Talk:FairTax/Archive 2

message: Since the talk page was getting quite unwieldy, I archived all sections where the most recent date-stamped post was older than 30 days. It's a somewhat arbitrary cutoff, but seemed appropriate here. I won't be offended if anyone wants to move old sections back. Feco 18:16, 27 July 2005 (UTC)
replies: text: I've moved some additional threads to the archive.  I didn't entirely move it based off a cutoff date.  Some discussions looked completed and others looked like they required further discussion.  As above, feel free to move the sections back if you think they should be.  Morphh 17:41, 4 October 2005 (UTC)
thread_title:  Old talk archived 

message: This is a popular topic that has been discussed at some length on this talk page.  Please read Talk Archive before posting on this topic.  Morphh 17:41, 4 October 2005 (UTC)
thread_title:  Tax Exclusive/Tax Inclusive 

message: Unfocused left in an edit summary:  "Other indirect effects - purchases of "first time home buyers" isn't really a relevant detail. The article is about the FairTax proposal in general, not 'FairTax for 1st time home buyers'."  
Morphh replied: 
"Other indirect effects - purchases of "first time home buyers" isn't really a relevant detail. The article is about the FairTax proposal in general, not 'FairTax for 1st time home buyers'."  
* I added that line as first time home buyers usually indicates a lower income family.  Since a home puchase is sometimes much of a family budget, I thought it might be relevant to show that it would be tax free and thus help lower income families.  I guess they can infer that themselves though.  Another thought is that statistics show in 2005, 3/4 of all homes sold are existing homes.  So It seems important to me that the FairTax article show that most low income families and 3/4 of purchased homes will not be effected by the statements made by the opponent view regarding homes.  Since much of taxation is about progression, burdens of the poor, etc., seems like it should be included.  Morphh 18:58, 18 July 2005 (UTC)
replies: text: The purchase price of the used home isn't taxed, but the mortgage and any loan fees are. The FairTax would tax "financial intermediation services," both explicit and implicit fees. Interest is an implicitly charged fee so the amount of interest above the "basic interest rate," as determined by the Sec. of Treas., would be taxed under the FairTax. Unless a person is paying cash for a home, I think it is a stretch to say that used homes can be purchased "tax free." Tom Joad 2k 13:42, 19 July 2005 (UTC)
replies: text: Hmmm - Hadn't thought of that...  Morphh 15:32, 19 July 2005 (UTC)

text: But what would that equity be worth in real terms? If you were to sell your house, any house you could buy would be inflated by roughly the same percentage. Tom Joad 2k 13:53, 19 July 2005 (UTC)
replies: text: Off the top of my head - Once you have 20% equity in your home you can drop PMI insurance.  I expect that it might also effect net worth / debt ratio which may allow lower interest rates and such.  :-)  Morphh 15:32, 19 July 2005 (UTC)

text: The transition to the FairTax should not be as harsh as a 30% change overnight.  The bill includes allowing businesses to claim what they have in inventory for taxes to allow prices to immediately drop.  So new homes will not shoot up 30% overnight as new homebuilders will claim the embedded taxes of those homes.  They'll drop the price of the home by that amount and add the 30% FairTax resulting in the new home price which should not be much more.  While I agree that used homes will stay in line with new homes and that prices may go up, such inflation as you describe doesn't seem likely.  Also keep in mind windfall gain to every American as they have a full paycheck.  It is not like a 30% increase in price with no increase in income.  The buying power has not decreased. Morphh 18:10, 29 July 2005 (UTC)

text: The FairTax would also allow the faster accumulation of a down payment as savings and investment are not taxed.  Morphh 19:33, 29 July 2005 (UTC)
replies: text: After reading the FairTax book, they state that an estimated 25% of the current cost of new homes is embedded taxes.  In addition, homebuilders can claim all inventory as these homes have already been taxed.  If they have 1 million in homes, the home builders would not pay tax on the first 1 million in sales.  This allows for an easier transition.  Morphh 13:20, 8 August 2005 (UTC)
thread_title: Mortgages, home buying, and related details subsection

message: To maintain readability on the mortgage/homeowner bullet point, I think it should be split into two points. Point A should address the transition effects (windfall gains to current homeowners at the expense of future homebuyers). Point B should address the enduring effects (mortgage interest will use its unique deductibility). NB- I figure this proposal should be discussed in its own little space here. I'm going to make content-related comments in the appropriate subsections above. Feco 19:21, 27 July 2005 (UTC)
replies: text: I don't see why this would be nessicary - I don't even know if there would be enough on the two topics to justify a split. But is you think it would work, don't let me discourage you. Be Bold in editing! Try doing it yourself!Trevdna 14:27, 11 October 2005 (UTC)
replies: text: Wiki boldness should be tempered by professional courtesy in certain situations. There had been much discussion regarding marginal analysis of before/after scenarios in the mortgage market. Making a significant content change in the midst of such discussion didn't seem to be a good idea. So I put the floater on the talk page, let it sit for a week, then made the changes. Feco 16:24, 11 October 2005 (UTC)
replies: text: OK, you know more about this than me. Good job. But what I didn't get was once you made the change, why not archive this section, so it didn't worry people or tak up any more space? -Trevdna 16:21, 13 October 2005 (UTC)
thread_title: Proposal to split the mortgage bullet point into two halves

message: One big effect: FT would remove depreciation/investment incentive from corporations. In the C+I+G+NX equation, I (corporate investment) tends to be the deciding factor between GDP growth and GDP shrink. Since FT would remove some incentives for I, this would lessen the net injection effect of Corporate I.
Feco 20:03, 27 July 2005 (UTC)
replies: text: I think this should certainly be flushed out more... I've looked for info on FT proponent/opponent sites with no luck. To reiterate, the economy relies on the "recycling" of money through the system. Anything that pulls money out is considered a leakage. Anything that puts money in is considered an injection. Injections are goverment spending (G), investment (I) and exports (EX). Leakages are taxes (T), imports (IM) and savings (S). Historically, goverment has been a net injector (runs a fiscal) deficit, so G exceeds T. Net exports (EX-IM) has been a leak (trade deficit). The key element that decides whether/how the economy grows is savings vs. investment. Households are almost always net savers. Business must pick up the slack by boosting their investment (I) to more than exceed savings (S). I must more than cover S, as well as the fact that our trade deficit tends to exceed our budget deficit (so that's another net leak). Business I is predicated on the fact that it's tax deductible... $1 in investment has a net cost to business of ~$0.70. Removing deductibility raises the cost back to $1. Like any other market, when the cost of something goes up, quantity falls. It seems to follow that FT would unequivicably make the econmy more prone to recession by raising the cost of I, which is the main factor that keeps us out of recession. Feco 19:24, 7 September 2005 (UTC)
thread_title:  FT Effects on US GDP 

message: Something needs to be mentioned about the effects of the FairTax on the States. A little known fact of the FairTax is that "all input purchases made by general government entities, including the acquisition of labor services (other than that used to produce education), would be subject to taxation."  In other words, state and local governments would pay the FairTax on their purchases and the wages and salaries they pay their employees. William Fox and Matthew Murray in A National Retail Sales Tax: Consequences for the States estimate the states "would pay $346.2 billion in NRST to the federal government, an amount about 50 percent greater than current state and local general sales tax revenues." They estimate to pay the NRST, states would have to double the size of their sales tax base and raise their rates an average of 2 percent.
There also might be some constitutional questions (e.g., intergovernmental tax immunity) about the federal government taxing the consumption of the states in this manner.
It seems obvious to me that the "revenue neutral" FairTax rate proposed is only accomplished by taxing the consumption of the states, which would require the states to either increase their taxes or reduce the services they provide to their citizens. --Tom Joad 2k 15:29, 19 July 2005 (UTC)
thread_title:  Effects on the States 

