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80 Influencial Economists Sign Endorsement of the FAIR Tax! 11 January, 2008

Posted by stoptaxing in Economic Policy, Fair Tax.
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80 well known business and university economists including Delaware’s own premier economist, Eleanor Craig of the Associate Chair of the University of Delaware Economics Department, signed the following endorsement of the Fair Tax which concluded the tax code can’t be fixed and the cost of keeping it is outweighed by the benefits of the Fair Tax.

An Open Letter to the President, the Congress, and the American people

Concerning Reform of the Federal Tax Code

Dear Mr. President, Members of Congress, and Fellow Americans,

We, the undersigned business and university economists, welcome and applaud the ongoing

initiative to reform the federal tax code. We urge the President and the Congress to work

together in good faith to pass and sign into federal law H.R. 25 and S. 25, which together call

for:

Eliminating all federal income taxes for individuals and corporations,

Eliminating all federal payroll withholding taxes,

Abolishing estate and capital gains taxes, and

Repealing the 16th Amendment

We are not calling for elimination of federal taxation, which would be irresponsible and

undesirable. Nor does our endorsement call for reduced federal spending. The tax reform plan

we endorse is revenue neutral, collecting as much federal tax revenue as the current income tax

code, including payroll withholding taxes.

We are calling for elimination of federal income taxes and federal payroll withholding taxes.

We endorse replacing these costly, oppressively complex, and economically inefficient taxes

with a progressive national retail sales tax, such as the tax plan offered by H.R. 25 and S. 25 –

which is also known as the FairTax Plan. The FairTax Plan has been introduced in the 109th

Congress and had 54 co-sponsors in the 108th Congress.

If passed and signed into law, the FairTax Plan would:

Enable workers and retirees to receive 100% of their paychecks and pension benefits,

Replace all federal income and payroll taxes with a simple, progressive, visible,

efficiently collected national retail sales tax, which would be levied on the final sale of

newly produced goods and services,

Rebate to all households each month the federal sales tax they pay on basic necessities,

up to an independently determined level of spending (a.k.a., the poverty level, as

determined by the Department of Health and Human Services), which removes the

burden of federal taxation on the poor and makes the FairTax Plan as progressive as the

current tax code,

Collect the national sales tax at the retail cash register, just as 45 states already do,

Set a federal sales tax rate that is revenue neutral, thereby raising the same amount of tax

revenue as now raised by federal income taxes plus payroll withholding taxes,

Continue Social Security and Medicare benefits as provided by law; only the means of

tax collection changes,

Eliminate all filing of individual federal tax returns,

Eliminate the IRS and all audits of individual taxpayers; only audits of retailers would be

needed, greatly reducing the cost of enforcing the federal tax code,

An Open Letter to the President, the Congress, and the American people

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Allow states the option of collecting the national retail sales tax, in return for a fee, along

with their state and local sales taxes,

Collect federal sales tax from every retail consumer in the country, whether citizen or

undocumented alien, which will enlarge the federal tax base,

Collect federal sales tax on all consumption spending on new final goods and services,

whether the dollars used to finance the spending are generated legally, illegally, or in the

huge “underground economy,”

Dramatically reduce federal tax compliance costs paid by businesses, which are now

embedded and hidden in retail prices, placing U.S. businesses at a disadvantage in world

markets,

Bring greater accountability and visibility to federal tax collection,

Attract foreign equity investment to the United States, as well as encourage U.S. firms to

locate new capital projects in the United States that might otherwise go abroad, and

Not tax spending for education, since H.R. 25 and S. 25 define expenditure on education

to be investment, not consumption, which will make education about half as expensive

for American families as it is now.

The current U.S. income tax code is widely regarded by just about everyone as unfair,

complex, wasteful, confusing, and costly. Businesses and other organizations spend more than

six billion hours each year complying with the federal tax code. Estimated compliance costs

conservatively top $225 billion annually – costs that are ultimately embedded in retail prices paid

by consumers.

The Internal Revenue Code cannot simply be “fixed,” which is amply demonstrated by more

than 35 years of attempted tax code reform, each round resulting in yet more complexity and

unrelenting, page-after-page, mind-numbing verbiage (now exceeding 54,000 pages containing

more than 2.8 million words).

Our nation’s current income tax alters business decisions in ways that limit growth in

productivity. The federal income tax also alters saving and investment decisions of households,

which dramatically reduces the economy’s potential for growth and job creation.

Payroll withholding taxes are regressive, hitting hardest those least able to pay. Simply

stated, the complexity and frequently changing rules of the federal income tax code make our

country less competitive in the global economy and rob the nation of its full potential for growth

and job creation.

In summary, the economic benefits of the FairTax Plan are compelling. The FairTax Plan

eliminates the tax bias against work, saving, and investment, which would lead to higher rates of

economic growth, faster growth in productivity, more jobs, lower interest rates, and a higher

standard of living for the American people.

The America proposed by the FairTax Plan would feature:

no federal income taxes,

no payroll taxes,

no self-employment taxes,

no capital gains taxes,

no gift or estate taxes,

no alternative minimum taxes,

no corporate taxes,

no payroll withholding,

no taxes on Social Security benefits or pension benefits,

no personal tax forms,

no personal or business income tax record keeping, and

no personal income tax filing whatsoever.

No Internal Revenue Service; no April 15th; all gone, forever.

We believe that many Americans will favor the FairTax Plan proposed by H.R. 25 and S. 25,

although some may say, “it simply can’t be done.” Many said the same thing to the grassroots

progressives who won women the right to vote, to those who made collective bargaining a reality

for union members, and to the Freedom Riders who made civil rights a reality in America.

