Unfair to FairTax

Pundit Jay Bookman, writing for The Atlanta Journal-Constitution, has penned an article entitled Huckabee’s fantasy FairTax feeds on workers’ frustration. I should note that his column is named, simply, “My Opinion”. That name, at least, is honesty in journalism; as the article is heavy on opinion, and sadly short on facts.

You know what? This calls for a good hard fisking!

There is indeed a cult member among the frontrunners for the GOP presidential nomination. But it isn’t Mitt Romney, the Mormon from Massachusetts, despite what some in the evangelical community might tell you.

Ooh, hey! Nice twofer there. Let’s start in with the name calling while simultaneously name calling by proxy1 a different Republican candidate. Is every group you don’t like a “cult”?

It’s Mike Huckabee, the Baptist preacher, former Arkansas governor and fervent believer in the cult of the FairTax.

“Cult” Counter: 2

For those unfamiliar with the FairTax creed, it goes something like this: Let us go forth and abolish the federal income tax, the estate tax, corporate taxes, capital gains taxes and payroll taxes, as well as the IRS. Let us then replace all those taxes with a 30 percent national sales tax collected on all services and goods, from a new house to chemotherapy treatments to a gallon of milk.

If we do that, economic heaven is within our reach.

“Creed”? “Go forth”? “Heaven”? You, Sir, are mixing your metaphors. Is it a cult or a religion? (Or are those the same thing to you?)

Beyond that, we also have our first factual inaccuracies: “…a 30 percent national sales tax collected on all services and goods…” First, as this is a replacement for the Income Tax, which is measured as an inclusive, not exclusive, tax, the only fair “apples to apples” comparison is to also measure the FairTax as an inclusive tax. As such it is 23%, not 30%.

That is: If I earn $100,000, and pay 25% income tax, the government takes $25,000 and I keep $75,000. $25,000 is 25% of $100,000 (inclusive tax), but 33% of $75,000 (exclusive tax). The FairTax works like this: if I spend $100,000 for something, the government takes $23,000 in taxes, and the retail seller keeps $77,000. Measured in the same way as today’s existing income tax, $23,000 is 23% of $100,000. Apples to apples, the FairTax is a 23% inclusive tax. Calling it a 30% tax is a distortion of the plan, and just a way to spread some FUD.

Second, it is not a tax on “all services and goods”, but all new, retail goods and services. Used or resale goods (from clothing to houses) are not taxed. Environmentalists should love this plan, as there is a strong incentive to buy (and thus re-use) used goods.

Or, as Huckabee says, “when the FairTax becomes law, it will be like waving a magic wand releasing us from pain and unfairness.”

That does sound wonderful. Don’t we all want to be released from pain and unfairness? Don’t we all yearn for a magic wand that would bring such a glorious day to pass?

Sadly, though, there’s this little matter of reality. Reality says taxes are going to hurt, and no magic wand will ever change that. For time immemorial, taxes have been perceived as unjust, and nothing will change that either.

So… what, your “reality based” outlook insists that taxes must remain as painful as possible, or they’re no good? You’re right — there’s no such thing as “no taxes” if you’re going to have any government at all, but there is a lot of room for a lower tax burden. A huge part of the current tax burden is the cost of simply figuring out how much you owe. Billions of dollars are lost to the sheer bureaucracy of the IRS and it’s 100,000-plus page long tax code.

According to Huckabee and other proponents, the FairTax will raise just as much revenue as the current system. They also believe that, somehow, almost everyone will pay less in taxes.

At the least, they will not have to pay those aforementioned billions of dollars in compliance costs. Retail businesses will be the only ones filling out federal income tax returns.

They believe that under the FairTax, the economy will grow at double-digit rates, interest rates will fall, exports will boom and the Falcons will win the Super Bowl.

OK, they don’t really mention the Falcons. Even the FairTax magic wand has its limitations.

Yes, Yes, Yes, and… Hey Look! A monkey!

In effect, the FairTax is the tax equivalent of those automobile engines designed to run on water. It sounds great, but it doesn’t have a chance of working.

