Read the bill. Run the numbers.

[major error corrected in editing]

You know, I put it in a comment, but let me make it clear. HR 25 – Fair Tax Act – has been submitted in almost identical form for years. I’ve read it every year, and the problems never go away.

It is a sales tax, despite Mr. Shipp’s protestations otherwise. If nothing else there’s the intro:

To promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States.

In case that’s not clear enough, Title II is “Sales Tax Enacted”.

Let’s see, what else. Oh, yes, the collection. I said the federal government would need to collect from the states. Yep, the states are supposed to collect from individuals but the federals need to consolidate. Lo and behold we have Title II Chapter 4: “FEDERAL AND STATE COOPERATIVE TAX ADMINISTRATION”. While all the sections make mention of letting states do the work if they want, 404 says that if the states decline to do the work, this agency will do it instead. The tax collector (IRS) is dead, long live the tax collector (FSCTA).

I’m willing to back up every statement I’ve made by linking to and quoting sections of the bill. I don’t care about the 23/30 argument, I care about the stupidity of claims that it will do magic things; things that won’t happen.

Of course then there are all the things most people don’t mention. HR25 also asks for the repeal of a constitutional amendment (the 16th) as well as the elimination of payroll taxes for social security and medicare and medicaid and unemployment insurance.

Most offensive, it tries to pretend TANSTAAFL is untrue. The bill would set a cap of 14.91% of a narrow slice of sales for general use. Only first retail sale counts – and even then only if it’s a ‘legitimate’ item. (not investments, for example.) That would not be enough to pay for our current military, much less anything else. The additional tax – around 8% – would not pay for current SS/MC/MA/UI.

Let’s hit this with numbers. In 2009, total Personal Consumption Expenditures (PCE), the closest approximation of sales we have, was 10,089,069 million. (That’s a touch under 11 trillion). If that’s 85.09% of the total, the 14.91% missing that would have gone to the federal government equals 1,767,869.6 million. Call it 1.8 trillion, rounding. The 2009 DoD budget, BEFORE supplementals, was 2.5 Trillion. The 2009 DoD budget was less than 700 Billion. Total expenditures were between 900 Billion and 1.1 Trillion, depending on how you class some expenditures in other agencies for DoD use.

In other words, FAIRTax would require cutting the defense budget by 28% and shutting down ALL other federal activities. Or keep some other things open and cut DoD even deeper. cover total DoD expenditures and require everything else to be cut to slightly less than 1/3 present expenditures.

(Note that the 14.91 and 8 are FAIRTax definition. That’s ~23% of total sales. Most folk would measure it as ~30%. It’s a long-standing argument which I intend to ignore — like arguing over whether to use 2/3 of a cup or 1/3 less than a cup. It’s immaterial.)

FAIRTax will eliminate the IRS by replacing it with another agency that does the same job. FAIRTax is a sales tax. Taxes on the first ~12,000 spent will be rebated (presumptively, meaning everyone in the nation will get ~$1800 at ~$150 per month) PROVIDED you annually renew your paperwork. There are a number of exemptions, plus a number of issues on working with the states and their collections, that will quickly make the regulations as complex as the current tax code. FAIRTax will collect significantly less revenues for the government, requiring us to fail our constitutional obligations.



3 thoughts on “Read the bill. Run the numbers.

  1. I like the idea of simplifying the tax code, and making one tax. I have no misgivings about SS, it won’t be there when I need it.

    But I hate the idea that I get taxed for working. Take my money away from me because I have a job? And then take some more everytime I need to buy something? That makes no sense to me.

    I understand why we need taxes. I’m not sure this plan will allow enough tax to be collected to support the government we have. but then again, I think we have too much government.

    But that’s like asking an organization to downsize itself. They aren’t very good at it. I think the whole thing needs to be overhauled… but that’s not going to happen.

  2. In the end, fair and simple are not compatible. The more equitable and reasonable you try to be, the more complexity you raise.

    For what it’s worth, the reason you have it taken from you in a variety of directions is a combination of palatability and “fairness”. If you had all your taxes taken in one form you’d balk. You’d also get angry because the people who didn’t do ‘that’ (whatever ‘that’ may be) received the benefits without paying (or paying as much).

    Everybody thinks they’re overtaxed. It’s as close to a constant in human perception as you’ll find.

    • I don’t. I pay 33% (or thereabouts). Its a pretty big chunk.

      Oh well. I’m one of the rich and privileged. I SHOULD carry a big chunk of the cost of government.

      HR 25 is proposed by stupid people who dream of being rich. Its the same dumb ass libertarians who spout nonsense that only works in R.A.H. novel.

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