We urge Congress not to abandon the FairTax Plan simply because it will be difficult to face

the objections of entrenched special interest groups – groups who now benefit from the

complexity and tax preferences of the status quo. The comparative advantage and benefits

offered by the FairTax Plan to the vast majority of Americans is simply too high a cost to pay.

Therefore, we the undersigned professional and university economists, endorse a progressive

national retail sales tax plan, as provided by the FairTax Plan. We urge Congress to make H.R.

25 and S. 25 federal law, and then to work swiftly to repeal the 16th Amendment.

Respectfully,

Donald L. Alexander

Professor of Economics

Western Michigan University

Wayne Angell

Angell Economics

Jim Araji

Professor of Agricultural

Economics

University of Idaho

Ray Ball

Graduate School of Business

University of Chicago

Roger J. Beck

Professor Emeritus

Southern Illinois University,

Carbondale

John J. Bethune

Kennedy Chair of Free

Enterprise

Barton College

David M. Brasington

Louisiana State University

Jack A. Chambless

Professor of Economics

Valencia College

Christopher K. Coombs

Louisiana State University

William J. Corcoran, Ph.D.

University of Nebraska at

Omaha

Eleanor D. Craig

Economics Department

University of Delaware

An Open Letter to the President, the Congress, and the American people

-4-

Susan Dadres, Ph.D.

Department of Economics

Southern Methodist University

Henry Demmert

Santa Clara University

Arthur De Vany

Professor Emeritus

Economics and Mathematical

Behavioral Sciences

University of California, Irvine

Pradeep Dubey

Leading Professor

Center for Game Theory

Dept. of Economics

SUNY at Stony Brook

Demissew Diro Ejara

William Paterson University of

New Jersey

Patricia J. Euzent

Department of Economics

University of Central Florida

John A. Flanders

Professor of Business and

Economics

Central Methodist University

Richard H. Fosberg, Ph.D.

William Paterson University

Gary L. French, Ph.D.

Senior Vice President

Nathan Associates Inc.

Professor James Frew

Economics Department

Willamette University

K. K. Fung

University of Memphis

Satya J. Gabriel, Ph.D.

Professor of Economics and

Finance

Mount Holyoke College

Dave Garthoff

Summit College

The University of Akron

Ronald D. Gilbert

Associate Professor of

Economics

Texas Tech University

Philip E. Graves

Department of Economics

University of Colorado

Bettina Bien Greaves, Retired

Foundation for Economic

Education

John Greenhut, Ph.D.

Associate Professor

Finance & Business Economics

School of Global Management

and Leadership

Arizona State University

Darrin V. Gulla

Dept. of Economics

University of Georgia

Jon Halvorson

Assistant Professor of

Economics

Indiana University of

Pennsylvania

Reza G. Hamzaee, Ph.D.

Professor of Economics &

Applied Decision Sciences

Department of Economics

Missouri Western State College

James M. Hvidding

Professor of Economics

Kutztown University

F. Jerry Ingram, Ph.D.

Professor of Economics and

Finance

The University of Louisiana-

Monroe

Drew Johnson

Fellow

Davenport Institute for Public

Policy

Pepperdine University

Steven J. Jordan

Visiting Assistant Professor

Virginia Tech

Department of Economics

Richard E. Just

University of Maryland

Dr. Michael S. Kaylen

Associate Professor

University of Missouri

David L. Kendall

Professor of Economics and

Finance

University of Virginia’s College

at Wise

Peter M. Kerr

Professor of Economics

Southeast Missouri State

University

Miles Spencer Kimball

Professor of Economics

University of Michigan

James V. Koch

Department of Economics

Old Dominion University

Laurence J. Kotlikoff

Professor of Economics

Boston University

Edward J. López

Assistant Professor

University of North Texas

Franklin Lopez

Tulane University

Salvador Lopez

University of West Georgia

Yuri N. Maltsev, Ph.D.

Professor of Economics

Carthage College

Glenn MacDonald

John M. Olin Distinguished

Professor of Economics and

Strategy

Washington University in St.

Louis

Dr. John Merrifield,

Professor of Economics

University of Texas-San

Antonio

An Open Letter to the President, the Congress, and the American people

-5-

Dr. Matt Metzgar

Mount Union College

Carlisle Moody

Department of Economics

College of William and Mary

Andrew P. Morriss

Galen J. Roush Professor of

Business Law & Regulation

Case Western Reserve

University School of Law

Timothy Perri

Department of Economics

Appalachian State University

Mark J. Perry

School of Management and

Department of Economics

University of Michigan-Flint

Timothy Peterson

Assistant Professor

Economics and Management

Department

Gustavus Adolphus College

Ben Pierce

Central Missouri State

University

Michael K. Pippenger, Ph.D.

Associate Professor of

Economics

University of Alaska

Robert Piron

Professor of Economics

Oberlin College

Mattias Polborn

Department of Economics

University of Illinois

Joseph S. Pomykala, Ph.D.

