minimum wages seems like a minor detail to get caught up with in the grand scheme of FairTax proposal. if FairTax can be implemented, minimum wages is a pretty simple thing to get rid of.

Entroper said: Final-Fan said: Entroper said: @senseinobaka: I followed your example perfectly. However, I find it extremely difficult to believe that you can replace a 22% inclusive corporate tax with a 23% inclusive FairTax, completely eliminate the income tax and payroll taxes, and remain revenue-neutral. Please explain. That's apparently because the 22% figure DOES include things like the income taxes and payroll taxes of the companies' employees. I had this exact same conversation with Eomund earlier in the thread. OK, so then wages will go down correspondingly with the amount you would be paying in income tax (roughly).  What about the minimum wage?  The minimum wage is set to increase quite a bit over the next couple years, and moving to the FairTax will essentially give all minimum wage earners a hefty raise on top of that.  That's going to cause the price of goods to increase, no question.

Perhaps, but the minimum wage increase has nothing to do with the tax system we are under. It ultimately makes little difference to a person's buying power whether wages are adjusted downward to keep tax-inclusive prices from jumping, or whether employers simply let wages sit where they are (the easier solution) and prices do jump, or something in between those two choices.

Lingyis said: minimum wages seems like a minor detail to get caught up with in the grand scheme of FairTax proposal. if FairTax can be implemented, minimum wages is a pretty simple thing to get rid of.

Why on earth would we want to get rid of the minimum wage? But yes, it's pretty irrelevant to the FairTax debate.

Entroper said: @senseinobaka: I followed your example perfectly. However, I find it extremely difficult to believe that you can replace a 22% inclusive corporate tax with a 23% inclusive FairTax, completely eliminate the income tax and payroll taxes, and remain revenue-neutral. Please explain.

 This is a very good question. However there are many factors that go into how the economist behind the idea figured it out. Both Final Fan and Eomund touched on some earlier in the discussion. But here are four factors I remembered from my research. There are others. The first Factor brings the Fair Tax within 65-85% of the revenue generated by the current tax system. The other 3 are designed to close that gap. 

One factor is that the Fair Tax taxes 23% of a much larger number, this is because the fair tax is designed to increase economic functions.

Example: While I was in school I made about $1200 biweekly. After taxes I brought home about $900. So effectively I was paying 22% in corporate taxes on $900(which means my total tax bill on $1200 in two weeks was $498)  instead of 23% on $1200 which would make my total tax bill $276. This leaves a deficit of $222 (19%) that the Fair Tax has to make up for me. You can imagine as income increases then the gap would remain the same or increase (probably as high as 35%). 

 

Second Factor is that lobbyist, congress, or the president will not be allowed to play favorites. There will be no cronyism in the tax code like the income tax code has. Do you ever wonder why there are hundreds of thousands of pages for our lovely tax code and why thousands are added each year? It's because congress is screwing over some and handing out free passes to others. By Leveraging the Fair Tax on EVERYTHING and EVERY BUSINESS the paying base will be greatly expanded. Right now, many corporations do not pay corporate taxes or pay less than 22 percent. 

 

Third Factor is the fact that more money would be circulated into the economy. If you look back to my example for factor one. I circulated $900 into the economy; under fair tax I would circulate $1200. Again, as income rises this would happen on a bigger scale. That much influx of cash into the economy would drive jobs, which increases the tax base, and would also increase buying power, which would increase tax revenue since it is a consumption tax. 

 

Fourth Factor is like the third except it happens from an international standpoint. The fair tax is designed to make America the single most competitive country for businesses. Imagine the prospects of a business creating a product with NO tax liability. Unlike we've seen in recent history, business would not flee the country but instead business would come home and bring some friends with them. This increases the number of jobs and increases buying power. 

 

Factors 1 and 2 are proven. They are from hard numbers and legislation. Factor 3 is theoretical but is a model used by economist in many situations. Circulating more money into the economy is always positive. Factor 4 is one that would happen sometime after implementation, so it may not be one that makes 23 percent neutral, it may be the one that makes 23% a bigger revenue generator than the current income tax system

 

Final-Fan said: Lingyis said: minimum wages seems like a minor detail to get caught up with in the grand scheme of FairTax proposal. if FairTax can be implemented, minimum wages is a pretty simple thing to get rid of. Why on earth would we want to get rid of the minimum wage? But yes, it's pretty irrelevant to the FairTax debate.

