RoR: Forum

There are no "good" tax systems; some are less "bad" than others. You present several possible problems with the Fair Tax, yet I still think if it were carefully done, it would have many advantages over the income tax. After Social Security, tax reform is Bush's biggest second term agenda item. I still hold out hope that he will propose something quite bold when he gets to it. In general, betting that Bush will take the less bold approach to a problem has been a sure way to lose money. I hope to see a lively discussion on taxes here at that time and plan to be in the middle of the storm when that occurs.
Meanwhile, FairTax.org is a way to start to understand the alternatives.

Post 1

Friday, February 11, 2005 - 8:53am

True libertarians and Objectivists would accept nothing less than the fairest tax of all: the head tax.

I began pondering the other day why most libertarians are more primarily concerned with fiscal matters than social matters, i.e. why do we want lower taxes but don't really get as riled about, say, marijuana? Well, first of all, we all pay taxes, so it affects us all, whereas marijuana only affects a minority (although a larger minority than I think anyone is willing to admit). However, it is right to be more concerned with fiscal matters, because the government can pass all the laws it wants (de facto, in a perfect world...), however, if they don't have the funds, they are a paper tiger.

Sorry for the tangent. Anyway, the smartest and fairest tax is the head tax, at about $1500 per person for the DoDefense, and that's all. If you can't get defend the country for that money, we raise it, but I doubt we'd have to.

Post 2

Friday, February 11, 2005 - 9:55am

If this really get anywhere I'll be impressed.

A major problem is that past "savers" will be penalised e.g. those nearing retirement. They were taxed on their earnings (some of which was saved) and now will be taxed on spending (some from savings which they were taxed on before).

However in an ideal world I would prefer VAT/sales taxes to income taxes. Its more difficult for a politician to isolate you as an individual and make you pay more (than the poor guy/guy with good accountant/dishonest guy). The comments on VAT are valid - practically you would need VAT rather than a sales tax.

A head tax would of course be best - but it'll probably be impossible to get Congress' spending habits down to Stephen's proposed levels!

Post 3

Friday, February 11, 2005 - 2:16pm

No change of the tax code means anything unless programs are eliminated and/or spending is drastically reduced. The money still has to come from somewhere.

Post 4

Friday, February 11, 2005 - 2:52pm

Wonderful article, Jim.

I am opposed to all taxation with no reservations. Any compromise on this position is evil. To say one is going to stop initiating force one way so that one can initiate force a different way is still an initiation of force. I oppose the current system and all proposed new tax systems.

Government can easily fund itself by limiting its role only to its proper functions,charging user fees for those functions and selling off its considerable assets.

You can't get good from a bad, ever, or as Ayn Rand said, "There can be no compromise on moral issues," and, "There can be no compromise between a property owner and a burglar; offering the burglar a single teaspoon of one's silverware would not be a compromise, but a total surrender--the recognition of his right to one's property," and "In any compromise between good and evil, it is only evil that can profit."

To Bush and his ilk, I say phooey.

Post 5

Friday, February 11, 2005 - 3:46pm

M. Palin raises an interesting point...what is the moral position on taxation? Does the Constitution therefore violate NIOF, or is it a Lockean social contract, and therefore moral? If 99% of people sign the social contract, does that make it bind on the others, or do they become non-citizens? There are some interesting moral and economics-related questions for this line.

Post 6

Friday, February 11, 2005 - 4:41pm

Steven,

The Constitution does violate NIOF in some cases. Eminent domain and the 16th amendment are just two examples that spring to mind. The bill of rights was an attempt to enumerate the natural, unalienable rights that men have. This is stated clearly in the 9th amendment. Any IOF in the constitution should properly be struck down.

Government is not a social contract. It is, in its proper form, an organized effort by individuals to protect their rights. When government acts properly, it is acting in extension of the rights of the individuals who form it. With no IOF, no individual has a need to defend themselves from government. When government initiates force, all individuals have the right to defend themselves from it.

