Tuesday, December 4, 2007

REPLY TO RICH LOWRY'S "MAGIC WAND OF TAX REFORM PLANS"

I have been reading e-mails about Rich Lowry's abomination of the FairTax in his opinion piece entitled "The Magic Wand of Tax Reform Plans. In it, he called the fair tax "daft", "politically unsalable", "so-called", "a bed-time story", "more complex than the current tax scheme".

His article was full of un-truths (lies) and I am submitting my reply to Mr. Lowry in the Oregonian as well as various other local newspapers in the area. I doubt if anything I send will reach print, so I guess that's what a blog is for: to state my views and refute the "big boys' lies".

Poor Rich Lowry, having to stoop to lies to turn us off the FairTax. We must be making progress with our grassroots campaign. Please allow me to address and correct Lowry’s Lies:

Lie #1: FairTax: “the most radical—and politically unsalable and substantively daft—proposal of any major presidential candidate of either party.”
Truth: FairTax: The most researched tax proposal to date, politically “salable” in that there are 72 members of Congress currently supporting this proposal. Lowry is calling the voting public “substantively daft”. I am not crazy—are you? Oh, and the FairTax reaches across the aisle, is non-partisan since everyone pays taxes and few, if any, like the IRS.

Lie #2: “The so-called (there we go again) FairTax would eliminate the income and payroll taxes and replace them with a (supposedly) 23% national sales tax.”
Truth: This statement is true except for the name-calling and the deliberate bashing of the 23% sales tax (Lowry says: “What they really are talking about is a tax of 30 cents on every dollar”). Doesn’t Lowry know the difference between an inclusive and an exclusive tax? The FairTax is being compared to the income tax on an “inclusive” basis, therefore it is 23%. It is like comparing apples to apples, Mr. Lowry.

Lie #3: “Nevermind that it is unworkable and would be politically deadly in a general election”.
Truth: The FairTax has been extensively researched by The Cato Institute, The Heritage Foundation, Fiscal Associates, Boston University, Stanford, Rice, MIT & other institutions. As for “politically deadly”, I say yes, only to the Lobbyists and the Senators and Representatives who want to control every aspect of our lives.

Lie #4: “The congressional Joint Committee on Taxation has estimated that the rate would have to go as high as 57%”.
Truth: With the FairTax, you will only be taxed once—at point of sale. No more embedded taxes added along the manufacturing line to cover the cost of payroll taxes and corporate taxes, which drives prices up and up. What we have now is a VAT tax PLUS and Income tax. And do you really think the Congressional Joint Committee wants to give up their control of you?

Lie #5: “it would amount to an incredibly regressive tax on even the most necessary purchases of low– and middle-income taxpayers.”
Truth: The FairTax would totally untax the poor and the elderly. The pre-bate makes this the most progressive tax of all the tax proposals on the table. As for middle-income taxpayers, you decide when and how much to pay in taxes.

Lie #6: “the government would send monthly “pre-bate” checks to all Americans based on income”.
Truth: The government would send monthly pre-bate checks to every head of household with a valid social security number, based on the annual poverty level determined by the Dep’t of Health and Human Services, NOT based on income. Remember, under the FairTax, no more income taxes, therefore no more reporting of income to the IRS..

Lie #7: “The mortgage deduction would be gone, and instead buyers would pay a 30% (at least) tax on their homes.”
Truth: There are two lies here: Yes, the mortgage deduction would be gone, but so would the income tax on every dollar you earn, therefore eliminating the need for a mortgage deduction. How much income tax deduction can you deduct from zero income tax? And yes, buyers would pay a 30% exclusive (Lowry used 23%, inclusive, in his other examples) tax on their homes, BUT only their NEW homes. Used homes and used goods are not taxed under the FairTax.

Lie of the day (#8): "Any of these points makes the FairTax so vulnerable to attack”…
Truth: Lowry is right about this point, and he knows just how to attack—with lies.

1 comment:

TAX SKEPTIC said...

So all taxes would be eliminated on poor? Sounds great. But inherent in FairTax are things that preclude that, to an extent.

For just one example, suppose a medicaid patient is in a nursing home.

Nursing home and health care are figured in the "total consumer market", and are taxed at 23%. If you took nursing homes and health care OUT of the "total consumer market" you have to raise your 23% to keep it revenue neutral.

70% of nursing home patients are medicaid, or insurance, or a combination. They wont suddenly get "all of their paycheck" cause most have none. Yes, you can send them a few hundred dollars prebate. But it wont touch the 1000 a month sales tax on their nursing home bill.

Either this large segment would get exemptions, or the government would pay extra to cover the sales tax. If the government had to pay pay more, they would have to raise the taxes to pay it. Either way, its defacto exemption.

So the treasury simply WOULD not get the taxes from this segment. Sorry. It would not generate the income for "revenue neutral" principle.

Even more, the middle income guy, making 50K, what if he faces back surgery? Brain surgery? Any surgery? All that is taxed.

THe prebate wont cover the 15,000 in sales tax on a 50,000 hospital and surgery cost.

And I know many people who had 100K hosptial bills. Its not even remarkable any more. Those people will be hit with 23,000 sales tax. Poor or not, that will be a huge shock to America.

This FAIR tax is a great idea, only if you can keep the rate low enough to work.