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A Very Flat Income Tax Makes Sense, the FairTax Does Not

Flat Tax
A Very Flat Income Tax Makes Sense, the FairTax Does Not

Republicans should support tax reform that stands a chance at passing, and working.

Congress may soon consider meaningful tax reform. Paul Ryan, the expected next Chairman of the House Ways & Means Committee has suggested in his budget, that both a flat income tax and the FairTax® should be considered.

I am a proponent of the flat income tax solution, and in this brief article I’ll set forth my summary comments. We are discussing tax laws, which by their very nature are complex matters and the devil is in the details.

To be enacted, change must be evolutionary not revolutionary.

If Congress enacts any tax reform, it will be an evolutionary Flat Income Tax. H.R. 1040 (S. 173 which differs slightly) offers a 17% single rate tax with about a $40,000 exemption for a family of 4. Business Income would be taxed on a simple basis to the owners. I suggest a 10% rate and no exemptions. It would repeal today’s Income Tax and Estate & Gift Tax, but not the SS/Medicare taxes (as the FairTax would). This at least retains the skeleton of today’s tax code while otherwise effectively gutting it.

People could file their tax returns (including business income) on 1 page in less than an hour, without the need of a CPA and no one would ever waste time and money restructuring their lives around a 10% tax. Those who have been paying tax would also think the tax system now operates more fairly.

No-one can predict future economic benefits. However, I think when people are freed of the hassle, time, and cost of dealing with their taxes, and when they realize they get to keep a full 90% of every dollar they earn, there will be an explosion of economic activity that will produce a great number of new jobs (especially if Congress ever rediscovers its backbone and reinstitute works requirements for welfare).

If taxpayers contact their representatives in Congress and tell them to Co-Sponsor H.R. 1040 with my amendments, we can achieve major change that would simplify our lives, save us time and money, greatly improve the economy, and reduce federal welfare expenditures.

The FairTax will never be enacted.

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If the people who currently support the FairTax would surrender their idea that will never be enacted, those of us who support this more evolutionary approach would be more effective.

The FairTax is marketed by Americans For FairTaxation (AFFT), a national grass roots lobbying group. Its marketing consists of the repeated and continual churning out of superficial deceptive materials, supplemented by motivational emotional appeals.

As is required of any tax reform proposal, the FairTax claims to be able to raise the same amount of revenue (to be “revenue-neutral”) as the Congressional Budget Office (CBO) currently projects. However, FairTax economists assume there would be absolutely no illegal evasion or legal avoidance (including consumers spending less and saving more), which is patently absurd. Independent financial experts predict that evasion and avoidance would skyrocket, requiring a large increase in the 30% rate, or perhaps a new Income Tax to make up for the lost FairTax revenue.

The combined federal, state & local sales tax rate of 40-70% would spark a consumer revolt that would destroy our retail-sales sensitive economy, and create a giant new “Black Market.”

Notwithstanding the FairTax claim that it’s transparent, the FairTax contains approximately 15% in hidden taxes – mainly from additional federal, state & local taxes that will have to be enacted in order for those governments to obtain the funds needed to pay their required FairTax for their purchases.

While people would get a raise with the FairTax – taking home their full pay and paying no Income or SS/Medicare taxes – consumer prices would go up by 25-30%!

New Homes would cost almost 40% more, and down payments would be nearly 50%. That’s because banks would not lend on the 40% sales taxes, and would require the buyer to pay those up front, along with the standard 20% down payment.
FairTax supporters market their measure as being extremely “progressive.”

The FairTax redistributes more wealth to the poor via its prebate – a monthly check based on generously “assumed” amounts of poverty level spending.

The bottom line is that poor people:

  1. would pay no tax to support government operations,
  2. would pay nothing for their personal SS & Medicare benefits, and
  3. would receive a large tax welfare check.
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The FairTax claim that the IRS would be abolished is untrue.

While the IRS as we know it today would apparently be eliminated, a new IRS called the STAA would appear, and it may be even worse if it decides to audit consumers. Far worse than that is the fact that the FairTax would act as a Trojan Horse for a new Income Tax to supplement the FairTax. That is, while the FairTax contains a laughable Sunset Clause by which it purports to disappear if the 16th Amendment is not repealed in 7 years, Congress has plenty of time to repeal that clause and — while the 16th Amendment is still in effect — enact a new Income Tax.

In spite of (or perhaps because of) this risky loophole, after 15 long years of marketing, The FairTax has only been able to gain only 75 House Co-Sponsors, many of whom probably would not even vote for it if it ever did come to a vote (which is unlikely in any case).

At sponsor Rob Woodall’s (R-GA) urging, the Joint Committee on Taxation (JCT) is currently “scoring” the FairTax (i.e., determining if it would raise at least the same amount of revenue as the Congressional Budget Office’s (CBO) projects today’s taxes would raise over the next 10 years). Interestingly, JCT reports only to the bill’s Sponsor, not to the public, but Rep. Woodall has suggested to FairTax supporters that changes may be necessary – an indication that the FairTax is “scoring” far short of the requirement for revenue-neutrality. In my opinion, that’s no surprise given its presumption that no one will evade or avoid paying, which as I’ve said, is wholly unrealistic.

To learn more about the detailed arguments against the FairTax, please visit my website where I have published several articles that dig much deeper into this issue than I’m able to do here.

Stephen C. Edridge is a retired lifetime tax consulting professional and attorney (JD, LLM in Taxation, CPA), with no financial stake in ANY tax system. You can contact Stephen here.

About Stephen Eldridge 1 Article
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43 Comments on A Very Flat Income Tax Makes Sense, the FairTax Does Not

  1. I count at least 5 unsubstantiated assumptions about HR-1040. Does it score revenue neutral with a $10,000 per person deduction? It never has. It is not a complete tax plan. With the equivalent of a 15% payroll tax that 17% tax rate is more like 32%. Does HR-1040 eliminate the payroll tax? I don’t think so. Does it allow those gaming the system to opt out of the flat tax? I think it does.

    • Randy,

      Well at least we now know that you can count all the way up to 5.

