I was going to say “I don't know why protection of property rights would be fee-for-service, but healthcare would be social insurance” but you answered that for me: it's a normative categorization.

There's often too little plain talking in blogging. I think we see where our views are different, and that is good because that will allow us to build better analogies in the future.

A VAT, especially if it replaced the income tax, would be a fine source of revenue.

What is “sufficient progressivity”? And why are you requiring it?

The first aim of economic policy should be to grow the economy, and increase the general welfare. If this is best accomplished through progressivity, then the tax code should be so progressive. If a lesser degree accomplishes this better, then that degree should be hewn to.

Neal Boortz makes that very claim over, and over, and over, and does so based upon a number of erroneous assumptions, a major one which he feeds his audience quite religiously … imagine the savings to business and industry when the costly and time consuming record keeping under income taxation is ended by H.R. 25. But this happens to be wishful thinking at best, and at worst, an outright lie if made by one schooled in constitutional law.

If H.R. 25 were adopted, and its language followed to the letter, and even if the 16th Amendment were repealed as promised, not only would the misery of present taxation remain very much alive [the costly and time consuming record keeping for paying taxes calculated from income], but an additional rule book would be created under H.R. 25 leaving the American people and businesses with two rule books to follow___ the one created under H.R. 25 and the rule book for paying taxes calculated from income. Let me give you the particulars.

There is nothing in H.R. 25 to prohibit Congress from laying “excise taxes“. Excise taxes can be laid upon a wide variety of things such as the privilege of being a corporation and can be laid upon countless other “privileges“ created by government, and can be laid upon certain occupations, callings, events, etc.

When such a tax is laid and the amount of tax to be paid is calculated from “income“, it is not laid upon “income“ [an income tax as such], but rather, it is laid upon the privilege of being a corporation, or is laid upon a certain occupation, or event, and the amount of tax to be paid is calculated from profits, gains, salaries, and other “income” realized under the privilege, occupation, event, etc. See: FLINT vs. STONE TRACY http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=220&invol=107 in which the SCOTUS explains all this in detail!

Along with this kind of excise tax, which calculates the amount of tax to be paid from profits, gains, salaries, and other “income” comes a tax code with allowable deductions, exemptions, and manipulative legislation to indirectly control choices and decision making just as we now suffer under income taxation.

So, even if the 16th Amendment is repealed, with the wording suggested by the primary promoters of H.R. 25, it will have no effect in relation to excise taxes which may still be laid and require nothing more than uniformity among the states.

In spite of all the Fair Tax talk about repealing various sections of the IRS Code and closing it down as portrayed on the cover of the Fair Tax Book, the misery now suffered under income taxation, the Internal Revenue Service and the IRS Code, would remain very much alive because of a failure to provide adequate protection with regard to excise taxes, and that failure leaves a glaring loophole which defeats the number one feature of H.R. 25, and does so even if the 16th Amendment is repealed.

If H.R.25 is adopted the loophole left invites Congress to simply erase the word “Internal” from “Internal Revenue Code” and replace that word with “excise“, as in “excise Revenue Code,” and, likewise erase the word “Internal” from “Internal Revenue Service” and replace it with “Excise“, as in “Excise Revenue Service“, and, go about its business inflicting the same time consuming and costly misery upon Corporations as now done, but in addition, these corporations will also have to abide by and follow an additional rule book with all its new regulations for record keeping as stipulated under H.R. 25!

Truth is, H.R. 25 doesn’t ”eliminate” squat as Boortz portrays on the cover of his book, and it especially does not even attempt to stop Congress from calculating a tax from corporate income. H.R. 25 leaves a sleeping loophole by which Congress may decide at its pleasure, especially a socialist dominated Congress, to enact, say a small tax upon those wealthy evil corporations and scoundrels who make millions of dollars a year and bleed the poor working people, such as was alleged about Leona Helmsley who they sent to jail for an alleged tax fraud, but actually contributed more in taxes than any twenty average working people in New York.

Regards,

JWK___ a proud supporter of our founding father’s ORIGINAL TAX PLAN http://usafoundingfathers.blogspot.com/2006/03/founding-fathers-original-tax-plan.html

“In matters of Power, let no more be heard of confidence in men, but bind him down from mischief by the chains of the Constitution”— Jefferson

Additionally, I am skeptical as many companies do not have nearly the tax overhead to make up for the 23% jump. Let's say your local meat locker sells beef at $1.89 / lb. With the 23% tax, it's now $2.32 / lb. Now, we get rid of all the payroll taxes, etc. for the two employees. I find it highly unlikely that their taxes come up as that 23% increase on every pound of meat they sold that year.

