CALL FOR REBUTTAL: “DOUBLE TAKE – SISCO: SO-CALLED FAIRTAX IS ANYTHING BUT FAIR”
“Beware of the so-called Fair Tax Act proposed by congressional Republicans. Reject any such bill that Iowa Gov. Kim Reynolds might introduce. This is a scheme that purports to treat everyone the same but would pummel the working class.
”The act would eliminate income tax on individuals and businesses, wipe out payroll taxes and abolish estate taxes. To raise revenue, Republicans would introduce a hefty sales tax to be paid by end consumers — us. In a sleight of hand, they call it a 23% sales tax instead of the 30% tax it actually would be. (Out of every $100 sale, $23 would be paid in taxes, with the purchase being only $77.) A $50 box of diapers would cost $65. The tax would not apply to purchases by businesses or to investments.”
EDITOR’S NOTE: The FAIRtax rate is 23% on a tax-inclusive or discount basis and close to 30% on a tax-exclusive or markup basis. The rate replaces the taxes currently collected by the federal government from income, death, and, most notably, payroll taxes. Payroll taxes are the most regressive taxes in today’s tax inventory. Let’s go on:
”Low-income people, who need all their income to buy necessities, would spend a far greater share of their earnings on taxes than wealthy individuals, who save or invest much of their income. Corporations and the rich would get richer.”
EDITOR’S NOTE: The FAIRtax allows everyone to buy their basic necessities tax-free. Read on to see how this works.
“To make the proposal seem just, the feds would send households monthly “family consumption allowances.” But families with children would no longer receive the Child Tax Credit, so those who struggle would be even worse off. Moreover, Vox estimates this would cost $650 billion per year, more than the $402 billion the Biden Administration paid citizens during the pandemic and which Republicans still grouse about. With taxes on government purchases, the cost would be even greater.”
EDITOR’S NOTE: Ms. Sisco is slightly confused here. The FAIRtax Family Consumption Allowance is the amount of spending that is not subject to taxation under the FAIRtax. Every legal household receives what we call a prebate—a rebate given in advance. Rather than dismissing the Family Consumption Allowance as inconsequential, let’s see what it would actually do for a low-income family.
Suppose a family of four makes $40,000 a year and spends every dime on new goods and services. With the FAIRtax rate being 23 cents of every dollar spent, this family would pay $9,200 in FAIRtax at the cash register. The FAIRtax Family Consumption Allowance for a family of four would be $39,440 in 2023. The prebate is 23% of the Family Consumption Allowance. For a family of four, that would be $9,071. So, of the $9,200 in FAIRtax this family paid at the register, $9,071 of it is refunded to them via the prebate. The net result is that this family pays $129 out of their own pocket to pay the FAIRtax. Even if this family pays no income tax, they would still lose 7.65% of their income, or $3,060, to Federal payroll taxes. Low-income earners fare considerably better under the FAIRtax than under our current system.
If Congress wants to resume the Child Tax Credit, it would be free to do so. The difference is that, instead of spending through the tax code, Congress would have to make an appropriation for all to see. Ms. Sisco cites Vox as an authority for how much the loss of the Child Tax Credit would cost. Vox is a news and opinion website and not an economic authority. Ms. Sisco also disregards why the FAIRtax imposes a tax on government services. Taxing government services encourages privatizing government services by treating private and government-provided services equally. To continue:
“According to the Brookings Institution, “the proposed tax rate is far too low to achieve its sponsors’ stated goal of deficit neutrality.” Instead, it would add $10 trillion to the national debt over 10 years. In order to maintain government programs and to account for expected tax evasion, “of which the FairTax offers ample opportunities,” the rate would need to be 51%. Ouch!”
EDITOR’S NOTE: Brookings economist William Gale, who provided the methodology for the revenue-neutral rate for the FAIRtax, could not answer a question about his data selection. Our rate comes from the Beacon Hill Institute and MIT Professor James Kotlikoff. Our economist, Karen Walby, Ph.D., updated the study a while ago and came to a similar figure.