      While I have not personally “scored” HR 1040, either with or without my amendments, I offer you the following;

      1) Your fellow Fairtax propagandist, AFFT Officer Steve Curtis provided the numbers (in a deceptive attempt to prove my plan was not revenue neutral) that in fact proved that my bill was in fact revenue neutral (I have not checked him). BTW, where did you get your $10,000 exemption – HR 1040 and S. 173 have higher basic exemptions?

      2) I have an escape clause which provides insurance (I hope) that if for any reason my bill does not score as revenue neutral, the starting tax rate could be higher than 10%, but that any “excess” revenues over the baseline must be devoted to reducing that higher rate, at least, down to 10%.

      3) Only on Planet FairTax will the the FairTax ever score as revenue neutral, because ONLY on Planet FairTax will there be ZERO evasion and ZERO legal avoidance (savings), as was “assumed” by the nation’s “top economists”
      as part of their “research”.

      No the Flat taxes do NOT repeal the SS/Medicare taxes and they SHOULD NOT. These programs already redistribute enough wealth and people should be funding their own benefits.

      SS/Medicare “taxes” are not really taxes but your personal payments for these specific benefits. As such it is disingenuous to add 15% to HR 1040’s 17% rate or to my 10%rate in any event. The employee’s share is only 7.65% (not the full 15.3% that you deceptively offer) and those taxes do not apply to unearned income (ignoring Obamacare taxes).

      HR 1040 (I believe) has a provision which allows people to elect the current tax system – it was put in just to accommodate those people who have structured their entire affairs around the current system (perhaps to give those poor taxpayers a break and make the change less traumatic). I expressed my unhappiness with that provision to the Sponsor’s office, not on the grounds that someone might be able to pay a little less tax, but because IMHO, it would be absurd (wastefully expensive) to maintain the current system.

      If you would like to try to be more explicit and state clearly what you claim are the 5 “unsubstantiated assumptions” that you claim I made, I can then make sure that I have responded to each of your comments.

      If this is the best that you and AFFT can do to attack the Flat Tax, I submit that you lose the argument. Your beloved FairTax has numerous fatal flaws that you people cannot properly defend.

      • To say that there is an “employers’ share” of SS/Medicare is, itself, deceptive. WE end up paying the employers’ share, hidden in the prices we pay. FairTax eliminates the regressiveness of this taking from paychecks by including it in the rate. Any increase would result in a general rate increase, under a FairTax, which apportions based upon spending above the poverty-level ceiling and is subject to individual choice to initiate a tax liability. FairTax, indeed and profoundly removes incurring a “tax liability” simply by showing up for work, and punching in. FairTax removes workers as “servants” to politicians (which is what taxing income effects), and restores the proper relationship: citizen-SERVED, politician-SERVANT. You want to stay a SLAVE, Stephen? Apparently so. Synopsis of FairTax Research Conclusions

        • Daar,,

          I recognize you as a Fairtax “true believer” who does not have an open mind, but I will attempt to deal with your comment.

          Exactly which comment of mine about the employers’ share of SS/Medi taxes are you referring to so that I can see the context of that comment and better understand your comment. In general, i mention that in the context that AFFT “asumes” that 100% of that savings would be used by employers to REDUCE PRICES, and disagree entirely because I agree with the economic concept that employers would view that as a cost of labor and would use that savings to fund employees raises.

          I agree with your view that employers do not bear their share of those taxes, nor their own income taxes, nor their employees income taxes – these are all passed on to customers in higher sales prices. I just don’t understand the point you appear to be criticising me about.

          Ignoring most of the rest of your passionate rhetoric, you rant the Socialist emotional argument that we are SLAVES to the Income Tax. Noted economist Murray Rothbard has said that a consumption tax is no more noble than an income tax – it is a penalty for the privilege of living.

          You champion the Socialist goal of “ending regressivity” i.e., MORE wealth redistribution.
          Sorry, Comrade, I want to save the American Republic.

  2. The title and the content of the information provided my Mr. Eldridge in this editorial is deceptive, to say the least. I won’t go into detail since I know that Mr. Eldridge will likely even refute my simple example: His statement that AFFT is a national grassroots “lobbying group” is very misleading. AFFT is a 501 (c) (4) organization designed to educate and communicate about the Fair Tax. The organization is indeed grassroots-based and consists of thousands of volunteers like myself who feel passionately about the need to reform our broken tax system. AFFT is not a superPAC or any other sort of political action committee. We are grassroots, through and through, and we all care deeply about maintaining our freedoms and liberties and saving this great republic. When the income tax system was established by creation of the 16th amendment in 1913, I’m sure our Founding Fathers began to squirm in their graves. I’m convinced that if they saw what a disaster our system has evolved into, with over 20,000 pages of tax code added since 1995, they would roll over in their graves in perfect unison. The creation of the income tax system was a paradigm shift in 1913; we need a new paradigm shift in 2014!!

    • You, and many others, are entitled to your solution – as is Mr. Eldridge – with the most important issue being that we recognize the need for reform, and like all good solutions it will have to be a compromise that can be legislated. Mr. Pruitt’s article about the Fair Tax and Mr. Eldridge’s about a flat tax both espouse solutions worthy of consideration, and civil debate among serious people with a genuine desire to fix a serious problem.

      • I agree with you 100%. Any and all of the tax reform proposals will need to be debated by Congress and by the people. That is what is so awesome about all of us having the freedom to speak out and express our opinions, as you have done so well in your response, Tom.
        Thank you.

      • Tom,

        Thank you for your comment.

        I hope you will take a look at my website sceldridge.wix.com/sceldridge to begin to understannd why I believe that the FairTax would be a disastrous plan and I don’t think ot can be saved.

        A colleague has suggested a solution, but one I do not think would work – it would NOT repeal the SS/Medicare taxes, there would be no Prebate and govts would NOT have to pay it. I think the tax rate would still have to be too high.

        I do NOT want to give the rascals in Congress BOTH taxes to manipulate (as the FairTax would surely lead to). Thus, a plan like 9-9-9 was dangerous, IMHO (and it was admitted to be a stepping stone to the disastrous FairTax).

        I see the only practical (least impractical), evolutionary change we can make is to retain the skeleton of the Income Tax but make changes that gut it, tame the IRS, allow people and business to do their taxes themselves in an hour, and keep 90% of everything they earn – sounds like a big winner to me.

    • Ken,

      AFFT is exactly a national grass roots lobby group, I understand they have an lobby office in D.C.

