Archive for the ‘Taxes and Spending’ Category
Why does it seem that stuff that interests me on the internet comes in waves? I’ll got three days with nothing to talking about. And there are 1600 articles I want to blog on. I wonder what the specific blog frequency is. Anyway…
Before I go on the following rant, I just want to make sure I have my facts straight. You’re telling me that a couple of weeks ago, a large corporation authorized the demolition of recently completed construction to remove a piece of cloth from a non-load-bearing area of their new facility? Let me check to make sure this actually happened. OK. Now, let me check the calendar. Son of a gun, it says right here that it’s 2008.
You realize what this means, right? It means we are no better at gauging cause and effect than the brother-in-law of the guy who discovered fire. We have, in spite of technological developments that might argue otherwise, no more right to the high ground of logic than the fellow whose job it was to select the proper virgin to be dumped into the volcano to appease the rumbly god therein. We might have gotten over the notion that the world is flat, but that’s probably the best thing you can say about us.
Five hours with jackhammers, folks. Five hours! That’s not counting the time it took to remediate the damage, either. Please don’t tell me it’s “all in good fun,” either. Good fun is spending $50 to hire an actor to dress like a wizard and put a pretend curse on the other team. This, on the other hand, is the work of people determined to undo what they believe to be a palpable threat to the well being of their enterprise. I have to know: did the Age of Reason bypass the Bronx?
Neal Boortz, fresh back from vacation:
Slemrod says in that article that there is not one reputable economist of any political stripe that would support the FairTax. Tell that to the economists who support the FairTax, like Lawrence Koltikoff, the chairman of Boston University’s Economics department.
What Slemrod actually says:
In “The FairTax Book,” the syndicated radio host Neal Boortz and Representative John Linder, Republican of Georgia, claim that replacing all federal taxes – income, payroll and estate taxes – with a national sales tax would increase the average household’s purchasing power by about 20 percent, end the need for the I.R.S. and turn April 15 into just another spring day. “Once the FairTax takes effect,” they declare, “you’ll be receiving 100 percent of every paycheck, with no withholding of federal income taxes, Social Security taxes or Medicare taxes – and you’ll be paying just about the same price for T-shirts and other consumer goods and services that you were paying before the FairTax.”
For a book that claims in its introduction to be “about honesty,” this statement falls far short. No reputable economist of any political stripe would support it. The honest truth is that replacing the current tax system with any system that raises the same amount of revenue (as Boortz and Linder claim their plan does) may make us better off, but only by redirecting our resources away from dealing with complex filing requirements and improving our incentives to work, save and innovate – not by creating the kind of free-lunch miracle suggested here.
Slemrod is right and Boortz is wrong. No economists would agree with the statement that, under the Fair Tax, prices won’t go up but takehome pay will. That is mathematically impossible. And Boortz himself has admitted it.
Should I keep kicking the Fair Tax? Why Not?
The FairTax does not increase the price of everything you buy by 30%
It almost certainly will, owing to wage inflexibility.
The FairTax does not put an increased burden on the poor. It literally “untaxes” them.
The FairTax does not destroy the middle class.
However, the middle class is where the saving rate and Fair Tax intersect to the produce the maximum effective tax rate.
Scientologists had nothing to do with it.
What is the truth behind the “you get to keep your whole paycheck” concept
Either you get your gross pay cut down to your current net or the price of everything your employer sells goes up 30%. There is no free lunch, no matter what the Fair Taxers try to tell you. And given the reality of wage inflexibility, the prices will almost certainly go up.
Retired Americans living on their investments and savings are not “double taxed” by the FairTax.
The FairTax rate will not have to be 40, 50 or 60 percent.
The idea that the Fair Tax rate will be 23% is based on a single paper that no one beside Jorgenson has ever seen.
The FairTax will not “destroy” our economy, no more than nutritious food would damage a starving child.
No, but it is certainly going to cause some shockwaves. Where do people get this idea that you can radically upheave 20% of our economy without a ripple?
This is standard nonsense from the Fair Tax crowd. But here’s what go me laughing:
Don’t you just love the idea of watching the moving vans pull up to those law offices on K Street after the FairTax is implemented? All those thousands of lawyer-lobbyists packing their gear to move off to greener pastures somewhere else … weeping at the loss of their six-figure incomes earned by manipulating the current tax system for the benefit of their clients.
Hahahahahahahaha. Hohohohohoho. Heeheeheeheeheehee.
Neal, do you think the lobbyists got rich by giving up? Do you think they won’t still be lobbying for every subsidy and regulatory exemption under the Sun?
And do you really think they won’t immediately try to monkey with the Fair Tax? To get certain industries exempted? To get the rate lowered for “important” industries? With the Fair Tax, the sugar industry will be screaming for rate cuts to protect them from “unfair” Mexican sugar. The steel industry will demand exemptions as an “anti-dumping” maneuver. The idea that we can use a magic bullet to curtail the influence of lobbyists — whether that bullet is called McCain-Feingold or the Fair Tax is childish nonsense.
The Fair Tax has become the rallying point of those who hate our current tax system. I sympathize. For a while, I was with them. I can’t stand the current system either. But this is not the way to fix it.