 Minimum Wage has a lot of problems to the fiscal conservative. It's one of those things that sound nice and important but then you look beneath the surface to some of the glaring problems.

1) Where in the constitution does it say the Federal government can force a person or company to pay a certain price for something? That is not free trade. And in the case of Min Wage the government forces someone to pay more than the value. This sounds mean spirited, but it isn’t. A grocery bagger is a good example, that child's labor is not worth much and the government should not force someone to pay more than it is worth. This does not mean the person is not worth much, it simply means the labor he is trading for money is not worth much money.

2) So Min Wage may increase what one worker makes, but what does it do for the person that now loses their job? It's sad, but the summer following the Min Wage increase was the summer High School kids and College Kids had the hardest time finding seasonal employment since Bush became president. Any educated person can deduce the consequence of raising price on a service. It reduces demand. Labor is no different.

3) It encourages businesses to cut out job categories. Let's go back to my grocery bagger. If the price for that labor is increased, what prevents the grocer to just say; "No more Baggers!"? Think about it. When was the last time you saw a bagger at Wal-Mart?  See, Wal-Mart doesn’t want to higher another person at $7.00 / hr, instead they by a $50 contraption called a Lazy Suzie, install it on the checkout counters and have the Point of Sale operator stuff the bags. Increasing Min Wage would only encourage businesses to follow suit.

4) My personal biggie. Its underhanded cronyism on the Democrat's Part. The biggest campaign supporters and the group that easily own the Democratic Party are Unions. Min Wage is a way of saying "Thanks" to the Union Bosses and uses legislation to make the Union Bosses much richer. How you may ask? Well union pay rates are pegged to the Min Wage. When min wage goes up then a union workers wage goes up. This screws over the business they work for, the consumers that will by their products, and in some cases the union worker. But it is awesome for the rich Union Bosses, because their salary is a percentage of the Workers pay. It's Sick.

 

 

1. It's not unconstitutional.

2 and 3. I do not believe it hurts employment nearly as much as you say. Some will probably lose their jobs -- teenagers more than adults -- but they will be able to find new ones (a minimum wage job is not that hard to get) and the good done overall to minimum wage earners is immense.

4. Wow. Democrats are only for minimum wage increases because their union boss buddies will get rich? I'm not even going to spend time on this conspiracy theory. Partly because there's a much better argument that Republicans only oppose it because their big business owners hate to take even the slightest hit for the good of the nation's people, but mostly because neither of those things has anything to do with the merits or faults of the minimum wage itself.

Also:
Minimum wage increases help the economy because low income people tend to spend all their money. What about that?

It's absurd to claim that minimum wage increases don't help minimum wage earners as a whole. The only minimum wage earners that are significantly hurt are teenagers, who have their whole lives ahead of them [edit:  and even they are helped overall].

HOWEVER:
This thread isn't about the minimum wage, it's about the FairTax.

P.S. I will say that the Earned Income Tax Credit can give the same benefits to low-income workers without hurting their employers. But that won't be an option under the FairTax ...

Thats one of the best articles against Fairtax Ive seen.  Fairtax doesnt even slow down at stupid, for many of the reasons you mentioned. It just wouldnt work.

But you left out a couple things.

For one thing, the exemptions that would surely be sought, and given. For example, nursing homes   will CORRECTLY raise a fit -- many of its patients are on medicaid, and almost all struggle to pay it, as is.   Cancer centers -- do they really believe someone will be charged 23% tax on their chemo? Their brain surgery? (yes they charge the sales tax on that too).

 Few realize, its even on RENT.  All these people would scream bloody murder. One group after another.