      They lobby at the federal and State levels to get the FairTax enacted.

      Why are you ashamed to admit exactly what AFFT is? Do you not understand that AFFT is lobbying?

      I agree the current system is a complete disaster. We need a practical, evolutionary way to fix most all of the problems with it – that is, my very Flat Income Tax.

      • Steven, You are indeed very clever with your language. Using your definition, I would then conclude, accordingly, that every single American citizen expressing his or her First Amendment rights of free speech would be considered a grass roots lobbyist, correct? Most of us common folk (not lawyers), instead, think of lobbyists as the approximately 31,000 very- -highly-paid former congressional staffers and former congressman who have much too much influence on Congress in Washington, DC and the host of other well-paid lobbyists at the local and state level. We consider ourselves freedom-loving Americans who volunteer our time to support movements that we think will more effectively and less expensively save our great republic.

        Just as with the ineffective health care reform as seen with the disasters of Obamacare, “nibbling around the edges” of tax reform as you suggest in your evolutionary Flat Tax proposal does not provide the comprehensive tax reform that the majority of Americans want. The Flat tax would be the same type of “incremental” or “evolutionary” change as you put it in your remarks–not the paradigm shift that we are suggesting to pull the roots out of the deeply imbedded and current corrupt tax system and to replace it with a transparent, fair solution for everyone.

        • I didn’t think you were a lawyer. Yes, people who live in Gucci Gulch are lobbyists, but so are you. You (AFFT) are pushing a SPECIFIC piece of legislation via your office in D and via pressuring Congress and State govts on this SPECIFIC piece of legislation.That is very far from people expressing their 1st Amend rights in general. The fact that you are not paid does not mean you are working to enact SPECIFIC legislation. I am sorry you find that I am “too clever with words” – I am a reasonably well educated lawyer/CPA – one core thing we do is to make relevant clear distinctions in ideas presented.

          IMHO, you appear to be so angry at the current tax system that you judgment is clouded.
          Changing to a VERY Flat income Tax (10% rate, no personal deductions, business income taxed on a simple basis to owners – no separate corporate tax – 1 page tax return you you do without a CPA, keep 90% of everything you earn) is by no stretch of the imagination a small “incremental’ improvement – it would be a sea change that guts today’s tax code and neuters the IRS.

          And, if you think rationally and maturely instead of passionately, you will realize that Congress is far more likely to enact evolutionary changes, not revolutionary ones (even Progressives understood that it would take a lot of time and patience – its taken 100 ears thus far – to reach their goals. Congress is looking at Flat taxes now, ones that are more Progressive than mine or even HR 1040 – my VERY Flat Tax would be a DRAMATIC change in the tax law that would solve virtually all the problems of today’s awful system.

          IMHO, your great passion ignores reality and good sense. Such decisions should be made rationally not emotionally.

  3. Any income tax is based on crime. It is government taking that which it doesn’t own. I can understand a person paying a tax for some transaction. What you earn is your first belonging. To take a person’s belongings without recompense is criminal. It is theft. Our Founding Fathers knew that, and twice forbade an income tax. Some say an income tax is voluntary. When did you volunteer?

    • Al,

      I know you are a long-term FairTax propagandist from WI (State Director?) and that you have much passion for it.

      I it unproductive for me to try to talk a person who FEELS that a tax on income is a CRIME.

      You say it is “govt taking that which it does not own” – same for the FairTax.

      You are being “compensated” (cough, cough” by receiving govt “services” – think about the US military protecting your life and liberty (and try to forget about the rest that’s wasted.

      The founders did NOT forbid an income tax – they said one would have to be APPORTIONED.

      I won’t play that word game – it is not effectively voluntary.

      Noted economist Murray Rothbard said, in effect, a consumption tax has no moral superiority over an income tax. It is a penalty extracted for the very privilege of living.

      • I can always tell when you get “shook up,” Steven, because you then make a whole slew of typographical errors. Just relax and make your points without becoming too flustered when you insinuate that the government’s withholding hard-working Americans’ money is not really criminal. Americans across this great land will be able to see the truth, the whole truth, and nothing but the truth (do you lawyers ever believe that to be possible?) when they see the movie, “Unfair:Exposing the IRS,” showing in around 700 theaters across the country
        on October 14 at 7 pm local time. More information can be found at http://www.unfairmovie.com and you, Steven, can actually find out how people feel about the Fair Tax by looking at the results on http://www.popvox.com showing a current national approval of the Fair Tax at 93%, which will be growing exponentially following the release of the movie! And remember, Steven, the people always have more power than the people in power!!

        • Ken,

          Don’t be presumptuous.. Don’t confuse my generally poor typing skills, difficulties with websites, the lateness of the hour, my declining energies and eyesight, with my being “shook up” by your otherworldly comments.

          When you say that I “insinuate that the government’s withholding hard-working Americans’ money is not really criminal” you expose your extreme ideology and closed mindedness.
          I do not merel “insinuate”, but firmly do NOT view paying Constitutionally NECESSARY taxes as STEALING from us(does your condo STEAL from you when it collect maintenance fees?).

          I do consider it STEALING when govt takes our money to redistribute to the poor (to buy their votes) and to otherwise fritter away foolishly or to spend on any federal activity NOT empowered to it by the Constitution.

          I guess you are too unsophisticated and naive (i.e, the perfect FairTax target audience) to understand that POPVOX is NOT a scientific poll but a well used persuasion tool used by AFFT.
          For you to suggest that 93% of all Americans favor the FairTax is an OUTRAGEOUS fraud – but one which I find typical of Fairtax marketers.

          You are also obviously too unsophisticated and naive to perform the analyses FOR YOURSELF (as I have) that are necessary to understand that the FairTax would be a disaster, and simply rely on raw numbers of other unsophisticated. naive people who have merely drunk the Kool-Aid.

          Ken, I have seen more than enough of your writing (but welcome more) to see that you are a closed-minded FairTax ideologue (sad to say). There are many such people in the FairTax cult.

          I write for those people whose minds are still OPEN and want to learn the truth. I welcome all those who would like to have the FairTax propaganda exposed.

        • Passage of the 16th Amendment meant that we were no longer a nation of laws. The income tax denies equal treatment under the law. The IRS continuously violates the 4th, 5th, 6th, 7th, and 8th Amendments. Collecting the income tax requires crimes to be committed against citizens of the United States.

