’s words, “neither natural nor comfortable for a central bank.” It’s the first time I recall a former Fed chief criticizing his successor. Justified?

Think of it this way. You probably learned in school the United States government has three branches. Actually there’s a fourth, in some ways more powerful than the other three. It’s called the Fed, and it pretty much runs the American economy. Yes, Congress and the executive occasionally pass laws like the little stimulus package that’s about to send you a few hundred dollars, and appropriate taxpayer money for other purposes.

But the Fed can expose taxpayers to hundreds of billions of dollars of potential losses without a single appropriation hearing, as it did recently when it allowed Wall Street’s major investment banks to exchange tainted mortgage-backed securities for nice clean loans from the Treasury. And the Fed can do amazing things – like decide one big bank, JP Morgan, is going to take over another, Bear Stearns, backed by $29 billion of taxpayer money.

Even its ongoing decisions about interest rates affect us more than anything the other branches do. The Fed has decided the threat of recession is bigger than inflation so it’s been lowering interest rates. This has made the dollar drop further and faster than otherwise, which means you’re paying more for gas and food. Can you imagine if Congress caused this to happen?

Five years ago the Fed decided to make money so cheap lenders shoved it out the door to anyone capable of standing up, and Alan Greenspan pooh-poohed the idea that regulators should be especially vigilant. What happened? We had a housing bubble, millions of Americans are losing their homes, tens of millions are watching their major asset (their home) drop in value and their pensions shrink.

So does this mean the Fed should be more accountable? Are its decisions so important that citizens have a right to more say in what it does? Problem is, most people don’t understand what it does, and have no idea how it makes decisions. And partisan politics could do terrible damage. Yet we don’t want the Fed to refrain from doing what it’s doing. Paul Volcker to the contrary notwithstanding, government has to make sure there aren’t runs on our banks and that our financial system is strong.

The first step in reconciling democracy with the Fed is for people to become better educated about it. Most Americans don’t even know where the Fed is located. (It’s on 20th Street and Constitution Avenue in Washington.) And most have no idea who runs it. (Besides the chair, now Ben Bernanke, are openings for six other members of the board of governors, each appointed for fourteen years. Five regional bank presidents join them on the Open Market Committee. Who appoints the regional bank presidents?
If you don’t know, you ought to find out.) These twelve people have more power over your daily life than your congressman and Senator, maybe even your president.

posted by Robert Reich | 3:54 PM

Gas is getting close to $3,50 and is only March, that will drag prices up whether you like it or not. Some basic goods are already up. Milk (btw, I have felling they water the milk lately, any comments on that), OJ, eggs…. The recent minimum pay increase was a joke as most of the states were at 7$ already.

If the feds can cut rates for the banks 3 times in 3 months why wouldn’t they lift minimum wage 3 times in 3 months too? Consumer oriented economy and nobody cares about the consumer. I as a consumer am unhappy by the attention given to me. And refuse to purchase American made goods; I will set a economical trade embargo and sanction the feds, I shall buy only imported goods from now on…