 None will scream quit so loudly as the Pentagon, however.  The goverment -- according to FT book and web sites -- pays the same sales tax. On everything.  Read page 148 of Bortz book if you dont believe me.  Ironically, Boortz uses the fact that government would pay it . He writes "... the federal government would itself be a major taxpayer: all sales at the retail level, whether to individuals or government, will carry the tax. "

 Now, can you imagain the US Army paying 2 1.5 million in tax, on ONE tank.  (M1a2 Tank cost over 4 million). Wait till they see a tax bill on an Aircraft carrier, air craft radar systems, ect.  

 Clearly, the Pentagon wont be paying sales tax.  In fact, its just  the worst economics on earth to imagine that the government CAN pay its own taxes. IF so, why not just charge the government all the taxes, have it pay itself. Its that kind of lunacy that underlies the FairTax plan. Its not a little dumb. Its a lot insane.

     I dont think Dick Armey's solution is fair. Yes, its slick. He has pushed it for years.  Its also a con game of sorts. Notice that when he pulls out that tax form from his pocket - that post card -- the only thing on the income line is "wages, salaries and business income" or something like that. Not a word about cap gains, dividends, or unearned income.  Very slick Dick - but he doesnt fool me.  He just wants ONLY work to pay taxes.  He doesnt want to admit that, or draw attention to that, but thats really his plan.

    Ron Wyden has the best plan in my book.  Take a look at it. Ron is lousy at promotion, though, Im surprised he ever got elected. Great guy, smart guy,  but only in Oregon could he win.  He doesnt have the kind of stage presence or dynamic speaking ability to get his plan front an center.

 

Final-Fan said: 1. It's not unconstitutional. 2 and 3. I do not believe it hurts employment nearly as much as you say. Some will probably lose their jobs -- teenagers more than adults -- but they will be able to find new ones (a minimum wage job is not that hard to get) and the good done overall to minimum wage earners is immense. 4. Wow. Democrats are only for minimum wage increases because their union boss buddies will get rich? I'm not even going to spend time on this conspiracy theory. Partly because there's a much better argument that Republicans only oppose it because their big business owners hate to take even the slightest hit for the good of the nation's people, but mostly because neither of those things has anything to do with the merits or faults of the minimum wage itself. Also: Minimum wage increases help the economy because low income people tend to spend all their money. What about that? It's absurd to claim that minimum wage increases don't help minimum wage earners as a whole. The only minimum wage earners that are significantly hurt are teenagers, who have their whole lives ahead of them [edit: and even they are helped overall]. HOWEVER: This thread isn't about the minimum wage, it's about the FairTax. P.S. I will say that the Earned Income Tax Credit can give the same benefits to low-income workers without hurting their employers. But that won't be an option under the FairTax ...

1) The 10th Amendment specifically makes it unconstitutional. The constitution doesn’t specifically give the federal government the power to price fix goods and services, including labor. And the constitution is very specific on this, if it’s not a power given to the federal government via the constitution then it is unconstitutional to assume such power, it belongs to the states and local governments.

2) We can argue points 1 and 2, but increased unemployment amoung lower income workers since the Min Wage hike was passed is some damning evidence in my favor.

4) It’s not a conspiracy theory. This tactic is very well documented. Fact, Unions are the party's largest financial supporters and Min Wage hikes generate allot of money for Union leaders. You ever wonder why it was the first thing they did once they gained power. They passed Min Wage before they tried to end the war in Iraq, the very issue they won on.

