Footnote 19

If you’re here in search of information on “Footnote 19”, you’ve probably run into the infamous Mark D. Curran (aka TruthSeeker, FilmCriticOne, Truth, BullShipDetector, Mark Douglas, Mark Curran, Mark Douglas Curran, Mark D, Seeker, Math Matters, 12FlyMe, ItchMyFoot – and many other aliases that we haven’t picked up on yet).

You can find the document Mark is referencing here: A COMPARISON OF THE FAIRTAX BASE AND RATE WITH OTHER NATIONAL TAX REFORM PROPOSALS. I encourage you to read it in its entirety when you have spare time. It is a study that compares the Base and Rate of the FairTax to the flat tax plan, the BTT, and our current tax system.

A major point to note is that this information is coming FROM A STUDY, NOT FROM THE FairTax Act itself. What you are reading does not mean that it will be enacted as written.

Footnote 19 reads:

The FairTax adopts a pre-payment approach to taxing government investment since much of the consumption generated by government investment would otherwise never be taxed.

And is lead in by:

B. The FairTax Base
H.R. 25 calls for a tax on “all consumption of goods and services in the United States.” That consists, for the most part, of what the NIPA defines as “personal consumption expenditures” and “government consumption expenditures and investment.”[19]

Our (unconfirmed) analysis of the term “pre-payment” is that it means “paying the tax when the purchase is made versus paying it at the end of the month“. We do not believe that the authors of the above noted study inferred, in any way, that the State or Government agencies would have to relinquish funds that a) they do not have yet, and b) cannot feasibly estimate.

19 comments on “Footnote 19
  1. Well, speak of the devil! There he is now.

    Mark,

    These numbers you keep spewing are – in your own words, “bat shit crazy” because you’re wrong about them. ALL of them. There is absolutely NO possible way that any entity would have to pay out money that they do not have. That is a ridiculous assumption. Maybe you would be better off reading the actual bill instead of some hypothetical study.

    And you keep talking about how “military wages are taxed”, but that is total B.S. The first thing you have to remember is that the FairTax does not tax income whatsoever. None. ZERO TAX on Income. EVEN on our military. Again, the FairTax DOES NOT tax income. How can you not understand this rudimentary concept?

    Directly from H.R. 25:

    ‘SECTION 2. DEFINITIONS.
    ‘(17) WAGES AND SALARY- The terms ‘wage’ and ‘salary’ mean all compensation paid for employment service including cash compensation, employee benefits, disability insurance, or wage replacement insurance payments, unemployment compensation insurance, workers’ compensation insurance, and the fair market value of any other consideration paid by an employer to an employee in consideration for employment services rendered.

    Do you know WHY they define those incomes, Mark? So that they can UNTAX them efficiently. And FYI, Mark, the services of our U.S. Military personnel clearly fall within that definition.

    Please don’t act like you understand our military, when you clearly don’t, Mark. Under our current system, Combat Pay is tax free. BUT! – and I spent 8 years in the Navy (in combat zones twice), so I know this well – combat pay is still calculated into the amount deducted for your FICA taxes. So, yes, technically, the military member is still “taxed” on combat pay, it’s just not a direct tax.

    I’d say this is a pretty clear definition of “investments”, Mark:

    “‘(c) Investment Purposes- For purposes of this section, the term ‘purchased for an investment purpose’ means property purchased exclusively for purposes of appreciation or the production of income but not entailing more than minor personal efforts.”

    And just a note to everyone else reading this. Even if Mark had the $50,000 to put up against his “bet”, all he’s doing is fishing for people to yell at and call “idiot”, or “f**king moron”, or whatever new word he learned that day. Best to just not even entertain him on that level.

  2. Will Manning says:

    Hey Mark,

    I want to thank you again for helping me win my $100 bet. My friend said you couldn’t be stupid enough to continue calling someone “dumfuq” after the terms of the wager had been told to you.

    How about doing my friend a favor, give him something that he can go double or nothing on.

  3. kicker51 says:

    So let me get this straight, I have an income, where from doesn’t matter. I spend some of my income on purchases, up to the poverty level, and pay taxes on those purchases. I also make purchases of goods and services above the poverty level and pay taxes on those.

    The FairTax says the government will not collect taxes on purchases below the poverty level, and refunds those monies collected on purchases up to that level, keeping the rest.

