• August 22, 2014

Letters praising Fair Tax fail to provide complete picture

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Posted: Sunday, March 17, 2013 4:30 am

To the Editor:

Once again, published in today’s (Feb. 24) local paper is another letter to the editor from someone in a different city praising the Fair Tax system and seeking people to contact Congress to support it.

The bottom line is that the Fair Tax system evidently would only benefit those with below $24,000 and those above $200,000 incomes and cost everyone else more in taxes.

Ron Brown

Killeen

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10 comments:

  • jbennettatty posted at 8:06 pm on Wed, Mar 20, 2013.

    jbennettatty Posts: 4

    No deal.
    Seniors make out just fine under the FairTax. The analysis omits the facts that Social Security and the family consumption allowance are adjusted, and tax costs come out of prices through competition.

    If millions of lower income workers effectively pay nothing because of the prebate, that is no different from today.

    I am no defender of the status quo.

     
  • dutchman3 posted at 11:48 am on Wed, Mar 20, 2013.

    dutchman3 Posts: 4

    Well, Jim, at least we agree on something. We need to reform entitlements and the sooner the better. I'm not so sure about the federal government putting all excess SS revenue in a "lockbox" as you seem to suggest, but I do support placing SS off budget, rather than mixing all of it in with the general fund.
    . For the benefit of any readers of this blog, please confirm that your Fairtax does shift a significant federal tax burden to middle class retirees, while at the same time producing millions of lower income workers that may pay no net federal tax due to the prebate. Is that your version of tax reform. If so, just say so in plain english so everyone understands what the Fairtax is and does.

    Thanks!

     
  • jbennettatty posted at 9:10 am on Tue, Mar 19, 2013.

    jbennettatty Posts: 4

    A couple of points here. When corporations are taxed, who do you think pays the tax in the final analysis? Hold up a mirror to yourself. That's who. Corporations collect a lot of tax money and write large checks to Uncle Sam, but if they are profitable, they pass those costs on to you and me. With any modicum of competition, businesses have to lower their prices. If they pay no tax, the cost floor drops, and businesses pass those savings on as lower prices. the FairTax permits this to happen.

    One other related point. Large corporations can afford lobbyists and get special breaks under the tax code. Large corporations do not support the FairTax because they lose their privileged perches.

    By the way, H&R Block, I understand, does not oppose the FairTax. Their income tax preparation business is a loss leader for other business activities.

    Once the people understand the FairTax, they will demand it.

     
  • jbennettatty posted at 9:03 am on Tue, Mar 19, 2013.

    jbennettatty Posts: 4

    The reply in the post- just before the last one - proves all my arguments. Citing a Senator whom I never voted for because of his fiscal irresponsibility, the post still proposes that we ask future generations pay for the excesses of yesterday's and today's seniors. That's stealing from our kids.

    There is one more point. The post overlooks the even larger unfunded liability for Medicare and Medicaid. The actual liabilities of the federal government—including Social Security, Medicare, and federal employees' future retirement benefits—already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the ANNUAL accrued expense of Medicare and Social Security was $7 trillion. Nothing like that figure is used in calculating the deficit. In reality, the reported budget deficit is less than one-fifth of the more accurate figure. See Cox and Archer: Why $16 Trillion Only Hints at the True U.S. Debt, Wall Street Journal, Novembeer 27, 2012.

    Don't misunderstand me. I think we will have to adjust future benefits and "steal from our kids," but only as part of an overall structural reform to federal entitlement programs. Entitlements need to be funded the way private insurance companies are required to fund their obligations (or their officers go to jail). The sooner we start, the less we will have to steal from our kids. The FairTax is a good start.

     
  • Dr Strangelove posted at 8:30 am on Tue, Mar 19, 2013.

    Dr Strangelove Posts: 413

    Like I pointed out last year the fair tax is not a fair tax but the wider issue is with all the corporations make millions dollars with the currant code we will never see this so-called fair tax becoming law. Do you people honesty think businesses like H&R Block is just going to standby and watch their business go down the drain? Myself I’d like to see a consumption tax but as the reason stated above it will never happen. [sad]

     
  • dutchman3 posted at 9:26 pm on Mon, Mar 18, 2013.

    dutchman3 Posts: 4

    Written by a full time "legal man" who subscribes to the theory that if you can't rebut a Fairtax criticism, distract the reader from the truth with misdirection and misinformation. Just what is your definition of "just a little more", Jim? Your Fairtax scheme already creates a group of tens of millions of lower income workers that would pay no net federal tax due to your prebate, yet would still receive full retirement benefits when eligible. Do you really support such a "nanny state"?