        • Al,

          I understand your great commitment to the FairTax and are closed-minded to any thought that it might be the wrong answer.

          The FairTax does NOTHING (it cannot) to eliminate the 16th Amendment (other than its laughable Sunset Clause).

          Al, why don’t you take the advice of Leo Linbeck, III (son of the FairTax’s “father”, Leo, II) who told the faithful that they should forget the FairTax because ANY specific proposal would draw criticism, which criticism IMHO could be countered if it were a GOOD proposal like a Flat Tax.

          Leo, III went on to tell people that instead people they to work directly on repealing the 16th Amendment – IMHO, don’t hold your breath awaiting that repeal.

          I guess he was suggesting that, with repeal pending, Congress would wake up and realize they would have NO tax system and would then rush in to pass the FairTax

          Shortly thereafter, Leo, III and the founders left AFFT and turned it over to its passionate cult members around the country.

          Maybe you should take a hint from Leo, III.

        • I found no content to your last post. Certainly there was no effort to respond to mine. Are you getting old or lazy?

        • You have yet to respond to my assertion that the 16th Amendment means we are no longer a nation of laws. How can we let a law stand that contradicts several portions of our main law? Your suggestion that I do what someone else (Leo Linbeck III) has done suggests that I have not done the research to validate my support of the FairTax. You mentioned the term “cult members.” This is not civil discourse. Your “reality” is simply something you have imagined all by yourself. Your fantasy of a flat income tax will never happen nor would it last long in your imaginary world.

        • This is in reply to Al Ose’s last comment “I found no content to your last post. Certainly there was no effort to respond to mine. Are you getting old or lazy?”

          Al, we are all getting old.AND you did not read AFFT Director and Co-Chair of the Communications (i.e., Propaganda) Committee, Randy Fischer’s comment to me about having a civil discussion.

          Please try to use a little more explicit language if you can.

          Do you mean you found no words there – i.e., that it was blank on your computer?

          I did not respond to the specific 4 items you mentioned because it would be a waste of time trying to write an essay for each of your political throw-out lines. In reviewing them, you strike me as a “tax protester” who resists the federal govt’s attempt to collect today’s taxes. While I am mildly interested in reading the specifics they offer about illegality of today’s income tax, I personally believe that it is a waste of time and energy for me to pursue that – I chose to live in he reality that today’s tax system will be enforced until we can change it LEGALLY, to a much more manageable Flat Income tax.

          You wrote, e.g. ” After the 16th Amendment we are no longer a nation of laws”. What the heck does that mean – we are still a nation of laws. IMHO, yours is a political scream not deserving of the time and energy to write a dissertation in response (especially to a person like you who has a firmly closed mind).

          The same for ” The income tax denies equal treatment under the law.” Yes, it un-Constitutionally redistributes wealth, as would the FairTax. If you want to make a more specific comment, I might find that worth responding to.

          ILLEGAL acts on the part of the IRS should be stopped TODAY, without any consideration of the FairTax. AND, as I explain in my response to AT Secy Jim Bennett, your FairTax will saddle us with BOTH Taxes (and also has its own IRS, i.e., the STAA which may audit consumers.

          Lastly, you write, “Collecting the income tax requires crimes to be committed against citizens of the United States.” another wild accusation which i will not chase without you getting more specific AND again this would all come back with a NEW Income Tax
          facilitated by your FairTax

        • Al,

          This is in reply to your comment of Sept 23 at 8:36 PM

          You obviously did not read my last response to you.

          With response to this point I wrote “You wrote, e.g. ” After the 16th Amendment we are no longer a nation of laws”. What the heck does that mean – we are still a nation of laws. IMHO, yours is a political scream not deserving of the time and energy to write a dissertation in response (especially to a person like you who has a firmly closed mind).

          Now it appears that you add just a tad of explanation, which I still find incomprehensible and a political rant – you will have to try to explain yourself somewhat better than this. You write “How can we let a law stand that contradicts several portions of our main law?” Off the top of my my, I do not know what you are arguing. The Constitution prohibited a direct (income) tax unless it was APPORTIONED. The 16th Amendment eliminated the apportionment required – I will not argue that it was not legally enacted. A LEGAL Amendment can change the Constitution. If you are somehow arguing that the 16th amendment is invalid because it cannot change the original Constitution, then IMHO, you are not only out in Left field but out of the ballpark.

          You wrote, “Your suggestion that I do what someone else (Leo Linbeck III) has done suggests that I have not done the research to validate my support of the FairTax.”
          No, that is not what I was trying to suggest (but I am curious as to what is your education and professional experience and exactly what research have you done). I am confident that Leo, III was extremely well schooled (in part by his Father, Leo,II) in the FairTax (likely much better than you are) and made a wise decision to drop it and the AFFT – I suggest that you follow his wisdom.

          I believe the FairTaxers like you are “cult members”, which description is intended to illustrate, not to personally insult anyone (same for saying you have consumed too much Kool-Aid – I do not insult the innocents who drank the Kool-Aid) Samuel Clemens wrote, “It is much easier to fool someone, than to convince them that they have been fooled”. Your minds are CLOSED, you will not read nor process anything that disagrees with your passionately held beliefs. FairTaxers spew rhetoric and propaganda, they denigrate and insult – they do NOT engage in a SUBSTANTIVE debate on the issue and they run and hide from debating me. That IMHO is s “cult” that simply “believes” – it does not think and analyze.

          You wrote, “Your “reality” is simply something you have imagined all by yourself.
          Your fantasy of a flat income tax will never happen nor would it last long in your imaginary world.” Well, Al, I did not know that you can read the future and I believe that it is YOU who lives in a fantasy world. I think that we will get a Flat Tax, but perhaps not as flat as I (or Rep. Dr. Burgess who Sponsored HR 1040 – 11 Co-Sponsors) would like it. IMHO, it is a whole lot closer to reality than is the FairTax (and it would be a very good idea, while the FairTax is a very bad idea).


