Tax protest mythology

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Here are some links....

Tax Protestor Myths

Probably the best FAQ on the flawed legal premise(s) of our friendly tax protestors can be found here:

Tax Protestor FAQ

A bit about the tax protest "movement" can be found...

The Tax Protestor Movement

And a word from the always interested Department of Justice

DOJ on tax protests

Remember... it's a new tax year.

-- Ken Decker (kcdecker@att.net), January 01, 2001

Answers

Ken,

I've posted these links myself from time to time. My favorite is Evans' site, and this paragraph in particular:

... when a judge calls an argument "ridiculous" or "frivolous," it is absolutely the worst thing the judge could say. It means that the person arguing the case has absolutely no idea of what he is doing, and has completely wasted everyone's time. It doesn't mean that the case wasn't well argued, or that judge simply decided for the other side, it means that there was no other side. The argument was absolutely, positively, incompetent. The judge is not telling you that you that you were "wrong." The judge is telling you that you are out of your mind.

;>

-- Stephen M. Poole (smpoole7@bellsouth.net), January 01, 2001.


These two would have you believe they can interpret the 25 million words in the tax code, then steer you to a site that arrogantly implies you are nothing but a fool and a waster of everyones time, and deserving of jail for questioning the legality of being separated from your property.

Your "libertarian" veiws are are always entertaining in a weird sort of way, Decker.

-- KoFE (your@town.USA), January 01, 2001.


Even the flat earth society has a more compelling argument than the tax protesters -- they at least have Biblical quotations to fall back on, however badly misinterpreted. The tax protesters seem more like werewolves, their minds switched off about once per full moon.

These sites only document the "what" at hilarious length, citing thousands of court cases, citing laws, rules, regulations, precedents, the disposition of one idiotic and baseless argument after another. The "why" part of it remains a mystery. Simple greed doesn't seem enough; many are greedy but few are rendered gibbering bozos by greed alone. Tax protesters are more like religious martyrs, willing and able to do great insult to themselves and their families while learning *nothing* in the process.

I think the tax issue is like a magnet, attracting a certain type of unbalanced and ineducable personality with irresistable appeal. But I still don't understand why.

-- Flint (flintc@mindspring.com), January 01, 2001.


"Render therefore unto Caesar the things which be Caesar's, and unto God the things which be God's." -- Jesus -- Luke 20:25

-- helen (b@r.f), January 01, 2001.

But Flint; you would have told Columbus the world was flat and most people would have agreed.

-- KoFE (your@town.USA), January 01, 2001.


KoFE:

Your knowledge of history matches your knowledge of taxes (why am I not surprised).

Even the ancient Greeks knew the world was round. The Phoenicians knew it, and so did Columbus (although Columbus did miscalculate the circumference).

Any more words of wisdom for us?

-- Flint (flintc@mindspring.com), January 01, 2001.


Yeah, you would have been one of the know nothings that went along to get along, without really knowing the truth.

That's all for now.

-- KoFE (your@town.USA), January 01, 2001.


Ken Decker has the blinders on. Just keep on paying taxes that you are not required to pay.

The IRS needs some dummies to keep the scam going!

-- ... (...@aol.com), January 01, 2001.


The Constitution forbids any direct tax......

So, why are you paying a tax that is outlawed by the Constitution?

If you don't stand up for your Constitutional Rights, then you don't have any!

-- snuggy but (snuggy@but.com), January 01, 2001.


Helen--

your chapter and verse begs the question. What things are Ceasar's? Everything?

Flint, Poole and Decker--

I'm not clear where you stand. OK, the "tax protesters" case is not legally sound. But are you guys opposed to tax reduction in general? Do you think we are not taxed enough? My impression is that you all voted for W who advocates an across-the-board tax cut. (I don't necessarily believe him but that has been the rhetoric). If you do favor lower taxes, why don't you at least say so before teeing off on the extremists?

-- Lars (larsguy@yahoo.com), January 01, 2001.



I rushed outside and was disappointed to see but a ‘sliver’ of the moon. I would have bet serious money that it was full to the max, what with all of the ‘tax protesters’ shrieking about. But then….maybe it IS full in ‘their’ neighborhood.

-- Barry (bchbear863@css.com), January 01, 2001.

Lars, if you read the whole story -- the chapter anyway -- Jesus was asked if taxes were lawful. The intent of the question was to trap Jesus into saying something against the law. Jesus asked to see a penny (or whatever coin they had on them). He asked whose image and superscription was on the coin. They answered that it was Caesar's. Then comes the verse Luke 20:25.

They weren't able to make a legal case against Jesus over that issue.

-- helen (b@r.f), January 01, 2001.


Lars -- I forgot to mention that it was a response to Flint saying that flat-earthers tended to use Bible verses as arguments. :)

-- helen (b@r.f), January 01, 2001.

Kofe,

First, I am not a "libertarian." I think the libertarians have some interesting public policy proposals, but the libertarian party is too busy quibbling over dogma to accomplish much in the policy arena.

Second, please feel free to question the legality of the tax code. Your right of expression is protected. I find the arguments entertaining... moreso apparently than the judges who have to deal with the legal mutterings of amateur constitutional scholars.

The simple fact is that the tax protest movement has lost court case after court case. The people ranting about the illegality of taxes usually have a seminar, a book or a service to sell... just like the Y2K suppliers were those predicting major disruptions in basic services. Your response to Flint is no different than the doomsayers' responses last year. Rather than provide a cogent counter-argument, the "doomers" simply dismissed Flint, Hoff and others as idiots. Lines of computer code, now lines of tax code... old wine in new bottles.

Lars,

I, like the vast majority of Americans would like to pay fewer taxes. I'm in favor of a greatly simplified tax system with no deductions, no loopholes. I also see the benefit of a national sales tax... rewarding those who save rather than those who consume and taxing "income" running around the underground economy. I'm in favor of reducing federal texation and allowing a greater role for state and local governments.

This has nothing to do with the "constitutionalist" movement and those folks peddling "tax protest" packages.

-- Ken Decker (kcdecker@att.net), January 02, 2001.


