This is an archive of past discussions about FairTax. Do not edit the contents of this page. If you wish to start a new discussion or revive an old one, please do so on the current talk page.
I'm trying to do research on the costs vs. benefits on the fair tax, and I'm finding that in this case Wikipedia isn't as helpful. Certainly the facts are here, but I think (this just might be my impression) that the article is presented in a pro-fair tax view. For example, although critics and opponents of the proposal are mentioned, there is an entire section on benefits and none on costs. The only major harm that is presented in this article is the emergence of a pervasive black market. Maybe some broad changes? - simon, charlottesville/va/usa
maclean25 (the person that did the peer review of the article) has, at my request, left another, less formal peer review on my talk page. It's helpful, but I can't imagine there being anything to add to the to do list at the top of the page. So if you're interested, head over to my talk page. --Trevdna19:12, 18 January 2006 (UTC)
Math in FairTax and status quo tax burden comparison
What does everyone think of the math in this section (toward the bottom - indented area)? I think it may be a little much and have considered deleting it. Should we delete this or create a stub for this type of thing or leave it alone? Perhaps an external reference. Thoughts Morphh02:47, 22 January 2006 (UTC)
The math described here does not seem to jive with the FairTax web site itself, which claims a 23% tax *added to* the purchase price (i.e., like a sales), not a 23% tax *exacted from* a purchase (i.e., like a profit margin). I made an edit to this effect higher in the article, then noticed this entire section suggesting otherwise. Can someone check into this (say, in the text of the latest bill) and adjust as necessary? User:RichardTallentRichardTallent
Good post on the Law Enforcement. I reverted your post on the rate as it is calculated as discussed in the article. Here is a link to the FairTax site that discusses this. When added like a sales tax it is a 30% rate. This is also discussed pretty good in the books and tends to be the rate that opponents like to use. The terms usually used to describe them are Inclusive (23%) and Exclusive (30%) though we don't use them here as it's sort of a neologism. Morphh17:47, 20 April 2006 (UTC)
Entitlement Terminology
I do not believe it is correct to characterize the “prebate” as a monthly entitlement check no more than it is to characterize a taxpayer’s refund of taxes paid on their annual tax return. It is their money.
The purpose of the rebate is to replace the standard deduction and personal exemptions under the income tax. They insured that persons could earn a certain amount before having to pay taxes. Similarly the rebate ensures that a person can purchase basic necessities before having to pay taxes to Uncle Sam.
Entitlements are guaranteed benefits because of rights. The FairTax is the rebate of taxes paid (albeit in advance). The only case where it could be considered an entitlement is where the person spends less than the poverty level for their family size. Then they would be receiving a rebate larger than the taxes they paid.
So the prebate is more properly viewed as a refund of taxes paid done in advance rather than after the fact. However, "Prebate" is a term coined by AFFT. Demogrant is another term used to describe it but is not commonly understood. Subsidy is a term we use often to describe it but I'm not sure it is completely accurate and has negative connotations. Perhaps "Advanced Rebate" or just call it a monthly rebate and then state in the description that it is in advance. I'll make some changes to the "Monthly entitlement checks" section and if the terminology looks ok then we can apply it to the rest of the article. Morphh17:54, 24 January 2006 (UTC)
On page 33 of the bill, it is called a family consumption allowance and then the bill says that each family shall get a monthly rebate. Morphh19:21, 24 January 2006 (UTC)
Sounds ok to me. In that same section, I think the Articles should go completely. I could add a new article every day if desired - why keep them. If they want articles, they should search the web. It is not providing anything of value. Funny - you just archived a post from Scott Ritchie titled "Way way WAY too many external links". So that's three votes. Morphh18:59, 26 January 2006 (UTC)
Not sure Wikipedia is the place for that. Is it normal to just have pages that have tons of external links to a particular topic? I'm asking as I really don't know - I'm not that wikified yet. Article links, like these, seem to me to be outside the normal scope of an encyclopedia unless they are used as reference, which these are not. I'd like to hear Feco's thoughts as he has a much better understanding of Wikipedia policy and practice then I. Morphh03:15, 30 January 2006 (UTC)
Hmm... this topic is more controversial/debated than most topics generally found on Wikipedia, so I don't think it would be a bad idea. What do you think, Feco? --Trevdna03:43, 30 January 2006 (UTC)
I edited the "For FairTax" list of external links and removed those I could not find actually supported the FairTax or a NRST. It appears someone along the way mistook membership in the "Coalition for Fundamental Tax Reform" as meaning they are for the FairTax. Unless an organization has expressed specific support for a FairTax or a NRST I don't think it can be assumed they are "for" the FairTax or a NRST. Supporting fundamental tax reform is not implicit nor explicit support of a NRST or the FairTax. I also looked at the "against" links and they all linked to organizations or articles that have specifically been "against" a NRST or the FairTax. Tom Joad 2k18:05, 14 February 2006 (UTC)
That book only lists them as members of The Coalition for Fundamental Tax Reform (you can do a search of the book on Amazon), not as "for" the FairTax. Tom Joad 2k15:28, 19 February 2006 (UTC)
So, should the list of associations be a list of any association that has any connection with the FairTax or a website that actually has pertinent information. I notice this Buzzbrockway added his own site that isn’t anything more than a page trying to set up a FairTax webring. I don’t see how that adds anything to the understanding of the FairTax. Should something like that be on the list? Tom Joad 2k23:53, 15 February 2006 (UTC)
I think the original idea was to put a list of organizations that were for / against a NRST like the FairTax. Some will not come out and specifically endorse one bill like "HR25" as politicians could modify it into something they did not intend or agree with before passage. The original associations that were listed were documented. Morphh14:18, 18 February 2006 (UTC)
As I stated above, FairTax: America's Best Kept Secret doesn't show them as "for" the FairTax, only as members of The Coalition for Fundamental Tax Reform. I did a search on each individual organization and removed the ones I could not find any evidence that supported the FairTax or a NRST in general. If you have other information, let me know. Tom Joad 2k15:28, 19 February 2006 (UTC)
I'm not disagreeing with you. I was just stating the original idea and the source that I believe was used. I think your changes are fine. Morphh01:39, 20 February 2006 (UTC)
Vote to remove articles
Ok, I took a bold step and deleted the Articles and a couple of state specific external links. This was a debatable move, even for myself. I think it works out better though for an Encyclopedia. Morphh00:54, 27 April 2006 (UTC)
Could you replace some of the articles that you removed? Many of them are very informative (pro & con) and contain information not listed in the main article. I haven't looked through all the external articles that were linked, but many fell within the guidelines for external links. Earthsound22:51, 1 May 2006 (UTC)
I understand your thoughts. Here are the reasons it was removed: Many have stated that we have too many external links. While they may comply with policy, the articles were pushing us to 50 external links (not including references). Deleting the articles dropped it down to around 30. The FairTax article is also getting very long - pushing 50k and close to the "Probably should be divided" size defined in Wikipedia:Article size. While I think we fall under a topic scope that can justify the added reading time, we need to be aware of the size. I do think the articles add value for those looking for more information (some are very good), however, this could be easily found by searching. If there is information listed in these articles that is not listed in the main article, we should consider adding such content if it makes sense and/or using it as a reference. The articles also tend to be one extreme or the other. While POV is permitted and encouraged in external links, I'm not sure we've had time to verify the factual accuracy of the material and the articles don't fall under an official site discussing the topic but a single article. Maybe we should put it for a vote and see what the consensus is. Morphh16:30, 2 May 2006 (UTC)
Tom Joad 2k20:52, 2 May 2006 (UTC) I don't see that the articles really add to the understanding of the FairTax and if anyone is interested they can search for them. I don't think Wikipedia is trying to be the Open Directory Project.
Oppose deletion
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Predicted benefits
I changed "Many respected economists, including former U.S. Federal Reserve Chairman Alan Greenspan, have stated that a national retail sales tax would boost the United States economy" to say "A number of economists have stated that a national retail sales tax would boost the United States economy." I don't think we can say "many" when the reference has 75 economists listed. Seventy-five is not a large number given the BLS puts the number of economists in the U.S. at 13,000. Also, I am almost positive that Greenspan has never stated publically that a NRST would boost the United States economy (I have looked specifically for his ideas on a NRST. He has made several statements about a "consumption tax" but that could be many things besides a NRST. If someone can provide the source for this statement, I feel the text could be put back. Tom Joad 2k22:40, 9 February 2006 (UTC)
I don't agree with this change. Here is an article on Greenspan - CBS News. It is obvious that his statements refer to a NRST and VAT type collection system and all major press releases reflect such. If it wasn't, he would have been more specific as that's what a consumption tax implies. His statements are perfectly relevant and accurate for the statement. The statement of "Many Economists" is that of Greenspan himself. "As you know, many economists believe that a consumption tax would be best from the perspective of promoting economic growth — particularly if one were designing a tax system from scratch — because a consumption tax is likely to encourage saving and capital formation," Greenspan said Fox News. A NRST and VAT are just the type of consumption taxes he is speaking about for the reasons specified by the second sentence. What is the list of Economists that have come out against the idea that a NRST would promote economic growth? While I'm sure there are some, statistics would indicate that "many" do in fact suggest that it would boost economic growth. We're not saying "most" or anything that indicates majority favor. Morphh19:32, 10 February 2006 (UTC)
CBS's headline is misleading and represents a common misunderstanding of what a consumption tax is. Economists consider consumption to equal income minus savings. So any income tax that exempted savings would be a consumption tax. The flat tax is a consumption tax. A "consumed income tax" is a consumption tax. When lay people (including headline writers) hear "consumption tax," they think sales tax. This isn't what an economist thinks (Here is a good explaination).
In fact, Greenspan considers our system to be a mix between a income tax and a consumption tax. From the very testimony CBS was reporting on: "Senator, we actually at the moment have a somewhat mixed system because remember, we do have a number of provisions in the tax code which lower the rate on savings and obviously, to the extent that you're lowering the rate on savings, you're essentially placing it on consumption. So in that regard, we do have a mixed system. I would suspect that probably that may be the best route to go."
