Talk:FairTax/Archive

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(10-June-05) The GOP has their own website

Can they put it there instead of wasting wiki-space?

It's a real proposal, with a real following, proposing massive, radical changes to the tax system. It can be made encyclopedic if there are enough editors around. However, since there are 600k activists pushing this issue, I don't think this article will ever lose the NPOV tag since the anonymous editors who hit this daily don't seem at all concerned with NPOV or neutral tone of voice. --Unfocused 14:30, 10 Jun 2005 (UTC)

(12-June-05) Proposal to Rename

I'd like to rename this to something like "United States Fair Tax Movement". We need to identify that this is a movement in a specific country. Labeling it a movement also removes a lot of POV issues- since a movement is free to define its own name, we don't have to delve into whether or not it's a fair proposal. Any objections? Feco 21:04, 25 May 2005 (UTC)

Also, I'm pretty sure CamelCase is a no-no for article names in wiki. Feco 21:05, 25 May 2005 (UTC)
CamelCase is fine for articles that are properly named by CamelCase. It's a no-no for new articles where the [[bracket syntax]] better expresses the idea that is being written about. Since this article is about a very specific piece of legislation, I would only support a move to the more formal name; however, I prefer the common name as the article title, and the formal congressional name as a redirect, since average readers will look for the common name. --Unfocused 00:52, 26 May 2005 (UTC)

I disagree with renaming this piece. Wikipedia is an encyclopedia, which means that an entry under a name should simply describe and define that name. FairTax is the actual name of an authentic grass roots tax movement in the US, lead by Americans for Fair Taxation and 600,000+ American taxpayers.

The description of FairTax is not entirely correct. The article says, for example, "It is essentially a national sales tax that includes a fixed monthly exemption." That is incorrect. There are no exemptions in the FairTax proposal. FairTax provides a monthly rebate to assure that no one pays tax up to the poverty level, but it is a rebate, not an exemption.

Also, the most important thing about FairTax is that it repeals the present income tax system. It is a consumption tax that assures that everyone, even tax evaders (who, according to the IRS, costs the US $350 BILLION a year -- and every individual taxpayer an extra $2,000 annually), illegal immigrants, drug and porn dealers and 40 million foreign tourists a year would pay into the system.

Yes, the article needs to be totally rewritten because it does not properly describe the FairTax.

An article in an encyclopedia, however, is supposed to be an accurate description of what the subject is. The piece on FairTax is not an accurate description of the proposal.AmericanWriter

The FairTax proposal is simply a national sales tax with a monthly exemption. The part of the proposal that exempts spending up to the national poverty level by "prebate" is an exemption, and nothing more. Beyond that, it is a sales tax. It's dressed up in fancy language by its supporters, but the fact remains, it's a tax on sales, otherwise, if it were a true consumption tax, it would be applied to every tree harvested from national forests by agribusiness, every barrel of oil extracted from the ground, and every resource consumed, not just retail sales. This is a sales tax proposal.
An article in an encyclopedia looks at both the good parts and the bad parts of every subject. The legislation itself is the description of what is proposed. An encyclopedia article explains the significance of the subject, including the advantages and drawbacks. Encyclopedia articles are not one sided propaganda pieces.
If you believe the description is inaccurate, then correct it. But the counterpoints and the opposing view description of the proposal belongs there just as much as the proponent view, so please take care not to push a single, supportive POV on an article that is clearly a radical proposal. Unfocused 03:34, 7 Jun 2005 (UTC)

Hey, this talk of taxing tourists and illegal aliens ... couldn't help thinking of something that someone once said... hmmm, what was it?... "no taxation without representation". Anyone for tea? Grace Note 01:40, 9 Jun 2005 (UTC)

AmericanWriter- I agree with the idea of renaming to something like "FairTax Movement" or "Unites States FairTax Act." I believe the latter is the official legislative name of the H and S bills. If you believe there are factual inaccuracies, then make the corrections. If you plan to make wholesale changes, it's probably better to propose them on the talk page first. Feco 08:30, 12 Jun 2005 (UTC)

(23-June-05) Non-neutral Point-of-View

This really needs well-written arguments in opposition to the FairTax. Pakaran 13:13, 16 May 2005 (UTC)

I agree with the above. Also directing National sales tax here to this FairTax article is POV. Either there needs to be a separate article about various national sales tax proposals or the article should be renamed National sales tax and have the contents of this article merge with content discussing national sales tax proposals in general with pro and con arguments included. --68.167.204.62 14:13, 19 May 2005 (UTC)
Editors should be aware that Fair Tax America, an apparently popular blog supporting the FairTax, is linking to this article from their front page. There may be an influx of biased editors, some of whom may not understand our policies. Pakaran 17:07, 19 May 2005 (UTC)
Agree with above, linking national sales tax (which is usually called "national retail sales tax", or NRST) is extremely biased.

This article needs a lot of work. Besides being incomplete, portions are very biased (especially the third paragraph under "Proposed changes to the tax system", and most of the references are biased editorials--not exactly a good, impartial source of data. Bkhouser 13:51, 26 May 2005 (UTC)

Please suggest alternatives. The Brookings Institute is an independent policy think tank, with better credentials than the average editorial whether you agree with them or not. A proposed piece of legislation isn't going to get much better sources than:
  1. The bill itself.
  2. The view and analysis from the supporters.
  3. The view and analysis from the opposition.
In this situation, individual paragraphs will always be biased, but can be improved. Both sides of this specific issue will always seem extreme, because the scale and scope of the changes proposed are extreme. For example, the first paragraph of each of the first four sections also contains a clear pro-FairTax bias. Even the common name adopted by the bill's authors is a POV issue.
I don't see any way to completely eliminate bias. The only thing I can do is record, as accurately as possible, the changes proposed, and the expected results from supporters and the opposition, with rebuttals from each, where available. If the supporters expect the only result of a bill would be to turn the sky a pleasant hue of green, yet the opposition expects a rain of fire, rivers of blood, plague, pestilence, a thousand years of war, and the four horsemen of the apocolypse to come riding down from the sky, then the nearest to fair treatment is to report all of the plausible results from both sides, with the best rebuttals of the same, leaving out straw man arguments from both sides.
Unfortunately, there are about four or five additional sections to add regarding the expected negative effects of this proposal, so I expect you'll find the article even more biased then. But I'll also post rebuttals I find.
If you find the third paragraph of the "Proposed changes to the tax system" section biased, then I think the action to take is to cite the plausible rebuttals of the FairTax supporters. --Unfocused 15:16, 26 May 2005 (UTC)
I agree that probably the best we can do is to provide both sides of each issue however biased they may be. We need to strive to find a counter argument for each point to get all the points of view. Things started out pretty well, I thought, because the tone tended to be "proponents say this" followed by "critics say this". But the third paragraph of the "Proposed changes" section bothered me because it was stated as simple fact when in fact, it isn't necessarily. While the Brookings Institute may generally be a respectable source of opinion, William Gale provided no supporting calculations or statistics to back up his claim about how regressive the FairTax is. Bkhouser 19:47, 26 May 2005 (UTC)

What part do you dispute is not simple fact, the progressive/regressive tax portion, or the direct quote from William Gale? The first portion is simple fact, and the direct quote is just that, a direct quote. Perhaps breaking them into two paragraphs? However, the Gale quote is about how a switch from a progressive tax system to a regressive tax system would shift the balance of taxation, so it sort of belongs where it is.

I'm not sure what you have in mind. I don't think a point by point "he said/she said" is necessarily more fair than a full review of the viewpoint of each side, regardless of whether one ends up larger than the other.

Please , I encourage you to make some edits and we'll work it out. --Unfocused 00:15, 27 May 2005 (UTC)

I don't understand how this article is bias in favor of the fairtax, to me it seems to be a very critical and extreamly confusing. At one point it says Underground industries are estimade to be worth 1 trillion dollars and then in later paragraphs is says the fairtax will drive buisness underground and create a vast black market. Someone either didn't read the first part or ignored it because you can not create something that already exists. Anyway the fairtax will be audited as much as the current tax so yes there will still be a black market but it will probably not be any larger or smaller than the present one.

There is also a lot of ninny gagging about why the tax is inclusive instead of exclusive, the reason is simple it is supposed to replace and inclusive tax (income taxes) so it is inclusive. If you stated your income taxes exclusively you would be paying a much larger precentage but you would still be paying the same amount of money. It is a very moot point.

In my opinion the only idea better than the fairtax is no eliminate federal tax period, this government has so much money they don't know what to do with it. They take my money from me under penalty of the law and then they give it of Africa and other diverse charities. I will choose the charities that I want to give to. Anyway I am off topic, this article is filled with William Gale supports and William Gales only real criticism of the fairtax is that too many people like it. He is a fop who uses big words to try and confuse people and direct the ignorant masses to his line of thinking. Some of you peole should visit fairtax.org it has an answer for every criticism made by the opponents of the fairtax.

NPOV dispute tag has been on here for a while now. Are there still specific complaints? The article still needs improvement but there don't seem to be many blanket value judgments. Should we remove the tag? Rhobite 05:35, Jun 15, 2005 (UTC)

It's my opinion that any article on a current political proposal, unless simply the wording of the bill itself, is almost by definition under POV dispute at all times. The NPOV tag is there not necessarily to ask for more changes to the article, but mostly as a warning to readers to say "here are strong opposing opinions, and it's up to you to decide if this is a fair representation or not." --Unfocused 20:41, 23 Jun 2005 (UTC)

(17-June-05)Don't know very much...

Your discussion shows that you people don't know very much about the FairTax. It is a proposal developed over 10 years by economists from Harvard, MIT, Stanford, Rice and other top-flight institutions. It is a bi-partisan proposal designed to provide a progressive tax structure that REPLACES the current income tax, social security taxes, corporate taxes, etc. It funds the government at current levels. Everyone is taxed the same, and everyone receives a monthly rebate so that no one pays tax on necessities up to the poverty level, and everyone pays essentially the same for goods and services that they do now.

The FairTax would make the USA the only country in the world that doesn't tax production, thus bringing back "outsourced" jobs and pulling foreign companies to do business in America.

With 100% of their paychecks or pension checks to spend, save and invest, the American taxpayer will be free to use his money as he sees fit; and without the IRS hanging over them, churches and charities would be forever free from the threat of losing their tax exempt status.

An encyclopedia entry should simply define the term. It doesn't include argument for or against an issue -- that is for comment sections, etc. [[User talk:AmericanWriter| 4 June 2005 (UTC)

I've researched this myself, and your hostile, superior attitude isn't going to win you any friends. My degrees are in Finance, Management, and Economics, so don't assume you're speaking to the uneducated.
Your bias is self-evident in your claim that this is a bi-partisan proposal. This issue has support ONLY from Republicans. How is that "bi-partisan"?


  • This is not true - There is some democratic support. Collin Paterson (Congress) and Zell Miller (Senate) both Co-Sponsored past bills. There are many others that have said they would vote for it if it got to the floor or just find it an interesting proposal and would like to see more research. I think both parties agree that our current system is not acceptable. It is a big stand for a politician to make on such a radical bill. I've also seen both sides against it. I would agree that republicans support it in much larger numbers but to say it only has support from republicans is untrue. Morphh 00:18, 14 Jun 2005 (UTC)
  • Unless we have cosponsorship, or a vote, or a the very least, a statement "on the record" in support of this specific bill, a politician can say anything and mean nothing. We should restrict ourselves to verifiable support. --Unfocused 16:17, 17 Jun 2005 (UTC)
Fixed rate sales taxes are ALWAYS regressive. There is no getting around that. It's built into the definition of regressive. A limited exemption for everyone, regardless of whether by "prebate", rebate, or an immediate exemption at the point of sale, only makes the exempt portion of the tax neither regressive nor progressive because it applies equally to everyone. The balance of the fixed sales tax is ALWAYS regressive. These are indisputable facts.
This is NOT a progressive taxation proposal. It is a regressive tax proposal. By definition, all forms of fixed rate sales taxes are regressive. Progressive taxation by definition, requires the wealthier taxpayers to pay more as a percent of their income. This proposal does not tax progressively.
You have a fundamental misunderstanding about what an encyclopedia is. A DICTIONARY is for definitions, an encyclopedia examines articles in total, with differing views where appropriate for full understanding. Encyclopedias are not for one-sided propaganda pieces. Unfocused 03:57, 7 Jun 2005 (UTC)
Did you miss the part about the automatic rebates? Individuals buying final consumer goods at the poverty level pay a net zero percent of their income in taxes. Individuals spending at twice the poverty level pay about 12%, and individuals spending at many times the poverty level pay nearly 23%. Individuals spending less than the poverty level actually pay negative taxes, as a percent of their income. That's the very definition of progressivity. Scott Ritchie 07:46, 9 Jun 2005 (UTC)

First, a minor point; they're not rebates, since they're paid whether any spending occurs or not. They're entitlements, subsidies, or stipends.

Second, an entitlement paid to reduce a flat tax's burden does not create a progressive tax. It creates a progressive effective tax rate, but since the actual tax rate does not go up as the taxed behavior goes up, the tax itself is not progressive. The overall effect of this entire policy may be progressive, but to claim a flat tax with a subsidy is progressive is a misnomer, as the tax rate itself remains fixed.

Further, "on spending" is not how progressive and regressive have been used in tax policy because there hasn't been a truly progressive sales tax that I'm aware of.

I do see what you're saying, and I definitely was overly rigid in assertion. I think I overreacted to the claim that "you people don't know very much" above. My apologies.

Since this use of "progressive taxation" has not been the common use, I suggest that any use of progressive/regressive in this article should probably include whether it's truly progressive (rates change) or effectively progressive (effective rates change), and on what economic activity such progressivity acts on, since uses other than "progressive on income" are not the normal use, and that is what people automatically mentally compare to when progressive taxation is mentioned. There should be clarifying comments since this is not typically how "progressive" has been used in past tax policy.

Progressivity implies that the rate changes as the taxed behavior changes. This proposal does not change the rates at all. To claim that it's a progressive tax policy without further explanation is a gross oversimplification, and may be a little deceptive, in my opinion. Unfocused 13:26, 9 Jun 2005 (UTC)

(13-June-05) 6/7 work on 'Black Markets' & 'Tax Code Compliance' section

  1. I changed the name of the section from 'Black Markets' to 'Tax Code Compliance'. There are relevant pros/cons to the proposal regarding compliance that don't fit the black market label. This was clearly the section to put those facts in, thus the name change.
  2. I clarified the compare/contrast details on a VAT vs. sales tax. A lot of the content was pretty much a copy/paste from about.com. The terminology was also fairly ambiguous for anyone with a finance/economics background. I tried to clean up the terminology while maintaining accessibility for the layman reader.
  3. I used indirect sourcing for the IMF and IRS facts. I've heard both of those factoids thrown around for quite a while... I found confirmation in an Economist article. It's subscribers only, but the title is "The case for flat taxes" from 4/14/05 if anyone feels the need to go to a library for a hard copy to verify. I didn't want to add a URL footnote to a page that will just say "subscribers only".
  4. I also added a disclaimer about who bears the actual cost of a VAT or a sales tax. In either case, it's not necessarily all the consumer or all the producer. That depends on the economic characteristics of the market. Who writes the check for the tax amount is not necessarily the same entity as who actually feels the effect of the tax.