message: The recent delete / revert made me read this area a little closer.  I have a problem with the following statements.  "The federal income tax system is progressive on income. Sales taxes, while uniform on spending or consumption, tend to be effectively regressive on income." & "These conclusions are apparently contradictory; according to Gale, the FairTax proposal is regressive on income and progressive on sales. 
The first sentence starts off with "Sales taxes" and the sentence of itself may be true (while I think it would be neither regressive or progressive but flat - I'm not debating that point).  The first problem with this sentence implies that the FairTax is just another Sales Tax.  The FairTax is not like any other Sales tax in that it includes a subsidy.  A statement about "Sales taxes" should not be in this section.  It should state "FairTax".  
The second problem comes in with the definition of progressive.  Progressive, as defined by wikipedia, is a tax that is larger as a percentage of income for those with larger incomes.  Regressive, as defined by wikipedia, is the opposite when the amount of the tax is smaller as a percentage of income for people with larger incomes.   What Gale and the paragraph is trying to state is that low income families spend a higher portion of their income on goods and services while middle to high income families tend to save a portion of their income.  This is not the definition of progressive / regressive system.  A low income family may spend $25,000 on goods and services consuming 100% of their income but will pay a tax rate of 0%.  A high income family may make $100,000 and spend only $80,000 on goods and services and save $20,000.  They are consuming 80% of their income on goods and services and may pay a tax rate of 15%.  The article makes the argument that since the low income family consumes 100% and the high income family consumes 80%, this is a regressive tax.  However, this is not the definition, the low income family is paying 0% and the high income family is paying 15%.  This is the definition of progressive.  Now it is possible that the family making $100,000 may choose to only spend $20,000 making it regressive to income but this is an unlikely scenario and not what is presented in this section.  For most Americans, the higher the income the more you spend in consumption.  Regardless of what percentage is put away for savings, this follows the definition of a progressive system.  Morphh 22:03, 21 September 2005 (UTC)
replies: text: This is what I propose.  Remove the two references to the FairTax being regressive on income unless someone can cite a credible source that states that high income individuals will spend less then low income individuals.  This is not a matter of what percentage of their income they spend on consumption but how much income they spend on consumption.  For most Americans, this would follow a progressive system.  You could make the argument that someone wealthy with little income could consume a lot and thus his tax rate would be regressive to income in comparison but I believe this is a proponent view of taxing wealth.  With such logic, would the income tax be regressive to consumption?  It think it is fair to state that the income tax is progressive to income and the FairTax is progressive to consumption.  There is a difference, however, I don't think we can flip it to state the other is regressive in such a general manner.  Doing so is inaccurate and deceptive.  I do believe the rest of the arguments in this section and that of MPC, while sometimes confusing, are valid arguments.  I would, however, like to add a proper rebuttal. :-) Morphh 14:11, 23 September 2005 (UTC)

text: I'm not trying to subvert or circumvent standard terminology. Economists often refer to taxes as "regressive" or "progressive," but the confusion over the terms' meanings requires careful definitions. The definitions that most economists use rely on the average tax rate. A tax is regressive if the average tax rate falls with an increase in income, proportional if the average tax rate is constant, and progressive if the average tax rate rises with income. I don't see how you could say that someone paying no taxes would be paying a higher tax then someone rich.  This is unlike a normal sales tax, what your definitions reference.  This is about "tax burden".  How could you be regressive to zero tax liability?  In addition, the FairTax would become even more progressive when looked at over a lifetime and not annually.  However, these are points that should be discussed in the article and I will concede the second sentence on FairTax regressiveness as a matter of opinion by Gale.  The first sentence should be removed.  Morphh 15:05, 27 September 2005 (UTC)
thread_title:  Effects on distribution of tax burden 

message: I know we have discussed this before to some degree but I wanted to bring up the latest research I could find from Gale - May 16, 2005.  We currently have him at a 50% inclusive rate / 100% exclusive.  The recent article states a 31% inclusive / 44% exclusive, as compared to the FairTax bill.  When he adds in current evasion rates and a couple other things, it brings the rate up to 39% inclusive / 65% exclusive.  I think these numbers should be used or to be more accurate use the first numbers but then state that it does not include evasion.  We address evasion estimates in the tax compliance section which quotes Gales projections with evasion added.  He does quote if state and local purchases were omitted the rate would be 45% inclusive / 85% exclusive but at that point he is no longer quoting the FairTax plan as written.  I think it is reasonable to add in costs for evasion and such but I don't think it is accurate to add in exemptions and legislative changes.  This should however be noted in our disclaimer that legislative changes to this bill could modify the rate.  I'm not sure if it should be mentioned or not but the JCT estimation did include exemptions on food and such.  This does not reflect the FairTax bill as written, however, they have not provided an alternate rate that does.  This rate should be included but we may want to state a little more then a "similar" proposal as food / medicine makes up a nice chunk of consumption.  In addition, I incorrectly stated above that the AFT used Dynamic Scoring.  It looks like everyone is using JCT methodology.  I agree that we should have a section on dynamic scoring or perhaps a new article on the subject.  Gale does seem to provide some dynamic numbers which put the rate at 27% inclusive / 36% exclusive - increasing with time.  Here is a recent article about that very topic Doesn't Anybody Know The Score?  Morphh 02:56, 29 September 2005 (UTC)
replies: text: I've made the changes discussed above.  Also added the information on scoring with links, however, they do not have articles yet.  I figured it would be better to create a new article on this topic.  Perhaps this should be a single article that discusses both methodologies.  Anyway, I added the footnote so their is some reference for the terms. Morphh 00:03, 11 October 2005 (UTC)
thread_title:  Revenue-neutral rate studies 

message: 1)The first paragraph states that monthly entitlements will go to every citizen.  The reminder of the article states that entitlements will go to every household.  There can be a big difference between the two.  I haven't read the book.  Is households correct?  Then the first paragraph should be changed.  But I'll leave this to someone who knows for sure.
2) if only households get entitlements, is there then a marriage penalty? (marry and/or move in together, you get less entitlement?)
:In public policy discussions, the proper terminology is household, not family. An unmarried individual living alone is one household. Two unmarried individuals living together are one household. From what I understand, the subsidy will be based on federal poverty calculations, which look at household size rather than family/dependent numbers. Feco 14:11, 27 November 2005 (UTC)
replies: text: I think there is currently a $1 dollar difference between two married and two single.  The married end up with an extra dollar every month.  So I guess you could say their was a "single" penalty but its not enough to even mention.  Morphh 05:26, 28 November 2005 (UTC)
thread_title:  Entitlements 

message: If the paragraph below is to be included, should it also have the average effective rate of the FairTax?  I think the income used is around $40,000.  This would put the average effective rate for the FairTax at around 12%.  This paragraph gives me the impression of comparing the Average tax burden under the current system to the Maximum tax burden under the FairTax.  I think that is what the sentence that was removed was trying to correct.  Perhaps it can be reworded to make sense.   The current paragraph: "The current tax code's complexity makes it difficult to calculate a precise percentage tax burden for an average taxpayer. Under the current tax law, the average taxpayers' direct federal tax liability is around 23% of income. The average income tax rate was 14.23% of adjusted gross income (AGI) in 2001. [9] An employee's share of payroll taxes equals 7.65% of (unadjusted) wage income."  Here is the sentence that was removed. "With a FairTax 23% maximum rate and the average effective FairTax rate greatly decreased due to the monthly subsidy checks, a tax burden comparison can be examined."
:A well-sourced median consumption amount would be excellent here. (Note that median is much better than mean in this case... I'm assuming that the income number referenced above is also a median number). However, a median household's consumption is only partially informative WRT effective tax rate.... since household size will effect the rebate's size, I'm not sure how it's possible to come up with an ex ante median effective tax rate. I do think it's useless to use median income figures to forecast anything relating to FairTax. Since FT is a consumption tax, income doesn't really apply. Feco 19:27, 28 November 2005 (UTC)
replies: text: Sounds good - I was just thinking of taking the median income and making the statement that if they spent all available income on new goods and services it would be this effective rate.  However, spending all income on new goods and services for the average income would not be the norm.  Your suggestion would be more realistic.  Morphh 02:33, 29 November 2005 (UTC)
replies: text: I was thinking... If we did find some estimate of household consumption, it probably would not be based on new goods & services only.  It would probably include all consumption.  According to the US Census real median household income was $43,318 for 2003.  Based on The Tax Foundation, the average income tax rate for 2003 was 11.90%.  We could say something like... "In comparison, if a married couple earning $43,318 a year spent all their income on taxable goods and services, they would pay an effective FairTax rate of 12.5%." (I estimated that %)  Morphh 02:19, 1 December 2005 (UTC)

