This post about the fair tax debate in Texas was almost certainly written by Texas State Chair (and Lago Vista city councilman) Pat Dixon. I was one of the SLECT members who voted against the endorsement, but I am willing to admit that I am open to persuasion. Frankly I would be more open to this if the LP first published a credible plan for reducing spending at the national level. In my mind that is the horse we need to ride first. I look forward to reading useful commentary on this topic.

I see that Pat's name has been added as the author of this post. Thank you for that!

Under no circumstances should any consistent Libertarian endorse the FairTax proposal.

Others have said it much better than I can: if you endorse this new tax, despite the claims on the repeal of the Income Tax, we will definitely end up with BOTH Income and Sales taxes.

Here's a vonMises.org article that make a good case that Libertarians who support the FairTax may be making a big mistake:

http://www.mises.org/story/1814

In addition, an LP member from PA summed up the case for rejecting the FairTax as a "Libertarian" solution in this article:

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"Dan Sullivan"

The Fair Tax campaign is not libertarian *at all*. Even the name "Fair Tax" is misleading. It is really a Consumer Sales Tax, which is like a General Sales Tax except that businesses are exempt from it. It is a notorious fraud that has no chance of passing, simply because its false projections have been exposed.

See:

http://www.taxhistory.org/thp/readings.nsf/0/cfbe9de4a695d74f85257014004f1184?OpenDocument

I attended the local presentation and heard a steady barrage of misleading comments and false conclusions. The tax is regressive in the sense of ordinary people paying more (despite a cute device for offsetting the impact on the very, very poor). A dishonest chart on the Fair Tax page shows the marginal tax rate increasing at higher levels of income, but this ignores the fact that higher-income people spend disproportionate shares of that income on acquisitions of stocks, bonds and other financial instruments that are exempt from the proposed tax.

Worse, it is economically self-destructive. Businesses operating near the margin would have to charge a high tax that would erode what little profits they have and would drive them out of business entirely. The apologist response was a sophomoric assumption that the tax is passed on to the consumer rather than borne by the seller, but it ignores the fact that sellers buy less if the costs of purchase are higher. Small businesses, which emphasize convenience and service over price, will be further handicapped with regard to big-box stores (WalMart, Home Depot, etc.) by a tax that magnifies price 30%.

The tax was described a 23% sales tax. No explanation was given that this was a "tax inclusive rate." In other words, the tax is not 23% of the product price, but 23% of the product price plus the tax. Of course, income tax is calculated that way, but honesty requires, or *should* require, that CST promoters make it clear that they are really talking about a 30% tax in conventional sales-tax terms.

Moreover, analyists overwhelmingly agree that the 30% rate is unrealistically low unless one taxes absolutely everything a consumer buys, including home sales. Those who rent or find themselves having to move again and again would be severely treated. Even those whose homes are destroyed by fire or other catastrophe would have to pay a 30% tax on the replacement homes.

This is not hypothetical, but is a major point of controversy in Canberra, Australia, which has a General Sales Tax , and which saw entire neighborhoods wiped out by a freak firestorm. Those whose homes burned down have to pay this heavy tax on the cost of rebuilding, even though they get no more government services than those whose whose homes were untouched. Indeed, to the extent that fire departments made strategic choices to save some homes at the expense of others, those who were spared disaster by the fire departments are also spared the tax, while those who were sacrificed by the fire departments are further sacrificed by this tax.

Advocates argue speciously that a CST would let you see how much you are paying, but I have yet to find anyone from a sales-tax state who can tell me with confidence even approximately what they paid in sales taxes last year. In contrast, everyone submits an income tax return with the total amount stated on the bottom line, and everyone with real estate gets a real estate tax bill with the total clearly stated. The CST hype is the opposite of reality.

A rather juvenile argument was made that the the CST is voluntary, using, as an example, the purchase of a necktie. The statement was that "If you don't want to pay the tax, you don't buy the necktie." Indeed, neckties are simply not necessary to have, are they? However, the tax is on *everything*, so the more honest response would be, if you don't want to pay the tax, you don't buy anything at all. That answer gives the "voluntary" claim a more hollow ring than the deceptive answer, but deception is intricately woven into the entire sales-tax mythology, and there is little point in excising these deceptions one at a time.

In any case, one can just as easily say that income tax is voluntary, because one is free not to earn anything. After all, what is the point of earning money if not to buy things with? For most people, the two go together, like breathing in and breathing out. Indeed, most people cannot live without spending and one cannot spend without earning. However, those who are wealthy can do other things with money, such as bid up the price of stocks or pile it up money in banks who lend it out to others who (largely due to the hefty sales taxes they have been paying) are too poor to have money of their own. Hence, what the tax really does is encourage concentration of wealth and exaggeration of indebtedness.

Advocates argue that there would be less auditing, but this notion evaporates with a little careful consideration. (Those business people who have suffered through sales-tax audits are be even quicker to scoff at this claim.) For example, corporate stocks pay no tax when traded. Rather than buy a home, then, one would be wise to buy stock in a corporation that owns a home, or even for companies to provide housing to their employees as a sales-tax exempt business expense. Does anyone familiar with employer-based health care doubt that business tax exemptions direct behavior?

Meanwhile, the temptation for small businesses to make unregistered cash sales will be overwhelming, and the countermeasures taken by government auditors will be similarly overwhelming. The owner of an independent pizza shop will not only see his invoices audited, but will be made to explain how the purchase of so much flour, cheese, tomato sauce, anchovies, etc., could result in so few pizzas having been sold. Given that a 30% tax rate vastly exceeds the usual rate of profit (as a percentage of gross receipts) for most businesses, the private incentive for cheating and the public incentive for creating heavy-handed compliance measures will be huge.

Similarly, company vehicles, used for business purposes, would be tax exempt. Thus, companies would tend to provide cars for their employees (not the ones the employees want, necessarily), and one would be committing tax evasion by using the company car for non- company purposes without carefully documenting the mileage and making necessary adjustments. One cannot even begin to appreciate the effect of this tax on bartering and on smuggling. (All imports would be taxed at 30% as well.)

Underlying the sophistry of the fair tax argument is a host of words with shifted meanings. Wealth for money, acquiring for investing, saving for hoarding, etc. These double-meaning terms are not new to the CST campaign, but that campaign relies heavily on them. The CST will cause people will put more money in banks, but not more wealth into their homes. For example, Mormons, who make a point of keeping six months worth of food and emergency privileges in a larder would be taxed for doing so. Yet, when disaster strikes, food will get a people through times of no money better than money will get people through times of no food.

There is no meaningful relationship between the cost of a CST and the benefits one gets from government. The CST is inversely related to ability to pay. The CST is destructive to small business. The CST will require an army of enforcers just as intrusive as the income tax. In the end, the CST is an interference between two parties privately cooperating with each other. It's only advantage is that the problems it will create are not staring us in the face yet. Once it is in place here, as similar taxes are in place elsewhere, people will see how destructive it really is, but it will then be too late.

*******************************************

-- end --

I am glad that the Maryland and Virgina Libertarian Party's endorse Fair Tax. I have read everything on it and it is great. I know some people in the LP like Lew Rockwell and others are staunchly devoted to abolishing all government which mainstream society percieves that as Anarchy. I am a stong advocate of incrementalism for the LP. Fair Tax is a great to advocate in the LP Platform. It is better to have smaller government than no governement at all. A society without government is impossible and it is a extremist intrepretation of Libertarianism. If The LP is going to win elections, then the LP should cosider Fair Tax

The horror stories from the income tax are still worse then the hypotheticals above. I hate articles that criticize with out giving an alternative.

Its all smoke and mirrors. Until the Federal Government terminates the unconstitutional Social Security and Medicare Programs and the Departments of Agriculture, Education, Energy, Health and Human Services, Homeland Security, Housing and Urban Development, Labor, Interior, Transportation and Veterans Affairs and in addition all the various agencies such as NASA, et al and the associated spending that goes with them, no tax will be fair or just.

If the Federal Government would rid itself of all its unconstitutional programs, we could take the following actions instead. Eliminate the income and estate taxes and repeal the 16th Amendment. Once that is done, return to financing the Federal Government with imposts, excises and tonnages. Obviously, on what items these excises would be levied would be a matter of controversy, any tax always is. One potential source is domestic crude oil production. A constitutional sized federal government, funded on imposts, tonnages and a few well considered excises would be very little burden on the American people and the economy.

At the state level, I would very much be in favor of eliminating property taxes, which is the most capricious and unjust form of taxation ever invented. Whether states went to sales or income based tax structures or a hybrid of both would be of less consequence than would be the primary focus of eliminating the property tax.

Congratulations, D Walter, on your ability to see the future. It's nice that you know for a fact that is Fairtax was passed an income tax would supplant it. Please use your gift for good, and not ill.

