I’m actually sitting here laughing while listening to Senator Gravel! I cannot write anything that can convey how absolutely amusing Senator Gravel is. Listen to his videos. He puts Ernie Boch to shame!
The reasons why I am supporting Senator Gravel are very simple. I won’t support anyone who supported the Iraq war or enabled the Bush administration. I’ve been looking for a candidate who has no fear. I want someone who is willing to say “stupid laws” enacted by disinterested, uninformed politicians who are financed by large corporations.
Please, if you feel as strongly as I do, consider helping Mike Gravel stay in this race so that there will be someone in the debates who will address the issues head on. I think he can influence this race and put some of the other candidates to shame. He can change the tone of the Democratic primary for the benefit of all of us.
Let me know what you think after listening to Senator Gravel.
Frankly, Gravel isn’t as bad as some people out of the race, and I could stomach him before Kucinich. I give him points for thinking outside the box, but even Bush isn’t so daring as to openly support a punitive, regressive 19% sales tax.
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Senator Gravel’s web site states:
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THE FAIR TAX
There is only one one entity in the U.S. that pays taxes; the individual. Business and corporations do not, they merely collect taxes from the consumer and pass it on to the government. The Fair Tax proposal calls for eliminating the IRS and the Income Tax and replacing it with a progressive national Sales Tax of between 19 and 23 percent on newly manufactured items. To compensate for necessities, such as food, there would be a “prebate” for families below the poverty line. An average family of three that lives below the poverty live would receive an additional $3,000 a year.
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Senator Gravel has obviously put a lot of thought into this issue. I initially had doubts, but I think there’s quite a bit of truth in the above statement. I’m not convinced that this is regressive at all. Can someone with an economics background (MFW out there?) explain how this could be more regressive than what currently exists?
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I am 100% in Gravel’s corner on every other issue. Your doubts will lead me to doing some additional research.
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That’s patently false, in almost all cases — specifically, in any case where both the supply and the demand curve have slopes not equal to 0 nor infinity. In any of these situations, an increase in tax (which shifts the supply curve) results in a consumer price higher than the old equilibrium but not as high as the old equilibrium plus the tax. Therefore, the consumer bears some of the tax, and the producer some of the tax. How much for each? It depends on the slopes of the curves.
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Ask restaurants about imposing a 10% meal tax nationwide. They’ll all be against it. Why? Because it will eat into their profits. Why? Because at 10% more expensive, demand drops. What happens? People eat out less (less good for them, since they’d want to eat out more were it not for the tax), and businesses make less money (since fewer people are eating out).
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Who’s paying the tax? Both customer and restaurateur, since each of them are worse off within the scope of the transactions.
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There’s another reason why it’s regressiveish — more specifically, it nails the middle class the hardest. Here’s why:
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p> * The poor pay no tax, thanks to the rebate. Not much different than now. * The rich don’t pay anywhere near 19 – 23 percent of their income. Why? The rich don’t spend anywhere near their entire income. That’s not why they’re rich perhaps, but that’s why we call them rich. They’ve got great savings, in stock market, bonds, real estate, whatever. * The middle class gets nailed. Why? They’re paying this 19 – 23 percent tax, and they spend most of (if not all of, or even more than all of) the money they make. The middle class family pays the bills, tries to put some in 401k, and then spends spends spends on home goods, auto costs, on their kids, maybe a vacation, etc. At the end of the month, they’re lucky if they broke even — which means they’re paying the 19-23% on nearly all of their income.
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The flat tax is a scam to make the middle class bear more than their share, at the benefit of the rich. Why? Because it taxes consumption, as if everyone consumes at the same proportion of their income. Rich people, on average, consume at a lower proportion of their income than the middle class, and therefore would pay more dollars in tax, but a lower tax rate than the middle class.
As you point out, all expense gets passed on the consumer in one way or another. Corporations raise their prices to accomodate the taxation leveled against them (or they offshore and don’t worry about it — whole other topic).
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If my standard, middle class tax rate is an average 33%, some of which is lowered based upon mortgage debt level, then wouldn’t I benefit from paying a 23% rate vs. the 28.5% or so I currently pay (after deductions for mortgage interest, charitable contributions, etc.)? Wouldn’t this cause somewhat of a paradigm shift that would result in the purchase or more Prius’ and less consumerism for the sake of consumerism? As I posted below, I’m doing more research. This is not my reason for supporting Senator Gravel. I simply want honest, open debate on issues near and dear to me. I want to hear someone with years of experience and exposure to Congressional idiocy to stand up at the podium with the other candidates and call them out.
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I explicitly claimed that the above quote is not the case. When prices are raised above the “natural” supply-demand intersection due to taxes, there is a reduction in both consumer surplus and producer surplus. Both parties contribute to that tax burden — the consumer in the form of higher (but not as large a delta as the value of the tax) prices, and producer in the form of less profit made per widget (and fewer widgets sold).
