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Posts Tagged ‘Fair Tax’

Congressman Lucas' Town Hall Meetings I

Thu ,14/07/2011

Election season is coming up, and many of our representatives are, or will be, holding town hall meetings. It is important that voters attend as many of these as possible, not only to express their opinions, but to decide if they wish to return the representative to Washington in the elections in 2012.   

Congressman Frank Lucas (R – OK) held one of his town hall meetings at the Hominy City Hall on April 19, 2011. He reported that the war in Iraq is winding down, but that Afghanistan continues to be a quagmire without a definite ending in sight.  There is concern about our role in Libya, but the President does have power to take limited military action without a formal declaration of war. He reported that the Legislature has become even more divided and partisan over the last year, and it is becoming very difficult to carry out the business of government. This year, Congress is mostly going to be about the budget, and little else is likely to get done.

A scientist in the audience explained that Dr. Patrick Michaels, who testified before Congress that there was no consensus among scientist on climate change, had been exposed for taking large payments from power companies to lobby for them. There is a consensus among scientists.  A recent survey showed that 97% of climate scientists active in research agree that global warming is happening and that greenhouse gas emissions are the cause. Every major scientific organization in the world has adopted a statement in agreement. Research has also shown that global warming is the cause of some of our extreme weather events, and that higher CO2 levels and warmer temperatures may damage crop yields. After that long explanation, the question was whether the Congressman, who will chair the Agriculture Committee next year, would be willing to hold hearings to determine if global warming might put our food supply at risk. The Congressman replied he could not make a commitment as yet.  

Note:  Later, on June 16th, Rep. Lucas voted to prevent the Department of Agriculture from planning for future extreme weather and crop loss that scientists say will be the result of climate change.  Apparently Congressman Lucas does not believe the scientific evidence and does not want the Department of Agriculture examining the issue, though it poses a danger to our food supply.

When asked about Social Security, Congressman Lucas explained that, over the years, the surplus collected has been put in a trust fund in U.S. Treasury bonds. Though the government has borrowed against the surplus, it must be repaid and will be available to make future payments.  After the trust fund is exhausted, Social Security will pay benefits as money is collected, and benefits may be reduced by about 30% unless the system is tweaked by reducing benefits or raising the retirement age. A little research after the meeting showed that the trust fund is expected to be solvent until about 2034 but that the most popular tweak, raising the cap on FICA contributions, will make this trust fund solvent to about 2080.

One lady explained that we had just spent billions of dollars developing Head Start centers and now the money needed to operate them may be cut from the budget. Head Start allows many low income people with children to work as it reduces some of the expense of child care. What sense does it make to extend the tax cuts for wealthy citizens and then cut programs that benefit disadvantaged citizens and may even cost jobs? The Congressman commented that the mood in Congress was to cut taxes and reduce spending.

Another lady asked about the wild horses on ranches west of town. Congressman Lucas explained it was a program, apparently one he questions, that moved the horses to save them from being euthanized. The horses are a non-native species that damage range-land and the program costs $5 billion dollars. The lady from Head Start asked why we could spend $5 billion on horses, but not $5 billion on the Head Start program benefiting children.  

One constituent complemented Congressman Lucas on the Tulsa World article where he defended raising the debt limit so that the U.S. would not have its credit rating lowered, which would be disastrous for the country. He asked about the monetary policy which benefited the stock market, but hurt many retired people by keeping interest rates low. The Congressman pointed out that the policy was set by the Federal Reserve and it benefits those who borrow and hurts those who save. He suggested the policy might change, and suggested it might be wise to be sure any loans you have were at a fixed rate.

When asked about a flat tax, the Congressman explained he favored a “fair tax”, a national sales tax on all purchases. The states would collect the tax and it would end income tax. Putting the IRS out of business sounds good except that a little research shows that the “fair tax” would have to be about 30% on all goods and services. It would shift more of the tax burden to middle and lower income citizens and would hurt seniors, who have paid income tax all their lives and would now be taxed more on their purchases. 

When asked about the wisdom of subsidizing ethanol from corn, the Congressman replied that the subsidy program benefits corn producing states but hurts everyone else. It costs tax money and it raises the cost of animal feed and food. He commented that the corn producing states have a lot of political clout, and the policy might be hard to change. 

The discussion was lively and it was good that voters could ask questions and express our concerns to Congressman Lucas. The third district covers a large area, the Western two thirds of the state, and it should be appreciated that he conducted town hall meetings at many towns in his district. Elections are coming up and Oklahoma voters need to weigh carefully what he says, and how he votes, in order to decide if we should return Congressman Lucas to Washington.

Bits and Pieces 3:The "Fair Tax" Isn't Fair to All

Thu ,05/08/2010

The “Fair Tax” proposal would replace income taxes with a “revenue neutral” consumption tax. To fund our government at the current level would require a national sales tax of  30%. The Fair Tax proposal  might simplify our tax codes, but it would also have ripple effects across our economy with unknown consequences.