text: The assumptions are multiplying here. I've begun to think that there's no reasonable way to come up with a median effective tax rate under FT. If I recall, there used to be a marginal to marginal comparison in the article, which is probably the best we can do here. Feco 02:27, 1 December 2005 (UTC)

text: In a nutshell, it's easy to compary the statutory tax rates between income tax and FairTax. It is much more difficult to compare average (median) effective tax rates under either system. In the case of the income tax, the code's complexity means individual payers' effective rates will vary widely from their bracket-specific marginal rate. In the case of FairTax, individual payers' effective rates will rely on several factors (family size, total spending, spending allocation). Does this help? Feco 13:50, 3 December 2005 (UTC)
replies: text: I'm thinking because of this, we should just remove those sentences.  They seem to offer no value without comparing it to the FairTax.  A little tough as I know both I and Feco worked on that piece but it just seems to make sense to me to remove it.  Morphh 02:57, 5 December 2005 (UTC)
thread_title:  FairTax and status quo tax burden comparison 

message: The analysis of mortgage interest deduction utilization needs to be sliced better. We're only interested in the filings of those taxpayers who own their own homes. In a perfect world, we could get the IRS data with adjustments for married filing jointly and separately distortion.  says 37 million payers claimed mortgage interest deduction in 2002.  says there were 70 million owner-occupied housing units in 2000. Granted the data are dirty, but the proportions should be roughly accurate. Ideally, the treatment in the article should be something like X percent of filers eligible to claim the mortgage interest deduction did so. We don't have access to data necessary to come up with the X%, and I've been unable to find mention of such a calculation online. But the current construction "Most don't take the deduction..." is misleading in the context. Feco 14:39, 10 December 2005 (UTC)
replies: text: In addition, the elimination of preferential deductibility will only affect the housing market going forward. The effect on seasoned mortgages doesn't really matter, because most holders of seasoned mortgages are likely to keep their current home for the foreseeable future. They're not affecting the housing market. I think the figure of relevance is the proportion of new (<5 years) mortgages held by those who take the deduction. My guess is it would be upwards of 70%. Also consider the proportion of ARMs in that group. Assuming that today's new buyers are like yesterday's new buyers, the loss of mortgage deductibiliby would pull a significant amount of money out of the market. It effectively raises the cost of housing (an overall negative income effect) while shifting spending away from housing towards everything else (substitution effect). Feco 14:57, 10 December 2005 (UTC)
thread_title:  Standard deduction & mortgage interest 

message: Someone really needs to trim down the external links section.  There are far too many that only cursorily mention the FairTax.  Wikipedia is not a place for a list of endorsements. Scott Ritchie 14:30, 10 December 2005 (UTC)
replies: text: I agree that the article sections should be removed.  New articles come out every day.  I guess I see the point as external reference articles but you could fill up page with such links if desired.  I do see some value in the Associations but perhaps this can be performed in another manner.  Morphh 21:08, 29 December 2005 (UTC)
thread_title:  Way way WAY too many external links 

message: Feco wrote "what's the mechanism fm. GDP to giving... G? C? I? NX? or DPI net C,S? Even taking GDP growth as true, it's non-sequitur to assume automatic growth in giving" in response to removing "Since the FairTax would encourage GDP growth, supports argue that charitable giving will increase under the FairTax."  The line right before it states that "FairTax advocates state that total philanthropy as a percentage of GDP has held steady at around 2% for at least two decades regardless of changes in income tax deductibility."  Opponents tend to argue that the FairTax will decrease charitable giving by removing the social engineer aspects of the deduction.  However, based on this historical information charitable giving holds to around 2% of GDP.  This is not an assumption of growth in giving - its historical fact.  This is the mechanism fm GDP to giving.  Regardless of deduction incentives and changes over the years, giving trends GDP.  Therefor, a boost in the GDP growth rate will subsequently be followed with an increase in charitable giving.  That is what this sentence is trying to state and it states that it is a supporter's POV.  Morphh 15:53, 10 December 2005 (UTC)
replies: text: If the 2% figure holds, there should be a high Coefficient of determination (Correlation) between nominal GDP and nominal charitable giving. I can get GDP data from www.bea.gov, but I haven't been able to find a decent multi-year sample of total charitable donations. Based on what I've read here , I think there needs to be better quantification of the predicition. Excerpts from arnova:
*Since 1998, charitable giving has been 2 percent or more of gross domestic product (GDP) following more than two decades below that mark. For 2003, total contributions are estimated to be 2.2 percent of GDP. The all-time high was 2.3 percent of GDP in 2000. Relative upward shift in giving at a time when GDP growth slowed to zero and dipped into recession... should be opposite
*Bequest gifts represent 9.0 percent of the 2003 total estimated giving. The increase is surprising because of concerns raised about lower bequests as the estate tax started phasing out in 2001. It occurred because charitable bequests increased in value as household net worth rose by an estimated 6.9 percent (4.3 percent adjusted for inflation) in 2003 and because of the distribution of some very large estates. A few issues in here... wealth vs. income effects, and skewing due to outliers... also effects of the estate tax.
I'm not comfortable with using a historical percentage of around 2% (assuming flucutations from 1.75% to 2.25%, that's a huge range of variation) to forecast the future. The statement needs to be strongly qualified in its current form unless backup can be provided. Feco 16:34, 10 December 2005 (UTC)

text: I'll see what I can find to help qualify it.  The intent was to show that raising income growth has more to do with boosting charitable contributions than tax incentives.  Morphh 18:04, 10 December 2005 (UTC)
replies: text: There has to be some mechanism. If charitible giving is primarily due to income, you'd look at disposable personal income. If giving is due to wealth, you'd look at net household wealth. Both of those figures won't necessarily grow at the same rate as GDP. And there's still the breakdown between personal giving and corporate giving. Until there's some firmer evidence than the "around 2% of GDP" stat, I'll pull the sentence in question. Feco 16:23, 11 December 2005 (UTC)
replies: text: I'm not sure I understand why it is important to break down the mechanics of charitable giving.  Why is the presented GDP statistics not acceptable evidence?  I find many articles on total philanthropy as a % of GDP but I haven't found where they break it down.  I'd even be fine with removing the 2% figure and just saying that philanthropy historically trends GDP.  This seems to be the common consensus.  Morphh 18:54, 12 December 2005 (UTC)

text: We can't tell if philanthropy trends GDP. Based on the article I linked above, I know giving swung from somewhere below 2% to 2.3% in 2000 (at minimum a 15% change in less than 5 years). I don't know what the downside swing range is. We don't know the time frame used. There's no mechanism that translates GDP directly into donations. There are mechanisms that translate personal income and household wealth into donations (writing checks and creating endowments). If there's any useful predictive relationship, it can be quantified. If there's no predictive relationship, it's purely speculation. Feco 01:24, 13 December 2005 (UTC)
replies: text: While I have not had the time to completely read it yet, I believe this article may provide some of the details we're looking for.  At the least, it describes the basis for the sentence.  I have a book that says "over the past 23 years, giving as a share of personal income has hovered around 1.83%.  This measure reached as high as 1.95% (in 1989) and as low as 1.71% (in 1985, the year before non-itemizers' ability to deduct charitable contributions was permitted).  The narrow range has persisted even through the top marginal rate has fluctuated in that period between 28 and 70%." It goes on to quote the average 2% of GDP figure.  Morphh 02:35, 13 December 2005 (UTC)
thread_title:  Charitable Giving 

