Thank you for this timely post. Here in Texas the so-called Fair Tax has picked up some support among Libertarian leaders. Personally I have serious technical problems with the Fair Tax, but I am willing to admit that it might be a good step towards liberty. If nothing else it encourages people to think big when it comes to changing the current tax (and spend) system.

But you bring up a critical point. Honest attempts at incremental improvements to the tax system cannot yet be reconciled with the current party platform. In fact there is a lot of work to be done to turn the platform into a useful political document that gets the party focused on real changes in government that can happen now.

I applaud those that are making the effort to bring the LP into the real world of current politics and encourage more members to get involved in this critical area of reform. I am convinced that we _can_ do this without corrupting our principles, but I am not convinced that we _will_ do it. I do feel strongly that we cannot win in the long run without eventually taking this important step.

The only fair tax is one that is voluntary, and then it wouldn't be called a tax.

Any time and effort spent on tax reform by Libertarians is wasted. The effort should go into reducing spending wherever and whenever possible.

If we spent years fighting for a national sales tax, and won, and spending kept on increasing, what would we have gained?

If instead we somehow persuaded the rest of America to cut government spending by 50%, or 25%, or even 10%, wouldn't we be a lot better off, even if we still had the income tax?

The ideal government would be funded by donations, but would have to be considerably smaller than what we have now. Perhaps even better would be competing national governments (Democrat, Republican, and Libertarian to start out), with a simple working agreement between them not to tax each other's citizens, and to cooperate on national defense. Then each group of citizens could choose their own level of government and method of payment.

If we're stuck with one national government, and need taxes to pay for it, my vote would go to a gross revenues tax on large corporations. You could set the size based on employees, or revenues, or just pick the 500 biggest. It wouldn't be entirely libertarian, but corporations aren't individuals, and depend on government for their existence anyway. Government would still have to be a lot smaller than it is now, though, to avoid all the large companies leaving the US.

A gross revenues tax on the 500 largest corporations would have many advantages over the current system.

With rough figures of a $10 trillion economy, with $6 trillion of it from the S&P 500, a 5% gross revenues tax could generate $300 billion, probably what you need for a reasonable minarchist national government -- $200 billion for defense (half what we spend now) and $100 billion for everything else (5% of what we spend now.) Advantages:

1. Only 500 tax returns to process, instead of 100 million.

2. Complete financial privacy for all individuals and small businesses.

3. The encouragement of small business formation and the consequent growth in jobs.

4. No Social Security withholding and no taxes on interest or dividends and no personal income tax would mean almost everyone could accumulate substantial savings for retirement.

5. Even large companies might would come out ahead, since they wouldn't have to pay the company portion of FICA....

Right on, Stephen. Let’s let the LP run on issues of making taxes fairer, lower, and less Marxian, rather than “no taxes.”

I support the FairTax, and the reason I support it is one I don't hear mentioned often enough but I would think all libertarians would agree is an improvement.

PRIVACY.

When I pay sales tax the cashier doesn't ask me anything about my income, how much I gave to charity last year, how much interest did I pay on my mortgage, did I buy a hybrid car in the last year, how many miles did I drive for business purposes that my employer didn't reimburse, how much did I pay for my children's child care, etc, etc, etc.

The income tax and all its special interest driven deductions require me to turn over mountains of personal information to government bureaucrats with guns. And to constantly fear that one day they will find an honest mistake in my return and rake me over the coals before. I've been in that situation before and it was a mess (though it all turned out okay in the end, the mistake was actually a mistake by my bank, not me, but I still got shafted for $700 because of it).

A sales tax requires none of this nit picking or digging into my personal affairs like an income tax does.

That alone is reason enough for me to support this. I hate property taxes and all taxation, but even more than that I hate the loss of my privacy that goes with paying the income tax. For whatever faults it may have, the FairTax makes that pain go away and is a vast improvement over what we have.

There is another reason I like the FairTax over an income tax. As a small business owner, every month I have to go pay my payroll taxes. And they are killing me. They are my biggest expense, next to my own paltry salary.

So if I have a "down" month where the business doesn't pay much, my taxes that I owe are still the same oppressive 30% plus of my salary. And that really kills my cash flow. Each month on the 15th when I pay that it makes me incredibly angry.

But with a FairTax, I would only pay taxes on the revenue stream into my business. So if the business brings in less money, then my taxes that I owe are also less. That makes my cash flow much more manageable because my taxes are always a percentage of my revenue, instead of a fixed cost regardless of my revenue.

I agree the FairTax doesn't solve the problem of government spending. I don't know what will with the current parties in power. But if we can at least ease the pain, that is a huge step in the right direction.

I think it's also pretty reasonable to expect that like property taxes, when people are forced to see how much they are paying under the FairTax instead of it being hidden in payroll deductions, that they will be more interested in limiting government spending.

What will cut spending is stopping borrowing from other countries. We're borrowing tons of money from other countries, and we can't pay any of it off. If we cut most of our spending, for a few years we could use what money we would have spent on paying off our debts to other countries, then we could focus on cutting taxes even more.

If the LP wants to be a key player in the mainstream we should endorse the Fair Tax. I think what Neal Boortz a fellow Libertarian talk show host here in Atlanta and The Congressman from my district John Linder is doing is great. The LP platform needs alternatives to the income tax like Fair Tax in the platform. We can talk about ending all forms of taxation, but when it comes to election time we need to be more realistic in our campaigns

Lex,

There's no such thing as a corporate tax. When they are taxed and lose revnue, they have a few ways to make up for it.

1. Take the hit, and then the shareholders, individuals, lose dividends.
2. Raise prices. Consumers take the hit.
3. Cut benefits, cut costs by ordering cheaper costs, etc. The employees take the hit, or their old supplier company takes the hit, see 1 or 2.

Now, as some of you might know, I am very familiar with the Fair Tax proposal. I've studied it and I've read the book as well. It's a very quick and easy read, and I would recommend it. The fair tax isn't truly voluntary, but it comes close for several reasons, which I'll explain here.

Firstly, it does elminate payroll taxes, including Social Security and Medicaid taxes. Next, it repeals the income taxes. Also, there are no longer taxes on capital gains, investments, or death.

The first thing a lot of people think about a consumption tax is that it is harmful to the poor. The fair tax would be 23%. Right now you pay 15% income tax and 7.5% social security tax if you are in the lower income tax bracket, which is 22 1/2% right there. Besides being a tax on what you spend rather than what you earn, this tax plan would also give every American a tax "pre-bate" every month for sales taxes. The pre-bate is equal to the sales tax rate times the poverty income level, adjusted for marriage and/or dependants. As a single person with no dependants, I would receive around $178 per month to pay for income tax on necessities. A family of four would receive $361 a month. This would ensure you never pay the tax on necessities. I receive this prebate whether I am Joe Schmo or Bill Gates, unless I don't apply for it.

Because there are no excemptions, politicians can not play special favors, exempting certain goods above others as a boon to industries.

Now, once corporations no longer pay taxes, prices will drop fairly fast. within one to two years, prices of goods and services should drop on average by about 22%, thanks to free market competition, almost negating the tax. Also, once there are no corporate taxes in the U.S.A, we would become the world's number one tax haven. Other worldwide corporations would come here to build, offshore accounts would move back into our system, providing more money and more jobs in our economy. It has been estimated by economists that our G.D.P would grow by %10 in the first year if this tax were enacted.

The Fair Tax is revenue neutral, which means after paying out all prebates and collecting taxes, the government would collect approximately the same amount of revenue and could continue to fund all programs at their current level. As GDP increases, so will the revenue, which will enable the Government to pay off the national debt, as well as lower the tax rate.

As far as collecting from businesses, most retailers would tell you that they would much rather file sales tax returns than income tax returns. Especialy since this is already done in about 45 states(give or take a few). These businesses would also be paid a collection fee, a percentage of the tax, as would the states they operate in, to offset administrative costs.

The fairtax is very eloquent in its simplicity and I encourage you to check it out for yourself.

I think there is one consensus that I would like to hear from the LP: that almost *ANY* serious example of tax reform put forth that lowers taxes is *BETTER* and in a more libertarian direction than what we have right now in our lives. Right now we have the worst of all possible systems I think we can have.

I want our candidates to be able to campaign on these reforms in 2006~8 without having to worry about their fellow libertarians bashing them or protesting with signs at their public appearances becuase they "arent libertarian".

Any reduction in taxes, however the method, combined with any reductions in spending, representing more personal choice and freedom for the individual person, is libertarian. It can be 1%, as long as it is in the right direction towards liberty. Should it be more? Yes, if you can *make it happen*, that's great. Otherwise, it amounts to nothing more than posturing.

I'd rather see a 1% drop in a tax that is actually passed as a result of libertarian political action that actually occurs, rather than a proposed 50% cut in tax that goes nowhere and does nothing except make libertarians feel good.

