I've posted this stuff on other forums before but this is a better explanation.


LET'S DEMAGOGUE THE FAIR TAX - Neil Boortz

Perhaps you noticed that in quite a few congressional races around the country Democratic candidates have been attempting to frighten voters into believing that the evil Republican candidate is going to burden them with a horrible new tax. More specifically, the wicked Republican is going to add a 23% federal retail sales tax on everything they buy .. and this is in addition to all the other taxes they're already paying!

Effective politics? You bet! Can you imagine how frightened some middle or lower income American would be at the prospect of paying another 23 cents on the dollar for everything they bought? If I believed that a Republican was going to do such a thing ... hell, I"D vote for the Democrat. And there aren't many things that could cause me to vote for a Democrat. A threatened beheading might do it, but I'm not even sure about that.

The big problem with this particular Democratic campaign charge is that it is simply not true. It's a lie. Not only is it a lie, but every single Democrat who has made this charge against their Republican opponent knows it to be a lie. In the Boortz book, that makes these Democratic candidates, and that includes Congresswoman Denise Majette running for the U.S. Senate in Georgia, and Inez Tenenbaum who is running against Republican Jim DeMint in South Carolina, bold, intentional, premeditated liars.

I've been studying the Fair Tax proposal in its various forms for 20 years. I am convinced that this plan to replace virtually all personal and corporate taxes with a national retail sales tax would bring a period of transformation and economic growth to America such as has never been seen before. On top of that, it would be a financial boon to the poor and the middle class.

First ... A Brief Overview

You can learn all of the details of the Fair Tax play by clicking on this link. In case you don't have the time, here's your brief overview.

The Fair Tax (HR-25) would eliminate all personal corporate and personal federal income taxes. It would eliminate all federal payroll taxes, including Social Security and Medicare. The Death Tax ... gone. Capital gains taxes ... gone. Gift taxes ... gone. Excise taxes .. gone. In the place of all of those taxes we would have one national retail sales tax on all purchase at the retail level. This means you would get 100% of your paycheck. The amount you place into an investment .. not taxed. The amount you put into a savings account .. not taxes. Money you give to your kids ... not taxed, neither to you nor to them. You make a consumer purchase, you pay the federal sales tax.

One more thing. The Fair Tax plan calls for the repeal of the 16th Amendment. That's the Amendment that brought us the federal income tax.

When the Fair Tax plan was first being developed it was believed that in order to be revenue neutral ... that is, to make sure that there is no decrease or interruption in the flow of tax revenue ... the national sales tax would be around 23%. I'm led to understand that soon-to-be-released research will show that the actual tax would be around 20% or slightly less. Since I've already run the numbers, we'll stick to the 23% figure for the purpose of this essay. Call me lazy.

So ... let's get on to the Democrat's charges that these evil, wicked, mean and nasty Republicans are plotting a financial Armageddon for poor and middle income Americans.

What Happens to Poor and Middle Income Americans?
OK ... let's put on our sensitivity hats for a few minutes here and think of the consequences of the Fair Tax Act on our nation's poor, poor, pitiful poor. After all, they can hardly afford a 23% sales tax when they're living paycheck-to-paycheck in the first place, right?

Remember ... right now, for the most part, those whom we define as "poor" aren't paying any income tax anyway. In fact, many of them are getting checks from the government. The absurdly-named Earned Income Tax Credit, for example. So, how can these people survive if suddenly they're paying a 23% retail sales tax?

There's no doubt that any implementation of the Fair Tax would fail in short order if nothing were to change except that the poor would be paying today's prices for a gallon of milk or a loaf of bread, plus a 23% sales tax. But ... that would be far from the reality under the Fair Tax. Under the Fair Tax the poor won't only survive, they'll positively thrive! The Fair Tax could turn out to be the best poverty-fighting tool devised in this country since the concept of hard work.

Let's begin by considering two realities.

First, remember, please, that the poor, along with everybody else, will no longer have Social Security taxes or Medicare taxes withheld from their paychecks. Whatever they earn, they get on payday. For most of them this means an immediate 10 to 15% increase in their earnings.

