The "Panama Papers"

Like most law, the Establishment favors the wealthy. No big corporations or mega-wealthy, but I did have millionaires as clients. I tried to help poor people, usually pro bono, but with much less success. It was infuriating, and was the primary reason I retired. I could tell you stories of IRS abuse that would curl you hair. The IRS is the most evil institution in government.

That's why I support the FairTax. It abolishes the IRS and the income tax. I'm not going to debate its merits, but I am interested in other alternatives. If there is a better plan, I'll listen. But I've worked too closely with the current tax code to listen to any "reform" nonsense. It can't be reformed. The only way to deal with this cancer on our society is to remove it. I won't be broken-hearted if the FairTax isn't adopted, as long as the IRS is gone. Originally Posted by CuteOldGuy

Well, on April 15 your anti-IRS sentiments are widely shared... as for the FairTax (or any broad VAT-type/consumption tax), you do understand that switching to it would greatly reduce the taxes paid by the mega-wealthy (who you think have rigged the existing system and are not taxed enough), right?

That would depend on what they consume. Do you look at tax policy as a means of raising revenue, or as a way to punish producers? If everyone does better, why care if the rich are also doing better, so long as they are doing without force or fraud. And I consider favorable regulation from purchased politicians to be fraud. And I don't support a VAT.

Oh. And Tax Day is Monday, not today.

Well, on April 15 your anti-IRS sentiments are widely shared... as for the FairTax (or any broad VAT-type/consumption tax), you do understand that switching to it would greatly reduce the taxes paid by the mega-wealthy (who you think have rigged the existing system and are not taxed enough), right? Originally Posted by lustylad

Yes, the question of how one might believe that he can square that circle does sort of leap out at you, doesn't it?

That would depend on what they consume. Do you look at tax policy as a means of raising revenue, or as a way to punish producers? If everyone does better, why care if the rich are also doing better, so long as they are doing without force or fraud. And I consider favorable regulation from purchased politicians to be fraud. And I don't support a VAT. Originally Posted by CuteOldGuy

You would be very hard-pressed to find an example of a high-income earner or wealthy individual who could somehow find a way to consume so much that he'd end up paying more in tax if the present system were jettisoned in favor of the FairTax. That would indeed be quite a neat trick!
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Why do you want him to pay more tax? Do you like class warfare? What does a rich person do with money not spent on consumption? Unless he stuffs it in a mattress, he invests it or saves it. What becomes of the money then? It is turned into jobs, and increases the tax base. You fail to look at the big picture. All you see is that even though everyone is doing better, if a rich guy isn't doing worse, it's not worth it. If we can increase the velocity of money without increasing the money supply, we will have a booming economy.

Why do you want him to pay more tax? Do you like class warfare? What does a rich person do with money not spent on consumption? Unless he stuffs it in a mattress, he invests it or saves it. What becomes of the money then? It is turned into jobs, and increases the tax base. You fail to look at the big picture. All you see is that even though everyone is doing better, if a rich guy isn't doing worse, it's not worth it. If we can increase the velocity of money without increasing the money supply, we will have a booming economy. Originally Posted by CuteOldGuy

COG, you're missing the point. You can't have it both ways. You can't rail against the existing tax code on the grounds that it favors the wealthy, and then turn around and endorse an alternative that would significantly lower tax burdens on the super-rich.

And if you really think we should look at the big picture, not engage in "class warfare" or obsess about how much money others make (notions I whole-heartedly agree with), then you should give up your own faux populist bumper-sticker rhetoric demonizing "the corporations, banksters and the mega-wealthy" all the time.

The current tax code favors the rich by fraud. It stifles competition and is more geared to social engineering than revenue generation. My way would stimulate competition, and mitigate fraud by reducing the effectiveness of purchasing politicians. I have nothing against wealth. I have everything against fraud, bought politicians, and government picking winners and losers. Look at the big picture. I believe in freedom. If someone can get rich honestly, more power to them. I'm not going to single them out for punishment. I want the fraud and favoritism out of the system. And remember where the money not spent on consumption goes. Instead of lining lobbyist's and politician's pockets, it will be put to work expanding businesses and starting businesses. That expands the tax base, and makes it possible for more people to get rich.

I'm not having it both ways. I'm consistent in my effort to limit government and expand freedom.