Oh, and about the black market.

Take drug dealer Joe Snert. He is selling drugs on the black market. He does not report this income. He does, however, go to Wal MArt, buy fancy shoes and plasma screen TV's. And now this is taxed.

If a black market were started due to the fairtax, firstly I don't think it would likely be much larger than the black market of today, but if Tightwad Tommy buys his goods from Blackmarket Billy, Black Market Billy is going to go spend his ill-gotten gains at reputable businesses, so his money will get collected.

Taxation if theft, and should be abolished.
That said, practically the LP needs to support the above philosophically and incrementalism politically. Let's get the electorate on a slippery slope toward smaller and smaller total taxation. Let's tackle, first, those "services" that could most easily be provided through user fees. I agree that most businesses would rather calculate a sales tax return each month than worry about quarterly filings and 1120s. Businesses that were mostly cash could evade the tax, but would probably not be able to evade taxes on the goods they bought for resale. And, as has been pointed out, unless they put the $$ in their mattress or in a qualified savings plan, they got to eventually buy something that will be taxed.

One more important note. The tax would only apply to NEW goods and services. If you sell your possessions to someone you will not need to file a sales tax return.

I strongly favor making the Libertarian Party platform "incremental." That is, it should speak to what the Libertarian Party would do now, and say nothing about the nature of an ideal libertarian society. Different libertarians have different views about what an ideal libertarian society would be like. Rather than using the platform to take sides in those debates or else to endorse any consensus, final goals should be dealt with solely in the "market place of ideas." Different libertarians have different views.

The current plank on taxation proposes the abolition of the income tax and its replacement with nothing. It also proposes that that all taxes eventually be abolished.

In my judgement, the question of whether or not all taxes should eventually be abolished is not appropriate for the LP platform. Some libertarians believe that is a realistic goal. Others consider taxation to be a necessary evil.
(Pesonally, I am not sure about what will be possible or, at least, sensible, "eventually.")

The proposal that personal and corporate income tax be abolished is an incremental proposal. However, it is a very steep increment. Leaving aside payroll taxes and social security payments, it involves an immediate decrease in federal government spending of about 90%.

While there are many Americans who favor less government spending and lower taxes, not many of them favor 90% cuts in federal spending over four years. (Unfortunately, the polling data is pretty limited.)

The best incremental tax program is simply lower government spending and tax rates. Just about every burden from every tax is less severe the lower the rate. Lowing rates requires less spending. So there you have it. Less spending, lower taxes.

While a general statement along those lines is fine, I think a specific "immediate" proposal is good. The Clark campaign's proposal of a 50% cut in income tax rates was pretty good. Other possibilities would be a repeal of the Clinton and Bush I tax hikes. The possibilities are endless.

The best incremental proposal for tax reform is an optional flat tax. Each taxpayer can be given the option of either continuing with the current tax code or else switch to flat income tax with a zero bracket amount.

While it is almost certain that if everyone were required to switch to a new tax system, some people would pay higher taxes, making the switch optional means no one is forced to make the change and pay higher taxes. Only those who will pay lower taxes under the new system, or else believe that the convenience and added privacy are worth somewhat higher taxes, will make the change. Of course, there is no reason to prevent people from making the change in the future.

Most people believe that Hong Kong has a flat income tax. But not exactly. Instead, people have an option of choosing a complicated system like ours, or else using the flat tax. Nearly everyone goes with the flat tax.

The lower government spending, the lower the flat tax rate and the less harm done. When the rate is zero, then no harm is done from that tax.

Abolishing the personal income tax immediately and replacing it with nothing leaves the government financing its activities with payroll taxes, excise taxes, and tariffs. Personally, I would rather abolish those taxes first, but as long as they aren't increased they will hardly do more harm than they do today.

If you abolish the income tax and don't cut spending 90%, then you are proposing increases in other taxes--not a good thing. I think raising excise taxes or tariffs is worse than continuing to live with a personal income tax--especially if the rates are lower.

Or one could go with an entirely new tax--like the so-called "Fair Tax." The "Fair Tax" is a kind of excise tax, but instead of federal excises on a few things, it instead involves putting an excise on just about everything.

Such a system will almost certainly raise some people's taxes. In fact, it would greatly raise taxes on people with lowest incomes.

Advocates of the "Fair Tax" propose to solve this problem with what they call a "prebate." A family of four would be given about $4000 per year. This is, in fact, welfare. While people who spend more than the poverty level (about $18,000 per year for a family of four,) would be getting partial rebate of their taxes, people who spend less than that amount will be getting more rebate than they pay. Someone who earns nothing will be just getting money from the government. Creating a new welfare program is a serious move in the wrong direction!

Now, personally, I would favor replacing all existing taxes with a low, national sales tax. No more than 10%, and 5% would be better. The fact that such a position is inconsistent with the LP platform is a weakness in the platform. While it is true that somebody could pay higher taxes with such a change (though hard to figure out given shifting tax incidence,) such a large decrease in the total tax burden is worth taking that chance--at least in my judgement.

But a 5% or 10% national sales tax wouldn't be revenue neutral. It would involve very steep cuts in government spending if it were implemented right away. And so, I don't think it is a sensible "incremental program."

There are, in my view, AT LEAST three major problems with the so-called "Fair Tax".
1-It does not eliminate the bureaucracy and burden of enormous record-keeping for business, and it still requires "rebates/refunds" to be accounted for by people who pay "too much". Much of the record keeping is only shifted away from every single "taxpayer".
2-It does not eliminate the ability of an income tax to be "re-enacted". This means, there is an increased probability that we would end up with a national "sales tax" as well as an "income tax".
3-It does not reign in the government. Pure and simple, it only rearranges the collection of the money for an enormously bloated federal government.
On the flip side, there are (in my view) two minor advantages. a-It is less intrusive into our personal financial privacy. However, those of us who are business owners still have no privacy.
b-This tax is more visible, however, the same visibliity, and maybe even more visibility could be accomplished with eliminating the withholding tax. Those of us who believe that increased "visibility" of a tax will help people to turn against taxes (I am one of those people) should consider the much more potent idea of eliminating the withholding tax.
On balance, I think the "Fair Tax" is a very bad idea. Fundamentally, Americans already believe that a tax on productivity ("income tax") is legitimate, and with the so-called "fair tax", the idea of the federal government legitimately taxing "consumption" will also be legitimized. Libertarians should see this tax for what it is . . . additional federal claws into our financial lives.

We need to make the LP incremental definitely. The Fair Tax is the only true solution to the Federal Income Tax and The IRS. I think getting rid of the IRS and Income Tax is the best way to implement Fair Tax. The LP should campaign for it, and agree to implement it by abolishing the income tax and IRS. We would have a tax reform shot.

No Answers
No Taxes

http://www.givemeliberty.org/

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Ideally, I'd have a flat property tax that doesn't take estimations of improvements to the land into account. Just tax how many square feet one has, that's it. It wouldn't require any additional bureaucracy than the local register of deeds, too.

I like the idea of the sales tax. Especially with the "prebate"; it makes sure a sales tax is regressive. Also, businesses buy as much if not more than individuals; so they would be paying more into the system, yet in a way that wouldn't hurt their sources of revenue. And it's more voluntary than what we currently have; if the government's fighting a war you cannot morally support by paying taxes, you can go all Thoreau on them and just not buy anything for a while and barter/trade instead.

Another idea for Libertarians to kick around... how about a carbon tax? We already have a gas tax, which is pretty much just a user fee for maintaining the highway system. But how about a carbon tax, which includes both gas and coal? It'll clean the environment (nabbing us some support from Greens), reduce our dependence on foreign oil (getting us some conservative support) by strengthening market incentives to increase fuel efficiency (getting us support all around). Only problem is its regressivity; but with a "prebate" of sorts it could be doable for the poor. There's only so many oil refineries in the nation, so the administrative costs would be tiny for the collection-end of things. The "prebate" would require a bit more bureaucracy, but it'd get us more support for the proposal.

At any rate, the Fair Tax is definitely a step up from what we have and I wholeheartedly support it.

Have the president by executive order convert the Federal Reserve to The Constitution Tax Collection Agency. By JFK's still existing executive order, have the US Mint print the money. Cap the percentage at 6%. Allow the Central Bank to keep 1 of the 6%. This way, tax collection would be privatized and run strictly in conformance with the US Constitution. What do you you Libertarians have against the Constitution? Do you think you out thunk the Founders?

I don't trust anyone who uses the word "Fair".

I personally support the Fair Tax. Here in Tennessee we do not have a state income tax but a sales tax and I love it, as far as being taxed goes and having to choose between the two. As others have stated, each year you do not have to worry about filling out forms and hoping no mistakes were made. Sales tax also promotes savings, which most Americans do not do enough of if at all. With a sales tax I have more money to save out of my pay check. More money saved and invested means I can make more money from my investments. Then I can pay taxes when I want to when I buy something instead of being forced to pay taxes directly out of my pay check and/or once each year at a set time.

