RE: Fair Tax: The Real Truth

I found another anti-FairTax blog post just rife with misconceptions and untruths that is just screaming for attention. You can read the whole blog at Redneck Democrat, but here are the highlights and my responses to each.

Neal Boortz, who has unilaterally brought the plan to some fame,  is retiring next year so the movement will likely die.  Just in case it doesn’t however, its worth explaining how it would really work, just in case someone like Mike Huckabee manage to revive this monstrousity(sic).

I guess the 70 State Representatives, 9 State Senators, 3 (recent) POTUS Candidates, and millions of grassroots Americans don’t matter. Well Neal (@Talkmaster), it’s on your shoulders now. If the #FairTax falls, it’s YOUR fault.

First off, The Fair Tax Puts All Americans On Welfare

1) The Fair Tax, although non-partisan, may be supported by some in the Tea Party, but was not created by nor is it considered “A Tea Party Bill”. Most “tea partiers” I know actually back a flat income tax (that is, until I convert them to the FairTax).

2) I think it would behoove the author to open up and understand that FairTax supporters are not all members of the Tea Party. The FairTax benefits ALL Americans regardless of party affiliation, age, race, color, creed, or wealth status. The only people the FairTax will ever be biased against are those who currently avoid or evade the current tax system; such as Illegal Immigrants, Corrupt Politicians, Drug Dealers, Prostitutes, and anyone else in the underground economy.

3) Let’s compare the FairTax prebate to something we all know and understand; the “Standard Deduction”. From Wikipedia:

The standard deduction, as defined under United States tax law, is a dollar amount that non-itemizers may subtract from their income and is based upon filing status. It is available to US citizens and resident aliens (for tax purposes) who are individuals, married persons, and heads of household and increases every year. It is not available to nonresident aliens residing in the United States.

The [prebate], as defined under [HR-25], is a dollar amount that [all legal US citizens] are eligible to receive at the beginning of each month and is [not] based upon filing status [nor income level]. It is available to US citizens and resident aliens (for tax purposes) who are individuals, married persons, and heads of household and [fluctuates] every year [based partially on the Department of Health & Human Servicespoverty guideline]. It is not available to nonresident aliens residing in the United States.

In other words, the prebate will merely replace the standard deduction and all other income tax deductions that are widely accepted now. One of the biggest selling points I’ve seen for Democrats is that the prebate will completely untax the impoverished, while ensuring that the middle, upper, rich, and wealthy are all taxed accordingly.

The Fair Tax is a massive Wealth Redistributionist plan

The FairTax is NOT a “redistribution of wealth”. The money being refunded each month is the money that each of us are expected to pay in taxes on the goods and services that we require in order to survive. In other words, our “necessities”. All the FairTax will be doing is giving each person their tax money so that we are not “out of pocket” on those necessities. Spend above the poverty level for your family size and you start paying taxes like the rest of America.

What the Fair Tax does is redistribute who pays and how much they pay.

I don’t think the author fully understands that because the FairTax broadens the tax base (to those mentioned earlier) that each person will now have a much smaller tax burden. What the FairTax (actually) does is ensures tax avoiders and evaders “pay their fair share”; THAT is how it “redistribute[s] who pays and how much they pay”.

And I don’t think the author understands that income taxes are only collected from people who file income tax returns. It fails to collect taxes from those who fail to file. And the cost of hunting those tax avoiders and evaders gets put on the shoulders of the honest tax payers to the tune of $430 Billion/year. In other words, we can look at the entire income tax system as the largest “Wealth Redistributionist plan” of all. The FairTax will fix and eliminate that.

FAIR TAX TEST CASE:

I’m sure you’ve all picked up on this, but the test case is seriously flawed; the most egregious mistake being the miscalculations on the earnings/prebate. Note to Author: The annual prebate for a married couple with 2 children is $6,767 (that’s $564/mo).

So, “Tom” earns $85,000/yr. and has managed to save $10,000 of it. Way to go Tom! Or not. Because of the 7.65% payroll tax that Tom had to pay, that left the family with $78,500. But since Tom saved $10,000, they actually only spent $68,500. So, under the income tax system, they only had $68,500 and the $10,000 that went into savings was 1) taxed daily and 2) most likely used to pay taxes on the entire $85,000 by April 15th.