Lars,

Of course I want lower taxes. I want a smaller and less-powerful federal government in general. That's not the issue, and don't for a moment think that anyone who IS in favor of fair taxes will support the inane and inept arguments of the tax protesters.

(By analogy, that's like saying that if I wish to support the space program, I will agitate for bio-engineering research to have man grow wings, gills, and embedded solar panels on the buttocks.)

The issue is the specific claim(s) made by tax protesters -- which, when you cut through the cheese, boils down to, "you ain't got to pay federal income taxes, period." They are wrong about that. This doesn't mean we can't work to CHANGE the laws, but the current laws say yes, Virginia, you DO have to pay federal income taxes.

Tax protesters have about two zillions different ways (read: arguments) to arrive at that conclusion (it depends on wind spend, the fullness of the moon and what they had to eat that particular day), but all of them can be rendered down to that essense: you don't gotta pay federal income tax.

No court in the land has ever agreed with their argument(s)(ss)(sss). Not once, not nohow, not ever. They keep trying; they are convinced that they merely haven't yet found the right words to use, or a judge who isn't "corrupt", or whatever. In the meantime, they keep getting sanctioned for bringing "meritless," "frivilous" and "groundless" lawsuits (witness my quote above).

Tax protesters do not understand how our legal system works. Congress passes the laws, the COURTS interpret and apply them (or bar their application, if they decide that they're unconstitutional).

So ... if the courts have decided that the 16th Amendment WAS ratified (and they have) and that income taxes are legal (ditto), that they are NOT voluntary (ditto ditto) and that you must pay them (ditto ditto ditto), then, well, too bad, but you have to pay taxes! It *IS* the law. I do not have to refer to the "specific section of the Tax Code" to "prove" this; I can refer to one of the court decisions at Evan's site.

Now, I will continue to work for lower taxes and a more fair system of taxation in general, but support tax protesters? I'm not a nihilist. :)

-- Stephen M. Poole (smpoole7@bellsouth.net), January 02, 2001.



Decker,

Interesting. I'll take a national sales tax (it's better than the current mess!), but a flat tax rate would seem to be more fair to me. Why would you prefer the former?

-- Stephen M. Poole (smpoole7@bellsouth.net), January 02, 2001.


Decker, Poole, Helen--

Thank you all for responding to my quibbles. Stephen, I agree with all that you said but I'm glad you clarified your POV on taxes in general. Ken, the "tax protester" grift has been around since the 70s at least. I remember some guys in my office who paid for alot of seminars, wore tax protest buttons on their pocket-savers and went several years without paying income taxes. I don't know for sure what happened but I do know that they didn't get away with it. Our employer didn't like it either.

-- Lars (larsguy@yahoo.com), January 02, 2001.


Stephen,

I much prefer a national sales tax over what we have now. I do not like the "Flat Tax" at all, why change the system to get more of what we already have? It's just the same old shit in a new package, big deal. You will still have to wrangle with the IRS each year.

OTOH a sales tax would allow me to have some measure of control over what my tax bill is, if I save and live frugally, I will pay less taxes. I will be rewarded for saving and investing, and not be punished for being more productive and earning more. I firmly believe that such a system would have a profound positive influence on the economy.

-- Uncle Deedah (unkeed@yahoo.com), January 02, 2001.


Poole:

Solar panels on the buttocks. Too funny, man.

-- FutureShock (gray@matter.think), January 02, 2001.


Poole,

I doubt we will ever have a truly "flat" tax. Most proposals have an income threshold, e.g. a tax of 20% for every dollar of annual income above $10,000. This would make the tax progressive. Most "flat" tax proposals do not deal with the issue of corporate profits or capital gains or "in kind" income. What happens under a "flat" tax when a large corporation buys a CEO a home, a jet, several cars, Yankee box seats, etc? The CEO may have only $100,000 in "real" income but may receive $10,000,000 in perks. Is it "fair" for the CEO to pay the same amount of taxes as some wage earner who makes $100,000 and receives no perks?

My position on taxation is rather simple. Taxation should not be an instrument of social or public policy. If the government wants to subsidize children, oil wells or retirement investing... they should write a check. We should limit taxation to the sole purpose of raising the revenue needed to run the government. This would allow every individual and business to invest without the distorting economic influence of tax "loopholes" or "shelters."

Lars, agreed. The only modest annoyance is the attitude of the tax protestors (as seen on this thread). Anyone who does not agree with their silly ideas is smeared as stupid, lazy and/or unpatriotic. Then again, after 18 months of Y2K... I'm pretty thick-skinned. (chuckle)

FS, have you waved the white flag on the welfare issue? Just curious.

-- Ken Decker (kcdecker@att.net), January 02, 2001.


Stephen:

A flat tax sounds fair in theory. Everyone deciding to stop fighting and love one another sounds fine in theory too. The practice, however, is a very different story.

I seriously doubt that any "flat tax" proposal Congress would even begin to consider, would start out anywhere near flat. There would surely be exceptions of some variety. Would social security taxes be part of it or separate? Would sales taxes be separate? Excise taxes? Capital gains? And how about special exemptions? Tax breaks for the poor? Children? Mortgage interest?

And from that starting point, Congress would start in on big time social engineering. The tax laws have always been used to encourage some behaviors and discourage others. We want to help the old, the poor, the minorities, the big campaign contributors. We want to encourage innovation and investment and savings. We want the bulk of the tax burden to fall on those most capable of bearing it. We want to discourage unhealthy behavior. We want to identify inelastic demands and jack tax rates WAY up on those. And on and on ad nauseum. Deedah is right -- by the time they've finished with it, the "flat tax" will be indistinguishable from what we have now, and for the same reasons.

And as Ken points out, a national sales tax reaches the underground economy, an economy that tends to grow proportionally to direct tax rates. Even those paid in cash under the table still must buy stuff to live on.

But the national sales tax itself has some drawbacks. Different tax rates on different items will make it clumsy and hard to manage. People all having their own income-based relative rates on different items wouldn't surprise me, and will also be a PITA. Businesses won't be happy dealing with a combination of national, state, and local sales tax collection being on their shoulders.

