> Cam wrote: > Er I meant.... "It's really not fair to argue against something you > admit to being "too lazy" to attempt to understand in depth. " >
I LOVED this idea when I heard about it, but I'm not reading the book for the same reason I don't read Scientology books. Here's but one example: http://www.amazon.com/review/product/0060875410/ref=cm_cr_dp_hist_1?%5Fencoding=UTF8&filterBy=addOneStar I read the FAIRTAX BOOK with some hope that Boortz and Linder would enlighten me as to how a consumption tax could replace the current tax revenues generated by the plethora of tax platforms it would replace (i.e. income tax, social security/Medicare tax, gift tax, estate tax, etc.). I had hoped that not only would they expound on the DETAIL of this bill (H.R. 25), but actually show some simple (or complex) calculations. I had hoped they cold validate the actual reasoning, without "politicking." Unfortunately, none of these hopes reached any level of fruition. Before you go any further, this review will be contrary to the overwhelming lovefest of this book evidenced by the 4- and 5-star reviews however, I am going to back it up with specific reflections of the flaws stated in the book and the page numbers on which these flaws exist. If one is not interested in believing the flaws in the book and in the platform being advanced by the FairTax movement, don't read any further, but please read this next paragraph. Before you begin believing blindly that the FairTax is the only way to go, ask yourself this question: does it bother you that the authors give absolutely NO evidence that a 23% consumption tax will actually replace the federal revenues generated by the current tax structures? They "say" 23% is all it will take, but do they show us a calculation? Do they cite a study? Do they do ANYTHING demonstrative to back up their claims? No, no, and no. Their entire justification for the FairTax is built around rhetoric ONLY. They don't compare contrast calculations. They don't even put forth the gross dollars we're talking about here. What they do instead is say [paraphrasing], "The FairTax idea is so simple, this book didn't need to be very long." Well, if you're just going to say, "My idea works, but I'm not going to prove it to you," then I agree, your argument doesn't need to be longwinded. Let's begin: Page 33 - the authors describe a fictional corporation paying $100,000 in corporate income tax and begin consider the possibilities. In their first possibility (#1.), they say the $100,000 income tax could be paid out of the $2 million profit, but "see who's picking up the income tax now? The shareholders, not the corporation." FLAWED. If this fictional corporation had pretax profits of $2 million, it would have to do one of two things: 1) pay corporate income tax, at a maximum rate of 35% (you can do the math here), or 2) pay it to the shareholders in the form of dividends, in which case the shareholders pay 15% income tax (tax on dividends is qualified at 15% for individuals), AND pay corporate income tax (since dividends are considered a deduction to corporations). Page 42 (last paragraph) - "Have you ever stopped to calculate just how much money you lose each year because you have to make financial and business decisions aimed at reducing your tax obligations?" FLAWED. If I have to stop and contemplate EVERY PURCHASE I make because the consumption tax of, say, 30% (23% Federal FairTax and assuming 7% state consumption (sales) tax), that will cost me much more time than considering the income tax effects of these same decisions. Example: I don't consider the income tax obligation of purchasing a new car, but I damn sure would if I had to pay a 30% consumption tax. Pages 49 - 50 - "...try to imagine what it would be like for a business owner or a corporate board of directors to contemplate a business expansion or other business move without having to give a second thought to the tax implications..." In this section, the authors are describing the costs associated with complying with the income tax code, and setting the stage for it flawed embedded cost argument. FLAWED. Instead of a business owner or corporate board of directors spending time contemplating the income tax effects of a business expansion or business move, they will instead contemplate the effects of the consumption tax on these same decisions and the potentially incredible amount of additional IMMEDIATE cash flow it will cost them to fund these decisions. I submit that in many cases, the cost of these decisions could actually go up as a business owner might have to fund a portion of the decisions (business expansion or other business move) by seeking a bank loan. Page 50 - "And as for you, the individual? Your tax compliance costs drop to absolutely nothing." FLAWED. Are they kidding? When you begin to consider that brand new car you've been thirsting for, do you think you're not going to begin to consider the additional cost in the form of federal AND state consumption taxes, and how much more it is going to cost you? You're only fooling yourself; this will become a major decision and will definitely cost you time and money. (I know, "but the embedded tax will be removed and the car will still cost the same!" I'll pour water on this argument shortly.) Pages 52 - 55 - the authors begin to discuss the concept of the "the embedded costs" in every commercial good consumers purchase. Yes, without any doubt, there are embedded costs, but that is simply Business 101. The costs they target are embedded tax/compliance costs, and they quote a study by Dr. Dale Jorgenson indicating the various "embedded costs of the tax code" in a variety of industries/goods. The problem with their presentation of this information is that Jorgenson's study was based on PRODUCER pricing, not CONSUMER pricing. Big difference here. (See page 59 - "Since PRODUCERS would no longer pay taxes on wages...prices received by PRODUCERS..." Producer pricing, not consumer pricing.) FLAWED. As I discussed above, the authors indicate there will be no compliance costs to businesses associated with the FairTax. Also as I indicate above, this is a bogus statement. Every purchase over a certain amount will cause pause and consternation