Reading throught the posts it doesn't seem like we have much of a consensus. Some say the LP platform should support the FairTax, a flat income tax, a property tax (in my estimation the worst idea), a corporate tax, or a carbon tax, etc.

The problem is none of these get at the heart of the problem. We need to reduce spending and as long as our focus is on the taxation part of the equation we will get nowhere on reducing spending. Without reducing spending all these taxation schemes are ways of changing around who is paying the bills. Since the rich are easily paying the largest chunk of taxes now, if they have a reduction in taxes someone has to make that up and that will have to be the middle class and the poor.

Personally I would much rather have a flat tax or a sales tax (though this would become very cumbersome for small service businesses that currently do not collect a sales tax and may just add another tax in addition to the income tax) than what we currently have. My problem is I believe we will have wasted our time, effort, and money and in the end will not see any gains in reduced spending. This would be especially true with the Fairtax since it will make the biggest change from what we currently have. The Flat tax wouldn't be as bad since it won't change the core of the current system thus it would be easier to implement the changes, with most people understanding how it would affect them.

This leads me back to the platform. I beleive the platform needs to call for incremental tax reform and spending reductions. I don't beleive we can put in to many specifics as shown in this short blog that we can't agree on what those specifics should be. Let each person running for office decide what tax reform they would support. This would give people running for office some flexibilty and at the same time not give fodder to the other parties candidates saying that all Libertarians want to eliminate most all government spending overnight, just look at their party platfrom on taxes. Most people cannot fathom losing their dependence on government overnight.

Paul:

I'm well aware that a corporate revenues tax would be passed on to shareholders and customers. The costs of any tax eventually spread to the entire economy. A corporate revenues tax on the 500 largest corporations would have the advantage that the IRS would only deal with 500 large corporations, not 100 million families or five million small retail establishments.

Tim:

I agree that cutting spending, even by 1% is a libertarian goal and should be pursued. 5% would be better, and still seem moderate to independent and centrist voters. I think a reasonable Libertarian platform for a presidential candidate could call for 5% spending cuts for four consecutive years.

All that being said, any time and energy spent fighting for a national sales tax is wasted. The Republicans who support the "Fair Tax" want it to be revenue neutral. Again, what would then be gained?

Terry,

Believe it or not, we HAVE a flat tax and have had one since the Reagan administration. If you earn over a certain amount your tax bracket is 25% or so(I can't remember the exact number) and if you earn under a certain amount your tax is 15%. It's a two tiered flat tax system with no deductions.

But wait, you say. There are tons of deductions and loopholes! You're right. This is because it has been amended 10,000 times resulting in our current tax code. This will happen with any kind of income tax, flat or not, the government will try to insitute control via tax rewards for certain behaviors, whether it be a credit for buying a hybrid car, private school vouchers, or home ownership interest credits. This will happen with any income tax system.

The retail sales tax, however, is uniform and allows for no exemptions or credits, giving the government no ability to modify your behavior based on tax cuts.

Though I usually find myself nodding positively at most of what he writes, I have to disagree with Bill Woosley's criticism above.

Bill...When the Feds suck $1,500 Income Tax with-holding out of your paycheck every month, and then send you a refund in May or June of $500, are you receiving welfare?

The prebate is NO different than an Income Tax refund, it is a refund against a certain level of the consumption tax to cover the tax on necessities.

And while I'm at it...the Fair Tax IS a marvelous incremental step toward more reasonable taxation, privacy and libery, and making it easier to control the size of the Federal Government.

Listen up folks...reality check here...our Federal Government will NEVER be run on voluntary contributions, or user fees and excise taxes alone. So we can either get the system under control and move one step at a time toward (somewhat) smaller government, or we can live with the present system. Just check the LP vote totals in the last five Presidential elections.

Sinners! The Fair Tax is not the end to all taxation. You're all going to hell, the DSM-IV says so here and here and here!

But seriously, the current plank, written seemingly by the religious noninitiationist crowd, leaves anyone seeking to reform taxation vulnerable to a "platform attack" from either within or without the party.

Paul P.

I don't understand how you can consider us having a flat tax when the first part is 0%, then 10%, then 15%, then 25%, then on up from there. That is no flat tax that I have ever heard of. With a flat tax you need to do the same thing as what you are trying to do with a sales tax: eliminate all deductions, credits, and other behavior controling measures and have one or possibly two tax rates.

What is going to stop the legislators from doing the same thing with the sales tax as they have done with the income tax. Currently every states sales tax has different exemptions. I will guarantee you that people and businesses will lobby for exemptions to this or that and with our current legislators they will bow to the pressure. To get the Fairtax passed compromises will have to be made and that will entail exemptions or other ways around the tax for certain people, which will then lead to more of this in the future. But the actual worst problem with the FairTax is it does not eliminate the income tax. Without a constitutional amendment to outlaw the income tax all we will have done is give the Republicrats another revenue source to pay for their ever increasing spending habits.

As I inferred before our worst problem is not the actual tax system though it is bad, but rather it is the spending that is going on and by concentrating on the tax side of the issue we take our focus off of the spending side of the issue. In politics for the most part revenue neutral means increased spending to cover inflation, increased population, and the ever increasing so-called emergency spending. For most everyone else revenue neutral would mean no increased spending for anything including emergencies. We must keep our focus on spending. Our current administration has gotten most of the public believing that "only" a $300+ billion deficit is a good thing. Give me a break. Any tax reform that is revenue neutral will not change this. Again we must keep our focus on reducing spending and once we have reduced spending we can have tax reform that will be easier to implement and at a much lower cost that more people will be able to agree with. Any tax reform that is revenue nuetral is just shifting the burden from one person to another and I can guarantee you that the people with the least amount of power will be the hardest hit.

Terry,

To clarify my meaning from above, I don't consider us having a flat tax, but what is our tax now, started as a flat tax. It was a 2 tiered flat tax(well, ok it was 2 tiered, so I'll call it a "pretty flat" tax) that evolved into what it became today. When Reagan first passed it, it had no deductions or exemptions either. It mutated.

As for revenue neutrality, I agree with you that revenues need to be lowered and spending needs to be lowered. I just disagree on the order in which it should be done.I think you have to fund the government at its current levels(and not a penny more) until it learns how to work at that budget. Then you reduce spending and pay off debt, and then you lower the revenues.

As for excemptions and special intersts in the Fairtax, this is my understanding of how it works. If you give an exemption anywhere you have to raise the tax in another area to be revenue neutral. With the current system you can get away with that by raising the tax in a hidden area no one thinks they care about. You can't get away with that in a sales tax rate because this rate is uniform. If you make an exemption in one area, you have to raise the tax rate for everyone in order to remain revenue neutral, and that hits everyone in America. No American will stand for it. The Fair tax orginization does not support any exemptions.

Paul

You said "As for excemptions and special intersts in the Fairtax, this is my understanding of how it works. If you give an exemption anywhere you have to raise the tax in another area to be revenue neutral." This is exactly what happens with the income tax. If you give someone an exemption everyone else has to make up the difference. If the tax was flat as in a flat income tax it would fall on everyone else just as equally as you explain it would for the sales tax.

The biggest advantage to the FairTax is eliminating the exemptions, deductions, etc. but you could do that with a Flat Income Tax as well. I don't believe, however, that our current politicians will eliminate all exemptions in either scenario.

Again my biggest problem with the FairTax is that it takes our focus off of spending and secondly it does not eliminate the income tax giving our politicians that much more to feed their lust for spending.

Well, it does eliminate it, it just doesn't abolish it. I agree it needs to do that. I just think it(16th amendment) stands a better chance of being repealed afterwards than it does simultaneously.

I think sales tax is just as unconstitutional as an income tax. Who is the government to take money for everytime you buy or sell something? In Michigan, we have both. We're taxed up the wazoo. The only thing not taxed is food items that haven't been prepared by a restaurant. Anything and everything else is taxed. Property tax sounds like the most constitutional. The property you own is in the United States. The goods you buy or sell are not, in any way, connected to the government. The money you earn is not connected to the government. If you don't want to pay taxes, don't own land. Try to tell someone that if they don't want to pay taxes to not buy goods or earn money.

Unnamed poster-
I don't know about the unconstitutional argument. Russo makes a good argument that a sales tax is basicly an excise tax put on the consumer end.