Second. There's that 22% in imbedded taxes buried in the cost of all consumer goods. This isn't my figure; it comes from respected economists. That 22% is sitting there in virtually everything Americans have to buy.. and that includes poor Americans. As soon as the competitive forces of the free market work their magic, and they always do, consumers, including the poor, will be paying at least 20% less for virtually everything they buy, including the basics of food, clothing, shelter and transportation. Yes .. they'll have to pay the new national sales tax, but when you factor in the lower prices caused by the disappearance of the embedded taxes you'll see that the total price paid for consumer goods will remain very nearly the same.

So ... just considering these factors, the Fair Tax delivers a winning hand to people living in or near to what we call poverty. They get every penny they earn on payday, and when you factor in the Fair Tax and the lower prices, they're actually spending less of their money for a retail purchase than before.

A practical example: Let's pull out the calculators. Let's say that a single mother with two children spends $45 a week on groceries. The removal of the 22% embedded tax would bring the price of those groceries down to $35.10. The sales tax would be $8.07. This brings the total price to $43.17. That's less than our poor mother would have paid under today's tax system. This single mother, whom we'll consider "poor," has just received a 10% to 15% increase in her weekly paychecks, and she's paying less at the grocery story for her basic necessities! Does that sound like such a rotten deal to you?

At this point you should be thoroughly convinced that the Fair Tax would actually benefit, rather than harm the poor. But, then again, maybe not. Perhaps you were educated in government schools, or you're just hard to convince. Sit down. Here's where I close the sale.

The Rebate

The folks who wrote the Fair Tax plan knew that burdening the poor with a 23% retail sales tax would doom the plan from the outset. They decided to devise a way were nobody, rich or poor, would ever have to pay the sales tax on the basic necessities of life. So, under the Fair Tax plan every consumer will receive a credit to their checking account or to a debit card equal to the sales tax that person would be expected to pay on the purchase of the basic necessities of life for that month. The size of the monthly payment will be based on the government's published poverty levels for various sized households. Considering the number of checks and financial transactions of this type the feds undertake every single month, this is entirely "doable."

Here's an example of how the rebate payments would have worked in 2003.

You are now a married couple with two children. The Fair Tax Act sets forth a formula for computing the poverty level, based on government figures, which negates any marriage penalty. Under the Fair Tax Act in 2003 you would have been granted an annual consumption allowance of $24,240. This is what the government would assume you would have to spend during that one year to buy the basic necessities of life for your family. The sales tax on this amount would equal $5,575. The government will rebate this amount to you in 12 equal monthly installments of $465. It's clear .. you're better off, MUCH better off, under the fair tax plan.

But what about a single woman with one child? Her monthly rebate in 2003 would have been $232. The lowest rebate payment would be to a single person with no dependents. That person would receive $172 per month.

Now ... bear in mind, this rebate isn't only paid to the poor. It is paid to everyone, rich and poor alike. The purpose here is to make sure that no American has to pay the Fair Tax sales tax on the basic necessities of life. Unlike the present income tax system, the Fair Tax treats each and every person in this country exactly the same. This, of course, presents somewhat of a problem to politicians who like to use the tax code to foment class distrust or outright warfare.

OK ... let's add it up for America's lower income citizens:

They get their entire paycheck.
Even with the sales tax, and considering the drop in prices, they'll be paying essentially the same for everything they buy.
They get a check from the federal government every month to rebate any sales taxes they had to pay.
Though their tax returns aren't that complex, let's also include the time these the poor (all of us, really) will save by not having to keep tax records or file tax returns.

If you're looking for some reason to oppose the Fair Tax plan, you're going to have to find a better excuse than its effect on the poor.

The Democrats who are using sponsorship of the Fair Tax proposal against their Republican opponents know the real story. They also know that for the most part the media doesn't understand the plan and will make no effort to learn the truth. Print this, copy it, spread it among your friends. Expose the lies of Denise Majette and Inez Tennenbaum and other like them. This tax reform idea is simply too good to allow it to be destroyed by desperate campaign lies.