Feco 02:35, 8 Jun 2005 (UTC)

If you can, please post your reference to the paper version of the Economist article. Not all references need to be online. Obviously online references are easier to double check, but these aren't necessarily contentious facts, just facts that should be referenced. --Unfocused 15:41, 8 Jun 2005 (UTC)
NB- an un-linked reference to the Economist article (w/ title & publication date) is now footnoted Feco 17:00, 13 Jun 2005 (UTC)

The effects on retailers discussion doesnt address the potential for a booming under ground services economy, such as already exists in the labor market were workers are paid under the table in the contracting trades. Unscrupulous contratoers, who already may be paying workers higher wages but contributing nothing to work comp funds, unemployment and social security accounts, can raise still be competititve with compliant businesses and still rake off the fed tax. Nobs01 17:40, 11 Jun 2005 (UTC)

Personally, I expect that just as they don't collect and pay payroll taxes now, they won't collect and pay FairTax if the system is ever changed. --Unfocused 18:31, 11 Jun 2005 (UTC)


(22-June-05) Marginal analysis in 'Tax Rate' section

I re-added the graf on marginal analysis, with a new disclaimer that such analysis is back-of-the-envelope. It ignores all of the details (eg, EITC and rebates), but this form of analysis is important enough to be included. It's pretty standard, especially for cross-country comparisons. Feco 02:50, 8 Jun 2005 (UTC)

The closing paragraph leaves an unequal comparison. It quotes an average income tax rate of 14.23%, also states a payroll tax rate of 7.65%, but then leaves the impression that the 14.23% income tax rate should be directly compared to the FairTax rate of 23%. I've added the correct comparison to the FairTax rate and a simplified example for a single person of middle income to show the effective rates under both Income + Payroll taxes and FairTax + Rebate. Kirk 03:20, 22 Jun 2005 (UTC)

NOTE: The previous paragraph was added by a non-logged in user with IP 65.112.161.200. User:Kirk has 11 logged in edits since 2003, none on FairTax or Talk:FairTax. To date, this IP address has a contribution history of exclusively 17 FairTax edits, and one Talk:FairTax edit.

(12-June-05) Transition effects & dbl taxation

I renamed the section to somthing that's a little less loaded. I also removed the term double taxation since it's inaccurate here. Double taxation is a tax on the same thing twice. The classic example is a tax on a corporation's income (which is owned by the shareholders anyway) then a tax on the actual distribution of that income to shareholders). The situation is this case is analagous to the gasoline tax: I use my after-tax income to pay for gasoline consumption. Money is never taxed... economic behavior is taxed. In this case, it is two different economic behaviors that are being taxed. Feco 03:03, 8 Jun 2005 (UTC)

For retirees, the purpose of building a nest egg of savings is to spend in their retirement. That money was taxed before setting it aside for future consumption, then would be taxed again when used for its original purpose. It's not like we live forever, there are cycles that everyone follows in life; double taxation in this case is merely a true statement. --Unfocused 03:52, 8 Jun 2005 (UTC)
Yes, retirees have used the term "double taxation" in their opposition to the FairTax, so we should use that term when describing their argument. Rhobite 18:26, Jun 10, 2005 (UTC)
The transition costs so far only discuss ordinary income; what about a Capital loss carry forward, unaccumaled decpreciation etc; I suspect the answer to redress for elderly savers would have to follow a line like this (particularly, for example, an elderly person who liquadates a home, then uses the proceed for nursing care). Has any of these questions been addressed by Committee Amendments? Nobs01 21:48, 10 Jun 2005 (UTC)
all kinds of terms are thrown around inaccurately in political debates. InvestorWords and Dictionary both define double taxation as the taxation of the same thing twice. I refer again to the fact that income and spending are two different economic activities. Also, savings can take many forms with many different characteristics. Contributing to a Roth is after tax. Contributing to a 401(k) can be either. Depending on structure, a pension never even shows up as income until it's being collected. I'd be happy with adding something along the lines of "opponents of the bill claim it would lead to double taxation of retirement savings. In fact, the plan represents an end to income taxation and an increase in consumption taxes. Individuals who live through the transition will have seen their income taxed before the change and their spending out of savings taxed after the transition." Feco 08:30, 12 Jun 2005 (UTC)

(25-June-05) Untaxed illicit income & taxed licit consumption

I re-added the sentance "[Illicit income] will be taxed under the FairTax plan when illicit income is spent on consumption." FairTax assesses all taxes at the point-of-sale, where consumption 'happens'. The illicit income (which is presumably unreported and untaxed) has to become consumption at some point... when it does, the consumption tax occurs. Obviously, the big caveat is the effectiveness of the consumption tax, but that's the subject of the entire article, so I think disclaiming such here would be a little cumbersome. Feco 03:11, 8 Jun 2005 (UTC)

In a nutshell, drug dealers buy cars and groceries and dine out like everyone else. There aren't many illicit business in sectors that aren't illegal or over-regulated to death. The costs of doing business illegally are huge, which is why illegal businesses tend to exist only in illegal sectors. One way or another, criminals spend most of their money in the legitimate sector of the economy. Feco 03:25, 8 Jun 2005 (UTC)

If we're going to claim that money saved is not taxed, then it stands to reason that illicit money saved will not be taxed either. Either we accept the argument everywhere in the article, or we get rid of it everywhere in the article. Therefore we cannot unequivocally claim that illegal trade will be taxed.
Further, what if a drug dealer uses all of his money from selling drugs to buy tax free business supplies to support his otherwise unprofitable business venture? Illegal transactions are not necessarily taxed under this plan. To claim otherwise is a fallacy. --Unfocused 03:41, 8 Jun 2005 (UTC)


I think we can all agree that any money saved will not be taxed no matter where it comes from but you can not tell me that a drug dealer or an illegal immigrant is never going to go to a Burger King or a Jiffy Lube. Illegal immigrants will also never see the rebate unless they want to risk deportation or an audit. The point is they still need to get toilet paper from somewhere and they may be able to get some of it on the Black Market but these people are like every other red blooded American, when they have a dollar in their hand they will go out of thier way to spend it.

But by your own logic arguing against the current system, these illegal purchases are already taxed by the hidden taxes already included in what they purchase. The only difference is whether the taxes are embedded in the price, or added on as a sales tax. I never claimed that illegal activity would not be taxed under FairTax, I'm just pointing out that illegal activity already has a tax burden built into the purchase price under the current system. Unfocused 05:22, 11 Jun 2005 (UTC)
to clarify the terminology, illegal activities bear some tax burden when the proceeds of those activities are spent in the licit economy. Illegal activities do not bear a full tax burden, b/c illegal income is not reported and taxed as income. Right now, our tax code is heavily in favor of taxing income. Not all of that passes through to implicit taxes on consumption. Under the proposal, the entire tax burden will shift to consumption. There will be no way for illegal income to avoid direct taxation, b/c there will be no direct income taxation. The spending of illegal proceeds in the licit economy will suddenly bear the full tax burden like any other licit spending.
Let's say the drug dealer earns $100 a year in cash. He spends $65 of that on consumption. The $65 is subject to current 10% sales tax (keeping it simple), so $6.50 is paid in taxes. He should've faced a 30% income tax ($30 in lost tax revenue). Had his disp. income been $70 after tax, he would've spent $45.5 on consumption (assuming constant MPC). This gives taxes paid of $4.55. Net loss to tax system is 30-(6.5-4.55) = $28.05.
Now assume the new system. Dealer earns $100 a year in cash. He spends $65 on consumption. It's taxed at 30%, so he pays $19.5 in taxes. His tax burden has risen from $6.5 to $19.5.

Hopefully, that will help convince that FairTax will increase the tax burden borne by the underground economy. Feco 08:30, 12 Jun 2005 (UTC)

Oh, I never stated that FairTax wouldn't increase the tax burden in the underground economy. If I implied that, please forgive me. I only objected to some anonymous users repeatedly claiming that the black markets weren't taxed at all now, while simultaneously claiming that there are hidden taxes in our retail prices that add up to nearly the same amount as (or more than) the proposed FairTax rate. The internal inconsistency of the argument was completely ignored.
I'm not sure if anyone's done a burden analysis under the current system and under FairTax for illegal trade, but would agree that it looks like FairTax may increase the tax burden on illegal trade. The net effect would depend on just how much business FairTax drives underground. --Unfocused 13:00, 12 Jun 2005 (UTC)
I had intended to seek some compromise language on the proposal's effect on the illicit economy. After doing a big wording/grammar tweak, my brain's a little fried right now. You're right that the net effect depends on how much of the "hardcore" illict economy becomes subject to increased taxation (through higher taxes on licit consumption) vs. how much of a new "softcore" illicit economy is created through relatively minor sales tax evasion. Feco 16:44, 12 Jun 2005 (UTC)
There is something here that bothers me, but it is a conclusion of my own, and I hesitate to modify the article. Several studies seem to show that the tax and compliance costs account for 20% - 30% of retail price of American made goods and services. That would imply retail prices have been inflated by $2T to $3T, yet the total income taxes and payroll taxes remitted by businesses is only $800B -- according to the 2004 IRS Data Book, even assuming that all income taxes "not withheld" were from small businesses. This means the unproductive losses due to compliance are between $1.2T and $2.2T, which is far in excess of the $400B - $900B that is usually reported. Still, it is clear that only a fraction of the additional price from "hidden" taxes in the price of goods is actually revenue. This is the "inefficiency" of taxes on producers. A Retail Sales Tax is considered much more efficient in that sense. So although the underground economy is absorbing some tax burden via these "hidden" taxes on its purchases, it is much smaller than the tax burden they would pay under the FairTax. I'd like to add "These hidden costs are largely wasted in compliance costs to businesses. Because only a small portion of the hidden costs is actually tax revenue to the government, by removing the compliance costs the FairTax would result in more tax revenue from the underground economy than the current system." Comments ? Kellis91789 23:38, Jun 24 2005 (UTC)
I've never heard the idea that compliance costs more than is actually collected. Please give a reference before posting something that "out there" in the article. Every suggestion of this that I've seen is including the costs of entire payroll departments in their guesstimates. I've never seen any actual research indicating what you wrote. I appreciate the consideration you're giving this (and showing me, and others) as you proceed. --Unfocused 02:48, 25 Jun 2005 (UTC)
Can anyone produce something like a pie chart comparing the growth of the sevice sector over the past 25 years as a percentage of GDP, seeing it is the service sector where most non-compliance occurs. ThanksNobs01 15:49, 17 Jun 2005 (UTC)

(12-June-05) Politics

The article handles the subject very well and straightforward. I however have developed one reservation over the two and half decades I've favored such legislation; that is the fear that without Constitutional change, we may infact end up with both Income & Consumption taxes. There is no guarantee that if a national value add sales/consumption tax (call it what you will) is made law, that the Income Tax could be reinstated in two years time after the next Congressional elections (or at some point down the road). Basically, it may even be dangerous to suggest such a radical change without demanding the repeal of the 16th Amendment. Nobs01 03:31, 8 Jun 2005 (UTC)

Call me undemocratic if you must, but I figure if we take care of the 17th, the 16th will solve itself. I'm sick of senators from my state approving Iowa corn subsidies simply b/c they may one day caucus there as presidential candidates. A state's interest has become secondary to a politican's interest... that was always expected in the House, but never the Senate. Sigh... stupid populism. Feco 16:47, 12 Jun 2005 (UTC)

(12-June-05) Consumption versus sales tax --- Why this is a SALES tax.

This proposal is a sales tax for the reasons I stated above, namely, that consumption of natural resources is not taxed. Consumption of capital is not taxed. Consumption of labor resources is not taxed. The only act that is taxed is the final sale to the end user. It is therefore a sales tax, and should be referred to as such everywhere in the article. To say that it influences consumption would be an accurate use of consumption in this article, but this is a sales tax proposal we're discussing, not a consumption tax (unlike a VAT, which IS a consumption tax). --Unfocused 04:02, 8 Jun 2005 (UTC)

VATs, retail sales taxes, and luxury taxes all fall under the broad category of consumption taxes since they are taxing acts of consumption. Income taxes, in turn, tax labor and income (interestingly, some VATs are also income taxes, if they don't exempt labor as a value add). It may be more precise to call it a sales tax, but it is still a consumption tax. Scott Ritchie 17:40, 9 Jun 2005 (UTC)
I agree with Scott Ritchie. Consumption is all non-investment spending by households. The depletion of natural resources is taxed under the system in that their depletion factors into the final price of a consumer product. Ultimately, every good and service ends up in the hands of a household. Whenever that step occurs, the sales tax is assessed and collected (who bears the economic burden is already passed along the supply chain depending on each component market's characteristics. A VAT and sales tax both do the same thing. Labor is in an entirely different market (factor market), so goods market terminology isn't always relevant. Feco 08:30, 12 Jun 2005 (UTC)

(23-June-05) Preparing for change of reference style to REF/NOTE format

There are hidden comments in the references at the bottom of the page. Please don't change them. I'm preparing to change to REF/NOTE style citations. See Caulfield Grammar School for an example of this and how it works. Thanks. --Unfocused 04:38, 8 Jun 2005 (UTC)

  • My intended change in footnote style didn't work as I expected it to. I reverted my own changes before anyone else edited. I'll try again later, after I've had time to learn the various footnote styles in use here. If anyone else feels like applying a more "automatic" footnote/citations style to the article, please do!--Unfocused 06:00, 9 Jun 2005 (UTC)
    • Yes, the references do need to be fixed up here. I've never used the automatic footnoting templates but maybe I'll take a crack at it. Haven't edited this article yet but I've done a bunch of research on the subject before. Rhobite 18:32, Jun 10, 2005 (UTC)
      • I cleaned up the footnotes, unfortunately the automatic footnote system is a little clunky. You have to keep the references in order manually, and you can't cite the same thing more than once unless you create another entry. But it's better than nothing I guess. Oh yeah the last 3 or 4 references are not used in the article. If they support a specific fact they should be referenced, otherwise we should move them to a general references section. Rhobite 04:26, Jun 15, 2005 (UTC)

Good idea to move unused items to a general references section. I haven't gone through the references in detail as you have, so you're welcome to "have at it." And so you know, there are other footnote/reference styles in use here. See Wikipedia:Footnotes for more information. Hopefully, the next version of MediaWiki software will support better automatic footnoting. FYI, I've used another of the footnote styles at Pukavik. Have a look at how references and notes can be kept separate with this other system. Remember, however, that the style in use there would require manual renumbering of all following notes if a note is inserted above the last current note in the article. --Unfocused 05:07, 15 Jun 2005 (UTC)

Now that User:Rhobite has changed the references to a footnoted style, I propose that this section go into the talk page archive. Agreed? --Unfocused 20:35, 23 Jun 2005 (UTC)