Property tax sounds good on the surface but once you get into it I think it may be worse than the income tax or sales tax. Most of the property tax reforms I have seen say you should pay the same amount per acre not by value to get around the arbitrary values that the gov't is currently using to determine property taxes in many states. The problem lies in the fact that most of the land lies in the midwest and west yet most of the people live in the east or along the west coast. The land in many parts of the misdwest and west isn't even worth 10% of what it is on the coasts, yet they will be expected to pay the same amount. Some proposals for a property tax say we shouldn't tax the buildings and other improvements on the land but that would make the divergence even worse between the midwest/west and the east and west coasts as most of the ground in the midwest and west is already unimproved as it is used for farming, pasture, forest, or desert. Basically the property tax will just shift the burden to the small amount of people in the central part of the country away from the more numerous people on the east and west coasts and away from the people in the city to rural people. The property tax also has the same problem as the sales tax as it does not eliminate the income tax. Only a constitutional amendment would do that.

In my estimation the only real constiutional and fair tax is a head tax. The problem is that this will never fly until we bring spending down to what the founders envisioned.

Again this brings me back to us needing to focus on spending rather than the tax side of the issue.

What is a head tax?

Terry,
Actually the fair tax bill that is currently in committee does eliminate the income tax. But the authority that is in the 16th amendment to start another income tax will remain intact. The fair tax bill does suggest that the 16th amendment should be amended out as well. But I think something like this would have to pass before getting the 16th amendment undone. I know we run the risk of having both a sales tax and an income tax but I also think it is the only chance we have of getting rid of the 16th amendment.

From Wiki:

A poll tax, head tax, or capitation is a tax of a uniform, fixed amount per individual (as opposed to a percentage of income). Such taxes were important sources of revenue for many countries into the 19th century, but this is no longer the case. There are several famous cases of poll taxes in history, notably a tax formerly required for voting in parts of the United States that was often designed to disenfranchise African Americans, Native Americans, and whites of non-British descent, as well as two taxes levied by John of Gaunt and Margaret Thatcher in the fourteenth and twentieth centuries respectively.

The word poll is an English word that once meant "head", hence the name poll tax for a per-person tax. However, in the United States, the term has come to be used almost exclusively for a fixed tax applied to voting. Since "going to the polls" is a common idiom for voting (deriving, of course, from the fact that early voting involved head-counts), a new folk etymology has supplanted any knowledge of the phrase's true origins in America.

The jizya is a poll tax that, according to Islamic law, Islamic states must take from adult non-Muslim males.

If the head tax is too big, then poorer people would get poorer. Would you propose that people who make under a certain amount shouldn't be head taxed? What about us college students. We often times don't make money at all, along with having to pay for college and other things. Maybe we could have an "extension" (for lack of a better word) on our tax. If I'm in college, I promise to pay off every year that I can't pay off the head tax when I can. Of course, it wouldn't be for just college students, but for anyone who needs to "get on their feet" before they can think about paying taxes. I'm interested in this head tax. I would like to hear more suggestions.

I know I don't keep up with all the changes in the tax code, but we are long past the 1986 tax reform.

Here is a recent one--

income tax rate
$0.00 10.0%
$14,300.00 15.0%
$58,100.00 25.0%
$117,250.00 28.0%
$178,650.00 33.0%
$319,100.00 35.0%

There are five brackets today.
The top bracket was 39.5% during
the Clinton administration. Before
Reagan, the top rate was 70%. Before
Kennedy, the top rate was 93%.

The other aspect of a flat tax is lower
rates and no deductions. Usually there
is a personal exemption or a standard
deduction.

What is important about the flat tax from a libertarian point of view, is that it can be made optional.

As for the National Sales Tax "prebate," it
is only welfare if you spend less than the
poverty level of 18k for a family of four.
You can find out the figures for a family of
one, two, three, five, six, or whatever.

Anyway, if you spend less than that, you pay
less sales tax than the prebate.

People who earn nothing at all get
welfare.

I don't think it is a bad thing for people earning more than the poverty level to pay lower taxes through a prebate. That part of it is like a tax refund. I guess a lot of Libertarians don't get much past thinking about how it would impact them personally. So, if you earn and spend more than the poverty level, then you are getting a kind of refund.

I guess I just am inclined to think about how the scheme works. (Personally, the Fair Tax would be great for me--at least if there isn't some kind of transition that requires that I pay the tax on my mortage payments. It won't be so good for people who haven't purchased a home yet.)

I think it is a bad idea that the "Fair Tax" proposal gives welfare to people who don't work at all. If you are a complete bum, the Federal government gives your family a bit more than 300 a month. So, you get about $250 a month. That will buy a good bit of boone's farm.

Also, the National Sales Tax cannot be implemented on an optional basis. Everyone must switch to the new system. That is a problem from a libertarian point of view.

The National Sales Tax is perfectly Constitutional. Congress has the Constitutional Power to implement any tax it wants. If it is indirect, then it must be uniform. If it is direct, it has to be imposed on the states in proportion to their populations.

A National Sales Tax is an indirect tax--like excises. It is just imposed on each and every good and service. And the rate is uniform.

It may be that the "prebate" scheme is unconstitutional. Like any welfare program.

Of course, the income tax is Constitutional as well. While most people in the late nineteenth century thought it was a indirect tax on productive services, the Supreme Court disagreed. It said it was direct. That would mean that the federal income tax would have to be set at different rates in each state so that the revenue gathered would be proportional to the populations of the states. But, the 16th amdendment fixed that. So the personal income tax is constitutional. That is why opponents of the income tax often call for the repeal of the 16th amendment.

Oh, and by the way, a property tax is almost certainly a direct tax. A federal property tax would have to be set at different rates in different states so the amount gathered from each state would be in proportion to each states population. Sure it is constitutional, it just has to be collected as a direct tax.

Anyway, the best incremental reform is lower govement spending and lower tax rates. Any tax system that obtains the kind of money the federal government is spending is going to be pretty much awful. Sure, the "Fair Tax" might be better than the personal income tax, but not much really.

HEAD TAX: A head tax in Colorado generally means a tax on employers and employees simply for the "privilege" of employment. In Denver it was a fixed rate of $4/month no matter what your income, clerk or CEO, part-time or full-time. Governments are exempt from paying it but agree to collect it for the collecting authority (the University of Colorado at Denver didn't have to pay its share but my share was withheld from my paycheck when I worked there). The City of Boulder is considering implementing one. Governments like a head (employment) tax better than sales taxes because it is more stable relative to the economy (Boulder suffered a big drop in sales tax revenue with the recession and closure of a retail mall with a new mall opening outside the city).

"Head Tax" in Colorado is the common name for an "occupational privilege tax."

I feel that the recent membership dues question on the LP website's "Daily Poll" failed to allow respondents to weigh in on the full range of dues options. I suggest asking this question as a better measure of what approach people favor:

Which course of action best matches your view of what the Libertarian Party ought to do about membership dues?

-Double membership dues to a minimum of $50/year, as the Libertarian National Committee voted to do in February

-Eliminate national dues completely, as the Libertarian National Committee voted to do in August

-Keep membership dues at the level they were until these recent decisions

Starchild
Outreach Director,
Libertarian Party of San Francisco

"The best incremental proposal for tax reform is an optional flat tax. Each taxpayer can be given the option of either continuing with the current tax code or else switch to flat income tax with a zero bracket amount."

In my opinion, this would be the most effective way to market the LP to the voting public.
Leave it up to the citizens, and let choice dictate the historic success of the Fair Tax.

I'm also relieved that we're discussing the possibility that today's LP members come in a wider spectrum of red, white and blue. We've grown as a party since we've started, and as our membership has grown, so has our diversity.

I'd like to see a more realistic, less idealistic platform that incorporates as best our core principals. I believe there are enough LP members out there who value reason, and also feel that adhering to ideological imporobalities (at least in the near future) just helps to further marginalize our party and keep us out of the current political arena.

I do have some questions about FairTax that maybe someone could shed some light on to me.

1) If the FICA tax is eliminated how do they determine how much someone will be receiving in social security? Is there a way in this plan to eliminate social security entirely and lower the sales tax rate to compensate for this?

2) It is my understanding that you pay a sales tax on only new things not used. What about used cars. In my state you pay a sales tax on used cars. You also pay a sales tax on used items purchased through a business, in fact I think you are supposed to pay the tax on used items not purchased through a business but most people do not submit their tax to the govt. Also how will you determine is something is new or used. For instance if I buy an old engine that has been refurbished how will a sales tax be determined or an old computer with some updated items.

3) I do like the idea of our exports being sold at substantially lower prices abroad if it leads to more American jobs, however, will this run us into problems with WTO and other trade agreements? This also sounds a lot like what is happening with our pharmecutical drugs where Americans pay a lot more than someone in another country. What will stop someone from going across the border to purchase items without the sales tax.

4) How will they regulate compliance, especially on service businesses that currently do not pay a sales tax. With such a high rate on everything a large black market seems inevitable.

5) Due to compliance concerns it seems like we may have an IRS type agency going through nearly every businesses records every year to make sure they are paying the right amount.