Department of Economics

Towson University

Barry Popkin

University of North Carolina-

Chapel Hill

Steven W. Rick

Lecturer, University of

Wisconsin

Senior Economist, Credit Union

National Association

Paul H. Rubin

Samuel Candler Dobbs

Professor of Economics & Law

Department of Economics

Emory Univeristy

John Ruggiero

University of Dayton

Michael K. Salemi

Bowman and Gordon Gray

Professor of Economics

University of North Carolina at

Chapel Hill

Dr. Carole E. Scott

Richards College of Business

State University of West

Georgia

Carlos Seiglie

Dept. of Economics

Rutgers University

John Semmens

Economist

Phoenix College

Arizona

Alan C. Shapiro

Ivadelle and Theodore Johnson

Professor of Banking and

Finance

Marshall School of Business

University of Southern

California

Dr. Stephen Shmanske

Professor of Economics

California State University,

Hayward

James F. Smith

University of North Carolina-

Chapel Hill

Vernon L. Smith

Economist

W. James Smith

Dean of Liberal Arts and

Sciences and Professor of

Economics

University of Colorado at

Denver

John C. Soper

Boler School of Business

John Carroll University

Roger Spencer

Professor of Economics

Trinity University

Daniel A. Sumner, Director,

University of California

Agricultural Issues Center

and the Frank H. Buck, Jr.,

Chair Professor,

Department of Agricultural and

Resource Economics,

University of California, Davis

Curtis R. Taylor

Professor of Economics and

Business

Duke University

Robert Vigil

Analysis Group, Inc.

John H. Wicks, Ph.D.

Professor Emeritus

Department of Economics

University of Montana

F. Scott Wilson, Ph.D.

Canisius College

Mokhlis Y. Zaki

Professor of Economics

Emeritus

Northern Michigan University

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Comments»

1. Bruce Barnes - 11 January, 2008

Editors note: Please don’t keep posting the same posting. Be creative. Thanks for your input though. I wish you would address the arguements of these premier economists.

I found this comment on http://www.lcurve.org regarding economic issues. I hope people find this as educational as I do!

Quoting from a recently-published book by political philosopher David Schweickart,
If we divided the income of the US into thirds, we find that the top ten percent of the population gets a third, the next thirty percent gets another third, and the bottom sixty percent get the last third. If we divide the wealth of the US into thirds, we find that the top one percent own a third, the next nine percent own another third, and the bottom ninety percent claim the rest. (Actually, these percentages, true a decade ago, are now out of date. The top one percent are now estimated to own between forty and fifty percent of the nation’s wealth, more than the combined wealth of the bottom 95 %.)

There is a growing class of billionaires that collectively holds a substantial fraction of the wealth of the country. [In March 2006 Forbes reported 793 billionaires in the US with combined net worth of $2.6 trillion. In March 2007 Forbes reported 946 billionaires in the US with combined net worth of $3.5 trillion. That is a 1-year increase of 19% in the number of billionaires and an increase of $35% in their net worth during a time of increasing poverty. Severe poverty is at its highest point in three decades.]

I do not have any problem with successful, wealthy, and/or well educated people, nor do I envy them. In fact I have great respect for Mr. Gates Sr., Mr. Buffet, and Dr. Robert Reich.

What I have a problem with is the attitudes in this country about the poor and the wealthy. Since President Ronald Reagan, people seem to have lost respect for poor and unfortunate people and detest giving a helping hand and the wealthy and businesses can do no wrong. That “kick them while they are down” attitude degrades our morals, principles, and government policies. The biggest injustice is the tax system. Mr. Gates Sr. has talked about estate taxes. Mr. Buffet has talked about the percent of tax paid. Dr. Reich has talked about the widening inequality of income and wealth and other things.

While I have nothing against billionaires, I do wish Republicans would let them pay their own taxes. When a poor person is taxed on 50 % of his net worth and a wealthy person is taxed on much less than 1 % on his net worth and a business is not taxed, that is not fair! The supporters of the consumption tax are trying to convince you to vote for the well being of the wealthy and businesses.

Let’s level the playing field for business by taxing every business out there the same. The only fair way to do that is a net worth tax. Should a single mother of 3 making minimum wage be forced to pay for part of a company jet? What are your morals? What is fair to you?

What should taxes be based on? Would you call someone making $50,000 a millionaire? If he has a net worth of $10 million, would you call him a millionaire? If someone has a net worth of $1,000.00, should he be required to pay $1 million in taxes? Should taxes be based on what someone buys?

By definition the term millionaire is based on net worth, not income. Therefore, if someone has a net worth of $1 million or more, yet only has an income of $50,000 per annum he is still a millionaire.

Income is not a measure of being rich, net worth is. Taxes should be based on ones ability to pay, not what he makes or spends.

When a poor person is taxed on 50 % of his net worth and a wealthy person is taxed on much less than 1 % on his net worth and a business is not taxed, that is not fair! The supporters of the consumption tax are trying to convince you to vote for the well being of the wealthy and businesses.

Wealthy people can use their influence single-mindedly and very effectively. A single billionaire can get the undivided attention of any politician he wants, any time he wants. If he doesn’t get what he wants he can, in fact, “fight city hall,” the statehouse, and even the federal government. Poorer people must pool their limited individual power and organize to have any effect at all. This is a very difficult thing to manage, in practice.

There are two classes in this country. One class derives concentrated power from its concentrated wealth. The other class has power only in numbers. That power is effective only to the extent that it can be mobilized through organization.

We live in representative democratic society. That means that “we the people” vote for people to represent us to conduct the business of government for the people. Businesses can’t vote and the wealthy that control the businesses are too small in number to elect the representatives. So what do they do? They have money to influence government to their advantage legally. The tobacco companies spent billions to influence public opinion and therefore government regulations to make even more money and kill people. The oil companies spent billions to fight the fact that burning fossil fuels accelerates global warming. Why? Short term profits. Will they make money? Yes. Will they destroy the planet? Maybe. Will people die? Yes. The examples go on and on. Increasing copyright laws from the original 14 years to 70 +, chemical company clean-ups, strip mining, saving and loan, Enron, and so on.