    But now, according to you, those monies I surrendered to the government, which the government says were “collected in error”, and returned to me, are now an entitlement.

    I pay money, I get money back…. doesn’t sound like an entitlement to me. Seems more like a refund.

    If you want to argue that spending below the poverty level is “optional”, and folks either choose not to, or can’t, spend at that level, then you may have a point. But my counter-argument would be that we should then drop the poverty level since it is not supporting a sustenance level of existence, but, instead, financing a higher lifestyle.

    The FairTax is designed to make sure folks take care of themselves first, and then render onto government monies as part of their “luxury” purchases. It is not an entitlement. It is a fundamental human right to provide for ourselves and our families first. Anything else, and we are nothing but chattel, working for the government, owned by the government, and controlled by the government. Just like now, under the income tax you so strongly defend.

  4. Here is also where YOU are wrong, my ‘friend’. Military personnel wages are NOT taxed, as you assume they are. This is taken directly from FairTax.org:

    How will the FairTax affect military personnel?

    Under the FairTax, the purchase of goods at military exchanges and commissaries by consumers is taxable because the FairTax is a federal sales tax. The FairTax repeals the entire federal income tax and payroll tax system so military personnel would no longer have to pay tax on benefits of any kind and they would get their whole paycheck (no income tax withholding or payroll tax deductions would be taken out). Combat pay, for example, is not subject to the income tax but the soldier does have to pay Social Security and Medicare payroll taxes on these earnings. He/she may also have to pay taxes on retirement benefits/pensions. Under the FairTax all income, from any source whatsoever, is not subject to federal income taxes or payroll taxes.

    So, Hank, now you know. But I have to ask, will you continue to (disingenuously) claim that the wages of our Military personnel are taxed? Or are you good with this?

  5. kicker51 says:

    Once again, it looks like Hank is trying to bend the FairTax to fit a model of his own making. While it is true that governments are considered “taxable employers”, Hank has “conveniently” chosen to leave out a significant exclusion from the definition of (taxable) service, specifically, 14(B)(ii), which reads

    (and) ‘‘(ii) shall not include any service performed by an employee for which the employee is paid wages or a salary—
    (I) by an employer in the regular course of the employer’s trade or business,

    So, what we have here is a clear example of someone attempting to misrepresent the FairTax for his own purposes.

    The FairTax imposes taxes on government services for a reason, to prevent unfair competition between government and private industry in the provision of those services. For example the collection of garbage, which can be performed by private industry, or by government. The FairTax ensures government does not have an unfair advantage when supplying those services.

    But the military is an obvious example of where private competition doesn’t exist. And military personnel are not providing any service to the public except in times of war. The rest of their time is spent in training and preparation, which is “the regular course of the employer’s trade or business”.

    Give it up Hank. The writers of the FairTax were much smarter than you think, and have constructed a system of taxation designed to be simple, fair and efficient. You can try and twist their words to your own ends, but it just isn’t going to work.

  6. kicker51 says:

    How could you possibly think that not taxing government services would result in “cheaper” government. It simply shifts it from one pocket to another. In case you hadn’t noticed, since the FairTax is revenue neutral, if government doesn’t pay “their fair share”, then it’s going to be made up by higher taxes on the public. How stupid would we be to give ourselves higher taxes, drive our own companies out of business, and promote a stronger, larger, less accountable, central government? Haven’t we already seen where that ends up.

    As to your other post, please define the service provided by the military, and to whom is it provided?

    • kicker51 says:

      While I certainly respect your service to our Nation, I refuse to allow you to use it as a means of avoiding the issue. Under the FairTax, if I sell a product to and end user, it’s a taxable transaction. If I sell the same product to another business, to be used in the execution of their business, then it is not taxable. My question is both relevant and central to the military issue.

      And yes, while people are the only ones who pay taxes, we don’t want to allow governments, of any level, to exercise an unfair advantage over “people” in the provision of goods and services. You want government to be untaxed so as to lower the costs of the services they provide. I want them to be just as high as the private company working to provide those same services. And given a choice, I’ll go private every time, helping to shrink the scope and reach of government, and forcing efficiency because governments would no longer have an exclusive right to control those services, or a cost advantage by which to supply them.

      And showing the true cost of government is EXACTLY what I am doing, while your proposal allows government to shove off the tax component of those services to the private sector. Under the FairTax, the provision of services will have exactly the same costs, government or private, given similar efficiencies, size, ect. Under your proposal, you’ve given government a decided advantage, and helped put more private companies out of business, put more workers out of a job, and increased other costs of government. Which makes the bureaucrats, social engineers, and self-styled elitists happy.

