William A. Alexander – 12/3/04

This page was last updated on December 4, 2004.

Don’t buy Bush’s free lunch; William A. Alexander; Beaver County Times; December 3, 2004.

I haven’t made up my mind about the “FairTax” proposal though I believe its promoters make some good points. The point of critiquing Mr. Alexander’s letter is to show the flaws in his knee-jerk “reasoning.”

Mr. Alexander constantly refers to President Bush throughout the letter, giving the impression President Bush is the source and/or a confirmed supporter of the FairTax proposal. That is incorrect. While President Bush has stated his desire for tax reform, the Fair Tax Act of 2003 proposal originated in Congress. The only comment I know of from President Bush on the FairTax proposal is, “it’s kind of an interesting idea that we ought to explore seriously.”

I’m no expert on the FairTax, so I suggest you refer to the FairTax web site.

Below is a detailed critique of the subject letter.

“Letter writer Jerry Corbin’s ‘fairtaxvolunteer’ Web site is part of a Republican conservative site. I couldn’t find the percentage rate of their proposed national sales tax.”

[RWC] Though he claimed the www.fairtaxvolunteer.org web site “is part of a Republican conservative site,” he provided no proof and I could find none on the web site. I don’t doubt a group of Republicans probably started the initiative; I just couldn’t find the link to “a Republican conservative site.” What difference does it make, though? A good idea is a good idea, and a bad idea is a bad idea, regardless of who proposes it. Would Mr. Alexander have a different opinion of the proposal if it were “part of a Democrat liberal site?”

Mr. Alexander didn’t look very hard for the proposed tax rate. Item five in the FAQ indicates 23%.

“A sales/consumption tax is the most unfair/regressive tax possible. The lower and middle classes will pay a disproportionate portion of income in taxes, while Bush’s base - the ‘haves and have mores’ - will pay less.”

[RWC] Why is a proportional tax “the most unfair/regressive tax possible?” Nearly every tax we pay is a proportional tax, including Socialist Security and Medicare taxes. The more you make or spend, the more you pay.

Mr. Alexander claims the “lower and middle classes will pay a disproportionate portion of income in taxes.” Apparently he believes it is fair for the top 25% of income earners to pay 83% of income taxes. The bottom 50% currently pays only 3.9%. Is that fair?

“Their argument is based on everyone paying their top income tax rate on their total income. But the income tax is a tiered system for everyone with initial, nontaxed deductions.

“The site’s sample returns show everyone paying less, which has to be impossible. It indicates poor people will receive monthly checks to make up for the sales taxes paid while ignoring that seniors will pay sales tax on items purchased with Social Security payments that are not taxed by income taxes.

[RWC] I couldn’t find the “returns” Mr. Alexander cited. Under the FairTax proposal, there are no tax returns. After reviewing several of the documents, I found no claims that everyone would pay less or that less would be collected. To the contrary, the documents claim the proposal is “revenue neutral.” That is, the revenue generated by the proposal would be the same as the taxes it replaces.

Despite Mr. Alexander’s claim to the contrary, Socialist Security income is considered taxable income by the federal income tax depending on your overall income.

“Who pays for the new bureaucracy to handle these repayments? These givebacks will ultimately be eliminated due to costs and those on limited incomes will get soaked again.”

[RWC] Mr. Alexander ignores the fact that most of the huge bureaucracy needed to support the current tax system – including the IRS – would be eliminated with the FairTax proposal. I suspect a small subset of the current IRS could be kept on to handle this task. That said, the issue may be addressed somewhere on the FairTax web site.

“Corporations will not pay any income taxes and will pass on any sales taxes to those buying their products. Corporation profits will increase and go to their stockholders (again Shrub’s ‘haves and have mores’).”

[RWC] Note how Mr. Alexander uses “corporations” when he really means “businesses.” Liberals like to use “corporation” instead of “business” because it conjures up images of large, faceless, evil entities plotting to steal our money. Mr. Alexander doesn’t want you to know local “Mom and Pop” businesses also pay income taxes and could also benefit from the FairTax proposal.

Earth to Mr. Alexander, businesses pass all taxes to consumers, including income taxes. Businesses never have and never will pay taxes because they are only legal constructs; they exist only on paper. Ultimately, only people pay taxes. So-called business taxes are no more than hidden taxes on people. Actually, Mr. Alexander should vigorously oppose business taxes because they contribute to the cost of products and services. Therefore, business taxes are “regressive” using Mr. Alexander’s definition of the term.

I don’t like to call people names, but anyone who calls any President “Shrub” deserves to be called a jackass, no offense meant to mules.

“Shrub’s tax cuts increased the portion of total income taxes collected from individuals and decreased the portion from corporations every year. The deficits have increased every year and will ultimately be paid for by taxation on future generations.

[RWC] Mr. Alexander forgot to mention the Bush tax cuts actually resulted in high-income earners paying an even higher portion of income taxes and more low-income earners had their liability completely eliminated.

Tax cuts don’t cause deficits, excessive spending does.

“There is no free lunch. The money to run our government must be collected by taxation from the population. If the rich and corporations pay less, the rest of us will pay more.

[RWC] The FairTax proposal doesn’t claim to provide a free lunch. As noted above, the proposal does not claim to reduce taxes and even states it is designed to generate the same revenue as current taxes.

“No one making less than $100,000 to $150,000 per year should believe that a national sales tax would decrease his total tax bill.”

[RWC] To understand the FairTax proposal, you need to take the time to read the documents on the web site. You can’t get a fair picture from “sound bites” and excerpts taken out of context.