The point is that wealthy people hire lobbyist, think tanks, government employees, and yes our representatives to persuade people that our representatives are voting in the best interest of people instead of allowing the wealthy to steal from society. The fair tax system is funded by millionaires and companies. The fair tax system benefits the wealthy and companies. Shouldn’t people take a critical look at their claims to see how the tax system will benefit them and society?

Until we come to terms with these issues, phrases such as, “We the people…,” and, “of the people, by the people, and for the people,” are hollow clichés. Every four years people get to exercise there power to vote for representatives. 2008 is one of those very important years. Please don’t make the same mistakes as the last years.

2. Bruce Barnes - 11 January, 2008

For FY 2006, the IRS reports collections of 44.7% of Individual Income tax and 13.8% of Corporation income tax for the budget of $2.76 trillion. When employment taxes are included, individuals contribute 60 % to the budget while corporations only pay 28.5%. Income is not a measure of being rich, net worth is. Taxes should be based on ones ability to pay. Individuals have assets of $55 trillion and corporations have over $60 trillion. If corporations were paying their fair share, we would not have a budget deficit of 9%.

The wealthiest 10 % own 80% of all stock and 73% of all individual assets. Shouldn’t the wealthiest 10 % be paying 73 % of the individual income taxes? The wealthiest 1-percent make 25% of all individual income and the wealthiest 0.5 % make more than the lowest 50%. Does anyone really think that the poorest 50 % of taxpayers should or could finance 50% of the income tax budget? Our present tax system is not doing a good job.

3. Bruce Barnes - 11 January, 2008

The Consumption Tax will replace personal taxes of 60 % of the budget and also another 40 % to raise enough revenue to cover the budget, plus 10 % to cover the rebate to everyone. The average taxpayer pays about 20% in federal taxes and will then pay over 30 % in sales tax. So people will pay 50 % more in taxes.

Corporations enjoy all of the privileges of persons except the vote. They benefit from infrastructure, employee public education, law enforcement and limited liability. If corporations do not pay taxes, their privileges should be revoked. Privileges include copyrights, trademarks, patents, and contracts. Only people should be able to own these items and be responsible for them.

4. Bruce Barnes - 11 January, 2008

Taxable property is what most of the people have. Intangible property which is not taxable is what the wealthiest people have the most of.

“FairTax” definitions:
Taxable property – any property (including a leasehold of any term or rents for such property), but excluding intangible property and used property.

Intangible property – an asset that is not physical and not real property. It includes copyrights, trademarks, patents, goodwill, financial instruments, securities, commercial paper, debts, notes, and bonds.

Taxable property or services purchased from a seller for a business purpose in an active trade or business, or for export from the United States for use or consumption outside the United States are not taxed.

Purchases by consumers are taxed.

Investments (property purchased exclusively for purposes of appreciation of income or the production of income) are not taxed.

Used property – defined as property on which the federal sales tax has been collected already, and property that was held for other than a business purpose on December 31, 2008 (the day before the sales tax became effective). The term “used” relates to whether or not the sales tax has been paid previously, and not just to whether or not the item has been sold previously. It appears that almost everything will be taxed for the first few years.
Why don’t we just tax intangible property and forget about the rebate?

5. stoptaxing - 11 January, 2008

Bruce, you can’t confuse net worth and income.

To your point, the only way the wealthy will pay a greater share of their income is through a progressive consumption tax.

Thanks for contributing.

6. Bruce Barnes - 11 January, 2008

The consumption tax is not fair.
Insurance will cost 23% more.

All types of insurance: Life, health, property and casualty, liability, marine, fire, accident, disability, and long-term care will be taxed.

If you can’t afford insurance now, you sure want be able to then.

7. Bruce Barnes - 11 January, 2008

The consumption tax is not fair.
When a company has a dispute with a customer, they may find themselves in a court that only the customer has funded and to add insult to injury, the customer has to pay his lawyer 23 % more than the company does.

Jeffrey Liakos - 23 June, 2017

Bruce Barnes, a consumption tax is fair. Don’t be naive.

8. Bruce Barnes - 11 January, 2008

Everyone will start their own business.
If a business pays Fair Tax on items for business use, the owner can get that FairTax back. Investments (property purchased exclusively for purposes of appreciation of income or the production of income) are not taxed.

9. Bruce Barnes - 11 January, 2008

Will the IRS really be gone? The IRS is uniquely qualified to administer the Fair Tax with people, computers, and facilities in every state and major city.
The FairTax Act will phase out appropriations for the Internal Revenue Service and then spend billions recreating bureaus to administer the Fair Tax.
The fair Tax Act will pay retailers to collect taxes and keep records for six years and pay states to collect from retailers. An administering state enters into a cooperative agreement with the U.S. Treasury Department governing the administration of the FairTax by such state.
The Social Security Administration sends out the monthly rebates.
The Secretary of the Treasury is given the authority to promulgate regulations, to provide guidelines, to assist states in administering the FairTax, to provide for uniformity in the administration of the tax, and to provide guidance to the general public.
The Secretary of the Treasury is required to establish an Office of Revenue Allocation to arbitrate any disputes between states regarding the destination of sales for purposes of allocating sales tax revenue among the states.
The Secretary of the Treasury and each state sales tax administering authority may employ persons as necessary for the administration of the FairTax and may delegate to employees the authority to conduct hearings, prescribe rules and regulations, and perform other such duties.
Following due process of law, the tax administering authority can seize property, garnish wages, and file liens to collect FairTax amounts due. Each sales tax administering authority must establish, maintain, and adequately staff an effective, independent Problem Resolution Office to protect citizens from abusive administration.
The sales tax administering authority must establish and maintain an appeals process that provides a full and fair hearing of any dispute regarding tax liability.
The Treasury Department may use FairTax data in preparing economic or financial forecasts, projections, analyses, or estimates.
The fair Tax Act establishes an Excise Tax Bureau within the Treasury Department to administer those excise taxes not administered by the Bureau of Alcohol, Tobacco and Firearms.
It also establishes a Sales Tax Bureau to administer the national sales tax in those states where the federal government directly administers the tax and to discharge other federal duties and powers relating to the FairTax.
Does a rose by any other name still smell as sweet?