      I fail to see why you’re working against the FairTax in order to help those who would destroy the American promise, restrict or remove our liberties (the very ones you may have fought to protect), and turn our great Nation into another Euro-nanny state.

    • // I estimate that 10% to 15% of the federal revenue will be hidden in higher S/L taxes. //

      YOU estimate, Hank? Please show credentials that say you are an expert on estimating State/Local revenues. As I’ve shown, part of $22M in research has proven just the opposite would happen. I’d like to see how you have come up with better (and contradictory) numbers than they have.

      // I “served” our country for 20 years, and would respectfully suggest you need to back off this nonsense. //

      I only served our country for 8 years. In your eyes, Hank, does that make me less of a servant than you? There are millions of people who serve our great nation each year, yet you keep throwing up this military card like it trumps everything else. There is no – and has never been – any question about your service or any other military personnel’s service, but when you start twisting the definition of “(B) SERVICE” to meet your individual qualifications, there is something wrong, Hank.

      You need to rethink your strategy and stop pretending to be the ultimate resource for the FairTax. Accept the fact that we will not agree with you and leave it at that. If this were YOUR website, then I would do that. It is your turn to step down, not ours.

  7. kicker51 says:

    Anyone who uses the Bush Tax Commission as a source of information on the FairTax obviously doesn’t recognize the purpose of the Commission. They worked very hard to undermine the FairTax, and their “redefinition” was just one example.

    As to the prebate increasing my gross income, I start with $100. I spend $100, of which $23 is taxes. I get a check from the government for $23. I now have $23 plus the goods I purchases with an untaxed value of $77. Seems to be my gross income is the same. (Or does $23 and $77 not equal $100 by your math?)

    • kicker51 says:

      So, using your logic, you have your gross pay for the year, then, all of a sudden, your income tax refund shows up. Suddenly, your gross income increases…. and we have a new entitlement.

      Obviously, if one is a refund, so is the other.

    • // “I’m not going to waste time defending the Bush Commission work” //

      Hank, that’s ALL you’ve been doing. You’ve wasted so much time defending it that I’m beginning to think you were on that panel.

  8. // Wow! I foolishly thought we were coming together on some Fairtax facts I presented //

    Yeah, I guess so. I don’t know what would have given you that idea. None of the so-called “facts” of yours have even made sense. You take HR-25 wording out of context and expect it to be a “fact”. Then when we put it back into context, you don’t believe it and claim we’re “drinking the kool-aid”. Sorry, Hank, that’s not going to work here.

  9. Sorry, Hank. There comes a point where a man just has to give in and just say to himself “No matter what I say, he just won’t get it”, and then move on.

    I encourage future comments of yours, and I will answer and refute them to the best of my ability and within reason, but will not “entertain” them or you to the point that it detracts from other work I have.

    Thank you.

  10. I’m sorry, Hank, I assumed that with your experience you could cross-reference information: https://fairtaxer.wordpress.com/2011/07/13/re-six-reasons-why-the-fairtax-is-a-really-bad-idea/#comment-192

    And since I didn’t provide an actual link to the study, here is that too: http://www.beaconhill.org/FairTax2007/FiscalFederalismNatFairtTaxStatesBHI-071025.pdf

    • Hank, maybe you aren’t aware of this, but 45 States already impose sales and use taxes on retail sales. For those 45 states it would be fairly simple (no, I’m not saying it would be a cake-walk) to convert to the FairTax system. The other 5 might be a little difficult, but they can start out as Administering State and let one of the other states handle their remittances.

      You keep talking about how “all services can’t be taxed”, well, I will agree with you on one condition – that you’re including services which are not performed by a legal business; such as a person who does roofing as a side job, but does not have a registered business.

      I’m sorry, but the state will have no problems collecting taxes from legal (registered) businesses who provide services such as AC/Heating repair services, plumbing services, or the like.

      Those minor side services won’t make one iota of a difference, because the money they make from those side jobs will go towards purchasing new goods that include the FairTax.

      Sorry, running late, more later…

      • kicker51 says:

        Good points, and remember, if a business isn’t registered, then it doesn’t have an ID number, so it can’t buy it’s raw materials “tax free”, therefore the price it charges to “do a job” will likely be higher. In other words, the FairTax encourages honesty and legality. Something that certainly can’t be said for the current system!!