I personally like the Fairtax. It is simple, makes taxes more voluntary than they are now(not truly voluntary, but you are truly only taxed as much as you are willing to pay, since taxes on goods and necessities are recomped), and is much more transparent. You are not taxed for expenditures up to the poverty level(or, rather, are given a rebate for them). I'm an investment minded guy, though. I plan on investing a good deal of my money. To a guy like me, it is a lot more voluntary because I will pay no taxes on those investments. I'll be paying taxes mainly only on luxury items. Of course it isn't truly voluntary, and no tax system can be.

It also removes the government's abilities to award/punish behavior with tax incentives. If they want to supplement some business, they'll have to do it as a direct loan right in front of our faces.

All that being said, I don't think the Libertarian Party should endorse it. I think this is really quite an individual thing. Some people get it, some people don't, and some people see some really bad consequences that I don't see. I think Fairtax is nice, but I don't think it is anything the Libertarian party even needs to have an official position on. Don't endorse it, and don't fight against it. Tax reform isn't really a libertarian issue, tax reduction is. And the Fairtax does not(nor does it claim to) reduce taxes. No such thing as a free lunch, and all that.

Oh, and on that small business argument by Mr. Sullivan, he is neglecting that the removal of corporate taxes makes the costs for that flour, cheese, tomatoes, etc by the local pizza shop go down. The current accepted figure is that costs of goods and services would go down by about 22%(or since you are quoting the Fairtax exclusively, so will I, %29). A %23(30) increase in taxes does not result in a %23(30) increase in prices, because costs go down. The net result is that things can be sold at nearly the same price for the same margins.

There is a very good article at the Cato institute explaining the merits of this with backed up research.

http://cato.org/pubs/pas/pa-272.html

This speaks of a similar tax system, but with a lower tax because this one doesn't repeal the payroll tax and because it was mid 1990's numbers.

I would be willing to accept the Fair Tax, or a variant thereof, but I think any endorsement should be firmly coupled with a very firm demand for reduction of spending and elimination of unconstitutional agencies and functions.

I also believe that any such endorsement should be coupled with a statement that such tax should only be a bridge until a return to imposts, tonnages and excises as the sole financing of the Federal Government can be fully effected.

I understand the idea of reducing spending at the National level but I say one step at a time. Make taxation more fair, which it currently is not, and once that is taken care of then start looking at plans to reduce spending. If this bill is passed it would repeal the 16th amendment which created the income tax. Once that is done I believe it would be pretty difficult to bring it back and have both tax systems. I think the party should definately endorse this bill.

Does the Fair Tax measure include a repeal of the 16th amendment? If not, then there is always the possibility that Pres. Clinton and a new Democratic congress could keep/reimpose the income tax in addition to national sales tax.
No tax is ever "fair" as long as the government engages in activities that are unConstitutional.
Even then, the "tax" needs to be more along the lines of a user fee for the protection of one's individual rights and property.

Personally, I consider the Fair Tax a far better alternative to our present nightmare. I see incrementalism as the only reasonable policy we should adopt if we ever want to win elections to higher offices.
I agree that we should have a stable plan before making a definitive decision.

Actually, Todd, this bill does not repeal the 16th amendment. It does repeal the taxes themselves, but the amendment is still there and the government could sitll conceivably stick an income tax on. The plan of Fairtax supporters is to first get this passed and then get a constitutional amendment to repeal the 16th amendment.

You can't logically do it the other way around, or that would be putting the cart before the horse, so to speak. Belive me, all fairtax supporters want to repeal the 16th amendment, but I don't want to give you any misconceptions as to the scope of the bill.

Todd:

This bill would not repeal the 16th Amendment, only a constitutional amendment, passed by two thirds of both houses of Congress and ratified by 38 of the states could do that.

You may be confused by an advisory statement in the bill that states the 16th amendment SHOULD be repealed. This statement is a statement of principle only and has no force of law.

There are two Joint Resolutions that have been introduced in the House of Representatives relative to repealing the 16th Amendment. H.J. Resolution 14 and H.J. Resolution 16. No action has been taken on either of them.

Creech!

That's awful defeatist of you! What makes you so sure that Clinton will be our next president and that we'll have a Democratic congress? For all we know Clint Eastwood could be the next President(and wouldn't that be sweet?).

Although I'm not sure which is worse, the Democrats "tax and spend", or the Republicans "don't tax and spend just as much even though we don't have the money". Clint Eastwood is, if I understand correctly, a Libertarian, and I'd love to see him throw his hati n the ring, but all that is another topic entirely.

The only fair tax I would support is a complete repeal of the 16th amendment. Otherwise it does nothing to reduce the size and power of the federal government. And a repeal of the 16th amendment will NEVER happen under democratic or republican leadership.

The 16th Amendment being a "direct tax" is a myth. Congress can't tax you more after the 16th Amendment than it can before [Treasury Decision 2303, as well as many court cases]. Replacing an income tax with a revenue neutral sales (fair) tax is useless. I say replace an income tax with no tax. This is from the law itself: no where in the law does it say that an American citizen living and working within the 50 states for a private comany is required to file a tax return and pay taxes. No where. Nada. If you don't believe me, ask Michael Badnarik. Alex Wallenwein's article explanes it all in detail:
https://www.freemarketnews.com/pview/5691/2419/html/index.php

I would support the FairTax if it contained absolute repeal of the 16th Amendment. I'm like Creech - I think we might wind up with a Fairtax and a Not-So-Fairtax.

If I could know we would only have one, I'd support it. I may wind up doing so, but I sure dont like that it does not throw the 16th on the garbage heap FIRST.

I also have to say that I dont think we could have a worse tax system than the one we already have. Almost any method would be better than what we have now - I dont think if one were to TRY to draw up a worse tax code could they do a better job.

I like the fact that libertarians can discuss this without going ballistic. :D It shows a lot of growing up is taking place.

How about this for a proposed repeal of the 16th Amendment:

H.J. Resolution ??

--resolving clause omitted--

Section 1. The sixteenth article of amendment to the Constitution is hereby repealed.

Section 2. The Congress shall not have the power to enact any capitation or direct tax of any kind, nor shall the Congress have the power to enact any levies upon the several states. All existing such taxes or levies shall be repealed within one year of ratification of this amendment.

Section 3. The Congress shall have the power to lay and collect duties, imposts and excises, but all duties and imposts shall be uniform throughout the United States.

Section 4. The Congress shall have the power to lay and collect user fees, but all revenue so collected will be for the sole use of the Department or Agency collecting the user fee.

This is a very rough draft of course, but it pictures where I think the country should go on financing the central government.

Oh, I don't know, Mark. Governments have for so long left their citizens to beg for a few crumbs, maybe it's time to get real and leave *governments* begging.

Donations only!!

Paul said this: "Congratulations, D Walter, on your ability to see the future. It's nice that you know for a fact that is Fairtax was passed an income tax would supplant it."

You might have said that, I didn't.

What I said was essentially that if you advocate for the "FairTax", you're going to GET

**BOTH**

a NRST **AND**

an Income Tax.

The FairTax does NOT repeal the 16th. It suggests it, at best.

Those who think otherwise are fooling themselves.

The only way to repeal any amendment including the 16th is by passing another amendment.

We should not support this bill at all, however we should speak out against this piece of legislation that will make government grow much bigger and control more of your life.

I apologize about how long this is but I have some concerns about the FairTax. First, everybody talks about retail businesses paying the tax, but service businesses will also have to pay the tax if my understanding is correct. These businesses have not typically paid a sales tax to the State. This will add an enormous cost to their service that many people will be unwilling to pay as it is likely there will be a black market in service businesses to cover their needs or they will do it in-house. How do they classify a taxable service? If I offer a service to an individual, is it taxed? If I offer a service to a business, is it taxed? If it is taxed, why wouldn't the business just hire in-house to do the task instead since their labor is not taxed. This could wipe out many small businesses. Is contract work taxed and if not, how do you differentiate that from service work? On the individual side, this would be extremely hard for any regulatory business to keep track of. If they don't audit individual's records, how would they know if the individual received a taxable service? Why would a service business go out of their way to charge 30% more than it would otherwise if it will be extremely hard to regulate and other businesses are providing the same service without the tax? Will States now start taxing these services as well? Will businesses have to keep separate records to determine what is taxable for the State and what is taxable for the Federal government as what is taxed may be different?

What happens to the cost of compliance? Now some businesses will have to pay an income tax and a sales tax as this bill does not get rid of the state income tax. For service businesses, their cost of compliance just doubled because they weren't paying a sales tax before. Now they have to do all the same work they had been doing to comply with the state income tax in addition to the new work complying with a sales tax.