“Don’t sell the bike shop, Orville! It’ll never work!”

The proposed 30 percent sales tax, for example, wouldn’t come close to being revenue neutral. A tax commission convened by the Bush administration found that eliminating just the federal income tax ? leaving all other federal taxes intact ? would require a sales tax of at least 34 percent, a finding backed by other economists.

Here’s I’ll just quote Neal Boortz, who (literally) wrote the book on the FairTax:

What Bookman either doesn’t realize, or doesn’t want you to know, is that the president’s tax reform commission was not permitted to consider the FairTax as it was written. They first were compelled by their own rules to rewrite H.R. 25, and then they considered the idea as reformulated by them!

Back to Bookman’s article:

To a cult, of course

“Cult” Counter: 3

the scorn of nonbelievers is transformed into proof that their cause is righteous; likewise, outside criticism is typically dismissed as the work of conspiracy. In this case, the FairTax cultists

“Cult” Counter: 4

dismiss the findings of the Bush tax panel on grounds that it was stacked with liberals.

Uh huh.

See above. If you’re going to examine a plan, don’t change the plan first. Study it as written.

The FairTax cult also boasts its own holy manuscript, in this case “The FairTax Book: Saying Goodbye to the Income Tax and the IRS,” by radio talk show host Neal Boortz and his congressional sidekick, U.S. Rep. John Linder (R-Ga.). Cultists

“Cult” Counter: 5

insist that the book, like the Bible, is inerrant and answers all doubts, and that all who read it will earn enlightenment.

I don’t think the book is infallible, but I do advise actually reading it before writing at great length about how the author doesn’t know what the hell he’s talking about.

The fantasy nature of the FairTax is perhaps most glaring in its approach to enforcement. Advocates believe that under their system, tax fraud would essentially cease to be a problem and that the new system would almost enforce itself, allowing the IRS to fade away.

Again, did you read the book? Tax fraud would not disappear, but it is a lot easier to police several thousand retail businesses than three hundred million individuals. Also, the IRS becomes obsolete not because enforcement is unnecessary, but because the states would be doing the enforcement.

But we all know human nature. Ask yourself how many people would be lured into the black-market economy to avoid paying a sales tax of 30, 40, 50 or even 60 percent on expensive items? The FairTax cult says very few ? maybe they’re counting on that magic wand again.

The fiipside of that is that drug dealers and foreign visitors would enter the tax system. When a drug dealer buys a fancy new car, he pays taxes on it. When a Japanese tourist buys a camcorder in New York, he pays taxes on it. Currently, neither of these people pay into the income tax system.

As for black market sellers, well… you’re right. There will always be people trying to buck the system. But again it is a lot easier to police retailers than individuals. Police will somewhere along the line notice that so-and-so is buying a bunch of wholesale goods and never officially selling them. This kind of market already exists on products with prohibitively high sales taxes.

By comparison, do you, Mr. Bookman, believe that nobody cheats on their income taxes?

The grassroots fervor for the FairTax is fed by a growing and all-too-legitimate frustration among working-class and middle-class Americans, a sense that they’re working harder than ever yet losing ground every year.

You forgot to mention upper-class Americans, who are most certainly frustrated with taxes. Lessee… “working” (i.e. “lower”) class, middle class, and upper class. That would be “All Americans” are frustrated with the current system… and rightly so.

Huckabee isn’t shy about appealing to that frustration, not just with the FairTax but with other rhetoric as well.

Oh my God! A politician who promises to do what people want! The Horror! My Eyes!

However, under the FairTax, those folks would end up paying significantly more in taxes, while the tax burden for the wealthy would fall dramatically. It would victimize the very people who look to it for salvation.

People at or below the poverty line would pay nothing under the FairTax. You conveniently forgot to mention the prebate, did you? Simply put: every single American citizen (and legal alien) would receive a rebate once a month for the amount of taxes on spending at the poverty level. Thus poor people pay nothing. Don’t worry, those eeeevil rich people will still pay the FairTax every time they buy caviar or a new yacht. They’ll get the prebate too, but it will be pocket change compared to a yacht! Heck, they spend that much in a week lighting their cigars with hundred-dollar bills.