6) since they say this is revenue neutral who will be paying more and who will be paying less?

7) In my estimation the cost of compliance for businesses will likely go up not down because of the sheer number of transactions that will involve sales tax. Many business currently do not have a sales tax on their product or service. They will now have to track the sales tax on everything that they do.

8) I assume then that this will mean that everything sold over the internet will now be taxed probably not only with a federal tax but also with a state tax, though many states are already pushing for this.

-Eliminate national dues completely, as the Libertarian National Committee voted to do in August

When I mentioned a head tax in an earlier entry I meant an identical tax that everyone of legal voting age pays. In otherwords everyone pays say $1,000 or whatever it takes to cover Gov't spending.

With government expenditures completely out of hand this is obviously something that you could not enact and be revenue neutral. It would also hurt the poor very hard unless you had some type of exemption as they pay very little now or even receive money back from the gov't.

Though I believe that this is probably the fairest tax I do not believe that it could or should be enacted until gov't spending was reduced substantially.

Terry,

I like the head tax idea. Like i posted earlier, the poor can maybe apply to not pay one year (or more) until they can afford it. Then they can pay retroactively, maybe in installments. This can also be used for other people with good reasons to not pay (like us college students). Someone just needs to draft a proposal up like the FairTax, but with head tax. As far as spending, that's a whole other matter that takes other means to solve.

With respect to a head tax, here is the math I come up with.

To begin, since several student and other deferments or deductions have been considered, I'll use 2004 US Census estimates of people in the country 20 years or older. This number is 212,103,606.

The cost of government, according to the CBO, was $4,295,500,000,000.00

The math works out to $20,251.90 per person.

The obvious observation is that our government spends far too much of our money.

Obvious question - how does a family which earns less than this figure pay for their tax bill?

Obvious answer - they don't. The government spends a hell of a lot less :)

If you really want a scare, figure the national debt on a per person or per adult basis--on a household basis, it's approaching the typical household mortgage, in addition to it.

It gets worse: our official national debt only includes money actually borrowed already; it doesn't include the cost of projected obligations under existing programs that are in excess of projected tax revenues, so rather than $8 trillion, our real national debt is probably around $30 or $40 trillion (with a population approaching 300 million).

I think the LP is doing itself a terrible turn by not making the national debt front & center. There a sizeable Perot vote out there to be had for the taking, and these people dont vote for R's and D's gladly.

people are hungry for a a message of responsible government, business, and social concern. I dont have to run a poll to figure this out. I hear it every day at work, at the grocery store standing in line, etc. people are fed up with "every person for themself" and I think it's reached the level at where sizeable political capital can be made from it.

Terry:

1. HR-25 does not address your 1st question directly, since it is not in any way a social security reform bill. My best guess is that employers would still report earnings (up to max counted?) to the SS Admin. (Not the IRS.) Eliminating SS is not going to fly in the present climate, and is the subject for additional reform legislation at a future date.

2. "Used" items will not be subject to the tax -- even 10 million dollar "pre-owned" yachts, because the tax would have been paid once already, and the Fair Tax is a tax only on new goods (& services) at the point of sale. The 2nd part of your question is more complex, and I'll have to research it. Again, a guess, the value of the new components may be taxed. Email me at jshuey@shueyfamily.org and remind me to look it up for you.

3. There is no problem w/WTO, because exports are not being treated differently than goods for domestic sale. The tax is only collected from the eventual consumer. As far as cross-border shopping, it will be minimal. Take Canada, for instance. Even though our goods enter Canada with no embedded tax on them, Canada's VAT and embedded income tax will likely make them more expensive than they would be at home. Remember...American consumers will be buying goods with a base price deflated by the amount of the embedded costs of our current system. (22% to 26%, based on industry.)

4. Service businesses comply today with payroll and withholding taxes...the only thing to change will be which tax they comply with. Further, they will get to keep 1/4% of the "selling price" of their service to help cover their administrative costs. Since, once your old embedded costs are backed out, the price of your service will be practically identical to the price you charge today, and since your clients / patients will be enjoying the benefit of 100% of their gross pay (a 25% to 50% "kick" for most folks), plus the prebates, EVERYONE comes out way ahead, and noncompliance is projected to be in the mid-single digits. (Compared to estimates approaching 30% under today's system.) One last thing...cheating on your income tax is very hard to stop because you are the only one who knows about it and unless you go around braggin about it, the IRS has almost no way of catching you. Cheating on a consumption tax requires a conspiracy that includes at least two people -- meaning the risk to cheaters is far greater. Another factor is 80% of all retail sales in the US is by fewer than 20% of retail businesses. Walmart, et al, are far less likely to cheat.

5. For the most part, compliance will be monitered by state sales tax agencies, as they do today. States will be compensated by keeping 1/4% of the total sales amounts also. The feds will audit state agencies every 5 years or so, plus maybe the largest 100 or so retailers. Individual citizens will never be audited.

6. Because compliance with the system will climb from about 70% to near 95%, and because criminals, foreign visitors, and illegal aliens will also be paying, the only people who will be paying more are those who don't pay now. The total tax burden for the average, honest citizen will go down...significantly when you factor in the 100% of gross pay thingy.

7. Yes, but they will be reimbursed, and they will lose the cost of withholding and corporate compliance, etc, so they will come out ahead. Compliance becomes a simple bookkeeping task, not a bookkeeping, legal, & accounting nightmare like today.

8. Yes, but this is coming anyway with the compact between most states on a uniform system. Remember -- the "tax free" aspect of the internet was never meant to include retail purchases, but only access fees. Your neighbor's local retail outlet, which hires local citizens, supports local charities, and pays local taxes; will no longer be at a disadvantage to some distant internet outlet. Government must not be in the business of picking winners and losers.

I hope this answered most of your questions. If not, drop me an email and I'll try to do better.

One can see from the above just how complicated taxes are to even Libertarians who follow such stuff. How is the average voter to comprehend the Libertarian position (when we can't even agree on it)? Without endorsing any scheme, our candidates need to hammer home two themes: if elected, we will vote to reduce spending to eliminate deficits; if elected, and spending is reduced, we will vote to lower the overall tax burden. This the voters can understand. Next battle, of course, is "well what spending will you reduce?" Here the voters get greedy when you target the one or two things that benefit them.

Good answers, John. A couple of notes.

On #1, yes, SS benefits are paid out and determined exactly as they are today. The only thing that changes is how those programs are funded.

On #3, the embedded costs are actually estimated from about 14% to 26%, with the average being 22%. Also on #3, you mention that our goods will be cheaper overseas. You're right. We'll start kicking other nations' butts in that regard. And you know what they'll do then? They'll move their headquarters over here or build U.S. factories so fast it'll make your head spin. The United states would be the number one tax haven for businesses in the world. In order to compete, guess what other countries will have to do? Lower taxes.

Stephen

I figured that the cost per individual ($20,000+)would be pretty high on a head tax basis, but that is exactly why I said it is completely unworkable in todays environment.

But every single Libertarian candidate for an national office should have this information with them to show people how much gov't is costing them. Over $20,000 per year for each person 20 and over. That is ridiculous. I believe that this doesn't even count the state and local gov'ts. Then add to that how much each person's share of the national debt and I bet you will entice a lot of people into thinking Libertarian ideas are not all that bad. The Libertarian party ought to be showing these figures front and center on the website and in advertisements especially when we are discussing tax and spend issues. These type of numbers get peoples attention.

Since most people are obviously not paying $20,000 per person, there are some (the rich and businesses) that are paying quite a bit more than this to compensate for some of the middle class and poor that are paying less or even receiving money back. With any tax reform that is not very simple to understand the powerful (ie rich and large business) will make sure that they will not be paying more under a new system. This is another reason why I have a concern with the sales tax. If large businesses manage to pay less in taxes and undoubtedly the rich will be paying less in taxes on average, the burden then falls on the poor and middle class to make it up.

I don't believe that the tax side of the issue is much for a Libertarian battleground at this point as all the reform ideas just seem to be mixing the pie, not decreasing it. However, the spending side of the issue is where Libertarians can shine. We need to do a better job of making people aware of how much the gov't is spending on an individual basis and coming up with workable ideas to reduce this spending.

Frankly, I'm not surprised to see and hear LP members debating what kind of tax reform (short of advocating total abolition) should become part of the LP Platform under the rubric of "incrementalism" . After all, the LP Platform no longer specifically opposes eminent domain, so why not pick a tax and go with it? Pick a tax, any tax. GOP, GOP!

I support the Fair Tax.

The FairTax book by Boortz and Linder is great and a must read for anyone that posts their opinion on this issue. It is not the perfect Libertarian solution to taxes and spending. However, my interest is to move in the direction of liberty and promote a government that defends the rights and property of We The People, which the Fair Tax does.