Why do you want him to pay more tax? Do you like class warfare? What does a rich person do with money not spent on consumption? Unless he stuffs it in a mattress, he invests it or saves it. What becomes of the money then? It is turned into jobs, and increases the tax base. You fail to look at the big picture. All you see is that even though everyone is doing better, if a rich guy isn't doing worse, it's not worth it. If we can increase the velocity of money without increasing the money supply, we will have a booming economy. Originally Posted by CuteOldGuy

As Lustylad noted in the post immediately below the one I quoted above, you completely missed the point.

First, when did I say I "want" anyone to pay more tax? And what could possibly give you the idea that I "like class warfare?" Surely you must remember from many discussions over the years (in which you participated) that I am in favor of keeping the burden of capital gains taxation as low as is politically practicable, and that incentives do matter. I hardly fit the profile of a "class warrior."

Second, unless you misspoke or I fundamentally misunderstand what you are trying to say, you seem to believe that any money not taxed, and instead saved or invested, somehow is automatically "turned into jobs" and "increases the tax base." But that's not how the economy works. True, an increase in savings boosts aggregate liquidity in the economy and the pool of available capital. However, the economy is now characterized by liquidity preference and is virtually awash in savings. You will note that yields all across the curve are still at near-record lows.

Virtually the entire world is oversupplied with productive capacity, and a consequence is that VCs and investors like me are experiencing quite a dearth of opportunities that we deem worth the risk. Under such conditions, it's difficult to argue that further tax cuts would stimulate the economy to any appreciable degree. There's a lot more to it than that. You urge that one envision the "big picture." Yes, I agree. For starters, note that tax policy changes never operate in a vacuum; they are up against an entire backdrop of conditions in which they operate.

Third, how in the world do you think you can bring about an increase in the velocity of money under present circumstances just by implementing a big tax cut? Again, that's simply not how the economy works. Additionally, note that an unprecedentedly massive quantity of liquidity has been sitting around in idle reserves.

Of course, all tax reductions or increases, if pursued to a sufficient extent, are likely to have some effect on economic activity. It's all about trade-offs, as well as what's political doable. As anyone who examines the issue can easily see, the most obvious feature of the FairTax is that it would amount to a very large tax cut for affluent taxpayers. If you don't want to balloon our already large deficit to gargantuan proportions -- and given many previous posts, I don't get the idea that you favor running trillion-dollar deficits -- someone else is going to have to pick up the slack.

There is no free lunch. The burden of taxation has to land somewhere.
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Yes, the burden has to land somewhere. I prefer that it land in a transparent, manipulation-free, (or limited), manner with as little social engineering as possible. In a manner that keeps government from picking winners and losers. That minimizes corruption. That is voluntary instead of forced at the point of a gun. Yes, I've seen the tax collectors with guns.

You won't have that scenario with the income tax. The income tax is evil and immoral. The presumption is that income belongs to the government, and they decide how much you keep. Yes, that is how they think. I've dealt with them for years. There is no reforming the income tax. It must be abolished and replaced.


I think if we got the banks in line, and replaced the income tax with the FairTax, or something other than the income tax, a lot of the economic models you discuss would fall apart. I think there would be a huge influx of companies relocating to the US to take advantage of the reinvigorated business climate. There would be a huge demand for capital and labor. America would be the #1 place in the world to do business. And it would be driven by market forces, not government planning.


Open, honest, transparent and simple. That's what a tax code should be.


There would still be a lot more things in this country to fix, but you have to start somewhere. The FairTax may not be a panacea, but all I hear are detractors. No one offers any alternatives, except reforming our current code, which does nothing. I'd be interested in alternatives.


And I'm not completely happy with the FairTax. There are changes I'd make to it, but what I like most is that it abolishes the IRS, and let's people know exactly what there tax burden is. And for the most part, it's voluntary, and not coerced at gunpoint. A much better plan for a free country. The income tax is designed for a police state.


And yes, everyone knows it is a 30% percent tax on the price of the product or service. When viewed inclusively, as part of the total cost, it is 23%. Same number. And that will vary by industry, depending on competition, price elasticity, etc. but overall, the plan is that the price level would remain constant. It would not be uniform. So there are problems. But not the huge, job-killing problems presented by the income tax. And the problems would be out in the open, not buried in stack of small print regulations that even the IRS itself cannot fully comprehend or explain.


And if the 23% or 30% doesn't cover the budget, maybe Congress should quit spending so goddam much. We could balance the budget in one year if we wanted to, and make our country stronger. But we won't, because Halliburton and other cronies would have to prove the value of their services, and they can't. But I digress. Another discussion for another day.