(14-June-05) Progressivity in "Tax Rate" section

I cut "Beginning with the lowest marginal tax rate of a negative value, the tax a family would pay is variable with a top rate being 29.9% for the most lavish spenders" from the 'Tax Rate' section. I'm assuming the sentance refers to after-subsidy effective rates, but I'm not positive. I would like to re-word for accuracy: "The marginal tax rate on spending would be constant at 30%. After the subsidy checks are considered, families spending below the federal poverty threshold would pay an effective sales tax rate of close to zero. When a family's spending exceeds the threshold, its effective marginal sales tax rate reverts to 30%." Feco 16:10, 12 Jun 2005 (UTC)

  • REPLY - This is very misleading. While the rate is flat, you couldn't actually pay 30% - maybe 29.999% Once you go above poverty level, you don't instantly jump to 30%. You would pay a 30% flat rate under or above the poverty line but what you pay in taxes for the year or month is what is important. It is truely incramental from a negative value to 29.9%. If you spend $10,000 over the poverty threshold, you may only pay a 5% tax rate for the year. The amount of spending also assumes that everything you puchase is new and you buy nothing used. Claiming a 30% tax rate is like taking the maximum income tax rate. Only Non-US citizens would pay 30%. I cut "I'm assuming the sentance refers to after-subsidy effective rates, but I'm not positive." Why would it be presented otherwise? The bill has the subsidy so why would you present the tax rate as if it didn't. Otherwise it would just be a flat sales tax, which the Fairtax is not. Morphh 14:12, 14 Jun 2005 (UTC)
I agree with Feco.
  1. The subsidy payment has no spending requirement, so the actual tax rate is always 30%. The subsidy creates a variable effective tax rate, but the tax rate remains unchanged. The marginal rate on each dollar spent is always 30%.
  2. Go beyond 29.9% to 29.99%, and you've exceeded the reasonably valuable significant digits of your calculation. Rounding is normal and expected. For this article, 29.99999% is the same as 30%. To say 29.9999% rather than 30% reduces the value of the article by inserting a trivial level of detail. --Unfocused 15:59, 13 Jun 2005 (UTC)
    • That doesn't even make any sense. How much will you pay in % to the Government for the year?! Not 30%!!! So why do you try and presnet it like that? The question of Tax rate should be how much of my money goes to the government. What do you mean that the subsidy has no spending requirement? It is your federal tax refund - monthly. Spend it or not, it removed your tax liabilty. Lets make this simple. Calculated inclusively for the year 2000, a family of four spending $22,500 in new goods and services would pay a tax rate of 0%, at $45,000 its 11.5%, at $90,000 its 17.2%, at $180,000 its 20%, and at $5,000,000 its 23%. [1] -- Rounding up is fine - I was just trying to show the math of the variable rate as 30% would mean you did not get any subsidy. Morphh 14:12, 14 Jun 2005 (UTC)

Morphh- take a close look at the title of the pdf link you provided. It is effective tax rates. Yes, someone's effective tax rate will asymptotally approach 30% as their consumption increases. Under the current system, everyone pays a different effective income tax rate, due to all the nuances in the tax code. Effective rates can only be calculated after the fact and are of little use for apples-to-apples comparison. That is why people in the field use marginal tax rates for simple analysis. Feco 16:53, 13 Jun 2005 (UTC)

As Unfocused pointed out above, the subsidy has no effect on spending behavior. Conceptually, George Bush will fly over in Marine1 and drop a sack of money into your backyard on January 1. That sack will fall come hell or high water, regardless of your behavior. For the rest of the year, you will face marginal sales tax rates of 30%. That is why marginal analysis is relevant. Feco 16:56, 13 Jun 2005 (UTC)

  • I see what your saying and you are correct. However, most people are not "in the field" and have no idea what the marginal rate implies. If I'm just a simple guy and you tell me my marginal tax rate is 30%, I'm going to think the effective tax rate is 30%. Perhaps both should be presented along with the current income tax marginal rate. Just seems like you’re trying to spin the reality of what people will really pay. Present what people are familar with and will understand - The effective Tax rate. For it or against it, that is at least fair. Morphh 14:12, 14 Jun 2005 (UTC)
    • Presenting just a hypothetical effective tax rate is not fair, it is one sided POV. There is no definitive way to compare people's effective tax rates, since both current rates and consumer behavior vary so much. I think we'll have to accept multiple explanations for this article, because each explanation has its own political undertone to it, intentional or not. --Unfocused 17:50, 13 Jun 2005 (UTC)

Can a marginal Income tax rate be accurately compared to the Fairtax marginal rate? I believe the marginal income tax rate is somewhere around 35%. Does this include payroll taxes, corporate taxes, capital gains taxes, gift taxes and inheritance taxes as does the Faritax marginal rate? Sorry for my ignorance on this, I've only been interested in effective rates up to this point. Morphh 14:12, 14 Jun 2005 (UTC)

No. There is no single marginal income tax rate - it varies from taxpayer to taxpayer. Due to the many credits, deductions, and phase-outs built into the U.S. tax system, along with its progressive nature, general marginal tax rates are inaccurate. Rhobite 19:56, Jun 13, 2005 (UTC)

(22-June-05) "Tax Rate" section

I cut "Other estimates range up to 50% inclusive, or a 100% sales tax on each purchase at the register". I'd like to remove this statement. This is just ridiculous and makes absolutely no mathematical sense. The Americans for Fair Taxation have spent millions in research and have top economists stating their numbers and we're going to through in some off the wall quote from some nobody. One of the articles referenced is from someone advocating no tax whatsoever. I'm for fair and having both sides. I have no problem with the Congress panel review (while they have much to gain with the current system and inflating numbers). On the other side, the bill has not been recalculated since the Bush tax cuts which would bring the rate down several % points. While I believe that to be relevant, for fairness sake, I thought we should leave it out and only present what is currently in the bill.

In the article they quote tax evasion and government growth as the reason for the higher % rate. Problem here is that we are not looking at government growth - The government income will grow with increased consumption as it currently does with increased income. The plan should be revenue neutral and not let’s tack on 10% because we want to grow the government. Secondly, tax evasion is huge under the current income tax system - 20% or more. Under the Fairtax it would be much less and here is why. 10% of the companies make up 90% of the sales. These large / most likely public companies will pay their taxes. So, even if 100% of the other 10% evade taxes, we're still in a much better situation then we are in now. Morphh 00:45, 14 Jun 2005 (UTC)

I would like to see those estimates removed, mainly b/c they're from a less-credible source. Since we have an estimate from the gold standard in the field, why should there be another one listed? The Congressional JCoT is the authority for these types of estimates, even more so than the CBO. Brookings (the source of the other estimate) is significantly less credible:
  1. they don't have access to the same quality of data as JCoT
  2. they may have a political agenda.

Feco 16:48, 13 Jun 2005 (UTC)

You can't simply remove arguments against that you don't agree with. You should rebut them instead. As far as I can tell, the analysis that resulted in the 50%/100% rates was genuine research. Disagreeing with research that doesn't support your point of view is natural, normal, and to be expected. But you cannot simple delete that which you don't agree with. In addition, no one is required to believe that JCoT has produced the only reasonable estimate, after all, Congress is about compromise, which is sometimes disconnected from reality. If Congressional JCoT is the "gold standard", then why even accept the FairTax proposal's claim that their tax is revenue neutral? Because reasonable people can come to reasonably different conclusions, that's why. We should report all reasonable estimates. Having multiple estimate, especially those that fall on both sides of the "gold standard" increases the credibility of the article. --Unfocused 17:00, 13 Jun 2005 (UTC)
I am rebutting them here instead of deleting it. The 50%/100% doesn't even make any sense for the reasons stated above and mathematically. Let's do the math. In fiscal year 2003, the current tax system generated revenues of about $1.67 trillion. In that same year, the economy produced goods and services valued at $11 trillion. Consumption in the U.S. economy was $9.5 trillion or 86.4 % of total economic output in 2003. Can you seriously think that it would take at 100% sales tax to remain revenue neutral? It's outrageous and in normal discussion I'd laugh it off, but it is being posted in an online encyclopedia. Let’s be realistic. Unlike some other sources, the proposed rate has been independently confirmed by several different, non-partisan institutions across the country. Morphh 19:11, 13 Jun 2005 (UTC)
First, how much of that $9.5T consumption was actual retail sales? From here Retail Sales and Food Services, Total: NSA: Millions of dollars, I get a much smaller total of $3.6 trillion dollars for US retail and food services sales for 2003. This includes restaurant & food service sales. What does your number include that mine doesn't? I think you're forgetting that a lot of consumption is business related, and tax free under this plan. Also, have you deducted the exempt categories of goods from the gross numbers you cite? How much of that consumption was government spending, which would be revenue neutral under FairTax, other than slightly increased compliance costs? Even if you referenced the source for your data, described it in neutral terms, and mentioned that there are other factors that you aren't including, such as the likelihood of overall spending going down in the face of a large sales tax, it's bad form to place your own mathematical example into the article. It is "original research" and therefore not suitable for Wikipedia. (See Wikipedia:No original research) Wikipedia is, more or less, a collection of verifiable facts, combined with references to research conducted by others. If your claim is true, it should be easy to find a study to cite.
I did not intend to use that example in the article. I was just using it for this discussion. An example of what goes into the National FairTax Base can be found here. Morphh 21:22, 13 Jun 2005 (UTC)
Also don't agree with this statement at all "likelihood of overall spending going down in the face of a large sales tax". I expect the economy to just the opposite. As the bill has included businesses claiming taxes on inventory, the cost reduction of domestic goods should move pretty quick. Economics will take over as businesses compete to be the first to remove the cost of embedded taxes. People with have a full pay check. They are going to do what Americans do.. spend beyond they're means. Morphh 00:45, 14 Jun 2005 (UTC)


The alternative is rebuttal. The best rebuttal, in this case, is probably providing a more direct citation of the non-partisan institution studies that you say have confirmed the proposed rate, instead or in addition to citing through the various FairTax support web sites. If there are twenty reputable, independent research studies that come to one conclusion, and one that comes to another conclusion, having both in the article gives neutral point of view while still showing where more researchers agree. If it were fifty to one, or a hundred to one, then perhaps leaving out the minority view may be appropriate, but even then, rebuttal may still be the more effective choice. --Unfocused 20:29, 13 Jun 2005 (UTC)
How about Dale Jorgenson, Professor of Economics at Harvard University and past President fo the American Economics Association, estimated the rate to be 22.9 percent. Likewise, Jim Poterba of the Massachusetts Institute of Technology found a rate of 23.1 percent. Laurence Kotlikoff of Boston University also found a rate of 24 percent. Furthermore, reserchers at Stanford University, The Heritage Foundation, The Cato Institute, and Fiscal Associates have reached similar conclusions (found rates from 22.3 to 24 percent). The comment just seems to be way out in left field. Morphh 21:22, 13 Jun 2005 (UTC)


These references are exactly the kind of thing that should be included, with, whenever possible, direct references to the studies that generated these conclusions. Secondhand statements of support through the FairTax web pages are better than nothing at all, but direct reference to these studies would be very valuable. When I read an article about a political proposal, I want to know who are the supporters, and where the statements of support came from. Coming from the most independent of sources increases their credibility. In my own reading, however, I expect the Heritage Foundation and the Cato Institute to have biased views, so having the others is of extra value to a reader like me. I'm not saying to leave out the Heritage and Cato references, but illustrating why multiple references are preferable to individual references.
Sure, a statement like the 50%/100% rate seems like it's from left field to a fervent supporter. But it's from a reputable source, based on research and calculations that I'm believe were done in good faith, so it belongs there. However, having good references in a political article from one side of the issue does not foreclose the possibility of having good references from the other side, too!
It is not my intent to argue one side of this issue or another. It is my intent to make this the best article possible, and that includes both valid support, and valid criticism, in the most neutral language possible. Have a look at the article's history, and see what it was like immediately prior to my first edit. The article is much better now, both on the support and oppose sides, and I think it is getting better almost daily. The FairTax proposal itself isn't that important to me. --Unfocused 23:29, 13 Jun 2005 (UTC)
What is the source? I have not read this yet and would like to see research and see where they think every other review went wrong. I can only come to the conclusion that it is unreliable and completely bias. AFT doesn't have much to gain by putting out BS. It is made up by people that want to see a better system. The status quo on the other hand has many many reasons to put out whatever they can to help opponents make their point. I am in favor of the Fairtax but I'm not here to make this a bias article. On the contrary, I'm here to make sure it is not bias by opponents. Morphh 00:45, 14 Jun 2005 (UTC)

The source is cited. AFT is made up of people who have already decided that they think the FairTax proposal is a good idea, so they have everything to gain by putting out anything that brings people around to their view. There's nothing wrong with having made a decision, but then claiming to be unbiased about a political decision you clearly feel this strongly about is, in my opinion, denying your own inclinations. That would be like Rush Limbaugh or Fox News claiming that they're not pro-Bush/Cheney. But that's not the important part. The fact is, biased people in favor of a proposal usually provide the best arguments in favor of the proposal, and thats why I want people of many different views to edit each of the articles I contribute to. The only trouble comes when the supporters refuse to accept that there are other legitimate views of the issue, or legitimate disagreements about the effects of a proposed law. (For example, our President holding "Town Hall" meetings, yet prescreening out all opposing views. That's not a true unbiased discussion, it's a staged rally. Or FairTax supporters who don't accept that other studies have come to different conclusions about the effects of changing from an income tax system to a sales tax system, or the rates needed to fund the change.) There are going to be disagreements. Argument and rebuttal in neutral voice presents those disagreements and allows the reader to decide. --Unfocused 12:35, 14 Jun 2005 (UTC)

This source is the opinion of one guy that is not indorsed by the Brookings Institue. AFT members believe the Fairtax is a good idea based partly on the rates. Do you think anyone would support such a reform if the rate was 100%? No of course not. So what are you accomplishing? What is everything they have to gain? What exactly is "their view"? Perhaps, that there could be a better way to collect taxes then the current income tax. AFT is made up of volunteers supporting a tax collection system designed by the people. Why waste their time and effort on a bill that would have a rate that no one would agree to. It is much more likely that opponents have everything to gain by putting out anything that steers people away from considering tax reform that hurts their special interests. The only purpose to include such figures is to dissuade people from considering the bill. I never said I wasn't biased, I said I wasn't here to make this a biased article. There are plenty of legitimate reasons to disagree with the Fairtax and they should be included. However, this is an encyclopedia article. I don't think it should be a point / counterpoint debate. Gale Article- Rebuttal If they want all the juice, they can go to the Fairtax website. If they want all the dirt they can go to an anti-fairtax site. The article should present the meat of what the Fairtax is and some common disagreements with the POV. Morphh 14:09, 14 Jun 2005 (UTC)