Jeff Schnepper makes a good criticism of the Fair Tax. Boortz’s response?
First of all … he resorts to the childish 30% argument. I’m sorry, but if a person can’t understand the concept of replacing one embedded tax with another, and calculating those taxes in the same manner, then you have to wonder how much serious thought they’ve put into their criticism.
I have the next Fair Tax book on my to-buy list. But when you respond to an article that list both the benefits and drawbacks of the Fair Tax with “Waa! It’s not 30%!”, then you’re not even trying.
One of the biggest reasons to oppose the Fair Tax is the deception being practiced by its proponents. If their plan was so great, they would respond to the arguments that:
PS – Speaking of stupidity, Boortz outdoes himself with this:
Remember the AIDS “epidemic?” Several years ago people were calling for my head because I repeatedly said that there was NO AIDS epidemic in the U.S. Now it seems that less than 1% of adults in the U.S. have HIV. Some epidemic, huh?
So if a million people dropped dead of ebola, you wouldn’t think we have an epidemic on our hands?
Stephen Bainbridge sums up the argument, from Right and Left, about why an “economic stimulus package” is a really dumb idea.
Megan McCardle on Clinton’s tax plan:
I don’t want to hear any more about how the Democrats are the party of fiscal responsibility; none of them are planning to close the current deficit, much less deal with the now-seriously-it-really-is-looming entitlement problem. Their tax code changes will claw back only a small fraction of the revenue lost in the Bush tax cut. If you are surprised, it is probably because the Democrats and the Republicans have a different definition of the tax cuts going “mostly to the rich”. If you mean, “which individuals got the biggest benefit from the tax cuts?”, rich people did, because they pay the most taxes; that is the definition Democrats use. But if you mean “which class of people got most of the money?”, then the answer is “the middle class”. There just aren’t that many rich people; it costs a lot more to hand out a modest amount of cash to 200 million than to hand out a lot of cash to 500,000. So when Democrats repeal only the tax cuts on the top one or two brackets, this may be symbolically rewarding, but it will not actually generate that much revenue for the treasury.
Democrats are, of course, planning to spend every bit of the money from their tax increases on new spending, plus it looks like some more. You may now return to forgetting that you ever thought you cared about the budget deficit.
Someone sent me this PDF file of Bruce Bartlett tearing apart the Fair Tax. Unfortunately, he still includes a footnote on scientology. But it’s worth a read.
This idea sounds dumber and dumber every day.
From Boortz today:
Taranto’s first attack this week on the FairTax occurred on Monday. In Monday’s “Best of the Web” Taranto implied that Mike Huckabee thinks that under the FairTax prostitutes would collect the 23 percent tax (a use tax?) and forward it to the federal government. Now what Huckabee had actually said was that under the FairTax “You end the underground economy, Illegals, prostitutes, pimps, gamblers, drug dealers–everybody pays taxes.” It doesn’t take much grey matter to figure out that Huckabee was referring to the fact that these miscreants of the underground economy would pay the FairTax along with everyone else when they used their earnings to purchase goods and services.
Neal, they are already paying the embedded tax when they buy those things. You have said, repeatedly, that the total price of legal purchases will stay the same. All that’s changing is that the embedded tax is coming through Fair Tax rather than the current system. If that is the case, then the legal purchases of illegals, prostitutes, pimps, gamblers and drug dealers pay the same tax they always were. Net gain: zero. The only way the Fair Tax would increase revenue from the shadow economy is if drug dealers started charging the Fair Tax.
I’ve never seen anyone as mathematically ignorant as the Fair Tax Movementarians.
Usual caveat: While I oppose the Fair Tax, that doesn’t mean I support the current system. I would just prefer a VAT or a flat tax.
I’ve attacked the Fair Tax because it falsely promises a big pay hike for Americans (a claim Boortz himself has withdrawn) and because I think the prebate would be a disaster. But I’ll hit it again because I need the blog traffic from the Fair Tax Movementarians responding.
One common argument for the Fair Tax over the flat tax goes like so:
We tried a flat tax with Reagan’s tax reform. And it wasn’t flat for long. Congress immediately began revising the tax and making it hideously complicated again.
This has two problems. The first is factual — the 1986 Tax Reform did not create anything approaching a flat tax. It simplified the taxes but not very much, as anyone who owns a business could tell you. It created all kinds of tax incentives and breaks. Claiming that the 1986 Tax Reform Act was the equivalent of a flat tax is like claiming my cat is a hippopotamus. Yes, they are both fat mammals. The similarities end there.
The second problem is naivete. The Fair Taxers assert that the Fair Tax will start simple and stay simple. That Congress will be unable to work all kinds of strange complications into it.
This is total garbage. Just to list a few things Congress will try to do with the the Fair Tax:
Granted, the potential for political abuse is a little lower and more transparent than with the current system. But to sit here and claim that the Fair Tax will be magically immune from the Washington need to endlessly tinker and update and improve is incredibly naive.
Some optimists say that in Army Gen. David Petraeus, Bush has finally found his Gen. Grant. That may or may not be true, but it is beside the point. The problem is that Petraeus has not yet found his President Lincoln.
Read the whole thing. (Hat tip, Lee).