10. Bruce Barnes - 11 January, 2008

The proposed Net Worth Tax only taxes companies with a net worth over $1 million and millionaires. It raises more revenue than the present budget and is fair to all. It is the simplest to file, a balance sheet once a year, and the easiest and cheapest to oversee. It will reduce government assistance, lift people out of poverty, boost the economy, and raise the standard of living.

The Consumption Tax will replace personal taxes of 60 % of the budget and also another 40 % to raise enough revenue to cover the budget, plus 10 % to cover the rebate to everyone. The average taxpayer pays about 20% in federal taxes and will then pay over 30 % in sales tax.

The two founders of Google took stock for compensation. They are now each a Billionaire with stock holdings over $12 billion each and growing. Unless there is a taxable event they have held their stock tax free for several years and it is conceivable that they could hold a considerable amount until they die and not pay any tax. A consumption tax would take some. They could buy 10 $10 million houses, a $50 million ship, airplanes, cars, and eat out every night but it will be hard to spend $1 billion. What will they do with the other $11 billion? A net worth tax would take a small amount (5 %) each year and therefore no estate tax would be required. The heirs would simple start paying the tax when they received the assets. Fair is fair.

Wal-Mart pays less than 20 % of income in federal taxes. They buy most of their products overseas so their cost will not go down with a consumption tax. They are the low cost leader so the demand for their products will not go down so their price will not go down. Wal-Mart will not pay federal consumption taxes. Wal-Mart would pay a net worth tax of 5 %.

Who gets the shaft? Which is the fairest tax? Which tax will benefit you and society the most?

11. Bruce Barnes - 11 January, 2008

Reasons for a Net Worth Tax System
America should adopt a tax system based on net worth for the following reasons.
1. The net worth tax system has the broadest base of any tax system. The net worth of this country is larger than the income system, about $9 trillion, and the consumption system, less than the gross domestic product, (GDP) about $14 trillion. The individual assets of $55 trillion and business assets of about $60 trillion, $115 trillion, is more than 8 times the GDP of $14 trillion, a stack $100 bills that go around the moon and back: twice. Three percent of which is over $3 trillion. More than what our national budget is.
2. Income is not a measure of being rich, net worth is. George Will has said that the wealthiest 1-percent of households have more assets than the lowest 90%, $16 trillion. (The top one percent are now estimated to own between forty and fifty percent of the nation’s wealth, more than the combined wealth of the bottom 95 %.) Since the total individual assets are $55 trillion. The wealthiest 10% own about 73% of the net worth in the USA. The biggest 1-percent of corporations own 80 % of the business net worth.
3. Taxes should be based on ones ability to pay. A tax on net worth is the fairest tax to all. Net Worth is the measure of ones ability to pay.
4. Taxes on net worth have the lowest percentage. America’s budget is about $3 trillion. A consumption system requires a sales tax of over 21%. A net worth tax would be less than 3%.
5. A tax on net worth is the most versatile. Besides a flat tax of 3% for individuals and businesses, there are other possibilities. Some people say we have double taxation. We could tax only people at 6% or only businesses at 6%. Since businesses can’t vote and they pass there cost on to their customer, this is the best way to go. Next is the progressive path. The first $1 million could be tax-free and increase by 0.1 % for each $1 million up to 5% after $50 million. The other methods could also start at above $1 million or higher.
6. A tax on net worth is the simplest to file. Take what you own minus what you owe. Our present tax system is 63,000 pages of loopholes. Example: a person leases a car. The lessee does not own the car, so no tax. The leasing company owns the $25,000 car, but has a $10,000 loan. The company is taxed on $15,000. ($25,000 minus $10,000) The loan entity has $10,000 of assets so it pays tax on $10,000.
7. A tax on net worth is the easiest to enforce. Since this is a property rights country, all assets are traceable. Taxing only the most prosperous 10 % of businesses and people is the most efficient tax system.
8. Like the consumption tax, all of our present taxes could be replaced, individual income tax, corporation income tax, employment taxes, gift tax, and estate tax. Plus the excise tax.
9. Guarantees funding for all budget items like social security and Medicare by eliminating use taxes. User fees or tolls are another way for the wealthy and businesses to avoid paying taxes. Budget items come out of general funds.
10. A tax on net worth promotes transparency. When a company shows an annual report with a book value of $1 billion and only $10 million in taxes, they aren’t paying their full taxes.
A tax on net worth promotes free trade. Money, inventory, buildings, etc. are all assets so everyone can move assets around for the best effect.
11. Eliminate inflation. Dr. Milton Friedman said to end inflation, stop printing money. By increasing the tax rate 1%, the national debt of $9 trillion could be paid off in 10 years.
12. We start collecting 100 percent of our earnings in every paycheck. We all get virtual raises, since payroll taxes are no longer siphoned from our checks.
13. Reducing taxes on the poorest 90% will raise revenue. When people have more money to spend, they buy more goods, which mean more profit for businesses and the wealthiest 10%. Money flows up, water trickles down.
14. A tax on net worth promotes jobs. Employees cost companies less since the employment taxes are repealed and therefore employees become more competitive in the global market.
15. A progressive tax on net worth levels the playing field. Small companies that create the most jobs become more competitive with large companies.
16. A tax on net worth removes some incentive to move plants overseas. Taxes are based on assets no matter where they are located. What you own minus what you owe.