I also see some other unintended consequences with the FairTax that may or may not be good, depending on your perspective. This deals with the elimination of the FICA tax. First, it is my understanding that there will no longer be any connection on how much you receive from social security and how much you pay in. If so, it seems to become much more of a welfare program and leads to dependency. I also believe it would be the beginning of the end of businesses paying for health care and putting money into 401K type accounts. Since 401K accounts would no longer have any more status with regards to the tax code than a regular savings account, why not just pay the employee the extra difference? Businesses would no longer receive any deductions for this and the employee would likely rather receive it in cash since they will no longer have any tax advantages to it being put into a retirement account. The same goes for the health care. There would be no advantage for the business to pay for this and no tax advantage for the employee if the business pays for health care. Wouldn't most people rather have this money in cash instead? Lastly, many of these benefits were paid this way because it reduced an employee's social security taxable income, yet they received the benefit. Now, it is my understanding that businesses will still have to send in income information to the Social Security Administration to determine how much an individual will receive in social security. People will no longer have any negative tax consequences to having as high as possible income, and in fact, now they will have a very positive consequence in higher social security payments if they claim all of their prior benefits as income. This will put an enormous extra burden on social security and will likely lead to higher taxes in the future. Now, if this leads to the abolishment of social security and leads to individualized health care, I see it as a good thing, but if not it, could lead to many negative consequences such as nationalized health care.

I have also heard about problems in a transition over to the sales tax that could lead to a period of time when the money coming into the government is quite a bit less due to people buying used and businesses adjusting to the new system. I have heard that because of this they may need to keep the income tax for a period of time until this adjustment period subsides. This is very, very scary to me. Politicians would likely find a way to keep both the sales tax and income tax unless you got rid of the income tax completely right away. If that happens, then how does our government cover it's expenses through the transition period: higher taxes, more borrowing, or reduced spending (Ha! Ha!)? Will our economy survive the transition?

If I am wrong about some of this, please enlighten me. Would a flat income tax similar to what Forbes is suggesting be a better choice? If you eliminate all the loopholes, credits, and most deductions, wouldn't you gain many of the same benefits of the flat sales tax without some of the negative consequences? I am still open to persausion about the FairTax but as of now I see too many potential negatives with it and I don't think that the Party as a whole should back this specific plan, especially since it does nothing to decrease spending.

Posted by: Mark B. at August 29, 2005 05:39 PM,
I did not know we had several bills in congress trying to repeal the 16th amendment.Ron Paul is still a Libertarian. He is doing like He said. I do not know if he created those bills to repeal the 16th amendment or not.he is one very few great congressmen left in our government

I think the LP should take no position on this legislation. If any position should be taken, it should oppose it. It is doubtful that this legislation would provide any significant tax relief, and inthe end it is likely to be as intrusive and onerous as income tax. The real issue isn't taxes or how they're collected, but spending.

we should have a fair tax,time to get goverment out of our lives, and out of pocket books

"I realize it does not get us in the end zone but gets us closer to the goal line."

My thoughts exactly. We have to start taking baby steps in the right direction. This bill will very likely pass in the House if brought to a vote.

President Bush - despite all his obvious shortfalls - would probably get behind it. I do believe, at least on this issue, he's with us.

With enough pressure from the White House, it might make it through the Senate on an election year.

Politics is the art of the possible. If we think we're going to come any closer to abolishing the IRS than this, at least at this point in history, we're nuts. We should take what we can get and try for more in a few years.

The LP should come out with a strong endorsement of the NRST and put serious resources behind the endorsement.

When people see how much money is coming out of their retail purchases (23% or is it 30%?) the outrage over government spending that we've been looking for will start to show up.

Terry needs to talk to a good tax accountant.
An across the board sales tax is easy to account for, mine tells me. What makes the current sales tax accounting so cumbersome is exemptions on certain classes of goods, and use tax on goods bought out of state for use in your state. If everything was taxed uniformly, the accounting is relatively simple. Don't forget too that without corp. income tax, the business would be saving all the bucks it takes to have its fed taxes prepared. Services would not have to raise their prices "30%" because current pricing already builds in - the market permitting - the 35% or so that will come out of profits to go to the feds.
Also, buyers - with more money in their pockets - could "afford" higher prices. All in all, a Fair tax, a flat tax, or any other kind of tax jut shuffles around the same money without lowering the overall tax burden UNLESS government spending is cut.

Ray, it's both.

I like to quote it inclusively as 23% because the retailer pays it, and overall they will send 23% of their revenue from retail goods and services to the government.

So for instance, if you make a purchase of $130 at Home Depot, they would send $30(23% of 130) to the government. There are some who like to quote this exclusively. Saying that since that $30 is tax, the real price of the good was $100 and $30 was added on, which would be %30(of 100).

Either way is accurate, but if you quote it as exclusive, you should quote other taxes as exculsive also. For instance, the 15% income tax and 7.5% social security tax are quoted inclusively, because 22.5% of your income goes to the government. You have to earn about $129 to spend $100. If you quote the NRST exclusively, you should also count the income exclusively, at %29.

Someone mentioned the negative impact on the service industry this might have. You are once again ignoring the fact that when corporations do not pay taxes and you do not pay income taxes, your costs go substantially down. The medical industry, for instance, is estimated to have its costs go down by about %25 across the board(I'm quoting inclusively here), so a 23% sales tax on medical services will not even necesitate a price increase to keep the same margins. The cost of most services is expected to go down by 22% to 27% once corporate and income taxes go away.

D Walter, FairTax does not repeal 16th, that would require a constitutional amendment, but the Fairtax DOES get rid of all current income, payroll, gift, estate, and alternative minimum taxes. That is written explicitly in the bill and it is within the scope of a bill's power to do that. When FairTax is passed, starting at the beginning of the year after it is passed, those taxes will not exist, though the federal government will still have the power to make new taxes. If you are saying that we will definitely have both, you are indeed predicting the future that the federal government will pass another income tax on top of it. And I say America would never stand for it. A repeal of the 16th amendment is not requireed to get rid of income taxes, it is only required to prevent any new taxes from ever being passed. It is every Fairtaxer's intention to get the 16th repealed after Fairtax is passed.

Creech said "All in all, a Fair tax, a flat tax, or any other kind of tax jut shuffles around the same money without lowering the overall tax burden UNLESS government spending is cut."

You are exactly right. That is my biggest problem with the FairTax. All it really seems to do is just shuffle around the same money without lowering the cost of government. In the end the people with the most power will make sure that any large reform will not hurt them as much as others. With such a major change their is absolutely no way we can fully anticipate how this will affect us. It may be great for a lot of people but it also could be a disaster. When the government is spending so much money and so much is coming out of our pockets we cannot afford a disaster. We are also spending a whole bunch of time, effort, and money and in the end the government will not have reduced its spending one dime. That doesn't make a lot of sense to me.

In just about every post re: the effects of the Fair Tax above, it is obvious that most have read neither the Fair Tax Book not HR-25 itself. Please, if you're going to oppose something, learn a little about it.

For instance, the embedded costs of the present tax code run between 23% and 25% for service businesses. Plus, they already have to comply with IRS regulations in withholding and their own income tax liabilities, either corporate or personal. The cost of complying with the Fair Tax is much less than all that, plus all businesses get to keep a portion of the tax collected to cover those costs.

Second, far from being a drag on the economy, the Fair Tax would provide an immediate and dramatic boost. Panels of independent economists project a 10%+ jump in GDP, plus up to a 70% increase in capital investment. In addition, stripped of the embeded costs of the IRS code, our manufacturers would immediately be 23% or so MORE COMPETITIVE in world markets.

I could go on, but the truth is this...the negative comments above are based on a total lack of knowledge about the proposal...including how and why it was formulated in addition to its real impact.

In closing, over the past couple of months, I have had conversations with legislators from several states outside of my own, Texas. Based on these conversations...most with members of tax writing committees...I can tell you there is support out there for not only repealing the 16th, but for instituting state Fair Tax proposals as well.

It is easy to be a naysayer...to predict, with no data or evidence to back it up, the most negative of outcomes. It is more difficult to study, understand, and then discuss intelligently the real impact of a proposal. Unfortunately, too many Libertarians are wont to take the easy way out.

I need to add one more comment to the above.

If the Libertarian Party really wanted to become something more than a fringe political movement, it could do worse than strongly endorsing, and having its candidates run on a platform of passing, the Fair Tax.

A two issue campaign for 2006 that would sweep Libertarians into state legislatures and perhaps even a Congressional Seat or two, would be the Fair Tax plus eminent domain reform.

Sorry for being such a space hog, but after I finished I came across the following quotation, which speaks most directly to the current debate:

"What the income tax does is lead the people of this country down a path to where actual control of their resources, which in the end is the control over their will, is handed off to the government.

The government then manipulates that will in order to destroy the freedom of our electoral system through the income tax structure, and we call the resulting slavery a free system.

In point of fact, it is not as the founders understood, and the only way to restore real freedom is to give people back control over the income that they earn so that they won?t, at the voting booth and in other phony issues, be subject to that manipulation.

The Intent of the individual income tax is for political and social control not revenue collection. The Individual Income tax is maintained to establish and hold every person in the country perpetual legal jeopardy. That is a situation that must end with the repeal of the income tax from the statutes, and the prohibition of its use by Constitutional amendment that future generations will not face the same manner of manipulation and interference in their lives.

Maybe we ought to see that every person who gets a tax return receives a copy of the Communist Manifesto with it so he can see what's happening to him."

T. Coleman Andrews, Commissioner of IRS, May 25, 1956 in U.S. News & World Report.

"If the Libertarian Party really wanted to become something more than a fringe political movement"

John, Thats a big "if."

