Billions of dollars and thousands of jobs in the tax compliance industry is just one reason why a fair tax won't see the light of day. by Chuck Angier
(libertarian)
Sunday, February 17, 2008
The concept of a "fair tax" and possible dissolution of the IRS as promoted by certain Presidential candidates has created great excitement. As stimulating, refreshing and sensible as both may be, I'm afraid there are about 700,000 reasons why neither will happen in the foreseeable (like, forever) future. Consider:
We are paying $4.128 billion to 19,242 tax preparation services with 205,122 employees to help us relieve ourselves of the fruits of our labor (source: 2002 Economic Census*).
Ditto for a substantial portion of the $48.497 billion we pay to the 56,705 Certified Public Accounting firms with 426,208 employees (source: 2002 Economic Census*), granted, CPA's do other things besides taxes.
Never mind the multitudes involved in litigation, ancillary services, or contracted/outsourced services (primarily by the IRS), which are undocumented and therefore indeterminate.
* The Economic Census is conducted every 5 years. The 2007 data is not yet available.
Tallying the numbers above it takes 723,000 people (jobs) at a cost of $63 billion per year just to pay our taxes. One shame of these statistics is that (I surmise) those jobs and that money are, to a great extent, included in the rosy job and GDP numbers that we hear regularly. I'm sorry, but I don't see how 723,000 people and $63 billion collecting taxes is adding value to the economy. Value is added to the economy when we spend of our own freewill, not under force of law, never mind the insult of the nature of the expenditure.
723,000 jobs
$63 billion
They won't go quietly.
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You are right about this bureaucratic special interest group. But there is no such thing as a "fair" income tax, anymore than there is a fair extortion.
I believe in paying for what I directly use - user's fees such as tolls to keep the infrastructure built and maintained.
Companies, not individuals, wishing to operate a business should bear a fair burden for the privilege of operating in this country, but not too much of a burden that would entice them to go elsewhere.
I believe in being billed for services rendered, be it the fire department, water, police, etc.; as long as there is government oversight to prevent abusive over-billing.
I do not believe in paying into any socialist scheme, whether it be to indoctrinate my neighbor's kids in public school or subsidize someone's housing, etc.
Lastly, I also advocate personal and corporate responsibility for social ills. Should the alcohol and cigarette companies pay a tax to help pay for the damage they contribute to? Yes.
I agree that those are powerful influences. But they only have money to offer to the members of Congress. We in the FairTax do not offer money, we offer something more valuable, reelection. They have numbers today, but the FairTax has roughly 1 million supporters and is still growing. Their numbers will not grow.
Being a grassroots group our only power is in our numbers at the ballot box. Our goal is to have sufficient numbers to effect the election in sufficient districts. In time we will be able to say "support us or we will not support you" and back it up. That's how the FairTax will become law.
Unless a fair tax is accompanied with a corresponding reduction in spending little will be accomplished. It is better than the progressive income tax since we can control our taxation somewhat through our spending. If we could get the fair tax and a spending adjustment we would be money ahead to set up a reading room like GM and just leave the IRS employees on the payroll until they retire.
I think in terms of "burdensome" and that concept includes the 723,000 jobs you quote. Now, is "burdensome" static? or dynamic? It's dynamic. Is it growing? or shrinking? It's growing. So the tipping point is somewhere in the future - maybe 20 years from now when the tax code passes 100,000 pages and your 723,000 jobs is 1,500,000 jobs.
In response to DX10, yes spending reduction is needed too, but just the elimination of waste (compliance costs) and the establishment of the USA as a tax haven for businesses would spur the economy to record levels, creating more tax revenue so maybe we'd at least have a balanced budget!
You actually gave 63 billion reasons as well as 700,000 additional reasons why the FairTAx eill work. The people will speak up, as in the grassroots movement with the FairTax. Over 700,000 are involved daily and more added each day. Thousands flock to our rallies. Ever see that for the Flat Tax or any other tax proposal?
For you to assume that because jobs are on the line, the FairTax will not pass is rubbish. But then again I suppose there were folks such as yourself that were against the Black vote and Women's vote. All were grassroots movements. We contact the lawmakers each day and let them know we will not vote for them until they are signed on the HR25 and S1025, the FairTax.
Wait, Watch, it will happen!
The Fair Tax would simplify things, but the many are concerned about an increased chance of fraud under the Fair Tax - which would keep many of those IRS jobs around - they would just be spending their time running the books of businesses looking for suspicous transactions. That would keep many CPAs in business reviewing corporate documents, probably less than now, but the taxation industry would not vanish, not by a long shot.