Declaring one side's view as "all the juice" and the other's as "all the dirt" is inherently POV and against the policies of Wikipedia. This is not the proper way to approach a topic that you edit. As I mentioned above, (far above, in the section titled "Non-neutral Point-of-View") the only way to present a political proposal in a neutral encyclopedia is to present, as near possible, a summary of the proposal, the supporting views, the opposing views, and rebuttals of each. This almost requires a "point-counterpoint" treatment of the issue. The challenge is to use neutral language to describe each view so the reader can decide, not us. An encyclopedia looks at ALL sides of an issue in general, and the potential impact on society, not just the supporters' views. "Encyclopedic" describes a comprehensive view, broad in scope; not just a definition, and not just support. --Unfocused 14:32, 14 Jun 2005 (UTC)
Of course it would use neutral terms, such as supporting and opposing or whatever. I only used it here in the discussion as 'slang'. The term is used to state a "Rosey" picture or a Not so "Rosey" picture. Is this not what the supporting and opposing views of the topic are? Now your just being argumentative. Morphh 13:28, 15 Jun 2005 (UTC)

Morphh, remember that guys like Laurence Kotlikoff and thinktanks such as Cato aren't any more neutral than opponents of the FairTax. Kotlikoff has supported consumption-based taxation for a very long time. Their opinions are fine in the article, but they shouldn't be presented as "more neutral" or "more expert". Going back to the 50%/100% thing, I read Bartlett's National Review article as well as the actual paper by Gale [2]. Gale doesn't actually talk about a 50% inclusive rate or a 100% exclusive rate anywhere in the paper, so I don't know where Bartlett got that idea. We should look into that. Rhobite 13:31, Jun 14, 2005 (UTC)

Page 2 states his 50% / 100% conclsuion. Gale Article While the people you listed above may support consumption-based taxes and may not be considered completely unbiased. They are collaborated by others and the institutions have a reputation to uphold. Morphh 14:08, 14 Jun 2005 (UTC)
I think you're picking and choosing your sources. It's a fallacy to suggest that some sources have a reputation to uphold, so therefore their work is more trustworthy. That's fine for supporting personal opinions, but let's keep it out of the article please. The Gale paper you linked to was written in 1999. Did you read the paper I linked to? It was written in May 2005, and it makes no mention of the 50% rate. Gale now claims that a 31% inclusive / 44% exclusive rate would be required in order to remain revenue neutral. Gale still challenges the "official" AFT numbers but his new conclusion is much more reasonable. The new paper should definitely be mentioned in the article - we may not even want to bother mentioning the 50%/100% thing. Rhobite 14:14, Jun 14, 2005 (UTC)
I agree - This works for me. These estimates are within a realm of possiblity. Morphh 14:29, 14 Jun 2005 (UTC)
Again, I'll state that presenting all reasonable views and arguments and letting the reader decide who is credible, and who is not is the nearest thing to a neutral treatment any political issue can get. Cite the most reputable sources you can find, and leave it at that. That's the limitation of working at a site that insists on neutral point of view as a matter of non-negotiable policy. --Unfocused 14:32, 14 Jun 2005 (UTC)
I guess we differ on what is considered a "reasonable" view. When you have 10 groups all saying close to the same thing and you have one that is close to three times that of the next highest figure... Thats got to be over a Trillion dollars difference. Who screwed up? Well - whatever works for ya. I was trying to keep it relatively clean and centered. Writing the left, right, up, and down of it will be quite a bit of effort. I don't think any of these figures include the Bush Tax cuts. Maybe that's why AFT hasn't changed their figures. They're trying to make up for lost ground ;-) Neutral POV is a mater of perception. Even between us two - I think adding those numbers is a bias and you think it makes it neutral. Morphh 20:02, 14 Jun 2005 (UTC)
I should note that Gale's 1999 paper factors in evasion and avoidance, while the 31%/44% conclusion of his 2005 paper assumes zero evasion and avoidance. Gale notes that the AFT stats also assume no evasion and avoidance. Not being an economist I can't really tell if his calculations have also changed. Maybe we should mention both sets of numbers. Rhobite 14:41, Jun 14, 2005 (UTC)
The new Gale paper mentions a 45%/82% rate on page 890, and also references his other rate estimates calculated in the previous paper (as well as rates calculated by others) in the footnote on the same page. Gale has not withdrawn his previous estimates, he is only making further estimates with different assumptions. "Other estimates range up to 50% inclusive, or a 100% sales tax on each purchase at the register." in the article is still a statement of fact. FairTax supporters should not be permitted to define the arguments of those who are not supporters. --Unfocused 14:46, 14 Jun 2005 (UTC)
Rebate, subsidy, negative income tax, call it what you will; bascially it is an extension of the earned income tax, or at least that is how it is likely to be administered, (qualified) albeit by monthly checks. Nobs01 02:12, 15 Jun 2005 (UTC)

Actually, the word "subsidy" has a very negative connotation. "Tax Credit" is more neutral, and still more accurate than "Rebate" or "Refund" since a "Tax Credit" can be for more than you were actually charged -- a refund or rebate cannot -- and "Tax Credits" are routinely issued in advance, just as the FairTax Demogrant is. Kellis91789 21:56, 22 Jun 2005 (UTC)

(17-June-05) Elimination of deficit?

I'm reading that Dr. Gale computed in the elimination of the deficit, it is actually budget neutral not revenue neutral. Seem he did this with a few things without doing so on the income tax side. Morphh 16:27, 16 Jun 2005 (UTC)

I don't know where you're reading that; I see on page 890 of the latest Gale report, paragraph 3, first sentence "maintains the real level of revenues". Later in the same report, he shows how his calculations include an increase of the deficit with rises in consumer prices (page 892). The only "reduction" shown in this report is on 893, where he calculates that the deficit would fall equal an equal proportion to the fall in consumer prices (if FairTax supporters are right and consumer prices fall) to reflect that the assumption that the overall size of the federal government will remain the same. Where did you see anything about deficit elimination? --Unfocused 18:14, 16 Jun 2005 (UTC)
This is what I was reading: A Note on the Required Tax Rate in a National Retail Sales Tax: Preliminary Estimates for 2005-2014. Under the Calculations section. "The required tax-exclusive tax rate in an NRST can be written as t = R/(C-X-aT+D) where R is the revenue to be replaced, C is the actual tax base, X is the amount of consumption covered by the demogrant, T is federal transfers, a is the share of federal transfers that are currently untaxed, and D is the deficit."
To further expand Gales numbers... For one, I'm not sure what exactly he means by all federal taxes in the formula he quotes. The bill does not remove all federal taxes, ONLY the taxation of income (social security, Medicare, estate taxes, corporate taxes, regular income taxes, and other income taxation), not things like utilities taxation, gas taxation, etc. So right there, he very well might be making the rate sound higher by assuming the need to replace revenue from taxes that this bill won't be eliminating.
Two, he is assuming "(b) about 20 percent of that base would be eroded due to avoidance, evasion, or legislative action (i.e., loopholes)".
I addressed the evasion of taxes above under 'Tax Code Compliance' so I'm not going to retype it. Loopholes? Unlike the current system, with is dizzying maze of thousands of potential loopholes to use, All new goods & services are taxed at the same rate, no exceptions.
And, of course, his formula does nothing to include the growth in the economy that would result from removing the dead weight of compliance costs (conservative estimates report at least $225 billion per year) and also the cost of the IRS itself and reinvesting that money into economic growth.
In footnote 2, he states how AFT deflate the true size of the needed rate to be revenue neutral by including taxes collected on retail sales to and between government agencies, and that these figures do not show a true increase in government revenue as they come from government and thus can't be counted toward getting the 23% figure. Eliminating the figure "G" as he does can certainly account for several of the percentage points in difference between his figure and others. While I agree with this assumption in principle and would accept him removing the "G" from the equation, he should apply it equally to his figures in order to be consistent and remove the "G" factor from the current revenue collected under the income tax, which he did not do.
The current income tax system also taxes the incomes of federal employees and requires all federal agencies to staff massive tax compliance & payroll departments just like any business? Government collecting income taxes (don't forget to include the half of the payroll taxes paid by Government) off of their employees is like the right hand paying the left hand. Yet, this money is counted as "revenue" under the current federal income system, so why shouldn't it in turn be able to count government payments of sales taxes as revenue under the FairTax system as well?
Please forgive me if this is not the place to post this. It is in debate of the information presented in the article. At what point to do you say that this is not presenting Apples to Apples and that Gale is just vandalizing. Morphh 19:03, 16 Jun 2005 (UTC)
Also note that the information above is for the 37.8/60.7 rate and not the 50/100. Morphh 12:34, 17 Jun 2005 (UTC)
Perhaps the concept of Dynamic scoring [3] needs to be written into the article. Or at least on article on Dynamic scoring. Se also CATO Institute [4] Nobs01 15:27, 17 Jun 2005 (UTC)
Plug the numbers into the formula Gale provided, and you'll see that the deficit is not being eliminated. Reduce the deficit, and the rate goes up even further. Increase the deficit to a bazillion dollars, and the required tax rate falls to nearly nothing. This is exactly what we should expect to happen. Gale is holding the deficit steady year after year. Further, if you look at the Gale paper that this brief is based on, you'll see that he has made his calculations more than once; including the deficit, but also again including the deficit under the best case assumptions of price reductions from AFT. He's included your best case assumptions!
All federal taxes? If you follow the reference he provides, for his own 1999 paper, you'll see that he's addressing the FairTax proposal in specific, and those taxes that it replaces. Further, the taxes that the FairTax proposes to replace represent over 97% of the federal revenue sources, not including new debt issues. This reference is a little old (FY 2000), but the proportions don't change much.
Regarding your complaints regarding loopholes & compliance, it's already addressed. Look in the latest Gale paper, and he's done the calculations multiple times, assuming full compliance, 10% non-compliance, and 20% non-compliance. This is in spite of the fact that non-withheld, self-reported taxes have the worst compliance rates, and that is what the FairTax proposal is. My own readings would suggest that 20% is a conservative estimate of non-compliance rates, but even so, lower rates are already included in Gale's calculations.
Growth & dead weight? Growth in the used goods industry and black markets is most likely. However, given that you're considering replacing a tax system that currently relies mostly on third party reporting and withholding with one that is self-withholding and self-reporting, and replacing a system where return checks are generated once a year with one that requires subsidy checks to be mailed every month, or twelve times as much, don't you think you'll need a hell of a lot of auditors and bureaucrats to catch tax underreporting and keep the monthly payments going to the right people in the right amounts?
Removal of "G"; Government employees pay income taxes out of their own pockets, just like anyone else. This is NOT the right hand paying the left hand. Also, consider that many government employees aren't covered by Social Security and Medicare (many Federal employees who started prior to 1984, I think.) and further, the government half of SSI and Medicare that it does pay is relatively small. As a fraction of the current government revenue stream, it's pretty trivial.
Re: "requires all federal agencies to staff massive tax compliance & payroll departments just like any business". Federal agencies are going to have payroll departments regardless of what type of tax system is used. There are no "massive tax compliance departments" in federal government agencies. There certainly are accounting departments, and they "pay" some taxes between government agencies through a budget item posting, but accounting departments would be necessary anyway. And regarding payroll taxes for any organization, once you set up the systems properly, you're done until the tax law changes, or until you have to enter an employee change of some kind.
The point at which I would say anyone is vandalizing an article is when they don't make a sincere attempt to explain or justify their changes to an article. Gale hasn't made any changes to this article as far as I know, so he couldn't possibly be vandalizing it. Legitimate disagreement with supporters will never be "vandalism" if reputable sources are cited.
What Gale has done, and in some ways, better than what I've seen from FairTax supporters so far, is explain how he came to his required rate estimates for replacing most Federal revenues with a sales tax. Perhaps you can point me to the formulas used by FairTax supporters that shows how they came to a 30% sales tax rate. I'm sure they exist.
However, remember it is NOT our duty to decide who is right or wrong. It's our duty to present all reasonable points of view in neutral language, referenced, and cited, and let the readers decide. If you have a problem with a particular reference, I think that this IS the correct place to review and discuss it. --Unfocused 15:29, 17 Jun 2005 (UTC)

(15-June-05) Current effective tax rate

I was curious about the lack of a citation for the statement that "when including payroll taxes, most people have federal tax withholdings in excess of 23%." This statement turns out to be false. According to IRS stats, the average federal income tax rate (total individual tax / total individual AGI) in 2001 was 14.23%. Even when adding in FICA of 7.65%, you get 21.88% - less than 23%. In 2001 more than 50% of taxpayers paid less than a 23% average tax rate. BTW I changed this from "withholdings" to "tax liability", since the actual tax liability is a much more useful number. The withholding process is inaccurate and people often overpay, and you get the refund back anyway. Rhobite 21:16, Jun 14, 2005 (UTC)