So when Greenspan, or any economist, makes a statement about a generic consumption tax, you can't apply that to specifically to a NRST. Some economist favor a consumption tax but don't favor a NRST. You should also note that in the testimony, Greenspan didn't say he thought a consumption tax would boost the economy - he said "many economists believe" that. Tom Joad 2k00:08, 11 February 2006 (UTC)
Perhaps "A number of respected economists, including former U.S. Federal Reserve Chairman Alan Greenspan, have stated that a national retail sales tax would boost the United States economy" Less POV than some or many. --Wynler | Talk21:34, 10 February 2006 (UTC)
"Respect" is also POV. We have no idea if the 75 economists listed are "respected," just that they signed the letter (one has won a Nobel prize - so we can probably assume he is respected). The endorsement letter is referenced. Individuals can determine for themselves if those economists are "respected." Tom Joad 2k00:08, 11 February 2006 (UTC)
I understand what your saying here and based on this information, Greenspans statements may have had broader indications. So, I'll concede and agree with you here. However, the statement doesn't say that they agree with a National Retail Sales tax. It just says that a National Retail Sales tax, a consumption tax, would promote economic growth as it would encourage saving and capital formation. Such a sentence may be deceiving though in context as support for the FairTax. Based on your argument, I remove my objection. As far as "respected", it went with that sentence as a consumption tax promoting economic growth. The 75 economists endorsed the FairTax, which is not what this sentence is about. It is an additional source as these economists also feel that a NRST would boost the economy. This is also where the "many" is not limited to the 75. The sentence is broader then support for the FairTax - it makes a statement about the type of tax and how it would effect economic growth. Morphh02:45, 14 February 2006 (UTC)
Real interest rates
Trevdna, I noticed you added back in the section on "Real interest rates". The section "Promotion of economic growth" has similar information about interest rates in this sentence "Further, studies of the FairTax at Boston University and Rice University suggest the FairTax will bring long-term interest rates down by as much as one third." It is more specific, recent, respected and says about the same thing. Do you feel the additional section on real interest rates adds further value? Morphh03:27, 30 January 2006 (UTC)
Oops - my bad. I didn't notice that one. Go ahead and redelete my readdition. However, I would be more easy about it if you could find a reference for the fact you are talking about (but I know that mine didn't have a ref either, so whatever). --Trevdna03:40, 30 January 2006 (UTC)
Will do - The reference for the above information is #12 in the article. Additional information in this section was also pulled from that source, so the reference # is a sentence or two down from the above statement in the article. Morphh04:10, 30 January 2006 (UTC)
The text says "Further studies of the FairTax." Was it specifically the FairTax that was studied or was it a generic NRST? I believe at least the Rice University study was a generic NRST. If it was a generic NRST, the details would have been different than the FairTax which could change the results. I don't think it's fair to attach these results specifically to the FairTax. Tom Joad 2k22:08, 9 February 2006 (UTC)
I'm not sure what you mean. I read it as stating "In addition". "In addition to the other FairTax studies above, studies of the FairTax at Rice University..." Even if it were a generic NRST study, it would still apply as this is a commonality. The FairTax is the leading NRST. Not everything has to specifically call out the FairTax by name to be relevant. The source is quoted. Do you have anything that suggests that this study would not apply to the FairTax? Morphh19:47, 10 February 2006 (UTC)
Lots of things could have been different in those studies. Specific results are being attributed to the FairTax when the NRST studied could have varied dramatic in rate, base, rebate, etc. These variations would change the results quoted. If it wasn't the FairTax specifically that was studied you can't say that it was. It's just not accurate. Tom Joad 2k00:40, 11 February 2006 (UTC)
There are many sources that utilize these figures for FairTax including Linder. These Universities were part of the research team that worked on the FairTax: Harvard University, Stanford University, Rice University, Massachusetts Institute of Technology (MIT), the National Bureau of Economic Research, the CATO Institute, the Heritage Foundation, and the Argus Group. I have not seen anything that would suggest that these studies do not apply. If you did find such a source that states that these studies would not apply, add a sentence below the paragraph stating such and quote the source. Morphh13:58, 12 February 2006 (UTC)
Debt markets
One thing that I don't understand is what will happen to the debt markets? How will the changing the rules affect companies who have optimized their capital srtuctures. If you have a company financed primarily with debt vs one that is financed by equity. Since interest payments are currently tax advantaged, what will happen to the companies financials, would it be enough to put some companies under? Would issuing equity become the preferred way to raise capital??
FairTax would have significant effects on capital markets. Some are obvious and can be predicted; there are certainly other unintended consequences that would occur as capital markets rationalized to the new tax environment. Debt is favored over equity in the current system... all else equal, FT removes the benefit of debt, so companies should lean more towards equity. Greater equity supply would tend to push equity values down (dilution). Lesser debt supply would tend to push debt prices up (thus yields down). However, equity values would fluctuate among different firms depending on the amount of expected future tax deductions that would be lost. It gets pretty complicated very quickly. Feco00:55, 12 February 2006 (UTC)
Sale of stock shares not taxed?
I see no mention of whether or not the proposal taxes the sale of stock and other investment instruments. Can a knowledgeable person provide an answer?
I'm guessing the answer is "the sale stocks and investment instruments is not taxed". I infer from the rule about not taxing the sale of used goods. Funkyj21:31, 14 February 2006 (UTC)
The return on an investment wouldn't be taxed as a capital gain, but any fees incurred with the transaction (e.g., brokerage fees, mutual fund manangement fees, etc.) would be taxed as they are considered a payment for a service. Also, money in "any underlying interest-bearing investment or account" would be taxed but only the amount of interest paid that is over the "basic interest rate." The interest received that is over the basic interest rate is considered payment for financial intermediation services. Tom Joad 2k06:08, 15 February 2006 (UTC)
Thanks for the pointer to the FAQ. Here is the FAQs answer to my question:
33. WHAT WILL HAPPEN TO TAX-FREE BONDS?
Tax-free bonds will continue to be tax-free. On the other hand, 'all stocks, bonds, and other investments will be tax-free as well'.
Revenue Neutral implies that re The Fair Tax vis-à-vis the Graduated Income Tax, currently in force, the rate under The Fair Tax is set at a level to insure the Federal Government will receive the same tax amount under either Law. Since wealthy people spend a smaller percentage of their disposable income than middle income Americans, the wealthy will, in effect, not be paying any tax on large portions of their income. Wealthy people will pay less tax. Therefore middle income Americans must pay more in tax under The Fair Tax. It is an irrefutable law of mathematics in a “Revenue Neutral” scheme. Read entire Article at: http://tabacco.blog-city.com/illogical_national_sales_tax_proponents_think_middle_america.htm
I'm sorry but that is the most non-sensical thing I have read in a while (that goes for both your comment and the article you linked). The problem is that you are totally ignoring that all expenditures up to the poverty level are not taxed (by way of a "pre-bate"). Basically, every tax payer gets a check for $460 at the beginning of the month under the plan (or $5520 per year). Now, refiguring the numbers in the article, Mr. Have More's tax looks like $132,480.00/ $1,000,000.00 = 13.25%, and Mr. Average Joe's looks like $3,795.00/$30,000.00 = 12.65%. So even under the ridiculous assumption that he spent 33% more than he made, his tax burden is still less than Mr. Have More's. Please, stop spreading FUD. El Cubano20:48, 22 May 2006 (UTC)
I posted a reply to the blog with my thoughts. It seems more like a debate question for www.fairtaxgroups.com then Wikipedia. I did not see any new information presented or any sourced data in the link. The section "Distribution of tax burden" covers this topic from both points of view. Morphh23:27, 22 May 2006 (UTC)
Change to Home mortgage interest deduction
A recent change was made to this sentence by 66.161.74.251. I don't understand the change or its intended meaning. Could someone clarify? It seemed to be much clearer to me in the first instance. Morphh23:02, 1 June 2006 (UTC)
However, since there are several areas that are considered tax free under the FairTax plan, it may decrease the incentive to spend more on homes in favor of savings, education, or other investments.
Changed to
However, since there are several investment products that are considered tax free under the FairTax plan, it may decrease the incentive (if a family took a mortgage interest deduction before the FairTax) to spend more on homes in favor of savings, education, or other investments.
- Illegal immigration: have any "official" arguments been made that the FairTax would create a strong incentive (the rebate program) for residents to have legal status? It also seems to me that the FairTax would make moot the argument that illegal residents pay no taxes. RichardTallent05:55, 20 April 2006 (UTC)
This would be a good addition. I'm sure it is discussed in the books. A google turns up several articles. Go for it! Morphh18:26, 20 April 2006 (UTC)
- How would the FairTax be applied to goods and services purchased from other countries? (outsourced contract labor, imported finished goods)? RichardTallent05:55, 20 April 2006 (UTC)
It would only tax goods and services sold in the United States. Outsourced contract labor would be tax according to the laws of the other country. Goods imported to the U.S. would have the FairTax applied when sold. Goods exported to other countries would not have a FairTax component but would be tax by the other country (VAT or otherwise). Morphh18:26, 20 April 2006 (UTC)
There might be a consulting fee that might be taxed but the salary of the consultant would not be. Their labor / cost would be considered as a service that is tax free or used to build the final good / service of the buisness. Since they are used to buid a final good or service, the FairTax would be applied at that point. So no double taxation would occur. (see incorporating question) Morphh18:26, 20 April 2006 (UTC)
- How would the FairTax be applied to education services? It seems from my reading that everything from public college tuition to medical continuing education courses would be taxed, which seems out of whack with other American values. RichardTallent05:55, 20 April 2006 (UTC)
- How would the FairTax be applied to purchases made to replace items lost in disaster or theft? I recently went through an expensive hurricane and the thought of a 23% effective cut in insurance coverage is unpleasant. RichardTallent05:55, 20 April 2006 (UTC)
Since the tax is included in the cost of the good, it would make sense that insurance would cover it. A $100 dollar camera is $100 and it includes the tax. Morphh18:26, 20 April 2006 (UTC)
- What will stop people from "incorporating" their families (as some farm families do), or executives from unfairly enjoying the benefits of corporate-owned homes, airplanes, etc.? RichardTallent05:55, 20 April 2006 (UTC)
In order for any person to purchase items tax-free for business purposes, the business has to be a registered seller with the state sales tax authority who will collect the FairTax along with the state sales tax. The state will issue the business a registered sellers certificate. This will enable the business to purchase tax free from wholesale vendors, but they must give a copy of their registration certificate to the vendor to leave an audit trail.
When they purchase items for business use from a retail vendor, they will have to pay the tax on the purchase and apply for a refund. They will be required to keep documentation. Also, they will be required to submit monthly reports of taxable sales and sales tax collected on their retail sales to the state sales tax authority. All of this will subject the business to being audited by the state.
During such an audit they will have to produce the invoices for all the "business purchases" that they did not pay sales tax on, and will have to be able to show that they were bona fide business expenses. (Since 132 million individuals will no longer be filing tax returns, there will only be about 16 million businesses who have to be audited. This will greatly increase the likelihood of getting audited, making the type of tax evasion behavior mentioned much riskier. Additionally, we would have stronger taxpayer rights than the current tax system, the FairTax legislation has a number of fines and penalties for non-compliance and authorizes a mechanism for reporting tax cheats and obtaining a reward.)
In order to prevent businesses from buying everything for their employees (in a family business, for example), things bought by the business on behalf of the employees that aren’t strictly for business use will be taxable. Health insurance and/or medical expenses would be an example. The business would have to pay sales taxes on these purchases. Morphh18:26, 20 April 2006 (UTC)
Absent Advocacy
This article takes a one-sided view in favor of consumption. It seems to suggest that consumption is always good for the economy. But in fact consumption is usually bad for the economy of the country that does it, while production is good.
Consumption reduces future productivity by consuming capital. Capital is the ability to start a new venture. New ventures must consume more than they produce for a short period of time. To replace lost capital, somebody (the saver) has to consume less than he produces. The less consumption, the better. —Preceding unsigned comment added by 72.196.244.178 (talk) 16:49, 16 April 2010 (UTC)
In the text, under "Other indirect effects," the following verbiage is found:
"The FairTax would be tax free on mortgage interest......"
What exactly does this mean. The "tax" would be "tax free"? That doesn't seem to make sense. I don't know how to correct it, because I haven't figured out what the sentence is supposed to mean. This might be some sort of grammatical problem. Help, anyone? Famspear (talk) 07:05, 19 January 2011 (UTC)
Here's the entire sentence:
"The FairTax would be tax free on mortgage interest up to the federal borrowing rate for like-term instruments as determined by the Treasury, but since several areas would be tax free under the FairTax plan, it could decrease the incentive to spend more on homes in favor of savings, education, or other investments."
What is meant by the phrase "several areas would be tax free"? What is meant by the term "area"? Areas of what?
In the phrase "it could decrease...", exactly what is "it"? Does the word "it" mean "the Fair Tax"?