Let us not forget that the removal of multiple layers of embedded taxes (that is, layers of income tax that hit at all levels of manufacture and distribution of goods) will lower prices, as, again, the FairTax only applies at the retail level, on new goods and services. Price drops will effectively balance out the increase caused by the tax itself. Thus prices will remain much the same as they are, but everyone’s buying power will increase because we’ll all be taking home our entire paycheck.

The real reason leftists don’t like this plan is because it would represent the single biggest return of power from the Federal Government to The People since the Declaration of Independence. Lack of government power means it’s harder to institute socialist schemes. When the country’s citizens no longer have to submit detailed financial information to the government, that makes it a lot harder for politicians to engineer their multitude of social experiments in the form of social programs. When the IRS and its thousands of exceptions and loopholes are eliminated, it’s far more difficult for politicians to buy votes by passing new loopholes that even further complicated the current bloated system.

The FairTax, like other cults, plays its followers for suckers.

You’re projecting, man. It is you playing your readers for suckers.

Power to the People!

[Update: Missed it at the end there… Cult Counter: 6]

1: “name calling by proxy”: v. the act of indirectly voicing a negative statement about another person (name calling), generally while feigning that you are not doing so, by referring pointedly to name calling by others. Ex: “Some people say he’s a criminal.” The “playing innocent” aspect of this is often enhanced by an explicit statement that you are not name calling, but simply pointing out that of others. This can be detected when there is no reason to mention the negative portrayal in the first place, except for the sake of it being mentioned. Ex: “I don’t actually know, but many people say that my opponent is a drunk.”

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11 Responses to “Unfair to FairTax”

  1. Kevin Says:


    Thank you for your insight into the FairTax. I was getting discouraged with all the attacks. I read these demogogued articles and I know that they misrepresent the FairTax. Thank you for putting the correct emphasis in your letter.

  2. Mark Curran Says:

    Fairtax is based on bogus math. This isnt a question of demogoging – its a question of math.

    Actually, Fairtax does have some great points — if it worked. How wonderful it would be to not have and IRS!

    The present system of IRS and FICA screws earned income — work — by taxing it almost 300% higher tax rates, than cap gains and dividends.

    But what if Fairtax didn’t work? What if, for example, half of the money it says it can collect, is impossile to collect?

    WOuld then the fairtax have to be 46%?

    Do you know that fairtax taxes the federal government, to pay for the federal government?

    This isn’t demogoging — Neal Boortz wrote “The federal government itself will become a major taxpayer” (Page 148 in his Fair Tax Book,)

    Tax the federal government to pay for the federal government. ??

    Right then, people should have said “Say what?”

    Isn’t that a bit like me, pretending I can pay myself 10,000 to cut my own grass? I can write the check, I can even deposit the check. And I can do this every day. But at the end of the month, I don’t have 300,000 dollars.

    Fair tax advoates want to claim the government “will become a major taxpayer” — but it can’t possibly be so because the government has to write the check to itself,.

    But why would Fairtax have the government write checks to itself?

    Because on PAPER –it has to add up to 23%. Fair tax has to claim revenue streams that will form a lake of 2.3 trillion.

    But Fairtax can’t really have the federal government pay itself a tax. But on paper, thats exactly what they do.

    So Fair tax would have to be higher than 23% to remain revenue neutral, just for this one fallacy.

    Are there any other fallacies?


    Fairtax can only work IF it gets people to pay 460 billion in taxes — on their health care costs. People who get heart bypass surgery, cancer surgery — people who are in nursing home. Famlies fighting leukemia and other expensive illnesses will get incredily hard by the “fairtax”.

    One family, who has a child with leukemia — could get a 40,000 SALES tax.

    One nursing home patient, who gets by on her social securty — would get a sales tax of 25,000 a year — plus more tax for any other medical costs.

    One cancer patient, with surgery, chemo, and radiation, could have 50,000 in “sales taxes”.

    So you will have the absurdity of a person who is actually taxed MORE sales tax than they have income.