message: Why does the section on Savings and investment and welfare keep getting deleted.  Niether are POV, and both are factual.  By not taxing savings and investment you encourage savings and investment.  By offering payments with no regard to an income cap you provide no incentive to cease ones earnings to maximize payments from the government.  These are facts.  Why do they get deleted from the unintended consequences?  
(Gibby 08:34, 11 December 2005 (UTC)
replies: text: Perhaps they are intended consequences. :-) Personally I think welfare may be a strong word with regard to this situation.  This is the government giving you back your money.  I define welfare around giving you somebody else's money.  Perhaps a better title would be something like "Saving, investment & productivity incentives".  The FairTax is intended to be revenue neutral and will continue to fund today's social programs.  Government spending is another battle.  Morphh 13:12, 11 December 2005 (UTC)

text: Morphh has one part right: the removal of taxes on saving is directly written into the law as an intended effect. Precisely, the bill penalizes taxable consumption, thus favoring tax-exempt consumption and saving. Guessing how people will allocate current income between the three choices (S, Ct, Cxt) is hard to do. It's also hard to figure how expectations of taxes on future spending out of savings will alter behavior. Again, there's no way to quickly summarize the effects of FT on such a complicated system. Regarding welfare, FT has nothing to do with it. Based on the figures in the article, a single-member household will get ~$2000 as a tax refund over the course of one year. This is far below the minimum required to live, even if they were keeping all of that refund. Thus, true welfare programs would have to continue, and FT has no effect on those programs' (dis)incentives to work. Feco 16:34, 11 December 2005 (UTC)
replies: text: Let's be careful here, and not confuse welfare programs with consumer welfare.  We may want to describe the FairTax's impact on both in the article. Scott Ritchie 18:17, 11 December 2005 (UTC)
thread_title:  Savings, investment and welfare; incentive effects 

message: I'm not comfortable with the use of progressive and regressive regarding a consumption tax. Those terms apply to income distribution. Income distribution doesn't map directly to consumption distribution. Here are the items that bother me:
#"This entitlement payment is meant to ensure that Americans have effectively no net tax burden for spending on necessities up to a limit equal to the federal poverty level and further make the overall policy effectively progressive in nature."
#Much of the body graf in the "Effects on distribution of tax burden" section.
#The one-sentence section under "Eliminates regressive nature of the Payroll Tax".
I have some ideas for what I would like to see done with those sections, but I'm curious if anyone else has similar concerns over the progressive/regressive terminology. I'll give this a day or so before I post my thoughts. Feco 16:59, 11 December 2005 (UTC)
replies: text: I understand your concern.  Politions, advocates, & opponents use this terminology in debating the FairTax so I think we have to apply it in those terms.  There is some historical discussion on this topic in the talk under "Effects on distribution of tax burden" Morphh 18:02, 11 December 2005 (UTC)

text: Factually speaking, critics of a consumption tax declare them to be regressive. IN the spirit of making the FairTax a passable law it had to be revenue neutral...and they knew they had to overcome the stigma of regressive taxation.  That is why they implemented the prebate.  That is why social security is paid from general revenues rather than a (factually) regressive payroll tax.  (Gibby 18:04, 11 December 2005 (UTC)

text: Income distribution doesn't map 1:1 with consumption distribution, however that doesn't stop usage of the terms progressive and regressive from applying.  It all depends on the particular group's marginal propensity to consume.  You'll frequently find people criticizing sales taxes as regressive, for instance, while by the same logic the FairTax must be progressive.  There is an interesting caveat, however, that we may want to mention: while the FairTax is progressive over the majority of income ranges (in particular the low and mid income ranges), the progressivity/regressivity becomes less determinate as the prebate becomes less significant.  As an example, if we compare someone with an income of 2 million to someone with an income of 3 million dollars, the prebate is only about 1% of their tax burden, so a very small change in marginal propensity to consume might alter the progressivity/regressivity.  This only applies, however, to the super wealthy.  Scott Ritchie 18:12, 11 December 2005 (UTC)
thread_title:  Progressive/regressive language 

message: Several subsections under 'other indirect effects' seem out of place now that they have been stripped of their bullet points. These two stick out most especially at me:
State and local government debt
States and municipalities would see their cost of debt increase. Currently, the federal income tax system provides tax advantages to state and local government bonds. Specifically, the interest paid on such securities is exempt from federal taxation. This tax discount allows state and local governments to issue debt at low yields, which reduces their interest costs. By eliminating income taxes, FairTax removes the tax advantage of holding state and local bonds.  Issuers would have to offer higher interest rates to attract investors. 
This seems very much like original research. Does anyone agree/disagree with me? If it isn't originbal research, can anyone give me a verifiable source? If it is, I don't think there will be any alternative to deletion. --Trevdna 18:06, 12 December 2005 (UTC)
thread_title:  Part of 'other indirect effects' 

message: I removed the POV Check Tag added by 68.60.6.235 at 03:48 on 15 January 2006.  It is required by this tag that a post be made in the talk explaining the reasons why you believe this article does not comply with Wikipedia's neutral point of view policy.  It would be proper courtesy to post ahead of time in the talk to allow editors to make corrections to the article, dispute your suggestion, or concur with the tags placement.  Morphh 14:14, 15 January 2006 (UTC)
thread_title:  POV Check Tag 

message: It occurs to me this article may work better if we had a new section, titled 'criticism and controversy' beneath the 'predicted benefits' section, for several reasons:
#It would reduce any POV problems people have with it, and go a long way toward making this a totally fair and balanced article.
#It could improve article structure and layout drastically.
Please discuss. --Trevdna 15:14, 17 January 2006 (UTC)
replies: text: I'm fine with such an addition if it, like the 'Predicted benefits', is not really discussed elsewhere in the article.  Currently most of the criticism is included in the topic of discussion.  Even the predicted benefits section has some criticisms included.  I also think we should stay away from a philosophy discussion of politics if possible which some criticism may stem from.  I'm not for restating all the criticisms with substance in a single section if they are already discussed elsewhere with both views presented.  I would be for moving the current topics of 'State and local government debt', 'Financial Markets', & 'Effect on law enforcement and crime' into such a section.  These are largely criticisms with little rebuttal. Perhaps a generic paragraph at the top reflecting the main common criticisms with links to the section discussing it.  Then have subsections below (like those above) that are not discussed further in the article.  Morphh 18:54, 17 January 2006 (UTC)

text: You make a good point, Feco. Looking back over the article, it does look pretty well documented as is. It was just an idea, and I'm pretty convinced it wouldn't be a good one.--Trevdna 19:12, 18 January 2006 (UTC)
thread_title:  New 'criticism and controversy' section? 