12. stoptaxing - 11 January, 2008

Bruce thanks for the info spam. Most of it you posted already. Do you have copy and paste files just ready to go? Your arguments are not based upon economic benefit but social manipulation.

Everyone will start their own business, you say. Have we not been dealing with consumption taxes at the state level for a century? You know it doesn’t work that way. You still have to pay sales tax if you purchase it from your own business. It is not a business to business transaction.

We don’t need to make any changes but adding a line in the POS computer programs. It is not some great burden, it eliminates burdens.

13. stoptaxing - 11 January, 2008

A tax on net worth would be anti growth and economically destructive. Once you devastate savings, what is used to produce income? At least an income tax skims off the growth and doesn’t destroy it.

Jeffrey Liakos - 23 June, 2017

A wealth tax would be more destructive to economic growth than a graduated income tax. However, both are bad for multiple reasons.

14. Bruce Barnes - 29 January, 2008

stoptaxing,

I found this comment on http://robertreich.blogspot.com/ regarding economic issues.

MONDAY, JANUARY 28, 2008
The Real Recession Problem: Consumers Are at the End of Their Ropes
Perhaps the silliest part of an already silly stimulus bill is a provision giving corporations big tax deductions this year on the costs of new machinery, instead of spreading those deductions over several years, as is normally the case. The idea is to get businesses to invest in more machinery, which will stimulate the economy.

But accelerated depreciation, as it’s called, doesn’t work. Almost the same tax break was enacted in 2002 and studies show just about no increase in business investment as a result. Why? Because companies won’t invest in more machines when demand is dropping for the stuff the machines make. And right now, demand is dropping for just about everything.

This tax break exemplifies the illogic of what’s called supply-side economics. If you reduce the cost of investing, so the thinking goes, you’ll get more investment. What’s left out is the demand side of the equation. Without consumers who want to buy a product, there’s no point in making it, regardless of how many tax breaks go into it.

Which gets us to the real problem. Most consumers are at the end of their ropes and can’t buy more. Real incomes are no higher than they were in 2000, while food and energy and health care costs are all rising faster than inflation. And home values are dropping, which means an end to home equity loans and refinancing.

Most of what’s being earned in America is going to the richest 5 percent, but the rich devote a smaller percent of their earnings to buying things than the rest of us because, after all, they’re rich — which means they already have most of what they want. Instead of buying, the rich invest most of their earnings wherever around the world they can get the highest return.

Add all this together and there’s just not enough consumer demand out there to keep the American economy going. We’re finally reaping the whirlwind of widening inequality and ever more concentrated wealth. Supply-siders who want to cut taxes on corporations and the rich just don’t get it. Neither does most of official Washington.

15. Alan Lidstone - 18 February, 2008

What Does the Fair Tax Really Do for You?

The Fair Tax is getting a lot of press these days, but relatively little information about the impact on American families is being distributed. The implementation of the Fair Tax is predicated upon several assumptions:

Assumption #1 – All active businesses entities in the US, including US corporations, sub-chapter S corporations, limited liability corporations, sole proprietorships, trusts, and partnerships have embedded costs that average 23% and prices for all services and new products will decline by 23% if the Fair Tax is implemented.

Assumption #2 – A Federal sales tax of 30% will be imposed on all consumers, Federal, State, and Local governments, and non-profit organizations on the purchase of all services, such as medical, legal, loan interest, and insurance, and all new products (including houses, food, and prescription drugs).

Note: Business entities and investors will be exempted from paying the Federal Sales Tax on any new products or services constituting part of the business activity.

Assumption #3 – The Fair Tax proposal is defined as being “revenue neutral” in that it is expected take in the same approximate amount of Federal sales tax revenues as comes in from the existing Federal business income taxes, FICA payroll taxes and Federal personal income taxes.

Assumption #4 – The Fair Tax proposal assumes that the IRS will be replaced with 45 individual state sales tax collection agencies and a U.S. Treasury sales tax collection agency to represent the states that don’t have a sales tax or don’t want to be responsible for collecting the 30% Federal sales tax and forwarding it to the U.S. Treasury.

Assumption #5 – The Fair Tax program does provide a prebate in the form of monthly checks to single people ($196), married couples ($391), and dependent children ($67) to help offset the impact of the 30% Federal sales tax for low income families. This will require well in excess of 100 million monthly checks from the U.S. Treasury to be distributed to individuals and families.

The Fair Tax assumptions have major shortcomings which will adversely affect all Americans, including children, working persons, and retired persons who are not in the top 5% of the income brackets as shown below.

(1) THERE IS NO GUARANTY OF PRICE REDUCTIONS: It appears obvious that most of tax savings, reduced costs and increased profits resulting from the elimination of the estimated 23% embedded cost will flow to the bottom line and be passed onto executives and investors and not to the customers or employees.

There is no legal requirement for businesses to reduce prices by the amount of any embedded cost elimination savings and no way to measure what they actually do.

Examples of windfall profits by US corporations in the past have a dismal track record. Look at the deregulation of the electric power generation and distribution industry that generated record profits and obscene long-term price increases to consumers; and Healthcare industry advocates stating that the “free market” healthcare HMOs were more efficient but required a 12% bonus (or more) to offer Medicare Part C over and above what Medicare currently pays the healthcare industry and providers for beneficiaries using Medicare Parts A and B.