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And congrats lolorb: YOU’RE NOT MIDDLE CLASS.
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According to the IRS tax tables, the 33% tax rate is for income in the $154,800-$336,550 range (and don’t forget that’s only on the $154,801st dollar and after). That is simply not middle class. That’s upper class. In fact, it’s top 5%, according to wikipedia:
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This demonstrates my point quite nicely: folks in the top 5% of income (the upper class) will get a double tax reduction — not only is the rate lower, but it’s on far less than 100% of income because people pulling in between 100 and 200 large per year have a positive savings rate, whereas people making between 0-75 large are far less likely to have a positive savings rate (I don’t have a link to back this up, and you’re welcome to claim that this claim of mine is wrong).
and I overestimated the rate I fall in, obviously.
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I get your point and appreciate it. I’m waiting for a response from the campaign because I’d like to know the thoughts behind the proposal. Obviously, Mike Gravel is a Democrat and a proponent of progressivism. I still think that ultimately, all expense is passed on to the consumer in one form or another. We’re paying not just for gas but for the absurd profits of the oil industry.
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I’m still willing to listen to the arguments for a national sales tax and I hope you will be interested as well. It’s not likely that this proposal will ever become reality.
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I reiterate: I’m supporting Gravel because he’s a great spokesperson who has the ability to push the debate on the war, etc. He’s a far better choice to do so than Kucinich or Nader.
what percent of Americans do you think qualify for “middle class”… you can feel free to include “lower middle” and “upper middle” if you like.
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It seems to me that today’s Americans are embarrassed to be poor or to be rich. I’d bet that if you asked Americans to answer if they are:
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___ lower economic class
___ lower middle economic class
___ middle economic class
___ upper middle economic class
___ upper class
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that you wouldn’t get 20:20:20:20:20. I doubt that more than 10% would say “lower” and I doubt that more than 5% would say “upper.” Somehow, the “middle class” is swallowing more and more people.
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Part of that might be that the separation between the top 1%, 5%, and 10% is growing very very quickly. But another part of it, methinks, is that people are just embarrassed to admit that they’re rich by American standards.
After reading the list of supporters of a national sales tax, I’m understanding stomv much better, but I’m still interested in learning more.
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Here are some links I just found and a little taste from each:
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Running Circles
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The Progressive Democrats’ Sales Tax
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“I consider myself to be fairly liberal on most issues. So some of you might be surprised that I am about to take a position that’s usually the providence of hardcore conservatives. I support HR25-the Fair Tax Act of 2005.
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[National Center for Policy Analysis (Cato Institute Talibangelists)
http://www.ncpa.org/…]
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“Replacing all federal personal and corporate income taxes with a national retail sales tax would have a dramatic favorable effect on the U.S. economy.”
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National Sales Tax Debate and Poll
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“QUESTION 7
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I’VE HEARD RATES FROM 10 TO 40 PERCENT. WHAT’S THE LIKELY RATE?
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Answer 7.1 The FairTax has a tax-inclusive rate of 23%, which is directly comparable to an income tax rate of 23% since income taxes are actually specified on a tax-inclusive basis. This rate applies to new things only – used things are not taxed – and the rebate based on family size also helps lower the effective tax rate.”
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Wikipedia
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“The FairTax has generated a large grassroots tax reform movement in recent years, led by the non-partisan group Americans For Fair Taxation.”
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Business Week Economist
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“Beware A Sales Tax In The Name Of Simplicity
Taxes on consumption would hurt the middle class and the poor
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President Bush is having a difficult time selling Social Security private accounts to America’s middle class.”
Margin-destroying graphic alert!!
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Please, if you’re going to post graphics, first reduce them to a manageable size and then re-upload them, perhaps to a flickr or photobucket account.
Like Brian Joyce, he had a very strong pro-life voting record until about 10 minutes before he decided he wanted to run for higher office. If you are willing to switch your position on an issue like that because you think it will help get you votes then I wonder what convictions, if any, you really have.
Plus, he made that bizarre deal to share delegates with John Edwards in 2004 Iowa caucuses. I’ve never understood why we chose to benefit Edwards — someone with whom he profoundly disagreed — over Sharpton, Clark, or Dean, three candidates with whom he shares more ideological ground.
There just didn’t seem to be any reason for it. I wonder if it was a backroom deal with the Kerry people. They were so awful and dirty in Iowa and in NH. If Kucinich were as principled as he claimed, he would have supported another candidate who shared those principles.
Thx for the post lolorb. I have mentioned Gravel several times here at BMG because of his pro-civil rights stance. However, I’ll admit that until now I hadn’t listened to his videos or delved into his other ideas too much.