But in FairTax terms, that means Tom and his family had a total of ($85,000 + $6,767) = $91,767 available to them.  And under the FairTax had Tom and his family only spent the $68,500, they would have saved $23,267. Or they could have spent an extra $13,267 on luxury items and still saved the $10,000. Interestingly enough, that would have allowed Tom to pay taxes on TWO new $25,000 cars and still not have touched the original $10,000 they intended on saving.

The Fair Tax doesn’t cut spending…

You may think that it doesn’t cut spending, but think about this: Where is some of the spending done in DC? Tax deductions, Politicians and Lobbyists, right? Well, the FairTax claims to eliminate nearly 50% of lobbyists. That means eliminating loopholes, dirty politicians, and income tax deductions. And ultimately that means what (?) you got it… LESS SPENDING.

I urge you (the author and everyone else) to look at the FairTax for what it is worth, not just what you see on the face of it. If you actually open the book, you may be quite surprised.

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I'm the grandson of an Underwood and have been mapping my Underwood Family Tree for a couple years now.

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Posted in Article, FairTax, FairTax Act of 2011, HR-25, Illegal Immigration
4 comments on “RE: Fair Tax: The Real Truth
  1. Redneck Dem here to defend my post. Looks like the biggest error you found was that Neal Boortz didn’t make the Fair Tax famous…. Wow, that’s hard hitting . Of course I didn’t say a bunch of Repo congressmen didn’t support it, I just said Boortz made it famous. And it will die with him. I said that in the first couple of paragraphs.

    Next you say by taking money that rich people pay (34% of their income currently) and lowering it to 23% (if they spend every dime they earn. Then you say that poor won’t pay taxes because of the prebate. Finally you say the Fair Tax is revenue neutral.

    So if rich pay less and the poor pay nothing, and you’re taking in the same amount of money, the middle class end up with the bag. Don’t fill me with that broader tax base crap. We both know illegals get fake ids and their bosses withold taxes to make sure they’re looking like they comply.

    I’m not trying to insult anybody, I briefly supported the Fair Tax. I know you’re trying to better your country and make things easy for business to thrive and lift the tax burden off people. I’m just afraid to inform you that the Fair Tax will not do either of these.

    • FairTaxer says:

      This is from Tom Stark (a friend on Facebook):
      First of all, RedneckDem, those who make more tend to spend more meaning under the Fair Tax they will pay more toward the upkeep of government because it is a consumption tax not an income tax. How much you make has nothiing to do with how much you pay except that those making less than the government poverty limit are reimburse the amount that they would pay on the first XXX dollars up to that limit. And they get it even if they never spend that much. So they could make money on the deal. This bill also adds many millions of people to the tax paying rolls because the tax is collected at the point of purchase and even if someone pays cash they pay the tax. Criminals pay, foreign tourists pay, illegal aliens pay, largely expanding the base of taxpayers. The one detrimental aspect of illegal status in the country under the Fair Tax is that you cannot qualify for the pre-bate so you pay the tax on every dime you spend. That, in itself, might be a further deterrent to illegal entry into the country. There are few truly rich people who pay 34% so your argument is a big red herring and cannot be given credibility by any thinking person.

    • FairTaxer says:

      I’m glad you took the initiative to register and post your rebuttal. We don’t need to be enemies or insult anyone. I’m not here to belittle you, I just want you to understand where I believe your faults in the FairTax are.

      So if rich pay less and the poor pay nothing, and you’re taking in the same amount of money, the middle class end up with the bag.

      Again, you’re ignoring the $19 Billion from Illegals, the $8 Billion from the Illegal Drug trade, the $7 Billion from prostitution/pornography, the $38 Billion from tourists, and the $345 Billion from the Underground/shadow economy. That is a total of $420 BILLION in Annual Tax Revenues that our Rich, Poor, and Middle-class will never have to pay out of pocket again. That means LOWER TAXES for ALL legal US citizens.

      We both know illegals get fake ids and their bosses withold taxes to make sure they’re looking like they comply.

      That is OUR point exactly. Under the FairTax it won’t matter because those illegals still have to purchase stuff to survive. THAT is where the FairTax hits them…not by “bosses withholding income taxes”.

      Something tells me you’re not understanding the concept of having EVERYONE pay their fair share. Good Luck!

  2. A little late to the rodeo, but I replied on this one (to one of Hank’s later posts even) … and this one seems to have stuck unlike the one I left on the latest blog post you’d found (I think I must have thought it posted but messed up the CAPTCHA up or something).

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