Didn't I hear that a recent poll indicated that the TOTAL tax bite that Americans thought fair for ALL levels of government combined was 20% or less? Why yes, I did (summary of Tax Foundation poll at http://www.taxfoundation.org/files/00db6c1dda7c84a685868c59e3395611.pdf).

In order to conform to the public will, and making allowances for separately levied state and local taxes, any federal flat/sales tax would have to be 10-12% or less. There is no way such a thing would be "revenue neutral" -- the Congress would have to rein in spending in a big way. What are the chances of THAT?

Why would we endorse a tax that is between 2 and 3 times what the public thinks is desirable and just? To be on the "winning side"? Puh-leeze.

James...

I never wrote, nor do I believe, that a "revenue neutral" tax shift should be the end point of our political goals.

But you do have to start somewhere; and you do have to gain political power before you can bring about change. Just look back at the last 30 years of libertarianism and tell me, is the US more free, less burdened by regulation and taxes today than it was then? Is the federal budget smaller?

OK then...just what has the Libertarian Party accomplished to date?

Working for a national sales tax is a complete waste of time and energy. Time and energy for political fights are limited resources, and should be used wisely, where they can have the most impact.

If the LP fights for a national sales tax, and helps it win, what has been gained if government spending and borrowing remain the same? If civil liberties remain unrespected? If Washington continues with unnecessary military intervention in other countries?

There are much higher priorities to focus on. Even the smallest reduction in government spending, or the successful elimination of any government program would at least be a step in the right direction. Exchanging one tax for another just puts us back where we are now.

John you are right that individuals in the Libertarian party could do far worse than endorsing the FairTax. As of right now, even after reading the FairTax book, I am still not sold on it, however. I just have to many unanswered questions. At some point I may change my mind and back it if I find answers to my questions that I feel are satisfactory.

Because there is so much disagreement on this issue within the party and because it does not reduce any spending it is hard for me to say that we should have a platform for the national party endorsing it. Our platform should be a little more generic in endorsing reform that will reduce government spending be it a sales tax, a flat income tax, or whatever.

I do believe that individual Libertarians that believe the FairTax will reform our economy and our government for the better should run on this issue. If Libertarians get elected because of this, great. If it brings good attention to the party, great, but I don't think the party should fully endorse it as the only and best way to reform our tax system. There are many positives to a flat income tax such as what Forbes is proposing as well, but I don't hear anyone jumping up and down that we should have a platform fully endorsing it either. Again it gets down to the fact that none of these reduce government spending.

It would be interesting to see where the L.P.'s rank and file sit on this issue.

I know the anarcho's want to go to donations only, but would be interesting to see what the remaining percentages are for:

1. Going to Fairtax or similar sales tax route

2. Going to a reformed income tax with payments made quarterly rather than payroll deduction

3. The route I prefer, get rid of it all and return to imposts, tonnages and excises.

That would be an interesting poll topic.

A two issue campaign for 2006 that would sweep Libertarians into state legislatures and perhaps even a Congressional Seat or two, would be the Fair Tax plus eminent domain reform.

Posted by: John Shuey at August 30, 2005 10:16 AM

EXACTLY, mention rising property tax that also adds to losing our home.

See, that's the problem. Too many LP members and leaders are much happier in an accomplish-nothing fringe party that allows them to feel righteous above all else.

LP should endorse the Fair Tax and get on board in endorsing things that have a chance of passing, such as eminent domain reform, and an end to the gerrymandering of districts.

Ed,

Libertarians have been at the forefront of the eminent domain issue years before it was cool.

Effective elimination of gerrymandering will require Constitutional reform.

On the FAIR Tax, I'd see it as a marginal improvement over the current income tax if, and only if, we repealed the 16th Amendment. Without such repeal, the only consequence of the FAIR tax will be that we all pay more in taxes, IMO.

Even though I am a huge advocate of the Fair Tax, my stance is pretty much the same as Terry's.

"No tax can ever be fair, simple or neutral to the free market." -- LP Platform

The FairTax is at best a sideways reform and at worst a disaster. I think it is a tremendous mistake for the LP to endorse it officially. There is no such thing as revenue neutrality or fair taxation. Shifting the massive income tax to a massive and unconstitutional national sales tax risks burdening us with both (as when the income tax was implemented partly with the excuse that it would lower tariffs, which were quickly raised), and would lead to enormous instant distortions in the market.

For those interested, here are two articles I've written on the topic:

http://www.lewrockwell.com/gregory/gregory48.html
http://www.lewrockwell.com/gregory/gregory65.html

Anthony, aren't sales taxes basically a kind of excise tax, which is actually allowed constitutionally?

Again, Mr Gregory, as with most of what spews forth from Lew RockHead, strong on extreme principle but very short on knowledge of what it actually does or how it would work.

Read the book...study the legislation. Read the economists studies and projections. Compare it to what we have now...and what we will have 100 years from now if we don't take a FIRST STEP...and maybe your head in the sand blathering will moderate if only a little bit.

Paul P.:

Excises vary from sales taxes, in that excises are placed item by item, rather than uniformly over all sales and services. Further, excises are collected at the moment of production or extraction, rather than at the moment of sale to consumer.

Another feature of excises is they are not related to the actual production price of the product. For example, if a $5.00 a barrel excise was placed on all domestic production of oil, this excise would not vary as the price of oil varied. If oil went down to $20.00 a barrel or up to $100.00 a barrel, the excise would remain at $5.00 a barrel. Same with alchohol or any other subject of excise.

As I have repeatedly said, I favor true excises, in addition to imposts and tonnages. However, I do not consider sales taxes to be excises and thus I cannot really get excited over this fair tax plan.

The original post states "Libertarians are likely to actually read a bill before approving it."

this has not been my experience. at any LP convention I've ever attended, bylaws and platform proposals have never been read beforehand by the membership. Just prior to time to vote, the majority of LP members run around, looking for people who have read these documents of "principle", hoping to get a clue before the vote.

I've seen nothing to indicate that libertarians, being people, will act as anything other than people.

As evidenced by the language and behavior on this blog and others just like it all across the web, Libertarians are really just more "likely" to behave like ill-mannered children.

Consider comments like "head in the sand blathering" and "spews forth from Lew Rockhead" as exhibit A.

John Shuey writes: "Again, Mr Gregory, as with most of what spews forth from Lew RockHead, strong on extreme principle but very short on knowledge of what it actually does or how it would work."

I have no problem with any step in the right direction. I am surprised that any libertarians would claim to have "knowledge" of how a huge government program such as a national sales tax "actually does or . . . would work." We're talking about an effective tax of about thirty percent (when you calculate it the way you calculate any sales tax, as a percentage _over_ the cost of the goods). This sounds like an incredibly dangerous proposal to speak about nonchalantly.

Yes, I do stick unflinchingly to libertarian principle. I would favor any clear reduction in taxation, spending, or other government coercion. Putting so much energy into convincing the state to shift from one method of robbery to another, while promising everyone that the amount robbed will stay constant, is not my idea of a good, real-world strategy. Sorry.

"Read the book...study the legislation. Read the economists studies and projections. Compare it to what we have now...and what we will have 100 years from now if we don't take a FIRST STEP...and maybe your head in the sand blathering will moderate if only a little bit."

I don't think hooking millions of Americans on a monthly check from the government to help them pay taxes on necessities is a step in the right direction. A clear step in the right direction cuts government; it doesn't create new bureaucracies, redistribute a tax burden without reducing it, or sell itself primarily with promises of being a "fair" method of coerced wealth extraction or more "neutral" social engineering.

People on this blog thread, have, repeatedly, referred to the necessesity of reducing government spending. I have a new first choice for cutting the feds. FEMA, the Federal Emergency Management Agency.

They will go, rushing in to tread along with the fools to the former city of New Orleans, there to waste our tax money left and right.

This should piss off every Libertarian, from Anarcho to pragmatist. These morons have built a city on a flood plain, in a depression between a major river and a large lake, twelve feet below sea level, protected only by two flimsy levees and some pumps. In a hurricane zone no less. And now they are crying their eyes out, begging for help.

I have no sympathy and no compassion for them. They sat and partied on in their bowl shaped coffin and as far as I am concerned, they got everything they deserved.

The federal government should not spend one dime on this matter. If the Federal Government got its nose out of these matters, they would not need so much revenue.

If there was any intelligence in government, which there isn't, they would evacuate and abandon the city and let nature reclaim it. Maybe set up a plaque to commemorate the arrogance and stupidity of mankind.

A flat tax would be a step forward. Flat taxes are politically easier to cut and harder to raise than income taxes because voters realize that a tax raise in such a system is truly a raise on everybody. It would simplify the tax code, which would hopefully streamline our government and cut down on burocracy.

I think it should be noted that many political parties of diverse leanings across Europe have begun talking about a flax tax. It is not really a socialism versus free market issue so much as a simplicity vs inefficiency issue. Maybe the guys above are right, that a flat tax isn't libertarian - but it isn't anti-libertarian either. It just makes sense.