  4. DEAL BREAKER: No income tax of any sort that requires a tax return will ever collect revenue from the tens of millions of scofflaws who do not file or pay tax now. You’re an illegal, or a pimp, or a pusher, or any number of other underground businesses. You don’t file a return or pay tax now. And you will not start to file or pay tax just because the rate is flattened to a single rate. This is not rocket surgery. As long as the tax is on income and requires you to tell the government how much you make, you will not. Maybe you will get caught. Maybe not. But meanwhile, you are part of a tax gap of nearly $1/2 Trillion every year in uncollected revenue that the rest of us have to make up.

    Only a consumption tax – like THE FairTax – will collect taxes from those who presently cause the tax gap. No flat income tax of any sort can do that. NONE. PERIOD. End of discussion. There is a better way. Get it done.

    • William,

      Not exactly!

      2 UT economists commented on that in their review of the FairTax’s impact on the States.

      They opined that criminals, tourists, illegals, etc. CURRENTLY pay the 23% “embedded taxes” that FairTaxers tell us about.

      They go on to say that these groups will pay the same amount of FairTax (no more).

      I add that we would have 300+MM NEW TAX criminals all trying to evade paying that outrageously high 35-45%, in-your-face combined retail sales tax. The revenue loss from this would be many times any potential tiny (the 2 economists say NONE) amount of additional net tax that criminals, etc., might pay.

      Under my Flat tax these taxes would still be “embedded” and all groups (that buy legally) would pay them.

    • Randy,

      I am glad that you made this comment and thank you for doing so,. I would very much enjoy a good civil conversation with you and your followers.

      In general, I have been subjected to a myriad of UNPROVOKED nasty, denigrating, insulting ad hominem attacks by AFFT members and followers, made ONLY in response to my substantive criticisms of the FairTax (I understand that that may be very upset at the possibility that they are very wrong, but it is wrong for them to lash out at me personally). I start out criticizing the FairTax and its marketing claims and tactics – AFFT attacks me personally.

      Specifically here, when you start off by saying that “I count at least 5 unsubstantiated assumptions ,,” that is not a civil opening but one that is accusatory, denigrating and propagandist.

      In my own personal style, I make an attempt at humor instead of just calling you a fraud. I felt that your making that charge, and then failing to clearly outline 5 things you thought I failed to substantiate (whatever that means in this context) is to me an objectionable acts of superficial propaganda that is effective on weak minds. I try humor to dissipate the effect of your propaganda.

      Yes, I see how you might find that insulting, but understand that i did not mean it to denigrate you, but for people to laugh at your wisecrack, “5 unsubstantiated …”.

      Again, I thank you for making this comment. Let us make the effort to have civil, courteous, friendly-opponent intellectual duels, for the benefit of all Americans.

      I tried to reach out to call AFFT members to establish such civil dialogue with very little success – I get the sense that AFFT has demonized me. But, I am an eternal optimist, so let’s try again – my phone number is 423-532-7337.

  5. Why I Have Graduated from the Flat Tax

    Mr. Eldridge’s piece calling for a flat tax is an idea from which I have graduated. While a flat income tax would be an improvement to today’s tax code, there are seven principal reasons why the FairTax(R) is a better idea. The FairTax(R), to recap, replaces Subtitles A, B, and C of the Internal Revenue Code with a national tax on all services and all new tangible goods sold at retail to a consumer in the United States – no exceptions. The rate is 23% tax-inclusive (30% tax-exclusive).

    The FairTax(R) brings in at least as much revenue as the taxes it replaces and leaves the spending side of the federal ledger intact – thereby sidestepping that debate. The FairTax(R) phases out the IRS over a three-year period and requires records needed to administer the “ABC” taxes to be destroyed – except those needed to calculate Social Security Benefits and to support ongoing litigation. A Family Consumption Allowance from the Social Security Administration assures that no household whose members are lawfully in the United States pays tax on essentials. The new tax is collected by retail merchants and state tax authorities who enter into a compact with the federal government. Merchants and state authorities, each, received 25 basis points for their trouble.

    Here are the seven reasons why the FairTax(R) tax is a better idea than any flat income tax:

    1. The FairTax(R) puts Social Security and Medicare on a funding base that is twice as large, substantially more stable and growing. The flat tax does nothing for Social Security and Medicare.

    2. The FairTax(R) facilitates responsible budgeting because its tax base is more stable. The Flat Tax continues the cycle of overspending in times of economic expansion and failing to cut back in times of recession.

    3. The FairTax(R) stops the taxation of exports and reinvested earnings. The flat tax continues to tax these items and hampers economic growth.

    4. The flat tax is a harder political sell because it does not get at wealth. The flat tax taxes wages, unemployment compensation and pension income, but – albeit for good reason – the flat tax leaves investment income untouched. The FairTax(R) taxes wealth at the point in time where it is voluntarily consumed.

    5. The flat tax is likely to morph right back into today’s Leviathan of a code. The flat tax keeps the IRS. The The FairTax(R) makes it harder for Congress to re-introduce the income tax because it dismantles the IRS and sunsets in 7 years if the 16th Amendment to the Constitution is not repealed.

    6. The flat tax increases the likelihood that we could end up with BOTH an income tax and a VAT. The The FairTax(R) makes that likelihood very remote.

    7. The The FairTax(R) taps the underground, illegal and shadow economies at the point where those classes of people consume. The flat tax does nothing for the underground, illegal and shadow economies.


    Let’s review AFFT Secy, Jim Bennett’s comments.

    In summary, all Mr.Bennett has done is to throw out a bunch of AFFT 1 line claims (that require somewhat more explanation to expose) and also evade answering several of the major specific criticisms that I level at the FairTax, including 1) the shock of 35-45% retail sales taxes, 2) the appx. 15% additional taxes hidden mostly in federal & state govts having to pay the sales tax and 3) the fact the new home buyers will have to need a down payment of nearly 50% of the price and will be at risk of loss on value under one of at least 3 future tax scenarios,

    Mr. Bennett says the FairTax applies to NEW goods. That may be a cruel hoax because the exemption for “used” property may be impossible to claim, as a practical matter – See Sec. 2(a)(16)’s definition of the requirements to qualify for that exemption.

