Transparency of federal spending under the FairTax

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Permalink Reply by Dan Hunt on March 6, 2011 at 1:53pm

David

People will spend less if Congress were to raise the tax rate beyond a point which makes the cost of a good or service too expensive.

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Permalink Reply by J David Swift on March 6, 2011 at 2:41pm

Thanks, Dan.

  You make a good point. 

  Yet, how will it work, will the 'government' propose new spending, then raise the tax to try to receive the money to pay for it?  Then when not enough folks spend enough on discretionary goods, the revenues do not accrue, and the proposal dies for lack of funding?

  Definitely will require keeping to a strict budget, and no borrowing.  But how will that be stopped?

  It seems the FTP does not address the issue of deficit spending, or allocating the revenue (social programs, military, highways, national parks, health research, space program, EPA)

  That's why I advocate selling the plan based on it's definite positives as stated in my initial post, and not raising the issues of human behaviour and attitude.

  Thinking Spring in the chilly northeast,

David

 

 

 

 

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Permalink Reply by cary henderson on March 6, 2011 at 7:54pm

> J David, you have brought up a good point, and one that the FairTax does address, although somewhat indirectly. The ideas behind this extend back all the way to nthe Federalist papers, and specifically to corspondence betweem Thomas Jefferson and Alexander Hamilton. They had discussed taxes on sales and their limits due to the willingness of the people to pay them at high rates. They concluded that at some rate people simply would not tolerate any more tax. Thus sales would decrease and revenue to the government would fall.

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Permalink Reply by J David Swift on March 7, 2011 at 5:46am

  Very interesting and helpful information, Cary.

  I am hoping you and others will respond to my questions, too.  They are not rhetorical, and  very practical ones, if we are to get out of this financial/economic hole we have dug for ourselves.

  Can we "sell" the FTP strictly on the practical grounds I cite or do we need to convince lawmakers of the philosophical reasons (transparency, people's intolerance to paying more tax and thus spending less on extras)? 

  Thanks for taking the time to respond, and I hope you and others respond to the specific questions in my two postings.

 

 

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Permalink Reply by Ken Hoagland on March 7, 2011 at 8:27am

David,

A destructive economic danger to the nation is a political class spending out of the Treasury to buy votes and make larger and larger segments of the population dependent on government spending. This is only possible because so many citizens don't really connect what the government spends with their own disposal wealth. In this, payroll taxes and withholding destructively hide the cost of federal spending from plain sight. For a lot of people, as I wrote, it is "free money" being spent by the government. What I tried (and apparently failed to clarly express) is that the FairTax finally connects government spending with personal wealth because federal taxes are not only on every receipt but are very visibly paid when we spend the hard won fruits of our labors.

The FairTax makes clear that government spending is always subtracted from personal wealth. I believe this and the fact that all contribute will lead to a sea change in the perception of government spending. The impetus of elected officials to spend more of our money (gaining power over programs, doing favors and buying votes) is so deeply ingrained that it takes the condemnation of every consumer to turn it around politically. We have just begun to see this peception take root with Tea Party pressure even on Republicans to cut spending. The FairTax will make every citizen see this reality.

The FairTax has many virtues including needed broadening of the tax base to include those who are excluded from carrying any load (like millions of illegal immigrants), the attraction of trillions of dollars of foreign investment into our economy, the lifting of taxes from what makes the economy grow--work, savings and investment--and increased personal freedom to choose how much and when taxes are paid by our consumption decisions. I believe, however, that the greatest benefit to the nation is that the FairTax finally makes clear where government spending comes from--us.

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Permalink Reply by Bill Krietemeyer on March 7, 2011 at 9:11am

David,

I also share your concerns about the ease in which the Sales Rate could be changed.  Pages 19 & 20, of the Fair Tax Act of 2011 (HR-25), "CHAPTER 1,  Sec.101, (b) Rate ... indicates that the 23 percent rate will only be guaranteed for year 2013.  After 2013 the rate will depend upon: General Revenue Rate (14.91%) + the old-age, survivors and disability insurance rate + the hospital insurance rate.

 

I have yet to find out who and how the Social Security and Medicare rate are determined, but this Bill leaves the rate easily changed without the general public being aware, until after the fact.  And we all know how hard it is to make a correction at that point.

 

I have written to Representative Robert Woodall, Feb. 22, 2011, proposing the following two amendments to HR-25. But, after studying the section referred to above, I am not sure these amendments would correct the problem.  I have yet to hear from Rep. Woodall.

1. That any revisions of amendments to the Fair Tax Bill, once the Bill is passed into law, be required to be in the form of a "stand-alone" bill (not be hidden as an amendment to another unrelated Bill) and
2. Any Bill offered to revise or amend the FairTax Bill, once the Bill is passed into law, require at least two third majority, of both the House of Representatives and the Senate, to be approved.

 

Bill Krietemeyer

Auburn, Alabama

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