It looks obvious

“Things should be made as simple as possible, but no simpler.” — Albert Einstein

The silver bullet tax

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Couple of day ago I wrote a short post, about the Fair Tax, which triggered a lot of comments. I took the time, after reading many of these comments, to reconsider my opposition to the Fair Tax proposal. As a side note I’ll have to admit that the most persuasive arguments in favor of the Fair Tax came from no other than my spouse, which was convinced by the comments (and also sided with those who most generously pointed to my poor grammar and spelling abilities:) ). So, after such a massive campaign even a stubborn person like me have to re-examine his position.

But before I’ll admit that I was wrong, and join in support of the Fair Tax I need a clarifications.

Let start with a simple scenario, which is very likely. Lets assume that the Fair Tax is being adopted and for a short while everything is working as the comments on my previous post predicted. However,  Al Gore, in his campaign to save the planet from global warming, convinced enough law makers in Washington DC that in order to encourage people to buy hybrid cars we must reduce the sales tax on these cars by few percents. Following Gore’s success  the farmers lobby start to argue that in order to protect the American farmers, and for the best of the economy, American produce has to be taxed (sales tax obviously) less than imported produce.  Before we even know it, and most likely while even before the Fair Tax bill will be even written, we will have a no less complex and no less corrupted tax system.

The only difference will be that it will be even worse than the one we already have.

I do not know of a way to make an intrusive government that makes its first priority to distribute wealth working. The so called Fair Tax will not fix it, not the Flat Tax. But until we are able to shift the government to do less, instead of doing more; Until we will see the day that our representative will say in a debate - this isn’t a problem that the government should be involve in - until then the only way to tax fairly is to tax everyone in the same rate.

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Written by Rogel

June 6th, 2007 at 9:52 pm

Posted in The Free Market

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Viewing 11 Comments

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    I give up
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    So fast? :)
    What would you suggest as an efficient and fair taxation system, Zoolish?
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    Life ain't fair.  We should adopt the tax system that makes the most economic sense, not the system that is most "fair". 

    Keep in mind that the Fairtax does not eliminate state and local taxes.   We can't solve every problem with government by enacting the Fairtax, but it would be a HUGE step in the right direction.

    Enacting the Fairtax would expose to all americans just how much we are taxed.  This visibility will cause a tremendous amount of pressure to reduce government spending and lower the tax rates.
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    Now I'm really confused.
    The fair tax got its name for being efficient and not because it is actually fair? so the name is a type of marketing newspeak?

