I ran across this editorial from a noted Democrat "journalist" which is filled with enough out and out lies to make me want to vomit. Its reposted below, my comments are in bold. <br> <br>------------------------------------------ <br> <br>Fair Tax, Flawed Tax <br>Does adding 30% to the price of every house sold sound like a good idea to you? <br> <br><b>Lie #1. The majority of houses sold are resales, not new developments. Sales tax only applies to new goods. Furthermore, the construction workers who build such houses, pay income taxes and their companies pay fees for accounting and tax management, which would now simply go away. To say "house prices would rise 30%" also neglects that your income taxes would *go away*. This article is off to a good start already.</b> <br> <br>BY BRUCE BARTLETT <br>Sunday, August 26, 2007 12:01 a.m. EDT <br> <br>Former Arkansas Gov. Mike Huckabee's unexpectedly strong second-place showing in the recent Iowa Republican straw poll is widely attributed to his support for the FairTax. <br> <br>For those who never heard about it, the FairTax is a national retail sales tax that would replace the entire current federal tax system. It was originally devised by the Church of Scientology in the early 1990s as a way to get rid of the Internal Revenue Service, with which the church was then at war (at the time the IRS refused to recognize it as a legitimate religion). The Scientologists' idea was that since almost all states have sales taxes, replacing federal taxes with the same sort of tax would allow them to collect the federal government's revenue and thereby get rid of their hated enemy, the IRS. <br> <br><b>Anyone who mentions the fair tax in disfavor has to bandy about the fact that the idea was original proposed by Scientologists. What exactly does that have to do with anything? The IRS is the "hated enemy" of many Americans.</b> <br> <br> <br>Rep. John Linder (R., Ga.) and Sen. Saxby Chambliss (R., Ga.) have introduced legislation (H.R. 25/S. 1025) to implement the FairTax. They assert that a rate of 23% would be sufficient to replace federal individual and corporate income taxes as well as payroll and estate taxes. Mr. Linder's Web site claims that U.S. gross domestic product will rise 10.5% the first year after enactment, exports will grow by 26%, and real investment spending will increase an astonishing 76%. <br> <br>In reality, the FairTax rate is not 23%. Messrs. Linder and Chambliss get this figure by calculating the tax as if it were already incorporated into the price of goods and services. (This is known as the tax-inclusive rate.) Calculating it the conventional way that every other (This is called the tax-exclusive rate.) <br> <br><b>That's the way our taxes are currently calculated. To calculate it another way would render the two *incomparable* by standard accounting principals. Its the same thing mathematically.</b> <br> <br>The distinction is confusing, but think of it this way. If a product costs $1 at retail, the FairTax adds 30%, for a total of $1.30. Since the 30-cent tax is 23% of $1.30, FairTax supporters say the rate is 23% rather than 30%. <br> <br>This is only the beginning of the deceptions in the FairTax. Under the Linder-Chambliss bill, the federal government would have to pay taxes to itself on all of its purchases of goods and services. Thus if the Defense Department buys a tank that now costs $1 million, the manufacturer would have to add the FairTax and send it to the Treasury Department. The tank would then cost the federal government $300,000 more than it does today, but its tax collection will also be $300,000 higher. <br> <br><b>And currently the government pays for accounting of its employees income taxes. And the goods they buy need to also account for such. And we spend 10 billion dollars a year on the IRS to collect those taxes. More bullshit from the bullshit machine.</b> <br> <br> <br> <br>This legerdemain is done solely to make revenues under the FairTax seem larger than they really are, so that its supporters can claim that it is revenue-neutral. But for the government to afford to purchase the same goods and services, it would have to raise spending by the amount of the tax it pays to itself. The FairTax rate, however, is not high enough to finance the higher spending it imposes. Therefore the proposal only works if federal purchases are cut by 30%, close to $300 billion--the increased cost imposed by the FairTax. <br>Similarly, state and local governments would have to pay the FairTax on most of their purchases. This means that it is partly financed by higher state and local taxes. It's also worth remembering that state sales taxes now average 6%, which means that the total tax rate will be 36% on retail sales. <br> <br><b>This is all moot because the state pays income taxes for all their employees already. More nonsense where Bartlett purposefully neglects to mention that income taxes go away and that income taxes are over 20% of middle class compensation.</b> <br> <br>State sales taxes have long exempted all but a few services because of the enormous difficulty in taxing intangibles. But the FairTax would apply to 100% of services, including medical care, thus increasing their cost by 30%. No state comes close to taxing services so broadly. <br> <br><b>And? This totally neglects the obvious fact that tax planning is a multi-billion dollar industry that would more or less vanish over night. The point is that you're effectively *charged the same amount of taxes*, only you have the option of how much you want to pay.</b> <br> <br>Consumers would also find themselves taxed on newly constructed homes. Imagine paying 30% to the federal government on top of the purchase price of your next house. <br> <br><b>Yay, he finally was honest about the housing question. Overdevelopment is part of the reason why our housing industry is so volatile. Developers over develop land and then are left with overstocked inventories that they can't push in a bear market. I see nothing but incredible benefits in terms of correcting urban sprawl and increasing homeowner value by making a disincentive for home starts.