Good find - However it still does not show the true tax burden for that group. It does not take into account the other 7.5% payroll tax, corporate tax, or compliance cost built into the cost of every good and service. The system is designed to hide the taxes. I think stating that most are paying less then that figure is a illusion. The comment was to show that most are already paying what is considered the Maximum tax burden under the Fairtax. Again - this is all dependent on the AFT 23% numbers. ;-) Morphh 21:30, 14 Jun 2005 (UTC)
Payroll taxes are (overly simplified) 7.65%, not 7.5%. That's 6.2% Social Security and 1.45% Medicare. Corporate taxes are irrelevant because salary is a deductible expense on corporate income tax returns. AFT alleges that there are hidden taxes in the system, but that doesn't matter to this discussion either. The fact remains that on average, people pay less than 23% of AGI in taxes, even after you add in the 7.65% payroll tax. Rhobite 22:39, Jun 14, 2005 (UTC)
7.65% by the employee and 7.65% by the company. Corporations don't pay taxes, people do. Dr. Dale Jorgenson, highly regarded economist of Harvard Univ., has found that 20 to 35 percent of U.S. goods and services are "embedded" taxes. How is this not relevant to how much people pay? Just because it is hidden doesn't mean the tax burden is not there. Let's take just one quarter of the lowest number added to the 21.88% and you have more then exceeded the 23%. How about I just label it "when including payroll taxes, most people have federal tax withholdings in excess of 20%." and cite the IRS (the masters of deception). Or we could put it back to "many" as Unfocused modified. I just figured it was a misunderstanding and not debated - My bad. It is difficult for some people think past income taxes when looking at the Fairtax. They often try to compare their income tax to the Fairtax and that is an unfair comparison. The point was to try and show this when looking at tax rates. Suggestions? Morphh 00:52, 15 Jun 2005 (UTC)
Your statement that "corporations don't pay taxes" completely ignores the laws of incorporation. Legally incorporated businesses have rights similar to individuals under the law. Corporations have legal rights normally reserved for individuals. The very root of the word "corporation" is corpus, or body. From dictionary.com, "A body that is granted a charter recognizing it as a separate legal entity having its own rights, privileges, and liabilities distinct from those of its members."
Incorporation is the creation of a separate legal body. This is a fundamental principal of our corporate economy, and explains why corporations are taxed in the first place. (A corporate economy is any one which allows the formation of corporations as separate legal entities.) A corporation is, in effect, a virtual citizen, complete with rights. With rights and priviledges comes the obligation to pay a fair share of the society's overhead costs; therefore, corporate taxes are billed and paid. --Unfocused 01:23, 15 Jun 2005 (UTC)
Come on!! This is simple economics! Corporations don't pay taxes. They merely collect them. The actual cost of whatever taxes a corporation collects is passed along to others in some combination of lower dividends or profits for shareholders, higher prices for consumers, or lower wages and benefits for employees. It's not like they have a little bucket of money label taxes. Taxes are an expense and like any expense it must be paid by income. Morphh 01:48, 15 Jun 2005 (UTC)
Corporations merely collect taxes? Oh, then they don't earn income, either, they merely collect it? Corporations currently pay taxes. That is the law of the land. How is a corporation expensing their taxes any different than me expensing them in the household budget? Taxes reduce my income, too. They lower the dividends from my investments and profits from my efforts that I pay into my savings account or reinvest. It's not like households have a little bucket of money labelled "taxes" either. Corporations purchasing from other corporations pass along tax costs as well. Where is the tax coming from in that scenario? I pass along my tax expenses to my employer in the form of demanding a higher wage. How is that any different? How is a corporate check to the IRS any different than my personal check to the IRS? --Unfocused 03:19, 15 Jun 2005 (UTC)
"Corporations don't pay taxes any more than buildings do.", Milton Friedman Nobs01 01:55, 15 Jun 2005 (UTC)
So there's a corporate apologist refusing to acknowledge current law. Outrageous and demonstrably false statements like that are an easy way to get really famous, once you've reached a certain level of fame, especially if you know there's a hungry constituency waiting to hear such things. (See Rush Limbaugh and/or Al Franken.) I don't have a problem with such things, except when someone quotes them as if they're fact. --Unfocused 03:19, 15 Jun 2005 (UTC)
I haven't met a rock or a dog that owns corporate stock yet. Seems shareholders are all people. And many, many, are 80 year old female widows, not "the rich". Or perhaps those elderly women would be better off sucking the public teat rather than being employers of people, providing goods and services, and paying taxes.Nobs01 05:43, 15 Jun 2005 (UTC)
And exactly what does this have to do with the fact that corporations pay taxes to the IRS? Corporations are legally independent from their shareholders. That's why the shareholders aren't liable for asbestos lawsuits, for example. Corporations pay taxes. I know, because I write checks from a corporate checkbook to the IRS. Who pays the fines if the taxes aren't paid? NOT the shareholders, the corporation does. If there isn't enough money in the corporation for the tax liability, do the shareholders pay then? NO. The corporation is legally independent from its shareholders; the shareholders are not liable. Even if the corporation is liquidated for tax delinquency and has a remaining tax debt after the sale of all assets, the shareholders are not liable unless criminal intent to defraud the IRS can be proven. --Unfocused 06:42, 15 Jun 2005 (UTC)
Your comparing the physical with the effect. Of course the company physicly pays the tax, but the effect is the money indirectly comes from the customer, employee, or decreased profits to shareholders. This burden is absorbed by the people as hidden taxes. I'll try to find some good research on the topic. Morphh 13:14, 15 Jun 2005 (UTC)
You're missing the point: legal independence of corporations. Every legally independent entity has individual rights, and therefore is liable for independent tax assessment. You're confusing corporations with partnerships. Corporate taxes aren't "hidden", they're just not as simplistic as individual or partnership taxes. You can trace money "indirectly" to virtually anywhere you want; that's management accounting's job of applying burdens and reporting in ways that serve the one requesting the reports, usually management. But in financial accounting, that is, accounting used in official records, the accounting of legal record, the accounting reported to the public as company results, the taxes are paid by the corporation. Confusing the two is easy, but leads to nothing but wrong conclusions. --Unfocused 13:34, 15 Jun 2005 (UTC)
Both you guys are right, the corporation is a separate entity, and its tax burden affects its owners and the costs to patrons from whom it derives its revenue. My point is, politically speaking, its to easy to inflame the public with passing the burden of government costs onto a faceless corporation, that appears nebulous with deep pockets. This encourages government overspending cause few people really see the direct impact on living standards, be it employees of the corporation, the consuming public, and even some idiot owners. Its always just to easy to beat up on a corporation (cause after all, they are in the business of raping the public, never mind the goods & services they produce, or the jobs, or the income to widows). Nobs01 17:51, 15 Jun 2005 (UTC)

We're getting off topic here. In my comment above, I just wanted to make sure that we didn't re-add the statement that most people pay over 23% in taxes. When I said that corporate taxes are irrelevant, I was referring to the fact that salary is deductible: corporations don't pay tax on income if they pass it on to their employees. There is no "double taxation" or "hidden tax". It's true that employers must pick up another 7.65% (exclusive) in payroll taxes. Some people view this as an expense to the employee. But it's not our job to deliberate about which taxes should be attributed to individuals, corporations, etc. Determining the incidence of a tax is subjective, as you can see from this discussion. Once we move past direct taxes and talk about who bears the "true" burden of a tax, it's original research. For example, who bears the incidence of the corporate income tax? Is it the customers? The shareholders? The employees? It's not a simple question, it requires complex economic analysis. This is a debate we need to describe, not one we should play out here on this talk page. Thanks. Rhobite 04:07, Jun 15, 2005 (UTC)

(22-June-05) Section defining and explaining "Hidden taxes"?

Perhaps an entirely new section should be added that explains the concept of "embedded" or "hidden" taxes in goods and services. The easiest way to see the difference of opinion above is to ask what would happen to Prices if the businesses in the supply chain did not have to pay payroll taxes and income taxes on profits. That way it is easy to see that Prices = Materials + Wages + Taxes + Overhead + Profit. Reducing one of these components without increasing another yields a lower price. A central argument of FairTax supporters is that Taxes will be reduced at each stage of production and all other components will stay the same. Factually, that is one possibility. The alternative possibility is that Profit and/or Wages could increase as Taxes are decreased. What is incorrect is to say (as Gale does) that Price pre-Sales Tax fall only if BOTH Wages and Tax costs to the business fall. (This gives an incorrect result because lower Wages would mean lower consumption.) With either option, the consumer comes out ahead -- either Prices have fallen or Income has increased. FairTax proponents assume the fall in Prices rather than an increase in Wages or Profits. They apply this drop in Prices to the Materials and Overhead components, and get even lower Prices at the consumer level. This is applied recursively through however many levels exist in the supply chain for any good or service.

To call these costs components a "tax" to the consumer is a broad definition of a the term "Tax". Similar to how people refer to "inflation" as a "tax" on the consumer. This broader definition could be framed as Tax = Price Paid - Value Received. "Value Received" is defined as the cost of the item in a world without taxes. In this sense, any component of a Price that does not contribute to the Value of the good or service is a "Tax". That it is not labeled as a tax shown in the Price tag makes it an "embedded" and "hidden" tax. To leave this concept out of the explanation of the FairTax means there can be no direct comparison of tax rates between the current system and the proposed FairTax system. Kellis91789 20:07, Jun 22, 2005 (UTC)

The explanation of what FairTax supporters call "hidden taxes" could be an appropriate section, if sourced and referenced properly, not original research, and clearly labeled as opinion of supporters. The reasoning behind a bill is an encyclopedic element of it. If included, it should be kept as brief and simple. Some AFT support sites go on for pages on a concept that would be best explained in a paragraph or two. Unless there's a lot to the concept that I don't already know, it would have to be pretty short to remain NPOV. First, it's a relatively simple view. Second, it has an element of self-explanation in it. Unfocused 19:55, 22 Jun 2005 (UTC)

I agree it should be a simple concept. I didn't realize there was anything controversial about the components of Price, or that it was something specific to FairTax supporters. I thought the only controversy was over who bore the "burden" of taxes as a cost component. Holding all other variables constant, wouldn't taxes necessary affect Price ? If this equation for Price cannot be accepted as unbiased, then the concept of "embedded" tax even at the retail level fails. And that shouldn't even be the difficult concept. Usually the tough part is that people have no idea how many layers there are to a supply chain and therefor don't see the compounding effect of a small reduction in cost at each level.

BTW, if a reference is tossed out as "biased" because they have come to a conclusion with regard to any tax system, then you won't end up with any references. The references used so far from Gale and the JCT are clearly biased, yet have been accepted here. Kellis91789 21:37, Jun 22, 2005 (UTC)

it's practically impossible to do a technical analysis of implicit taxes under the current system against the FairTax sales tax. Who bears the burden of any tax depends on the market's structure, so it's not a safe assumption to say that final good prices will fall if the current tax regime ends. On the other hand, it's not possible to say who will bear the economic burden of the new sales tax under the FairTax regime. Feco 22:56, 22 Jun 2005 (UTC)

(23-June-05) Criteria for including references

I am not saying that biased references don't belong. They can belong. But all references need to be reviewed for what I'll call "confidence"; that is, what combination of research, editorial, speculation, and advocacy they are. The farther they are to the right of that scale, the less they belong, or at least the less prominently they should be featured in the article. Then the sources need to be identified clearly, and openly disclosed. An example is the claim as fact that interest rates would go down as a result of FairTax, without any supporting documentation. The only references where I've found these claims are speculation by advocacy groups. I don't want to add advocate speculation to an article, it's hardly NPOV. The Gale articles are excellent examples of research, and he's even given his formulas so you can repeat his work. The Congressional report is primarily research, too. All research requires some assumptions to be made. Think there is still bias? Find an appropriate rebuttal and cite it, preferably based on approximately the same level of confidence or better. Lower confidence levels can be rebuttals for higher ones, but they usually don't match up as well, so are unlikely to fit in the article as well. --Unfocused 20:26, 23 Jun 2005 (UTC)

(9-July-05)Language on refund/rebate/subsidy

I struck the term subsidy b/c it doesn't apply here. A subsidy is designed to encourage a specific behavior. This is a blanket cash handout that takes no account of behavior. The common terminology for this seems to be refund or rebate or credit (see Earned Income Tax Credit), none of which are really accurate. Subsidy is marginally less bad than refund, but refund/rebate is certainly without the factual error... especially in light of the explanation graf. Feco 02:43, 8 Jun 2005 (UTC)

Since the recipient is not required to spend any money up to the federal poverty rate, this is, in fact a subsidy for spending. It's not a rebate, since it's paid up front, and there are no spending requirements to receive it. It's not a refund for the same reason. "Prebate" is a neologism designed to get around the word subsidy, in my opinion. The word I rejected to choose "subsidy" was "entitlement", because that is inflammatory. --Unfocused 03:56, 8 Jun 2005 (UTC)
yeah, I hate "prebate." Rebate/refund/credit aren't accurate. Subsidy still doesn't sound right to my ear. Perhaps b/c this is a totally new concept... blanket, uniform cash handouts to everyone. It's the economist's dream tax in reverse... minimal impact on behavior. I guess subsidy is the least-bad term. Feco 08:30, 12 Jun 2005 (UTC)
I believe the economic term is "demogrant," define by the Asian Development Bank (pdf) as a "noncontributory benefit paid to individuals solely on the basis of meeting specified demographic criteria (e.g., age, residence, and disability)." Tom Joad 2k 7 July 2005 14:52 (UTC)
"Demogrant" is pretty esoteric; it isn't found at Dictionary.com nor the Merriam-Webster online. I'm not really sure it applies, as the only demographic required is citizenship, and the payments included in the FairTax proposal aren't grants in the traditional sense of promoting a specific activity or desired result since they're also paid to those who don't need them to live above the poverty line.
If "demogrant" is used, an inline definition would have to be included. Even so, I'm not sure I support its use in all occasions in this article. Either way, that was good research to find someplace online where demogrant is pretty clearly defined. Here is another place where demogrant is defined, except this time, it's referred to as a "universal demogrant", which is more in line with what the FairTax proposal includes. Unfocused 7 July 2005 15:11 (UTC)
I agree that if "demogrant" is used an inline definition would be necessary. In my research on consumption taxes and, specifically, the FairTax, I frequently see the word "demogrant" used to describe the Family Consumption Allowance. "Demogrant" is used by Gale (pdf) in his "The National Retail Sales Tax: What Would the Rate Have To Be?" paper and by R. Glenn Hubbard in his June 2005 testimony before the Ways and Means Committee. Huffman and Koenig of the Dallas Fed describe it as "a lump-sum transfer payment from the government" in this paper. And (I hope I'm not beating this one too much) a quick Google search shows that it is use quite a few times when discussing consumption taxes. Tom Joad 2k 9 July 2005 02:04 (UTC)
I agree that demogrant is likely too arcane to be helpful is this case. I also would like to file a complaint with whomever coined that term... it appears to be a portmaneu of democracy or demographic and grant. However, they ended up with a very Latin-sounding word that breaks down into the odd Latin: de + mis + ant (one/something that goes/sends away from). Feco 7 July 2005 21:28 (UTC)
I'm pretty sure it's a neologism where demographic and grant have been merged to form demogrant; in normal use, it is a grant given to a specific demographic group. In the case of FairTax, the group is "all US Citizens". Unfocused 7 July 2005 21:51 (UTC)
In point of fact, the demographic for receiving the demogrant under the FairTax is any "lawful resident of the United States" with a Social Security number. Tom Joad 2k 9 July 2005 02:04 (UTC)

(30-July-05) Tax Collection

I have some concern with this section. While the source is quoted, I'm not sure it is true. "For taxes such as ordinary personal income taxes on wages, where there is withholding and third party reporting to the federal government, tax evasion rates are about one percent. Where there is some reporting or withholding, the rate rises to 17 percent. However, for taxes such as the FairTax proposal that are not withheld and reported by an independent third party to the government, evasion rates rise to 30 percent or more. Evasion rates of only 20 percent would require raising the sales tax rate to over 51 percent. [11]". While the citizen is not reporting anything to government, the business that collects the tax is required to do so and will be subject to audit. With only businesses reporting taxes, it is much easier to manage tax fraud. I know our state does a pretty good job with its sales tax. Does anyone know the evasion rates on State Sales tax? While the rate is considerably lower then the federal tax would have to be, it may give a much better indication of evasion and enforcement then the above figures. In addition, a majority of new goods and services are provided by a small percentage companies. (I use to have the figures on this but I can't seem to find them - I think it is 10% of companies provide 90% of goods & services). These are larger companies that would most likely not evade taxes. While I'm sure there will be evasion, I think the claim that under the Fairtax the taxes are not reported or monitored by government is false. As Unfocused so persistently claimed below, companies must pay taxes. I propose removing this statement or rewording it as to say that opponents have some concerns as to the evasion rate and maybe reference the article. Morphh 15:44, 16 Jun 2005 (UTC)

In addition, I'm not sure where he got the 1% tax evasion rate on income taxes and what falls under 17%. Even 17% seems to be a low number - I've seen old articles with much higer numbers. With less returns to audit (no more individual tax returns, only retail level businesses) and with the returns asking only the level of sales per year (as opposed to the massive size of returns for most businesses under the current system), it will be much easier to enforce compliance and detect fraud, as compliance auditors will have to look at a tiny fraction of the current pool they need to audit, and then only concentrate on one factor per audit, instead of hundreds like the current income tax system. Morphh 16:20, 16 Jun 2005 (UTC)