But most important, there is a natural tendency of government to extract taxes from its citizens every way they can dream up. Even if we could find the political will to scrap the incredibly complex system we have now in favor of a much simpler system, we will never find the political will not to meddle with this later.

So I see taxes as being like a black hole. You can't help falling to the bottom of it, and you can't escape once you're there. Any major change in emphasis will be both temporary and so encrusted with major exceptions as to be more of the same old thing. Nor will we reduce overall rates until we reduce what we're using taxes to pay for. And so long as so many people believe in a free lunch, we'll be buying the most expensive lunches known to man and *calling* them free. We just need to start shutting down government programs (except those that help me, of course).

Ken:

If you know of any way to prevent government from making taxes an instrument of policy, I'd love to hear it. I suspect some politicians regard this as taxation's *primary* purpose, and raising revenue as secondary.

And no matter what the tax laws are, tax lawyers will be finding ways to rearrange income to avoid taxes.

The law of unintended consequences dogs those who attempt to regulate in defiance of human nature.

-- Flint (flintc@mindspring.com), January 02, 2001.


Flint,

Charles Adams had an interesting idea... separating the power to spend from the power to tax. In this system, one legislative body would have the power to set tax rates. The other legislative body would be responsible for how the revenues were spent. Intriguing notion.

Personally, I think there are some potential remedies for our current federal tax morass. Many states are required to pass a balanced budget. This has proven a useful limit on expenditures. I would support constitutional amendments to force a balanced budget and limit federal taxation powers.

The problem is not state ratification, but congressional opposition. Politicians will oppose any limitations on their power, particularly the power to tax and spend. This is, after all, how they stay in office.

As for a national sales tax, I imagine one set amount for all purchases would be the ticket.

While I realize the opposition to tax reform, I think it a battle worth fighting. There have been examples of profound changes in local and state tax policies, e.g. Prop 13 in California. It might be possible to have the same sort of revolution on a national scale, but it is difficult when so many citizens are dependent on gov't programs like social security and medicare. Perhaps when when every two working Americans are supporting one retiree....

-- Ken Decker (kcdecker@att.net), January 02, 2001.


Fair Taxation

-- Uncle Deedah (unkeed@yahoo.com), January 02, 2001.

Geez, Flint, that last post looks like a tax protest.

-- KoFE (your@town.USA), January 02, 2001.

Sorry, Unk, but I can't buy a 23% national sales tax, particularly when many states would be adding another 4 to 8 percent. Why? The higher the tax on goods and services, the greater the incentive for black market activities. Why do so many small businesses ask for cash? I imagine at least some are not declaring the cash as income. If you added a third to the cost of goods and services tomorrow, there would be a strong incentive to buy goods "under the counter." The affluent, more than others, would have the option of buying goods and services abroad to avoid taxation. Ask Canadians about buying trips to the US. Or Americans about buying prescription drugs in Mexico.

The greatest compliance will be derived from a system that is perceived as fair and reasonable. I think some derivation of a flat tax would have broad support... particularly if the rates were reduced and the revenues offset with a national sales tax.

There would be some disruption in the economy as tax attorneys and accountants found other employment... but the transition could be phased in.

Oh, and I dislike eliminating capital gains tax. Realized gain from an investment is income and should be taxed at the same rate as income. I think we can accomplish something similar with corporate profits... to prevent the obvious loophole of every person forming his or her own personal corporation.

-- Ken Decker (kcdecker@att.net), January 02, 2001.


Kofe,

Flint realizes an important distinction. It is one thing to complain about a bear eating your picnic lunch. It is another to jab the bear in the ass in with trusty pocketknife.

-- Ken Decker (kcdecker@att.net), January 02, 2001.


Lars,

To expand on Helen's earlier post, Matthew 20:

15 Then the Pharisees went out and laid plans to trap him in his words. 16 They sent their disciples to him along with the Herodians. "Teacher," they said, "we know you are a man of integrity and that you teach the way of God in accordance with the truth. You aren't swayed by men, because you pay no attention to who they are. 17 Tell us then, what is your opinion? Is it right to pay taxes to Caesar or not?" 18 But Jesus, knowing their evil intent, said, "You hypocrites, why are you trying to trap me? 19 Show me the coin used for paying the tax." They brought him a denarius, 20 and he asked them, "Whose portrait is this? And whose inscription?" 21 "Caesar's," they replied. Then he said to them, "Give to Caesar what is Caesar's, and to God what is God's." 22 When they heard this, they were amazed. So they left him and went away.

In context, it really is pertinent to both the Flat-Earthers and the Tax Nuts.

Frank

P.S. Thanks for the reminder, Helen.

-- Someone (ChimingIn@twocents.cam), January 02, 2001.


And it's another to let bears eat from you basket whenever they want and then complain about what a shame it is.

-- KoFE (your@town.USA), January 02, 2001.

Hey Frank, does God talk to you, too?

-- KoFE (your@town.USA), January 02, 2001.

Ken:

Good point. Taxes need to be made as painless as possible. Painless, when tax rates have reached current stratospheric rates, means fairly invisible. Payroll deductions are one way -- you never even see the taxes you are paying. Invisible can also mean no particularly good alternative. Few businesses can do all their transactions in cash.

Unlike the tax nuts, I'm not opposed to taxation. I think it's necessary, because there really are some things government is the proper vehicle to perform. I just don't think the "answer" to the current tax mess is simplification. I'm opposed to the *rate* of taxation, not the method.

Taxes haven't evolved byzantine complexity just by accident, but because of the very many different policies we're trying to uses taxes to effect. We'll never stop trying to do this. Goodies for everybody is the secret to successful re-election campaigns.

I think Adams' idea would founder in practice, because (as you say) it would tend to reduce political power weilded by some. And we'd look silly voting the tax-raisers out of office for raising too much, yet voting out the spenders for not spending enough! Meanwhile, government would fund itself by borrowing, which has its own pitfalls.

The only answer is a long-term reduction in government's ratio of expenditures compared to the private sector. There are countless ways to make this happen, but all of them depend on how we vote.