Famspear, the "several areas would be tax free" refers to "savings, education, or other investments". The "it" refers the "the Fair Tax". I'll try to rewrite it a bit. Morphh(talk)17:31, 21 January 2011 (UTC)
Vagueness in article as well as bill
The sentences you mention above probably refer to the bill provisions defining what interest payments are taxable. The way I interpret proposed Sec. 805[otg 1], interest is subject to the tax only to the extent it exceeds the Applicable Federal Rate (AFR).[otg 2] This taxability appears to apply to all new and existing consumer debt, including home mortgages and personal use credit cards.
The bill has several places that are as hard to interpret as the article. My favorite is: Sec. 2(a)(14)(B), defining "service", which is taxable:
(B) SERVICE.—For purposes of subparagraph (A), the term ‘service’—
(i) shall include any service per formed by an employee for which the employee is paid wages or a salary by a taxable employer, and
(ii) shall not include any service performed by an employee for which the employee is paid wages or a salary—
(I) by an employer in the regular course of the employer’s trade or business,
(II) by an employer that is a not-for-profit organization (as defined in section 706), H25 wwoods2 on PRODPC68 with BILLS
(III) by an employer that is a government enterprise (as defined in section 704), and
(IV) by taxable employers to employees directly providing education and training.
This bill provision seems to contradict itself. Did they really mean "or" instead of "and"?? Such is the stuff of lawsuits. The bill's rules on legislative construction (very unusual) only muddy the water.
The article has a lot of deficiencies. It's long on the politics involved and short on details of the proposal. With any tax, the definition of what is taxable is the most important question. Nearly half the bill discusses this in detail. In the entire 99k Fair Tax article, it says only this about what is taxable:
"The tax would be levied once at the final retail sale for personal consumption on new goods and services. A good would be considered "used" and not taxable if a consumer already owns it before the FairTax takes effect or if the FairTax has been paid previously on the good, which may be different than the item being sold previously. Exports and intermediate business transactions would not be taxed, nor would savings, investments, or education tuition expenses as they would be considered an investment (rather than final consumption). Personal services such as health care, legal services, financial services, and auto repairs would be subject to the FairTax, as would renting apartments and other real property. ... The FairTax would apply to Internet purchases and would tax retail international purchases (such as a boat or car) that are imported to the United States"
Hardly an adequate summary. The bill appears to exempt from taxability goods and services used in a trade or business or for investment. The article implies this in stating that the tax applies to goods and services "for personal consumption." Further, businesses have a choice of varied mutually exclusive credits, one of which is a credit for trade or business. Together, the provisions likely will have the effect of removing all Federal tax burden from corporations. These major points are not covered in the article beyond the three words in quotes above.
The introduction implies that the "prebate" is automatic, but the text of the article mentions the annual registration process. The rebate is sent only to "duly registered qualified families". The bill would establish more bureaucracy within Social Security Administration[otg 3] to administer the rebate, including determining the amount for each family and tracking reported changes in family status. The article fails to explicitly mention that the onus for getting any rebate falls on the family, not SSA.[otg 4] The article also states that the rebate is determined annually and then paid monthly, with inflation adjustment. I can't find anything in the bill to support such statements. Further, the bill (prop. sec. 301) states the rebate amount is determined based on the "monthly poverty rate" and is paid monthly. This seems to contradict the article.
The tax rates for other than 2011 are to have 3 components, a fixed general rate, and variable OASDI and HI rates. The latter are to be determined by the Social Security Administration based on "that sales tax rate which is necessary to raise the same amount of revenue that would have been raised by imposing a 12.4 percent tax on the Social Security wage base". The bill clearly contemplates variable rates, and provides procedures for publishing the rate changes and when they take effect. The article says nothing about this
The Fair Tax article is a fairly good discussion of policy issues and politics, but it is woefully short on information about the tax proposal itself. It also omits[otg 5] any discussion of the impact on corporations, which would almost all cease to be taxable in any manner. This is a major shift in incidence of taxation that to the non-economist is very important, yet it is completely ignored in the article. This is a major omission. If the article were titled "Policy and politics of the Fair Tax", it might be considered a Good Article, but for the major omission. It is titled in a way that implies it will tell you something about the tax itself, and it does not even get to start class on that count. As it stands, it is little more than a highly political debate disguised as a NPOV article. The article needs massive work, or retitling to something that reflects what it does cover. I note that the article is so highly policed that changes, no matter how accurate or relevant, are almost impossible to sustain.
Notes otg
^The bill, proposed as H.R. 25 in the 111th Congress, repeals much of the IRC in a few bill sections then adds a lot of sections to 26 USC in a single bill section. References are to proposed 26 USC sections, except as noted.
^AFR is defined nearly the same in proposed Sec. 511 as under existing Sec. 1274(d). The long term AFR for January 2011 is 3.88%, short term is 0.43%. Inexplicably, the drafters of the bill left out a few key words, appearing to give broad discretion to the Secretary in determining AFR. Maybe it's just sloppy drafting. The following three sentences are OR: I conclude that this would effectively tax consumers in interest payments at varying overall rates depending effectively on their credit rating and the type of debt. Those with worse credit pay higher interest rates, and would pay more tax under the proposal. The plan would also give an advantage to long term over short term debt. Query: would a 3 year adjustable rate mortgage be long term or short term?
^State tax administrations, who would be doing part of the administration of the Fair Tax, are required to send out annual registration forms, but SSA must do the computations.
^See proposed Sec. 302, which outlines the procedures in a brief 10 pages. Note that prop. sec. 302(f) explicitly denies the rebate if the family does not timely file a registration, but allows cures of failures (with limits).
^The only reference to this within the article is the phrase "because the FairTax eliminates corporate income taxes" buried in the "Economic" subsection.
Given the fact that the "Fair Tax" is just a proposal at the moment, and unlikely to be enacted any time soon (I would say 2013 or so at the absolute earliest), the policy and political debate is probably just as important as the details in the bill. We should certainly try to make clear what the current bill says, though. As to the POV thing, a big problem has been a lack of good published criticism of the idea. You seem to have found some, I would support integrating more criticism into the article. Brianyoumans (talk) 16:55, 20 January 2011 (UTC)
Agree with Brianyoumans. The article does cover business in the section Effects on tax code compliance and primarily in Personal versus business purchases, so maybe we need a little clarification, redirection, or restructure to make it clearer in the other area discussing what is taxed. As far as the overall content, the sources cover more politics than actual bill content, like most bills under debate. We certainly want the technical details to be as accurate as possible and I'm certainly open to corrections. Oldtaxguy, seems like you're starting off with a strong lack of good faith though, which is not what I've seen of you on the other articles we've worked on (and I don't think I've been unreasonable to work with). There is no cabal here. Of any of the tax articles I work on, this one has probably had the most debate and give/take that I've seen (and I watch hundreds of tax articles). It's honestly been quite stressful sometimes, so be cool and make suggestions / discuss - we're all here to make the encyclopedia better. Morphh(talk)17:10, 21 January 2011 (UTC)
Democrats still controlling Congress?
I updated a sentence I noticed that anachronistically claimed that the Democrats controlled Congress. Has the Republican leadership of the House made any pronouncements on whether they might advance the FairTax? If so, that should probably be noted. Actually, that whole section needs to be redone. Brianyoumans (talk) 04:10, 3 March 2011 (UTC)
I haven't heard the republican leadership in the House make any pronouncements on it. John Boehner never let the FairTax out of committee when he was House Majority Leader in 2006. Current House Majority Leader Eric Cantor is a staunch supporter of Paul Ryan’s Roadmap for America. But there has been a push due to the Tea Party movement, which should probably be mentioned - it's popular with this group. ‘Fair Tax’ seen as wedge issue to push split between Republicans, Tea PartyMorphh(talk)14:51, 4 March 2011 (UTC)
Yeah, I'm not convinced that the FlatTax will get any farther in this Congress than in previous ones. But clearly the political situation has changed and at some point that paragraph needs to be updated. Brianyoumans (talk) 21:02, 4 March 2011 (UTC)
Article appears to be written entirely by fair tax proponents with a libertarian persepective
If you read this article, and had not been following the issue on your own, this article would lead you to believe that the fair tax is almost without any economic risks, or major critics among economists. This is simply not the case, there are many well trained economists who would refute any or all claims made by this article. Do you really think nobel prize winnering economist Paul Krugman or one of the many Keynesian economists would not point out that the Fair Tax may shift more of the tax burden from the wealthy to the poor (for a short period or even permanently), and thus may have negative economic and moral implications?
This has come up many times before in the talk pages for this article - I thought much the same myself, at first. However, the main reason that there isn't more criticism of the Fair Tax in the article is that there simply hasn't been that much work done on it by anyone except proponents. I think there has been considerable efforts made to find more criticism to put in, but there just aren't the studies out there. If you can find some, or even interviews or opinion pieces by reputable economists, please bring them up and they can be integrated into the article. Brianyoumans (talk) 02:52, 6 March 2010 (UTC)
I proposed in mid-2009, that the article was fringe and highly biased. I was told "There is no way it will be deleted or reduced to a summary, sorry to say.. your wasting your time." Few reputable tax people have bothered to debate the "Fair Tax" because it is so fringe. One hazzard of Wikipedia is that wacky views persist and often are given undue weight. For instance, see the article "Flat earth", which is very lengthy. Few would argue that the view is not REALLY fringe. Yet the introduction states "Although the hypothesis of the flat Earth has long been generally dismissed, there are still occasional modern advocates of the hypothesis." Also see our colleague Famspear's tireless efforts to combat frivolous tax protester arguments. Fair Tax and Flat Tax proposals are very far out of the mainstream, and generally advocated by politicians trying to appeal to the radical right. So far, neither proposal has been adopted anywhere. (Note: proponents of Flat Tax claim otherwise, but the claims are baseless misinterpretations of tax law. The discussion above by a proponent claims "concensus" in spite of the fact that a third of editors still claim the view is fringe.) Both Flat Tax and Fair Tax articles appear to be very well policed by proponents of the views espoused in the articles. Good luck on getting any meaningful changes to stick.Sfcardwell (talk) 02:27, 22 April 2010 (UTC)
The reason that no "reputable" tax expert takes either a Flat Tax or Fair Tax seriously is because they're pompous. —Preceding unsigned comment added by 68.63.136.142 (talk) 06:29, 3 May 2010 (UTC)
Criticism sections are discouraged, particularly with high quality articles. The criticism is spread throughout the article where appropriate. Morphh(talk)14:29, 04 May 2010 (UTC)
It's going to be a long time before this is a high-quality article, maybe it needs a criticism to balance it correctly.M4bwav (talk) 16:12, 23 November 2010 (UTC)
I've added some citations in the See also section to at least provide a hint of balance. Maybe they'll survive at least a few hours amid the policing by proponents of this bill that has never made it to even a committee hearing. Oldtaxguy (talk) 00:20, 7 January 2011 (UTC)
Oldtaxguy, one of these articles already exist as a reference (we could add the others as references for critical content if needed). The See also section is not for external links, it's for other Wikipedia articles that relate to the subject that are not covered in the article itself. These news links also wouldn't apply to the External links section per WP:EL. The article is not lacking in criticism based on reliable sources. This article has been heavily edited and debated by both pro and con editors for years and is relatively stable. If you know of specific criticism due weight that is not included, then please bring it up and we can review it for inclusion. Morphh(talk)16:27, 7 January 2011 (UTC)
"Fair Tax" is a title, not a description
This is an important distinction. The title itself is propaganda, like "Death Panels" or "Repeal of the Job-Killing Health Care Bill". As such, it should always be cited as a title -- either with quotation marks or italics, whichever is appropriate in a Wikipedia article. For now, as a minimum, I propose changing the introductory sentence
The FairTax is a proposed change to the federal government tax laws ...
to the revised sentence
"FairTax" is a title used by proponents to refer to a proposed change to the federal government tax laws ...
