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Discussion > Labor Day Tea Party

Well I went to my first tea party event today on the Green in Morristown. I have to say with all of the hype concerning the tea party, and the many negative portrayals that have been put forth by the media I was a little bit apprehensive. Not that I bought into their radical portrayals of the movement, but as with any movement I figured it would be a mixed bag of characters, some radical, most not.

The few concerns I had were gone quickly, however. It was a VERY civil crowd...just a bunch of concerned citizens getting involved, and hoping to do something about the direction the country is heading.

Doug Hartlove spoke about the FairTax, and gave me a nice shout-out. Got some contact info from some people who want to help out.

Sheriff Mack was there and spoke. If you are not familiar with the Sheriff, you can check out his website here. http://www.sheriffmack.com/ He is a wonderful advocate for our Constitutional freedoms and gave a great speech.

All in all a BEAUTIFUL and productive day.

September 6, 2010 | Registered CommenterJim

sorry - prior post had redundant points. This 1 is the real post end-end

Hey Jim

I was there too - great event. I was happy to meet Doug Hartlove and wife Carol. They advised me you were a 2nd alternative to Rodney and supported the Fair Tax. You left by the time I met them.

So I researched the Fair Tax in more detail and right now view it a positive step for multiple reasons:

1 - can immediately add 1 1/2% to 3% to GDP -- cost of complying with all tax filings. This by itself is a very major benefit. Combine that with fact it is progressive and revenue neutral and any opponent will have difficulty attacking it.

2 - progressive - with the prebates

3 - will greatly eliminate class warfare and special interests; hence our country will be more unified

4 - will provide predictability and stability to tax code. Hence, private corporations will be more motivated to invest their 1.8 trillion

5 - small business owners -- many in the top 5% of earners will also be motivated to take more investment risks. Small business entrepreneurs create 2/3 of all new jobs - another huge plus.

** These benefits must be coupled with expectations that our US Govt will not increase taxes (increase that implicit 23% tax), will cut wasteful spending. Simply reducing our budget to 2007 levels will jettison 900 billion or 2/3 of our annual deficit.

As Doug asked at the 9/6 event - has any job been created with a tax increase?

The private sector created permanent jobs and expands the economy. If one reviews US Treasury revenue growth following the Kennedy, Reagan, and Bush tax cuts, once concludes that within 1-3 years revenues tend to increase from base levels following tax cuts. This is very easy to comprehend -- create a stable investment environment and entrepreneurs produce.

Why do Obama, Reid, Pellosi do not comprehend? Do they not want to grow the economy?

Reid and Pellosi, I suspect may be economic imbeciles. But Obama is not. He is brilliant and may understand these points in fine detail. However, I am worried that Obama may be a Marxist and committed to the destruction of US capitalism. His plans may include:

Taxing our most productive so they can not challenge the Leftists /statists (entrepreneurs will become less wealthy and thus less powerfull)
Destruction of all private industries – so all will be controlled by the statists (Power more important than economic growth)

Level the playing field globally. Obama may think that the US has economically damaged the world through Yankee capitalism and thus wants to level the playing field.
Amnesty for illegal aliens so they can vote and secure a political base that steadily moves Left, thus solidifying and extending socialism in the US.

I am not sure that raising the “Obama may be a Marxist” and wants to destroy capitalism argument may be a winning strategy at this time. But I wonder if you share this perspective.
More importantly, do you share the above assessment of the Fair Tax and perspectives on how to best grow the economy?

Who am I?
Like you a technical person ( have many years of programming ), also Rutgers Grad 78 (Bachelors - Economics) and 82 (Masters). I have been in Wall Street IT since 1983, currently an Applications Architect at an IB. I am a free market capitalist – run a fitness/personal training LLC part time; have been a registered Dem and Rep back/forth; was a co founder of the Rutgers Democrats in 1976; was a Leftist until my experience as an auditor with the USDA Child Nutrition Programs (78-83).
I blog periodically under alias Economics501 – to CNBC and Investors Business. I am considering blogging this week to Star Ledger or local news sources on-line about the Fair Tax and how to best grow the economy and mention you as an option to Rodney. I am in the 11th district.

Please respond to this blog in your email.

Best
Ted “Economics501”

September 12, 2010 | Unregistered CommenterTed

HI Ted,

I certainly do agree with your assessments of the benefits of the Fair Tax, and I think there are many others besides.

I think the two biggest benefits come from the facts that

1. It would make the U.S. the best place in the world to do business again, and the impacts that will have on job growth in this country cannot be understated.

2. It would remove all disincentives for individuals to work hard, make money, save, and invest.

Those two things alone would provide an amazing boost to growth in this country. In order to recover from this downturn we need to have SIGNIFCANT, year over year job growth. Nothing any party, or any person has suggested is going to change the economic climate sufficiently to accomplish this. The Fair Tax will.

As for the intentions of President Obama, or anyone else, I feel it is needless to speculate. All that we can do is attempt to influence and change those policies as best we can.