-- Flint (flintc@mindspring.com), January 02, 2001.


So Ken, you would not support a 23% national sales tax, yet a national income tax PLUS a national sales tax would be OK with you? Oh my, now there is a system truly ripe for bureaucratic muckery!

-- Uncle Deedah (unkeed@yahoo.com), January 02, 2001.

ROTFL Unk!

What the big brain Decker doesn't understand is that he is paying 23% on every cent he earns now! 15% marginal tax rate plus 7.5% Social Security deduction equals 22.5%!

-- ...I can see it (but@don't.tell.Decker), January 02, 2001.


KoFE,

Yes he does, although I'm not too good at listening most of the time, and I can't say that we don't go out for beers or anything :-)

Frank

-- Someone (ChimingIn@twocents.cam), January 02, 2001.


KoFE,

Change that to:

Yes he does, although I'm not too good at listening most of the time, and I can't say that we go out for beers or anything :-)

Or, Yes he does, although I'm not too good at listening most of the time, but we don't go out for beers or anything :-)

Take your pick, as long as it's not the first one!

Frank

-- Someone (ChimingIn@twocents.cam), January 02, 2001.


KoFE:

What Decker is trying to tell you and Unk is that the underground economy/black market is very real. The goal is to keep it to a minimum. If all taxes come from employment directly (like some flat tax proposals), we're looking at a BIG payoff for working under the table. If all taxes come from humongous sales taxes, we're looking at a truly thriving black market. Remember what I wrote about inelastic demand -- we only dare jack excise taxes sky high on items that (1) people are not willing to do without; (2) that are regarded as not quite necessary -- like gasoline (beyond a certain minimum), alcohol, tobacco, etc.

In other words, we need to spread taxes around as thinly as possible. Get it from income, get it from payroll deductions, get it from sales, get it from capital gains, get it from excises and fees and duties, get it from employers "paying" half (which comes out of your salary, so it's invisible), get it from inheritance, on and on.

The whole point is that, if too much is taken from one source, then the payoff for circumventing that source becomes worth the risk. The government's goal is to collect the maximum revenue possible without excessively rewarding any specific tax-avoidance behavior. The Beatles (and many others) didn't become citizens of Monaco for nothing.

-- Flint (flintc@mindspring.com), January 02, 2001.


In other words, we need to spread taxes around as thinly as possible. Get it from income, get it from payroll deductions, get it from sales, get it from capital gains, get it from excises and fees and duties, get it from employers "paying" half (which comes out of your salary, so it's invisible), get it from inheritance, on and on.

Actually, in other words, doing both income and sales taxes means MORE bureacracy, MORE work for employers and sales and service providers, and MORE convoluted tax laws. Being an advocate for smaller government, I think the best way to get people to understand just how much their government costs them is to show them plain and simple, at the register, not with the invisible income withholding system we have now.

Everytime a politician promises me a tax cut I think "Yeah right" because the current system with it's myriad of laws and loopholes makes it VERY easy to promise one thing and accomplish another while hiding the details in the complex tax code. With a national sales tax it is easy to see if the promised tax cut is delivered, 22% is always less than 23%, and 21% is less than 22%.

Will a sales tax encourage cheating? I don't think so, rather than one person fudging figures in the privacy of his own home on April 14th, two people will have to conspire to cheat the system, which would have a chilling effect on cheating, IMHO.

-- Uncle Deedah (unkeed@yahoo.com), January 02, 2001.


Unk,

I think a 23% national sales tax is silly. I don't think this level of taxation would generate the same amount of revenue as the current tax system. People would quickly find ways around the system... from outright "bootlegging" of goods and services to barter systems to off- the-books transactions to off-shore transaction... you get the picture. As the tax failed to provide the necessary revenue, government would increase the tax rate to 25%, 30%, etc. So it goes.

The proposed tax moves the money directly into the federal government. As a matter of principle, I think the size (and power) of the federal government is much more problematic than the size of state or local governments. A better solution would have a limited national sales tax and allow only state and local governments to tax income.

There is far less bureaucracy in a simplified income and national sales tax than in the seemingly endless tomes that constitute our current tax code. A "postcard" income tax system would require a fraction of the current labor (and GDP). A national sales tax would be relatively easy to administer as compared to our existing tax mess.

Aside from some kind of constitutional revolution, any change will be incremental. I think it is possible to phase in tax reduction and simplification and offset the revenue losses with a national sales tax. You have a better chance of playing professional basketball than of seeing a 23% national sales tax emerge from Congress. But hey, you're a libertarian and don't have to be realistic. (chuckle)

Flint states well the argument for diversification of revenue. Modest taxes on both income and consumption (and other money streams) maximize revenue by reducing the marginal incentive to cheat. I imagine there are Laffer curves for each type of taxation. Consider the pea and walnut shell games. If you tax income, people increase nonmentary compensation. I'll work for $1,000 a year if you buy my house, clothing, vehicle, food, entertainment, etc. If you tax only consumption, I find ways to acquire goods and services outside normal channels. For each type of tax there is a rough form of marginal utility. When taxes are modest in each category, the utility of tax avoidance (or evasion) is lowered. Would you falsify documents to save $1? $1 million?

All taxes "encourage" cheating. The higher taxes simply provide more encouragement.

"a" or facsimile thereof... I am aware of how much tax I pay. I am also aware of the labor required to pay this same tax. Personally, I'd go for a postcard return and "pay at the till" program rather than fill out another 1040 long form. Oh, and you forgot state and local taxes, capital gains taxes, excise taxes, license and registration fees, state sales tax, federal communications taxes....

-- Ken Decker (kcdecker@att.net), January 03, 2001.




-- Bush Needs Tax & Finance Help (happy@new.year!), January 03, 2001.

Ken, Flint, Unk,

Thanks for the thoughts. I'm still making up my mind on what kind of tax system I'd prefer. Potential objections that popped into my fevered brain as I read your comments, in no particular order:

1. Some would argue that a national sales tax would unfairly tax the poor. Perhaps this could be offset by not taxing food stamps (or the equivalent).