I believe this is an accurate and npov description of the term. I will make this edit later, after a reasonable amount of time for discussion.
Aftermath (talk) 19:34, 21 May 2011 (UTC)
The term is used by proponents and opponents alike to refer to this specific plan. It's the name of the plan as used by reliable sources, which is also the name of the bill. It is not used here as a description of a "fair tax". The article states in the Legislative overview that such a description is subjective and debated depending on pov. So while it is a title, I'm not sure it makes any sense for succinct prose in the lead to say "is a title to refer to" - the capitalization does this as a proper noun. The current sentence accurately reflects reliable sources and should remain unchanged - it has been vetted through years of debate, compromise, peer reviews, and holds the weight of consensus. Morphh(talk)21:55, 21 May 2011 (UTC)
In my experience, opponents always begin a discussion of the "FairTax" with a caveat about the title. An encyclopedic article must not assume that readers are already familiar with conventions regarding the topic. For this reason, the lead is precisely the place to clarify that the term is a title, and one that has a distinctly different significance for proponents and opponents. The fact of capitalization is inadequate to neutralize the bias that is built into the term. Even in the lead paragraph, clarity trumps succinctness. I see no justification for neglecting explicitness and clarity, especially when it costs only eight words.
Aftermath (talk) 04:54, 22 May 2011 (UTC)
I can't speak to your experience, but opponents don't always begin a discussion of the plan with such a caveat and I don't see such a clarification of a title used in reliable sources. Looking at the sources (focusing on opponents), it seems rarely if ever stated in this way. Some sources do put quotes around the first use of the term, but in these cases it most often treats it as two words "Fair Tax", not as one word FairTax (commonly used to refer to the title). When the words are separated in the article, we do add italics or quotes depending on use. We also have to be aware of the use to employ scare quotes to signify disapproval of a term, which would be inappropriate here. The title refers to the same thing for opponents and proponents - a specific national retail sales tax plan. Our first sentence based on context defines it as a proper noun, not a adjective. Readers need not be familiar with the conventions to understand it's a title - it's obvious in the first sentence. Morphh(talk)14:30, 22 May 2011 (UTC)
I made a change to the first sentence and only then read this discussion... sorry about that! But I think the change is reasonable and it might deal with the concern raised here.Jytdog (talk) 23:32, 22 May 2011 (UTC)
I don't want to demotivate you and I'm certainly open to adjustment, but I do have some problems with the changes. I don't think it follows our standards on WP:LEAD and WP:FACR. It's become too large and unstructured, adding too much detail for the lead, which runs into WP:WEIGHT issues for certain areas. It makes self references and questionable statements. "The term FairTax is used to denote a set of ideas, a political movement supporting those ideas, as well as specific bills to implement those ideas..." Where do you get this? I think it may be pushing WP:OR. Why should we give weight to breaking this up as denoting three things? Do the sources break this up as three things? Where do we have a majority of sources that says the FairTax is a movement? Not that there is a movement around the FairTax, that seems different.. you're saying that the term denotes a movement. Where is the sources to support this? Why give it first sentence weight - is it really that distinguishable? Later in the lead we state that a movement has formed around the plan. Keep it simple, succinct, and easily supported by reliable sources - "The FairTax is a proposed change to the federal government tax laws..." The lead has been heavily and fiercely debated and gone through years of compromise and struggle to get where it is.. it's now been stable for a couple years. Can we just let it be... WikiProject Taxation has over 1000 articles that need our attention way more than this one. Morphh(talk)13:35, 23 May 2011 (UTC)
I came to do this discussion when Herman Cain announced his presidential run and I read about him and this whole "FairTax" thing. For instance, the Wiki article on him says "Cain is a strong supporter of the Fair Tax". And I thought, what the heck is "the Fair Tax"? So I came to this article. It originally said: "The FairTax is a proposed change to the federal government tax laws of the United States intended to replace all federal taxes on personal and corporate income with a single broad national consumption tax on retail sales." As I read further, I found that the description, "a proposed change", was a misleadingly modest description. It would be like calling a switch to socialized medicine "a proposed change" to our healthcare system. Hence "a set of ideas." Clearly the term also refers to legislation to make those ideas law. Finally as this article itself describes, there is a movement to support the ideas and the legislations. Anywhere you encounter the term "FairTax" it is going to be signifying one or more of these meanings.
The intro is now very structured. One definitional lede, brief legislative history and status (formerly the intro gave no information about when it was first introduced (is this an old idea or a new one? It is important info that it was first introduced 12 years ago! and that it has never made it out of committee), a bit more fleshing out of the proposal itself, various POVs on what its effects would be, and a brief statement that there is a political movement. Tight as a drum.
I took out the "see below" -- I note that intro formerly contained internal links to the rest of the article so I am not sure where the self-referential criticism is coming from. Jytdog (talk) 12:24, 24 May 2011 (UTC)
The self reference links in the lead are footnotes, which where placed based on discussions of including too much detail in the lead. As for structure, we went from three even paragraphs to five greatly uneven paragraphs. The length causes issues with WP:LEAD. Paragraphs are now 1 sentence, 3 sentences, 5 sentences, 8 sentences, 2 sentences. While the topics are structured, it looks horrible. I'm fine with putting some reference to the time spent in congress, but the length currently gives it undue weight. You're giving it 1 of the 5 paragraphs of the lead. Most reliable sources don't even mention the introduction of the bill or the time spent in congress. I understand your expanded definition of the term, just not sure it's proper here. It's long, broad, unreferenced, and includes duplication. What are the set of ideas? I understand the concepts, but we don't discuss a specific set of ideas that make up the proposal. Where do we get that it has three meanings? It's a tax reform plan... keep it simple. As for prose, "The term".. does "term" add anything, does "used to denote" add anything, or "those ideas"? Does "The FairTax is a set of ideas, a supporting political movement" convey the same thing with less words. I point this out as there has been a lot of work and discussion that has been put into the current lead. We're open to changes, but we should discuss them out and get some agreement on it. We may be able to make some small changes that satisfy your concerns. For example, you stated that "a proposed change" was insufficient to convey the amount of change.. so perhaps something as simple as changing "is a proposed change" to "is a major tax reform proposal to change the" or "is a significant change proposed to the federal government tax laws". Morphh(talk)13:35, 30 May 2011 (UTC)
I didn't do the footnotes and have no investment in them; do as you will there.
I am baffled that you don't think the legislative history is important. The thing was first introduced 12 years ago! It is by no means new, and has never gotten enough traction to get out of committee. That is very important context for how disruptive the FairTax is.
Which leads to the next point - as you dig into this it becomes very clear that is not simply a proposal to tinker with taxation - it envisions a remaking of the government (e.g. relationship between states and feds) and of the economy. Maybe this is the nature of every "tax reform plan" but for the everyday reader hitting this, it is too modest to say "tax reform" - all the implications don't ring as they would for an expert in the field. But I am OK with what you propose above!
On "term" and "denote" -- this term, "FairTax" - is clearly the product of a branding effort, like iPod or easyJet or iPod or PayPal or YouTube - this one word with internal capitalization makes it a "term" or a "brand" not just a neutral set of words like "Tax Reform" or "Cosumption Tax" -- calling it a "term" signals all this. And because it is a brand, a "term" there is no obvious meaning for it, just like there is no obvious meaning for YouTube. When you look at how people use it -- how it is used the article itself, you find these three meanings -- the ideas, the legislation embodying them, and the movement. Three separable things.
On the uneven-ness -- I think the pro/con paragraph is crazy long, but all I did was add stuff from the old last paragraph and put with the other pro/con stuff that was already there. I agree it should be edited but I didn't feel comfortable chopping that down. Feel free!Jytdog (talk) 17:03, 30 May 2011 (UTC)
I didn't say the legislative history wasn't important. In fact, I had put it in there a while ago myself and it was removed as unnecessary detail. What I said was that it was too long, but would agree to some form of inclusion to indicate the time-frame and hoped that we could come to some sort of compromise on it. I don't disagree that the term is a brand, but to use your examples, we don't say "the term iPod denotes a media device", or "the term YouTube denotes a video sharing website" - we just say an "iPod is a media device" and "YouTube is a video sharing website" - the "FairTax is a tax reform proposal". I haven't seen where anyone is confused that this is a branding. It seems we're trying to solve a problem where none exists. The impact of the plan and how it would change, influence, or affect government and the economy would be a matter of opinion, so we need to be careful of introducing such into the first sentence as a statement of fact. Morphh(talk)20:37, 30 May 2011 (UTC)
I tried to revise it based on our discussion. Looking back at the past version, the legislative history was present in the third paragraph. So I guess the purpose was to move it into the first paragraph where the bill is first mentioned. I tried to do this and pulled in the information from the third paragraph regarding the movement, as that's the balance for that section. It was first introduced in 1999, but only started gaining momentum after 2005. From there, I tweaked a few things to provide the proper flow to maintain three evenly sized paragraphs. It keeps the opinion together, but breaks it up so it's not one huge back and forth. Morphh(talk)01:09, 31 May 2011 (UTC)
One thing I noticed when rewriting this was the statement of fact regarding it being a federal proposal. I'm not sure it's due weight, since almost all sources reference the Federal plan, but there also State level bills. SC for example just introduce a state level plan (H3993) with 64 representatives as co-sponsor.[1] This may go toward your various meanings, since the plan can reference different bills, depending on if your talking about federal or state tax reform. Morphh(talk)01:35, 31 May 2011 (UTC)
Thanks! I appreciate the care and time you took to address the concerns I raised as well as to follow lead protocols. I hear you on the state tax reform bill issue and the slipperiness of semantic reference! Jytdog (talk) 01:49, 31 May 2011 (UTC)
NRF study on the Tauzin act
The 'effects' section contains this line "Opponents offer a study commissioned by the National Retail Federation in 2000 that found a national sales tax bill filed by Billy Tauzin, the Individual Tax Freedom Act (H.R. 2717), would bring a three-year decline in the economy, a four-year decline in employment and an eight-year decline in consumer spending." Tauzin's ITFA was very different from the FairTax proposal. Is it really NPOV and accurate to use criticisms based on a different , but similar sounding proposal? I've removed it for now, if you put it back in, please explain why you think it is appropriate. 131.111.185.34 (talk) 07:44, 5 June 2011 (UTC)
I agree that it's not particularly accurate to use one tax plan to criticize another as if they were the same, but that's to suggest that criticism is always fair or that advocacy is likewise always presented without deception. Fact is, opponents use this to criticize the plan and we should report their criticism. It may be a poor argument and a supporter would rebut it as you describe, but it's an argument they make, so we should report it without bias. A good many criticisms are not based on the plan as it is written. What we can do for NPOV is to be clear on what it is being compared and let the reader decide if such a comparison is accurate. If you have a source that states how the plans differ, or how such a comparison is inaccurate, then we can look at including it. Morphh(talk)18:26, 6 June 2011 (UTC)
Treasury Department entry
The discussion about the treasury department regarding recent entries is over here. The tax panel looked at many vat and sales tax ideas. Essentially, those figures are for a state sales tax model, not the FairTax model. They do discuss the FairTax model, which is covered in Box 9.2 in the Tax Panel study, which we already include in the article. Morphh(talk)21:23, 22 January 2012 (UTC)
Page 217. While somewhat irrelevant, I'll note that both their "First and Second" objection points were shown to be inaccurate in subsequent papers published by two universities, which is why it's important to publish the methodology. The public still has no idea how they came up with those figures, even after several Freedom of Information Act requests. Being they're the Department that stands the most to lose from such a plan and the Tax Panel leaders are now income tax lobbyist, it doesn't surprise me. Morphh(talk)23:09, 22 January 2012 (UTC)
"First, it appears that FairTax proponents include federal government spending in the tax base... However, they neglect to take this assumption into account in computing the amount of revenue required to maintain the government's current level of spending.... Second, FairTax proponents' rate estimates also appear to assume that there would be absolutely no tax evasion in a retail sales tax...." Those are some pretty serious statements! What are the "subsequent papers published by two universities" to which you refer? Selery (talk) 04:57, 23 January 2012 (UTC)
I feel like I'm doing your homework. ;-) The tax panel study was done before methodology was published for determining the rate. So the tax panel was basing this on assumptions, because they had nothing from proponents to assess except back of the napkin figures. The government paying itself is a zero sum, just as it is today (which I guess the tax panel failed to consider based on the comment). Government paying taxes under the plan is only done for the purposes of competing on a level playing field with private industry (whether this is a good thing is a debatable point). In any case, the tax rate is the same if the government pays taxes or not. This is shown in all the published methodologies from William Gale, Kotlikoff, BHI, and Diamond & Zodrow. As for evasion, BHI discusses what evasion figures are included and offsetting factors left off for math simplification. Morphh(talk)14:53, 23 January 2012 (UTC)
Excellent. We should prefer sources from non-advocates. Am I correct in reading that Brookings report as saying 44% without any evasion? Selery (talk) 21:03, 23 January 2012 (UTC)
It's not about preferring opponents over proponents. That's not how neutrality and weight works on Wikipedia. Everyone has motives to push a particular point of view, so we fairly cover all significant views. You are correct on the 44% exclusive, which we include in the article, but note that it covers a rage from 2006–2015 (assumes that the Bush tax cuts expire on schedule and accounts for the replacement of an additional $3 trillion collected through the Alternative Minimum Tax). It's not a static year estimate and makes assumptions on future revenue as projected based on growth at that time with no changes to the system. Morphh(talk)01:10, 24 January 2012 (UTC)
I'll note that the BHI study was actually built on William Gale's methodology with changes to updated figures and assumptions based on the their reading of the legislation. The Diamond and Zodrow study actually compares the two. The major difference being 300 billion in education exemptions, which Gale gave to the States, and keeping the Earned Income Tax Credit (roughly 50 billion). So Gale's study decreased the burden at the state level at the expense of a higher federal rate and increases progressivity by keeping the EITC. The BHI study tries to more closely follow the legislation's exemptions on education and keeps about the same level of burden on the state in real dollars and removes the EITC, since the prebate is designed to cover this function under the plan. Diamond and Zodrow followed BHI on the EITC, but followed Gale's method on the education. Morphh(talk)01:55, 24 January 2012 (UTC)
Here is the actual statement, which is the largest factor between the differing federal rates.