Yes, the burden has to land somewhere. I prefer that it land in a transparent, manipulation-free, (or limited), manner with as little social engineering as possible. In a manner that keeps government from picking winners and losers. That minimizes corruption. That is voluntary instead of forced at the point of a gun. Yes, I've seen the tax collectors with guns.

You have actually seen "tax collectors with guns?" Good grief! How in the wide world of sports did that happen? Were you one of those stubborn tax protestors who refused to file a return for many years, like Irwin Schiff?

You won't have that scenario with the income tax. The income tax is evil and immoral. The presumption is that income belongs to the government, and they decide how much you keep. Yes, that is how they think. I've dealt with them for years. There is no reforming the income tax. It must be abolished and replaced.

I think if we got the banks in line, and replaced the income tax with the FairTax, or something other than the income tax, a lot of the economic models you discuss would fall apart. I think there would be a huge influx of companies relocating to the US to take advantage of the reinvigorated business climate. There would be a huge demand for capital and labor. America would be the #1 place in the world to do business. And it would be driven by market forces, not government planning.

Pie in the sky. Supporters of all sorts of tax plans, including the flat tax and other tax cut proposals, seem fond of claiming that their idea is some sort of magic elixir that will usher in an era of explosive growth. Before he dropped out of the Republican primary, Jeb! claimed that his tax cuts would quickly return us to 4% growth. Then "The Donald" decided to outdo Jeb! with a claim that under his plan, we'd clock in at 6% or better!

Again, there's a whole lot more to fixing the economy that getting rid of the present tax system. Besides, if you replaced it with the FairTax, how would you deal with the likely chaos resulting from ballooning the deficit beyond all reason, which that would obviously do?

Open, honest, transparent and simple. That's what a tax code should be.

There would still be a lot more things in this country to fix, but you have to start somewhere. The FairTax may not be a panacea, but all I hear are detractors. No one offers any alternatives, except reforming our current code, which does nothing. I'd be interested in alternatives.

And I'm not completely happy with the FairTax. There are changes I'd make to it, but what I like most is that it abolishes the IRS, and let's people know exactly what there tax burden is. And for the most part, it's voluntary, and not coerced at gunpoint. A much better plan for a free country. The income tax is designed for a police state.

Say what?? The FairTax would be "voluntary" and not enforced by means of criminal prosecution if merchants and service providers don't pay up? What do you think the government would do, just sort of ask nicely that people remit their tax payments?

I can't believe you haven't emigrated from this tyrannical, income tax-imposing dystopia in favor of some nice country that doesn't levy an income tax. (Oh, wait ...)


And yes, everyone knows it is a 30% percent tax on the price of the product or service. When viewed inclusively, as part of the total cost, it is 23%. Same number. And that will vary by industry, depending on competition, price elasticity, etc. but overall, the plan is that the price level would remain constant. It would not be uniform. So there are problems. But not the huge, job-killing problems presented by the income tax. And the problems would be out in the open, not buried in stack of small print regulations that even the IRS itself cannot fully comprehend or explain.

The number is 30%, not 23%, if presented like any other sales tax. Presenting this as a "23% tax" is nothing more than weaselly, disingenuous sleight of hand designed to make the plan more palatable to people who have little understanding of economics and taxation, or who suffer from a severe case of innumeracy (or both).

And what in the world do you mean when you say that "the plan is that the price level would remain constant?" What plan? And on what level does that make any sense?

Speaking of prices, and for that matter "job-killing problems," how do you guys think you can add almost 30% to the price of a new house or a new car and not torpedo the economy overnight?

Many of your posts are rife with inconsistencies and contradictions. You rail against tax systems that you claim favor the wealthy, yet zealously promote a plan that would amount to the biggest tax cut in history for high income and high-net worth individuals. And you lambaste politicians for dishonesty, yet eagerly tout a tax proposal that's peddled in blatantly dishonest fashion.

And if the 23% or 30% doesn't cover the budget, maybe Congress should quit spending so goddam much. We could balance the budget in one year if we wanted to, and make our country stronger. But we won't, because Halliburton and other cronies would have to prove the value of their services, and they can't. But I digress. Another discussion for another day. Originally Posted by CuteOldGuy

I certainly agree that Congress should quit spending so much in a number of areas, but do realize what it would take to balance the budget?

