Jeff Schnepper rebutted

Two FairTax supporters copied us on their responses to Mr. Schnepper's opinion piece.

Mr. Schnepper,

In your article on the MSN Money Web site, I am sorry you either didn’t do your homework, instead believing opponents' arguments at face value, or you aren’t intelligent enough to understand the FairTax and all of it’s implications.  Some of your statements make it clear to me you haven’t read H.R. 25.  Economists have estimated the FairTax to remains revenue neutral at an inclusive sales tax rate of 23%.  See in particular the article in Tax Notes about What Rate Works? Our current income tax is an inclusive tax, therefore 23% equals 23% when comparing to our current federal taxation, not the 30% you mention.  Yes, most state sales taxes are calculated on an exclusive tax basis, but this would not be a fair comparison to our current income tax which is inclusive.

You mention we would be paying 30% more for homes, kid’s tuition and doctor appointments.  This is simply not the case.  First, as an inclusive tax the rate would be 23% as mentioned above.  Second, economists have estimated the cost of all product and services currently carry an extra cost of 22% due to embedded tax.  With the elimination of income, Medicare, Social Security, payroll and corporate income taxes these embedded taxes go away and by way of the competitive marketplace the cost of goods and services would fall by an average of 22%.  Third, anyone who has done their homework and read the FairTax would know that tuition for education is not taxed under the FairTax.

Proponents of the FairTax do not argue that there would no longer be an underground economy, only that the underground economy would be taxed when those benefiting from illegal business activities buy their mansions, yachts, airplanes and everything else they would be buying.

As it pertains to the poor, the Fair Tax can beat a zero income tax liability because the elimination of Social Security and Medicare taxes is included as part of the plan.

When Bush administration officials made their projections they were not actually using the FairTax plan as it exists in H.R.25.

Anyone who would argue that a federal agency as large as the IRS (with it’s code consisting of 67,000 plus pages) or with a budget of even 1/100th of the current tax compliance agency simply doesn’t understand the concept, or isn’t willing to be honest because of their bias.

In summary our current form of taxation punishes individuals and corporations for being productive and rewards laziness and lack of productivity.  Switching to the FairTax would reward productivity, encourage corporations to locate their corporate headquarters in the United States, bring money back to our shores from offshore accounts, encourage savings and welcome those currently earning their money through illegal and untaxed ways to begin paying their fair share.  The inaccuracies and deceptive statements made in this article suggest a strong bias against the FairTax and/or a complete lack of understanding of the components of the FairTax and all of it’s implications.


Thomas C. Kennedy, MD


To MSN Money,

I must say I found your article entertaining, though with little substantive value. The audacity of the author, Jeff Schnepper, mis-quoting the Web site as if they actually agreed that the sales tax would be 30% instead of 23%. It must be intellectual dishonesty or your lack of knowledge of the FairTax. Had you read the book or thoroughly researched the Web site you would know the difference between 30% and 23%. Oh, I forgot you have a socialist agenda to propagate instead of informing the citizenry of the benefits of the FairTax. It isn’t a perfect system but it's so much better than the current one where the government hands out deductions, rebates, tax incentives and legal loop holes. It makes me think of the Roman Caesar society when food would be thrown into the stands of the Coliseum like they were saviors instead of oppressors. Why tax productivity? Why should I be penalized two and three times for saving money? I have several points.

1)      I’m a cop, not an economist, but if I can get it I would imagine you can too. Here goes… I’m paid $100 for working my butt off. Under the current system I would keep $77 after payroll taxes were taken out. The government would take $23. 23% right? My family is in the 28% tax bracket. If you divide what the government keeps into what I would keep, it equals 30% tax. But how can that be. Its called tax exclusive verse tax inclusive but the dollar amount doesn’t change. Spin that. No matter how you call it, it's still $23 in tax. So continue to confuse the public with your trickery but you, sir, are in a losing battle because the middle class is growing angrier and is tired of paying the majority of the taxes.  

2)      In the article you never mention that everyone will keep all of their paycheck. What no payroll taxes? What a new concept. So the 23% sales tax or if you want to call it 30% tax isn’t so bad now. Tax exclusive: (Same $100 above) I spend $77 out of my $100 dollars and the government gets $23. It’s the same $23. Numbers don’t change. This would = a 1% negative gain meaning in reality someone would spend 1% more for every item they currently buy but would have the benefit of keeping their entire paycheck. I’ll buy that for $1.

3)      You admit the 66,000 page tax code is broken with trillions being spent just to find loop holes in the system. Why, then, begrudge a system that puts the choice back into the citizenry’s hands. I choose to spend $12 for a hair cut while former Senator Edwards pays $400. My tax would be 2.76 (however, the tax would be built into every item not tax exclusive) while Edwards would pay $92. Put choice in his and my hands. Don’t provide loop holes for the rich allowing them to escape the tax system and then let them have an elitism attitude when they spend theirs. Given the choice, I choose to save. Edwards has a 25,000 square foot home. I wonder how much tax he would have paid with the FairTax? So what is your point about the rich escaping the tax system with a 30% tax bracket verse 35%. If someone made $500,000 per year the 35% tax above 357,000 would be $125,195. Let’s say he wanted to buy a new home for $1,000,000. The tax on the home would be $230,000 which is almost triple what he would pay in taxes for that year. SO WHAT IS YOUR POINT ABOUT THE RICH NOT PAYING THEIR FAIR SHARE OF THE TAXES WITH THE FAIR TAX? I believe Edward’s 25,000 square foot home cost him more than 1 million.

4)      In addition to the previous section what about the people who don’t earn any earned income but live off their fortune? Can you say 15% capital gains. Everything they buy would go to paying tax and not leave it totally up to the physically working class. Then there are the governments and non-profits that would pay taxes through the sales taxes. Then there are tax evaders and criminal enterprises who would start paying taxes with everything they bought. How about tourists who enter the country on vacation. There covered too. What it won’t work? Think again because Florida has been doing it for years and if I’m not mistake tourism is their main business in their state.

5)      The biggest benefit to our economy seems to be the benefit to businesses, which in turn will affect my bottom line. So one of the factors (35% taxes i.e. second highest in the world) would be absent with only regulation being left to stifle business. Not only would companies decide to come back but new businesses would come to America to escape taxes in their country of origin. This would bring more jobs, salaries would increase and people would spend more. Also, with no federal income taxes including personal, estate, gift, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes, there would be no reason mega rich tax evaders would need to hide their fortunes in offshore accounts. With the return of that money would come more investment in our economy.

6)      You briefly hinted that people might not spend money. Well I don’t know for sure but I would tend to think that if the country continues into its negative savings rate our country's vitality will continue to weaken in the world setting. Some saving would not be bad at all. Remember if everyone goes bankrupt, gets welfare, etc., then who is going to pay? I like Huckabee’s idea that he brought to the public’s attention when he was the Governor of Arkansas. He said if you feel compelled to pay more taxes then you could pay into a state fund account if you felt obliged. I don’t want to escape taxes I only want to pay my FAIR share.

The system is broken. Being stagnant and continuing with the same system doesn’t do you or me any good. Change is needed and at present the FairTax seems like the best solution.

Ronald Schumaker
FairTax supporter

The original article was posted on MSN Money. Read it here »


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