I would endorse it. That having been said, it's very clear we need a poll on the issue.

I didn't vote for the LP candidate for president for one reason in the last election...He didn't support the FairTax. Yes, I believe the LP party should officially support the FairTax.

G-Man

Mark B,

Your comments are highly insensitive and cruel. New Orlenas deserved a fate of drowning because of their location and where they chose to build the city? That is insane. Do all hawaiaans deserve to have their homes destroyed by Volcanoes because they built their property near them? Does anyone with beach front property deserve to be hit by a hurricane? Does somebody who owns a trailer have a tornado "coming to them"?

New Orleans has been there for hundreds of years, and will be there for hundreds more. Humanity has always strived to thwart mother nature and develop in fertile places that might otherwise be unfit. New Orleans will be rebuilt, and have new systems to thwart nature again. It will be better, it will be stronger.

What you are going to see is thousands of entrepaneurs and volunteers flocking to New Orleans, in the American spirit developing and helping their fellow man as fast as they can. What would be a severe economic depression anywhere else will be a great economic resurgence in that area as businesses pump money and jobs into rebuilding, and extend a helping hand to those who lost the most.

FEMA will be a part of it. It is the government's job to protect its people, not leave them to their fate. FEMA is there to save lives and provide relief for Americans who have been attacked by a natural disaster. Your comments are heartless and callous. What did New Orleans ever do to you?

John Shuey-

I wasn't speaking to you, only to the general topic, and I wasn't putting words in your mouth, only saying things that I believe to be true or likely. No need to come out swinging that old dead cat at me("what have libertarians been able to do in umpty-ump decades?"). But if you must...

I read on the front page of this website today that libertarians in Indiana were instrumental in getting their town to reject a 1% restaurant tax that other nearby localities had embraced. Here in Caliornia, libertarian tax fighters (notably Richard Rider in San Diego) have helped to prevent the enactment or collection of billions of dollars in other taxes. So, while our good effect is dwarfed by the bad effect of the Demos and GOP playing politics as usual, especially at the national level, we have had a good effect and can have more.

As far as getting power, I doubt that a Libertarian would ever be elected on a platform of a small tax cut or a minimal tax increase. But however it may someday happen, once libertarians are in office will be the time when we can talk seriously about throwing our support to or withholding it from this or that tax reform proposal. Individual LP members may decide that the sales tax proposed here is something to support on an individual basis, but it is hard to see what the LP would stand to gain from endorsement of a tax reform proposal, unless it were a less much expensive and less intrusive substitute for the income tax lost because of our successful repeal of the 16th amendment.

Let the focus be repeal of the amendment, and a tax&spending reform proposal be our answer when we are asked, "how will we get along without an income tax"?

No, the Libertarian Party should not endorse the FAIR TAX. Though the FAIR TAX is 400% better than the dreaded INCOME TAX, it (the FAIR TAX) is still ROBBERY BY FORCE and should not be condoned by a free society. -- James M. Young, Reno Nevada

I also oppose the unfair tax. As a Virginia resident, I am ashamed and embarrassed that my state party has endorsed this travesty. I refuse to call it a fair tax, because that name gives it an unjust umbrella of righteousness. I have laid out my objections before on other blogs of this website, but here is a brief, incomplete synopsis of some of my main points.

(1) It cannot repeal the 16th amendment. Therefore, the 16th amendment will not be repealed.

(2) Based on recurrent history, we know that if the bill ever makes it out of committee, it will most likely end up removing the part about repealing the income tax, and we'll end up with some form of both.

(3) This tax will destroy my internationally based service business, as it will make it impossible for me to compete with foreign services like mine on the web that don't have to charge an extra 23%.

(4) The 23% figure will not last. It will more than likely double over the next 20 years.

(5) If the LP associates itself with this tax and it somehow passes in a bastardized form, it will be a permanent blot on the libertarian movement that we will likely never be able to overcome.

(6) Calling the unfair tax a baby step is a horrible distortion of the truth. At best, it is a baby step in the wrong direction. At worst, it is further justification for continuing the monstrous growth of big government.

That's enough for now. I'm sure the pitbulls will be all over me just for what I've said so far.

Paul P.:

I don't mean my comments to be cruel or callous but I do mean them to be objective.

I am more than well aware that there are hazards in every place a human might choose to live. I live in a hurricane prone area myself. However, I at least have the sense to live inland, on high ground, out of reach of storm surges and inland flooding. Yes, a tornado could take the house or a category 5 could take the house. Life is inherently hazardous and I understand this well. I lived through a month of on and off inconvenience last year, having suffered two direct and one indirect hurricane strikes at my location.

New Orleans is a bit different. It is just not a matter of living in normal hazard. Instead, they seem to have gone out of their way to increase the hazard. The town is located below sea level, protected only by levies, between a major lake and major river, in a hurricane prone area. This is not living in normal hazards of live. This is just ASKING for trouble. I have no problem giving a helping hand to somebody who has suffered a catastrophic loss. On the other hand, I don't suffer fools well. If they rebuild the city, they could at least move it up the river a few miles to a site that is a few feet above sea level, such as John The Baptist parish, near the interchange of I-10 and I-55. But to rebuild in the current spot, KNOWING the same thing will eventually happen again, that is just flushing money -and lives- down the toilet.

On a side note, the Federal Government does not have the enumerated power to provide emergency management services, so FEMA is unconstitutional in any event. The only constitutional role the federal government could have is activating the militia, at Louisana's request, to put down looting. It is reserved to the states to handle emergencies.

On number 2 there, I believe Tom Daschle has said he is committed to getting the bill out of the committee in its present form, and that he wants to bring it before Congress in 2006. He's somewhat of a power player, so it may make it out of the committee untouched.

As for your business, I'm just wondering what are you selling that wouldn't have its costs go down with removal of corporate taxes. Also, you wouldn't pay tax on exports. Those foreign companies products would be taxed when sold in our country, not vice versa.

As for #4, I'd like to see any research you have to suggest that. The high figures which I've seen were based on a different model of taxation which didn't tax certain items, and didn't tax services at all.

NO! I will never vote for any candidate who supports a national sales tax, Libertarian or not, period. I live a spartan life style because I have opted out of giving money to the government by not working. A national sales tax would force me back in. If you you give money to the government and the government uses the money to kill prople, are you responsible?

Unfortunately, we do have to pay taxes and contrary to what some people say it is constitutional as in Section 8 "The Congress shall have power to lay and collect taxes..." They have the power and we have to pay.

What we must do is keep the public informed and hold our elected officials and the government accountable.

A national sales tax is asking for lots of problems, stay away from that!

I suggest we, as a nation, elect all challengers henceforth.

I have mixed feelings about the "Fair Tax." In theory it is simpler than the income tax, and it has some progressive elements to it (by making labor cheaper at home vs. imports). The biggest case for it is the fact that it eliminates the Social Security tax, thereby eliminating the government's records of people's income history.

That said, I have some powerful reservations:

1. Enforcement would required lots of government spies and warrant-free searches. The income tax is largely "voluntary" not in the sense of people complying without duress, but in the sense that people report on each other. My salary is my boss' tax deduction. This double-entry feature would be absent with the fair tax. Expect a huge increase in the black market coupled with more active government surveillance.

2. It is regressive. Yes, the very poor get a tax cut, and manufacturing employees at home should see a net increase in spending power. But the middle and upper middle classes will take a huge hit while the ultra rich will get a gigantic tax break. This widening gap between rich and poor will not support a free-market society.

3. Like the income tax, it is based on the Marxist principle of "from each according to his ability."

---
I think Libertarians should support the idea of fee-for-service government. A good example is gasoline taxes and tolls to pay for roads. Other examples:

1. Property tax on (older) copyrights and patents. If you don't pay the tax, then the government doesn't enforce the right.

2. Property tax on broadcast spectrum. If you want your radio station free from interference, you pay the enforcer.

3. Value tax on corporations based on market cap, not income. If you want the government to enforce the complicated contract that is a corporation, then you pay proportionately.

4. (State/local level) Real estate taxes are preferable to sales and income taxes. Conquest of land, national defense, and enforcement of no-trespassing and no-squatting laws are all functions carried out by government. Fees should be proportional to service rendered.

--
This list is not complete. See my web site for more ideas.

Such an approach provides a better spproximation of anarcho-capitalism while maintaining the economies of scale and citizen control of having a monopoly government.

Such taxes would be easier to enforce than the Fair Tax since these are taxes on actively registered property. All the government has to do to punish a property owner who doesn't pay tax is to do nothing. No tax prisons needed.

Thanks to Pat for his informative article.

Libertarians: Don't waste time debating other parties' news and reacting to their issues, wondering what our position is supposed to be on a mostrosity we did not create. Make your own news, define the issues, and advance Libertarian positions.

Fair Tax is a conservative Trojan Horse--don't touch it unless you have a torch to burn it. These schemes, as in Canada, have led to even more taxation overall. At best it can be endorsed as a transitional measure in a context of calling for tax elimination. This may make sense in a State LP context.