There is a point that is missing from the article that is important to this section. HR 25 is a National Retail Sales Tax, but it is to be administered by the States and not a Federal Agency. This has a bearing on compliance because it will be a State's own agency that monitors and audits businesses within that State. The 25 basis points paid to the States amounts to 5 billion dollars the States will have available for enforcement. As an example, California should receive over $500 million for enforcement. According to the first line of the second paragraph here http://www.lao.ca.gov/analysis_2004/general_govt/gen_09_0860_anl04.htm this is more than California is currently spending enforcing its own Sales Tax and Excise Taxes. The FairTax is simpler, but extends to cover services which are not currently subject to the California Sales Tax. Because the Federal money paid to the States for enforcement is a percentage of the total revenue collected, the States will have an incentive to maximize collections. I would expect a system of rewards to citizens similar to the IRS rewards system for reporting income tax evasion. Except it is rare for someone to know that someone else is evading income taxes. A consumer will know immediately if a retailer is not charging them the Sales Tax. Getting a reward for 10% of that year's penalties and taxes owed by a retailer is going to be worth a lot more to a consumer than the little they would save on their own purchases from that retailer. The California BOE does not currently offer rewards for information on tax evasion, but with a higher rate involved I think they would. Kellis91789 22:38, Jun 22 2005 (UTC)

I see someone trimmed my long-winded paragraph about a possible rewards system for reporting tax evasion. There is no comment here on the Talk page as to what they objected to. That is discourteous considering I waited a full day after stating my intention to add these paragraphs. I have trimmed it to a single clause about rewards similiar to what the IRS currently uses. Kellis91789 23:10, Jun 24 2005 (UTC)

I recently heard David Burton of the Argus Group state that studies show that State Sales taxes are better complied with then State Income Tax. I'd like to see more of this if someone has some links to these studies. Morphh 19:39, 29 July 2005 (UTC)

Made some changes to this section. Added a few things on FairTax compliance. Removed a couple of the sentenses that referenced 1% and 17% complaince as the IRS states a 20% compliance (I think it may be 22 - 23% but I need to find more source info). The statements didn't refute the IRS they just seemed to complicate the paragraph with irrelavent information and just made it confusing. Made a couple small corrections and additions. Morphh 21:31, 30 July 2005 (UTC)

(2-August-05) Percentage rate statments

The graf: The current income tax system fails to collect on a significant percentage of taxes owed. The IRS estimates there are twenty additional cents or 20% of taxes owed on unreported income for every tax dollar collected. In 2001, the IRS estimated this shortfall to be over $312 billion had the 20% figure recently added. I would rather remove that percentage figure, because it's an ambiguous value in the context. Example:

  • considering the revenue increase over current levels: ($1.20 owed / $1.00 collected) - 1 = 20% increase.
  • considering the revenue not collected: 1 - ($1.00 collected / $1.20 owed) = 16.67% increase.

Leaving the graf without an explicit percentage figure avoids the problem of different readers reading and interpreting the percentage value in different ways. Feco 17:35, 1 August 2005 (UTC)

I'm still trying to research this myself as I'm not sure how old or accurate that sentence is. I've heard higher numbers recently but I'm trying to find the reference material. This article has some source data but it looks a little dated. I tried to put it as a percentage as the discussion uses percentages with regards to FairTax compliance. It seemed to make sense to put the current evasion rate as a percentage as well. However, I do see your point (our inclusive / exclusive problem again). I'd like to get this strait from the IRS with source referenced but I'm having trouble finding it. I guess this raises the question on how these percentages are compared if we're working with different bases. Is a 30% evasion rate under the FairTax equal to a 23% evasion rate under the income tax? Is it fair to state a 16.67% income tax evasion rate and in the same thought state a 30% FairTax evasion rate without clarification? At this point, your correct, I can't tell what they are really saying. - I think I have a headache.  :-) Morphh 19:00, 1 August 2005 (UTC)
I removed the 20%. Morphh 01:41, 2 August 2005 (UTC)

(27-July-05) FairTax and interest rates

I'm seeing a couple of references to FairTax leading to lower interest rates. Is this just bald speculation on the part of supporters? I've tried to intuit the mechanism by which FT would lead to lower i rates... no luck. Can a supporter provide a link to the speculation (ideally, with an accompaning economic explanation)? If nothing turns up, I think the speculation on FT and i rates should be removed. Feco 18:46, 23 Jun 2005 (UTC)

addendum: even better would be an explanation that discusses whether this is a real or nominal effect. Feco 18:47, 23 Jun 2005 (UTC)

This may answer your question Interest Rates Morphh 01:27, 24 Jun 2005 (UTC)

I'd like to get my hands on the original paper by the Fed governor. So far, every google hit for that has led me back to FairTax. I read the FT's two-pager... I have a nagging hunch that there are some oversimplifications and omissions of the Fed's caveats. Any chance you can get the original Fed paper from FT? Feco 1 July 2005 05:23 (UTC)
What paper are you looking for? I looked at the above PDF but I wasn't sure to which paper you were refering. I'll see what I can do to get a copy. Morphh 19:42, 11 July 2005 (UTC)
I believe this is what you are looking for: How Would Tax Reform Affect Financial Markets? (pdf) Tom Joad 2k 20:47, 11 July 2005 (UTC)

NB- I'm going to post comments about FT's effect on capital and money markets under the 'other effects' section above. Since my comments will address i rates, I figured some helpful navigation text would be useful here. Feco 19:49, 27 July 2005 (UTC)

(27-July-05) Splitting 'tax visibility' graf

I gave its own section header to the graf on tax burden visibility. It was (inappropriately) under the 'tax compliance' section. I assume this was an accidental side effect of organic article growth, so I assume the change won't be a problem. Hopefully, the headers now better reflect the actual section content. Feco 19:01, 27 July 2005 (UTC)

(11-August-05)Tax Exclusive/Tax Inclusive

(29-July-05) Treat inclusive tax rate as neologism

I haven't been entirely comfortable with the usage of inclusive tax rate in the article. I haven't heard the term outside of the FairTax discussion. It seems perilously close to an intentional distortion of numbers to make them look better. Google seems to back me up on this. my search (the search string is a doozy: "inclusive tax" OR "inclusive rate" tax -hotel -car -hospital -room) This generates ~850 hits... some spot checking shows almost all of them are related to FairTax; roughly half of those hits are critiques that critize FairTax's calculation of the 23% rate. Such results tell me that the term inclusive tax rate doesn't have a usage outside of the FairTax context, so it should be treated as such in the article. An example possible treatment: "FairTax would impose a 30% national sales tax on goods and services. This tax would be added to the pre-tax cost of taxable items. FairTax proponents assert that the tax is better stated as a 23% inclusive tax rate. Out of $1.00 of total spending, $0.77 is spent on goods and services, while $0.23 goes to pay tax on purchases. Such treatment includes taxes paid as part of the total amount used to cacluate the tax rate; thus, the inclusive rate of 23% is lower than the assessed rate of 30%." Feco 28 June 2005 20:09 (UTC)

  • Well, I think you've done the basic research to justify the changes you propose. Just as I think "prebate" is made up term that requires definition and conversion to the more commonly used version, it is appropriate to convert the tax rate to the more commonly understood version, then explain why FairTax supporters choose to describe it differently. Adhering to the proponents' view, in this case, is POV, in my opinion. Unfocused 29 June 2005 00:54 (UTC)

Just because the term inclusive is not used often doesn't mean the method is not in use. I would not expect to see it much on Google as it is not often you are comparing the two methods as you are here. Inclusive is the measuring stick. The income and payroll tax is factored in this way. The FairTax is a replacement for the Income and Payroll Tax. Readers will be reading it as such and comparing it as such. I'm in no way for deception. In fact, I believe presenting it as exclusive is an intentional distortion of methods to give the perception of higher numbers. This is used by opponents as a scare tactic. I would be all for presenting exclusive if people easily knew how much they currently pay exclusively but people don't. People know how much they pay inclusively. It is only fair that any tax reform be presented apples to apples when possible. First thing people want to know is how much is the rate. Truthfully, what rate are they comparing it to in their head when you answer this question? If the comparison to a sales tax was instantly understood, there would be no need for the in depth explanation of inclusive and exclusive. To present it primarily as anything other then the closest comparison to the system it is replacing is POV. I'm all for presenting the exclusive rate. It is important for people to understand how it will be applied to goods and services but this should not be the primary method of presentation. Morphh 30 June 2005 01:20 (UTC)

Morph-I think you have a valid point that the 30% rate sounds higher than income tax rates. However, income & payroll taxes are "off the top", whereas FT will be "on to the top". So it's not a precise 1:1 comparison. I belive it's accurate to present the rate as a 30% tax, without mention of the terms inclusive or exclusive. I don't belive those terms should be mentioned because inclusive tax rate appears to be a new term coined in the process of the FT debate. Based on Google hits, the term doesn't look to have gained widespread usage, so shouldn't be presented as such. However, it is perfectly reasonable for the article to point out the logical fallacy that a 30% sales tax is a signifiacantly higher rate than a 23% income tax, for all the reasons already discussed. Per my sample text in the initial post on this topic, I think compromise verbiage is close at hand. Perhaps adding "FT supports prefer to describe the tax as a 23% inclusive rate. Because FT replaces current payroll and income taxes, FT's assessed rate of 30% appears similar to a 23% income tax rate, for these reasons...." Apologies for the slapped-together sample, but I hope it illustrates my point. Comments? Feco 1 July 2005 05:15 (UTC)

I have no expertise in economics, but I believe I have heard of the terms "inclusive" and "exclusive" in regards to taxation. For example, in Wiki's own article on VAT (in the section on VAT in the EU), the terms are used. I do agree with all above concerns and think that any example rates should be given with examples of what "inclusive" and "exclusive" mean with any given sales prices.

BTW, this is my first Wiki Talk entry and it took me a while just to figure out how to use the Talk feature and put a signature, so, my apologies for any technical or etiquette mistakes. CCMCornell 3 July 2005 08:56 (UTC)

Glad to have you in the Chat CCMCornell. I'm still thinking about this myself. Feco has a point and the sample sounds like a good start. I guess I'm unsure on removing the terms. While not used often, they make sense to me. More so then other terms used such as pre-taxed. All of the material we use as references also uses these terms. I guess I'm for making it simple for the reader to understand and discuss while remaining accurate and unbiased. While listening to the Tax Panel discussing reform sales / vat options, they use the "inclusive" rate. However, I don't know that I've heard them use the term inclusive or exclusive. Morphh 14:41, 11 July 2005 (UTC)

I made the changes along the lines of my earlier sample text. I stand by the assertion that a sales tax should be presented like current sales taxes. At the same time, I threw in a new chunk of analysis about making apples-to-apples comparisons between sales and income taxes. Comments? Feco 18:54, 27 July 2005 (UTC)

I made some additions to Feco's post. While I feel the percentage should be presented primarily as compared to the system it is replacing, I think the current format will work. It first defines the rate as a 30% sales tax and follows up with comparative rates. We have removed all reference to Inclusive and Exclusive as discussed. I think the apples-to-apples comparison that Feco added fits well with the article. I moved one of the paragraphs under this heading as it was more of a comparison then a reference to the FairTax rate. I also added some supporting information that supports the FairTax rate as we had the other rates defined below it. I added back in the comparative rates for the JCT and Gale as to line up well with the rates presented by the other economists. While I understand that some would like everything to strictly be presented as the sales tax rate and have a reference to the comparison, I think that would be biased, difficult to compare, and would not line up with all the supporting documents, articles, and news. I think we've reached a good compromise. Morphh 16:06, 29 July 2005 (UTC)


(11-August-05) Tax Exclusive/Tax Inclusive

I wanted to chime in on the debate about quoting FairTax in "tax inclusive" terms. I've had a pretty spirited debate on FairTax over at my blog, mostly regarding this certain point. While there is clearly an argument to be made that quoting in tax inclusive terms allows for a true "apples to apples" comparison with the current system, the disadvantages of presenting the proposal in this manner far outstrip the benefits. The major concerns are:

1. Since FairTax is (as this article correctly states) a retail sales tax, it should be presented to the public in a manner they would best understand....as a retail sales tax!!! The overwhelming majority of sales taxes in this country are quoted in tax exclusive terms and more folks will understand it this way. Presenting in tax inclusive terms generates the perception of misleading the public even if this is not the intended effect. From the looks of the post (and particularly all of the comments) I've linked to below, it seems pretty clear that even a large percentage of FairTax supporters are/were unaware of this difference.

2. Presenting in tax inclusive terms makes it looks like FairTax supporters are trying to hide something. For example, if you go to FairTax.org and look at the FAQ document, it isn't until question number 47 (out of a 48 question document) that there is an explanation about the difference between tax inclusive and tax exclusive methods. A reader who only explores the first few sections of this document and who (like most Americans) is unfamiliar with this difference, will not appropriately understand the proposal. Why isn't there an example prominently featured in the very first question? Secondly, even the top FairTax leadership seems more than content to let this common misconception just fester. See this post about a communication to FairTax director Tom Wright for more on this topic.