Today our federal tax system rewards lobbyists and punishes workers. It uses the massive bureacracy of the IRS to intrude into the personal lives and wallets of every income earner.

The FairTax will collect federal taxes from the much smaller number of retailers. This drastically reduces the bureacracy, compliance costs, and intusion into our lives.

***

Some of you Libertarians have opposed the FairTax on the following concerns:

1. It's about spending, not taxes. Unless you address out of control spending, you haven't solved anything.

I agree that spending is the problem. That does not refute the FairTax. The FairTax is a clear improvement compared to the IRS. The best way to address out of control spending is to elect people that are true fiscal conservatives. Your only choice is to elect Libertarians

2. You will create a black market of businesses avoiding the tax

We have a black market today. There are people that cheat or don't pay their income tax. The cost will be much lower and effectiveness of enforcing compliance far better when there are fewer tax-collectors.

3. There is no gaurantee that we won't end up with an income tax and sales tax

The bill as written ends the income tax. It does not repeal the 16th amendment. Of course I support repeal of the 16th amendment, but do not want to throw more into the bill that would make it more difficult to pass. Let's pass the FairTax first.

***

Do Libertarians really want to defend the IRS? Do we really want to support federal intrusion into our privacy and bank accounts? Do we really want to be an obstacle to progress in the battle for economic liberty?

It is clear in Texas as well as elsewhere that Libertarians are the only fiscal conservatives on the ballot. The FairTax is an effort that Libertarians should support to restrain federal intrusion and promote economic liberty.

For those that post their opinion without reading the Boortz/Linder book, you haven't done the homework yet. Read the book, and decide for yourself.

Patrick Dixon
Chair, Libertarian Party of Texas
www.LPTexas.org
www.PatDixon.org

Most privatization plans for social security involve letting workers put part of their social security pay roll taxes in a personal savings account. In other words, a tax credit against payroll taxes. The proposal can be made optional. Those currently anticipating very low, zero, or negative "returns" have an incentive to make the change. The amount of the credit can be increases to 100%, getting rid of the current system and leaving only those beneficiaries who get large net transfers--maybe some poor people.

The "Fair Tax" makes this reform avenue impossible. It will simply come down to cutting benefits--presumably in the future.

I am OK with giving people a tax credit
for money saved, and can even accept regulation on the saving instruments as an incremental change. At some future time, reducing the amount of tax and deregulating the savings could be pursued.

Social security reform will have to be dealt with in the future? How? What is the motivation? Just tell people that even though they are paying sky high sales taxes now to finance current old people's pensions, they won't be getting as much benefit in the future and so they better save?

The only advantage I can see is that future social security recepients will not be able to pretend that they "paid into the system," well, except they will be paying taxes to support social security.

This "Fair Tax" looks more and more like a plan for big-government Republicans. (They like having the Federal govenment cut checks to all of those old Republican voters, right?) Everyone gets a check from social security (the prebate) and the old people get even bigger checks. Great!

By the way, benefits would no longer depend on how much payroll tax you paid. It would depend on your wages. So, higher wage people would just get bigger social security checks. Why?

What a mess.

Like all libertarians, I stopped reading books about alernative tax plans about the same time I stopped reading books about Dick and Jane.

Instead of reading books about the proposed Fair Tax, I would recommend Rothbard's "Power and Market". That should disabuse anyone of the notion that one form of taxation is somehow preferable to another.

Frankly, I'm disappointed (but no longer surprised) at the persistence of this ongoing debate within the Libertarian Party. This is the kind of discussion that one would expect to find on a GOP website.

Bill,

Right now each Social Security is on, I think 2 or 3 workers per one beneficiary. I don't remember the exact figures but in the not too distant future it will be 1 to 1.

Under the fairtax, everyone who purchases a good or service in America is paying into social security. The amount of money Social Security has is directly proportional to the GDP, and benefits will not have to be cut. You don't need to put a portion of your payroll taxes in some sort of personal savings account when you don't pay payroll taxes anymore! All those payroll taxes are yours to do with as you please! Put the whole wad in a mutual fund if you please, it would be a good investment.

Benefits would now be determined by your wages? What do you think they're determined by now? Your payroll taxes are based on your wages!

Social Security reform and tax reform are two completely seperate issues. I don't know why you're trying to marry them.

Paul:

Read Rothbard's book. You'll see that it is the very nature of your inquiry that is inapposite. If you can still support the FairTax (SquareCircle) idea after that, I'll not comment further or make further remarks directed at you.

It seems to me that the LP has become a gathering place for disgruntled Republicans (I don't blame you . . . I don't like George Bush or John McCain, either). What we Libertarians all once dreaded has finally come to pass.

Too bad.

Actually, I'm a disgruntled Democrat. And I actually LIKE Bush. I don't like most of his policies, but I tend to go easy on the guy.

Sorry, I couldn't tell. Unlike some of my more aware Libertarian brethern, I was never very good at distinguishing one statist's attitudes from another. But it has been my experience that the tax reform advocates are usually the disgruntled GOPers.

Please accept my apology if I offended you. No slight intended.

In any event, try Rothbard first. "Power and Market" describes in some detail the deleterios effects of government's binary and tertiary interference in the economy. He makes the rather unremarkable observation that any system of involuntary revenue collection inevitably sets up two (2) classes of people; the net tax payers and the net tax recipients. From whom and how the revenue is raised (the collection side) is quite beside the point . . . the real issue is who gets the raised money (the disbursement side).

Obviously, there's far more to Rothbard's analysis than the above suggests. But I'm sure you get the point. There can never be such a thing as a "fair tax" unless you accept the redistributist theory of justice and fairness, which traditional libertarian theory categorically rejects.

It would be more accurate, however to say I WAS a disgruntled Democrat. The only reason I was a member of that party, as I look back, is probably because I thought it was the more Libertarian of the two parties at the time, and at the time, I wasn't familiar with the idea of libertarianism, it was just something inside me. Then when I became an adult, I discovered what the word Libertarian meant and found out that there's a whole Libertarian party.

I was caught in the constant struggle of choosing the lesser of two evils because I thought the democrats wanted less to take away personal rights than the republicans. Honestly, from an objective view, I might as well have flipped a coin to see which party I would have ended up with if there wasn't a Libertarian party.

And I think you can have a non redistributory tax, if and when the government gets out of the business of welfare, schools, and other such things and sticks to building highways and protecting the country. Might not happen for a couple of centuries, but I plan on being here for a few centuries more. I'm very optimistic about the future of medicine.

Bill Woosley...

Actually, there is a provision in HR-25 to assure adequate funding of Soc Sec. And there is nothing to prevent other reforms to that program. I got a couple of ideas myself, but since I have truoble walking and chewing gum at the same time, I'll concentrate on Fair Tax for now. As for folks who make more money getting bigger checks, they do now! But even under Fair Tax, the size of the checks would be capped just as they are now. Social Security is an excuse to oppose reform, not a reason.

Pat Dixon's comments are right on. This is reform. This is a step in the right direction. The IRS and all their abuse, gone. Government snooping into your private affairs, significantly reduced. Far greater financial freedom including, in at least many cases, the ability to decide if and when you want to pay taxes. (Buy used stuff, postpone purchases, etc.) Free up American business to be more competitive here and abroad.

I for the life of me can't understand Libertarians like "the other Bill", above, who would rather maintain the tortuous status quo than make incremental improvements. Is it these Libertarian's secret belief that one of these days God Almighty is going to proclaim himself a Libertarian and start awarding us elections?

I've said it here before, and I'll say it again. Such purity of ideology is the chief, if not the singular reason, why Libertarians consistently get about 1/2 of 1% of the vote. We will never even get to the point of being an important third party, much less a majority one, unless we are willing to drink in small sips, rather than expecting one big chug to do the job. We will either get to the promised land incrementally, or we will never get there at all.

Rothbard's writings are incisive. Let's see, I forget, when was it he was elected President?

Sorry, but you can't have a non-redistributive tax.

The administrators/employees of the government itself are always net tax recipients by definition, meaning that they receive more in the form of direct (if not always indirect) revenue benefits than others. Since there is no true "market" wage for government employees, and since they will always collect 100% of their "earned" income from tax revenues and must pay out something less than that in taxes, they can't be anything else but net tax gainers.

Try reading that book I refered you to. It's not a difficult read as economics texts go.

As a economic text, it might be great reading. But as a guidepost to how a political party should operate and run itself, it SUCKS.

The problem is voters dont give a darn about any of this crap that libertarians hold so dear. They wouldnt be able to listen for more than 15 seconds of Rothbard before their eyes would glaze over. Thats what mine do too.

Let those that know how to politic do so. Let those that dont know, fill another mission in the movement having nothing to do with politics. Each one can stop interfering in the others affairs and bring their strong suit to bear in the battle for liberty.