The appropriate Libertarian model is having government (i.e. public services) pay us--a proven one in concept, as with the Libertarian inspired Alaska Permamnent Fund. See:

http://64.233.179.104/search?q=cache:hBCXiWt_83oJ:www.apfc.org/publications/TP5-3.cfm+alaska++permanent+fund+dick+randolph&hl=en

This pays a family of 5 about $10,000 yearly from investments of efficiencies, oil and other items owned in a trust of the people. It's imperfect, but that's the direction: voluntary permanent funds that pay you. Alaska has no income tax and additional benefits from this concept.

The LP should NOT under ANY circumstances endorse the Fair Tax.

It is a beauracratic mess of a plan that includes an outrageous 23% sales tax, even more stunningly calls for no reduction in the size & scope of our government, allows for the continuation of the social security system, and is truly anti-libertarian!

It is beyond my ability to comprehend how a true Libertarian (big "L" or little "l") could ever support this plan and have any respect for the solidarity of his principals.

Do you think the government really needs 20+ percent of every dollar you spend?

Do you think a Libertarian sized government really needs that much income?

Do you really think that it is morally ethical to force one person to give money to another against their will? If you don't believe it is right for a mugger to hold a gun to your wife, son, or daughter and demand they hand over their money then you can't support the government stealing in a totally criminal way dollars from citizens across this nation to be given to others!

However, let me get back to one very important point...

This bill calls for NO REDUCTION in the size, scope, or cost of our government! None! Zip! Zero!

Personally, I am just as offended by the idea of a large sales tax that maintains both the same size and scope of government (not to mention social security) just as I am by the current IRS and income tax.

The only bill the LP should ever support for tax relief should include FIRST OF ALL (before anything else) massive cuts in the size and scope of our government. It should then call for immediate and rushed abolishment (not just elimination because that term indicates that such taxes could one day be implemented again - we need these taxes gone FOREVER) of the income tax, social security tax, medicare tax, and a whole slew of other taxes.

Once there have been massive cuts in the size, scope, and cost of government and a multitude of taxes have been abolished simultaneously then we can think about what SMALL, ITTY BITTY, and TINY taxation system we MIGHT need if we can't find any other way to fund the basic function of our government.

I am APPAULED that the LP would support or even think about supporting the Fair Tax bill.

I do not believe in abolishing all of government. Those who are attacking us by claiming that are simply trying to stigmatize us so they can gain a foothold into the party and destroy the foundations of our party and then twist it around in some warped form to suit their own desires. I very firmly believe in a small, efficent, and basic government. We can have a government that does everything specified in the constitution plus perhaps a few other basic functions we FAR less than a 20% sales tax. These beliefs are truly libertarian and not those of someone that wants to abolish the entire government.

I urge everyone reading this board to resist those in our party that are supporting big government, calling for support of high taxes, and urging our nation to keep troops in nations around the world with so called exit strategies that keep our troops in danger and keep our nation entangled in conflicts all across the globe.

The heart and soul of the LP is freedom, liberty, and a small government that's only true function is to protect all of us from each other and from outside invasion. The government is involved in a thousand areas that it should stay out of and has no right to be in. Some of us recognize that, but others seem not to care and are willing to throw any such notions of limited government to the wind to bring about any kind of change even if it's completely against the principles this party was founded upon.

If the LP or any state LP parties decide to support the Fair Tax then they are making a huge mistake and must have lost the quality of character to stand by their principles despite any adversity.

The LP could write a government reduction and tax abolishment proposal that would stand by and promote ALL of our VALUES and PRINCIPLES. Such a proposal could call for a vast reduction in government, the abolishment of the income tax, the abolishemnt of social security, and of course the return of all our troops from around the world to save billions upon billions of dollars.

Instead of writing a truly Libertarian proposal and presenting it to the world it seems the leadership of this party has lost all desire to promote LP principles and are jumping as high as they can in the hopes of latching onto anything that might help them gain some political support or a cause a little change regardless of any principles they sacrifice in the process.

I dare say it is a time that those who value REAL small government and true libertarian values in the National LP stand up and declare that they will not allow the party to slide towards oblivion any longer!

I believe that the Libertarian Party should endorse the Fairtax, provided that the 16th amendment to the U.S Constitution be repealed. I have read Neil Boortz's book, and, if you ask me, it is a good plan that would have people keep all that is in their paychecks and bring about needed economic and personal prosperty in this country.

If Libertarians are so anxious to abolish the IRS that they are willing to adopt a national sales tax, then come up with something better than the "Fair Tax."

Most importantly, the Libertarian Party should not endorse a "revenue neutral" tax reform. Our key message is less government, and one aspect of that is less government spending and lower taxes.

Rather than adopt the Republican proposal of a 23% National Sales Tax that finances current levels of government spending, we should propose a lower tax rate and cuts in goverment spending. A tax of 20% is better than 23%, 15% better than 20% and so on. Figure out how much immediate cuts in federal government spending you want to propose and go with the lower tax rate that generates that lower amount of revenue.

Second, the Libertarian Party should oppose the introduction of George McGovern's Guaranteed National Income under the guise of a "prebate." While $4000 per year for every family in today's dollars is worth a lot less than it would have been in 1972, it is still a bad idea. Telling Americans that getting a monthly check from the government is OK because they are really just getting part of their taxes back one of the worst ideas ever.

Finally, I think it is a mistake to replace the social security payroll tax with a portion of the national sales tax. Letting people keep as much of that money as possible, by letting them have a tax credit for an IRA-type account is the best way to make progress towards the privatization of social security.

Remember, the "supply-side" Republicans, like Jack Kemp, were always dead set against any cuts in government spending, especially social security. According to them, we can just change the way we collect taxes, the economy will grow, we will collect more revenue, and Republican politicians can continue to hand out money for popular spending programs--especially those that put money in the hands of the middle class.

The result of that "plan" has been out of control spending and a mountain of debt. How is this "fair tax" any different?

The Libertarian Party should clearly support a direction for change--less government. And the way to do that is to support cuts in government spending. If we go with a national sales tax, it should be at a lower rate than the so-called "fair tax."

A 15% national sales tax (exclusive like sales taxes are usually caculated) would allow for a balanced budget with a 15% cut in federal government spending. This doesn't allow for prebate/welfare and doesn't replace the social security payroll tax. It allows for a tax credit against those taxes equal to the current "surplus" in social security.

Why not a Libertarian 15% solution instead of a Republican 30% national sales tax with univesal welfare?

Personally, I am opposed to any gradual plan that "works towards" a smaller government.

If you try to slay a giant beast, but don't kill it the critter will only be made very angry.

Our government is a giant beast. It's body is composed of many members who are addicted to big government in a way similiar to a meth addict. They use big government every single day, can't get enough of big government, will do whatever it takes to keep big government doing, don't notice how their usage of big government is hurting those around them, and eventually feel that death would be better than coming clean.

If we are going to cut government we need to do it VERY quickly, in BIG ways, and at the same time not just make tax cuts but abolish the income tax and replace it with nothing.

That's what we really need to do. Cut off the governments income and watch as the fat is trimmed off VERY quickly.

Then, we get down to only the most basic of constitutional functions can we decide the few other functions that are absolutely needed (at least for the time being until they can be eliminated or privatized) and come up with the absolute lowest tax possible.

The federal government has NO REASON to need even a 10% national sales tax if it were reduced down to it's constitutional limitations.

What we have now is not a government, but one huge tyranical beauracracy. Period.

I have read many comments, both pro and con to this "FairTax" bill. My view is that it has some minor advantages over the income tax, and several major disadvantages. We should remember that the people who opposed the income tax in the early 20th century did so in fear that the tax might become as high as 10%! New tax schemes never stay "put".

This bill should be soundly NOT endorsed by the L.P. because:
1-It will very likely become just as cumbersome, complicated, and intrusive as the income tax is now,
2-The passage of the bill will likely take alot of effort and money for not very much long term effect (with many negative effects),
3-It does nothing to rein in the size of the federal government,
4-We COULD end up with both a sales and an income tax at some point,
and finally,
5-The L.P. should not support any new tax scheme, but should support any tax removal scheme (without the concurrent new tax-like the "Fair Tax").

My suggestion for tax "legislation" is for the L.P. and it's activists to work to get a bill introduced in Congress to do one thing . . . eliminate the withholding tax. This is both achievable and would make the income tax more "visible" to most citizens, without introducing any new tax schemes.

The "Fair" Tax bill in NO way should be endorsed be the LP. In fact it should not even be up for discussion. First off, the 16th amendment was illegally added. The government should have no DIRECT role in taxation. If we have a national tax the Federal government will be taxing every single thing. They feds have 0 reason to stop their insane spending spree, also this could make inflation go out of control. Any LP candidate that takes "no position" or "supports" this bill will not get my vote.