Although Gale and Kotlikoff et al. both follow this general approach, Kotlikoff et al. subtract only the labor costs of education, while Gale subtracts all state and local costs of providing education, including nonlabor costs and capital spending. For education costs, H.R. 25 specifies that tuition costs are fully deductible, but costs for room and board, sports activities, recreational activities, hobbies, games, and arts or crafts or cultural activities are not deductible. (It is unclear whether there would be an attempt to determine the portion, if any, of tuition payments that finance such nondeductible activities.) Determining the appropriate fraction of total state and local education expenditures that correspond to the nondeductible items would be exceedingly difficult. Accordingly, to err on the side of a conservative estimate of the tax rate required to achieve real revenue neutrality, we follow Gale in subtracting all state and local expenditures attributable to education, effectively assuming that the fraction of expenditures that goes to the nondeductible items is relatively small; this reduces the sales base by $302.3 billion.
While we don't cover this detail in the article, this reduction in the federal tax base (rate increase) is a gain at the state level (rate decrease) assuming proper adjustment. Morphh(talk)02:56, 24 January 2012 (UTC)
As mentioned above, the information you linked is not a reference to the FairTax plan and can not be included in the article. That's not whitewashing - we already report the figures presented by the Treasury publication in regard to this tax plan, which is on page 217 of their report. I am removing the tags for this dispute as no further action should be taken. Morphh(talk)23:06, 22 April 2012 (UTC)
To clarify, the plan that fits the FairTax model the closest is the one with the extended base, which the report itself clearly indicates in the publication (page 209).
The Panel initially evaluated the federal retail sales tax using the broad tax base described by advocates of the “FairTax” retail sales tax proposal. That tax base (the “Extended Base”) would exempt only educational services, expenditures abroad by U.S. residents, food produced and consumed on farms, and existing housing (or what economists refer to as the imputed rent on owner-occupied and farm housing).
The figures reported with the extended base on their retail sales tax found the rate to be 25% (34% tax-exclusive) assuming 15% tax evasion, and 33% (49% tax-exclusive) with 30% tax evasion (page 216). The figures of 64% with low evasion, or 89% with high evasion are for their sales tax plan with a Median State Sales Tax Base, which does not reflect the FairTax plan (page 216). The table on page 216 is presented below. Morphh(talk)23:17, 22 April 2012 (UTC)
Table 9.1. retail Sales Tax Rate Estimates - Range of Tax-Exclusive Rates
Evasion Rate
Extended Base
Partial Replacement VAT Base
Median State Sales Tax Base
Low Evasion (15%)
34%
38%
64%
Higher Evasion (30%)
49%
59%
89%
The sales tax base that resembles the FairTax by the publications own description is the one listed as "Extended Base", which reports a rate of 34% & 49%. Including in this article that the FairTax was reported by the Treasury to have a rate of 64% and 89% is clearly false. Morphh(talk)23:46, 22 April 2012 (UTC)
Breister's comments
Brianyoumans objects to the location of the comment; however as I note and as in true in life key omissions can be tantamount to dishonesty - and this I believe constitutes a key omission (even though it is spelled out later, a casual reader might have already formed an inaccurate opinion before they reach that section - if in fact they ever read that far). He also objects, saying that he would not "propose that as the motive." Here I would agree with him partially - certainly no one promoting the FairTax wants to try to promote it by saying, "Hey, let's replace a 23% income tax with a 30% sales tax!" Both are true; however given full context people are more likely to accept the reasoning behind it. The chart does help, by the way...
Proposal: Include FULL disclosure (that the 23% rate is the only way to achieve an apples-to-apples comparison, which is true, and that it undoubtedly was also meant to make the idea more marketable - which everyone expects anyway). Do it where the rates are first introduced (where I had placed it), and also make it explicit that the 30% rate is shown because that is what people are used to seeing at the cash register. — Preceding unsigned comment added by Breister (talk • contribs) 22:23, 11 July 2012 (UTC)
The real answer is that there is NO WAY to do an apples-to-apples comparison between a Fair Tax-style consumption tax and our present tax system. The Fair Tax would alter economic behaviors in so many ways that it is hard to see a comparison. By the way, I think your example comparing the tax paid at 15K and 100K leaves a bit out. For instance, my guess is that a family making 15K under the present system already pays negative taxes, and their taxes therefore might well go UP under Fair Tax. Also, while a family earning 100K might well pay the percentage you calculate, the rate would go DOWN for families earning 250K, 1000K, etc. - the effect of the rebate would wane, and the percentage of savings would continue to increase. So, the maximum tax rate on gross income would occur somewhere in the middle class. If you want to point out that the rate goes up from 15K to 100K, it should be pointed out that it goes down after that.Brianyoumans (talk) 02:34, 12 July 2012 (UTC)
Re NO WAY to do an apples-to-apples comparison. Today over 90% of Federal Tax Revenues come from Employment Taxes plus Income Taxes, which are directly replaced with the FairTax under the bill. Your argument that the 23% calculation is not apples-to-apples is actually splitting hairs, because the comparison does accurately portray removal of a portion of a person's earnings (income tax; employment taxes) before they may purchase any items. I agree that the other factors you mention will have varying but relatively minor effects; however, the net effect will be "about the same." Wage earners, retirees living off pensions (to be un-taxed) or investment earnings (also to be un-taxed), and those living on Social Security will all have a similar experience, and collectively those are representative of the majority of Americans except for niche folks such as disabled veterans living well above the poverty and entirely on tax-exempt stipends. In fact, it seems likely that that niche would be recognized, and that Congress may allow a one-time COLA adjustment. Pretty much everyone else will experience a near net-neutral impact of the changeover. Irrespective of whether you agree with my belief on that, the argument should be made explicit so that the readers can make up their own minds. If you also want to include something about "unpredictable side effects" and can provide positive examples, those too might be useful but should be factual, not speculative.Breister (talk) 14:27, 16 July 2012 (UTC)
Re Net Negative Taxes. There are taxes, there is welfare, and there is waste in the system. The FairTax is not a Welfare system, and twisting a tax system into a stealth Welfare system is corrupt. It is this very dishonesty in our political system that the FairTax hopes to reduce - if we NEED another Welfare Program (and, how many do we "need?"), call it what it is and push it through Congress, let's not be hypocritical about it and call it an "Earned Income Credit" when nothing was earned. In the mean time, prebate over-payments are not "welfare" nor intended as such; they are simply the incidental "waste" in a system so much more efficient than our current one that the sum of all over payments will not even amount to 10% of current "compliance costs," now estimated at around $450 billion. In other words, it will cost us $40 billion to remove a $450 billion load off of our economy, thus further reducing the prices of domestic products.Breister (talk) 14:27, 16 July 2012 (UTC)
Re the rate goes down (somewhere) after $100,000 in income. How is that any different than today, with billionaires paying less in taxes than their secretaries? Again, this goes to the heart of corruption in our tax system. If we really believe as a country that it should be illegal to be rich, then have a separate tax on net worth over some calculation based on median net worth (using a number is dishonest, as inflation will ultimately slide more and more people into that bracket). MOST people who make over $1 million in a year only do so for a few years of their life; of those, MOST those spend it before they die; and of those who don't most of the wealth passed on as inheritance is spent by the third generation (and thus would be taxed - see "The Millionaire Next Door").Breister (talk) 14:27, 16 July 2012 (UTC)
It may or may not be different from the present system, but the problem is that we may be leaving the reader with the impression that the Fair Tax is a progressive tax - which is in fact not true, it is in fact a somewhat regressive tax above a certain income level.Brianyoumans (talk) 02:07, 17 July 2012 (UTC)
Brianyoumans, not going into Breister's comments - just your statement, I have to disagree with you (technicality) on this one. :) Income is not the tax base. The definition of a progressive tax is a tax by which the tax rate increases as the taxable base amount increases, which in this case is consumption, not income. See progressive tax, regressive tax, proportional tax. It might be easy to fall into the income mind set, considering we tax income today, but that's a misapplication of economics - you can't properly measure something that's not taxed. In addition, such a statement assumes savings is untaxed for the year, which for such measurements, it's not - it's deferred. For example, we don't calculate income placed in a 401k or IRA until it is withdrawn - it's tax deferred and thus calculated in the year in which it is consumed. Similarly, consumption taxes are time neutral and, if measured against income, need to be looked at over extended periods of time or more accurately, like the last example, measured during the year in which it is consumed. So while it is somewhat true to say, if you redefine the measurement in the statement, that it is "regressive on income" (which assumes an income tax base, measured yearly and savings as untaxed income), it's completely bogus math. Such terms are thrown around wildly in politics though, so you have an economics and finance definition and a wildly spun political definition. haha Morphh(talk)13:52, 17 July 2012 (UTC)