The US pharmaceutical industry manufactures prescription medications around the globe, is given Federal government protection from allowing people to purchase prescription drugs outside the US, and gives Americans the highest prescription drug prices in the world.

Most of the profits resulting from savings for any purpose (elimination of “embedded costs”, moving jobs off shore, reducing employee wages and benefits, and importing manufactured products) went straight to executive perks (bonuses and salaries, stock option plans, and executive retirement programs) and investors with very little to none to employee salaries or reduced customer prices for products or services.

Anyone who seriously thinks a 23% reduction in costs will not disappear long before it hits the consumer prices or employee wages doesn’t understand the current implementation of capitalism, business organization and tax regulations, and corporate protectionism existing in the US.

(2) IMPACT ON MOST AMERICANS: The Fair Tax program is a reverse “Robin Hood scheme” that shifts the raising of tax revenues to finance the US Government operations from the business community (reduced to zero) and higher income Americans (who spend a lower percentage of their gross income on services and new goods) to the working Middle Class, retirees, and children not in the top 5% income bracket.

While proponents are quick to mention the “prebate” program mentioned above, they neglect to mention that the Fair Tax eliminates all current tax credits such as the Earned Income Credit, Credit for child and dependent care expenses, Foreign tax credit, elderly or disabled, etc. which currently help eligible people, substantially. I have seen no comparison as to which program (current IRS or prebates) offers the most dollars to assist low income individuals and families.

(3) IMPACT ON RETIREES – The Fair Tax proposal works directly against the needs and contribution of tens of millions of current retirees and increasing numbers of baby boomer retirees approaching retirement.

The Fair Tax proposal elimination of the payroll tax (Social Security and Medicare) and Federal personal income tax also eliminates the very reliable system used to report earnings and calculate Social Security benefits.

The Fair Tax proposal requires retirees, most of whom have a Federal Tax obligation of less than 10% of their gross income and no payroll tax to now pay a sales tax of 30% on all their purchases of services and new products. The 30% tax rate will apply to purchases of services and new products made with Roth-IRA income which was supposed to be tax free, and a 30% tax on services and new products made with Social Security income.

Note: Social Security is currently tax free for many retired individuals and couples, and partially taxed for the rest.

With no defined commitment to maintaining the Social Security and Medicare programs and no way to calculate individual Social Security benefits, the door will be wide open for politicians looking to “reduce taxes” to simply declare that the Social Security and Medicare programs are “wasteful” and “no longer required”. In its place, they will most likely propose a means-tested charity program.

(4) WHAT IF PRICES DO NOT DROP BY 23%? If the average cost of ALL new products and services does not decline by 23%, then the 30% Federal sales tax on the allegedly reduced prices from elimination of embedded taxes will increase the costs/prices of new goods and services over and above the current costs/prices for new goods and services.

Americans purchase many products that are manufactured in foreign countries, and shipped directly to the selling location. The cost of a Lexus made in Canada or a Hyundai made in South Korea have zero embedded costs in the vehicle wholesale price. The additional distribution costs and profits probably keep any embedded costs at less than 3-5% of the retail price, not 23%.

(5) WILL INDIVIDUALS PAY MORE TAXES? The Fair Tax proponents allege that it will raise the same amount of Federal Revenue as the current tax code. This means that the revenue from Federal business income and payroll taxes currently paid by business entities will have to be paid by individuals and State and Local governments under the Fair Tax. By default, individuals will pay more in taxes over their lifetime under the Fair Tax, not less.

Also, the Fair Tax will result in everyone (children, everyone in the work force, and retirees) that is not in the top 5% of income brackets to pay the 30% Federal sales tax on every service and new product they buy from “cradle to grave”. Since this group spends just about all their available lifetime income on goods and services subject to the Fair Tax, their effective tax rate will be close to 30%.

(6) ELIMINATING THE IRS DOES NOT SAVE ANY MONEY – It is also important to realize that the proponents of the Fair Tax have already conceded the costs of collecting the proposed 30% Federal sales tax are the same as the current expenditures for the IRS to collect and process Federal tax revenues. While the Fair Tax eliminates the IRS, it does not reduce the costs for Federal tax revenue collection expenses.

Other impacts of the Fair Tax mean that nationwide or regional businesses will be dealing with up to 45 separate tax collection agencies (the states currently collecting sales taxes) depending on the number of states they operate in as well as a new Federal tax collection organization that the Fair Tax proposes to establish to monitor and collect the new Federal sales taxes.

Each of the individual states sales tax collection agencies has different organizations, business processes, and penalty determination and assessment policies. Businesses operating on a nationwide basis or large regional basis could find the tax compliance work increasing by having to report to up to at 20 – 46 agencies on a monthly basis.

If you think the IRS can be heavy-handed, you don’t realize that state sales tax penalties can start at 25% for being one day late, and quickly climb to 100% penalties. Many state sales tax agencies can come directly into a business to monitor the business and revenue activity and seize cash if they suspect the business of not paying all taxes due.

CONCLUSIONS: Great for business (taxes go to zero), great for high income earners (top 5%) who do not spend the bulk of their income and disastrous for the remaining 95% of Americans. It will be onerous for Federal, State, and Local Governments; and non-profit entities (now exempt from all sales taxes), and an administrative nightmare to deal with dozens of individual state sales tax collection agencies regarding collection of the 30% Federal sales taxes.

Note: Many smaller businesses will like not paying Federal business taxes and FICA but will conclude making monthly payments to a combination of State and Federal bureaucracies may prove more onerous than the current reporting requirements.