If the goal is to get people to understand the proposal, it should be presented as a 30% retail sales tax. If the goal is to confuse folks by engaging in circular semantic battles, try explaining the difference between tax inclusive and tax exclusive methods. It's a big exercise in futility and your time is better spent examining (and improving...because there are some weak points) the actual legislation. </rant>

Thanks for joining in the discussion. Most of the editors here fully understand the point you're making. I think it is best addressed in "Inclusive vs. Normal Rate Statements" as well as under "Treat inclusive tax rate as neologism". I think we have been fair to present and address both views in this article with a section describing the mathematical semantics. Both sides feel it is a deception to present it as the other - it is a mater of POV and we do the best to address it equally. The later posts in Inclusive vs. Normal Rate Statements discuss the most recent changes. According to the author of the legislation, Congressmen Linder, the FairTax is not to be implemented like a traditional sales tax. It is to be included in the price of the good and present as 23 cents out of every dollar (this is also how Tom Wright presents it). Your $100 jacket will be $100 and $23 of that is the tax paid for the coat. It will not be presented as a $77 dollar coat with $23 of tax. It is not just a mater of presenting apples to apples. In the end, it will be presented as 23% tax and not 30% like a traditional sales tax. Perhaps you should present this in your next poll. Morphh 14:12, 11 August 2005 (UTC)
Is this really true? I thought part of the point was to make the tax portion of a purchase more visible, not to hide it in the retail price. Strange if true. Unfocused 14:27, 11 August 2005 (UTC)
It is to be included on the sales receipt and visible. This just means I don't have to figure out what the item really costs out of pocket. The cost of the good is the cost of the good including the tax. Sales receipt will show the cost and what I paid in taxes for the purchase - 23% of the cost of the goods. Morphh 15:03, 11 August 2005 (UTC)
So in essence, FairTax is to be hidden in the retail price until after I've already made my purchase? Or alternately, on the shelf or on the rack, you would just have to know that about a quarter of the retail price would be FairTax? Unfocused 15:49, 11 August 2005 (UTC)
Ya I guess you could state it that way. It would be like stating that the tax is hidden from the advertised price of the good in a normal sales tax. You're either adding it to the good in a normal sales tax or subtracting from the good with the FairTax. Is one more visible then the other? I prefer it to be included as it is the true price of the good. I see lunch adds all the time for $4.99. Be nice to actually pull out $5 bucks and be done with it instead of trying to figure out how much change I need. It will be on the receipt how much I paid in tax for that transaction - $1.15. It is certainly more visible then the current income tax that is designed to hide the true cost of government from the taxpayer. Morphh 16:15, 11 August 2005 (UTC)

(12-August-05) Inclusive vs. Normal Rate Statements

Can we agree to state effective tax rates in the standard ("exclusive") style? Saying there's a 23% inclusive rate means that of a dollar spent, 77 cents went to the product, 23 went to taxes. 23 over 77 is 30! 30% of a product's value must be paid in taxes. This is a 30% rate. What's the point of the article listing two rates, inclusive and normal? Feco 15:52, 12 Jun 2005 (UTC)

  • REPLY - Most people will instantly take a perception that the rate is grossly higher then what they are currently paying without understanding the difference. In addition, many are blind to all the hidden taxes. It is tough enough to get them to add in payroll taxes when comparing. It only makes sense to compare it to what people know and then add the section explaining the difference. This is often used as a scare tactic by opponents without clarification as to the difference. I find it important and informative that both rates are present and if anything the rate compared to our current tax system.
The FairTax is a sales tax, that is people's frame of reference for the rate. They would compare the FairTax NRST rate to what they know, their state sales taxes. By stating a sales tax in the unfamiliar inclusive rate, the strong tendency is for people to believe the FairTax would charge less than it actually would. Except when directly comparing it to income taxes, the exclusive rate is the only way to express the FairTax rate without confusing the vast majority of readers. Tom Joad 2k 18:38, 11 July 2005 (UTC)

This is discussed further under the section "inclusive tax rate as neologism". Morphh 19:16, 11 July 2005 (UTC)

(begin unsigned comments from 66.161.74.248)

Reply:
Many opponents of the FairTax argue that volunteers of the Americans for Fair Taxation and many proponents of the H.R. 25 plan are liars. This just is not true. The opposition claims that the 23% sales tax rate is actually a 30% rate in disguise. While, the H.R. 25 FairTax plan will charge 30% at the register, I argue that this is not deception.
Let us define some terms here: Sales taxes are typically quoted as a tax-exclusive rate and income taxes are normally quoted as tax-inclusive. Tax-exclusive is defined as what the rate is after you paid for an item. Such as, you go to the register to pay for a $100 item, but the total comes to $107. The 7% sales tax was excluded from the price until you had to pay for it. Although 7% on the $100 item is $7.00 – that same $7.00 is 6.54% of $107.
Tax-inclusive is defined as what the rate is, inside the total amount (gross pay). Assume you bring home a $1,000 paycheck, but really only get $800 take-home pay. The 20% was calculated on your gross pay of $1,000 – not the $800 that you actually have to spend. That same 20% within all of your pay, would be 25% on your take-home pay.
This can make a huge difference in what rates that are quoted. Everybody is used to the old (current) way of doing things: income taxes that are taken out of our paycheck. The advocates for the FairTax are trying to compare apples to apples when they are quoting 23%. A 23% tax-inclusive sales tax is comparable to a 23% tax-inclusive income tax in this case.
It would be fine and rather true to quote the FairTax rate as a 30% rate. However, what does that say in your mind? As an example, to someone who is in the 28% marginal income tax bracket, this would seem like a bad deal. Not so, just by comparing these simple rates, alone, the FairTax is actually a better deal. Because, if you compare your income tax rate as a tax-exclusive rate similar to the 30% sales tax, the rate is 28% marginal rate is actually 38.89%. In addition, the 38.89% does not even include the payroll taxes (Social Security and Medicare) that are taken out of the paycheck. For this income bracket, that rate would be an additional 4.67% (tax-exclusive). Tack on the other 4.67% that your employer is paying to the government (instead of giving you a raise). Oh, and don’t forget about that 28.21% (tax-exclusive) in average embedded corporate taxes and compliance costs. Voila: 76.44%! No, ladies and gentlemen, this absolutely is not an exaggeration. Believe it, because it is true: some of us pay 76% to the government. With the FairTax, that 76.44% will be reduced to 30% (At the VERY MAXIMUM).
Here’s a breakdown of the marginal tax rates for the current income tax compared to the 30% FairTax rate:
7.65% payroll taxes = 8.28% plus another 8.28% that your employer pays:
10% = 11.11%
15% = 17.65%
23% = 30.00%
25% = 33.33%
28% = 38.89%
33% = 49.25%
35% = 53.85%
So, what it all boils down to, for all of the Conspiracy Theorists, is that you can say that the rate is 23% compared to the tax rate that you pay now in the current system (tax divided by net pay). On the other hand, you can list all the higher tax-exclusive income tax rates and compare them to the 30% that you want to quote.
There is also one minor thing in this. When the FairTax is enacted, purchasers will not have to calculate an item based upon its retail price plus the tax. They will want to know the whole price at the register. Nobody will have to figure out what the tax is on that $7.21 item. They will go to the register already seeing on the price tag, a price of $9.37. The 23% tax equals $2.16 divided by $9.37. Since $9.37 will be on the price tag, wouldn’t the 23% rate be the relevant rate anyway.

(break unsigned comments from 66.161.74.248)

  • I do find this point very interesting. I have heard by several sources that this is how the tax is to be implemented. The tax is to be included in the price of the item. If that is the case, then it's not presented as a traditional sales tax to the consumer. In the end if implemented, it may truly be presented as a 23% included tax and not a 30% add on tax. You know politicians will do as much as they can to give the perception of the lowest rate possible. Morphh 14:07, 3 August 2005 (UTC)

(continue unsigned comments from 66.161.74.248)

What it all boils down to is that if you disagree with the FairTax, it is not due to a deceptive tax rate. It is something else, so mention that, but not the rate.

(end unsigned comments from 66.161.74.248)

Anon IP 66.161.74.248:

  1. I strongly suggest you register for a wikipedia account. It's quick, easy and free. It allows you to have a user name, which prevents users from seeing your IP address. read the benefits here!
  2. Most of the editors here fully understand the point you're making. In fact, it seems to be perfectly addressed in the article in current form. In brief, readers should see a sales tax explained as all other sales taxes are. For comparison purposes, readers should see an explanation of why sales taxes don't directly compare to income taxes. Then, readers should see a specific demonstration. All of that is in the article.
  3. Working for a big real estate firm, you might know this: how will real estate sales commissions on used homes change after fair tax? Used home prices will rise overnight (by an unknown amount) if FT is passed. Will RE agents lower their commission rates, or will they overnight provide more services for more money? (Did I mention having a user acct hides you IP address?)

Feco 22:30, 2 August 2005 (UTC)

With the house prices out there in California it probably wouldn't matter - those Newport Beach commissions are probably killer ;-) Morphh 01:29, 3 August 2005 (UTC)

I just finished reading the FairTax Book and as discussed above and to my surprise, the FairTax is not presented like most sales taxes. The sales tax is to be included in the price of the product. So a coat for $100 dollars cost $100 dollars and not $100 with $30 dollars additional tax. The tax would be $23 dollars of the cost of the $100 dollar coat. This changes the view slightly for the 30% argument. As debated earlier, I think we were all under the impression that the coat would cost $77 dollars and they would add the tax like every other sales tax. The thought was AFT was using 23% as an apples to apples but when the customer would buy the item, it would be presented as a 30% tax. This is not the case however. When the customer buys the item, it will be presented as a 23% included tax. With this new information, I believe the current presentation of the Tax rate as primarily using "exclusive" rates should be changed. I'm still fine with doing away with the terms inclusive and exclusive but this article should reflect how the bill is written and present a 23% included tax. Something should still be written on the 30% figure and discussed as a matter of mathematical semantics. (It is expected that most states would mirror the FairTax system if enacted - it sure would be nice to have the true price of a product after taxes on the "tag" and not have to dig for pennies at the register) Morphh 13:10, 8 August 2005 (UTC)

I believe Boortz is wrong in stating the prices would be listed inclusive of tax. The bill doesn't state how prices should be displayed but it does state that the tax exclusive price and the tax inclusive price should be listed on the receipt. A practical matter against displaying tax inclusive price is state sales taxes. They would be very difficult for a shopper to try and figure out. And in Texas, it is illegal to advertise/display most items prices inclusive of tax. Tom Joad 2k 16:14, 9 August 2005 (UTC)
The book was co-authored by the creator of the bill, Congressman Linder. They specifically state that it will not be presented like the traditional sales tax. I would also expect politicians, if the legislation was enacted, to do their best to make it appear as low a rate as possible - it only benefits them to give such a perception. It is expected that States would jump on board and present their State taxes in the same way - same reason plus a larger base (services) and lower collection cost. This would certainly be easier for a shopper as there is nothing to figure out. If the State doesn't adopt this method, they're no worse off then today figuring out a state sales tax and digging through their pocket for pennies. The receipt will state the final price of the transaction and the tax associated with that transaction - seems pretty simple. Not sure what you mean by the tax exclusive price and the tax inclusive price as they are the same price. While I respect your opinion, I think I'm going to have to believe the author of the legislation on this one. Morphh 19:51, 9 August 2005 (UTC)
Again, the bill doesn't specify how prices should be presented and the bill would trump the book. Also, on the state taxes, if the states were to conform to the inclusive rate it would complicate issues even more. When you add to inclusive sales tax rates together, they generate more tax than if they were charged separately. Example: if you have a 20% inclusive federal tax and a 5% inclusive state tax, a $100 tax exclusive item would have $25 in federal and $5.26 in state tax charged for a total of $30.26. If you add the two together to get 25% inclusive, the tax on the same $100 would generate a total of $33.33 in tax. Why? Because when you add them together, the state is taxing the federal tax and vica versa.
If the state chose to use an inclusive tax and add it to the FairTax, they would be decreasing their rate as they would be including services. While doing this, they would just factor in the additional income you specified to provide the adjusted rate. I expect a State would do research to determine what rate they would need to be revenue-neutral. As the State is collecting the revenue, this should not be a big problem for the bean counters to work out. I guess I'm trying to figure out what we're debating. Concerning the article, we have addressed both points of view quoting both rates, removed inclusive and exclusive, and described the math regarding the base of the tax. The 30% point has been visibly made. The bill is presented as 23%. This is the rate in discussion by Congress, the Presidential Tax Panel, and what is used in most of our references. First and foremost, the article should describe the bill and then address other viewpoints. When providing the method of presentation, while not in the bill, we should look to the author of the legislation for the primary method and then address other viewpoints. Morphh 03:20, 12 August 2005 (UTC)
I added language to the article to address some of the discussion above. Morphh 03:46, 12 August 2005 (UTC)

(13-August-05) Minor Suggestion

I suggest that this article mention that the use of the name "FairTax" may be a loaded term. You won't find mass agreement that a tax in this style is fair. The evidence that not everyone agrees is that it is not a law. Some folks wouldn't agree that any tax is fair, for example.

The FairTax is the name of the bill. The FairTax act of 2005. It's just a name. I guess we could add a comment like that but it seems a little unnecessary. As like saying the Best Tax Bill may not really be the best. On a side note, the name was not given by politicians. It was given by the American people. The FairTax is the only tax reform that was not created by politicians. Extensive polling of the people asked what they wanted in a tax system. $22 million in research later, we have the FairTax bill. I think we have yet to see what the mass agreement is on the FairTax. However, there is definitely mass agreement that the current system is unfair. I expect it is not a law yet as it does not benefit the politicians. Morphh 19:37, 12 August 2005 (UTC)

Your side note is interesting, but deceptive and more incorrect than it is correct. I don't recall voting on the "give Georgia Representative Linder's proposed tax reform bill a name" line on my ballot. The name was chosen by politicians, just like any other bill's name ever was. You think the "USA PATRIOT Act" would have passed if it were called the "Let's Give Big Government Law Enforcement Bureaucracies Virtually Unlimited Secret Rights To Spy On Our Citizens Without Court Review Or Oversight As Long As They Say It Is In The Name Of Counter Terrorist Activities Act" (LGBGLEBVUSRTSOOCWCROOALATSIIITNOCTA Act)? I don't think it would have passed.

The fact is, simple truth doesn't sell in politics. Republicans have learned this better than anyone else on the planet, so all of their prominent bills are named for maximum surface appeal. Because "fair" is a value judgement, use of this name will alway be a political spin. FairTax is more fair to some taxpayers, less fair to others. But the common name for the bill is "The FairTax Act", so even though it is an extremely loaded term, it's what's appropriate for the article.