message: Okay, I went hunting and found a relatively recent law review article: George K. Yin, Is the Tax System Broken Beyond Reform, 58 Fla. L. Rev. 977 (2006), which specifically examines the question: "Would a National Retail Sales Tax Be a Viable Replacement for the Income, Payroll, and Estate and Gift Taxes?" Yin, incidentally, is a former (Republican) Congressional staffer and a fairly distinguished tax law professor from the University of Virginia (and is almost certainly notable enough to merit his own Wikipedia entry, if someone wants to do that). 
The article is rather lengthy, and I don't want to tread on any copyright waters by reproducing it at length. However, specific criticisms that Yin raises are that the proposed 23% sales tax rate is too low, as "the FairTax estimates apparently did not assume any level of noncompliance" (p. 994), that the bill "would require the federal government to pay the sales tax on all of its purchases of goods and services as well as on the payment of compensation to its employees" (essentially transferring money from one pocket to another and calling it 'revenue', without accounting for the transaction costs imposed) (p. 994), and that "the family cash grants would create the largest entitlement program in American history" (p. 995). Yin estimates that a revenue-neutral conversion to a sales tax under the FairTax model would require the rate to be set closer to 90%, and could exceed 100% if it is also intended to replace the payroll tax and the gift and estate taxes (p. 993).
Yin also contends that the estimated transition costs for the implementation of such a tax are not reflected in the proposal. For example, some states have no sales tax in place, and no apparatus for collecting one, meaning " "there will likely be some continuing need for a federal tax collection agency, whether labeled the "IRS" or something else, to administer the sales tax in at least a few states" (p. 999). As with the federal government paying itself sales tax, state and local governments would also be required to pay this sales tax (they currently pay no income tax), which would force them to extract more revenue from their citizens to maintain existing services (p. 1001). In other words, even if federal government revenue were neutral, it would be because states would suddenly have to start paying enormous taxes to the federal government, simply shifting the burden to the states to exact more revenue from their citizens while (again) increasing the transactional costs of doing so.
There's also a big transitional issue. Yin finds it unfair to impose such a tax on retirees, who have paid income tax all their life, and would now be taxed a second time on the same money whenever it was spent (p. 1004). People currently working will be subjected to this double taxation on their existing savings (p. 1004). Although the government could provide additional relief to compensate such individuals, "[t]he amount of "relief," if any, provided to taxpayers in the treatment of their accumulated capital under a national sales tax may be so important as to determine whether the switch to such a tax results in efficiency gain or loss" (p. 1004). There's also a fairly substantial section on the effects on international trade (and possible gaming of the system with domestic vs. international purchases) which I haven't the time to look into today.
Yin suggests that the perceived problems of the incomes tax can be addressed through a transition to a flat tax combined with a value-added tax (p. 1006). Yin says that such measures were proposed to and rejected by the Congressmen who ultimately proposed the FairTax, and this this rejection was based on pessimism that any real and substantial tax reform could take place at all under the system as it existed in the late 1990s and early 2000s. He notes that "Archer's pessimism about fixing the current income tax, and rejection of a possible replacement of the income tax with something like the flat tax, were due to concerns about the legislative process, then this worry should have led him to be pessimistic about making any change whatsoever" (p. 1019), which suggests that the FairTax was proposed without regard to whether it was mathematically sound, because those who proposed it figured it would never be enacted anyway.
So that's a rather cynical (but very thorough) critique from a taxation expert.
Cheers! bd2412 T 00:20, 24 August 2008 (UTC)
replies: text: That will teach me I was searching for stuff in economics journals. Kbs666 (talk) 00:47, 24 August 2008 (UTC)

text: Have you read Ch. 9 of the Tax Panel Report (cited in the article)?  I would be interested in your opinion of it? Looie496 (talk) 03:23, 24 August 2008 (UTC)
replies: text:  I have not, but I'll see if I can track it down. Cheers! bd2412 T 16:23, 24 August 2008 (UTC)
replies: text: It's available here: .  Chapter 9 is devoted to proposals like the FairTax, but you may want to give a quick read-through to the Intro and Executive Summary as well. Looie496 (talk) 16:38, 24 August 2008 (UTC)
replies: text: I see that the Tax Panel raised many of the same points as Prof. Yin. bd2412 T 07:02, 25 August 2008 (UTC)

text: That looks like a good additional source to use for much of the criticism in the article, and may have a few things we can expand on.  I don't think we have any criticisms on international trade.  A few of the things stated are from old data/arguments.  For example, the newer studies by Gale, BHI, Zodrow & Dimond, do not have the government paying itself error (that was considered the mistake in earlier research).  The only place I can think that suggested rates like 90% was some of the older sales tax studies by Gale 1999, which excluded a great deal of this plan's tax base.  Gale's 2005 study did score the FairTax, which is what we use in the main article.  Unless, based on the payroll tax comment, he may be using the Tax Panel report when considering a sales tax with a limited base (similar to a state sales tax).  The tax panel also lists an extended base (one of the three instances that they refer to the FairTax in the report).  This is the figure we use in the article under revenue neutrality, since the FairTax uses an extended base.  Morphh  (talk) 13:02, 24 August 2008 (UTC)
replies: text: Yin's 89% projection may be based on the inclusion of the $600 million+ cost of the prebate program, and perhaps includes the increased cost of funding the federal government which is shifted to the states (which have their own sales taxes, and would either have to increase those or increase income taxes to maintain revenues). Like the Tax Panel, Yin is also concerned about the middle class getting squeezed. bd2412 T 07:04, 25 August 2008 (UTC)
replies: text: Looking at Yin's drafts available online and the tax panel study, the 89% figure he is using is a Median base (state sales tax) with 30% evasion (see page 216 of the Tax Panel study), not the extended base which is what the tax panel compared to the FairTax (page 209 & 216).  The state sales tax base cuts the FairTax base in about half, so at that point we're not talking about the same plan anymore.  The prebate program is included in the rate figures, as well as the government spending from what I understand.  One thing we have to factor when reviewing the tax panel study with regard to tax distribution is that they did not replace the payroll tax, so this has an effect on burden distribution - the panel did not compare this to the FairTax plan (but we include it anyway in the article since it is used as criticism).  You may want to read the tax panel rebuttal as well.  I don't think it is especially good (as it seems to ignore the extended base calculations), but it gives the other point of view.   Morphh  (talk) 14:35, 25 August 2008 (UTC)
replies: text: I see they have very different projections for the prebate (as does Yin) - which is, of course, highly contingent on what is considered to be the poverty-level to which the prebate applies. As Yin points out, even if the IRS is abolished, a new IRS-like structure will have to be put in place to track who gets the prebate and who does not. bd2412 T 01:35, 27 August 2008 (UTC)
replies: text: Poverty level is defined by the Department of Health and Human Services, so this should be constant.  I think the higher calculation is likely due to their higher tax rate, which in turn makes the tax rate higher.  Rebate distribution would be handled by the Social Security Administration. Morphh  (talk) 11:02, 27 August 2008 (UTC)
replies: text: Who gets the prebate, then? Just people living at or below poverty, or people ranging up to some higher income on perhaps a sliding scale, or everyone? bd2412 T 12:59, 27 August 2008 (UTC)
replies: text: The short answer is everyone - no legal resident pays taxes on spending up to the poverty level.  The plan does not track income and the prebate is not based on income.  It is based on family household size of lawful U.S. residents.  To receive the prebate, households would register once a year with their sales tax administering authority, providing the names and social security numbers of each household member.  The Social Security Administration would disburse the monthly rebate payments in the form of a paper check via U.S. Mail, an electronic funds transfer to a bank account, or a “smartcard” that can be used like a debit card.  It is similar to exempting income up to a certain amount under a flat tax.  The rebates would have the greatest effect at low spending levels, where they could lower a household's effective rate to zero or a negative rate. At higher spending levels, the rebate has less effect, and a household's effective tax rate would approach 23 percent of total spending.  If Yin suggested it was based on income or an agency would be required to track income, he is incorrect.  Morphh  (talk) 13:11, 27 August 2008 (UTC)
replies: text:  Actually Yin is correct. Many of the SSA's duties are presently handled by the IRS and those functions would have to be handled by the SSA which would still require reporting of income, by recipients of benefits at least, as well as tracking names and mailing addresses. So we'd get rid of the IRS in name but instead greatly expand the size of the SSA and employers would still have to be able to report income for employees. Kbs666 (talk) 16:41, 27 August 2008 (UTC)
replies: text: Yes, but that's not what I stated.  Income is not tracked for the prebate (a somewhat commonly repeated error).  If Yin stated that or if he stated that a large agency was needed to track income for the prebate distribution, than he is mistaken.  Having business report income for SS purposes was outside of what I was talking about, but you are correct there.  That's not a fucntion of the tax code, but the Social Security program. Morphh  (talk) 17:00, 27 August 2008 (UTC)

text: Glancing at the draft, It doesn't appear that Yin makes this error.  It looks like he correctly states the rebate is based on family size.  So what he was probably talking about is the generic statement that we still are going to need some agency.  True - the bill creates a Sales Tax Bureau, passes some off to the Social Security Administration, and offers a large portion of administration and enforcement to the State (where they receive .25% of the tax for doing so).  So it is not a matter of if there is an agency, but the size.  BHI estimated a 73% federal reduction in size.  I don't recall any other estimates.  Morphh  (talk) 17:30, 27 August 2008 (UTC)
thread_title:  A neutral, refereed source. 