I'm a big fan of government (especially the federal government) spending as little money as possible--and in turn returning surplus revenue to the taxpayer. But I've never been overtly impressed by a national sales tax, due to its regressive nature. This article at least addresses this nature, but I still have some questions.



Could I see some hard figures on this, such as total current tax revenue, and how much is spent on retail annually?



In what form are these 22% in embedded taxes on everything?

Also, I was kind of amused at this statement, since traditionally it is the other way around:

I find it kind of funny too since ending the current system as we know it would seem to benifit everybody across the board and it is usually completely the other way around. This represents a radical change in the way things are done and takes power away from politicians, so I would guess that's a big reason they are against it.

If this tax is treating all equally, IE everyone gets paid on what they spend for the "necessities of life" the tax is neither regressive nor progressive because all are treated equally. I don't think he could say it more clearly that under this system poor people actually have it better than they do now. Essentially that's what the fair tax is about as I understand it. As far as the logistics are concerned, the government already distributes funds electronically as with food stamps and social security checks so I'm sure this would be not much of a problem, not to mention the abolition of the IRS which would free up all sorts of funds.

Representative John Linder is currently working on a book about the fair tax I believe which would explain the whole deal much better than I could.

I'm not sure about all the figures, but they might be at http://www.fairtax.org

You could E-mail Boortz and ask him where he got his figures.

His website is http://www.boortz.com but e-mailing congressman Linder would probably be a more effective plan. He's in Georgia, sorry I don't know the district.


Denise Maggette, was Cynthia Mckinney's replacement in Ga, untill she "decided" to run in a different election.

The other lady is from South Carolina I think.

the national sales tax would not apply to producers who are spending money on inputs for their businesses. an example: a farmer who spends 150,000 on a new tractor would not have to pay the 23% rate. he would have to pay exactly $0 in taxes.

the repeal of all the taxes also has an overlooked benefit. it removes the tax on savings. of all the taxes the government has managed to saddle the public with, this has always been the most perplexing to me. savings is the life blood of an economy, and for the government to be taxing economic progress speaks to their incompetence.

and this plan is not as regressive at it may appear at the outset. it is a consumption tax, not an income tax. it makes consumption more expensive, meaning you ultimately get less (what happens when you move the demand curve back for any good? lower prices). also, it rewards savings. a poor person can effectively innoculate themselves from the tax by saving and not consuming. remember, there is a non-taxed consumption allowance up to the poverty line. in fact, there is even a rebate.

it makes sense to me.

Well, here's the regressive flaw I see in a typical sales tax.

Person A makes $25,000 a year and Person B makes $250,000 a year.

Let's say, for argument's sake, that the basic necessities cost $5,000 a year. This is 20% of Person A's income but only 2% of Person B's income.

Now, say we slap a 20% sales tax on that. That's $1,000 in taxes. This is 4% of Person A's income but only 0.4% of Person B's income.

This is what makes me wary.

Of course, Person B will have more money to spend beyond necessities, but as a percentage of income, it's far more than Person A (97.6% to 76%).



Sure, make me do all the work.

The fact that this man doesn't understand why the credit is called the "earned income tax credit makes me question everything else he said. (the credit is based on income you earned - duh)

well ok, lets go basic figures then.

Ok for a second lets forget entirely about income. The poorest people are no worse off than they are right now, infact they are better because they are getting their entire check right and they still aren't paying taxes because they get paid back by the government.

Let's say they save a little and buy a Kia to get them around.

That's about 6 grand right? so tax would be $1,440 dollars for their purchase of their new economy car. Bringing the total to a very manageable price even at the lowest wage. Hell, if you live in an urban area and you save that money for say public transportation and spend say 40 bucks a month on a bus/rail pass you're even better off. Or you could walk or ride a bike too right and spend the extra money on whatever you want like, for instance......healthcare.

Let's say Joe Rich guy decides to by a BMW 740I It retails for around 80 grand by the time you add all the options.