    At least Mr. Bennett hides the FairTax’s true rate, just a little less than AFFT normally does by saying (deceptively) that its a 23% “tax-inclusive” rate, but then adds “30% tax-exclusive”. Perhaps this is AFFT’s tepid response to all the criticism they have received that trying to sell it as a 23% SALES tax. It is a 30% SALES TAX as we all understand SALES taxes – we have never used tax-exclusive or inclusive terminology. AFFT’s 23% sales tax has and fooled a lot of people and their new language is still deceptive as many people will gloss over that without understanding its implications. AFFT just cannot bring itself to be fully honest with people and admit that it’s a 30% SALES tax (they are afraid of that higher number).

    He claims that the FairTax is revenue neutral i.e., it brings in the same revenue as the taxes it replaces. That is based upon AFFT’s “peer-reviewed” economic “research” performed by the nation’s “leading economists” that make the INCREDIBLE economic “assumption” that there will be ZERO evasion and legal avoidance (e.g., savings). Thus, revenue-neutrality would occur ONLY in the minds of AFFT.

    While the bill purports to superficially defund the IRS, it creates a NEW IRS (i.e., the STAA) which may decide to audit CONSUMERS, which would be more invasive. Far worse, the FairTax is a Trojan Horse for us winding up with BOTH taxes – see my reply to his point 6, below.

    The FCA (prebate) goes much further than merely assuring the poor pay no tax (as if we all agreed to that goal – I do NOT). The FairTax assures that the poor 1) pay nothing towards our general tax burden, 2) receive their personal SS/Medicare benefits for FREE, and 3) RECEIVE a large tax welfare check. See FT Increases Tax Welfare, http://media.wix.com/ugd/acdb03_c09d69364d4147af82d113eaccf9f1de.pdf

    As to his 7 points:

    1. What AFFT Progressive word twisting is saying is that it no longer has to rely on SS/Medicare taxes and can grab any other tax revenues to pay for these programs which should be self-funded by beneficiaries in the first place. It is yet another step in the Progressive-Socialist gradual move towards SS/Medicare for all regardless of whether you pay for it (remember, the poor pay ZERO) and even regardless of whether you even work for it (FairTax “invites” fraud in reporting of SS Wages by eliminating the tax “penalty” for reporting them, as noted by other authors as well).

    2. Budgeting has never been a problem for Congress before. This is a very superficial claim. The Flat Tax (or today’s Income Tax) does NOT in any manner contribute to OVERSPENDING – that’s Congress’ fault alone.

    3. My Flat Tax would impose only a 10% on exports, which represents a reduction in current taxation and an aid to exports.

    4. Here is a continuation of AFFT’s hard Progressive sell (see FT’s Progressive-Socialist Goals http://media.wix.com/ugd/acdb03_c1b43654db854b5589ad497c7ea834fe.docx?dn=%22FairTax%27s%20Progressive-Socialist%20Motives%208-22-14.docx%22

    What AFFT is saying is that they must PUNISH wealth is order to satisfy the bloodlust of the Progressive-Socialists in Congress (Sponsor Rob Woodall mentioned this in an interview).

    While current bill HR 1040 does not tax investment income, I would add some items of investment income (not dividends because that would be double taxation). It makes sense to encourage investment in businesses to grow the economy and jobs.

    At the end of the day, AFFT hates private enterprise and those who succeed – they advertise their Progressivity proudly and passionately.

    5 & 6. His point 5 spills into point 6 so I will cover them together.

    While Mr. Bennett declares that the Flat Tax is likely to morph back into today’s monster, I know that he has been made aware several times that his fellow AFFT Board member, Steve Curtis was challenged with the very same vulnerability with respect to the FairTax. and responded that with ANY tax system, we must carefully monitor Congress to prevent that (this is a rare time when I agree with him fully).

    Yes, the Flat Tax keeps the IRS, but neuters it. With (under mine) no personal deductions and very simplified business deductions (and ONLY commercial activities taxed), the IRS has very little to do (misuse by the White House of the IRS, OSHA, EPA, Justice Dept, etc. is a wholly different subject).

    The FairTax’s own IRS may decide to audit consumers. Sec 101(d) provides the legal basis for such audits, including a request to produce FairTax receipts.However, this may be delayed until after the next big and for more serious step, described immediately below.

    AFFT claims that he Flat Tax will lead to BOTH taxes (without explaining exactly why) and that the FairTax will not (again without explaining why).

    The FairTax contains a laughable Sunset Clause (Sec 401), whereby it purports to “commit suicide” if the 16th Amendment is not repealed in 7 years. Many of you may recall the Sheriff in Blazing Saddles who when confronted by an angry mob, puts his gun to his head and threatens to shoot if they don’t back off. When he reaches the safety of the jail, he says. “Boy, are they STUPID (for believing he would pull the trigger)”. Congress will surely repeal this laughable “suicide pill” and with the 16th amendment not going away any time soon, Congress will be free to enact a NEW Income Tax (bringing back the old IRS which has been working for the STAA) – Congress’ “excuse” will be the terribly short tax revenues occasioned by massive evasion/avoidance that FairTax economists “assumed” would be ZERO.

    The Flat Tax would continue to keep it uncomfortable for Congress to enact a national sales tax for the very first time – a tough political hurdle for Congress to overcome.

    7. I Know Mr. Bennett has read this many times, but good propaganda rules require AFFT to keep repeating the same claims, even if they may well be false. In an study by 2 UT economists, they opined that criminals, tourists, illegals, etc., would pay no more in FairTax than they pay today in the taxes “embedded” in the cost of goods they buy.AND, the FairTax now produces 300+MM new tax criminals trying to evade paying 35-45% combined retail sales taxes.

    For additional specifics, please see my website; sceldridge.wix.com/sceldridge

      • Jim Bennett, AFFT Secy, is the gift that just keeps on giving.

        He offers to teach you about my “background” and “agenda’ (implying that he has some deep dark secret about me to reveal) by reading what turns out to be his paper, i.e., his pathetic REBUTTAL to (some of) my criticisms of the FairTax.

        I have combined his pathetic REBUTTAL with my RESPONSE in one doc. If you read it, you will begin to understand that the AFFT is a very superficial, deceptive propaganda organization that attempts to fool the public. See the doc, http://media.wix.com/ugd/acdb03_cf84c3da09c3475db3a9256e7de35eb4.docx?dn=“My Response to AFFT’s (Jim Bennett’s) Rebuttal to me (7-24-14).docx”

        • Mr. Eldridge, you have made me curious. Is it your hatred of freedom that causes you to fight so hard for the draculean income tax? Why would any American want the government to put an intravenous feed into their income? Could you provide the clarity that I need to see your point of view?