Post 7

Friday, February 11, 2005 - 9:16pm

The problem with always presenting the moral argument TO THE EXCLUSION of the political argument is that while you are sitting to one side righteously sipping your victory cognac, someone else is winning the political argument and taking us all further from the desired moral and political goal. It is true that a 50% tax is immoral, but a country of ten that taxes five men 100% and the other five 0% is less moral than a country of ten that taxes all men 50%.
I think one should always make clear his opposition to taxation in general. However, it is not being immoral to support policies that do less damage while we are awaiting the arrival of the limo to Galtch's Gulch.

Post 8

Friday, February 11, 2005 - 9:53pm

Pete had it right. Changing the ways of taxation is unimportant and inadvisable until programs are eliminated/spending is cut.

I second others� concern that income taxes will be retained after the implementation of a new system of taxation (if spending is high like it is now.)

Jon

Post 9

Friday, February 11, 2005 - 10:02pm

Or, I should say that I second Jim�s concern that we will be stuck with two ways to tax us.

Good article, Jim. Thanks.

Jon

Post 10

Saturday, February 12, 2005 - 2:46am

From what I have read about it, it seems like the substitution of one rotten scheme for another.

All the exact same problems would arise out of this taxation system than income tax. It would probably just exact a massive administration cost for the Government restructuring of the tax department.

It's a lose-lose situation if you ask me.

Better to just get a simplified and massively reduced income tax - if you really want change for the better.

(Edited by Marcus Bachler on 2/12, 3:33am)

Post 11

Saturday, February 12, 2005 - 4:41am

The problem with always presenting the moral argument TO THE EXCLUSION of the political argument...

James, there is no dichotomy between the moral and the political. The political is derived from the moral or the immoral, as the case may be. Granted that there are degrees of evil between governments as well as individuals. And there are degrees of evil related to taxation: the greater the tax, the greater the evil. But as I stated, no good will come from compromise with evil.

I support neither the current nor proposed alternatives. I've never seen a tax cut I haven't liked nor a tax increase I haven't disliked. If there is any initiation of force, in any proposal, even if it includes the elimination of some other initiation of force, irregardless of the amount of either, I would oppose that proposal completely. I believe Ayn Rand was clear and correct: no compromise on moral principles, ever.

Oh, and I don't drink cognac, I prefer draft beer.:-)

(Edited by Bob Palin on 2/12, 8:21pm)

Post 12

Friday, August 12, 2005 - 12:29pm

I have read The FairTax Book, newly published on August 2nd, and I see a number of fallacious assumptions in the above discussion of the FairTax plan.

(For example, it is incorrect to assume that retirees would be taxed twice -- because prices wouldn't actually change from their current levels.)

There is a real danger in criticizing political initiatives of which you have limited first-hand knowledge.

For anyone with an interest in the topic, I strongly recommend READING THE BOOK. It's well-written, it's a carefully thought-out plan, and it certainly convinced me that the FairTax plan would constitute a significant improvement over what we have today.

So, go get the facts.... read the book! Here's a link: http://www.theatlasphere.com/fairtaxbook

Post 13

Monday, June 1, 2009 - 1:50pm

I was recently asked in another forum whether I supported the "fairtax." I was unfamiliar with the details, but reading about it on wikipedia I decided that I opposed it for the reason of the "prebate" which amounts to puttingG every person in the US on government support up to the poverty level. You'd have 40% unemployment if everyone got a check for $10,000 each year. This article only makes me doubly dubious.

Post 14

Monday, June 1, 2009 - 4:12pm

I disagree with the article. Joshua is right, this is something you need to do a little study on. Take a look at the web site.

The FairTax isn't perfect, but it is a powerful step towards reducing the size of government, and a gigantic boon to the economy.