That would be $19,200 in tax he would owe on that. Rich people are still paying way more than poor people because the items they are buying cost more. Corporations can't get around tax this way because they are paying the tax on all the goods they buy to make other products.

Now, I guess the main argument from progressives here would be that it's wrong to have more than anyone else therefore any tax system that does not take everything from the rich and redistribute it evenly among the entire population is wrong.

The fair tax dosen't make poor people equal to rich people it just makes the tax system fair. So I guess a person who believes equal distribution of wealth is actually a posibility then the fair tax is not going to sound appealing at all.

I'm not rich at all but, having that all that extra money in my paycheck to spend, or invest as I want sounds appealing.

Another argument I guess would be that the public is too stupid to actually handle thier own money responsibily. I would contend education should include primary courses on living and how to invest and plan for the future.

But that's just me I guess. *sigh*

I'm sure he understands what it is. He probably means that if you recieve a credit you are obviously not paying taxes because the government is giving you back that money they withheld and more (credit) because you did not earn enough to pay taxes correct? You're the CPA, I failed Algebra.

I'm generally a proponent of progressive income taxing, but I've read and heard a good deal about this particular flat tax plan, and it is intriguing to me. Another aspect that was not mentioned in this essay was that there would be no sales tax on USED goods, therefore encouraging recycling and reuse, and also not taxing items that would be primarily used by the poorer people in society.

The 22% embedded taxes he speaks of are the various taxes paid by manufacturers and others in the pre-retail line of production, transport, etc... that are paid to the government and then recouped by raising the prices for the end consumer. The math there seems to be relatively solid as far as I can see.

My biggest problem with this plan is the people who are pushing it. Your sickeningly condescending tone towards the poor and those who try to defend the poor from corporate predators makes me suspicious of the motives behind this tax reform idea. I also did not see anything in this particular piece, although I beleive I've heard others say it, about retaining social welfare programs for those people who don't have ANY income. Many of those people are in those situations not for any lack of "hard work" or desire to contribute to society.

--PunkDavid

For the record, here's my hair-brained tax scheme:

--A flat income tax with a non-taxed part of income equivalent to the poverty level.

--A small added percentage above level of, say, $1 million currently to be spent at the individual's discretion toward private, charitable causes.

--In times of budget duress, a "last resort" tax would be an estate tax for inherintances of a substantially high level.

As far as actualy percentages go, that would depend on the level of spending needed--which I would keep as low as humanely possible.

Not all the people who are pushing it are so condesending. That's just Mr. Boortz here. He's stated several times that he's worked 2 and 3 jobs to get by before in his life and he sees no reason why other people should be forced at the point of a gun to provide for others. He's pretty much against all governmental welfare (though he does give substantial amounts of his own money away to various causes like cancer relief funds and hospitals) other proponents say that there will be more than enough money coming in to pay for various social programs.

Mr. Boortz believes individuals not the government should decide what to give to people who have no income, because this country has so many opportunities for employment.


Please do not connotate Mr. Boortz tone and my own as the same.

yes. good point.



i'm curious. how does a corporation "prey" on the poor?



data from the most recent census reveal that those who are officially classified as "poor" by the united states government possess a surprising amount of wealth. the official "poor" are not that poor after all. of those persons classified as "poor," 46% own their own home and 76% have air conditioning. more than 66% of the "poor" have more than two rooms of living space per person. the average "poor" united states citizen has more living space than the average citizen (not "poor" citizen) living in austria, belgium, france, finland, germany, greece, ireland, italy, portugal, spain, and the united kingdom; 97% of the official american "poor" own a color television and over half own more than one; 62% of the "poor" have either cable or satellite television. far from being undernourished, the "poor" have a greater obesity problem than the rest of the population. the most common hardship that most poor people face is making late rent and utility payments.

i agree that some of the poor are at their station in life due to factors they can't control. but the opportunity to better yourself is out there. work hard. save. plan ahead. it isn't sexy, but it works.