Furthermore, remember that the FAIRtax was designed and developed by a team of economists who were tasked with coming up with the best tax system possible that would raise the same amount of revenue as the income tax, payroll and self employment tax, and the death tax. They researched their creation extensively and concluded that a 23% inclusive rate would achieve revenue neutrality.
If Ms. Sisco is concerned about tax evasion, she should enthusiastically support the FAIRtax. The IRS admits that the income tax is evaded to the tune of roughly $1 trillion a year. Some studies have concluded that the FAIRtax would reduce the evasion rate by 95%.
“Furthermore, the system would be more complicated than proponents claim — what with credits, exemptions and annual registration requirements, plus the fact that states could still tax.”
EDITOR’S NOTE: This claim is preposterous. The statutes, regulations, and revenue rulings that make up our current tax code comprise well over 70,000 pages. The FAIRtax bill is just 133 pages long. Even if the FAIRtax does end up being “more complicated than proponents claim”, its complexity won’t even begin to approach the complexity of the income tax system it will replace.
The FAIRtax is simple to administer, reduces collection points by at least 80%, and requires only a simple form from retailers, an annual headcount from households whose members are lawful residents and have valid Social Security numbers, and employer wage reports. The system will become more complex only if future Congresses make it that way.
“If this measure seems extreme, that’s because it is. But it could become law if Republicans gain control of Congress and the presidency.
“So, what would be fair? A fair tax system would cover our expenses but would allow borrowing during national emergencies, such as COVID-19 and the 2008 recession.”
EDITOR’S NOTE: What in the FAIRtax prevents borrowing during national emergencies? Nothing.
“Second, it would be equitable, with everyone being taxed on their ability to pay. Progressively higher rates would apply to increasing portions of income, as they do now, but the top tier would be assessed more than the current 37% at, say, 40% or more. Social Security and Medicare taxes would apply to all earnings, not just those up to $147,000. And the corporate rate would go back up to the pre-2017 level of 28%.”
EDITOR’S NOTE: We thought Ms. Sisco complained because the FAIRtax would be complicated. What about the system she proposes? And Ms. Sisco thinks that corporations pay taxes. Corporations write large checks to Uncle Sam, but they pass these costs on, primarily to you and me, through higher prices. Yes, you and I pay corporate income tax. And why should we tax payroll at all to fund Medicare? Payroll taxes are regressive.
“A just system would do away with costly loopholes. ‘In 2018, deductions, credits, exclusions and other tax expenditures cost the government more than $1.3 trillion in revenue,’ Brookings reported. Capital gains would be taxed at the regular (usually higher) income-tax rate instead of the current 15%.”
EDITOR’S NOTE: If Ms. Sisco wants to do away with costly loopholes, she should embrace the FAIRtax. The FAIRtax has no exceptions to retail sales of new tangible goods and services. It features the Prebate instead.
“Companies would pay taxes on overseas sales and stop getting breaks on oil and gas drilling. The complicated pass-through business deduction would go away. Interest deductions on second homes would end. Employer contributions for health plans would be taxed. There would be larger fines on safety and environmental violations.”
EDITOR’S NOTE: Companies today domiciled in the United States declare their worldwide income to the IRS. This requirement makes U.S. companies uncompetitive with foreign companies, including those foreign companies who do business in our market. If Ms. Sisco wants to punish U.S. companies, she is succeeding. The FAIRtax makes U.S. companies competitive in world markets and brings jobs back onshore.
“Taxes are the cost of doing the nation’s business. Demand they be fair. Run like hell from the Fair Tax Act and lawmakers who support it”.
EDITOR’S NOTE: We agree with the first two sentences.
“Sisco is a retired adjunct instructor and a former newspaper reporter. She can be reached via email at bsiscoColumn@mediacombb.net.”
EDITOR’S NOTE: Our investigation indicates that Ms. Sisco was an adjunct instructor in public speaking at Loras College and the University of Dubuque. We were unable to find any credentials in economics. If you want to contact Ms. Sisco, feel free to do so. But keep your communication respectful and fact-based. Abusive and threatening language reflects poorly on all of us FAIRtax-ers. It is OK to hit hard, but hit fair.
I would love to read your response to Ms. Sisco.
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