Fencing off various crony capitalists and rent-seekers from the federal trough is something I think we can all agree should be done, but that makes up only a very small percentage of total spending. The really big money is in entitlements and transfer programs. Even under the current tax system, you'd have to take a meat axe to a whole lot of this stuff in order to balance the budget -- cutting a number of major programs by 20% or more, for starters. If you shifted to the FairTax, you'd have to slash much further than that if you wished to have any hope of balancing the budget. Good luck with that!

You implored me and Lustylad in a couple of posts to look at the "big picture," yet continually fail to do the same.

Well, there you have it -- a couple of "big picture" thoughts to chew on!
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I would cut further. I would remove from federal control every program, agency or department not specifically enumerated to them in the Constitution. But that's another discussion. And I am looking at the big picture. As far as the guns go, they weren't tax protesters. They were small businesspeople, who, admittedly, didn't take my advice, but were held at gunpoint while the tax people carried off every last item they owned, and items in their possession that didn't belong to them.

And you forget the problem of embedded taxes. Approximately 23% of the price of everything is there due to the costs of compliance with the tax code. If those costs are removed, competition will naturally drive the prices down. Of course, some more, some less. But on average 23%. If we drop the price of the widget by 23%, and then add a 30% tax to the new price, the price remains essentially the same. You talk about adding 30% to the price of a house. What you fail to understand is that the FairTax would only apply to new housing. Pre-existing housing is not subject to the tax. Used cars are not subject to the tax, etc. And the cost of new houses and cars would not increase much, if at all, because the manufacturers would no longer have to recoup the cost of tax compliance in the sticker price.


Vendors would be required to remit the taxes collected to the government, just as they do now. I'd expect we'd handle them in the same way. But there is a difference. Vendors will be paid to collect the FairTax, instead of being slaves to government. Sure, there are some protocols to be introduced, but vendors aren't being asked to do anything they aren't doing now. Except now, they don't have to do it for free.


The problem I have with the wealthy is that the income tax encourages the accumulation of massive wealth through the manipulation of politicians and bureaucrats. If a person becomes wealthy honestly, through innovation, creativity, and providing value, that person should be able to do whatever he wants with his money, without the government laying any claim on it simply because he has it. What entitles you to anything I produce honestly?


The FairTax isn't perfect, but it's a damn sight better than our current system. If you have another plan to consider, that doesn't involve simply "reforming" the current system, I'd be glad to consider it. I just haven't heard one.

And you forget the problem of embedded taxes. Approximately 23% of the price of everything is there due to the costs of compliance with the tax code. If those costs are removed, competition will naturally drive the prices down. Of course, some more, some less. But on average 23%. If we drop the price of the widget by 23%, and then add a 30% tax to the new price, the price remains essentially the same. You talk about adding 30% to the price of a house. What you fail to understand is that the FairTax would only apply to new housing. Pre-existing housing is not subject to the tax. Used cars are not subject to the tax, etc. And the cost of new houses and cars would not increase much, if at all, because the manufacturers would no longer have to recoup the cost of tax compliance in the sticker price. Originally Posted by CuteOldGuy

Complete nonsense.

I didn't "forget" or "fail to understand" anything. First, this embedded taxes stuff is simply laughable bullshit. No credible, unbiased economist or tax policy expert could possibly believe that it amounts to more than a very small fraction of the 30% sales tax that would be added on. We went through all this in another recent thread. Have you forgotten about that already? You can't keep peddling all this ridiculously preposterous BS and expect anyone to take you seriously in a tax policy discussion. Second, I am fully aware that the FairTax would only apply to new and not pre-owned homes and autos, and in fact stated so in a previous discussion of this topic with you. At the time, I noted that during the run-up to the implementation of the FairTax, the demand for new homes and autos would spike while people rushed to "beat the tax," but then drop precipitously once the "start date" for the tax arrived, and remain depressed for an extended period of time, while the demand for pre-owned stuff would rise. The notion that the price of a new car or home would not take a big leap after adding on a 30% sales tax is simply ridiculous beyond words. Good luck with getting homebuilders and auto manufacturers on board for a plan like that! But you forgot all about our discussion of that little detail, too, didn't you?