2. If you increase the cost of goods by 23% overnight, it's going to have an effect on buying. Even though people will have more money in their paychecks, some people will have a mental block against paying $500 today for a refrigerator that was $400 last week.

3. I'm not sure I buy the black market aspect on the flat tax. We are currently taking a HUGE chunk out of people's paychecks PLUS requiring employers to match the FICA, so there's ALREADY an incentive for an underground workforce. Going to a flat tax wouldn't change this.

4. Unk, the other complaint that I have about tax cut proposals is that they're so miserly. Sure, we might get a 5% or even 10% tax cut, but considering that the FICA/Medicare deduction from my paycheck is the largest by far, it still won't make that much of a difference.

Simply put: you could eliminate ALL income tax coming out of my check and there's still be a huge deduction for FICA/Medicare. No one will touch THAT political football, either, so it ain't gonna change.

-- Stephen M. Poole (smpoole7@bellsouth.net), January 03, 2001.


Stephen,

Under the “Fair Tax” plan that I linked to (and wholeheartedly support) every American would receive a rebate check equal to the tax paid on essential goods and services. This rebate would eliminate the tax burden on the poor. As to the buying patterns, even though you mentioned it in passing a refrigerator that cost $400 last week and now costs $500 would be paid for out of a paycheck that was $750 last week but is now $1000. And if you don’t need to buy a refrigerator each week, you can keep that extra $250, minus what you spend. From the Fair Tax website:

More than $2 million dollars has been invested in economic research by the FairTax advocates to determine the impact of the FairTax on the economy, business and individual taxpayers. The FairTax research team includes some of the leading economists in the country: Dr. Dale Jorgenson, Chairman of the Economics Department, Harvard University; Joseph Kahn, Decision and Ethics Department, Stanford University; Dr. Laurence Kotlikoff, of Boston University, Dr. George Zodrow, Chairman of the Economics Department, Rice University; Dr. Jim Poterba, MIT; Steve Moore, The Cato Institute; Dr. Bill Beach, the Heritage Foundation; David Burton and Dan Mastromarco, the Argus Group; Gary Robbins and Dr. Aldona Robbins, Institute for Policy Innovation.

There seems to be a disconnect when people see 23% tax rate on goods, they say "That is too much!" yet 23% (or more) is deducted from each paycheck now, but it is hidden from view since you never pocket that extra money. If you want less government and lower taxes, the best way to do that is to show people exactly how much they are paying for it, plain and simple.

But the best thing is no more April 15 blues, no more piles of receipts, no more wondering if you owe this year, and the grand-daddy of all positives; no more audits!

-- Uncle Deedah (unkeed@yahoo.com), January 03, 2001.


Unk,

I noticed you sidestepped my objections....

As for the "rebate check," how exactly does one calculate this sum? Wouldn't a family of six pay more than a single person for "essential goods and services?" When does a person become a family member? How often are these checks mailed? Who would be responsible for tracking address changes, name changes, deaths, etc? How would you control rebate check fraud? Speaking of bureacracy....

The "fair tax" plan has the fingerprints of academic economists... an interesting concept on paper that has no chance in the real world.

It is difficult for most people to escape the high tax on personal income. The majority of American workers work for a wage or salary where taxes are taken out by the employer. If you are a business owner, you can "game" the system by using company funds as a substitute for personal income. If you are wealthy, you can hire accountants and attorneys to "avoid" taxation... but most Americans lack the resources to engage in such practices.

Consumption is a different matter.

There are many ways to avoid consumption-based taxes. If your "fair tax" passed, my first move would be to a Native American reservation. Under current law, your "fair tax" would not apply there. I have already mentioned the advantage of rolling into Canada or Mexico for goods and services.

Under this tax, imagine the incentive for "cash only" transactions. Rather than having taxes taken out by an employer, there would be an opportunity with each transaction. Local mechanic fixes your car... pay in cash. Local doctor sees you for an appointment... barter with him for another service in return.

What surprises me, Unk, is how you see the failure of the war on drugs and yet do not see the same economic dynamic in a tax system based entirely upon sales tax.

-- Ken Decker (kcdecker@att.net), January 03, 2001.


Ken,

I wonder if the local mechanic takes cash now to avoid paying the income tax? All your arguement says is that the incentive to cheat would shift from the mechanic to the guy getting his car repaired. And since you bring up the war on drugs, I wonder how many dealers claim their lookouts as employees when they dutifully pay their taxes each year? Is a payoff to a crooked cop a business deduction as an expense, or does it make that cop a sub-contractor? How about fishnet stockings, can a streetwalker deduct them on her schedule C?

Yes people will attempt to avoid paying taxes, no matter what the system of collection is. But while you may be happy in the wastelands of Arizona communing with the Native Americans and eating peyote, I think I (and most others) will pass.

-- Uncle Deedah (unkeed@yahoo.com), January 03, 2001.


No, Unk, I do not say the incentive will simply "shift." My argument is a bit more complex than the "fair tax" proposal. The incentive to "cheat" increases as taxes increase (a spin on the Laffer curve). Placing the tax burden entirely on one activity creates a greater incentive to cheat. If there were no taxes on tobacco, there would be no black market in cigarettes. The greater the tax, the more active the underground economy. Declaring a good illegal is really just the ultimate in taxation... see Prohibition and the "War on Drugs" to gauge the government's ability to regulate consumption.

The opportunities to cheat are plentiful. To borrow the language of crime, your tax provides motive and opportunity. The higher the national sales tax, the greater the incentive. By having a modest tax on the wide spectrum of economic activities, one stays lower on the respective "Laffer curves" and keeps the incentives for "cheating" lower. Yes, there will always be those who cheat... so it goes.

Taxes work best when they are perceived as balanced and reasonably fair. Most Americans support tax simplification. Some modified version of a "flat tax" is a political possibility... I think policy makers might be able to pass a modest national sales tax in return for lower "flat" income tax rates.

The "fair tax" you advocate is typical of pie-in-the-sky libertarian proposals... and its why the libertarians will never be a major political influence. Politics is the art of the possible. Changes to the tax system will meet strong resistance from entrenched interests. It is not enough to have a few economists and some white papers. (Did Harry Browne get his usual one percent?)

