Synopsis - FAIRtax(sm)'s (FT) Fatal Flaws - 2015
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FT's POLITICS: No FT is paid on poverty level purchases, as if we all agree.
TRANSACTION M/M SMITH (NO KIDS) M/M JONES (+ 6 KIDS)
Spending (before adding FT) $ 100,000 $ 10,000
FT - 30% * 30,000 (up to) 3,000
Less: PREBATE - Total (5,414) (11,155)
NET FT Paid or (REFUND) $ 24,586 $ (8,155+)
* Smith’s $30M FT (no dispute) is 30% of $100M - i.e., the normal “tax exclusive” view. FT tries to force us to view it as only 23% ($30M/$130M) - i.e., FT’s novel (bizarre) “tax inclusive” view.
Notes:
1) Net, Jones pays nothing, we pay him $8,155 to $11,155 for 2015(HI +15%, AK +25%)
2) Each year we give Jones a raise for CPI inflation.
3) Jones pays not $1 more, but gets free SS/Medicare - on $13,000 salary, he pays $995 ($1,990 with share) employer’s today, but nothing under FT - i.e., the rest of us pay for him.
4) For each new child Jones blesses us with, we give him an additional $957 yearly, increasing yearly, plus
more food stamps + more of many other Fed/State welfare programs).
FT deliberately overpays any FT paid by the poor. Prebate ($2,707/”adult”, $957/”child”) derives from assumed levels of spending even if actual spending is less – to which FT applies its deceptive 23% (in truth, 30%) sales tax. See http://aspe.hhs.gov/poverty-guidelines. Jones is “assumed” to spend (including FT) $48,500 (x 23% = $11,155), but he actually spends less. FT adds $7,610 spending ($1,750 Prebate) for a “spouse” (& others). HHS’ high assumed spending includes high non-cash welfare, used goods & black market buying on which no FT is paid, produce Prebates that will exceed any FT paid by the poor. Jones may well receive even more welfare from the Prebate than from today’s Refundable Tax Credits (“RTC’s”). NB: the Prebate effectively extends (& renames) RTC’s to a whole new group (i.e., the non-working poor) who are not eligible to receive RTC’s, today, but would receive a Prebate. Instead, RTC’s must be repealed - it’s welfare not a tax credit and is substantially un-auditable fraud.
At the House Ways & Means Committee’s FT Hearings (7/26/11), Charles Rangel (Dem-NY, former W&M Chairman) nearly choked on FT’s giant new welfare entitlement (Prebate). US Treasury concluded that a similar Prebate entitlement would (dangerously) result in a large number of Americans receiving a monthly check from the Fed Govt which represents a substantial portion of their monthly income. FT openly promotes egalitarian class warfare admitting to being “more progressive” and “social justice”. Under FT, more people receive more tax welfare than today – FT does not replace any of the numerous existing welfare programs (except RTC’s).
The Tea Party’s Contract from America REJECTED the FT as one of its 10 core principles.
FT's ECONOMICS: Even eliminating the Prebate, FT would bring economic disaster - it is a scam. FT asks you to “believe” in economic theories and miracles, none of which can be assured.
Independent economists, (not paid by AFFT) believe the 30% FT rate would have to be much higher (AFFT-paid BHI noted the FT rate needed is 35.1%). 1st, they believe tax avoidance will run rampant, requiring an increase in the FT rate to make up for lost revenue - incredibly, FT “assumes” ZERO FT evasion & avoidance, reduced spending & migration to USED goods. 2nd, the FT base is way too broad - no other state or nation has ever successfully employed such a broad based retail sales tax.
A National Retail Sales Tax is simply impractical. US Treasury found the FT rate needed to be nearly double FT’s 30%. It also designed a more rational tax with a median State sales tax base, exemptions targeted to the poor. At a sample 30% tax avoidance rate, the sales tax rate to achieve revenue neutrality would need to be an astounding 150%. FT can’t be saved! Harvard Economics Prof. Dale Jorgenson who was consulted by AFFT said “Replacing all 3 taxes is too heavy a burden for FT to carry”.
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Most States would likely conform their sales tax bases to the FT base. Even at “only” a 30-35% FT rate, we would be shocked by an in-your-face fed+state 40% (at a MINIMUM, but 70% @ 30% evasion/avoidance) sales tax – these rates alone would inflame buyers. The ensuing tax revolt would destroy our very retail-sales-sensitive economy.
In addition to a 40-70% sales tax, FT adds more hidden taxes, while claiming none. 1) State+fed govts need to raise taxes to pay FT on most of their purchases (AFFT now admits prices will rise) – the FT’s rate of 30% is really 42+%. 2) Federal govt will need to raise taxes for higher SS and all fed pension COLAs assured by FT and by more SS outlays caused by new fraudulent SS wage reporting. 3) The FT’s initial 30% is 1-5% too low, see above, and must rise to meet FT’s revenue goal. 4) There’s a possible cascading effect of 30% x a State’s sales tax rate, or the reverse. 5) Used goods may not be exempt from FT, as a practical matter.
Banks won’t lend on the FT: home buyers need to put up nearly 1/2 the cost (which cost will be higher by most of the FT). In addition to any State law bars to lending on sales taxes, any 1 of 3 events (FT repeal, Exemption for new homes, repeal Exemption for existing homes) would reduce the value of the house and put the mortgage “under water”. Banks cannot take that risk.
Seniors would pay for SS/Medi again and pay a 2nd or 3rd tax on their earnings. Middle class seniors will pay more tax under FT and will lose purchasing power because of the 15-30% price increase.
FT claims: “IRS” is abolished (in name only). To protect revenue, the new IRS (the STAA) may audit sellers and buyers far more intrusively than IRS and require all to file an annual “FT Summary”. FT can’t tie the hands of a future Congress - a new Income Tax can be enacted (+ repeal FT’s sunset clause). RESULT: The new IRS would audit Obamacare, a new Income Tax and the FT. Other FT claims ($T’s overseas coming home, criminals paying tax, & others) wilt under proper analyses.