Wow! Your kidding me the Libertarian Party's membership has found another reason not to support a issue that moves the country in a more libertarian direction. An issue that currently has a bill in the House that would eliminate the income tax and the IRS. An issue that has enough popular support that a book on the subject has been #1 on the NY Times bestseller list for two weeks straight. I have the same concerns that others do about double taxation but we have to start rolling the dice. The party has not moved one bit the ten years I have been involved. This is one issue that can move the party. We should not only endorce it, but only give money to national candidates that supports the Fair Tax. The popular swell for this issue could put us in the spotlight. Ross Perot style of debt,spending and tax reform is the ticket.

I had been non-committal about the Fair Tax and other sales tax proposals, but the more I study the back and forth of debate here and on other sites, the more I am coming to oppose it. It does seem, at best a sideways move and, at worst, a step towards double taxation.

I would propose, as an intermediate step, for the LP to endorse, would be a bill in Congress to repeal all withholding for Federal Taxes, FICA and Medicare. Require people to make quarterly payments, so that taxes are painful and hateful, as they should be.

This would be the best first step towards repeal of the 16th Amendment and the return to imposts, tonnages and excises.

On full consideration, I think the ONLY revenue source that the LP should endorse are imposts, tonnages and excises.

I agree very much with Mark B's removal of withholding, but instead of making quarterly payments, how about one payment, on November 1st. The day before election day. I can't take credit for this idea, someone else said it on another post.

I also like the Fair Tax, but it is too much of a wild card for the LP to endorse.

Oh, Bill, your 15% figure with 15% reduction, I believe may be calculated wrong. I'm pretty sure that is based off a model that eliminates income taxes but not withholding taxes. Not that it isn't a decent plan, because it is a good one.

After reading the blogs, doing a lot of research, and getting some of my questions and concerns answered I have now moved over to being a supporter of the FairTax, though not necessarily for the common reasons. Some of my reasons are as follows:

Our Federal, State, and Local governments will now be at a competitive disadvantage to private businesses. This may lead to them privatizing or at least contracting some of what they do now to private businesses.

The effects that it will have on giving our businesses a competitive advantage for exports, giving us a competitive advantage to bring international business to the US, and to bring our off-shore economy back to the US.

The effects it may have on the unfair practice of employers paying for health care and retirement pre-tax, while individuals for the most part having to pay for this with after-tax money. This will even the playing field and allow for more individual choice in what people do with their money.

The effects that it could possibly have on abolishing Social Security. It will start looking like the welfare program that it is. Once we lose the connection between what you are paying in and what you are getting out, it may be easier to just scrap the whole plan and lower the sales tax rate by 8% or so (I believe that this is the figure economists have used).

I still believe that there will be a fairly large underground economy going on to try and avoid the sales tax, though it probably won’t be much worse than our avoidance of the current income tax system. I also believe that compliance costs will not be as rosy of a picture as it is painted out to be unless the states drop their income tax as well. I still worry about this creating dependency on the government but it probably is not any worse than our current system.

I have been concerned in the past about the FairTax just mixing the same pie to come up with different winners and losers. After doing more research it does seem to actually grow the pie by starting to account for some things that have not been included in the pie such as money received from illegal activities now being taxed when used to purchase items, money in off-shore accounts due to income taxes coming back to the US, making us more competitive world-wide thus bringing more jobs and money back to the United States, visitors from foreign countries will now be paying more into the system on every purchase they make here, and making our governments at a competitive disadvantage compared to private business instead of currently the other way around. This could lessen the impact on creating different winners and losers.

I am still torn on whether the national party should endorse the plan, however. There would be some implications and unintended consequences that could lead to more liberty, which I don’t think we can ignore even if the FairTax does not reduce spending. This isn’t a truly Libertarian reform but it is a step in the right direction, but it is certainly not universally supported by most everyone in the party. Irregardless, I believe that individual Libertarians who believe in the FairTax should push it and use it when they are campaigning. It is possibly one of the largest issues that some Libertarians could use to get votes, much in the same way that Steve Forbes gained some attentions a few years back. It would also help to get votes I believe if those pushing it also called for scaling back the governments spending in some form or fashion outside of the scope of the FairTax bill, much like Ross Perot did. If we had a formidable candidate that called for both the FairTax and a reasonably significant reduction in government spending that person may be able to pull in a lot of votes and attention and possibly even get elected. To be quite frank a Libertarian, independent, or someone running on a platform as above will likely pull in a lot more votes than a pure Libertarian candidate saying we need to immediately slash the gov't to 5-10% of its current spending.

What it boils down to if we want to continue to just preach pure Libertarianism than we should forget about trying to elect anybody and become more of a group that educates and markets the concept of freedom and Libertarianism. If we want to get people elected than we need to act like a political party and look at ideas and platforms that are palatable to the general public that will move us in the direction of more liberty and our ideals. Look what the socialists have done. It has taken them many years but little by little we have become a socialist/welfare state. Look at the people who want to control how we live. Little by little they have been continuing to take our civil liberties away and shredding our constitution to bits. Possibly we could be the party that little by little we start giving individuals the ability to take back their lives.

The Fair Tax is certainly not a perfect plan, and is also misnamed because there really is no such thing as a "fair" tax.
I do believe it is better than what we currently have, and as long as the 16th is repealed, I would be in favor of it.
The main reason I favor it is because people could finally see just how outrageous government taxation is. A 23% tax rate is ridiculous, but so are the current income tax rates. The problem is that income tax rates are hard for the average person to pin down, with all the deductions and exemptions.
The sales tax is more tangible, more easily understood. For example, (and I'm making up the numbers) we could call for the abolition of the FDA, the Dept of Ed, and Energy Dept, and reduce the tax from 23 to 20. With the current system, you can't do that. Abolishing a few programs or agencies can't be as easily quantified with the income tax. But paying a few cents less on the dollar certainly can be quantified. Then, we could get on a roll. People would start asking what else can we get rid of to save a few more cents.
As far as officially endorsing the plan, that is much trickier. With so much dissension, it's probably not a good idea.

Should the LP support the fair tax proposal?

(1) Since the LP favors limited government, it follows that reductions in tax revenue are consistent with that principal. However, the fair tax does not propose to reduce tax revenue but should have quite the opposite effect.

(2) To make any real change in the current tax code it must be supported by a large constituency to overcome the lobby for the current system. To prevail, the proposal must be marketed as revenue neutral. This is not consistent with the LP principal of limited tax revenue and government.

(3) One should set priorities and a focused distribution of resources. So in order to concentrate resources on a single goal, the LP should set the limited government principal aside, for now, and get behind a constructive collection system (Fair Tax) and leave the limited government fight for another day.

(4) Just how much attention can the LP bring to this issue and when should it strive to do so is a question for more the more politically astute in the LP leadership. 0n those questions I haven't got a clue!

I read about how Canada had enacted a Goods and Services Tax in the 1980s. It generated so much controversy, that opponents referred to it as the "Gouge and Screw Tax". Also, Mulroney's administration was voted out and Chretien was voted in. Mulroney's Progressive Conservative Party dissolved and it took ten years before the new Conservative Party came back and now make up the 2nd strongest party in the Parliament.

Anyway, Chretien and the Liberals (centrists, really) promised to abolish the Goods and Services Tax. However, it was such a huge generator of revenue that they couldn't abolish it. Three Canadian provinces (Nova Scotia, Newfoundland and Labrador, and New Brunswick) merged their respective provincial sales taxes with the Canadian Goods and Services Tax. Their Harmonized Sales Tax is at 15%. The in-your-face nature of the Canadian Goods and Services Tax keeps Canadians sharply aware of how heavily they are taxed. The Goods and Services Tax is at 7%.

My question is: What do you think of merging state sales taxes with a national sales tax?

Do you think it's a good idea to merge local/state taxes? Or state/federal taxes? Or local/state/federal taxes? Are these good ideas? Why or why not?

By the way, the Goods and Services Tax generates so much revenue for the Canadian government that income taxes don't even make up a majority of their revenue. Perhaps a plurality, but definitely not a majority.

Tommy

My guess is that if the FairTax passed most if not all States would piggback this sales tax and eliminate their income tax if they have one and start having a sales tax on every item that the federal gov't does. This would lessen complications and cost. If they don't businesses will have to comply with both a income tax and a sales tax. Businesses may also have to keep seperate records for the state and the federal sales tax if they don't coincide on what is being taxed. This would be a serious compliance problem and cost if they didn't piggyback the FairTax. All things being equal what company would want to continue to do business in a state that charged an income tax if they could comfortably move to one that did not. It is likely that the free market would force most states to conform their business and individual taxes to the FairTax unless they could come up with something better. For busniesses at least it would be hard to come up with something better than not having to pay any income tax. It may even force the property tax to be looked at as it will become much more prominent to businesses at least, since the income tax will be abolished.

The 15% sales tax and 15% cut in government spending leaves social security benefits financed by the social security payroll tax.

I believe that the social security payroll tax should be abolished in the context of social security privatization.

The "Fair Tax" bill is sponsored is a Republican bill. Bush flirted with supporting it a while ago. Supposedly, DeLay is a big supporter.