MarkDouglas said: Thats one of the best articles against Fairtax Ive seen. Fairtax doesnt even slow down at stupid, for many of the reasons you mentioned. It just wouldnt work. But you left out a couple things. For one thing, the exemptions that would surely be sought, and given. For example, nursing homes will CORRECTLY raise a fit -- many of its patients are on medicaid, and almost all struggle to pay it, as is. Cancer centers -- do they really believe someone will be charged 23% tax on their chemo? Their brain surgery? (yes they charge the sales tax on that too). Few realize, its even on RENT. All these people would scream bloody murder. One group after another. None will scream quit so loudly as the Pentagon, however. The goverment -- according to FT book and web sites -- pays the same sales tax. On everything. Read page 148 of Bortz book if you dont believe me. Ironically, Boortz uses the fact that government would pay it . He writes "... the federal government would itself be a major taxpayer: all sales at the retail level, whether to individuals or government, will carry the tax. " Now, can you imagain the US Army paying 2 1.5 million in tax, on ONE tank. (M1a2 Tank cost over 4 million). Wait till they see a tax bill on an Aircraft carrier, air craft radar systems, ect. Clearly, the Pentagon wont be paying sales tax. In fact, its just the worst economics on earth to imagine that the government CAN pay its own taxes. IF so, why not just charge the government all the taxes, have it pay itself. Its that kind of lunacy that underlies the FairTax plan. Its not a little dumb. Its a lot insane. I dont think Dick Armey's solution is fair. Yes, its slick. He has pushed it for years. Its also a con game of sorts. Notice that when he pulls out that tax form from his pocket - that post card -- the only thing on the income line is "wages, salaries and business income" or something like that. Not a word about cap gains, dividends, or unearned income. Very slick Dick - but he doesnt fool me. He just wants ONLY work to pay taxes. He doesnt want to admit that, or draw attention to that, but thats really his plan. Ron Wyden has the best plan in my book. Take a look at it. Ron is lousy at promotion, though, Im surprised he ever got elected. Great guy, smart guy, but only in Oregon could he win. He doesnt have the kind of stage presence or dynamic speaking ability to get his plan front an center.

Your whole premise assumes that A) the government does not already pay taxes and B) that the Fair Tax would cause a significant increase in the prices of goods and services. Both are wrong. You need a new premise.

Also the abolishing of exemptions is crucial to the fair tax. In fact, if a consumption tax was passed that did not feature such a prohibition, then it will not be the Fair Tax. It would be some other tax plan.

senseinobaka said: Final-Fan said: 1. It's not unconstitutional. 2 and 3. I do not believe it hurts employment nearly as much as you say. Some will probably lose their jobs -- teenagers more than adults -- but they will be able to find new ones (a minimum wage job is not that hard to get) and the good done overall to minimum wage earners is immense. 4. Wow. Democrats are only for minimum wage increases because their union boss buddies will get rich? I'm not even going to spend time on this conspiracy theory. Partly because there's a much better argument that Republicans only oppose it because their big business owners hate to take even the slightest hit for the good of the nation's people, but mostly because neither of those things has anything to do with the merits or faults of the minimum wage itself. Also: Minimum wage increases help the economy because low income people tend to spend all their money. What about that? It's absurd to claim that minimum wage increases don't help minimum wage earners as a whole. The only minimum wage earners that are significantly hurt are teenagers, who have their whole lives ahead of them [edit: and even they are helped overall]. HOWEVER: This thread isn't about the minimum wage, it's about the FairTax. P.S. I will say that the Earned Income Tax Credit can give the same benefits to low-income workers without hurting their employers. But that won't be an option under the FairTax ... 1) The 10th Amendment specifically makes it unconstitutional. The constitution doesn’t specifically give the federal government the power to price fix goods and services, including labor. And the constitution is very specific on this, if it’s not a power given to the federal government via the constitution then it is unconstitutional to assume such power, it belongs to the states and local governments. 2) We can argue points 1 and 2, but increased unemployment amoung lower income workers since the Min Wage hike was passed is some damning evidence in my favor. 4) It’s not a conspiracy theory. This tactic is very well documented. Fact, Unions are the party's largest financial supporters and Min Wage hikes generate allot of money for Union leaders. You ever wonder why it was the first thing they did once they gained power. They passed Min Wage before they tried to end the war in Iraq, the very issue they won on.

1. If that argument flew the minimum wage would not have lasted 70 years. QED

2. Evidence please. Also, demonstrate that the overall impact has been negative.

4. Oh, so it's not that downtrodden employees who banded together and gained collective bargaining power would have negotiating for decent wages kind of high on their priority list? Maybe they were trying to get it done fast so it wouldn't get lost in the battle over Iraq funding. 

Actually, never mind my demand for evidence. I don't want this FairTax thread to get distracted by other topics. Feel free to create a thread dedicated to how awful the minimum wage is and I'll be happy to tear you apart. (Assuming I spot it.) But please drop it here.