The Prebate Ted mentioned is a political necessity to get it passed, and it is small. It is not the $10,000 he mentioned - it is equal to what someone at the poverty level would be paying in sales taxes. If you live on $1,200/month, and the sales tax on a substantial number of purchases for a person at that level would be, say, $200, then that is what is sent to everyone. It is equivalent to saying, "If you are poor, you don't pay very much in sales taxes - only a little. And to be fair, if you are not poor, you get a discount on your sales taxes, equal to what the poor people get."

If that poverty level person saves their money and doesn't spend much, they would come out ahead - subsidized. If they spend all the money they make, that $200 goes back to the government in sales taxes. But everyone gets that same amount - rich or poor - it is not going to some and not others. That universality makes it fairer than the progressive feature we have in the current system. It makes it possible to pass a bill that would otherwise be stopped by those who would see the elderly on fixed incomes and the poor being hurt. I would never sanction a scheme like this prebate as part of an Objectivist government. As an Objectivist I'm working towards a minarchist government that collects only voluntary revenues (like the insurance premium on contracts, or fire insurance you pay to the fire department, etc.)

But, it is silly to imagine that we can jump from here to there in one long leap. Apart from a bloody revolution, which we don't have the support for, we have to move in stages. I advocate and vote for each step that is in the right direction (if it is better than other steps that are available).

Yes, the FairTax comes with the "promised" repeal of the 16th amendment which requires much more to get passed - but that is the nature of any constitutional amendment. However, the elimination of the income tax code itself and the end of the IRS is actually part of the FairTax bill and passes with the same majority, at the same time, as does the FairTax itself. Repealing the 16th amendment is to ensure that the IRS or something like it doesn't come back in the future.

The complaint that it will be converted into a VAT tax to make it less visible is valid, but it is also meaningless, since right now, we are in the middle of a giant tax muddle made up a great many different taxes - all spread around between businesses and individuals. And people are already talking about a VAT to add onto the Income tax and all the other taxes. It would be much better to have a large, but honest tax, right in front of us instead of the multitude of hidden taxes that are not understandable, not visible, not logical, driven by special interests, tweaked by congress annually, and a Killer burden on American business in a global economy.

The reality is that the IRS and the income tax, with capital gains tax, payroll taxes, loop-holes, alternative minimumns, death taxes and all of the insane, nonsensical regulations that nobody understands is making out country unable to compete on the global market. It discrimates against saving, investing and producing and it causes massive dislocations and inefficiencies in the marketplace that aren't even measurable. It is such a mess that it isn't even possible to count how many ways some thing or someone has been taxed over the course of the year. An income tax on businesses is like a VAT tax - when you buy the product, you pay the taxes of the entire supply chain as part of your purchase price - except that it is hidden.

We will never be able to move forward towards real fiscal health without doing away with the entire concept of a tax on income, on producing, on investing, or on business.

The FairTax makes the burden of government felt - painfully - each and every purchase that is made. That in itself, it is the best possible way to reduce federal spending by creating the direct link between national spending and what it costs to buy things. Every single budget proposed could be explained to every citizen as "This budget will increase/decrease your purchases by this many cents on every dollar you spend."

Keep in mind, that the actual cost of goods and services would go down by much more than 23% (realized efficiencies in the marketplace, no supply chain embedded business income or payroll taxes).

Rearranging tax collecting is the first step to reducing federal spending. You'll never make any lasting headway as long as the Income Tax Code is still on the books along with it's gaggle of fellow tax laws. The best step is to not elect anyone that doesn't support the FairTax, then lobby to shift services away from the Fed to the States on the principle of States Rights and local representation, and let the states compete with each other on who will violate economic reason the most or the least. Both those moves are the strong tactical moves to end up with a government that respects individual rights. Moving in stages, going on strike, or picking up a gun - those are the choices.

Neither this nor any other proposal I'm hearing will address government spending. Unless you are a supporter of the Libertarian party and expect them to win and make everything better all at once. To reduce government spending what is needed is a balanced budget amendment - that stops borrowing and eliminates the need to print money. The other thing that is needed is to get rid of the Fed and the Central Banking system - take credit and the control of the interest rate away from the government. The FairTax, a Balanced Budget Amendment, and an end to the government run banking and credit manipulation - do those and all of the rest of the ideals shared by Objectivists will become much, much easier.