Nothing would help this party more than an agreed upon division of labour between those that "get" politcs and those who dont.

We can debate forever about vote totals and why the LP consistently does poorly there. The reasons are complex and varied, and cannot be so simply stated.

Most people I know won't vote for Libertarians because those voters believe that the LP supports the use of drugs, prostitutes, gambling and a myriad of other libertine-type causes. Basically an image that the LP has done nothing to dispel in recent years.

Libertarians have always struggled with the message . . . not its content, but its management and delivery. Nothing new here.

I was uncomfortable as a Young Republican in 1964. All they ever talked about was tax reform, "states' rights" and winning elections. I was a libertarian then, but there was no Libertarian Party. As soon as the LP was founded, I left the GOP. I had finally found a home.

I still understand politics the same way I did in 1964. Now I am an uncomfortable Old Libertarian. I have no home in the LP anymore because too many of the GOPers found a home in the LP, too. They brought their politics with them.

I'm too old to go back to the drawing board. But there is no such thing as tax reform, really.

The government need not collect any taxes at all. While Douglas' Social Credit http://www.mondopolitico.com/library/socialcredit/socialcredit.htm ideas on free distribution of surpluses is flawed from a libertarian perspective, the concept that the money supply should grow proportionally to the growth of the GDP is mathematically sound (currently, taxing & spending balanced out, the government is essentially growing the money supply faster than the GDP grows, driving inflation).

A minarchist government could easily be funded purely on money supply growth, as the removal of all taxes would increase the rate of GDP growth (currenty federal budget is roughly 10x GDP growth).

I fear that the NRST, with fully exempt 'savings' and heavily taxes 'purchases' will merely shift more personal expentitures to be hidden under 'business expenses'.

I tend to think that such a tax would, depending on what was exempted from taxation, likely cause quite a bit of real estate speculation - pushing housing costs out of the reach of most - and eliminating their opportunity to pay their own way; as well as pushing commercial properties out of reach of the potential business owner.

As for the elimination of taxes in favor of user fees and the like - I support this, and tend to view the land-property tax as a user fee, in that it compensates the rest of us for the limits on our rights.

Sean...

Most of your concerns are addressed further up this column, but your best bet would be to read "The Fair Tax Book". There are a lot of misconceptions that the book clears up.

As to your housing concern, severalpanels of economists predict housing will become more affordable due to your increase in take home pay (100% of Gross) and the stripping away of the approximately 23% in embedded costs attributable to our current system.

We all took a pledge not to initiate force. Many times, potential actions
from the LP or its members have been vetoed because it violates the pledge.
These are usually on technical grounds. This is a good thing because it
keeps us out of trouble.

But has the LP ever compiled a list of people or organizatgions that HAVE
initiated force against the LP or its members? It seems to me that there
should be an official list. Otherwise, the pledge remains nonspecific. Has
anyone ever listed Al Qaeda as sufficently forceful and Saddam as not quite
forceful enough? If we had an LP chapter in Bagdhad since 1995, would
Sadaam then have been considered forceful enough?

Surely, someone must have initiated force against the LP or its members at
one point or another? If no one ever has, then what are we so worked up
about? (this is just food for thought -- I am not advocating storming the
Bastille or anything remotely like that. )

(I just want to hear a reasonable explanation why there has never been a
list of groups that have or have not committed sufficient force to trigger
an in-kind response?).

Since the LP (at all levels) keeps bringing up the pledge, then can someone
in this organization come up with a list of organizations who have initiated
force or fraud against the LP or its members? Would it then be okay to
greenlight force or fraud against them? The Pledge seems to sanction force
against some people in some instances. But where is the 'line' anyway?
Could these forceful groups be rank ordered from worst to least?

Would we respond 'an eye for an eye' or would we use "modified tit for tat'
from Game Theory?

Just wondering.

Mark:

I suggest that you read today's "Daily Article" entitled "The Myth of the Magical Multiplier" by Frank Shostak and appearing on the Ludwig Von Mises website. The article easily disposes of the reformulated Keynsianism fallacy underpinning Douglas' Social Credit theory.

Old myths die hard, and this one keeps getting a rebirth via reformulation and readoption, making it even harder to kill it off once and for all.

Vinegar repackaged in new wine bottles with fancy labels is still vinegar.

Crowley:

I never took any such pledge as your post indicated and I have been a member of the LP (state and national) since 1973 or 74.

The pledge, as it was alternately characterized and worded asks the affiant to aver that he or she does not believe in or advocate the initiation or threat of physical force or fraud to achieve political or social goals.

When taken, the pledge is a statement confirming the affiant's ideological committment to the non-aggression principle as a condition precedent to becoming a member of the Libertarian Party. As I understand it, it is the only real distinguishing qualification for official afilliation with the LP.

Part of the libertarian creed (for some at least) and the official Libertarian Party policies and pronouncements sanction the use of force only against those who initiate it or threaten its imminent use and strictly for purposes of defense against such forcible actions or imminent threatened forcible actions directed at person(s) and/or other property.

Most libertarians would probably agree that in actually implementing the use of such defensive force, the defender must only use so much force as is necessary to protect against or repel the imminent threat or actual use of the initiated force.

Mr. West:

It's true that Rothbard's economics texts would never suffice or even serve as suggested bluprints for political action. That's at least convenient because they don't purport to provide a guide for political action at all.

But this particular text at the very least obliquely suggests that certain debates/discussions involving alternate or competing fiscal arrangements are beside the point and unavailing, particularly and categorically ones that focus upon the revenue raising side of the ledger.

The mere fact that the text itself does not posit an actual blueprint for political success does not mean that the text is not useful to the LP in formulating policy, if only in a negative way; on the contrary, reference to the text informs us not to waste our time debating non-issues like whether the LP should support the proposed and horribly misnamed "fair tax" over the present (and presumably less fair) income tax.

If cultivating public (mis)perception of economic reality is all of what the LP is now about, and getting elected is the paramount value, I suggest that the LP disband and all members simply join or re-join the GOP. Why waste time duplicating what the GOP already does?

I've been hard at work on my business lately, trying to make ends meet while forking a large proportion of my income over to the government. So I haven't been participating lately on the blogs.

I don't think I've missed much, based on what I see on this page.

After reviewing everything written here, I am still amazed at how many Libertarians believe the following:

(1) Elimination of the income tax will eliminate withholding taxes.

(2) An unfairtax (my term for the misnamed "fair tax") will not be passed without also eliminating the income tax.

(3) The reason why the LP has poor results is our platform.

'Nuff said.

I don't understand why Libertarians support the Fair Tax at all. It's more of a step sideways than forwards. While I welcome less intrusion into my financial life, it creates as many problems as it solves:

(1) People who have savings from before the Fair Tax is implemented get double-taxed. They paid once when they first got the income, and they get to pay again when they spend it. Do we want to punish the remaining savers in this country even more than the fiat currency inflation already does?

(2) The "pre-bate" creates a whole constituency accustomed to receiving monthly checks from the government. Sure, "it's their money," but how many people think of their income tax refunds as a gift?

(3) How does this necessarily simplify the tax code? I'm already hearing that necessities should be exempt or taxed at a lower rate. On cue, the same swarm of lobbyists we have now will descend on D.C. trying to secure a tax advantage for one company's/industry's products over competitors.

(4) Some Libertarians hope that the Fair Tax will be more visible to consumers since it shows up on every purchase. Well, your income tax shows up on every pay stub and what good has that done?

Here's my preferred revenue-neutral tax scheme:
- Eliminate withholding entirely. You pay your tax in a lump sum once a year.
- Instead of April 15, taxes are due on the first Monday in November, the day before election day.

My God, LTV. It says it RIGHT IN THE BILL that it eliminates withholding taxes! I QUOTED it last time you had this argument!

It also says it RIGHT IN THE BILL that the INCOME TAX REPEALED.

"TITLE I--REPEAL OF THE INCOME TAX, PAYROLL TAXES, AND ESTATE AND GIFT TAXES

SEC. 101. INCOME TAXES REPEALED.

Subtitle A of the Internal Revenue Code of 1986 (relating to income taxes and self-employment taxes) is repealed.

SEC. 102. PAYROLL TAXES REPEALED.

(a) In General- Subtitle C of the Internal Revenue Code of 1986 (relating to payroll taxes and withholding of income taxes) is repealed.

(b) Funding of Social Security- For funding of the Social Security Trust Funds from general revenue, see section 201 of the Social Security Act (42 U.S.C. 401).

SEC. 103. ESTATE AND GIFT TAXES REPEALED.

Subtitle B of the Internal Revenue Code of 1986 (relating to estate and gift taxes) is repealed."

So go on, keep saying what it does and doesn't do when you haven't even read it.

PR,

1) PUNISH savers? Removing all taxes on investment and letting people take home all of their pay, and then not taxing used goods, which more frugal people would buy, is a PUNISHMENT to savers?

