Another Response To John Bowyer's Misinformed Criticism Of The FairTax

Looks like lots of people read John Bowyer's January 9, 2008 column where he sarcastically questions the FairTax. Over at TownHall, William Phelps has a response to Bowyer's questions. Here are some of the more pertinent ones:

Q: Are sales taxes, where they area currently in operation, simple and free from special interest lobbying? Since there are no exemptions and no tax shelters under the fair tax, there would be no work for the tax lobbyists in Washington who currently manipulate the income tax for the special interests. Because the fair tax includes the prebate reimbursing on the necessities of life, there is no need for exemptions. Fair tax is not based on any existing system, but was developed based on original research by leading institutions and economists on the charge to develop of the best tax system for the federal government.

Since the tax applies uniformly to all new goods and services a tax lobbyist would have to get Congress to consent to changing the tax on one single commodity, say lumber. However, in order to make up the shortfall, Congress would have to raise the tax on a comparable commodity, say plumbing supplies. Such a manipulation of the tax code could not be hidden and would immediately be seen by consumers (as the FairTax applies at the retail level where consumers pay the bill) and Congress would face major negative publicity as a result, not just from constituents, but from business leaders of other industries. That would be incredibly bad for re-election prospects.

Q: Isn't it that the rate is not really 23% but 30% at least, because it's tax inclusive? Bowyer doesn't understand that inclusive and exclusive ways of computing rates don't change the dollar amount of the tax. Either way the tax is the same $23 per $100. Computed the same inclusive way as the income tax, the fair tax is $100 -$23 = $77. Computed the exclusive way it is $23 divided by $77. =30%. If you computed the income tax on the exclusive basis, the 25% bracket would be the 33% bracket, or $25 divided by $75 =33%. Either way it is the same $25 tax per $100.

This just shows how desperate opponents of the FairTax are to find a flaw in the system. They parse words and play with numbers to make people think the FairTax is more than it really is. But as Phelps notes, it does not matter what rate you believe in, in real numbers, the tax on a $100 purchase will always be $23.

Q. How do we determine interest rate portion of the mortgage? Just as now, the market rate is the interest rate, but market interest rates will fall to the level of tax free bonds today which will make it easier for home buyers who will be paying the purchase price in pretax dollars, rather than after tax dollars under the income tax. The borrower and lender will continue to state the interest rates in the debt instruments, but this is irrelevant to how the home would be taxed. The fair tax applies to the purchase price of the home, if it is new.

This last question (as well as the question about used goods being taxed) is why I firmly believe that Bowyer never even read the FairTax Plan. Had he done so, these questions would have seemed stupid to him.

You can access the complete column on-line here:

A Fair Defense For The Fair Tax
William Phelps
TownHall.com
January 28, 2008

Herman Cain Supports The FairTax

Despite naysyers like Bruce Bartlett and Jerry Bowyer and others who throw uninformed criticism at the FairTax, the FairTax movement is growing. One day, the FairTax will be a reality and the United States will undergo a major economic boom as a result, regardless of how loudly people like Barlett and Bowyers yell or how many times they stamp their feet in protest.

The FairTax, unlike any other proposed tax reform plan, would address three end-goals:

1) The plan must remove from the IRS any power to intrude on the private lives of American citizens.
2) The plan must remove from the K Street lobbyists any power to influence Congressional votes.
3) The plan must not allow hidden taxes to be passed along to the consumer at any time.

Curiously, whenever anyone criticizes the FairTax and then is asked how these three end-goals are to be achieved through any other tax reform plan, they quickly become quiet, almost as if they are embarrassed for not having an answer.

In his January 17, 2008 column, Herman Cain looks at the FairTax movement with regards to the 2008 Presidential Primary:

Immediately after the Iowa Straw Poll last August, the noted and respected journalist George Will referred to the FairTax believers who supported Mike Huckabee as “those FairTax people.” He made it sound as if the people who helped Huckabee finish an unexpected second place among Republican presidential contenders were politically challenged, unfit to associate with the political elites. Jay Bookman, a columnist with the Atlanta Journal-Constitution, referred to the FairTax believers in his editorial on Dec. 23, 2007, as a “cult.” He called it “Huckabee’s Fantasy FairTax” as Huckabee was surging in the unreliable presidential polls leading up to the Iowa caucuses held on January 3.

And yet, neither Will nor Bookman has come up with an alternative proposal that addresses the three end-goals stated above.

Cain continues:

Because of George Will’s history of writing thoughtful and credible opinion articles, I am willing to give him the benefit of the doubt that his comment was just a slip of the tongue. This may have been motivated by his acquired skepticism of any dramatic changes being possible in the halls of Congress. Personally, I hope this was indeed the case, because I would miss George’s political insight if he were forced to take a Don Imus-like sabbatical. On the other hand, Bookman clearly displayed his ability for misinformation and factual inaccuracies, too many to spend valuable time and space refuting. Anyone familiar with the facts of the FairTax can peruse his attempted assassination of the FairTax for himself. One would also note that pure media bias could hardly be an excuse. If Huckabee’s success continues, the greater the attempts will be to derail him by the liberal opposition, the Republican establishment and, naturally, his Republican presidential rivals. The FairTax is the biggest cure for our tax code insanity on the political table. Mike Huckabee’s courageous embrace of the idea has heightened interest in it by many, and attracted contempt against it by many more. Since death to the FairTax has not been achieved swiftly by skepticism, denial or distortion, then we can expect repeated attempts to kill the FairTax by a thousand cuts. Fortunately, there are millions of believers in the FairTax, and they have been around much longer than the current presidential race. It is a legitimate movement in this country that is based on solid economics and analysis. The real cult consists of people who are skeptical of dramatic changes, and those who are content with allowing this country to drift into economic mediocrity.