In addition, State and Local governments will increase taxes to offset the Federal Sales taxes they pay, and non-profit entities will most likely reduce services since they will have less income available to provide services.

Pay particular attention when any candidate or politician talks about “Means-Testing” or “Entitlement Reform”. These are generally buzz words that really mean reducing health or retirement benefits while leaving the potential beneficiary with the responsibility and requirement to continue paying for them.

In closing, I have grave reservations that any savings achieved by corporations from not paying the business portion of the Federal payroll taxes and business Federal income taxes will result in reduced prices for the products and services they sell or wage increases to their employees.

I am also concerned about the high potential for rampant avoidance and cheating by consumers (under the table cash payments, etc.) and businesses failing to remit the collected 30% Federal sales taxes to the appropriate state and Federal agencies.

16. Alicia Martin - 19 February, 2008

Yes, Alan the economists are stupid. The prebate is not an assumption it is in the bill. Prices would not rise at the level you are predicting for long because of supply and demand laws. If some companies tried it, competitiors would come in and sweep away market share. Yes, you are right that domestic goods would finally have an even playing field with imports. That is what most of us want.

No local governments and the like would not pay taxes.

The federal government has no constitutional authority to tax them.

17. Alan Lidstone - 20 February, 2008

Alicia, economists are not stupid, but people tend to dice and slice what economists say to get the answer they want.

Regarding the contents of HR 25 – the Fair Tax bill. My comments state several assumptions that represent some of what the bill would do. There is a big difference in a bill sitting in committee and a bill that is passed by the Congress and signed by the President because no bill ever gets out of committee and up for a vote without lots of changes.

Essentially, a bill in committee and Fifty Cents will get you a newspaper (but your really don’t need the bill in committee).

Regarding your comment that “Prices would not rise at the level you are predicting for long because of supply and demand laws. That would be the case if supply and demand were the only factors driving prices. Many widely used products and services do not really operate in the very popular concept of the “Fair Market”, having other ways to control their prices that can involve legal requirements, unique products, and extremely creativity in allocating costs between manufacturing and design facilities in the U.S. and outside the country.

If they did, then why do all mobile phone carriers basically offer very similarly priced service plans with the same prices for phones.

If the “Fair Market” and rules of supply and demand apply, why has the Pharmaceutical industry persuaded the Federal Government to pass laws restricting the purchase of imported prescription medications by individuals from outside the United States of America? It is interesting that the Pharmaceutical industry does not see any need to limit imports of prescription medications from foreign countries for members of the industry, just individual American citizens.

If the “Fair Market” and rules of supply and demand apply, then why did the Pharmaceutical industry lobbyists work so hard to ban Medicare from using competitive bidding to purchase prescription medications for the Medicare Part D program?

If the “Fair Market” and rules of supply and demand apply, then why did the cost of electricity in the state of California triple after the sale of electrical plants and the deregulation of power generation and distribution to multiple very large companies in Texas and North Carolina?

If the “Fair Market” and rules of supply and demand apply, then why does the price of natural gas that is readily available in the United States increase in price whenever the price of imported petroleum products increase in price? Also, you might ask, why do oil companies pumping oil in the United States increase the price of domestic oil whenever the OPEC oil prices go up?

Regarding your comment that “No local governments and the like would not pay taxes.” I took the following quote from the conservative Townhall.com site re the Fair Tax that stated “Implementation of a tax exclusive flat rate national sales tax of 30% on all goods and services sold at retail (ensuring that goods and services are only taxed a single time).[1] Exports would be exempted from the national sales tax. Property purchased for investment would be exempted from the sales tax. Retail purchases of goods and services by government would be subject to the 30% sales tax.”

There is a big conflict for large multi-national corporations to decide if they want to get the largest profits by providing the lowest prices and taking business away from everyone else, or unofficially agree for everyone to charge a price that keeps everyone making some profit, and efficient business making very large profits.

I had a mobile wireless executive tell me regarding a complaint about cell phones that worked for less than 60 minutes (when they worked at all) that “Our products and service are no worse than our competitors”. So much for world-class manufacturing and providing the best product and service at the lowest price.

18. stoptaxing - 21 February, 2008

Slice and dice. These folks were quoted in their own words in their entirety. There was no editing involved.

19. Barb Wise - 25 March, 2008

oblate wilfred loosing oroheliograph remuster pseudotributary anapterygotous profess
Netherlands faces fresh election
http://dmbs.home.att.net/

20. bob - 26 March, 2008

epphuM hi good site thx http://peace.com

21. Albert Curbello - 9 November, 2008

I am a huge supporter of ” The Fair Tax”. Why is it so hard for people to get the names of economist supporting the fair tax. Even this site will not allow printing the names of everyone listed.

22. David Gortler - 1 January, 2009

Great long list.
David

23. homepage - 21 July, 2013

I would like to start a small business or franchise I could invest in or something i could make good money off?

24. HMRC QROPS - 18 August, 2013

Write more, thats all I have to say. It seems as though you relied
on some reputable sources to make your point.

You obviously know what you’re talking about.

25. WH Predicts: Taxes Will Hit Record $3T in FY14--$29,673 Per Full-Time Worker - See mo - 15 November, 2013

[…] nobody you support or can name . Like i said stop your wining and see for yourself one sample 80 Influencial Economists Sign Endorsement of the FAIR Tax!Better yet come up with a real reason not to Reply With […]

26. Jeffrey Liakos - 12 January, 2017

Why do Socialist/liberals/progressives hate the idea of letting people of all incomes keep every penny they earn? The Prebate is what makes the Fair Tax progressive. Critics of the plan confuse the marginal and effective rates.


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