2 and 3) There are NO exemptions. You don't NEED exemptions or lower rates on certain items. That is what the prebate is for. It pays for the tax on all necessities. No fairtax supporter wants exemptions or lower rates on anything. It shall be uniform. That's the reason it is called the "fairtax" because it treats all Americans and all goods and services the same. Nobody gets special treatment.

4) Your income tax shows up on your pay stub, but all the corporate taxes that you as a consumer are paying whenever you buy something is NOT. There's a whole hidden level of taxation. No more with the NRST.

Epilogue: I do like the idea of paying taxes on November 1st. Clever.

Paul,

A key sticky point is that:

SEC. 101. INCOME TAXES REPEALED.

Subtitle A of the Internal Revenue Code of 1986 (relating to income taxes and self-employment taxes) is repealed.

SEC. 102. PAYROLL TAXES REPEALED.

(a) In General- Subtitle C of the Internal Revenue Code of 1986 (relating to payroll taxes and withholding of income taxes) is repealed.

(b) Funding of Social Security- For funding of the Social Security Trust Funds from general revenue, see section 201 of the Social Security Act (42 U.S.C. 401).

...does not repeal the 16th Amendment

Yes, but it does repeal the income taxes. Repealing the amendment would be the next logical step, and that would be abolishing the taxes.

LTV seems to believe that the bill does nothing about Payroll taxes either, and I don't know where he got that idea, so I was pointing out that he is wrong.

Yes Paul, bills never come out of committee unchanged. It never happens, right? Amendments are never attached either.

Also, Social Security, Medicare, State Income and Local Income taxes are all withholding taxes that are going to be repealed too, right?

Give me a break.

Paul P.,

I meant specifically that the *transition* would punish savers. Income saved in my bank account before Fair Tax passed would be taxed again when I spent it. I realize that any change is going to have transition costs, but this one is too severe to let stand.

Re: exemptions, you seem to have more confidence in the government than I. I'm sure early proponents of the income tax sincerely believed that it would be simpler than the complex web of tariffs and excises too.

How does the Fair Tax handle the fact that businesses are consumers too? When Acme Widgets buys pencils for its employees, does it pay sales tax? If so, that's a hidden tax that gets passed onto its consumers. There will be tremendous pressure to turn the Fair Tax into a VAT, with all the paperwork and bureaucracy that entails.

For the last point, even the *visible* taxes we pay now should be enough to cause an outcry. I make approximately the median income and my pay stub clearly shows ~25% in withholdings. If people don't look at their 1,2,4-week pay stubs, what makes you think they'd total up dozens of receipts?

I know my "November Massacre" proposal would never pass, but I brought it up to make a serious point: If we must make any proposed tax change revenue-neutral, the most Libertarian option is to make the pain of taxation as acute as possible, e.g., physically writing out a check to the US Treasury for $8-9k. Fair Tax moves us in the opposite direction in my opinion.

Libertarians who advocate for the "FairTax" are going to be partly responsible for the imposition of both a NRST ** and ** an unrepealed Income Tax.

There is no need for this "something, anything, at whatever price we must pay" desperation that leads us to ask for a new tax.

Massachusetts already proved that tax abolition ** is ** a marketable idea. We just need to stay on our message and work on finding more people who agree, so that we can fully fund the repeal campaign to match dollar-for-dollar the funding the confiscationists raise.

The Texas Republican Party was advocating Income Tax Repeal in 2000, and their guy became President anyway. Go to a CPAC conference -- plenty of Republicans advocating Repeal. They aren't afraid of talking about repeal, but we are?

Come on.

"As to your housing concern, severalpanels of economists predict housing will become more affordable due to your increase in take home pay (100% of Gross) and the stripping away of the approximately 23% in embedded costs attributable to our current system."

BUT...since I'm competing with everyone else, who also gets to keep their take-home pay, will not real estate prices rise, just as they have recently with everyone having access to <5.5% interest rates?

I can certainly see where the 23% might be removed from the *constructed* cost, however, no such reduction could possibly be expected from the LOT cost - there were no 'imbedded taxes' in the price of the lot. Or, to put it another way, there is no price level that will produce more space on which to build houses. There is no construction cost associated with a real estate lot - there is no manufacturer, and there are no imbedded costs.

Only more people with more money chasing after a fixed amount of land.

From the fairtax website: "All owners of existing homes experience large capital gains....Gains are likely to be in the range of 20 percent."

How, if gains are likely to be in the range of 20%, does this make housing more affordable?

I agree that the the so-called "Fair Tax" is a step sideways rather than a step forward.

I don't consider it a benefit that the "Fair Tax" guarantees adequate funding for social security benefits.

Perhaps the implementation of the "Fair Tax" would have the advantage of making social security more clearly into a welfare program for the elderly. Maybe it would help efforts to make it means tested at some future time. While the intergenerational transfer argument really wouldn't be any different, they couldn't obstificate as they do now with the annual reports on what you paid in payroll taxes (over your entire life) and the benefits you have earned.

Hey, just give the elderly a bigger prebate. Isn't that going to be the new plan? Social security writing checks to everyone in the country? Just increase the poverty level (I mean, everyone needs this or that, right?) and we all get bigger checks. Run a bigger deficit, and it doesn't even mean higher sales tax rates!

It is my understanding is that there are extremely complicated provisions of the Fair Tax to deal with a transition. This is supposed to deal with taxing funds saved twice.

Why buy into this "Fair Tax?"

If you really want to replace the income tax with a national sales tax, come up with a better proposal.

First, and most important, come up with a lower rate. Yes, that will involve proposing a smaller government. Why is that bad?

Don't try to get rid of the social secuirty tax at the same time. Deal with that in the context of social security reform.

Forget the "prebate." Libertarians should not be proposing that the social security system send every American a check.

This does "change" the system so that it involves a greater burden on the poor. Taht is both because they aren't being freed from the payroll tax and because there is no prebate.

Still, I think a low national sales tax in place of the current high income tax is a plausible incremental reform. (Though inferior to just lower income tax rates and an optional flat tax.)

I just realized something very important about the unfair tax. Since it taxes goods and services, that means that billable labor is taxed. This means that most small businesses are going to get hit very hard, because their effective labor rates are going to increase by nearly 25%.

Many small businesses absorb the sales tax in the labor rates in order to appear to be more competitive. If, for example, they charge $25 an hour, many will choose to pay the 5% state sales tax (or whatever it is) rather than charge it on top of their rate. Again, they do this to appear to be more competitive because they find that their customers resent paying even a 5% sales tax on their billable labor. On their sales receipts and invoices, they don't show the sales tax. They simply show the labor rate.

If they do the same thing with the unfair tax, it means that one of the main goals of the unfair tax advocates will be adversely affected. The tax will be hidden from the public. The public will only perceive that these particular small businesses that don't overtly charge sales tax will have suddenly increased their labor rates. Over time, the public will forget that the labor rates include the unfair tax, just as the public currently forgets that such labor rates include state sales taxes. Small businesspeople like my wife will be the losers. She charges $25 an hour, but she doesn't add on the sales tax. She simply absorbs it and pays it out of her earnings. Thus, with Virginia's 5% state sales tax, she actually earns $23.81 an hour on the $25 an hour she charges. Add in a national sales tax, and she'll only be earning $19.53 an hour.

In other words, in order to keep her net earnings at their current level, she'll have to raise her labor rate. But if her competitors don't raise their rates (and simply absorb the unfair tax in their labor prices), then she won't be able to raise her rates either, without fear of losing business!

Furthermore, since billable labor is taxable under the unfair tax, the unfair tax is...drum roll please...an income tax!

In fact, what's truly awful about the unfair tax is that the only labor that isn't taxable is labor that is not billable. Thus, there is no national sales tax on government labor. In other words, the unfair tax creates the deceptive appearance that government labor is effectively "cheaper." In practice, this means that there will be more economic incentive to increase government salaries. After all, $25/hr will go a lot "farther" in government than it will in small business.

This amounts to a windfall for government employees, while it is simultaneously a disaster for small businesses. That's a very un-libertarian result.

Also among those harmed will be contract laborers. After all, a contract laborer is not an employee. Thus, they will also have to charge an extra 23% sales tax.

Employers, on the other hand, won't have to charge their employees sales tax, but they'll have to charge their customers for their employees' billable labor. Many of these will also choose to build the sales tax into their billable labor charges. In effect, this means they will have less money available to pay their laborers.

We could very easily see a major downtown in wages if the unfair tax is passed.

Except for government employees, of course.

Abolishing the income, payroll, and other sorts of taxes will not reduce the prices of goods and services. The higher after tax incomes will raise the demand for most things. Improving the incentive to work, save, and invest, will increase the supply of most things. The higher demand and higher supply will leave the prices about the same.

Imposing