By the way, I can't find any peyote. It seems the libertarians have cornered the market... astrally projecting with Ayn Rand and dreaming of the day when crack cocaine and Uzis are on the shelves of the local 7-11. (chuckle)

-- Ken Decker (kcdecker@att.net), January 03, 2001.


Actually Ken, your argument against the Fair Tax (as opposed to the income tax) is that the incentive to cheat will shift. Rather than attempting to hide income because of an income tax burden, you state very clearly that consumers will attempt to hide purchases.

Now while it may be very true that spreading the tax burden to many various activities will lessen the tax on each activity, and thus the incentive to cheat on any one taxable activity, I feel that spreading the burden to many various activities increases the incentive for government growth and waste. Taxing hundreds of different activities makes it very easy for the government to incrementally raise a tax here, raise a tax there, until we are nickel and dimed to death by a system of taxation with it’s Hydra-like tentacles embedded into every economic endeavor. Getting your over-all tax burden reduced then will be truly a job for Hercules, as you chop one head off, two heads grow back in it’s place while your attention is occupied chopping at the remaining heads.

Also, FWIW, the Fair Tax has nothing to do with the Libertarian Party, it is a bi-partisan proposal introduced to Congress by Rep. John Linder (R-GA) and Rep. Collin Peterson (D-MN).

Americans for Fair Taxation is now the fastest growing tax reform group in the country. Check out the current statistics detailing AFT's ever growing grassroots support.

More than 300,000 people have now joined AFT and membership is growing daily.

In the last 4 months alone, our membership has increased by more than 30%.

E-mail membership has grown more than 400% in the last 4 months.

H.R. 2525, The FairTax Act, is now in the House Ways and Means Committee. For the first time in history, we've got a chance at real tax reform!

Yes the entrenched special interests will fight, but the politicians will be forced to listen if this movement continues to gather steam at it's present rate.

-- Uncle Deedah (unkeed@yahoo.com), January 03, 2001.


Unk:

I seem to be missing something here. This 23% sales tax would replace ONLY the Federal income tax, right? Wouldn't we still have to pay all other kinds of taxes?

At the end of the year, I note that the government has taken approximately 40% of my salary -- and I only pay half of my Social Security, and no corporate taxes, no import duties, no inheritance taxes, no capital gains, etc. etc. I recall reading that when all forms of taxes, duties and fees are added together from government at all levels, it's about 50% of GDP. Much of the complexity of the current system is due to the sheer number of government revenue streams, of which you plan to substitute one for another, and only one. And depending on how it's implemented, this sales tax could be even more complex than the income tax it's replacing.

So while we're dreaming, why don't we jack the sales tax up to 50% and eliminate ALL other forms? Well, you've gone a long way toward answering this question yourself, when you say "If you want less government and lower taxes, the best way to do that is to show people exactly how much they are paying for it..." This is clearly the LAST thing politicians want to do. The goal is to keep taxes hidden, painless, incremental, various, targeted, and predictable.

Our problem right now is NOT the complexity of the system, but the sheer size of the tax bite. We need to accept that people do NOT want less government, they want lower taxes. They want manna from heaven, and free lunches. They want support for every worthy cause in everyone's eyes, and more space program, and better national defense, and more environmental protection, and lower crime, and free national health care, and more support for the poor and the elderly and the unfortunate, and a reduction of the national debt, and more new roads and better maintenance of the old ones, and higher prices for what they sell and lower prices for what they buy, and shiny new idiot- proof voting machinery. And lower taxes. I repeat, people do not WANT less government, they only want to pay less for it.

What has evolved is the best compromise available -- incremental increases in tax amounts, and a maximum number of tax sources, and ways of keeping the true tax bite as invisible as possible. Because faced with a choice between less government or higher taxes, people will choose to get *other people* to pay for what they want, every time. The real political goal isn't to reduce or simplify the tax burden, but to shift it onto someone else. Selling smaller government is like selling sobriety. Everyone agrees it's a good idea for everyone else, but in the meantime they personally would like another drink.

-- Flint (flintc@mindspring.com), January 03, 2001.


Unk,

(sigh)

Flint, as usual, makes some excellent points. People want all the benefits of government... they just want someone else to pay the freight.

By my math, VP Gore (democrat) and Mr. Nader (green) received more votes than Gov. Bush. This is clearly not a mandate for decreased gov't expenditures. In fact, most Americans seem to prefer to use any "surplus" to reduce the national debt. Dare I mention Harry Browne and his less than 400,000 votes?

In my opinion, it is more important to shift power from the federal gov't to state and local entities. Citizens have shown the ability to shape state and local tax policies. State governments have been far more innovative and reform-minded than the federal bureacracy.

Your 23% national sales tax would push money right into Washington, DC... not a heartening thought.

Calling AFT the "fastest growing tax reform group in the country" is a bit silly. 300,000 members? The AARP has 30 million... that, Unk, is political clout.

I hate to rain on your parade, but your version of tax reform is on a fast track to nowhere.... What you may see is a 5 percent national sales tax linked to modest income tax reductions and, at the outside, some simplification.

-- Ken Decker (kcdecker@att.net), January 03, 2001.


No need to sigh Ken, this is just a friendly exchange of opinion.

Your two major objections, if I am reading you right, are that the Fair Tax would encourage cheating by consumers, and the Fair Tax would channel money straight to Washington DC. But I am curious where exactly your “5 percent national sales tax linked to modest income tax reductions” would channel the money? DC? And I am also curious if in fact people might be tempted to pay cash for goods or services under a “5 percent national sales tax linked to modest income tax reductions” plan, and thereby evade both taxes at once?

I agree with you that local government is more responsive to the needs of the citizenry than the Federal Bloat, but under a system that spreads taxes around to enough activities so as to “hide” the tax burden, where does the incentive to shift the power to the local level come from? Certainly not from DC. Under such a system people are basically walking around with holes in their pockets, wondering where on Earth all of their money went, and without a clear vision of exactly how much they are paying in taxes.