Post 15

Monday, June 1, 2009 - 4:49pm

What's fair is not always fair...or right. But, the FairTax could be a great step in the right direction, if it's done the right way. Mr. Cox is on to something though, when he states that our politico's cannot be trusted. They have established that countless times. What once was a great idea has often been, in the hand's of Washington insiders, turned to collective garbage. They seem to have the anti-Midas touch. Everything they touch turns to lead.

However, if we can keep a close eye on this and actually work it correctly, there is every reason to think this is a step in the right direction. Getting rid of an taxing system that only serves to punish the successful, regardless of their economic status, is a good thing. Replacing that with a tax on consumption might not be ideal, but it sure as shit is better.

And, not to stray too far from the topic, is there not a problem among many in the Objectivist pantheon with accepting nothing but the ideal? I too would like to live in a world where reason and free-markets rule, not by default, as they do now, but through intention. However, can't we take a little wackiness until we get there? I'm damn near certain that I will not one day toss a few quarters into the paper machine to find on the front page that we are now living in the ideal climate for a Rand inspired social system.

Post 16

Monday, June 1, 2009 - 6:02pm

Steve W., according to a government website, the poverty level for an individual was just under $9,000 in the year 2000. Do a google search. You will have every 18 year-old in the nation renting a furnished room a smoking pot on that payment.

I would support a flat sales tax of 15%, if it were to replace the income tax by amendment. The first $5,000 or so a year spent on a mortgage or rent for a primary residence and all money spent on unprocessed food items (fresh meet, vegetables and dairy) and could be tax free. There would have to be a mechanism that would automatically lower the tax rate, say 1% every two years, unless a congressional supermajority voted otherwise. As it stands, the 23% rate will simply allow us to maintain the current levels of waste, the rate will go up, the rebate amount will quickly exceed the actual amount spent on tax, and we will be stuck with this nonsense.

Post 17

Monday, June 1, 2009 - 6:39pm

Ted, if the poverty level was $9,000, then the pot smoking student would have to live on a monthly check of $172 or less. The prebate is just on the estimated sales tax - no more. (I would like The FairTax much better without the prebate - but I can't imagine it passing without that feature.)

The figure of 23% was chosen to be revenue neutral at current tax rates. Nobody knows for sure, but that is the estimate.

I like the idea of having it automatically go down by 1% a year until it hits 15%. But, again, getting it passed wouldn't be easy if it includes that feature. I will support it as it stands, then after it passes, start campaigning for passing the 1% annual decrease AND as the retail prices drop, campaign for a decrease in the prebate by 10% per year (90% of poverty level, 80% of poverty level, etc.)

Here is one of the reasons given in the FAQ part of their web site for not exempting any items: "...exempting one product or service, but not another, opens the door to the army of lobbyists and special interest groups that plague and distort our taxation system today. Those who have the money will send lobbyists to Washington to obtain special tax breaks in their own self-interest. This process causes unfair and inefficient distortions in our economy and must be stopped." I would rather have no prebate, and no exemptions... but it would be passable - so I'd go along with either prebate or exemptions to get it passed and then work at reducing it.

Post 18

Monday, June 1, 2009 - 6:51pm

I have to agree with Steve Dubya (W. I'm just kidding you) on this one. Once the door is opened, even a crack, for some loophole here or an exemption there, every maker of toys, cars, boats, milk, bread, toasters, tires, and suits for the Prez will be asking for an "essential" exemption.

(That's one of the problems we have with out current tax system. The laws and codes change every year, which means that every year there's a need for someone to pay off a chump in Washington. Instead of fighting for term limits people should be fighting for tax law term-minimums.)

Post 19

Monday, June 1, 2009 - 6:53pm