Sorry, but I had to respond to World on the fraud issue. How many people does it take to commit tax fraud today? Just one. And under the FairTax it lessens the chance of fraud because you need at least 2 criminals. Since the FairTax will be administered by the states (in most cases) and the paper work required will probably be combined with the current state sales tax reporting the fraud will also be on the state sales tax. I've spoken to merchants from several states and the states seem to be quite consistent in their response, they lock the company's doors. Not many merchants are willing to risk being closed down, and since over 80% of sales come through "big box" stores with multiple stores at risk, I think you will find the instance of fraud will be minimized.
This is no different than prisoners arguing about how they want to be killed. One prisoner says, "I want to be shot". Another prisoner says, "I want to be electrified, I think that is fair!" A third prisoner says "But why do we have to die? With what crime are we charged?" The other two prisoners denounce him as a dissident and possible terrorist and decide to silence him so he won't corrupt the thinking of the remaining prisoners.
“Power corrupts; absolute power corrupts absolutely.” Much of the power in government resides in the elected officials’ ability to reward or punish by levying taxes and by granting or denying tax breaks to those who please or displease them. Without our current tax code, large numbers of attorneys and lobbyists would be out of a job, and the average American would not fear his or her own government (i.e. the IRS) as much. Unfortunately, many lawmakers are well aware that the Fairtax would undermine much of their power and that there would be far smaller army of sycophants and toadies in Washington, wallets out, currying their favor. Therefore, I expect that the fight for the Fairtax will be long and bloody indeed. It just depends on how many Americans have the stomach to really demand a radical change in the way their government relates to them.
Hey Chuck, do you remember who is supposed to run this country? The IRS works for us, we can fire them. H&R block says in “FairTax: The Truth” that they are looking forward to a day when they no longer have to waste time doing taxes so they can concentrate on their financial investment services. I imagine it’s a lot more rewarding helping people make more money than just saving them some taxes.
CPAs will be needed for the boom in business created by the excellent economic growth that is the main promise of the FairTax. Many foreign businesses will move here and need CPAs. Quote from John Linder from here:
Princeton U. economists surveyed 500 European and Asian companies about the impact on their business decisions. If we enacted the Fair Tax 400 of these corporations stated that they would build their next plant here, and 100 declared that they would move their corporate headquarters here.
While CPAs may be fearful of change they will find a much more rewarding life with the FairTax.
Aguila1, The founding fathers preferred indirect apportioned taxes like the FairTax and expressly forbid un-apportioned direct taxes like the income tax. It took Americans infatuated with Karl Marx to overturn the wisdom of the founding fathers and pass the 16th amendment allowing the income tax.
All wealth is created by businesses. There is no reason to burden them with anything other than creating wealth. The FairTax will eliminate almost all of the burdens, only requiring a one page form sent monthly for the collected tax.
Excise taxes like those on cigarettes and alcohol are not repealed by the FairTax.
DX10, The FairTax has to be passed by both parties. It is also not supposed to be the FairSpend proposal either. Spending cuts need to be done, but they are a separate issue.
I think it’s very important to start growing the economy as soon as possible. We have a huge debt ahead of us in entitlement programs. If we continue with our current measly 2% growth it will be difficult not to have cut benefits that people have paid for all their lives.
Growth is a far better solution as this article shows. Notice how we could lower than FairTax rate to 15% or lower with just 1.5% extra growth. I’d like to point out the author is Louis R. Woodhill who is on the Leadership Council of the Club for Growth.
dculling, agreed. Except a spending cut sends the right message about reducing government. Growth is good, assuming that the government growth doesn't outpace the growth of the economy. Although a step in the right direction, much more is needed than just the fair tax.
It still is a huge burden and would cause a drag on the economy. Where did they get that number from? Maybe they figured that's what they would need to support our leviathan of a statist government.
How about 1% of all consumption and make the government make due with just that? The way the economy would explode in growth, the govt. would probably have more money, anyway. Now that might be fair...
Hey I'm all for reducing spending, but the Democrats will never vote for the FairTax if it isn't revenue nuetral and we have to have their votes.
I would like to see it require a simple majority to reduce the rate, but a 2/3 majority to raise it.
Better yet would be automatic reductions in the rate if revenues grow past a point. A point that pays off some of the debt.
I don't think we can get away with 1%, but I did read a book once that suggested thousands of years of organized religion figured out by trial and error the max rate to get the max revenues and that is 10%; a tithe.
It looks like Louis Woodhill's work sort of confirms that. That 13.4% rate sounds pretty darn sweet anyway. One has to wonder what happens if economic growth ends up even better.
If the FairTax will not pass because jobs at the IRS and tax preparers will be lost, well, I guess we should stop trying to find a cure for cancer. Think of all the jobs that will be lost there. This country, in the past, has done many things that couldn't be done.
Posted By: Tim in Georgia
Date: 2009-02-12 14:24:24
The gov. will never "allow" us to have a fair tax because taxes are 50% about revenue but the other half is about controlling us and THAT my friends is something the gov. will NEVER give up...they love control almost as much as they love themselves.
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