    The real choice to get SS and Medicare back on track was laid out by your NJ Senator long ago. Gradually raise the retirement age to more nearly reflect life expectancy, remove the cap on the SS wage base, adopt a "chained" method of COLA calculations, and both plans will be good for another 75 years. Rather than save SS, the Fairtax would destroy the current SS concept. From a system where we pay in during our work years and collect benefits in retirement with no further payments, please explain the implications of paying in for life, even while drawing benefits. Social Security will require a complete overhaul under the Fairtax.

    It is the broad base of the Fairtax that is the real problem, not a solution to anything. No other nation has ever successfully used such a broad based retail sales tax to fund their central government. Six have tried, failed, and switched to a VAT which has far less evasion potential due to the "self policing" nature of the collection system.

    I'm not sure what lower pre-tax prices have to do with anything, but since you brought it up, middle class retirees will also have to cope with higher retail prices after including the 30% sales tax. AFFT estimates prices could rise by 15% or so, and my own analysis indicates closer to 17%. In any event, your higher take home pay will be needed just to maintain your current standard of living.

    There are over 50 million retirees who vote, and you can't sweep this issue under the rug by describing it as just a narrow case. The only poor tax policy would be congressional consideration of the Fairtax which really isn't fair! And, it isn't transparent either. Roughly 15% of the federal revenue collected would be paid for by higher State and Local taxes of all kinds. Is that really transparent?

     
  • jbennettatty posted at 5:55 pm on Mon, Mar 18, 2013.

    jbennettatty Posts: 4

    If fairness is the issue, the retired couple in one of the previous comments belongs to a generation that has had the benefit of lifelong deficit spending by the Federal Government. If indeed it is true that the retired couple has to pay more under the FairTax, it is not unfair to ask that couple to pay a little more - to quote a contemporary American President. The other choice is to break promises to future generations in order to pay the current retirement of that senior couple. One economist has called the folly "inter-generational child abuse."

    The FairTax shifts the funding base for Social Security and Medicare to a base that is twice as large, far more stable, and growing. Thus, the FairTax makes a start at preserving these two vital programs for future generations.

    The comment also disregards lower pre-tax prices that are brought about by competition before applying the FairTax.

    There is a legal maxim that hard cases make bad law. If the state legislates to the hardship case, which I do not concede this case is, the state makes poor policy. The narrow case that the previous commenter cites should not be allowed to drive tax policy. The FairTax is the only tax, existing or proposed, that meets all four elements of sound tax policy: transparency, efficiency, conduciveness to economic growth, and fairness.

     
  • dutchman3 posted at 12:38 pm on Mon, Mar 18, 2013.

    dutchman3 Posts: 4

    fastfred,

    In the event Ron Brown doesn't reply to your question, here is my answer. All middle class retirees will pay more net federal tax under the Fairtax scheme. Here's how.

    As an example, a retired couple living comfortably on two average SS checks ($24,000) plus $26,000 from savings/investments would pay $770 in federal tax on their $50,000 total income.

    Under the Fairtax, with the same gross income, adjusted down by 25% to account for untaxed spending, they would pay $8625 in sales taxes, offset by their $5,000 prebate for a net federal tax of $3625. That is $2855 more than under current tax law. And, this pattern persists all the way up to $100,000 gross. There should be no question that the Fairtax shifts a considerable federal tax burden to middle class retirees.

    As for Mr Brown's post, I agree that lower and higher income workers benefit, but not if they are retired middle class. Perhaps he will explain? Stay tuned!

     
  • fastfred59 posted at 7:26 pm on Sun, Mar 17, 2013.

    fastfred59 Posts: 1

    I would like to know what part of HR:25 you are basing your increase in taxes on?
    Have you read HR:25 or S122? Every calculation I have seen puts the amount of tax paid under HR:25 equal to or in most cases slightly below the current tax system liabilities for the same income levels. How did you determine the increase?
    Thanks for your help.

     
  • Dr Strangelove posted at 11:33 am on Sun, Mar 17, 2013.

    Dr Strangelove Posts: 413

    I pointed that out among other things wrong with the so called Fair Tax to that guy a couple of times last year he never answers back I think he’s just a troll with an agenda.