Boortz arlready supports the Republican big-government foreign policy of conquering the middle east. Now he supports their big-government tax plan.

People who want a big-government conservative tax plan already have a political party that supports it.

The choices aren't either the LP's past approach of proposing an immediate 90% cut in the federal government (abolishing the income tax and the IRS right away, as well as privatizing social security immediately) or else supporting this "fair tax" that doesn't cut government at all.

We can come up with our own proposal--cut the Federal government 5%, 10%, 15%, 25%, 50%, whatever you think reasonable. And then a lower tax rate that will balance the budget.

Why do we need to support this welfare scheme?

Why are we even talking about endorsing this Republican bill?

We can do better.

P.S. Give up on limited government so we can work on the national sales tax? How can anyone say that? I see that as giving up on the core of libertarianism--for what?

>

While if forced to choose between the lesser of two evils, income tax or sales tax, I would choose a National Sales Tax. But one thing I notice people keep mentioning, is "provided that the 16th amendment be repealed". I see this similar to stating "The PATRIOT ACT is okay, provided that the government doesn't abuse it."

If the FairTax *is* passed--and I hope it is not--we *will* have both a Federal income tax system and a national sales tax. Considering the small chance that they actually do repeal it, we will see it again--a year, four years--down the road. Some kind of "national emergency", no doubt. Maybe to nationalize oil. It'll start small, too. We will whimper. Then, over time, it will baloon again. This is the nature of the Leviathan, and anybody who thinks otherwise is kidding themself. :)

Perhaps we could offer the public a 2 for 1 plan. Note that I am blatantly robbing this from a fictional Republican candidate on a fictional television show, "The West Wing". My apologies for that.

Basically, his promise was to cut taxes. When asked how he would do this, he said he would offer a two for one plan. For every one dollar he gave as a tax cut, he would cut two dollars from the federal budget, and use the extra dollar to pay off national debt. It's actually kind of clever if you think about it. Then when debts are paid off, you can give America back that extra $1.

Couldn't they put something into the Fair Tax bill stating that this bill even if passed could not go into effect until the 16th amendment has been repealed by Congress as well as the States. This might avoid us from having both an income tax and a national sales tax.

It should be plainly obvious to every single LP member that the federal government must be reduced by a minimum of 90% as quickly as possible. Our federal government is involved in thousands of areas not specified by the constitution that are supposed to be reserved for the states or the people.

Now, I am NOT saying that I support an FDA, FBI, ATF, or DEA. I am actually against ALL these agencies and programs!

However, if they are to exist in the USA (they should not of course) they should be ran by the STATES and NOT the federal government.

There is no question that the government should be reduced by 90%.

Just imagine the thousands of unconstitutional federal programs, the hundreds of thousands of troops around the world, the billions spent on social programs each year, the billions given away to other nations in aid, and of course the drastic ammount of sheer WASTE that occurs.

If we eliminated this pork a small federal government fully able to do everything the constitution intended could certainly be only 10% as large as our current government and survive off of only a VERY small level of taxation.

The LP must call for a HUGE reduction in government and the total abolishment of the IRS. But it must also NOT call for a sales tax.

What does anybody think of merging local/state taxes? Or state/federal taxes? Or local/state/federal taxes?

I'm talking about merging local/state property taxes, state/federal excise taxes, local/state/federalsales taxes, etc.

Merge them, then reduce them? How about it? Does it simplify things or worsen the problem?

The immediate 90% reduction of government may sound nice, but it would be disastrous. Big government right not just some giant beast to be slain. It is a giant cancer interwoven into the lives of all Americans. You try and kill it all at once, and you'll kill the host body. It is something that must be carefully and surgically removed, not something that should be torn down.

I read the Fair Tax book last night and it answered some of my questions, but I remain unconvinced.

How exactly do businesses avoid paying tax (and hence passing it on to consumers)? Small businesses in particular buy stuff at retail all the time. Say a business owner buys a box of pencils at Office Depot. Does he pay tax at the register and get a rebate later? That means collecting receipts, facing audits, just like he does now. Or will he hand the retailer his "get out of tax free" card and not pay tax at the register? Plenty of potential for abuse there. How does this work?

The distinction between new and used goods isn't always clear. I'm thinking of someone buying an old broken computer with the intent of replacing the bad components with new ones and reselling it. Do they pay tax on the components or collect tax when they sell the computer or both or neither or what?

Any Libertarian should have objections to the prebate. The chapter on withholding has a whole discussion on how people think of their income tax refund as a gift, and several chapters later they propose something even worse! The last thing we need is more people psychologically dependent on regular checks from the government. Since the prebate is defined by the tax rate, any attempt to lower the tax rate means lower prebates and will be met with hysterics from the left. "Tax cuts for the rich!" they'll cry, just like they do under the income tax, and just as wrongly.

The tax exemption for education (as an investment) is casually mentioned without much discussion. Isn't that a big fat belly slide right back down the slippery slope? Why not gym memberships or home improvement or anything deemed to reveal low time preference? Is gold jewelry taxed and gold bullion not? And since the Fair Tax warmly embraces different prebates for different family sizes (something the original income tax didn't do, did it?), the door is wide open for higher prebates for the disabled and other sympathetic cases.

I think the only reason there are different prebates for different sized families is because there are sifferent poverty levels depending on the size of your family. If you are one person, $10,000 is considered the poverty line.

Obviously with a family of five your poverty line would be quite a bit higher.(I think it's like $28,000 or so, for a rebate of %23 of that).

Those numbers above are just ballpark guesses. I think the current real numbers can be found somehwere on the fairtax.org site.

I don't believe any statist would ever consider repealing the 16th Amendment *before* enacting a national sales tax. If it ever happens, both would have to take place at the same time, or the 16th Amendment would be repealed afterwards. Now, there's a reliable promise.

Would be fun to repeal the 16th first, though. The FedGov'd cave within itself after 60 days of no 'payroll witholding' cash flow. I can dream!

I think the Fair Tax is a huge step in the right direction. Let's face it, America isn't ready for the types of dream legislation we'd want in a perfect world.

If this bill eliminates the a statist department like the IRS, I'm for it.

I believe that everyone has the right to keep what they earn. But I also revere gluttony and irresponsible behavior. I think the Fair Tax helps curb this type of behavior. If you don't save and just spend, then you'll soon feel the effects.

Do you mean revile?

Any endorsement should have a condition that it does not take effect while income taxes are collected. Also, a spending plan that reduces govt. spending should be passed first to show good faith. I realize how unlikely this all would be. The era of big govt. is far from over, notably while the GOP controls the branches of govt.

If there would definitely be no income tax, guaranteed, then I say vote for it and here's why...

Will it kill anyone to pass it? I dont think so.

Will people be annoyed by it? maybe

Will some people be happy about it? Definitely

Will it downsize our current government? YES!!! The most important job we have right now as libertarians is to, with good judgement, cause a shrinkage of our government.

Less money out of our pockets because a portion of the tax bureau will be gone. Nothing huge though, just a drop in the pond, but with these small inroads is how we will win.

It's just one step closer to our ends. So long as my top sentence applies...

Alan,
Please explain how the "Fair Tax" bill (if enacted) will downsize our current government. I do not see how it will cut spending, eliminate or reduce the power of any federal agencies or departments, nor do I even see how it will reduce the amount of tax collected by the federal gov't. Even it's proponents say it is "revenue neutral"! Even with the "elimination" of the IRS, a new, specific agency within the Treasury Department will have to oversee this new tax, and as I've stated before, it is highly likely, given the tax history in America, and the use of taxation as a "social engineering" tool, that this tax will become just as cumbersome, complicated and intrusive as the income tax.
The real problem however, philosophically, with the enactment of this tax, will be the legitimization of the federal government taxing consumption. That means that every transaction is legitimized as fair game for the feds to stick their nose in. The general population already believes that "those who earn more should pay more", and with this tax "those who consume more should pay more". Thus, every part of our financial lives is now under the thumb of potential scrutiny of the federal government.
Let's work to ELIMINATE taxes, or at the very least, reduce the existing ones, and not enact new ones!

To Thomas R:
You said "Any endorsement should have a condition that it does not take effect while income taxes are collected" Let's look at the facts. No congress is beholden to any previous congress's promises, such as a new promise that "no national sales tax will be enacted while there is collection of an income tax.
If the Libertarian Party were to make such an endorsement as you state, it shows that our "collective" heads have been in the sand. Congress cannot even remember what "Gramm-Rudman" was. Can you?
Our goal should ultimately be to reduce and eliminate force and coercion in human relations. While the efforts to enact this tax is huge, I fail to see how it reduces or eliminates coercion.

This "Fair Tax" effort is a whole lot of a waste of time, for not a whole lot of positive result, with alot of potential negative result. It is a waste of effort, and all Libertarians and libertarians should reject this HR25. I sorely hope that the L.P. does NOT endorse this proposal. Join me in working to eliminate the withholding tax, which has much more potential to effect the changes that Libertarians are looking for.

Steve LaBianca writes: "Let's work to ELIMINATE taxes,