Yes, but I think the type of "fairness" many people are trying to create is somewhere between an income tax and a wealth tax, not a consumption tax. Let's look at the famous case of Warren Buffett and his secretary. Buffett makes a billion dollars a year, let's say, but he lives a modest lifestyle - maybe he spends a couple of million dollars a year? His tax rate on gross income under the Fair Tax would be close to zero. His secretary would probably pay about the same as she does now, I would guess. Most people would not believe that this is an improvement in fairness. All I am saying is, if you are including two examples which, taken together, seem to imply that the tax is progressive on income, maybe we should include an example showing that it can be (honestly, would be) regressive on income.Brianyoumans (talk) 14:23, 17 July 2012 (UTC)
Economically, taxing consumption expenditures is effectively equivalent to taxing existing wealth and labor income, with the growth benefits of pretax investment / savings / capital. In the Buffet example, it measures something that's not taxed and assumes all savings is never taxed. That logic boggles me. I can see the perception of it when presented that way, but it makes no economic or mathematical sense. Where does the savings go? It brings up images of Buffet swimming in a pool of money like Scrooge McDuck. In reality, that billion is untaxed capital for someone else when he's not consuming it. It's tax deferred like a 401k but applies to all savings and investment. The only way to correct the perception is to tax savings, which is to shoot ourselves in both feet when we need to increase economic growth. I guess at that point it becomes a deeper discussion. [Sigh] Morphh(talk)16:09, 17 July 2012 (UTC)
Just to piggy back on this a bit (since it was originally addressed to me) - in a mathematical sense the FairTax is infinitely progressive. Like every other proposed progressive cap, there is a maximum level of taxation (23% of total consumption); however, a person's effective tax rate can never quite reaches that level. The only argument that can be made that it is NOT progressive would be a matter of degree (e.g. opponents want it to escalate to some astronomical percent). Neither the income tax nor the FairTax directly tax wealth, and the argument against the Income Tax is that most folks who ever make $1 million or more in a year only do it for a couple of years after a lifetime of work (like Lucy pulling the ball out just before Charlie Brown can kick it - theft of the prize of a lifetime of work at the final moment) - so it isn't really "taxing the wealthy" (which folks hide their income quite effectively) so much as "penalizing success" to prevent most people from ever JOINING the ranks of the wealthy. If "immense wealth" (whatever that is) is truly a threat to our prosperity, why would anyone try to wrap a tax targeted at 0.01% of the population into the primary tax system, unless it is simply propaganda to give the ILLUSION that those people are actually going to pay it? I can actually imagine a valid argument for such a tax, which so far I've never heard from anyone, that being that a Free Market is not in fact an infinite pool and at some level of absolute wealth the mere existence of such a pile becomes destabilizing. Liberals, however, never make that argument because their objective is the complete overthrow of the free market, whereas Conservative leaders won't let it enter the rhetoric because that is the only remaining path to effective "kingship." In any event, for such a tax to work would truly require world government to prevent the rich from simply moving their money around - so implementation is from a practical standpoint impossible. All attempts to do so to date have been propaganda smoke-and-mirrors.76.97.154.201 (talk) 16:55, 17 July 2012 (UTC)
I've gone ahead and added another example to the article, using some information on Warren Buffett's taxes. There is a bit of speculation included, but I don't think it is at all unreasonable speculation. Since there has been so much talk about Buffett's taxes, I thought it made a good example. If you want harder numbers, I could try to find an example of a high income individual where their annual spending and taxes are all known. But Buffett is known for his modest lifestyle - I think 1-2% of gross income is if anything an overestimate of how much Fair Tax he would pay in a year.Brianyoumans (talk) 18:56, 18 July 2012 (UTC)
I'm going to try and find something we can source, perhaps to Gale, Bartlett or Kotlikoff. There are too many assumptions here for me to be comfortable and it gets us into WP:OR. We're creating an effective tax rate on something that's not taxed and assuming 98% of his income is never taxed or used as reinvestment/charity. I think this goes beyond WP:CALC. There are a couple papers that get into the Gini coefficient, but that may be "heavier" than we're looking for and most likely to be done on the tax base. I'll see what I can find. Morphh(talk)13:23, 20 July 2012 (UTC)
I found this in the Money Magazine article,[2] which while not as extreme as the Buffet example, does present the point. It also provides enough specification to be accurate "of that year's income". It states "The rebates help make the FairTax progressive -- tax jargon for "richer people pay more." For the very rich, however, that's not quite the whole story. Say you earn $2 million a year. You can live pretty well spending $1 million, and as a result pay a mere 11 percent of that year's income in taxes." So I'm fine with inducing something based on this. I would like to move it to the section discussing regressive / progressive aspects (to where the second example is located). I think this example is more appropriate there, since we'd be on questionable ground to call it an "effective tax rate", since such a calculation is suppose to be done on the tax base. Morphh(talk)14:20, 20 July 2012 (UTC)
Morphh(talk), thanks for finding the Money magazine example. I have moved it to the Tax Rate section, with the other examples. I think this is the logical place for it - it extends the logic from a low income family to a middle income family to a higher income family. Why wouldn't this be the right spot for it? It even comes from the same article.Brianyoumans (talk) 19:32, 20 July 2012 (UTC)
The first example is for an "effective tax rate", which is the amount of tax divided by the tax base minus deductions. The new example is not an effective tax rate, which is what the section is intended to cover. While not proper, we do include the statement "If a rate is calculated on income, instead of the tax base, the percentage could exceed the statutory tax rate in a given year." Similarly, it could reduce it to nothing. Presenting the new example gives the impression that this is an effective tax rate calculation, and it's not. It's not even the same tax base. So it is better served in the section that discusses the distributional effects, regressive and progressive effects, and the debate about income, consumption, and savings, which includes a similar example "A person spending at the poverty level would have an effective tax rate of 0%, whereas someone spending at four times the poverty level would have an effective tax rate on consumption of 17.2%." I'd be fine with reducing the length of the first example to a minimal overview, as opposed to something more detailed like we currently have. Or maybe we could swap the example places, if it makes better sense. Point is, I think it would be highly improper to put such a calculation in the effective tax rate section. Morphh(talk)22:00, 20 July 2012 (UTC)
Mmmm... see what you mean. Problem is, from my point of view it makes a point worth making - that the FairTax is ultimately regressive on income, if the income is high enough. No time to think about this at this instant. Brianyoumans (talk) 22:19, 20 July 2012 (UTC)
A true point, but this section doesn't discuss regressive or progressive, which as we discussed can involve many aspects of tax incidence and several ways of measuring what is fair. Hopefully this will work as I really like the reduced verbiage of the ETR section. It doesn't get into complicated income examples, family sizes, etc. It's just a simple measure on consumption. The users can look at the other section for the debate regarding its progressivity, regressivity and opinions on income and wealth. Morphh(talk)23:18, 20 July 2012 (UTC)
I like your fixes. By the way, what does "statutory tax rate" refer to at the end of the effective tax rate section? The rate under current tax law? Brianyoumans (talk) 01:40, 21 July 2012 (UTC)
The statutory tax rate is the legally imposed rate of the legislation, in this case 23%. The marginal tax rate would be 0% to poverty level, then 23% thereafter, similar to a flat income tax with a standard deduction. Morphh(talk)12:28, 21 July 2012 (UTC)
Good page
This site has a reasonably intelligent piece on the Fair Tax and some intelligent comments and discussion. It may not be reference-worthy, but it makes interesting reading, and we might be able to get some ideas there on how to discuss the tax. Brianyoumans (talk) 00:01, 9 May 2012 (UTC)
The terms "rebate," "rebates," and "prebate" are co-mingled throughout the article with no apparent consistency. I attempted to edit the article to make it consistent; however Brianyoumans "undid" the change (reverting to an inconsistent state) and suggested bringing the topic up here. I propose use of standard formal writing conventions - which would mandate an initial introduction and definition of the topic-specific term "prebate" (this is already there near the top of the article) followed subsequently by the exclusive use of the unique term "prebate" in favor of any other generic term. In the case of strong opposition to the use of this particular on the grounds such as, "it is a marketing gimmick," then another unique term should be introduced and used subsequently (and it should be explained to the users that that term will be exclusively used). In no case should the generic word "rebate" be endlessly repeated as it is in both singular and plural forms; this is confusing to the reader as they may wonder if "some other rebate" is present within the Bill. — Preceding unsigned comment added by Breister (talk • contribs) 22:43, 11 July 2012 (UTC)
I think that "rebate", although slightly inaccurate, is the best word - "prebate" might well mean nothing to the reader if they miss the explanation of it earlier on, and the same would apply to any other jargon we would invent. "Rebate" gets the idea across. If the usage is inconsistent and confusing, that can be worked on. Brianyoumans (talk) 02:17, 12 July 2012 (UTC)
Breister - We looked at this a while back and felt that the term was a neologism. Considering Wikipedia:Manual_of_Style_(words_to_watch)#Neologisms_and_new_compounds we thought it best to use rebate, then just describe the nature of the rebate being paid in advance. We also thought showing the alternative term "prebate" in an introductory capacity would help associate the terms to those familiar with the topic.