        • Al,

          I know that you are a big time FairTax, PLEASE understand and PLEASE take no offense at my words. With all due respect and with absolutely no intent to insult you, IMHO, you need to first detox from whatever it is that makes you such an irrational zealot. As difficult as it is (I FULLY sympathize with what I perceive to be your utter frustration with the CURRENT tax system), you must try to calm down and think about a solution to the problem in a rational, methodical way so as to TRULY fix the problem – the FairTax would make it even WORSE!

          I LOVE FREEDOM. A 10% Income Tax that leaves me 90% of everything I earn, that takes me less than 1 hour a year to prepare, that does not impact my life’s decisions, that steals LESS of my money to redistribute to someone else that a politician may feel is more “deserving” , knowing the IRS is but a mere neutered shadow of its former self and likely won’t get any worse, ALL combine to make me feel a lot freer than I have been in the past.

          I would rather NOT pay my condo maintenance fees, but I do so willingly because I know they must keep the (my) property up. Similarly, I know the fed govt needs some money to perform its Constitutional duties (but takes more than it needs to do so) and so I must pay something to enjoy the protection of the military, etc. My very Flat Tax is the least invasive method of paying that tax and is the least impractical major change we can accomplish.

          Al, I approached this topic with an unemotional professional analytical point of view and applied my lifetime of experience and education. I WANT TO FIX THE PROBLEM – not make it worse. This is what I (a tax “doctor”) says is the right medicine to fix the awful tax system we have. I hope you generally take your MD’s advice about your health. I don’t ask you to merely “trust me” – read my exact reasoning. I try to explain it more fully on my website, sceldridge.wix.com/sceldridge and many people are beginning to lunderstand. Feel free to call me with any question, challenge or comment.

          If this is insufficient to help you understand my perspective, please let me know what else you would like me to explain and I will try to just that..

        • Al,

          I forgot to ask you what educational/professional expertise you bring to this discussion. s

          Knowing that sometimes helps me understand a person’s perspective – I find that different occupations/professions tend to approach issues from a unique perspective that they develop in the course of their unique professions.

  7. Al,

    My Flat Tax keeps me FREE of the devastating problems the FairTax would bring.

    It would keep me FREE from being robbed to bribe others for their votes.

    It would keep me FREE from an OUTRAGEOUS 40-70% sales tax every time I wanted to enjoy the fruits of my labors.

    It would keep me FREE from another 15% or more in HIDDEN federal & State taxes.

    It would keep me FREE from Sales tax audits.

    It would keep me FREE from being stuck with BOTH an Income AND a sales tax.

    It would keep me FREE from double taxation on my after-tax savings.

    It would keep me FREE from starting to pay for (someone else’s) SS/Medicare all over again.

    It would keep me FREE from paying more in FairTax than in Income Tax.

    It would keep me FREE from having to pay nearly 50% down to buy a new house and be at risk for a later big drop in value.

    As you can see, my very Flat Income produces a great deal of FREEDOM. It would seem that YOU have something against FREEDOM.

    • Mr. Eldridge:
      You have yet to respond with clarity to my first point, let alone the others I have made. You seem to take great joy in pounding keys on a keyboard. I believe I am done with you. How many legislators have signed onto your flat income tax?

      • AL,

        You are either very confused, very stupid or simply very much into Saul Alinsky tactics of trying to confuse readers. Perhaps that works on the FairTax’s unsophisticated, naive target audience, but it does not work on intelligent people.

        I thought I did respond to all of your points, but somehow you do not find my answers to be clear enough for you.I have asked you to be more explicit in exactly what IS the point you want me to respond to.

        So try one last time to express your point that you would like me to respond to and when I do, you can tell me exactly what it is you found unclear about my answer.

        Or, better yet, you can tell me which point you thought I did not answer clearly and exactly why it was not clear to you.

        I am doing my best to try to answer you and took the time to write out answers to all of your comments, but you seem to evade satisfaction. If you are going to accuse me of not being clear, then you have an obligation to explain exactly what you found to be unclear and perhaps further refine your point.

        I find it strange that you seem to be upset that I have taken the time to answer you as fully as I can, under the circumstances. Perhaps you are upset that i have explained the truth and you just can’t handle the truth. I have frequently seen that FairTaxers get very upset when someone like me explains away their deceptive selling points and emotional; appeals.

        HR 1040 has 11 Co-Sponsors, 7 of whom also Co-Sponsor your FairTax.

        • HR 1040 does not contain the merits you described. How can you have an income tax law that constantly contradicts the 4th Amendment. Talk about being stupid!

        • Al,

          Here is a synopsis of the 4th Amend: I have capitalized certain words for emphasis.

          The Constitution, through the Fourth Amendment, protects people from UNREASONABLE searches and seizures by the government. The Fourth Amendment, however, is not a guarantee against ALL searches and seizures, but only those that are deemed unreasonable under the law.

          Whether a particular type of search is considered reasonable in the eyes of the law, is determined by balancing two important interests. On one side of the scale is the intrusion on an individual’s Fourth Amendment rights. On the other side of the scale are legitimate government interests, such as public safety.

          I have answered you before but you are not happy. If what you want is for me to waste my time in a long theoretical discussion of whether any Income Tax violates the 4th, etc. Amend, I am sorry, but I will not waste my time in such an irrelevant endeavor.

          I will not waste time getting into a long and fruitless justification of the Income Tax that we have suffered with for 100 years. It is here and we have had to swear under oath and be examined, etc, etc, etc.

          IMHO, it is a waste of time to now discuss the theoretical Constitutionality of what YOU believe are violations of the 4th, etc., amend. I accept that reality while you don’t – so be it!

          My Flat Tax (HR 1040 with modifications) would be even less invasive than today’s Income Tax and theoretically LESS violative of any 4th, etc. Amendment rights.

          Please let me know if this is the point which you feel I have not clearly answered before. Even if you are unhappy that I will not waste my time trying to justify any Income Tax’s violation of other Constitutional rights, that does not make my reply “unclear”.

        • AL<

          I just noticed your last words in your last comment that you think that my (any) Income Tax violates the 4th Amend and is therefore STUPID.