    That’s right. Because many people have health care cost GREATER than their income, and health care is taxed 30-40%, then you will have people who make 20,000 a year, taxed 30,000 just for health care. Plus, the other fair taxes — on their rent, on their utilties, etc.

    Therefore, one way or another — these patients will get exemptions, either defacto exemptions — by not paying it. Or dejure exemptions – by getting an official exemption.

    EIther way, the Fairtax can’t possibly collect 460 billion-dollars from these folks.

    Most likely, the outcry from even attempting to tax an 80 year old stroke victim in a nursing home, would result in Congress exempting all health care cost from the “fair” tax.

    Fair tax has to get 150 billion in taxes — from people as a tax on their rent.

    That’s not demogogury — thats the fact. Fairtax taxes rent. All rent. People who rent will have to pay it.

    Now supposedly Fairtax lowers cost so much, that most prices will drop so much, the added fairtax “will be a wash” as Neal Boortz claims.

    Thats demogogery. Look at rent – landords WOULD save some, cause no longer would they have to pay their employees FICA. But apartment complexes have very small employee cost, relative to their gross income. Other businesses have higher ratios, but apartment complexes might have 5 employees, and 2-3 million in gross income.

    So an apartment complex could save, say, 30,000 dollars, out of 3 million. Great savings! But thats 1%, not 22%.

    Our family has a business and we looked over the numers. We save less than 2%, if Fairtax were enacted. Our employees also save — they save more in fact, as a group.

    But they save that, we don’t. They wouldn’t pay income tax or their FICA. Great! But we don’t save that. We can’t pass along what they save.

    Thats not demogogueing. Thats simple facts.

    To cut our prices even 6% — not 22 — our employees would have to give us ALL their income tax and FICA.

    So Fairtax has a lot of problems. Sure, it sounds great, as long as you don’t look real close.

    Imagine if you wake up one day, and the fairtax is passed. Suppose you rent a nice place near the ocean, for 2,000 a month, and you just had a knee replacement.

    You open your mail, and get 400 dollars prebate. And you get your entire paycheck in the mail, since you are off for the surgery. So you are happy, you will be ahead 1500 a month!

    Then you open your rent statement. Your 2000 a month rent went up to 2800. Wow, Thats 800 gone, of that 1500.

    Then you open your utility bill. You were paying 300 month, but that went up to 500 — fairtax 200.

    Then you open up your medical statement. Hope you are sitting down. Your 30,000 knee replacement is now 40,000 — 10K taxes.

    And you get your insurance statement — you have to pay that to stay insured. It was 500 a month, but since insurance premiums would be taxed, its 700 a month now.

    And you get your cable bill, your phone bill, your health club bill. More tax on each.

    You haven’t even gone outside to buy gas, or food, or a restaurant. Yet you have 14,000 in taxes. For one MONTH.

    So — some people will get CLOBBERED with this tax, absolutely clobbered. If you rent, if you have medical cost, if you pay insurance premiums (on car insurance too).

    There is a notion that you can buy USED products, so dont worry. Just buy used cars, and used homes.

    Fine – but you can’t get used rent. You can’t get used cancer chemo. You can’t get used nursing home care.

    Thats not demogoguing. Thats simply fair tax, how it will work, if its passed.

    If its passed– those people who are clobbered — nursing home patients, cancer patients, renters — will scream bloody murder, and get exemptions.

    Im sorry, Fairtax can’t work.

  3. Strider Says:

    Mark —

    I wasn’t claiming that the FairTax is perfect, I was directly addressing significant fallacies in the article in question. It’s notable that you attack the FairTax (which is fair enough), but do not even try to defend the article….

    Tax the federal government to pay for the federal government. ?? Right then, people should have said “Say what?”

    The point is not that government will make money off of government, but that government will not have an unfair advantage in completing against private industry. It’s not the income that’s important, it’s the outgo, which overall is a wash as you say, but for whatever particular _part_ of government (which of course has a budget of some sort), it is _not_ a wash.

    Next point — I agree with you of the political difficulty of taxing things such as health care. The only mitigating factor here is that _everything_ gets taxed at the consumer level. Still, you are right in that it is a significant point for opposing piliticos to make, and it _will_ be made. Start exempting things fromt he tax, you will have to raise the tax. Period.