Economist Mike Moffatt has identified the likely winners and losers under the Fair Tax proposal. Winners would be people who are inclined to save, people who can shop in other countries, those who can avoid sales taxes by unscrupulous means, and the wealthiest one percent who will get an average tax cut of about $75,000.

The losers would be the working poor, families with incomes less than $200,000, people who derive income from the current system (tax accountants, IRS employees and income tax lawyers), and seniors who have already paid a lifetime of income taxes and would now be taxed on spending as well.

The “Fair Tax” proposal would shift more of the tax burden to middle and lower income groups, those groups already benefiting the least from recent tax cuts. Our present graduated income tax code is based on the ideas that those who profit most from our country’s wealth, resources, and opportunities should pay a greater share of their bounty in taxes. The current system seems fairer and more pragmatic than shifting taxes to those who could least afford to pay.

For more information and references, click Here.

Both a Congressman & Wealth Redistribution in Camouflage

Sat ,24/07/2010

Dan Boren (D-OK) has made a number of ads critical of his Democratic primary opponent, Jim Wilson.  It bothers many Oklahomans that Boren appears to be just camouflaging himself as a Democrat because his father was a highly respected Democratic Governor and Senator. It’s not clear whether the acorn fell really far from the tree or if Boren’s ads represent what a Democrat has to do to be elected in Oklahoma. One ad showed Boren in new camouflage gear, tags still attached, cocking a gun at his opponent. However, the ads have not gone over well as State Senator Wilson, who Boren chastises as Oklahoma’s “most liberal” senator, was a combat marine in Vietnam.

An article recently appeared in the Daily KOS containing a video making fun of Boren’s ads and criticizing him for supporting a “Flat Tax” scheme. (1) True to form, in the tree scene in the video, Boren is wearing the unofficial state color – camouflage. He is the  only Democrat among 61 Republicans in Congress supporting the “Flat Tax”(or “Fair Tax”) scheme.

Boren apparently hasn’t thought that Flat Tax scheme through. My Congressman, Frank Lucas (R-OK), also favors a “Fair Tax” scheme that would replace income taxes with a national sales tax ( a consumption tax) (2). Boren says it would be a sales tax of 30%. It  may need to be higher for it to be “revenue neutral” as we have to raise a certain amount of revenue to support our government and that would not change. What the “Fair Tax” would change is that more of the tax burden would shift to the middle and lower income groups, those  already benefiting the least from state and federal tax cuts. (3)

While many like the idea of the Fair Tax’s simplicity, that may turn out not to be the case. The Tax Reform Act of 1986 was supposed to bring us “simplification” of  our income taxes but there is little evidence that it has worked. Adopting a national sales tax will have a ripple effect across our economy with unknown consequences. For instance, we would have to tax internet purchases and raise import duties to keep the wealthy from shopping overseas for major purchases.

Economist Mike Moffatt has worked out who would be the likely winners and losers under the Fair Tax proposal: (4)


  • People who are inclined to save: People who do not consume as much will benefit from the plan.
  • People who can shop in other countries: People who take a lot of overseas vacations or living near the Canadian or Mexican borders.
  • People who can avoid sales taxes: Those who can exchange or barter services and goods, or the unscrupulous who can buy for personal use and claim as a business use.
  • The wealthiest one percent: They will see an average tax cut of about $75,000 per person.


  • The Poor: The working poor pay little income tax but they must spend a larger proportion of their income to survive. They’d pay a larger percentage of their income in taxes than wealthier individuals.
  • Families: Tax breaks such as dependent deductions, earned income credits and child care credits would disappear. It would hurt families with incomes less than $200,000 but help families with income above $200,000, due to the dramatic reduction in the top tax rate.
  • Tax Accountants, IRS Employees and Income Tax Lawyers: Yes, but they’d survive somehow.
  • Seniors: They’ve already paid a lifetime of income taxes and this would now tax them again on consumption as well. They would end up paying a disproportionate share of taxes.

Overall, the Fair Tax is fairer to some than to others, and it looks to be most fair to the wealthy. Our present graduated income tax code is based on the ideas that those who profit most from our country’s wealth, resources, and opportunities should pay a greater share of their bounty in taxes. The rich may not think that’s fair, but that’s fairer and more pragmatic than shifting more taxes to those who have little.

Note added on 3/29/2012: Congressman Dan Boren has decided not to run again for Congress in 2012. This post about his 2010 campaign has been left as it explains the disadvantages of flat tax schemes – and also what a Democrat might try to do in Oklahoma to be elected.

(1) http://www.dailykos.com/story/2010/7/3/881389/-Dan-BorenCongress-Worst-Democrat-Has-A-Primary

(2) For an in depth analysis of the consumption tax see:  http://mises.org/daily/1768

(3) For historical top tax rates see:


(4) http://economics.about.com/cs/taxpolicy/a/fairtax_5.htm