Vendors would be required to remit the taxes collected to the government, just as they do now. I'd expect we'd handle them in the same way. But there is a difference. Vendors will be paid to collect the FairTax, instead of being slaves to government. Sure, there are some protocols to be introduced, but vendors aren't being asked to do anything they aren't doing now. Except now, they don't have to do it for free. Originally Posted by CuteOldGuy

Paying vendors and service providers additional monies to collect the FairTax would add even more to the already greatly-increased deficit resulting from switching to a highly revenue-negative tax system. Also, do not forget that illegal evasion, already engaged in by many merchants and service providers much lower state sales tax rates, would very likely balloon to very high levels if you levied a 30% national sales tax on top of state sales taxes. That's just too tempting a target. Every other nation that levies a consumption tax does so by utilizing the VAT structure. There's a good reason for that.

The problem I have with the wealthy is that the income tax encourages the accumulation of massive wealth through the manipulation of politicians and bureaucrats. Originally Posted by CuteOldGuy

Seriously? How, pray tell, does it do that? Don't you think most of the wealthy people you seem to resent so much would be a whole lot wealthier if they never had to pay income or capital gains tax?

I hope you don't continually allow yourself to become dyspeptic over the existence of the income tax, since there's no way in hell politicians will ever give it up.

The simple fact is that income taxes and payroll taxes are where the big money is!

Ok. All you do is bitch at me. Fine. You offer no alternate solutions. The 23%, IMHO, is a good number. It's been researched. I tried to maintain civility, but you refuse. Keep your income tax. It may well be a losing fight, but I will continue to fight for Liberty. And there is no greater impediment to Liberty than the income tax.

I've been in the business too long, and have seen too much, to defend the FairTax against the income tax. There is no defense of the income tax. I know those people. I've worked with them. They are not human. Seriously, there is a bizarre mindset within the IRS.


If all you're going to do is attack my position without offering alternatives, I'm done. You and Lusty can have this thread for yourselves, too. But I've been in the trenches. Tax is not a policy question to me. It is a moral issue. We aren't a free country as long as the IRS is able to enforce draconian laws without any checks on their actions.


So have fun. Enjoy feeling smart.

And you forget the problem of embedded taxes. Approximately 23% of the price of everything is there due to the costs of compliance with the tax code. If those costs are removed, competition will naturally drive the prices down. Of course, some more, some less. But on average 23%. Originally Posted by CuteOldGuy

COG - we discussed this in the other (Rand Paul honesty) thread. CM is more skeptical than I am. I think prices will go up but not by the full 30%, as some embedded savings are realized and passed along to consumers. Can anyone substantiate your claim that pre-FairTax prices will go down by an average of 23%? You state it as fact. And your percentage is a perfect offset to the tax - that's convenient! Is it based on a study or estimate of any kind? Here's our previous discussion:

My Comment:
If there are significant savings to be reaped (and potentially passed along in terms of lower prices), they would come from eliminating: 1) payroll taxes 2) personal income taxes and 3) the high costs of complying with our existing Rube Goldberg tax code. Arguably these benefits could percolate through the entire economy. A business would save not only on its own reduced costs but also on lower costs for parts and materials it purchases from other firms enjoying similar savings. Trying to predict and quantify all of this with any degree of accuracy looks like a dubious undertaking, however.

Cap'n Midnight reply:
Although I think it's fair to say that we can establish a reasonable range of estimates, I certainly agree that quantifying all this with any degree of precision would be a very nebulous undertaking, to say the least. But I do think it should be abundantly clear that the elimination of "embedded taxes" could not possibly balance more than a very small percentage of the 30% FairTax rate. Originally Posted by CaptainMidnight

It's an average. Some will be more, others less. It's not exact in each and every instance. And the fluctuation of prices depends on the price elasticity of demand for the individual product or service. Overall, the price level should remain fairly static.

If you don't think the 23% is real, do your own research. I'm trusting the authors of the bill. We won't know until we try it, and we won't try it because it would severely limit the ability of industry to control politicians, and politicians like being controlled because it is an income stream for them.


The 23% level is not convenient. It was planned that way. The bill is designed to be revenue neutral. Like any economic prediction, it's a best guess. The beauty of it is that the tax is out in the open, not hidden in thousands of pages in legalese that even Einstein said was incomprehensible back when it was much simpler. If Congress needed more money, the tax goes up. Everyone sees it. They will have to justify the increases to the people, rather than the lobbyists.


Regardless of whether the numbers are exact, the concept is beautiful. It's market controlled, transparent, and much more embodies this country's ideals of liberty and personal responsibility than the income tax. We can adjust the numbers if necessary. And if the people think the tax is too high, Congress will need to prioritize spending. That's not a bad thing.