    [Y]ou will have the absurdity of a person who is actually taxed MORE sales tax than they have income.

    Clearly this would only happen in situations where the person has _significantly_ more medical bills than they have income. Yes, of course that can happen.

    Moving on…

    That?s not demogogury ? thats the fact. Fairtax taxes rent. All rent. People who rent will have to pay it.

    That’s not a fact, that is an opinion. Please learn the difference. [edit: The overall argument is opinion. That rent would be taxed is, as you say, a fact. Your suggestion that rents would rise is opinion.]

    [S]upposedly Fairtax lowers cost so much, that most prices will drop so much, the added fairtax ‘will be a wash’….

    Thats demogogery. Look at rent – landords WOULD save some, cause no longer would they have to pay their employees FICA. But apartment complexes have very small employee cost, relative to their gross income. Other businesses have higher ratios, but apartment complexes might have 5 employees, and 2-3 million in gross income.

    The landlord no longer pays FICA, plus he no longer pays _income tax_ on that 2-3 million in income. Ditto income tax compliance and bookkeeping costs. I’ve had people argue that he’ll just keep rents the same and charge the tax on top of that, but as always competition will prevent that….

    [My family business’s employees] wouldn?t pay income tax or their FICA. Great! But we don?t save that. We can?t pass along what they save.

    YOU HAVE INCOME, DON’T YOU???????? Do you pay taxes on it???

    You haven?t even gone outside to buy gas, or food, or a restaurant. Yet you have 14,000 in taxes. For one MONTH.

    Okay, _this_ is demagoguery, even ignoring the fact that you are simply tacking 25% on to the cost of everything (which ain’t the FairTax). Most people don’t have knee surgery every single month. so acting as though that’s going to hit your hypothetical person every month is pure nonsense. [Edit: Actually, NOBODY has knee surgery every single month….]

    I’m not positive that the FairTax will work, but I KNOW that the current system doesn’t work.

  4. Dan Says:

    Hey look a monkey.

    The fair tax would have the impact of another form of tax. People and entities would seek to avoid the tax burden. The first thing that would disappear would be tourism dollars spent in the US. Why pay the surcharge? So even if the Fairtax could nicely create a fairly balanced tax including prebates, the net revenue generated by the government could not capture as much as it did before.

    The US would become an incredible place to work, but not a great place to live and spend money. People would seek to work in the US and live elsewhere. The borders would see more travel and so would international airports and some ports. Anyone in a position to take advantage of this woudl see an immediate benefit such as the rich, the world business travelers and Mexicans who would send more home.

    Next up… If the Flat Tax were implemented all at once, the inventory system for goods in the US would hit some hard times as people deferred purchases on goods that were higher end, luxury, or deferable. Again those near borders would take advantage by buying luxury yachts and cars outside the US and bringing them in, which is already a nice way to give yourself a discount on European cars. About 10 years ago I almost flew to Germany to buy a car and have it shipped back because it would have been less expensive and I would have gotten a nice trip out of it too.

    Any company in the US with international ties would be able to shift their inventory overseas more easily than those without. The resulting glut of goods in the world market would crash many economies around the world as the supply exceeded demand for a couple years (again depending on the good).

    If it was phased in, then all systems could adjust.

    So what does the final product look like? The entire US population would have significant encouragement to save and invest and significant deterrance from spending. That sounds great. It would be great to have a system set up to encourage a population to be fiscally responsible, which is one reason why people get rich just the same as being fiscally irresponsible helps rich people go broke, especially athletes and others that didn’t learn good financial sense before or while they gained their millions.

    The US would go from being a consumer importing nation to an exporting nation and in one swooping change of the tax code, the US would start become wealthier and national trade imbalances would reverse back to the US’s favor in a lot more areas than it currently is favored.

    So there are a few good reasons to be in favor of the Flat Tax and there are a few good reasons to be against the Flat Tax. All it boils down to is what you want your world to look like and behave like and being successful in convincing a significant number of other people that your idea is a good one.