The other positive in this plan is the elimination of income tax preparation. How much is wasted in money and time understanding and preparing tax returns by individuals and bookkeeping and enforcement by teh government? It would also kill the non-productive industry that revolves around searching for tax loopholes to exploit.

Every American waiting for a check from the federal government every month? God help us.

I'm all for abolishing the tax code, but of course that must go hand in hand with a demand to reduce the size and budget of the federal government.

A simple flat tax is a much better idea.

This plan sounds like it would really fuck over a middle class family. It seems to me, the class idea of it at least, is to expand the lower class but increase its happiness level, i.e. make it more palpatable to be among the poorest and least powerful. With a small middle class and a nearly untaxed upper class you have plutocracy.

High tax, low tax, no tax, yes tax.


Either way it is still best to become as educated and competitive as you can in this society, for that is the one way someone from "below" can make it "above".

I'm probably one of the bigger libs on this board, but even I recognize that the US is a capitalist society where education and competitiveness can make someone's life easier financially.

The only problem is the sick, disabled, orphaned, and elderly of the nation who cannot thrive in such conditions. What do we do with them? Charity? Government support?

The answer is often tough to find.

Do rich people spend money?

they are taxed.

I don't understand how you people are dividing this into classes?

The more you spend, the more you get taxed the only thing not taxed are life essentials.

If a rich guy buys a house lets say a big one 1 million dollars. He will pay 240,000 dollars to the government when he purchases that house.

Rich people will pay exactly the same load they do now and they can't get out of it like they can with the current tax code.

At the same time, if you wnat to live frugally, and save your money you aren't penalized. What the fair tax does is put you in control of all of your money and decisions. The more you spend, the more you are taxed, therefore the people the most money who spend the most pay the most tax period and no one pays for the essentials of life.


So that being explained, how does it "fuck up" a middle class family as I've explained it to you?

Everyone gets their entire paycheck, they choose how to spend it? How is the middle class "fucked"?


The whole reason for the "fair tax" is so that no one regardless of socioeconomic status gets fucked over. Everyone gets their entire paycheck back nothing is withheld. All tax is sales tax and all people get a check or e-transfer back every month for whatever level the government deems is what the average person spends on essentials. See the above boortz diatribe.

Lemme ask you........do you own a house? Because as someone who is in the process of buying a house the thought of spending thousands of more dollars on a home is not appealing. Now should I not have the 'American Dream' of owning a home because i is not a 'necessity?' That I should live in an apartment for the rest of my life? I am just curious who the government is to classify what is and is not a necessity.

If my understanding of this bill is correct, there would not be any 23% tax on the purchase of a home because it would not be retail purchase of new goods or services.

I haven't read the full text of the bill however. If anyone has, could you please shed light on this issue since real estate is in most cases the most valuable thing that a person owns.

--PunkDavid

ok, Kate, apparently you haven't read the article. You should probably do that before I respond to you although Boortz has a much more condesending attitude towards poor people than I do.

Under the fair tax, income tax, withholding all that is abolished. You get your entire paycheck. Therefore you have all your money. The government dosen't classify necessities, they classify how much money the average person spends on life essentials and then returns that amount to everyone, probably based on a variety of factors such as how many children they have, whether they are single moms or single dads, what have you just as they do now under the current tax structure.

You can still get a loan for a home. This is a massive simplification of the tax structure, no ones taking the American Dream from you. Just like it is currently any tax you pay could be added to the price of your home. Your home is likely to be cheaper anyhow because the 22% give or take tax cost imbedded in the retail products to build said home will no longer be there if you are buying a new home anyway. Keep in mind you will not have any money withheld from your paycheck so that will be available for you to spend on your home if you want also the government essentials check will also be in the bank each month.

Essentially give your self around 10 or 15% more money than you have currently in your paycheck, that's the major difference under the fair tax system.

Also if Punkdavid is correct then used goods are not taxed at the 23% sales tax. I'm not sure how that applies to homes or not.

If you'd like it laid out better than my silly scribbles http://www.fairtax.org.

Cheers, good luck with the new house.