AARP, 30 million members, how long has that organization been around, 30 or 40 years? Americans for Fair Taxation is only a few years old, 300,000 dues paying members, members who are not in this for personal gain BTW, is pretty impressive for a organization on a “fast track to nowhere”.

Oh, speaking of fast track to nowhere, tell Joe Six Pack that you are going to tax his income AND his purchases, and see what he thinks about that plan.

Flint,

Yes "people" want to have their cake and eat it too. But those of us who object to the price of cake need to keep our lips flapping in protest.

-- Uncle Deedah (unkeed@yahoo.com), January 03, 2001.


I could see a minimal (2% or so) national sales tax, provided it exempted all food, medical care and prescription drugs. That would include restaurant food, just for the sake of simplicity. If you eat it, no tax applies. When any item is needed just to keep body and soul together, it should not be taxed. All other items should be fair game.

However, items already taxed such as alcohol, cigarettes and gasoline should be taxed at the present rate and not increased.

-- Brian McLaughlin (brianm@ims.com), January 04, 2001.


I think it would be an interesting exercise to eliminate witholding tax and require everyone write quarterly checks to the IRS. No change in tax rates, just in tax collection procedure. People would suddenly become aware of how high their taxes are.

On capital gains taxes, there is an optimum rate to maximize tax revenues. Some studies say this rate is 15%. Who knows, but common sense says that if the capital gains tax rate is too high, then no one will take capital gains and revenue will fall. Likewise if cap gains rates are too low then revenue would fall sgain.

Another consideration in capital gains tax is indexing; ie, adjusting for inflation. Indexing is only fair but it is an accountant's wet dream in complexity.

-- Lars (larsguy@yahoo.com), January 04, 2001.


Sorry, Unk, but from my perspective your attachment to the "fair tax" is hindering your objective analysis of the political and economic realities.

All taxes "encourage" cheating... the question is, "How much?"

The higher the tax, the greater the incentive. Most people have a single source of income that taxed before it ever reaches one's pocket. For the average "wage slave" the opportunity to cheat is limited to fudging on the 1040.

On the other hand, people make hundreds or thousands of purchases each year. It is far easier to avoid a sales tax than an income tax.

If you create a high tax that is relatively easy to avoid, you create a situation where cheating will run rampant. Since gov't still needs x amount of revenue, the gov't will raise the sales tax... which will induce more cheating... so the gov't will raise the rate... which will induce more cheating.

See a pattern?

Modest taxes on a wide range of economic activities reduce the incentive to cheat by lowering the marginal utility of dishonesty.

Yes, a modest national sales tax would go to Washington, DC. If I were writing the legislation, the federal income tax would be greatly simplied, flattened and reduced concurrently. Many federal programs would be eliminated and the responsibility moved to the state or local level. Corporate taxes would be structured as to create a level playing field between individuals and private firms. Capital gains would be treated exactly like income. The rules on tax exemptions for nonprofit organizations would be tightened considerably. Over half the federal budget goes into social security and medicare. You cannot reform taxes with seriously changing these monolithic programs.

I disagree with this notion that people don't know how much taxes they pay. It's not like the gov't tries to hide this amount. I know how much I pay in sales tax, property tax, income tax, etc. Your essential premises seem to be: "Taxes are bad. If people 'knew' how much taxes they were paying, things would change."

I doubt it.

Flint is right. People simply want others to pay for the government they want. The traditional "tax cut" mantra of the republicans created almost no excitment during the recent presidential race. The democrats and greens combined (both firmly behind increased gov't spending) received more votes than the republicans. What does this tell you about current public support of tax reduction?

I think the issue of a national sales tax will emerge in the next few decades hopefully as part of a package of income tax reduction and simplification... but I'm not going to hold my breath.

-- Ken Decker (kcdecker@att.net), January 04, 2001.


Actually I am not holding my breath either.

But I have to voice my opinion, and my opinion is that a sales tax is easier to understand than the current system. It is highly visible, which makes raising taxes through a shell game more difficult for the politicians. It eliminates the yearly April paperwork nightmare for the vast majority of tax payers, relying instead on a sales tax collection system that is already in place for most businesses, and, perhaps most importantly, it encourages saving and investment, the life-blood of a capitalistic economy.

-- Uncle Deedah (unkeed@yahoo.com), January 04, 2001.


Unk:

Please bear in mind that we didn't get ourselves into the current mess by accident. We got here because we want government to do far more than we are willing to pay for. So we do all we can to (1) make it as hard as possible to cheat; (2) trick ourselves into thinking we pay less than we actually do; (3) make it look as much as possible like most taxes are being paid by those who won't miss them anyway; (4) justify the taxes on the grounds that they are used for nothing but good deeds.

What you call a shell game has two fundamental purposes -- to permit the collection of enough revenues to satisfy our requirements without wholesale cheating, and to engage in the extensive and detailed social engineering taxes have traditionally been used for.

These motivations aren't going to go away, so you really must address the "Decker principle" that holds we must minimize the marginal utility of cheating. Even with everything spread around as much as possible and with the tax rate structure so complex few tax lawyers understand it, there is a sizeable underground economy.

A huge sales tax is simply too easy to avoid. All of the wonderful benefits you list won't come to pass if the tax cannot be collected in the first place. So some mechanism not currently necessary must be developed and deployed to prevent massive cheating. I can't think of any cheap or easy way to do this, can you? The costs of a bureaucrat overseeing every transaction everywhere to make sure these taxes are paid is a cure for current evils much as death is a cure for the hassles of living.

Bottom line: You MUST provide a workable mechanism for guaranteeing that tax collection happens in the first place, before you can start extolling the virtues of this tax. Otherwise, you are the mouse recommending that a bell be put on the cat.

-- Flint (flintc@mindspring.com), January 04, 2001.


Flint,

I can apply the very same argument to an income tax. Yet for the most part the vast majority of people comply with it, even though the majority of people believe that it is rigged in favor of those who can afford to lobby for loopholes.