      • Hank, once again you’re ignoring the Prebate. If you would just stop ignoring the Prebate, this whole “avoidance” or “tax-evasion” argument of yours would be meaningless. Yes, I know you feel that it is “welfare”, Hank, but you yourself admitted that you would take it if offered. So, even though your receipts will show 23% (or 30% if you choose to calculate it yourself), with the prebate you already received at the beginning of the month, your effective tax rate has already been reduced.

        So, let’s assume you kept all your receipts for the year and add them up. Your total spent comes to $36,000 on everything (rent/mortgage, utilities, groceries, vehicle payment, fuel, and whatever else you want) over the year. Out of the money you spent throughout the year, 23% went to paying the FairTax (because THAT is how much the govt will take – not 30%). So that’s $8,280 to FairTax. The Prebate will give you and your wife $417/mo (or $5,009/yr). Out of the $36,000 you spent, you have already received $5,009 to cover the taxes on your necessities. So #1, you’ve really only spent $30,991 and #2, because you were reimbursed $5,009 of the $8,280 you paid out in taxes, your effective taxes paid come to $3,271. $3,271 is 9.1% of your original $36,000.

        Simplified it looks like this:
        1. Spent: $36,000
        2. Taxes: $8,280
        3. Prebate: $5,009
        4. Eff. Taxes (2-3): $3,271
        5. Eff. Tax Rate (4/1): 9.1%

        So, “As Alan Tait, a leading expert on sales taxation around the world has stated, at 5 percent, the incentive to evade tax is probably not worth the penalties of prosecution; at 10%, evasion is more attractive”. This tells me that your exaggeration of the 30% is an absurd tactic to try and scare people into believing there will be more avoidance than there actually will be. You seem to be intentionally ignoring facts that would otherwise play a pivotal role in their decision making. That, Hank, to me is impure.

      • 2nd point: Enforcement. There are some 22,000,000 registered businesses in the US already. The government knows exactly how many businesses are registered every year and they have known this every year for the past 50 years (at least). Do you not think they would be able to figure out that, if there is a sharp increase in business registrations immediately before or after the FairTax is imposed, there is some additional fraud going on somewhere? And do you not think they would immediately start auditing those brand new businesses to ensure that they are in fact legitimate businesses? I mean, would that not make sense to you? It certainly makes sense to me.

        Additionally, if businesses are required to report their earnings on a monthly basis (as they are under the FairTax). Do you really and truly believe that people like you or me would go to lengths of reporting and remitting their taxes on a monthly basis – JUST so they can avoid paying 5-10%? I hardly think so; because as a business, they would have to turn over 23% of their “business” earnings or risk losing their business license. Hank, I don’t know about you, but I have a hard enough time filing taxes annually; and when I owned a business, I certainly didn’t want to file them quarterly. Monthly is completely out of the question for me and I’m certain of that for the majority of Americans. Leave that to someone who gets paid to do it.

        As for “the weakest link”. If they are currently the weakest link, then how will the FairTax change that (positively or negatively)? Under the current system, (A) retail businesses are forced to file lengthy forms; and (B) spend millions of dollars complying with current laws. Reducing or relieving businesses of both (A) and (B) will allow them to more easily focus on one primary question: How much taxable income did you have this month? A: $1,023,978. Calculate the FairTax at 23%, send us $235,514.94, and you’re done!

  11. Ya know Hank, it baffles me that you’ve been attacking the FairTax for 6+ years and you still (intentionally?) fail to understand that regardless of whether you say it is 30% exclusive or I say it is 23% inclusive, the amount is exactly the same. So why even try to argue the point? Does it make you feel like a big man to say “they’re lying to you”, even though you know that it really doesn’t matter? Another impurity in your actions, Hank. And yes, excluding a fact is lying by omission and is considered impure (as well as extremely biased) – even if you are telling the truth about other portions.

    For anyone else that has actually made it this far into the conversation, Hank likes to throw out these “detractors” that mean absolutely nothing to the FairTax. Like this 30% load that he wants everyone to believe. Here, this will explain it much easier than I can:

    I know the FairTax rate is 23 percent when compared to current income taxes. What will the rate of the sales tax be at the retail counter?

    Hank, I think this conversation is over. Thank you!

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