These are my responses to Dutchman's FairTax quiz. What do you think?
(1) HR25 abolishes the IRS and the IRC.False. However, it will greatly reduce both the cost and size of the organizations.
(2) There are 67,000 pages in the Internal Revenue Code and supporting Regulations.False. Although, I have no idea of the exact page count, the number is too high. Can anyone argue that shorter less politically manipulable (I may have just made this word up) code is worse than what we currently have in place?
(3) A sales tax inclusive rate of 23% would be revenue neutral.False.
(4) The after tax price of retail purchases will be about the same.False.
(5) The “prebate” is a tax refund paid in advance.I know your answer is False, but I don’t want to play games of semantics. The prebate is money to cover an essential basket of goods for everyone. So whether it’s a refund or in advance, I’m not really concerned. It helps offset the consumption tax for people that the FairTax would otherwise be a regressive form of taxation.
(6) Your dollars will purchase more under the Fairtax.True. My tax dollars will purchase more under the FairTax. I have demonstrated this using your numbers.
(7) You choose when and how much tax to pay.True. Please don’t come back with false on this based on verbiage. Under the FairTax I choose when and how much of a good(s) I purchase.
(8) Everyone will be economically better off under the Fairtax.False. This is from an immediate financial standpoint. Over time though, I believe that the country as a whole will be better off.
(9) Interest bearing investment and debt instruments are not taxed.This needs to be verified. If your read of 801-806 is accurate then the answer is False. That provision of the FairTax would then need to be adjusted!
(10) There is $10-$15 trillion of US owned assets in offshore accounts.This is the viewpoint of the authors of The FairTax Book. I’m not sure how either you or they prove it. It is fair to say there is some percentage of that number at minimum.
(11) Buying “used” goods, (tax previously paid), eliminates the tax costs from the sales price.False. Of course the initial tax is imbedded in the reseller’s mind as part of the COGS.
(12) A national sales tax would have no impact on State and Local governments.False. There will be lots of impacts. My viewpoint is that those impacts would be beneficial and go toward making State and Locals more sensible when it comes to spending their revenues.
(13) FICA payroll deductions are a tax.True. I would prefer non-government run/third party payor insurance programs. It is a tax on me because I could provide for my retirement and long-term care better and at a lower cost than the current programs do.
(14) The Fairtax will save Social Security.False.
(15) The Fairtax is progressive.
False. It is not progressive. However, it is far less regressive than both the current system and a Flat Tax.
-2outof4
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I have a question somewhat related to this discussion...something that may be more pertinent to the political landscape of the next year. Since we all know that taxes will be going up to try to finance all the new spending (especially if the healthcare bill gets enacted), would you, as a proponent of the 'fair tax' prefer to see the taxes collected in the form of a sales tax (like a European style VAT that some dems are considering) over increasing income or corporate taxes?
ReplyDeleteSeems like a vat would have some of the same hoped-for benefits as the fair tax, but I think it would be like opening pandora's box. After the initial price shock (10% from what I've read), it would be very easy politically to inch the rate up over time.
That scenario makes me want to throw up. I know you don't like the idea of messing with success (i.e. tax structure of the Gipper's years), but the necessesity to do the above shows the system is broken and an alternate strategy is necessary
ReplyDeleteAt the onset of the financial crisis I said instead of hastily rushing through bailouts and increasing our tax and debt burden, we needed to figure out a way to wind the "too big to fail institutions" down. I got a little razed here for saying so b/c it was thought to be too tough. Well guess what, the guys in Washington are trying to figure out a way to do that today - ex post facto and several billions of tax payer dollars later.
We cannot make the same mistake with healthcare or any other politically supported entitlement programs. We need to get it right (or on the path to right) the first time - not cram in an off the cuff plan before recess!
No, I don't support a VAT on top of the current income tax structure. If we see that, I would say that the plans to make Atlas Shrugged a film will not need to follow the manuscript, they can just turn on CNBC or CNN.
-2outof4
I think that a big risk of a VAT in the current situation is that it would be a second form of taxation, as opposed to the FairTax (on which I am neutral), where the sales taxes is the only tax. I think that giving the government two different places to collect taxes is an awful idea, more complex and further-reaching tax code is the last thing we need.
ReplyDeleteThat being said, I don't support raising taxes at all, nor do I support any of this expensive legislation, so my opinion is clearly biased.