And who are all of these people who will evade this tax? Do you seriously believe that Ford Motor Company and Wal-Mart will go in cahoots with their customers? Even though Burger King is a cash business I feel pretty confident that they would comply with the new tax laws. Ken earlier pointed out that the local mechanic might take cash to evade this type of tax, yet I'll bet that very same mechanic who takes cash could do the very same thing under the current tax system since he does not need to actively conspire with a customer to do so. It is far easier for him to cheat now under this current system, since he can do so alone in the privacy of his office, with no witnesses. In fact, since the sales tax system would reward the customer for cheating, and NOT the mechanic (who would in fact face penalties for such behavior) the customer must actively recruit the mechanic to cheat. Even if they agree to split the difference and line their pockets with a 12.5% incentive each, I'll continue to argue that those types of transactions are wide open to abuse now, under an income tax.

-- Uncle Deedah (unkeed@yahoo.com), January 04, 2001.


Unk:

Basically, what you're saying is, "Nobody now does much to avoid a tax rate we don't have. If we suddenly jacked it WAAAY up, nobody would act any different. I just can't imagine how they would."

But I'll keep asking you to reflect on WHY we haven't moved in the direction of your fair tax. If it has all of these manifest benefits and no drawbacks, do you suppose it's been avoided simply because all legislators are stupid? I've been trying to point out that things are the way they are because that's been the path of least resistence, the path with most incentives and fewest disincentives. And so long as the incentives don't change, the tax structure won't either, and wishing real real hard won't improve a thing.

We have to get there from here, and we can't unless we understand why we're here in the first place. Otherwise, if wishes were horses...

-- Flint (flintc@mindspring.com), January 04, 2001.


I'm not saying that at all Flint. We already HAVE a 23% tax now, it is taken out of your income! I am not proposing jacking anything WAAAY up. Keep in mind that your ENTIRE check will be yours to keep.

And I am perfectly well aware that the path of least resistance is the status quo, and we got here because a serious effort at changing this system (so far as I know) has not yet been attempted. The income tax has been around for nearly a century now, and it has been tinkered with as many times as Congress has met, but at some point it will get SO complex, and SO mistrusted that the magic number of people who are fed up with it will crest, and change will occur. When that happens (if it happens) I want the sales tax idea to have a serious shot, so I open my mouth about it when the subject comes up.

-- Uncle Deedah (unkeed@yahoo.com), January 04, 2001.


Unk:

That wasn't my reading of your links. It sounded to me like the "fair tax" was to replace the federal income tax only. I'd still be paying social security, medicare and medicaid, state income tax etc. before I ever saw it. And these things together are about equal to the federal income tax. And I still pay local sales taxes as well.

But that's a quibble. If you're waiting for people to someday realize that they want their tax structure rearranged substantially, you are waiting for Godot. Someday we may experiment with a national sales tax, or with a VAT. But what you're going to find is that these will be *in addition* to all the taxes we're already paying. You can extoll the virtues of pie in the sky all you like. But if you want to get there from here, you need something more workable.

-- Flint (flintc@mindspring.com), January 04, 2001.


Unk,

Most people have no opportunity to hide from taxes until tax time. Then, one is staring down the barrel of a 1040 knowing that your employer has already reported your earnings and taxes to the IRS.

Just try walking into the accounting department and asking them to reduce your federal witholding and social security taxes to zero. Ask them to pay you in gold bullion. Ask them to pay you in cash. Then tell them you were joking so you do not become the butt of jokes in the accounting department for the next five years.

For most people, the only opportunity to "cheat" is when one files an annual tax return. Taxpayers know the government already has their earnings and tax data provided by the employer. They also know they could face an audit and serious penalties if they are caught cheating.

Most people comply with income taxes because they don't have a choice... and there is a real fear of enforcement. It is difficult to structure income to minimize taxes. Put more in your 410(k), prepay some eligible expenses... but not much else.

Consumption, however, is much easier to structure. The sheer number of transactions makes enforcement much more difficult. People avoid state sales tax every day and the tax is far less than you propose.

For example, a man buys a used car. The man offers to pay $5000 in cash, but asks the seller to put $1000 on the title as the sales price. With a five percent sales tax, the buyer and seller can split the $200 "saved."

With your 23% sales tax (and an existing 5% state sales tax), the buyer and seller split $1,120. Not too shabby, eh? My saintly mother might cheat for that kind of money.

Sure, people will be forced to pay sales tax on some purchases. Big businesses will comply and some revenue will be generated... but what if I can hide 20% of my transactions, 30%, 40%.... If you set the tax at 23% (not including any state taxes), I wager that I can hide 25% of my transactions... easily. If I'm about average, this means the size of the underground economy in the U.S. explodes... and the traditional economy suffers a huge hit. Some honest businesses go under while black marketeers thrive. Remember Prohibition? If I were a member of the mafia, I'd vote for your tax proposal because it would mean a great new source of revenue.

Here's a question, Unk. The IRS announces that there will no longer be audits of personal income. The new president thinks Americans are just plain honest and decides the IRS will just trust everybody. Will tax revenues rise or fall? (laughter) You makes it easier to cheat, Unk, and more people will cheat... the iron rule of incentive.

Income tax works pretty well because the IRS has most Americans (and their employers) by the short hairs. I don't like it much, and think the system could be greatly improved. On the other hand, I think your "collect everything via a national sales tax" is a flawed concept and will have a boatload of unintended consequences.

You still haven't answered the biggest problem... during the last election the greens and democrats received more votes than Bush with his tax cut plan. We still live in a democracy (of sorts). Just how to you propose to get your tax plan passed when a majority of Americans want even more gov't than we have today? People are already unhappy with the current tax code and system... just how bad do you think it will need to get before this "magic moment" when all 300,000 AFT members rise to lead us into the land of milk and honey?

-- Ken Decker (kcdecker@att.net), January 05, 2001.


OK, that is two of you who are objecting to this plan, but have not spent any time actually reading it.

-- Uncle Deedah (unkeed@yahoo.com), January 05, 2001.

And one, apparently, who does not understand it.

-- Ken Decker (kcdecker@att.net), January 05, 2001.

That's a mean thing to say about Flint! Shame on you!

-- Uncle Deedah (unkeed@yahoo.com), January 05, 2001.

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