Replace All Federal Taxes on Income with the Fair Tax Act , HR 25

Lost my respect for Hugh Hewitt over his FairTax position.

I understand that Hugh Hewitt opposes the FairTax and has gone as far as to co-author a book against it. I heard Hugh who appeared as a guest on Dennis Prager's talk show today and I have to say I have lost all respect for the man.

Some Hugh's spin against the FairTax comes right out of the power-and-wealth hungry incumbent playbook. But there is a deeper meaning for Hugh... his slobbering love affair with Mitt Romney. You see, to give the FairTax credibility means giving #1 presidential rival Mike Huckabee credibility. Many believe we are looking at another clash in 2012. When Hewitt opposes the FairTax using baseless talking points he is basically attacking Huckabee. In fact, Hewitt went out of his way to describe how the FairTax would be an albatross around Mike Huckabee's neck going forward.

Why is Hugh Hewitt (and many other talk-radio hosts) so enthusiastic about Romney? Some say that when Romney threw his hat into the ring in December of 2007 and divested himself from Bain Capital (the firm he founded), Bain's co-incidental acquisition of Clear Channel Communications has something to do with it. You see, Clear Channel Communications has the contracts with Hugh Hewitt and many other talk radio hosts. Want to increase your chances of getting elected to our nation's highest office? Why not buy the voices of American talk radio?

Fortunately, there are many who see through Hugh's FairTax spin. Hugh insists that the FairTax is 30% and not 23%. I know it could be described both ways but when you compare the income tax to the FairTax you need to chose one or the other. If you insist on using the 30% figure (i.e. what tax you have to add to the untaxed portion of the product/service offering) we should do the same on the income tax side.

To illustrate, say you have a retailer or service-provider who wants to keep $100 exclusive of tax under the FairTax system. He would have to price the item at $130 ($100 + $30 in tax). The $30 represents 30% if you add it on top of a $100 price tag. Under the FairTax, the price tag would read $130 which includes the $30 of FairTax which represents 23% of the $130 price tag.

Our income tax works like the embedded 23%. Say an individual earns $100,000 per year. To be honest, the true figure that he earns is actually $107,650 when we consider the employer-matching FICA and Medicare which is included in the FairTax. Say, after above-average deductions he is able to reduce his income tax liability to 10% of the $100k. His total income and payroll tax comes to $25,300 ($10,000 income tax + $15,300 FICA + Medicare). Divide this by his earnings ($107,650) and we arrive at 23.5%.

In our scenario the employee is left with $82,350 after Federal taxes. If we treated this calculation like Hugh Hewitt wants to treat the FairTax percentage, we would take the $82,350 and then add $25,300 in tax to arrive at 30.7%.

With an apples-to-apples comparison, the FairTax and Federal Income and Payroll tax are pretty equal (assuming that our employee spends every dime of his earnings). But actually it is better with the FairTax because of the FairTax prebate. Our employee will get a payment from the government each month to untax up to the poverty level. A single person will get about $200 per month. My family of four would get $537. The idea is to untax initial consumption - considered consumption of the basic necessities of life. So, if our employee from above had a wife and two kids and he spent every dime of his earnings, he would only pay $18,860 in Federal Tax (or 18.9% of his $100k earnings). If he saved or invested money instead of spent it, he would pay less. This is an important point... the individual is in control.

There are many other benefits of the FairTax (private economic stimulus that dwarfs recent government efforts, spreads burden of taxation to all who consume in our lands vs. those who produce in our lands, etc.) but I will leave detail of these for another time. For now, just know that there is spin… even from folks you wouldn’t necessarily expect it from. It is good to know why there is spin and then move beyond it.

Cheers,
Art

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Comment by Ed Suarez on July 7, 2011 at 11:32am: This is baloney

Comment by Jim Tomasik on May 5, 2009 at 5:59pm: Well Hank, you can't say I didn't warn you.

Comment by Beryl Nichols on May 5, 2009 at 3:54pm: Where has Hugh Hewitt been hiding all these years? What is his agenda? I heard him on Michael Medved's show and couldn't get on the line. Many of these talk show hosts like Glenn Beck, Michael Medved, etc. have people on the show talking about something they know nothing about. We just let them talk to hear their head rattle without confronting them. We need to educate these people about the FairTax and quit assuming they will do the reasearch themselves. They obviously wont do the research but are willing to support the lies and misrepresentations. Bad news!!!

Comment by Peter D. on May 5, 2009 at 1:33pm: I got so furious a couple weeks ago when I heard Hewitt say the dumbest, biggest LIE I've heard about the FairTax: that city governments will go bankrupt because every time they hire a Police officer, they will need to pay 30% tax on him/her.

PREPOSTEROUS!!! And an outright LIE. I think we should have someone at HQ take care of that crap post-haste!

I used to enjoy listening to Hugh...now I realize he's just in the bag AGAINST Mike Huckabee....hence his vitriol for th FairTax.

Comment by Raymond Chuang on May 2, 2009 at 12:36am: I think Hewitt is also compromised by the fact one of his earliest show advertisers is a mortgage brokerage company. As such, he has a vested interest in keeping the mortgage interest deduction (but why? Under FairTax, the mortgage interest deduction has no meaning since there are no more need to use it to deduct against taxes on earning money!).

Comment by Art Villa - Global Perspective on May 1, 2009 at 2:10pm: Thanks folks. I go a little long on the "inclusive" vs. "exclusive" illustration but I am generally pleased. It would be nice if we could count on so-called conservatives to not have an agenda...

Also, honored to get front page status...

Art

Comment by Jim Tomasik on May 1, 2009 at 1:51pm: front page!

Comment by David Shipp on April 30, 2009 at 11:31pm: Art Villa,

Excellent post. I just had the same argument but not as well stated at http://www.fairtaxnation.com/forum/topics/the-fairtax-fantasy?page=2&commentId=2636007%3AComment%3A52325&x=1

Comment by Jamie Wheeler WA on April 29, 2009 at 7:02pm: I just heard this guy on Michael Medved and was so disgusted!! Don't know who he is but definately a nay sayer to "OF THE PEOPLE, BY THE PEOPLE, FOR THE PEOPLE!!!!" Our system does NOT need reform it needs REPLACED!!! "The GREAT REAGAN reoformed it and looked where it is ONCE AGAIN!!! I for one am sick and tired of being manipulated and discourgaed to be productive!!!

Comment by Pat Conroy on April 29, 2009 at 5:39pm: I use the gas tax to explain the difference between inclusive and exclusive. In Texas, we pay 20 cents per gallon gas tax. Add the federal tax of 18.4 cents and the total tax we pay per gallon is 38 cents (rounded). The price on the pump today in Austin for regular gas is $1.90. That means the actual price per gallon is $1.52 plus $.38 tax. That equates to a 20% inclusive rate and a 25% exclusive rate.

Prices under the FairTax will be shown and calculated the same way.