Instead, I think it would do two things:
1. The meat locker can't compete, because John Morrell saves real money with the abolished tax, and really can lower their prices by 0-23%.
2. Goods made by companies that don't gain competitive advantage by the tax relief become more expensive, thereby pushing them out of the market. Pretty soon the only companies that are selling goods are ones with great economies of scale… The already successful Big Brands.

So, again, who stands to benefit? My grocery bill will go up, but I'm not going to get 23% more pay. Where will the prebate come from? Last year's taxes? Mr. Boortz and Linder have had people doing their shopping for them for too long if the best example they can come up with is airline tickets.

Let's look at it this way… Airline tickets are not a commodity, but let's take something that practically is, gasoline. Let's say the government drops the $.30 or $.40/gal tax ( I don't recall it offhand ). Now, a company who wanted to sell more gas would set his price a bit lower than the other companies, right? So why doesn't gas go down to the same price as Flying J, Casey's and Mr. Nifty? Because demand is practically inelastic. People are still buying their gas at Shell and BP, even though the price is higher.

I'm no economist, although I'm always interested in the topic. Again, all I seek is an effective explanation. I don't think the airline tax is a good one.

Additionally, I'm not here to argue the ethical implications, although I have been Again, I want to understand how the reduction in employee payroll tax and corporate taxes will make up for a sudden 23% spike in the cost of all goods.

Perhaps if you can explain it well enough to sate me, and Dan buys me pizza, I could become a Republican convert. With DeLay's resignation, the party's looking better and better. Get rid of Frist, Santorum and O'Reilly/Limbaugh and I might sign up.

Brendan & Aaron:

Price is determined by supply and demand. It is not directly determined by producer's cost. Cost serves to increase or decrease the supply.

Brendan's airline analogy is flawed, because the air-travel market has been profoundly warped by government regulations. The US air market is much, much more “big government” than Europe's, for example. Airports are publicly owned, failing airlines are historically bailed out, etc. Fortunately the Bush administration is beginning to reverse, but there's a long way to go.

Likewise, Aaron's example is flawed. He criticizes premium (that is, “name”) brand cereal for being expensive, but then notes the widespread availability of cheaper substitutes (“off brand” cereal). That would be like saying the car industry is broken, because BMW costs an arm-and-leg, so how can people afford cars?

Further, Aaron's auto industry example supports Brendan's contention. The entrance of Japanese automakers have depressed real prices and increased quality, leading to a sustained, real decreases in prices for similarly good vehicles. One would expect companies which price irrationally (say, the great Michigan companies). to suffer the consequences. They are. [1]

Jimmy & Dr. Nexon:

A black market already exists in other taxes. I don't see it necessarily being worse for sales. Though Dr. Nexon's idea of a VAT may allow a functionally similar “fair tax” with less room for cheating.

I think “the principle that those who benefit more from the social contract should pay more into it” is precisely the wrong way to enter the taxation debate. Tax policy should not be a mechanism to punish (take) from those who “most benefit” — rather, it should be a way for providing for the general welfare and national defense. Its also a rhetorical flourish which falls apart on examination, as it would be insane to tax someone whose life is saved by subsidized medicine at a higher marginal rate (even though they are benefiting more from the social contract than someone who merely makes a few extra bucks), and the word “more” is used in a non-standard way for common English (to indicate a percentage rather than a quantity).

[1] http://www.suntimes.com/output/business/cst-fin-delphi31.html

And the current problems with sale-tax avoidance demonstrate how bad things would be if we financed everything through a sales tax system that focused on point-of-retail-consumption purchases. That's one of the basic reasons why virtually no state adopts a national sales tax and most opt for some form of VAT (in conjunction, usually, with other sources of revenue).

Your frame of “punishment” is interesting but mispecified. But we'll have to draw the lines of the debate there, because we're not going to convince one another. I'm just making my position clear: I object to the Fair Tax on both pragmatic and normative grounds.

A negative income tax:
(http://en.wikipedia.org/wiki/Negative_income_tax)

or negative consumption taxe: (http://econlog.econlib.org/archives/2003/09/libertarian_red.html)

When the technology is feasible in 10 or 20 years, I like a straight Transaction tax:
(http://www.apttax.com/).

Purpleslog
http://purpleslog.wordpress.com/2006/04/03/tdaxp-on-the-fairtax/

Instead, he's just making a Swiftboatload of cash giving Republicans wet dreams about how much money they'd save purchasing everything online.

I've been to the FairTax website and had a fairly libertarian friend try to explain to me how 23% of an item's cost is corporate tax, etc. and why the cost would decrease that much. I failed to be swayed.

Perhaps Brendan or TDAXP could explain how this isn't just a brilliant marketing scheme to get 49% of America purchse-level excited with those two magic words “lower taxes”