to determine if 1) the item is really needed now, 2) can I afford the additional costs in the form of a federal AND state consumption tax, and 3) how will I fund this purchase if I don't have the cash on hand? No, their argument is fatally flawed. The "compliance" costs for businesses will still be there; thus, the embedded costs the authors describe will still be there as well. Not only that, but this is very important to understand: BUSINESSES WILL HAVE TO FILL OUT SOME FORM OF CONSUMPTION TAX FORM DETAILING THEIR COLLECTIONS, AND FILE AND REPORT THEM TO THE FEDERAL GOVERNMENT. DOESN'T THIS REPRESENT COMPLIANCE AND WILL BECOME AN EMBEDDED COST? If so, then the authors contention that the FairTax will rid us all of embedded costs is fatally flawed on its face. (Disclosure: under the FairTax, approximately 7.65% of the embedded costs would evaporate in the form of social security/Medicare matching tax paid by employers. However, the costs of compliance with the FairTax have not been studied or disclosed by the authors therefore, we do not a reasonable basis for comparing what the NEW embedded costs will be. Has anyone paused to think: could the embedded costs actually be more under the FairTax simply due to the incredible amount of time a business owner will have to take to make decisions over a large purchase?) Pages 56 - 57 - the authors discuss the possibility of the embedded taxes "disappearing" and ALL businesses reducing their retail pricing by that same amount. FLAWED. Are they kidding? First, I've already proven that there will still be embedded costs (perhaps even MORE), but more than that, do you really think that across the board, without fail, every single retail business, doctor, attorney, accountant, engineer, etc. in the entire U.S. is going to reduce their retail pricing by the amount saved from embedded tax cost removal, if ANY? That is a ludicrous, self-serving statement, and it will never happen. Capitalism is too lucrative and attractive, and profits are the main goal of every business. Page 77 - "As already stated, the tax will be levied against all goods and services. Yes, you will pay a tax to your doctor. In fact, approximately 26 percent of the money you pay the doctor today represents the embedded cost of the tax system-so look for your doctor's fees to go down by as much as, if not more than, the amount of the consumption tax he will collect." FLAWED. First, as I've already PROVEN, there will still be embedded costs in complying with the FairTax, and this may actually become a greater cost to someone like a doctor who has never had to collect a tax like this (unlike your grocer or hardware store). Second, doctors are screaming right now at the cut in fees they've had to take due to insurance reimbursement mandates. Do you really think if they have a chance to make some of this reduced reimbursement back, they won't take it? You're fooling yourself if you believe this. Third, if the costs of health care go up, what happens to our already overburdened healthcare system and the insurance sharks (companies) who continually raise our medical insurance premiums and cut our benefits? Do you think this won't continue, but now, at a much greater rate due to the increased costs placed on doctors? Again, you're fooling yourself if you believe this tripe. Page 106 - "Economists estimate that in the first year after the FairTax Act becomes law, the economy will grow by 10.5 percent." FLAWED. Notice how the authors say "Economists," but never say what economists or cite a study giving proof of this statement? Does this bother you? Doesn't believing this just because they say it (without a proven study) make us lemmings? Go back to page 7 of the book where the authors describe the vice president of the National Retail Sales Federation (this is the organization representing all retail sales entities). The National Retail Sales Federation is AGAINST the FairTax. Now, if the FairTax was going to grow the economy by 10.5% in the very first year after enactment, don't you think the National organization representing retail sales entities would be all for the FairTax? Don't you think they'd be spending advertising and lobbying dollars to get the FairTax enacted? You've got to ask yourself why the retailers, who supposedly will benefit from the FairTax, are then against it. And, if retailers fear that, in actuality, retail sales will suffer because of the added consumption tax, and the result is consumers dramatically slow their spending, how will this do anything but oppress economic growth? Page 148 - the authors describe how the 23% FairTax rate was decided upon. "The researchers and analysts concluded that we would need an inclusive sales tax rate of 23 percent." Okay, show the calculation of why 23% works. Show me the simple math of how 23% replaces all the current tax revenues. FLAWED. They NEVER show the proof that it will work. If Amazon allowed more space, I would continue. Suffice it to say, I found this book full of flaws, making it, in my mind, a fatally flawed concept and idea. It is my contention that a consumption tax "could" work, but ONLY if the out-of-control spending habits of our federal government are reduced significantly. I believe they would have to be reduced by law for it to reflect a permanent reduction and then, and only then, could a consumption tax be considered to be effective. There will still be problems with the FairTax, as there would any tax structure, but it would be more effective with government-controlled spending. Conceptually, the FairTax has merit and some promise, but the way the authors present this platform with smoke and mirrors and disingenuous rhetoric, makes me very wary and quite dubious. The FairTax concept rates 3 stars, the book, with its half-truths and deception rates 1 star. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Adobe® ColdFusion® 8 software 8 is the most important and dramatic release to date Get the Free Trial http://ad.doubleclick.net/clk;160198600;22374440;w Archive: http://www.houseoffusion.com/groups/CF-Community/message.cfm/messageid:252248 Subscription: http://www.houseoffusion.com/groups/CF-Community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=89.70.5