    It is never or almost never the system of government that fails. It is the people in the decision making seats that define what the government is. The US system at most levels of government is designed to make it easy to replace those out of favor. A dictatorship has advantages, but that system of government significantly promotes bad behavior.

    I go on about governments because the current tax system isn’t the enemy and isn’t the problem. It could keep getting tweaked to be nicer and fairer in so many ways and eventually a stalemate would occur with occasional shifts. It would probably be closer to the mark to say that the problem is that there are elected officials spending too much of other people’s money.

    I currently believe that there is a certain amount of spending that the government should make, even if that money would be better spent and more efficiently used in the proviate sector doing the same job because the government creates a stable set of income that helps balance the economy and smooth out the rough spots. If the entire economy was private sector, then it would be easier to bring about another Great Depression.

    I also currently believe that some current areas of government spending would be more efficiently done by the private sector.

    One thing I’ve never heard about is how the states do. Do Illinois income taxes amount to a larger amount than the state of Illinois receives back? I would hope so because there is national defense and national disasters that should have government money backing them, which would mean less back to an individual state. What about proportionate returns? No again, except in the area of interstates so that rush hour isn’t rush 3 hours. Illinois receives a less than average share of the national disasters and hurricanes and earthquakes don’t commonly destroy assets in Illinois.

    There are some new points to follow up on, but they are already far from the original conversation topic of the Flat Tax. If the US implemented the Flat tax it would change the world.

  5. Strider Says:

    Okay, one at a time. Responding to Dan (oh, and… “Hi Dan, whereya been lately?”)–

    People and entities would seek to avoid the tax burden. The first thing that would disappear would be tourism dollars spent in the US. Why pay the surcharge?”

    You appear to be unfamiliar with the plan. A significant part of the FairTax plan is based on an economic study from Harvard that states that if you eliminate the burden of payroll taxes and income tax from the economy, it would on average bring the cost of goods down by 22%. You $1 product now costs 78 cents. Add the FairTax to that, and you get $1.01.

    In other words, “What surcharge?”

    As for buying foreign goods, those foreign goods would be about the same comparably as they are now, because those goods _were_ burdened by that country’s tax code, just as they are now.

    If the Flat Tax were implemented all at once, the inventory system for goods in the US would hit some hard times as people deferred purchases on goods that were higher end, luxury, or deferable.

    The plan accounts for that. Existing inventory at the time the tax is implemented would be exempted from the tax. (Those items will have already been taxed in the form of the payroll taxes, etc, that existed when they were manufactured).

    If the US implemented the Flat tax it would change the world.

    Yup. ๐Ÿ™‚

  6. Strider Says:

    Responding to Mark (also note Mark’s web site: http://fairtaxabsurdity.blogspot.co.... While being a partisan doesn’t automatically mean you’re wrong, he appears to have some kind of stake in this debate….)

    No, its NOT an opinion that Fairtax taxes rent

    As I corrected the statement immediately after writing it:

    The overall argument is opinion. That rent would be taxed is, as you say, a fact. Your suggestion that rents would rise is opinion.

    Flat tax what income?

    Huh? Why bring the flat tax into this? “Flat Tax” and “The FairTax” are two completely different plans.

    Or are you responding to my question of whether your family business has income? You stated your family business would not save any money. If your business has income, it wiil no longer have to pay Income Tax.

    Beyond that, you go on an extended tear against “flat tax” proposals. None of those arguments have anything to do with the FairTax, and thus I won’t bother defending them. A true flat tax would be better than the current code, but the FairTax would be better than that, for a number of reasons (some of which Dan outlined above).

  7. Strider Says:

    Oh, and one further point, Matt…

    One of your big arguments is that government can’t possibly pay itself taxes, and that throws the numbers off. It wouldn’t throw the numbers any more than the fact that the government currently “pays” itself payroll taxes on all its employees.

  8. Strider Says:

    No Im saying the family business doesnt save NEAR 22% Thats what Im saying. Is this hard to grasp?