message: First, some disclaimers. I'm an academic economist. Although this is not my field, it's my impression that very few professional economists take the fair tax proposal seriously. Firstly, economists favor many diverse taxes with low marginal rates, rather than a single tax source (for reasons of efficiency and revenue stability). Secondly, it is quite possible that not enough revenue (as a % of GDP) can be collected from a sales tax alone to support the modern state. Laffer curve considerations (tax evasion, non-monetary transactions, underground economy) mean that the revenue from a general sales tax may max out below current tax collection no matter what the tax rate is. Thirdly, as it will probably lower government revenue, the legislation will almost certainly never pass. 
I've just spent the last hour reading through the article and going over the sources. The article is subtlety, but persistently tilted in favor of the fair tax. This occurs in two ways. Firstly, arguments supporting the fair tax are presented first, and often stated in the encyclopedic voice, while arguments against are given later, and prefaced with statements like 'opponents argue that ....' Secondly, arguments supporting the proposal are reported in more detail and are given more space than arguments against. 
I'm not offering to fix the article, as it would take a much greater investment of time than I'm willing to give (sorry!). All I can offer is targeted specific help. If you need answers to specific questions, drop me a message on my talk page, and I'll get back to you. Good luck guys, and thanks for working on it. lk (talk) 16:10, 24 August 2008 (UTC)
thread_title:  Subtle, but presistent POV tilt. 

message: I took some time to try and cleanup the article on many of the points brought up.  We've spent so much time debating that I haven't had time to actually work on it.  I haven't finished yet but did make some significant changes (deleted about three paragraphs worth of proponent verbiage).  Since I'm usually the most vocal about removing content, I figured there may be less objections if I attempted it myself.  Morphh  (talk) 21:14, 25 August 2008 (UTC)
replies: text: From the diffs it looks like it was mostly in the tax compliance section and that you removed 4 refs, the AFFT blog, a Bartlett piece, A Cato Institute book and a GAO report. Looks ok to me. Kbs666 (talk) 22:29, 25 August 2008 (UTC)
replies: text: So far it was about a paragraph from the economic section, a paragraph from the tax compliance and evasion section, and a paragraph from underground economy.  I also removed some content under the Monthly tax rebate section.  Morphh  (talk) 22:59, 25 August 2008 (UTC)

text: Removed a paragraph from Theories of retail pricing. Morphh  (talk) 0:34, 26 August 2008 (UTC)
replies: text:  Would you post letting folks know when you're done? No point in doing a bunch of editing at the same time you're doing major trims. Kbs666 (talk) 06:31, 26 August 2008 (UTC)
replies: text: Will do. Morphh  (talk) 0:21, 27 August 2008 (UTC)
replies: text: I don't mind regular updates. Cheers! bd2412 T 01:27, 27 August 2008 (UTC)

text: Took a good bit off of "Presentation of tax rate", removed some math, cleaned up some other areas.  Still have some other areas to focus on. Morphh  (talk) 0:21, 27 August 2008 (UTC)

text: Cleaned up "Distribution of tax burden" removing about 1k of text.  Removed several of the references that Kbs666 had issues with, along with another ref that was no longer needed.  Morphh  (talk) 20:59, 27 August 2008 (UTC)

text: Removed another paragraph from "Personal versus business purchases", and more refs (see comments above). Morphh  (talk) 19:25, 28 August 2008 (UTC)
replies: text: Did some additional cleanup in Other indirect effects.  I think I'm probably done with the major cleanup.  Overall, I think I removed about 15% of the article, reworded and reorganized for pov balance, and removed most of the AFFT refs.  I hope this can be a better place to move forward from and hopefully addresses some of the past disputes.  Morphh  (talk) 16:50, 29 August 2008 (UTC)
replies: text:  I just got back from vacation and will look things over but a quick skim didn't find anything. Kbs666 (talk) 05:46, 8 September 2008 (UTC)
thread_title:  Cleanup 

message: It's been more than a week since I suggested removing the POV tag. Since no one objected, I'm going to be bold and remove it myself. Comments (if any) here please.lk (talk) 15:14, 4 September 2008 (UTC)
replies: text: Thank you.  As a note, removal does not imply that there are no longer disputes on the talk or that we don't have additional work or issues to address. The tag has a specific purpose and is added as a last resort after specific issues that are actionable within the content policies have been presented and are in dispute. I think we've moved past this point and can hopefully move forward to address any additional issues. Morphh  (talk) 15:52, 04 September 2008 (UTC)
thread_title:  removed POV tag 

message: Am I right that the AMT would still be in place under the proposal? If so, I think that bears mention in the lead. PDBailey (talk) 03:50, 20 October 2008 (UTC)
replies: text: No, it replaces all income taxes, including the AMT.  We use to have it stated but it was removed a while back (see discussion).  I preferred to have it in there as many people see it as different from normal "income taxes".   In an effort to reduce the size of the lead, the list of income taxes was moved to a footnote; however, I don't think we ever put the AMT back in the note.  We also listed the taxes under the legislative overview section.  I'll add the AMT to both the footnote and the legislative overview as a tax that would be replaced.  Morphh  (talk) 11:51, 20 October 2008 (UTC)
thread_title:  amt 

message: I just thought I'd point out that neither the 30% or 23% figures for the FairTax are incorrect.  The 23% figure is drawn by subtracting $23 from $100, which is 23% of 100.  The 30% figure is drawn by dividing 23 by 77, which makes roughly 30%.  The 23% figure is *inclusive* (like income and payroll taxes) and the second figure is *exclusive* (like sales tax).  However, the reason the 23% figure is used is because it better compares to the income and payroll taxes.  In any discussion, it is fine to refer to it as 30%, as long as income and payrole taxes are then calculated the same way.  Lets say someone pays 25% in income taxes and 11% in payroll taxes.  This makes a total of 35%.  $35 out of $100 is $65.  Divide 35 by 65 and the rate becomes roughly 53%.  I don't want to edit the article myself, I just wanted to point out that this is not included in it.  Anyone who wants to add that in may do so if they wish. 173.89.231.248 (talk) 20:55, 29 November 2008 (UTC)
replies: text: I think the tax rate inclusive / exclusive debate is covered quite well several times in the article and the section Presentation of tax rate covers it in detail.  I did, however, add a sentence that provided a reverse comparison to the income tax per your comment. "A common reverse comparison is for supporters to quote the income tax system exclusively; a 25 percent income tax and 7.65 percent FICA tax, a total 33 percent inclusive tax, is equal to a 50 percent exclusive tax."  Morphh  (talk) 12:53, 01 December 2008 (UTC)