No matter what you think about Mike Huckabee or his personal choices in life, he has brought the FairTax to national prominence. It may not be such a big player in this election, but in 2012, after millions more people have had the chance to read the real FairTax Plan rather than someone's misinformed criticism, the FairTax will loom large in the campaign.

You can access the complete column on-line here:

The Attempted Assassination Of The FairTax
Herman Cain
NorthStar Writers' Group via FairTax.org
January 17, 2008

Also, Professor Laurence J. Kotlikoff, Professor of Economics at Boston University, has this rebuttal to Bruce Bartlett's criticism of the FairTax:

Why the Fair Tax Will Work
Laurence J. Kotlikoff
FairTax.org
January 15, 2008

And here is a rebuttal to Jerry Bowyer's column criticizing the FairTax. It should be noted that had Mr. Bowyer actually read the FairTax Plan before commenting on it, he would have found the answers to the very questions he posed with such sarcasm.

The FairTax Crowd Answers Jerry Bowyer
Louis R. Woodhill
FairTax.org
January 14, 2008


Americans For Fair Taxation

How Massachusetts Supports The Troops And Unfair Criticism Of The Fair Tax

We've already seen a few instances where the government of Massachusetts has been cracking down on displays that support the troops fighting the War on Terror. It gets even worse now. Massachusetts is now trying to eliminate U.S. flags and other diplays along the highways. According to the Boston Globe:

The crackdown comes a year after the state's last attempt to regulate the overhead displays. At the time, under pressure from military families and their advocates, highway officials said signs would be allowed if positioned behind fences, but now they are saying even these must go. "When the soldiers or their families hear about this, they're going to be up in arms," said James Wareing, the leader of a military support group who assembled and maintains the display dedicated to Jimenez, whose family lives in Lawrence. "It has nothing to do with safety. . . . Nothing has ever happened in six years." ... "I was told I could do that and they gave me their word and that was it," said Linda Noone, 49, of Reading, who put up a series of flags on an Interstate 93 overpass near the Wilmington border in 2005, a year after the death of her father, a Korean War vet.

What will they do next?

You can access the complete article on-line here:

Overpass Flags, Troop Tributes To Be Removed
Noah Bierman
The Boston Globe
December 4, 2007

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You know, when people criticize the Fair Tax, it would be a good idea if they actually read the plan before commenting on it. I showed earlier how Bruce Bartlett got his criticism wrong in this blog post:

Bruce Bartlett Gets It Wrong
84rules
August 29, 2007

Now Rich Lowry is commenting on a Tax Plan for which he has obviously not even read the plan. Here is what Lowry wrote in the New York Post:

To avoid the risk of getting both a national sales tax and an income tax, FairTaxers would have to repeal the 16th Amendment. Good luck: Huckabee's magic wand will come in handy. Then, there's the sales-tax rate. FairTaxers say that a 23 percent rate would be enough to replace current revenues. What they're really talking about is a tax of 30 cents on every dollar - what most people would call a 30 percent rate. The government would pay the tax on all its purchases, a gimmick "done solely to make revenues under the FairTax seem larger than they really are," notes economist Bruce Bartlett. Budget trickery aside, the congressional Joint Committee on Taxation has estimated that the rate would have to go as high as 57 percent.

I will simply repeat what I wrote about Bartlett's misguided comments:

"This is a total misrepresentation of how the Fair Tax works and hence my conclusion that he never really researched it or he is deliberately giving false information.

What Bruce forgot (or neglected) to say was that the Fair Tax first strips away all Federal taxes that go into the price of a new consumer good at the retail level. Currently, 22% of what you pay at the retail level is taxes that have been passed on from supplier to producer to distributor to retailer to you.

Thus, under the Fair Tax, an item that costs $1 under the current tax system would be reduced in price by 22% (i.e. all of the taxes passed on to the consumer), that is, its real cost would be $.78. It is at this point where the Fair Tax is levied. A 23% tax rate would take to price of that product up to $.99. But to keep it simple, round that back up to $1."

As for the part about repealing the 16th Amendment, if Lowry and Bartlett had actually read and fully comprehended HR 25, they would have both seen that the bill includes a provision for a national referendum on repealing the 16th Amendment. But apparently, people like Lowry and Bartlett just don't want the facts to get in their way.

Lowry, Bartlett, et. al. would be better served if they would inform themselves rather than just listening to the blather of others without bothering to check out the validity of the blather. In each case here, Lowry and Bartlett both rewrote the Fair Tax Plan and then criticized their own rewrites.

Isn't that how libs do their reporting?

You can access Lowry's misguided and erroneous criticisms on-line here:

Huck's Sales Tax Lunacy
Rich Lowry
New York Post
December 4, 2007