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I am a bit taken aback by his “let the people legislate” initiative. I need to read his proposed legislation to see what safeguards are in place, if any. The whole rash of anti-gay state amendments proves to me that legislation by the people can easily amount to legislation by the tyranical majority. Also, it is my experience that legislation passed by initiative in WA and CA sometimes/often ends up being unconstitutional and creating huge, conflicting budgetary nightmares. This is, I suppose, because the avg citizen is no more versed in their constitution & laws than is the avg Talibangelist in the Bible. I’m not saying that the representative system is perfect, but a complete side-step of it would be problematic too. Lolorb, how does Gravel’s proposal prevent the problems of tyrany of the majority, conflict within the laws and budgetary mess that could increase under his plan?
Thanks for asking that question and I agree that there are concerns. I’m going off to do my research. I have not focused on that issue.
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I also appreciate stomv’s input. Since few even know about the Gravel candidacy (no thanks to the MSM), it’s been hard to even initiate discussion with anyone about it. I love BMG for just that reason.
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One thought I had while pondering a national sales tax was that it would be a powerful method for excluding energy efficient items from taxation. Buy a Hummer, pay 23% sales tax. Buy a Prius, pay 0%. Thoughts on that anyone?
in that it just happens “at the register” instead of in April following a pow-wow with your tax attorney, HR Block, and the IRS.
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But, it’s also subject to all kinds of problems. Furthermore, there exist (albeit more complicated) mechanisms to offer tax incentives (or penalties) now.
Talibangelist! I like that! Is that a Laurelism, or did you crib it from somewhere else?
Talibangenlist should be repeated often.
from Pam’s House Blend.
Best since CA/Tastrophe I think.
-Has a historic defense of holocaust deniers, and not just a pro free speech defense
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-The Fair Tax plan which I briefly considered would be highly regressive since poorer people buy things more often on a daily basis, the only way its truly fair is if you tack on a guaranteed minimal income which Gravel to his credit supports, but in the end it’d be a pyramid scheme that redistributes wealth, and not in a good way since primarily it’d be the middle class basically paying high sales taxes to support the poor who also pay high sales taxes, the rich don’t buy as much so its a dumb idea
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-Lastly I oppose most ballot initiatives since we live in a REPUBLIC and not a DEMOCRACY and the only way to protect minority rights is to ensure that objective institutions like courts can protect them rather than leaving them to the majority, also when people are confronted with dumb proposals they are usually dumb enough to vote for them, i.e 45% of MA residents voted to abolish the income tax in 2002, so again the less power to the masses the less we get to anarchy, mob rule, and the more power we leave to rational people to make decisions
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Also on Kucinich and abortion, had Kucinich ran on his actual record on abortion he’d be the perfect candidate for someone like me who opposes unnecessary wars (99% of them usually are), the death penalty, and abortion and you rarely get all three nowadays in one package. But yes he did abandon his credentials to suck up to the rabidly pro abortion wing of the party, the same wing that nearly lost us a Senate seat in PA and endorsed the Republican in RI.
Interesting discussion.
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I voted to have him in the debates, though I do worry that his “issues” could be a distraction rather than productive. Still, it would be more entertaining than listening to Senator “John Edwards and I have a plan” Kerry and his ilk.
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The national sales tax and variants of it have been on offer for many years now, and I’m not aware of any thoughtful academics who take it very seriously. It is sometimes presented as a “consumption tax” with the argument being if we want to promote savings and investment (as we should, with the national savings rate hovering around zero), we should tax what people spend and leave other income and wealth alone.
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Trouble with all this, as stomv points out, is that the chief beneficiaries are the rich. They get all the benefits that are bought with tax dollars (police and fire protection, an educated workforce, etc.) without having to contribute much to support the government. Violates most notions of fair play, I would say.
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The idea of direct democracy is appalling to me, for the reasons mentioned by others plus more. California is a good example of how government by plebiscite can really screw up a society.
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So, I won’t be supporting Mike Gravel, even though he’s from Springfield, but thanks for generating a lively discussion!
In doing a little googling, I found it interesting that there is so much disagreement on the tax issue — on both sides. I understand your reaction to direct democracy as well. There are some very bad examples of what can happen. Those talibangelists might love the concept!
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All that said, I can’t help but continue to support Senator Gravel’s candidacy because he is outspoken and will be a thorn in the side of a few of the more notable and well financed candidates. If we have to watch the debates, they should at least be amusing!
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It is good to have discussions. Many thanks to everyone for participating. BMG is a great blog.
…that would be incredibly regressive. Lower income people consume goods at a higher rate, relative to their incomes, than higher income people do–higher income people tend to consume services at a higher rate, and that is a reflection of the fact that sales taxes on goods are regressive. In more than a few countries that have national “sales” taxes, Canada (“GST”) and Europe (VAT), they also cover services
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Unless the national “sales tax” in the US was imposed not just on goods but also on services, I would oppose it. Vehemently. But, attempts have been made to impose sales taxes on services. The most recent being in Florida a few years ago. But a coalition of lawyers and accountants in FL got together and by initiative petition got FL’s services tax repealed. I wouldn’t expect a national sales tax including services in the US to be enacted any time soon, and, so I’d oppose imposition of a national sales tax here.