text: I am not too familiar with the inclusive or exclusive terms for tax rates. However the math here just doesn't make sense. The $23 figure is drawn by multiplying $100(theoretical cost of product) by the proposed 23%(.23)tax rate. The 30% figure is drawn from subtracting the $23 from the $100 cost of the product, then deviding the whole amount of $23 by this number that does not represent anything. Your doing stuff to one side of the equation and not the other. The exclusive rate just seems to be some asinine rate to inflate the orgional tax rate to make it seem to have more of an impact than it actually does.  —Preceding unsigned comment added by 70.13.72.210 (talk) 13:05, 6 February 2009 (UTC)
replies: text: The 23% rate allows comparison to income tax.  The 30% rate allows comparison to existing sales taxes: the tax is like a 30% state sales tax.  A tax that doubled all sales prices would be like a 100% sales tax, but certainly not like a 100% income tax (it is like a 50% income tax). 68.239.78.86 (talk) 02:58, 12 March 2009 (UTC)
replies: text: The real answer is that attempting to compare income taxes and sales taxes is like comparing apples and oranges - they are just not the same and can't be compared.  For a sales tax, the amount of tax you pay depends on how much you save or donate or use in other non-consumption ways (gambling, for instance).Brianyoumans (talk) 17:31, 12 March 2009 (UTC)
replies: text: That's not an answer to why the 30% figure is meaningful, which is the question being discussed. 68.239.78.86 (talk) 23:11, 12 March 2009 (UTC)
replies: text: It is my view that comparing it to a 30% sales tax is reasonable, while saying it is comparable to a 23% income tax is misleading and really just plain wrong. But that is not Morphh's view, and until someone can persuade him, this change is not going to happen, as Morphh "owns" this article. And, frankly, over time I've come to the conclusion this isn't a terrible thing - the article is a bit POV, but not horrible, and probably better than it would be if it didn't have an informed and active editor "owning" it. And Morphh is persuadable - I think the article has changed positively over the past year.Brianyoumans (talk) 19:37, 13 March 2009 (UTC)
replies: text: The part that is confusing to...well, me I guess, is the "$23 on top of every $77 spent before taxes" line. To me, that makes it sound like they are adding another $23 to the amount of tax you pay. Is anyone opposed to just saying, "$30 for every $100", or would that be incorrect? (This is why I'm a Computer Information Systems major, not a friggin accountant...Joshua Ingram (talk) 04:12, 19 April 2009 (UTC)
replies: text: I'm trying to think of how it could be worded better, but I rather not change the dollar figures to something dissimilar to the other figures.  I'm thinking that we could remove the "before taxes" terms and similar to the prior statement, say "$100 total".  Morphh  (talk) 20:07, 19 April 2009 (UTC)

text: Brainyoumans, I'm looking at the article for statements where we make a comparision to a 23% income tax burden.  What I think we should be saying is that the rate percentage is "calculated similar to income taxes", which I don't think is the same thing as comparing it directly with a 23% income tax burden (which may or may not be true depending on several factors, as you point out).  We're comparing the math calculation in relation to the tax base.  We'll leave the burden comparisons to the section on "Distribution of tax burden".  Morphh  (talk) 13:42, 07 May 2009 (UTC)
thread_title:  23% vs 30% 

message: According to economist William G. Gale, the percentage of income taxed is regressive.[5] When presented with an estimated effective tax rate, the low-income family above would pay a tax rate of 0 percent on the 100 percent of consumption. The higher income family would pay a tax rate of 15 percent on the 75 percent of consumption
I read this the first several times as saying that the tax as a percentage of income is regressive.  The example given obviously supports the opposite.  I think it means to say the the fraction of income that is subject to the tax decreases with income, but that's fairly meaningless (we could just as well say that the low-income family pays tax on 0% of its income) and, more importantly, not what it seems to say as currently worded. 68.239.78.86 (talk) 02:54, 12 March 2009 (UTC)
replies: text: The only percentage of income as consumption that is of any value is "100% of income is consumed". A percentage of any period of income as consumption is a measure with no value. There will be periods of higher consumption and lower consumption per period of income. Example: one buys a new house or car, although the fairtax is collected and payed in the year the item was purchased, most persons will pay off large purchases over a period of a loan or mortgage. Also income might not not be consumed by the individual that created it as it may be gifted to other individuals, charities, or passed on as inheritance. The minute, day, month, year, or individual that created new wealth/income, does not matter, 100% of new wealth is taxed when it is used for personal consumption. Further more, individuals may purchase used items that are not taxed, but the proceeds of that sale will eventually be used to purchase new items that are subject to tax. --Shomas (talk) 16:47, 10 June 2009 (UTC)

text: The first sentence is a conclusion to the prior sentences "A family of four (a couple with two children) earning $25,000 and spending this on taxable goods and services, would consume 100 percent of their income. A higher income family of four making $100,000, spending $75,000 and saving $25,000, would devote 75 percent of their income for the year on taxable goods and services."  Gale provides the conclusion that the percentage of income tax for the year is regressive.  The second and third sentence is the beginning of the proponent argument, that it is progressive on consumption.  Which is followed by the a similar concluding sentence by Kotlikoff "According to economist Laurence Kotlikoff, the effective tax rate is progressive on consumption."  Perhaps you could clarify your thoughts as I'm not understanding.  Morphh  (talk) 0:57, 13 March 2009 (UTC)
replies: text: For starters, "the percentage of income taxed is regressive" will be read as saying "the tax as a percentage of income decreases with income".  None of the numbers presented here support this (though I imagine it's true once you reach middle income).  It's also not clear (to me at least, obviously) what is supposed to support what.  Some "thus's" and "therefore's" would help. 68.239.78.86 (talk) 01:58, 13 March 2009 (UTC)
replies: text: It should be read as saying "the tax as a percentage of income decreases with income".  It is supported by the statement that someone spending $25,000 is taxed on 100%, while someone spending $75,000 and saving $25,000 is taxed on 75% of their income for that year.  This is not an effective rate calculation and strays from the actual definition of regressive (which is why it might be confusing), but that's the opponent argument in any case.  We try to define the base to make it clearer - "regressive on income".  It's a twist on words in my view as you can't properly measure consumption on a yearly basis assuming the other 25% never gets taxed.  It's taxed deferred to another year, so should be measured for that year plus interest.  I'll look at adding in some therefore's and thus's to try and make it clearer.  Morphh  (talk) 12:46, 13 March 2009 (UTC)
replies: text: With the prebate, the family earning $25,000 will be taxed on a lower fraction of their earnings, so this doesn't make sense.  I do agree with the point about the 25% eventually being taxed, but it seems to me that this weakens the "incentive to save" argument. 68.239.78.86 (talk) 01:48, 14 March 2009 (UTC)
replies: text: I agree with you there, but not all arguments make sense. That's part of the debate, figuring out what makes sense to you.  I don't think this would weaken the incentive to save argument because of accrued interest.  The result is a significant increase over the current system with regard to savings return.  Morphh  (talk) 14:08, 15 March 2009 (UTC)
thread_title:  Regressive 

message: : Exports and the purchase of intermediate business sales would not be taxed ...
The purchase of sales?  Is that a fishy derivative investment, an error, or what?  —Tamfang (talk) 05:59, 8 April 2009 (UTC)
replies: text: It's talking about Business-to-business intermediate purchases that are part of the product life cycle (not the final end product purchase).  Let's say you purchase iron to build a structure.  You would not pay tax on the intermediate business sale of iron.  The end customer would pay the tax on the final retail transaction when the structure was purchased.  This prevents the cascading of taxes as a item moves toward a final retail product.  The tax is only charged once on the final retail product, not on any intermediate business sales to create the product.  Hope this clarifies it.  I'll add a wikilink to the article.Morphh  (talk) 15:46, 08 April 2009 (UTC)
replies: text:  So it should be "intermediate business sales/purchases" or "purchase of intermediate goods" or some such.  Looks like my point, that "purchase of ... sales" is silly (the kind of thing that happens when someone revises a sentence without looking carefully at it), was too subtle. —Tamfang (talk) 02:05, 9 April 2009 (UTC)
replies: text: That does sound weird and your suggestion sounds good to me.  I'll make the change. Morphh  (talk) 14:17, 09 April 2009 (UTC)
thread_title:  purchase of sales 

message: When was the last time they rated the importance of this article? It seems to me that this article should be a lot higher than "low" or "mid" on any scale. Since I haven't made any actual changes to it, I feel that I would be out of line to request a rating review. Does anyone agree? And if so, could someone take care of that? Joshua Ingram (talk) 04:27, 19 April 2009 (UTC)
replies: text: The rating scale is for the WikiProject's prioritization of work and should not be considered any form of slight or promotion to any article by having a high or low.  This has a higher scale on the tax wikiproject than economics, which makes sense.  If you consider the global scaling criteria, this seems to fit the project "Mid" scale "Medium probability that non-accountants would look this up. Important tax concepts in an individual country, significant tax legislation, or notable international concepts."  An example of high priority for the project for the tax group is Income taxes in the United States, so I don't see that it should be increase to this priority.  Economics has an even larger scope, so the article is of even less importance to that project.  Since the purpose of the scale is the help direct workload, and this article has already reached FA, the change would seem unproductive for the projects.  Morphh  (talk) 17:40, 19 April 2009 (UTC)
thread_title:  Importance 