-Jim

September 26, 2010 | Registered CommenterJim

Jim,

I came to your site, as I'm sure many will, searching for a third-party candidate from our district. I am unemployed, a student, and have little faith in our current 2 party political dynamic. As I was working my way through your page, I came to this discussion, and found myself woefully uninformed concerning the FairTax, so I've spent the last day or so finding as much information about it as I could. The proposal looked extremely promising at first. The poverty line prebate is a wonderful idea, I could see the ways in which it would stimulate economic growth: Increasing worker's paychecks, no dramatic increase in the price of goods because of decreased production costs, fighting unemployment, (which would act as an accelerator, further multiplying the levels of cash flow, and thus tax revenue) it would be a return to the values of the original constitution, which prohibited direct taxation until the passing of the 16th amendment.
It all seemed too good to be true until I realized that it was.

Here are some issues/ questions I have concerning the bill and your endorsement of it:
1) There is some disagreement on the 23% figure, even if calculations are subject to variance based on school of economic thought, there are a few points I would like to raise.
a) The 23% figure is misleading in that it is tax inclusive, meaning that the price of an item that cost $10 would not be $12.30 as many would believe, but $13. Rather than the calculation of total cost being 10(1.23), it is 13(.23)+10 This is just the way it would work, but not harmful so much as misleading to the general populace.
b) The government is subject to taxation on the goods they purchase, which to me doesn't make sense, as they would be paying a tax to themselves from tax revenue they collected. If you add the money they spend in taxes to the revenue, you must also add that to the budget. If they were tax exempt, it would remove their contributions from the calculations that make the bill revenue neutral.
c) The 23% figure's revenue-neutrality is based on the assumption that there would be 0 tax evasion, which is unrealistic.
2) Even if I ignore all that, say the figure is 40%, essentially i should be paying nearly the same amount as I do now anyway. Call the exact %sales tax a bug to be worked out. The main thing that I simply cannot reconcile is the exemptions.
Apparently out of 500 companies polled, 400 reported that they would build their next plant in America if the FairTax were passed. Well here's the reason,

(1) BUSINESS AND EXPORT PURPOSES- No tax shall be imposed under section 101 on any taxable property or service purchased for a business purpose in a trade or business.
(b) Business Purposes- For purposes of this section, the term `purchased for a business purpose in a trade or business' means purchased by a person engaged in a trade or business and used in that trade or business--
(1) for resale,
(2) to produce, provide, render, or sell taxable property or services, or
(3) in furtherance of other bona fide business purposes.
(c) Investment Purposes- For purposes of this section, the term `purchased for an investment purpose' means property purchased exclusively for purposes of appreciation or the production of income but not entailing more than minor personal efforts.

Of course international business would want to relocate here, they wouldn't have to pay tax on anything. To whom exactly is this tax fair? Are these the interests you support?

-Zac

September 26, 2010 | Unregistered CommenterZac

Hey Zac,

Yes, businesses pay no tax under the Fair Tax. However, I believe it an economic fallacy to think that businesses pay tax now, just as I think it is an economic fallacy to believe that businesses "help contribute" to employee costs such as healthcare etc.

Here's why. Imagine a world free of tax. ( Ah, nice thought ! ) For our example, let's pretend it's a local restaurant. Let's say that for simplicity all meals at this restaurant cost $10. They would charge more if they could, but due to competition they cannot charge more without losing customers, so they are currently making a certain percentage of profit on each meal they sell, let's say it's 5%, so for each 10 dollar meal they are making 50 cents in profit.

Then government policy changes and it is mandated that the restaurant must pay the government $1 in tax for every meal sold...essentially a 10% income tax on the business.

How will the business respond ? There are three possible outcomes:

1) They could choose to absorb the cost of the tax entirely, however that may not be an option for a business that hopes to stay open for long (Indeed income tax rates generally exceed business profit margins)
2) They could pass the cost along to the consumer, and charge $11 for their meals...this should not eat into their business as all other competitors are going to be in the same situation.
3) They could use a mixture of 1. and 2.

Generally businesses choose number 2. And the consumer ends up paying $1 dollar in tax on each meal. The restaurant just serves as a pass through entity for the tax. The consumer feels less taxed in this scenario because the extra dollar is not reflected as tax on the receipt, it is included in the cost of the meal. They only see the portion of the tax on the meal which is charged to them DIRECTLY. ( The sales tax ) But in reality it is all being paid by the consumer.

In this same world if the business did not pay tax, but there was a consumption tax paid by the consumer on each meal, the cost of the meal on the receipt would remain 10 dollars, and the 1 dollar tax would be marked as such.

In both scenarios the consumer is paying 11 dollars for the meal. 10 dollars for the meal itself and one dollar in tax. The only difference between the two scenarios is the PERCEPTION of who is paying the tax.

Tax policy folks would like to keep the PERCEPTION of how much a consumer is taxed as low as possible. It cuts down on voter unhappiness....tax payers should prefer TAX TRANSPARENCY, meaning I think it is beneficial for me to know EXACTLY how much of everything I make or buy is due to the tax burden. The Fair Tax provides this transparency.

It's a long explanation, for that I apologize, but it's a complex topic, but now given that explanation I can answer your question more directly. Yes, it is a position that I support. I do not think that it is a shift of the tax burden onto consumers, as only individuals truly pay tax in either scenario. It is simply a matter of perception.

And as I mention in my "Tax Reform" page on the site, we need MASSIVE amounts of new jobs for YEARS to get out of this mess, and having 400 of 500 businesses put their next plant here instead of elsewhere is just the kind a fundamental economic shift we need to start heading in the right direction again.

-Jim

September 26, 2010 | Registered CommenterJim