          I would like to point out to readers that you are saying that the entire US legal system (and all intelligent US citizens) have been STUPID for the last 100 years and ONLY YOU, Allen Ose, are intelligent. Well Al, I guess that is appropriate for someone who likes the FairTax.

        • READERS: I just want to be sure that you all saw this!

          I wrote: “I just noticed your last words in your last comment that you think that my (any) Income Tax violates the 4th Amend and is therefore STUPID.

          I would like to point out to readers that you are saying that the entire US legal system (and all intelligent US citizens) have been STUPID for the last 100 years and ONLY YOU, Allen Ose, are intelligent. Well Al, I guess that is appropriate for someone who likes the FairTax.”

          It looks like Al Ose answered this specific comment by saying “As they say in my hometown: “You got that right, you sho’ got that right!”

          In the law we have a doctrine “res ipsa loquitur” (the thing speaks for itself). His reply says all we need to know. Al tells us that he believes that he alone is intelligent and caught these glaring Constitutional errors that the entire nation has been overlooking for 100 years.

          Al, although I needed no further justification, your comment confirms to me that it would be a great waste of time for me to engage in a conversation with you about these Constitutional issues – some lawyers would tell you you are correct and represent you in this battle, UNTIL you ran out of money, but I have a conscience and would tell you up front to save your money for better things.

          Al, you are the perfect FairTax spokesman – committed, rabid, delusional, consistently espousing the same untruths until the masses believe them, etc.

          You have not yet shown readers, what other specific points you made that I have not yet CLEARLY responded to.

        • I believe you all are aware of the 4th Amendment. I don’t need to repeat it. I list below instances where the IRS has violated the 4th Amendment. It is nowhere near complete, but only a beginning. If Mr. Eldridge believes I am the only human to have discovered wrongdoing on the part of the IRS he has not been associated with any portion of legal actions or research. I apologize that I do not have the time to pound keyboards like Mr. Eldridge.

          Lawsuits by the National Organization of Marriage (NOM), True the Vote, J Street, Inc., Judicial Watch and various Tea Party organizations are achieving some success, certainly more than the derelict-in-duty Holder.
          NOM settled a case in which its donors were illegally disclosed, and will receive $50,000. That’s taxpayer money. The law-breaking officials within the IRS feel no pain in that, and that too must change with legislation authorizing personal liability.
          “No search warrant authorized the seizure of these records; no subpoena authorized the seizure of these records; none of the 10,000,000 Americans were under any kind of known criminal or civil investigation and their medical records had no relevance whatsoever to the IRS search. IT personnel at the scene, a HIPPA [sic: recte HIPAA] facility warning on the building and the IT portion of the searched premises, and the company executives each warned the IRS agents of these privileged records. The IRS agents ignored and discarded each of these warnings, ignored their own published and public-reliant rules and governing ethical requirements, and ignored the limitations of the court’s search warrant authorization, seizing the records under threat of destroying company property”

          The Bill of Rights is the first ten amendments to the Constitution.
          The Bill of Rights is the protector of our fundamental Rights. If you do not know your Rights thoroughly, click here. The Bill of Rights makes specific references to property seizure four times. The Bill of Rights speaks to due process of law eighteen times. I mention the numbers so you can answer the following questions with some certainty.
          1. Can the IRS mandate the filing of a tax return?
          2. Can the IRS seize property by simply sending a notice or placing a lien?
          3. Can the IRS seize property without proving their case in a court of law?
          Mr. Eldridge was in such a hurry to pound on his keyboard that he forgot my second point from my first post, which was that the IRS continuously violates the 5th Amendment. He would probably write that I am the only one who noticed that also.
          Is filing mandatory? The answer is found in the Fifth Amendment.
          The fifth Amendment clearly says nobody may be compelled to be a witness against himself in any criminal proceeding. The Supreme Court has ruled that nobody may be compelled to be a witness against himself in ANY proceedings, criminal or civil.
          [The fifth Amendment] “applies alike to criminal and civil proceedings.” McCarthy v. Arndstein, 266 US. 34
          The courts have also ruled that filing an income tax return causes you to become a witness as used by the fifth Amendment.
          “There can be no question that one who files a return under oath is a witness within the meaning of the Amendment.” Sullivan v. United States, 15 F. 2nd 809
          “The information revealed in the preparation and filing of an income tax return is, for Fifth Amendment analysis, the testimony of a “witness” as that term is used herein.” Garner v. United States, 424 US. 648.
          1. Since no law may compel you to be a witness against yourself; and,
          2. Since filing an income tax return is being a witness against yourself, then …
          3. Any compelled filing of tax returns would violate the fifth Amendment.
          If you don’t file a return there can be no assessment; without an assessment there can be no liability; without a liability there can be no lien, levy or seizure.

          There are other points Mr. Eldridge has failed to respond to, just read my posts. I will not repeat something I wrote earlier. If you have the time to read Mr. Eldridge’s posts, I salute you, but please, research his statements.
          Good night all, Allen Ose

        • Al,

          Thank you for your extensive reply about the IRS’ violations of the 4th & 5th Amendments, which I have skimmed. If I have some spare time, AFTER completing several priority projects of adding materials to my website sceldridge.wix.com/sceldridge , I may take a closer look at it.

          For now, it appears to be a “tax protester’ list of reading materials (which I do not mean to denigrate), to which I assign a very low priority be because I believe that sending time and energy on such matters as suing over the fact that we should not be required to file a tax return because it unconstitutionally requires us to give testimony against ourselves is – after 100 years – a WASTE of such time and energy because that requirement will NOT be overturned legally, IMHO. If we can live with today’s more extensive disclosures or testimony”, we can live with LESS of that under my very Flat Income Tax.

          On the other hand, IRS abuses (such as its use as a political weapon, its campaign against Conservative groups and Churches, some property seizures, etc.) should certainly be attacked.

          You claim yet again, that i have failed to answer others of your questions. You force me to chase you to get you to be SPECIFIC and tell me and other readers, EXACTLY which of your other points you are purporting that I failed to address – I find it difficult to follow your presentation of your arguments.

      • AL,

        I just noticed that you not only complained that I did not clearly respond to yur first point (I just did), but you also complain that I did not answer your OTHER points.

        Please explain which OTHER points I have not addressed clearly in your opinion.

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