message: Would the repeal of withholding, via Constitutional amendment, apply only to Fed income taxes?  That is to say, would the States be bound to repeal withholding as well, since they are the ones necessarily ratifying it in the first place?
I may have missed it inside the article (which is very good indeed) and if I did I apologize, but it seems to me that once the repeal of withholding becomes an established fact, a great deal of political power passes from the politicians back to the consumer.  Simply put, a dollar represents a unit of freedom.  And if the phrase "a bird in the hand is worth two in the bush" has any truth to it at all, it means political power is being leveraged, indeed heavily back to the consumer/producer for every dollar he keeps.  That is an extremely compelling argument, it seems, though hardly ever mentioned.  Regards.  155.188.183.6 (talk) 19:56, 11 June 2009 (UTC)
replies: text: Quick answer - it only applies to the Fed.  The repeal of withholding is not done via a Constitutional amendment.  This is done immediately upon implementation of the FairTax by the removal of the IRS code.  The Constitutional amendment is to prevent them from creating new income taxes in the future.  Separate income taxes enforced by individual states would be unaffected by the federal repeal. The States can continue to withhold and apply income taxes within the bounds of their State Constitution.  Morphh  (talk) 20:56, 11 June 2009 (UTC)
thread_title:  Dumb question? 

message: According to this article, the tax will be at 23%. My parents make about $100,000 a year, and about $60,000 of that is consumed. With this law, the tax on that would be about $13,800. My question is, will that $13,800 be added ON TOP of the 60k or will it already be taken out when consumed? It may be a dumb question, but I just want to make sure.  —Preceding unsigned comment added by 74.233.109.144 (talk) 20:07, 14 August 2009 (UTC)
replies: text: The way the bill is intended to be implemented would include the tax in the price.  So $13,800 of $60,000 (or $13,800 on top of $46,200).  This assumes a non-accommodation model, where cost is reduced to reflect the removal of income taxes.  Your parents (married couple) would receive a prebate to offset taxation up to the poverty level $4,784 yr, reducing their burden to $9,016.  If other accommodation models are used, SS and wages are tied to the price inflation. Morphh  (talk) 12:22, 15 August 2009 (UTC)
thread_title:  Need clarification 

message: http://en.wikipedia.org/wiki/FairTax#Theories_of_retail_pricing
I am not entirely sure, but it appears that this graph here does not include the shift on the demand curve that the higher income levels would provide. People in some of the higher tax brackets could have well over 60% more income after the 40%+ income tax rates are removed. Equilibrium would shift no matter what because of the tax rates, but the demand curve would shift so much that the graph is a complete misrepresentation of the effects this would have on the market.  —Preceding unsigned comment added by Castellorizon (talk • contribs) 21:05, 7 October 2009 (UTC)
replies: text: The image does show the demand as well as the supply curve.  The tax adjustment can be applicable to a income tax or a national sales tax - the economic cost is the same.  As for any equilibrium changes, that would depend on the type of good and the actual change in purchasing power after taxes for that good.  You may have more income, but purchasing power may be the same after taxes, in which case, no shift would occur.  Morphh  (talk) 13:27, 08 October 2009 (UTC)
thread_title:  Theories of Retail Pricing graph 

message: The article states that the Fair Tax originated with AFFT.  But AFFT was founded in 1994, while CATS, which promotes a virtually identical plan, was founded in 1990.  Thus, it's unclear why the article credits the Fair Tax to AFFT and not to CATS.
Those in favor of the Fair Tax may not wish to be associated with CATS due to its Scientology connection; but facts are facts.  —Preceding unsigned comment added by 75.18.205.215 (talk) 09:48, 12 July 2010 (UTC)
replies: text: The Fair Tax (HR25) was created by AFFT, and its connection to CATS is an opinion.  We cover this opinion in the FairTax movement section. It is true they are both broad national sales taxes, but beyond that, the two tax plans are very different and were created independently.  While the idea of a national sales tax has been around way before CATS, I will make a change that clarifies that the FairTax was created by AFFT, which may mean something different than its origin.  Morphh  (talk) 13:22, 12 July 2010 (UTC)
thread_title:  Query on history of Fair Tax 

message: Reading this article you get the impression the only choices are income tax or sales tax.  This is hardly the case, for over 150 years this country had neither.  The only significant federal revenue was an Import tariff.  There are groups pushing for a return to this, or other non-income methods like http://libertyamendment.org/ and entirely different proposals as well.  This article should, at least, link to several alternatives.  --LanceHaverkamp 03:40, 15 August 2010 (UTC)
replies: text: This article would not cover such topics.  It's not an article about general tax reform or other proposals for replacing the  tax system. It is about the FairTax, a sales tax, replacing the income tax.  Look to other articles such as Automated payment transaction tax, Competitive Tax Plan, Efficient Taxation of Income, Hall-Rabushka flat tax, Taxpayer Choice Act, USA Tax, Value Added Tax, or Flat tax to cover alternate proposals.  Morphh  (talk) 11:58, 15 August 2010 (UTC)
thread_title:  Absent Alternative Proposals 

message: This is a very one sided article. I find it hard to believe the case for and against is as one sided as the article. It would seem therefore that there ought to be a section detailing criticisms of the fair tax proposal in the article, rather than the occasional remark such as 'some critics believe a fair tax would be unconstitutional'. I find it hard to believe e.g. that Paul Krugman has said nothing on the subject and that this was his objection.  —Preceding unsigned comment added by 82.3.71.230 (talk) 18:43, 18 December 2009 (UTC)
replies: text: Criticism sections are frowned upon in Wikipedia.  Criticism is integrated throughout the article where available in the appropriate section as required by our policies.  If you think a specific criticism is missing and have reliable sources for it, please let us know. Morphh  (talk) 20:17, 18 December 2009 (UTC)
replies: text: Morphh, I could have sworn I read these exact same words by you a few months ago. Did you copy and paste an old response?Kmarinas86 (6sin8karma) 04:14, 20 December 2009 (UTC)
replies: text: Haha, You could probably see the same message by me going back several years on any number of articles.  Such is the cycle on Wikipedia.  It's a common thing to hear from new users that are unfamiliar with the encyclopedic format and requirements.  It's also a common thing to hear on controversial articles by people that already have preconceived notions on a subject and it doesn't line up with their view of how it should be demagogued or praised.  Morphh  (talk) 14:47, 20 December 2009 (UTC)

text: I've been here for over 5 years and worked on many WP:GA and WP:FA articles.  Criticism sections are frowned upon, particularly articles that go through these processes.  They are permissible, but that doesn't mean they are the mark of high quality or the goal.  These sections are often referenced (WP:CRITS, Wikipedia:Neutral point of view#Article Structure, Wikipedia:Pro and con lists, Wikipedia:Avoid thread mode, and Template:Criticism-section) but there is a consensus that criticism should be woven into the article, not separated into sections, forked, or placed in pro / con lists.  I'll take a look at the Compliance and Evasion section to see if it can be reorganized or worded better to convey the opinions. Morphh  (talk) 12:35, 28 March 2010 (UTC)
replies: text:  Jimbo Wales himself has said that it's a case-by-case thing. That some articles benefit from having a criticism section and some are made worse by it. There's a reason we don't have a policy banning them. 75.76.213.106 (talk) 20:44, 31 December 2010 (UTC)

text: I looked at the "Tax compliance and evasion" section but don't see your point.  The first two paragraphs are a proponent viewpoint and the second two paragraphs are the opponent viewpoint.  They lead off with "Proponents state" and "opponents state".  Morphh  (talk) 12:46, 28 March 2010 (UTC)
thread_title:  Absent Criticism