</b> <br> <br>Since sales taxes are regressive--taking more in percentage terms from the incomes of the poor and middle class than the rich--some provision is needed to prevent a vast increase in taxation on the nonwealthy. The FairTax does this by sending monthly checks to every household based on income. <br> <br><b>Our current income tax is more regressive than progressive. Whereas income to retained earnings is only loosely correlated, retained earnings to spending is very strongly correlated. By that I mean that thanks to huge disparities in cost of living, income is only loosely related to how much free spending money a person has and in reality, their spending money is based on what they have left after paying their rent/bill obligations. Further that means that this is primarily a more progressive tax than currently, because you have the option of *choosing* your effective tax rate through savings and investment.</b> <br> <br>Aside from the incredible complexity and intrusiveness of tracking every American's monthly income--and creating a de facto national welfare program--the FairTax does not include the cost of this rebate in the tax rate. As noted earlier, the FairTax is designed only to match current revenues and does not cover any increased spending that it may require. Since the rebate will cost at least $600 billion the first year, either federal discretionary spending would have to be cut by 60% or the rate would have to be five percentage points higher than advertised. <br> <br><b>I love how he feels the need to start every paragraph with a straw man argument - inventing some bullshit and passing it off as legitimate, then arguing why that's bad. The rebates would go to *everyone*. That's a fairly simple process compared to validating people's income taxes and hunting down people who misrepresent their deductions. The way he calculates that $600 billion, as a sidenote, is by ignoring the fact that lowest income wage earners don't pay income taxes now. So he purposefully distorts the figures so that they're incomparable then argues on that bad comparison. More proof that statistics are on the of the greatest evils when in the hands of someone who is deceptive.</b> <br> <br> <br> <br> <br> <br>Rejecting all the tricks of FairTax supporters and calculating the tax rate honestly--by including the higher spending that it mandates and by being realistic about what could actually be taxed--professional revenue estimators have always concluded that a national retail sales tax would have to be much, much higher than 23%. <br> <br><b>Here's he puts this out there as an "argument from authority" where he doesn't even cite the authority and we're supposed to take it for gospel.</b> <br> <br>A 2000 estimate by Congress's Joint Committee on Taxation found the tax-inclusive rate would have to be 36% and the tax-exclusive rate would be 57%. In 2005, the U.S. Treasury Department calculated that a tax-exclusive rate of 34% would be needed just to replace the income tax, leaving the payroll tax in place. But if evasion were high then the rate might have to rise to 49%. If the FairTax were only able to cover the limited sales tax base of a typical state, then a rate of 64% would be required (89% with high evasion). <br> <br><b>No citations for these.</b> <br> <br>I've emphasized problems with the FairTax rate because public opinion polls have long shown that support for flat-rate tax reforms is extremely sensitive to the proposed rate, with support dropping off sharply at a rate higher than 23%. But there are also massive technical and administrative problems with collecting all federal taxes at the checkout counter and relying entirely on state governments to collect the federal government's revenue. <br> <br><b>This is patently untrue. No matter which way you try to spin it, collecting taxes at the counter is how sales tax for states work and its *much more cost effective than income tax*. By any measure of honesty he's just flat out lying here.</b> <br> <br>Among the problems: What possible incentive would the states have to be vigorous in their federal tax collections? What is to stop them from slacking off and giving their citizens a tax cut at federal expense? What about states with no sales taxes? What's to stop people from bypassing retail outlets and buying their goods from producers or at wholesale, tax-free? <br> <br><b>Give me a break. The states are going to hide money from the feds? What kind of nonsense is that? What's to stop people from opening off-shore accounts and deferring their taxes so that their effective tax rate is *negative*? Nothing, that's why its done now and costs billions of dollars per year. That's what Congress is crying about with their attack on hedge funds but the obvious fact is that when you have a huge income tax burden any wealthy person with half a brain will just open an off-shore account that is immune to income taxes.</b> <br> <br>Perhaps the biggest deception in the FairTax, however, is its promise to relieve individuals from having to file income tax returns, keep extensive financial records and potentially suffer audits. Judging by the emphasis FairTax supporters place on the idea of making April 15 just another day, this seems to be a major selling point for their proposal. <br> <br>Yet all but six states now have state income taxes. So unless one lives in one of those states, this promise is an empty one indeed. In short, the FairTax is too good to be true, and voters should not take seriously any candidate who supports it. <br> <br><b>Obviously the states would see it as smarter to remove their income tax once the federal income tax goes away. Its easy for them to piggy-back on federal income taxes right now, it'd make little sense otherwise.</b> <br> <br>Mr. Bartlett was deputy assistant secretary of the Treasury for economic policy from 1988 to 1993. <br> <br><b>And a big fat liar.</b> <br> <br>