That's why the article carries a POV tag, and why claims of fairness cannot be asserted as simple fact. Unfocused 21:57, 12 August 2005 (UTC)

How can you call me deceptive and incorrect when you obviously don't know the history of the FairTax? You seem to do your best to make this a partisan issue - do you have some grudge we should be aware of. Not very Admin like. While a waste of my time, here is an abridged history lesson...
In 1995, three men - Jack Trotter, Bob McNair, and Leo Linbeck decided to do something to try and rid the tremendous waste in our current system. They decided to go with a two-pronged approach. One was academic and the other was market research. The product should be efficacious, good, and not harm anyone. They read a number of books and found 50 authors that they thought were good. They thinned that down to 20 who they deemed very good at what they were writing about. They wrote to these 20 and sent them a request for a proposal to meet their needs. Over three months, they interviewed 15 of these experts and finally chose eight. These include: Marty Feldstein, professor of economics at Harvard and president of the National Bureau of Economic Research; Jim Peturba chairman of MIT; Dr. Larry Kotlikoff, professor and chairman of the Economics Department (Ph.D., Harvard) of Boston University; Dr. Dale Jorgenson, Frederic Eaton Abbe Professor of Economics at Harvard; the CATO Institute's Dave Burton and Dan Mastromarco, partners in the Argus Group; and Dr. George Zodrow, faculty scholar of Rice University's Baker Institute. They also engaged Bill Beach, John M. Olin Senior Fellow in Economics and director of the Center for Data Analysis to program software for supercomputers to do the dynamic studies of whatever they came up with. They added Stanford University's Dr. Kahn and Dr. Ferguson, coordinator of the Decisions and Ethics Center. Malcolm Gillis, president of William Marsh Rice University and Ervin Kenneth Zingler Professor of Economics also joined the team, did his doctorate work on consumption taxes and has also been a consultant for countries around the globe to ensure that their tax plans are beneficial in their outcome.
They began with $1 million in seed money. They raised $3 million more to keep the research going. They also hired Republican, and Democratic polling companies The Wirthlin Group and The Mellman Group, which were to get a more balanced feel about their product. This is the first time these two companies had worked together on the same project, a national poll. The idea was to begin with a bipartisan plan. Four cities were chosen for tests. They were Los Angeles, Boston, Chicago, and Tampa. Two focus group studies were performed in each city. It was from these focus groups, were the FairTax got its name. They test-marketed the plan in three cities: Bakersfield, Calif.; Traverse City, Mich.; and Charleston, S.C. This process took two years. They did not approach legislators but willingly discussed what they were doing if they were asked any questions...
The story goes on but I think I made the point. The name existed before the bill - Linder just put it into a piece of legislation. Morphh 03:20, 13 August 2005 (UTC)
I sincerely apologize for using the word "deceptive". Perhaps "unintentionally misleading" is more correct. I was more "loose" with my language on a talk page than I'd ever consider in an article. Please choose any other article in Wikipedia, and I will make a good faith, content contributing, referenced edit as my apology.
That was a nice background story you provided, but even you have just now stated that the FairTax bill was named by a politician. Linder, by name. Based on focus group research. The bill didn't get it's name from "the American people", it got its name from a politician. This article is about the bill, not the "movement" or "political interest group" or some general proposal that the bill followed. Perhaps you are confusing them. This article is about Rep. Linder's bill in Congress. (We could change the article to be more about the larger movement, then have a much smaller article about the bill itself. It's a lot of work, but it would probably be more accurate.)
Georgia Representative John Linder claims to be the author of this bill. A claim of authorship requires more than just accepting a suggestion from "the American people", or any political group that is a subset of "the American people".
People who engage in politics are politicians. By creating proposed legislation by interpreting research, even the original reseachers have engaged in politics. Perhaps my definition of politician is broader than yours. Mine was expanded a lot by the recent wave (over the last 20 years or so, culminating in 527 groups) of special interest groups getting involved in politics. (Groups like "Americans for Fair Taxation" and "moveon.org". In my mind, they're politicians.)
Regarding bias, I think your pro-FairTax bias is obvious and is currently present in the article, but not "offensively" so. I also want to mention that think the article is very much improved since you've been here and is pretty good at this point. You've done some very fine work along the way. I don't agree with some of the phrasing, but that's why I still edit the article from time to time.
Sometimes my edits are more weighted in favor of the opposition than at other times, but as I mentioned to you before, I'm fine with being reverted in the process of seeking neutral language for important points.
Finally, I am not an admin, and have no desire to become one. Unfocused 12:53, 13 August 2005 (UTC)
Thanks - As I read my initial statement, it does come off like I was saying the bill was named by the people. Of course you are correct that the bill itself was named by Linder. I only ment that the name itself, that which makes up the bill was named by the people. So the solution / product had the name of the FairTax and then bill was created using the same name.
My bad on the admin - I assumed such during your offering to Feco. Morphh 17:17, 13 August 2005 (UTC)

(20-August-05) Associations Endorsing FairTax - For / Against

I noticed the new addition that lists articles that are For / Against the FairTax. Seems we could probably go on for pages with articles for / against. I thought it would be better if we could get Associations that are Supporting or Opposing the FairTax. This seems more meaningful then articles conveying just the author's opinion. Perhaps this section should be broken up into For / Against with Associations and then Articles. Morphh 13:20, 30 July 2005 (UTC)

There have been two books written for the FairTax and possibly some against. What would be the best way to present these? Is a link to Amazon.com against Wikipedia policy? Perhaps a link to the authors / publisher website. I know of "The FairTax Book" by Boortz / Linder and "America's Best Kept Secret: Fairtax : Give Yourself a 25% Raise" by Al Ose. Morphh 19:21, 10 August 2005 (UTC)

To add a tag for a particular book just add "ISBN" and the ISBN itself and wikipedia will make a hyperlink to an assortment of ways to obtain the item including libraries and an assortment of book merchants. I added the two you mentioned even though I think FairTax is a shell game. Thane Eichenauer 11:12, 20 August 2005 (UTC)

(20-August-05) Remove NPOV tag

I hope I am not being too bold, but in reviewing this article, the discussion on this talk page and the article itself I would say this article is written from a unbiased viewpoint and should no longer be marked NPOV. I don't see a particular comment in the edit back to May 2005 where it was added but I would like to remove it. Thane Eichenauer 09:18, 20 August 2005 (UTC)

(23-August-05) Repeal of the 16th Amendment

Simple repeal of the 16th Amendment is not sufficient to preclude the return of income tax. A little history:

Article 2 Section 8 of the Constitution grants Congress the power to lay taxes.

Article 2 Section 9 of the Constitution requires that any taxes be apportioned among the states based on the census. This makes an income tax very cumbersome but not impossible.

Amendment 16 removes the apportion requirement of Article 2 Section 9.

Any repeal legislation would need to go further and preclude taxing of incomes.

I think an Income Tax is unconstitutional even with the 16th Amendment. www.861.info and www.861evidence.com - These sites containing scans of the prior law that shows over 80 years in the law itself that only those engaged in INTERNATIONAL commerce can owe federal income taxes. Most Americans are engaged only in DOMESTIC commerce and such incomes are NOT shown to be taxable. In other words, the type of taxation that the public has been led to believe exists is MISSING from the law BECAUSE the Constitution prohibits Congress from taxing these incomes (Congress does NOT have jurisdiction over intrastate commerce, state governments do). Morphh 13:43, 23 August 2005 (UTC)
I wish you good luck waving Web site printouts in the faces of the IRS agents as they seize your property for nonpayment of taxes. FCYTravis 16:39, 23 August 2005 (UTC)
I didn't say that I avoid anything. I try to change system through my representatives and not defaince. Hence my involvement with a consitutional tax system for reform. Sure would be nice to live without fear of the dreaded IRS seizing my property. :-) Morphh 20:01, 23 August 2005 (UTC)
I certainly agree that the income tax is flawed. I just disagree that a national sales tax is the way to fix it. :-) FCYTravis 20:25, 23 August 2005 (UTC)

So give us a better idea.

(16-September-05) The importance of an accurate rate

Somehow we should note that the FairTax rate is key to almost all other discussions on this page. Virtually every argument would change if the rate were higher or lower than the proposed rate, or if the proposed rate would quickly eliminate or severely inflate the federal deficit. Of course, this is obvious to those of us who've done the research to get the article into this state, so I wouldn't call a brief statement to this effect "original research", but I don't think the critical importance of an accurate rate is as clear to the casual reader as it should be.

I've been thinking of a way to present this, but haven't thought of how to state the obvious without making a mess or using mushy language. I think a simple sentence or two, or at most a paragraph somewhere in the "The FairTax tax rate" section would accomplish this. I'm hoping we can collaborate on something brief. Unfocused 12:28, 14 September 2005 (UTC)

Perhaps something like this... I changed the font size and italicized it. Could bold it small or leave it normal size and italicize it. Morphh 01:40, 15 September 2005 (UTC)
Note: This section makes assumptions that the presented rate in the FairTax bill is revenue neutral. An alternate rate may change these discussion points. See Revenue-neutral rate studies.
This is something like I had in mind, but it could be applied to so many sections that it would clutter the article tremendously. That's why I was thinking that a blanket statement actually in the "The FairTax tax rate" section might be enough. How about this:
"The proponent views in the remainder of this article assume that the rate in the FairTax bill is revenue neutral. If a different rate is used, or if the FairTax is not revenue neutral, some of the assumptions used and the comparisons presented in the rest of the article may not apply."
I don't think we should bold or italicize it. Comments and re-edits welcome. Unfocused 02:38, 15 September 2005 (UTC)
Sounds good - Although, I would remove the word "proponent" and just have it say "The views in the remainder...". As both proponent and opponent views use some of these assumptions in presenting certain arguments. I think this would best be placed at the end of section 2.1 "Revenue-neutral rate studies", the sub-section of "The FairTax tax rate". Morphh 13:47, 15 September 2005 (UTC)
Agree with placement 100%. I think some of the opposing views elsewhere in the article are still based on the argument that the FairTax rate is hopelessly optimistic, and I know of a few more that aren't in the article now that are also. How about something more like this?
"Note: Many arguments in the remainder of this article assume that the rate in the FairTax bill is revenue neutral. If a different rate is used, or if the FairTax is not revenue neutral in practice, some of the assumptions used and the comparisons presented may not apply."
Only not in italics. Unfocused 15:49, 15 September 2005 (UTC)
Perfect :-) Morphh 02:02, 16 September 2005 (UTC)

(11-October-05) Legislative Overview

I just added that Mr. Linder had introduced the Bill in every Congress since 1999 (he says it specifically on pg. xii of his book), but if we dont have the information on the other Congresses, why not just speak of its current legislative status? Why not get rid of 2003? Also, if we don't get rid of 2003, why not put it chronicologically, instead of reverse chronicologically? Trevdna 17:24, 7 October 2005 (UTC)

For any political proposal, the most interesting fact regarding its legislative progress is how far it has proceeded as of now. That's why it is set up reverse chronological. (I'm not sure who did it; it could have been me.) Your point that it's been introduced annually since 1999 says to me that yes, we should eliminate the 2003 section, and perhaps just add a few notes about years prior. As of this moment, there is no indication that there was a Democrat who supported the bill, and I think that fact is worthy of inclusion. Unfocused 17:39, 7 October 2005 (UTC)
I've been thinking some more about this: I don't see why we shouldn't eventually write a second article "Legislative history of FairTax" for years prior to current. However, if anyone runs with this idea, please make sure to either build it out as a section here, or create a pretty good start offline before submitting it; it is my opinion that some on Articles for deletion are pretty aggressive about deleting topics they aren't familiar with or interested in. Your thoughts welcome. Unfocused 01:19, 8 October 2005 (UTC)
Two things on that note: 1) Do you have any resources that there have been no Democrats in support of the bill (cause then we could actually note it on the page)? 2) Can you think why no Democrats would support the bill? Is it just because they're more cynical and untrusting? Trevdna 03:46, 8 October 2005 (UTC)
I found out why the Democrats will not sign the bill. They were given instruction by their leadership Pelosi & Reed not to do so. Since it was introduced by two Republicans, they don't want the Republicans to get credit for such a major tax reform. Stupid politics getting in the way. This is also why Collin Peterson has not co-sponsored this time. Morphh 15:09, 12 October 2005 (UTC)
It is untrue that no democrats support the bill. There are many that support the legislation and a couple that have even co-sponsored the bill. Zell Miller in the Senate and Collin Peterson in the house co-sponsored the FairTax in 2003. Many are waiting for the Presidential tax panel to announce before co-sponsoring the 2005 bill. This is also why 2003 is an important piece to include. Many politicians would not put there neck out for such reform in the past but 2003 shows the push by the American people for Tax reform. It also shows a stronger co-sponsorship in 2003 then 2005. While there is currently more political support in 2005, it has less co-sponsorship due to the Tax reform panel. To not show the 2003 numbers, it would give the impression that it has less support then it really has. A history would be a nice addition. Morphh 13:26, 8 October 2005 (UTC)
When I say that they support it but have not co-sponsored it, I mean that letters have been received from the representative stating that they support the bill and would vote for it if presented for a vote. There are also many that would fall under "leans for". They have not made the commitment to vote for the bill but believe that it is an option and they are not opposed to it. Again, many are waiting for the tax panel to make their support. Morphh 13:44, 8 October 2005 (UTC)
Public, verifiable support is the only support I'm referring to. No current Democrat is willing to give that at this point in time. If any Democrats support this bill, it belongs in the article. Rumors and "behind the scenes" support aren't encyclopedic because they're not third-party verifiable. Unfocused 14:36, 8 October 2005 (UTC)
What do you consider public and what do you consider verifiable? They are publicly supporting it as they will discuss it openly in town hall meetings, letters to constituents and such. It is also verifiable if you call their office and ask for their position on the bill. They will send you a nice letter telling you they support it and would vote to pass it. They are not rumors or "behind the scenes" support. Such politicians are classified as "will not commit". They are only considered to support the FairTax if there is written proof from the Representative. Such letters are usually not posted onto the web but I don't think you could say that the representative doesn't support it because some media hasn't posted the views in an article. In addition to the above, these democrats are also in favor of the bill: Robert Cramer, Dutch Ruppersberger, Benjamin Cardin, Harry Reid, Dan Boren, Jim Cooper & Kenny Marchant. This is just at the Federal level. On the other side of the coin, there are many Republicans that are against the FairTax. Most politicians on either side will not commit. I don't think this article is the place to list every politician that is for the FairTax. This would be unnecessary and way to long. To be even you would have to list all the Republican supports and then maybe the state supporters. To be NPOV you would then have to list all those that are against the FairTax and then probably add people that are not members of congress but have political pull such as Alan Greenspan. Then keep up with all their positions. I think it is enough to list the leaders / major sponsors and not be exclusive with extreme statements. I do agree that support is much stronger in Republican circles but tax reform is a bipartisan issue and I'd hate to cloud up the article with fuzzy party lines. However, if you choose to include such a statement, I would understand and work with you on phrasing. Morphh 23:04, 8 October 2005 (UTC)
That having been said, I've added the cosupport of Miller and Peterson to the section, but do you have proof of other support after the Tax reform panel makes its findings?Trevdna 20:54, 8 October 2005 (UTC)
FairTax.org keeps a close eye on who supports and who is against the FairTax in Congress. They error on the side of non-support as this drives constituents to contact the representative for support or co-sponsorship. Any changes in the status of co-sponsorship or support will be posted to that site. Messages are also often posted on FairTax newsgroups. If the FairTax is chosen as a reform option by the tax panel, they will commit their support. I expect if it goes toward a Flat Tax, they will put their support behind that proposal. Many believe either would be an improvement to the system. Much hesitation on the FairTax is if it has the legs to finish the race. The Flat Tax is an easier sell, even if many think the FairTax is a better plan for American. Morphh 23:04, 8 October 2005 (UTC)
Regarding verifiability, have a look at this page which sums up the standard. Unfocused 23:51, 8 October 2005 (UTC)
I would consider a written letter from the Congress representative to be "published by reputable or credible sources". Guess the problem with that is that it is not published easily for everyone to retrieve. It takes someone a little bit of time to verify it. I don't see anything on the policy about how timely a verification must be. Since FairTax.org is not the publisher of the information but just a media form presenting the position of the publication, it might be helpful for quick checks but the verification lies with the publisher which would be the reputable and credible congress representative office. However, as I stated above, I disagree with presenting the position of every congress person which would make the above irrelevant. The major sponsors and leaders are easily verifiable. Morphh 01:43, 9 October 2005 (UTC)
Ok, this is getting more heated than I would like (and more than a little off-topic). Is there any specific problem that either one of you has with the current article as it stands???
No problems - Looks good :-) Heated discussion seems to be the norm on this talk - we end up with a good article though ;-p Morphh 01:52, 11 October 2005 (UTC)
I usually though that things look like heated discussion here, when in fact, they're really not. The core group of editors at this article know and respect each other too well to take offense easily. Re: verifiability, an official communication from the congressperson's office is clearly an acceptable source document. Unfocused 02:30, 11 October 2005 (UTC)