    And one more question that I would like you to answer - how an indirect tax - such as sales tax will expose to tax payers how much they are paying more than an income tax? just by the virtue of being the only tax? isn't it better to institute flat income tax rate as the only tax to achieve this goal?
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    Rogel,Frank Again! I Fail to see how a Sales tax is Indirect? How much more Direct an it be? You are at the checkout counter of you favorite store and you look at the receipt after you pay and you see how much tax you just gave the government! That is as direct as can be!Indirect is a system that takes the money you earn before you get a chance to see it and then manipulates the numbers and for the un-educated or the poor , “get money back!”, when in truth you are getting some one else’s money that they earned. The Government it took from them and gave it to you. Furthermore Taxes are a cost of doing business currently, so from reading these posts from my first comment to you. I assume that you have agreed that this is True.  Assuming that! Then there is no way you as a Business owner or board member can ignore this cost. So your products/Services have to include this cost in the price. IE Hidden Taxes that the consumer pays that he doesn’t know about in the foreground, only after education does he become aware that he (the consumer) is being taken for a ride!  The Fair tax is not only one of the fairest ways of doing taxation it also EXPOSES THE TRUTH ABOUT WHERE ALL TAX DOLLARS COME FROM. {THE CONSUMER} i.e. YOU AND ME!Frank  
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    Frank - do you know what are the taxes you are paying on your phone service? did you know that until recently you paid a tax to fund the Spanish-American war? this is how direct is sales tax. I think that we can agree that, given the theoretical assumption that they are the only taxes, as direct as income tax.
    But this was the minor point of this post, and I really appreciate if someone will address the scenario I described in the post.
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    Hello Rogel, I’m glad that you are seriously looking at the proposal now.  Since I still haven't figured out how to split posts into paragraphs, I'll answer each of your two questions in separate posts.  Your first question is in regards to exempting certain items from the FairTax in order to manipulate behavior.  Your implied question is "won't we quickly have a nightmare scenario of every lobbyist in Washington trying to get things exempted from the FairTax"?  One of my favorite examples is someone demanding to know why she has to pay the same tax for her Bible that her neighbor pays for his pornography.  The answer is "Because it is fair".  In part, you are thinking that way because of the twisted system we have grown to know and love.  There are no exemptions under the FairTax.  I am not at all opposed to congress trying to make some purchases more attractive than others, but I am opposed to having those manipulations done in the tax code where they apply only to the 30% of Americans who itemize their taxes.  If congress wants to manipulate people into purchasing more hybrids, they can more efficiently do so with a rebate program.  And it is far easier to just leave things in the tax code even after they have outlived their usefulness than it is to remove them.  I say let every rebate program stand or fall on its own merits and sunset after a set time unless specifically renewed.   DavidN@TampaBayFairTax.org
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    Frank has already addressed your question regarding how someone will notice the FairTax and therefore the amount the government costs them.  Written into the language of the proposed legislation is a requirement that the amount of the tax must be written onto the receipt for every transaction.  Of course that won't be a perfect fix, but it will make a significant portion of Americans realize how much our government is costing us.  In fact, even people who will be completely untaxed by the prebate will still see the cost of government at every purchase and may begin to take note. David
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    I would, as a raving Libertarian would prefer  that the government will avoid trying to give incentives altogether. I'm still failing to see how do you prevents the governments and the lobbies from making a "progressive" sales tax. Knowing that something is a bad idea didn't prevent them for enacting bad policies in the past; Arguing that it will be wrong to temper with the FairTax isn't, by itself, an assurance that it will not happened.
    Since the Scenario of the government tweaking and creating different sales tax rates for different social programs and incentive is more than likely I think that the Flat Tax is a better "lesser evil" than the other options.
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    In order for them to lower the rate for anything, it will by default raise the rate for everything else for everyone else in a very visible way.  Currently, something can be slipped in and there is no visible signs that some ceiling fan company just got a huge tax break.  But, try to exempt them from the sales tax and we have just either reduced the revenue or we have to make everyone else pay a little bit more for every purchase that isn't a ceiling fan.David
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    Rogel,Going with what David has said. The sheer visibility of the fairtax on the receipt will put the legislation on notice that to much monkeying with the system and they will loose their Job! When Grey davis Screwed up in California, the people put him out! The same thing would be done with legislators because with the taxes paid on the reciept daily not "Yearly", out of money already in your Hands not taken out of your paycheck before you get it educates! The uneducated become informed. When you have a well informed public then the government becomes more accountable to that same public. The "Fairtax" may not be perfect for all. But who ever said Fair was Perfect? However it does help bring us back to what this country used to stand for. As for the taxes on the communications and such, they are not Income taxes unfortunatly and the fairtax doesn't replace them. I for one would like someone to let the number out on what the revenue for the US Government took on Gasoline sales this past year. I'll bet that they rival what the Oil companies are getting. I wonder what an educated public would do about that when they find out that Uncle sam makes twice as much on a gallon of gas that the oil companies do? This all relates this Bill houses a lot more than just simplifying the tax code. It could be the very silver Bullet we need to get government back in check with the American People. This is why the bill "HR25" needs to pass AS WRITTEN and the 16'th and 17th' admendments repealed. The People can insure it! We just need someone with enough Intestinal fortitude to say what needs to be said get the masses moving and get the job done!Frank

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