Looking at the other changes, I'm not all to comfortable with some of them. The changes in the lead could be contentious as our prior language was heavily debated. Using terms like "consumption tax on retail sales" was discussed and deliberately chosen over "retail sales tax". Personally I like having the income taxes identified, but an agreement was reached a while back that it was too expansive for the lead, which we need to keep a succinct summary. It is also currently misleading as not all federal taxes are replaced, just those on personal and corporate income. Sourced content was changed with unsourced content. Unsourced opinion was added. I think we need to revert a bit more and discuss the additions. Morphh(talk)19:54, 12 July 2012 (UTC)
In one example, Breister updated figures based on the 2011 prebate. I had an issue with this as the previous example was sourced to Money Magazine. However, the example is from 2005 and may be misleading to someone looking at it in today's dollars. So, is it acceptable to update the example and still maintain the source - I think we could probably do this under WP:CALC. I wonder if it would be better to update the income to reflect the same percentages, rather than apply the latest rebate value to the old income levels changing the percentages. Another idea might be to specify in the description the updated figures, such as "Using an example updated for 2011, ..." Thoughts? Morphh(talk)13:12, 13 July 2012 (UTC)
Ok, I missed that it was supposed to be cited to an article. In that case, perhaps we should simply dispose of the reference (since the math is now wrong) and provide new examples? My intent was simply to insure that the math was explicit and accurate. There were two different examples I updated. One specified a couple and 2 children; the other was more vague specifying "a family of three," which cannot be calculated unless you specify how many are adults. I have no strong feelings about what examples should be used, and in fact perhaps more would be better. However, whatever examples are used should be calculated correctly and explicitly show the math to avoid incorrect math as was originally presented. If someone has a good idea of which examples would be "representative" I'll be happy to do the math and update the posts.Breister (talk) 14:48, 16 July 2012 (UTC)
DELETED HERE: My earlier question about posting notes and the responses, which were helpful (thanks!) but not relevant to the discussion.Breister (talk) 14:48, 16 July 2012 (UTC)
I think it would be fine to leave the source, but I'd suggest it would probably be better if we updated the income levels so that the 2011 prebate results in a 6% and 19% effective rate, similar to the example in the Money Magazine article. I'm fine with showing the math in the example. Morphh(talk)15:31, 16 July 2012 (UTC)
Likewise in the other example, I'd update the income levels. Using a percentage such as -4.06% and 13.9% and not the simple examples we need. I'd try to say with 0% and 15%. I also don't like that the second example starts of with "However, including the rebate specified in HR25 yields a different picture.". "However" is a word to avoid as it, as well as the sentence, implies the piror statement was incorrect and what follows is correct, which is an issue for remaining neutral. Morphh(talk)16:08, 16 July 2012 (UTC)
Re Example Income Levels: First, I'll try to back into some examples that end up with those rates. I actually think that the negative example is a useful argument for those opposed to the idea, and should be faced squarely rather than "hidden in the noise." Some ultra-cons don't like the rebate because they suggest that it is simply a disguised Welfare program. I happen to think that saving our economy from $450 billion in compliance costs and the annual violation of privacy of working folks is worth $40 billion in "waste" that incidentally happens to land in the pockets of our poorest, but that is not a universally held opinion.Breister (talk) 16:34, 16 July 2012 (UTC)
Re "However:" I agree that "However" should come out; but if I do only that it still reads to me in a way that might leave the reader wondering why the Gale statement is being essentially negated. Reading just that section it is not obvious that Gale's "comparison" did not include a rebate. The section which does mention that Gale analyzed a Sales Tax "different from the FairTax in several aspects" does not explicitly state the rebate, which is a real whopper of a difference. I think this is once again a matter of the article having evolved in sections rather than holistically. It will take me a while, but I'll put together a wiki on a private site and take a stab at re-writing the entire "tax rate" section. Once I've got something up, I'll invite this group to come poke holes in it and, if we can agree it is better, I'll update Wikipedia with it.Breister (talk) 16:34, 16 July 2012 (UTC)
Perhaps more accurate would be to say that the article has been heavily edited and debated by 1) a single pro editor who seems to be devoting her/his life to maintaining a pro-fair-tax-bias to this article, seemingly as much as s/he can get away with (namely Morphh) and 2) a larger number of more occasional and more reasonable editors who would like to see the article have a more balanced inclusion of the con perspective. 71.84.176.53 (talk) —Preceding undated comment added 08:21, 1 May 2012 (UTC).
WP:NPA - Rather then discuss the issue, you attack me? Nice... If you have a dispute then discuss it. I am not here to add bias and have in fact added a great deal of criticism to the article and been praised by some of the most vocal FairTax opponents. So keep your snide "toolbag" comments to yourself. I stick around because I don't want to see the quality of the article degrade into partisan misrepresentations and biases from either side. Your recent edit makes more sense in the total context but it's confusing either way. Your recent comment suggests round numbers only apply to the sales tax presentation, but the primary figure is the one as written in the legislation. The 30% is a comparison - a conversion so as not to mislead readers to the equivalent tax rate common with sales taxes. Either the figures as presented as the tax is written is confusing, or the conversion to it as a sales tax is confusing. Having it both ways as your prior edit makes it even more confusing. Perhaps you misunderstand how the tax is to be applied? It's not a common sales tax. Since we're describing the tax as written, then we should use the round figures as the plan would be implemented, which is similar to an income tax. We wouldn't present an income tax as you have $130 of income and a 23% tax, would tax you at $30. We round it to $100 total to make the percentage meet the dollar amount. Likewise your reasoning with the sales tax figures. It's the basis of inclusive and exclusive math and the very point of confusion between conversion. So what is proper? The way the tax is written and implemented is the focus and should be presented in the least confusing way. We have an entire section discussing the conversion if the reader is confused. I would rather remove the figures entirely than present it in this backwards and even more confusing way. If your goal is less confusion, then the way it was written prior to your edits is the least confusing, as it has stood with the weight of years of discussion and consensus. Morphh(talk)13:15, 1 May 2012 (UTC)
I basically agree with User:Morphh here. I think that the Flat Tax sales tax is done the way it is for two reasons: to make a (false) comparison with income tax, and to confuse people who are used to the traditional American "purchase price plus tax" way of quoting it. But, that is the way it is written, and the way that proponents talk about it. The best we can do is make clear what the conversion to "traditional American sales tax" is. I don't feel strongly either way about the specific edit that Morphh reverted; as he says, it is confusing either way. I would blame the Flat Tax authors, but there isn't much we can do about it here.Brianyoumans (talk) 13:33, 1 May 2012 (UTC)
Regardless of who or how many people are involved, this is not an encyclopedia article, it is political advocacy. I make no statement of agreement or disagreement with the objectives of the advocates, but I do want to register a very clear objection to the obvious tone of advocacy that suffuses this article.∼∼∼∼ — Preceding unsigned comment added by Madison Max (talk • contribs) 16:23, 19 September 2012 (UTC)
To the recent changes, I think they make it perhaps clearer as suggested, but less correct and may introduce a point of view. If it was just a matter of definition, it might be fine, but that is not the case - it's also a matter of application. We can make assumptions about the motives, but it is constructed as an inclusive tax, similar to foreign national VAT and GST taxes. The tax is applied on the receipt as 23% of the total. It is fine to present the comparison as a point of clarification for people familiar with a state sales tax and unfamiliar with many VAT/GST taxes, but the FairTax is not applied, implemented, defined like a state sales tax. It's not our place to make this appear as deceptive marketing, though it may be. Let's not confuse the reader - the rate is 23%. It is applied to the tax base like this xxx. If you apply it to the tax base like yyyy (like a US sales tax), then the percentage would be equivalent to 30%. This is the lead - we need to keep it succinct and not go into detail regarding what might or might not confuse the reader. They can read the body (an entire section) to explain the method of calculation if they're confused. I rather have something that is accurate, yet slightly confusing, then the reverse. Morphh(talk)17:51, 8 May 2012 (UTC)
I don't know, Morphh; I don't find the Fair Tax that much different from a traditional state sales tax; it just has fewer exemptions. And I don't think it is written like a VAT at all - it doesn't have the whole complex mechanism of the tax being applied at various levels and credited back, etc. Basically, I DO find the supposed reasons for saying the rate is 23% phony. But... as I have said in other comments, that is the way it is talked about, and we are stuck with it, and it isn't our job to chastise the authors for their marketing tactics. And, concerning the language that is in dispute here... I think that the old language is in fact clearer than the proposed change - although the new language shows some thought and I appreciate the effort that has been put into it. If we end up using the proposed change, I would replace the first example with "$23 out of each $100 spent" or something like that - I think that would actually make the comparison between the two methods of describing the tax clearer. Brianyoumans (talk) 18:56, 8 May 2012 (UTC)
I agree that the mechanisms of various levels do not mirror a VAT. I should have clarified that I was talking about the inclusive / exclusive application. Many VAT and GST taxes are applied inclusive to the price, not exclusively. I didn't mean to imply that the FairTax was more like a VAT in regard to how it is applied to business. I also liked some of the changes suggested, but I'm thinking through how to apply them where it is clear and accurate. Morphh(talk)19:02, 8 May 2012 (UTC)
Mathematically, 25% income tax out of $100 income yields the same as 33% sales tax on a $75 purchase. We have one on the tax rate article, which presents a 25%/33% example. I could upload one that would reflect the 23%/30% comparison and place it in the section "Presentation of tax rate" if the image makes the comparision clearer. Morphh(talk)22:20, 21 May 2012 (UTC)
I suggest a chart comparing inclusive of tax and exclusive of tax be added. The base price of $1.00 should be used because many people, such as me, can picture the effects easier starting with a round cost of goods sold. Some people are better visual learners verse prose learners.
Example: If I pay 30 cents in tax, how is the percentage 23% if the base price is $1.00.
Also, the dispute between the percentages rates applied in the book, "The Fair Tax" is clearly explained. See The Fair Tax Book, Chapter 15, Questions and Objections
Great diagram. A comparison of income taxes to sales taxes is not necessary because the focus is on the semantic as mentioned in Chapter 15 of the Fair Tax Book.
(My suggestion because round numbers are easier to deal with.)
Please replace the $75 with $100 and the $25 with $30.
Exclusive of tax: 30% tax on $100
Inclusive of tax: 23 % tax out of $130
Or
(As the book's example on page 153.)
Please replace the $75 with $77 and the $25 with $23
I made the changes and included the graph. I used the method presented in the book as discussed earlier in the section, which reflects how the tax is applied and written. Morphh(talk)20:44, 1 June 2012 (UTC)
Breister A minor clarification I made was just "undone" by user Brianyoumans. New here and don't know the full history; however, it is clear from the talk that those here are cognizant of the spin on both pro and con sides around the 23%. Full disclosure: I support the FairTax, but don't want it sold dishonestly any more than I want it inaccurately portrayed.
My position: Failure to include key context when first introducing the two ways of calculating the rate may be implicitly just as dishonest as if it were explicitly presented falsely, just as it is we have seen how dishonest it can be in our media if they cut out important pieces of a video to reverse the meaning of the clip. Example: A few years ago some media ran footage of an armed man (omitting any skin in the shot)in a gathering of people, insinuating that the group were radical white supremacists. Later footage revealed it was a black man... Therefore, when introducing the two different methods of calculation it should be made abundantly and explicitly clear WHY there are two different methods (one to provide a reasonable comparison to our current system; the other to provide a familiar way of thinking about the tax based on existing State sales taxes).