    Do you, personally, have income? Do you, personally, pay income taxes? if you own the business, your personal income and the business’s income are in essence the same thing. Are you telling me your personal income taxes are in the 2% tax bracket??? Where do I sign up?

    Or to put it another way: There’s no such thing as corporate taxes. Companies are the people who own the company.

    (You’re not the only one with a family business.)

    Pretend we just magically pay higher prices on everythign else we buy….

    This has already been addressed. Repeatedly.

    I already showed how GM and FORD save about 200 dollars per car on FICA.

    You’ve shown no such thing. You’ve simply stated it.

    Even the guy that came up with this 22% embedded tax nonsense said PRICES WOULD GO UP.

    For the sake of argument, let’s say you are correct. Prices go up, and everybody’s paycheck gets bigger by roughly the same amount. Assuming your own worst case scenario, it’s a wash.

    It would be 70%

    And exactly which orifice did you pull that number out of?

    …these ditto heads will forever insist the fairtax was magic.

    Ah, the obligatory ad hominem “right-wing wacko” barb. You do realize that the support for this is strongly bipartisan, don’t you? Look at the sponsors in Congress.

    So you think the federal government can pay itself 500 billion in taxes?

    I’ve made no such statement, and in fact have clarified the point more than once. As such, I can only assume from you relentless beating of that particular dead horse that you’re either running out of arguments or simply not arguing in good faith.

    Once more (and finally) the only purpose in the government “paying” the FairTax is so that in those places where the government competes with private industry, it’s a level playing field. Over the entire government it may all be a wash, but to a particular department of the government, with a budget, the tax will affect their spending within that budget. Prevents the Post Office from undercutting FedEx by 23% simply by virtue of the tax difference.

  9. Mark Says:
    [Image: silhouette of a forlorn child wearing a dunce cap]

    You tell me the “purpose” of the government paying itself a 500 billion dollar tax?

    Why don’t you tell me the purpose of flying pigs — cause the government can pay itself 500 billion in taxes the same way pigs can fly.

    Are you mental?

    [editor’s note: That’s quite enough of that. I read your full comment, and you’re saying absolutely nothing new. In case you hadn’t figured it out, repeatedly screaming at people and calling them “moron” and “mental” isn’t going to convince too many people any time soon. Additionally, this comments section is not a public square; it is private property, and you are a guest. If you cannot keep the conversation civil, you will eventually be shown to the door.

    Congratulations! You’re the first commenter I’ve ever “dunced“! Your mother must be proud.]

  10. Dan Says:

    Responding to Steve

    You missed the point.

    If the cost of the good comes down to 78 cents and the Fair Tax generates .22 or 23 cents in revenues, then great. I’ve got no problems with that because most market systems will self-adjust to acceptable profit levels no matter what changes in the tax code. In the end there is just quibbling about whether it ends up at 21% because the cost of goods went up or 24% because the cost of goods went down in order to generate the same level of tax revenue.

    The point is if you start taxing purchases, then you cause everyday people to defer purchases, which signals a decrease in tax revenue. Purchases that can be made outside of the new tax zone (i.e. the entire US) will be made outside the US. And since most of those nations don’t have large sales taxes, the consumer benefits, the other nation benefits, and the US loses out on tax dollars. That means less federal funding.

    To recapture the lost revenue new taxes or tweaks would occur or the Fair Tax percentage would have to rise until it was generating the same level of revenue.

    If sales tax is higher in the US it will affect the cost of travel and vacations. Tourism will suffer. If hotel rooms and a plane tickets are taxed at 22%, then foreigners as well as US citizens will take their vacation dollars outside the US and all of the tax revenue is lost forever, but a tweak to the tax code can increase the tax on international travel to recoup some of the lost revenue.

    LOL. Inventories being exempt means that the government loses out on even more revenue. GDP is between 13 and 14 trillion and the annual US budget is about 2.5 trillion dollars. How much of that 13 trillion could be said to be stored in inventories? Whatever it is 22% of it is a hell of a lot of money and a considerable portion of the budget.

  11. Strider Says:

    An extended reply is in a new post.

    Let’s move further comments there too. ๐Ÿ™‚