Supporting information: It is explicit in the writings of those who performed the original FairTax study, as well as in the FairTax books, that the reason they chose to use the 23% inclusive rate was to provide as close to an apples to apples comparison between our current system and the FairTax. Omitting that piece of information when first presenting the two possible rates, and then following that immediately with comments about the opposition's portrayal of that as "deceitful," has the effect of displaying bias through omission (whether intentional or not) towards those opposed by making it look as if the authors intended to "trick" people. — Preceding unsigned comment added by Breister (talk • contribs)
The article includes this opinion prior to the criticism "Linder states the FairTax is presented as a 23% tax rate for easy comparison to income and employment tax rates (the taxes it would be replacing)." and includes rebuttal to the criticism "Proponents believe it is both inaccurate and misleading to say that an income tax is 23% and the FairTax is 30% as it implies that the sales tax burden is higher." So please clarify why this does not fairly represent the debate. I don't see that it omits the content that you describe. Morphh(talk)12:44, 13 July 2012 (UTC)
Moved this here from section below, as it applies to Rate. Morph undid my change regarding the examples, but what he reverted to is incorrect using the tax rebate tables on the page so I've reverted it. The date of an example should not matter - it should simply be kept current and consistent with the Bill. Maybe the solution is to be even more explicit as to which Prebate tables we are using (e.g. "see figure xxx"). In any event, the original examples that I corrected were demonstrably wrong. We should not be using an outdated example that readers cannot verify for themselves.Breister (talk) 14:31, 16 July 2012 (UTC)
Monthly tax rebate
I believe that the amounts shown in the table for monthly rebate check are incorrect because they are based on 23% of the poverty level for the various family sizes. Instead, I believe the intent of the bill H.R. 25 Sec 301 and ref. to section 101(a)(1) the 23% would be added to make the GROSS payment = 100%Taking from the table that is shown in the article - taking the "two adult household with 4 children:"the table shows poverty level ( consumption allowance ) $37060 with annual prebate $8524. In my opinion, the calculation should be as follows: $37060 / 0.77 = $48,130, then $48130 - $37060 = $11070 annual prebate; finally 11070 / 12 = $922 monthly rebate check. MelvilleS (talk) 21:32, October 14, 2012 (UTC)
In this example, I'm pretty sure $37,060 represents gross payment and the calculation uses a non-accommodation model, which assumes consistent after tax prices. You are correct that given price changes, the prebate would increase as it is adjusted for inflation. See Theories of retail pricing for a better understanding of the possible accommodation scenarios. The material is sourced to the group that designed the plan. I've updated it for the 2012 figures. Morphh(talk)13:47, 16 October 2012 (UTC)
New as I am to this sort of Wiki stuff (2nd attempt on my part), I don't see the connection between your - Morphh - comment and mine: If you Morphh are only 'pretty sure' that the figures in the table - the figure that is called by some fancy name with the words 'consumption allowance' in it (based on my vague recollection that it is not called Poverty level) is actually the GROSS amount attributed to some typical family of 4, then how or where can I find that out 'for sure?' Further, I don't see any connection at all between 'price changes' or 'inflation' and the prebate: the prebate is based on a family INCOME. Nor do I see what the use of the words 'non-accommodation' have to do with the prebate - something vaguely about years somewhere in the future?? I certainly appreciate that you took the time to respond to my previous remarks. Melville S. MelvilleS (talk) 17:51, 21 October 2012 (UTC)
The prebate is not based on family income. It is based on family size. These figures are sourced from the group that actually wrote the legislation. You can read the material in this publication The FairTax Prebate Explained. The annual consumption allowance is based on the 2012 DHHS Poverty Guidelines, which represents the net income level for poverty level spending. The figure represents gross spending. For nominal income and spending to remain consistent, it assumes a non-accommodation model - FairTax replaces income taxes, net income and after tax prices stay the same. $37,060 total spending, includes $8,523 in taxes, offset by $8,524 prebate, meaning the family of four can spend up to $37,060 tax free. $37,060 is the gross (post tax) consumption, not pre tax. $48,130 in consumption that you describe ($37,060 * 30%) would represent a 30% rise in prices, if the FairTax was added on top off existing price levels - so no reduction of cost due to the removal of the income tax system (a full accommodation model). In such a scenario, this would increase the poverty level income / consumption as it adjusts for the inflation, increasing the consumption allowance (prebate value). Hope that helps explain it. Morphh(talk)19:11, 21 October 2012 (UTC)
This is MelvilleS back again with continuing attempt to get the dollar amount of prebate for various famiy sizes - to get it understood or straightened out: You ocmmented on my remark about the prebate being based on family income, as if you misunderstood what I intended to imply by the use of the words Family Income. My intention was to indicate the relationship of "poverty level" family income to family size, as the two are shown in the table above.
The opinion I have now developed is the same as the one I started with: the terminology 'consumption allowance' used in the table is used incorrectly. The heading should be "annual income," because it is taken from - copied from - "2012 Poverty Guidelines, Federal Register No..." that I have just now reviewed by going to thst link here Wikipedia. The same table is shown there as the part of the above table that is identified as 1 adult, and the page that I have printscreened includes the table as I show in abbreviated form here:
The following guideline figures represent annual income
2012 POVERTY GUIDELINES for the
48 CONTIGUOUS STATES and the DISTRICT
of COLUMBIA
Persons in
family/household Poverty guideline
1 $11,170
...
6 $30,970
etc. down to 8 $38,890
(( didn't find a similar table for 2-adult families in Fed Reg)
Now, after struggling to get all of this 'talk' so far, what was I trying to do?
I was trying to explain that I'm convinced that the Rebate Amounts shown in the table in the FairTax wikipedia 'monthly rebate' article are incorrect, and too small because they are 23% of what the table incorrectly calls Consumption Allowance as the term is defined in H.R. 25, Title II, "Subtitle A - Sales Tax" - Chapter 3 - Family Consumption Allowance; Sec. 301 - which then refers to Title II "Subtitle A - Sales Tax" - Chapter 1; Section 101(b)(1)where the words read: "...tax is 23 percent of the GROSS PAYMENTS for the taxable property or service."
So the dollar amounts in wikipedia table, being income, are not the gross payments that a family would spend, they are 77% of the gross payments that the family would spend (if they spent it all).
At this point, believing that I have imposed on your time too much already, may I wish you the best, and assure you that I will appreciate any more time that you may give to my problem.
What does the note down below my post mean when it says: Sign your posts on talk pages: MelvilleS (talk) 23:00, 28 October 2012 (UTC) ??
This may be digressing into WP:NOTFORUM since it falls into WP:OR, but here are my thoughts. While the consumption allowance may be based on measures of income (and the CPI), it is inappropriate to use the term income to describe what is applied to consumption in this case. Regardless of the income level (rich or poor), the family size determines how much that family can spend tax free - your income plays no part in your prebate. It is an allowance of consumption based on family size, intended to make such consumption tax free based on an estimation of poverty level spending for that family size. I think your mistaken calculation can be addressed in this statement "So the dollar amounts in wikipedia table, being income, are not the gross payments that a family would spend, they are 77% of the gross payments that the family would spend (if they spent it all)." The dollar amounts in the table is based on income and is also the gross payments, 100% of what the family would spend, not 77%. It is inclusive, meaning the total spending includes the tax (income, gross spending, is 100% of which 23% is tax). For your net income to remain consistent, which you assume here, then the cost of products decrease by removal of the income tax system, leaving after tax prices essentially the same. So spending $10,000 post income tax, is equivalent to spending $10,000 post FairTax. Gross income = Gross spending, taxes are 23% of total spending covered by the prebate. Morphh(talk)14:02, 29 October 2012 (UTC)
Thinking on a new train of thought... Are you adding the prebate itself as gross spending for the year in calculating the value of that prebate itself? The prebate is not part of the CPI calculation, so I don't see that as accurate in determining the figure. If you did add the prebate in, then the CPI itself would adjust to cover that, meaning 23% of that 23%, or just factoring 30% of the original. Morphh(talk)14:40, 29 October 2012 (UTC)
The sign your posts on talk pages (this page) means to use the four Tilda at the end of your post, which you have done. Morphh(talk)14:02, 29 October 2012 (UTC)
Fair Tax or FairTax?
I made a few edits on the name before I realized that in the article, it's spelled "Fair Tax" and "FairTax" in numerous places. So, now I'm not sure whether "FairTax" is incorrect or is just an alternative "acceptable" spelling. Does anyone know why it's spelled both ways in the article? Famspear (talk) 02:52, 26 November 2012 (UTC)
It is primarily referred to as the "FairTax" in sources, which includes the plan, movement, etc. It even has a service mark. The legislation uses the name '"Fair Tax Act". So we only separate the name if we're specifically describing the bill and in any other case we use the single word. Morphh(talk)16:41, 26 November 2012 (UTC)
Yeah, I figured it was something like that. I was too hasty when I made the edit, and then after looking at the article more carefully (including the name of the article), I realized there was probably a good reason for spelling it both ways. Thanks.... Famspear (talk) 16:51, 26 November 2012 (UTC)
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It may be time to rewrite parts of this article in, well, past tense. Public interest in and support for the plan appears to be dropping off, perhaps with the decline of the Tea Party movement.Brianyoumans (talk) 19:18, 14 December 2018 (UTC)
Various tags were recently added to the article and I'd like to discuss placement / removal. It is usually better to address such issues on the talk page before we jump to the last resort of tagging in article space, particularly for one that's been heavily debated, reviewed and stable for years. I haven't followed this topic for quite some time, so maybe there is new information or studies that I'm unaware of that should be reflected in the article. If so, let's discuss it. Currently though, I don't see a new consensus on these issues or discussion with examples of each problem area. If nothing significant is discussed, we should consider it a well intentioned drive-by and remove it. We can continue to address issues on the talk. A decent review should also be done when sources are removed for attributed material. One recent source removed wasn't an op-ed as described in the summary - it was a debate hosted by the think tank that included economists that studied the plan. It was neither pro nor con and sourced both proponent and opponent viewpoints. I don't think the content or source material was reviewed - the removal appeared to be solely on the basis of being a free market source. Morphh(talk)20:10, 24 March 2017 (UTC)
Seriously? This article reads like tea party erotic fan fiction. Do feel free to clean it up by removing the far-right think tanks and adding robust discussion in independent (i.e. not libertarian fundamentalist house journal) scholarly sources. Guy (Help!) 22:39, 25 March 2017 (UTC)
Seriously is also what I'm thinking. The tea party wasn't even around when this article was written and Von Mises called it a fraud. Look, I get it - I help clean up the economics project when it was being overrun with Austrian economics and nonsensical information. So I'm well aware of the ref-spamming and am not opposed to your cause, but not every article needs the machete approach. Happy to remove think tank sources if they're used improperly or there are better sources that represent the viewpoint within the scope of the article. But removal needs to be consistent with policy - the sources included likely represent significant topic viewpoints or research done on the plan. I'm not aware of any new research or the robust discussion you're referring, so if you could please provide links to the independent scholarly sources are you speaking of and provide some specific examples and evidence, we can discuss it properly. If we can't come to agreement, we can hold an RFC on the topic or FAR of the article. Morphh(talk)14:33, 26 March 2017 (UTC)
Having had this article on my watch list for many years, I am reluctantly forced to agree with Morphh. Most of the research on this has been done by conservative economists who are favorable to the idea. Others have basically ignored it. I think we have as much balance here as we can get. Improvements are welcome. Brianyoumans (talk) 00:11, 27 March 2017 (UTC)
Hi. Sorry I'm a drive by editor who looked this up because I was trying to figure out what it was (this is how I edit wikipedia, sorry) and the fairtax.org website isn't very straightforward and I came here and was disappointed to find that this is basically a bunch of historical cut and paste from similar sources. So, I tried to clean up the first paragraph a bit and I think it helped some but it really could use a better overview. It read like the Ancient wikipedia of the early 2000s with the: "proponents say this..." "opponents say this..." (which was a style I use to enjoy when it was done well... but I am old and wikipedia isn't supposed to read like that kind of advocacy anymore) and the "opponents" sections were pretty thin. I tried to just tamp down some of the promotional language in the proponent section. I don't really have enough of a stake in this to do more research and edit the rest of the article. So I put the UNBALANCED tag at the top. I agree with most of the above discussion, probably most of the info is from proponents of this cause so mostly it should be their own words but leave out the adcopy and have a little perspective with links to relevant context aka flat tax issues and the kind of political movement that the advocates are part of. And I don't think Stable should be conflated with Overlooked. It does need improvement, not just for bias but also update ---a lot of it reads like it's promoting a contemporary movement when it seems most of the action petered off 10 years ago. Thank you muchly to whomever finds it and continue the work. Rusl (talk) 09:35, 6 March 2020 (UTC)
This article does not currently meet the current featured article criteria. There is an outstanding maintenance tag, bits of uncited text, and heavy use of advocacy sources instead of scholarly sources. I have concerns about the sheer amount of sourcing here to advocacy groups, political action groups, and sources that clearly take sides on this debate, such as "Fair Tax: The Truth: Answering the Critics" and sources with titles like " "The U.S. Corporate Income Tax System: Once a World Leader, Now A Millstone Around the Neck of American Business". I have serious concerns about the quality of this article. Hog FarmTalk19:53, 6 March 2021 (UTC)
