Transcription of an interview of economist, Wayne D. Angell by Maria Bartiromo Fox Business “Opening Bell” on November 6, 2014
M (Maria)—November 6, 2014 WSJ Op-Ed by John Boehner and Mitch Mc Connell.
“Our priorities in the 114th Congress will be your priorities. That means addressing head-on many of the most pressing challenges facing the country, including: the insanely complex tax code that is driving American jobs overseas…”
With more I want to bring in Wayne Angell. He is a former Federal Reserve Governor and former Chief Economist at Bear Stearns.
Wayne, it is wonderful to have you back. Good to see you.
W (Wayne)—Thank you, Maria.
M –What’s your take on the Mid-Term Elections Victory for the GOP?
W – Well, I think it’s fantastic, but it really means the GOP must get positive and must not see itself as being a negative force.
M – Will they be able to achieve what they write in this Op-Ed this morning? Will they be able to get tax reform moving?
W – Well, the way to get tax reform moving is to change the base from income tax to consumer tax, that is, what we’ve got to do is we’ve got to make it so that the tax xyxtem doesn’t distort economic activity, and the current one does, because it places the tax on our exports. Why could we tax exports?
M –Well, what’s your plan in terms of tax reform? I mean, how do you think a tax policy should look?
W –Well, I think a tax policy should look, first of all, the rates ought to be flat, and we ought to have a rebate of that tax for the lowest income people, so that they don’t end up paying the tax.
M –Alright, and where does the money come from?
W –Well, the money comes from taxes on what people spend, so both imports and locally produced goods would all be taxed at the same rate.
M – Wayne, what’s your take on the economy right now? Do you think the numbers are telling the true story when we see these improvements in the data?
W – Well, I think the numbers barely tell the true story. I think the economy is very strong and will continue to strengthen as we go through out 2014.
M – What’s your take on the only thing that actually can get done with the new Congress? I mean, what’s the low hanging fruit here, Wayne? I don’t think it’s tax reform. Is it something else?
W – Well, I think that tax reform, if it is not done, everything else jams up behind it. So I think we’ve got to get tax reform accomplished.
M – Alright. We will be watching. Wayne, good to have you on the show today. Thanks so much for joining us.
During part of the interview there was a split screen titled “The Fair Tax Plan” listing 3 points about the Fair Tax.
A most outspoken critic assumes increased Social Security and COLAs based upon an unfounded 30% increase in prices. This price increase has, I believe, been debunked by the previously submitted information.
The claim of a new IRS — in the form of a State Tax Authority that will audit consumers and challenge them to present receipts — is unfounded. State tax agencies already exist, and under the FairTax, rather than having a burgeoning national agency collecting from — and possibly abusing — citizens, each state will have the option to collect the taxes as part of their usual tax collection activity (which already collects from businesses), then submit the taxes to the federal government. State organizations tend to be both more efficient and easier to deal with than any federal leviathan.
As far as the claim of auditing consumers, I have studied the FairTax since 2005 and have found no basis for thinking that will ever happen. Nor should it — since legal residents will no longer be responsible for tax reporting at all. This represents an unfounded scare tactic.
As far as the claim that the government — and the FairTax founders — want to enact the FairTax as a way of having both a national sales tax and a national income tax… there is no truth to that. While the 16th amendment makes an income tax legal (it was illegal before), the goal of the FairTax is to eliminate the 16th amendment through repeal. In fact, section 401 (the last section of the FairTax) specifically states that if the 16th amendment is not eliminated by 7 years after the FairTax goes into effect, the FairTax will essentially become null and void.
The effect on senior citizens will be mixed, primarily because many who have saved money have done so in tax-deferred investments (traditional IRA, 401k), but some also have the so-called Roth IRAs, which are post-tax. The effects will vary depending on what type of investment dominates a senior’s retirement portfolio or pension. Senior benefits, however, will be taxed at the same rate as everyone else ($23 of every $100 spent) and they will receive the “prebate” like everyone else (offsetting a significant amount of their taxes at low levels of spending). As many seniors live frugally on low, fixed incomes, their dollars would go further and many seniors would see a significant benefit.
In conclusion, Mr. Uninformed tries to be a one-man wrecking ball where the FairTax is concerned. Despite his claims of our ulterior motives, those of us who support the FairTax have not done so glibly, or because we seek personal gain. No, the vast majority of FairTax supporters are critically-thinking, well-educated U.S. residents (including many small business owners just trying to make ends meet) who have grown weary of both the corruption and individual intrusion evident in our current tax code. We are simply trying to find a better way… and we have found it in the FairTax.
We have encountered naysayers — and their same, tired claims — many times. They often attempt — in public view — to disparage a proposal that thousands of us have found worthy of our time and attention, while pushing his own proposal that is not financially feasible for the country at current levels of spending. As the FairTax focuses simply on the collection of taxes — and does not take any position on current spending levels — it is able to be a non-partisan proposal; and I personally believe its attempt to relieve lower- and middle-class residents of the biggest burden to upward mobility (income confiscation) is not only noble but right. And the fact that the FairTax removes tax lobbyists — and their influence — from national prominence elicits praise from those who are tired of special interests receiving tax breaks while the rest of us pay the bill.
I encourage every reader to check out the FairTax themselves. Once examined, the exhibits held up by detractors will be revealed as poor efforts at an attempt to discredit a large movement of people ready for a positive change in our tax code.
Dr. Presten Witherspoon is a small business owner in Duncanville, TX. He holds a BA in History from Harding University in Searcy, Arkansas, and a Doctor of Chiropractic degree from Texas Chiropractic College in Pasadena, TX. Dr. Witherspoon is a frequent apologist on behalf of the FairTax.
Possibly the most egregious comment falsely claims that the FairTax will stick a 40-70% tax on everything you buy. This is absurd.
Firstly, if that were the case, no right-thinking tax reformer (such as myself) would have even given the FairTax a hearing. Someone like me would have dismissed the entire thing as impractical.
Secondly, a tax that, at its maximum, taxes people at 23% of what they SPEND (not what they earn), cannot cross the threshold to become some behemoth that raises taxes to 40-70%. To arrive at these absurd numbers, one assumes that having the state and local governments pay the FairTax will increase state and local tax burdens without taking into account that states and cities are already paying the extra 22% that Dr. Jorgenson found elevated the prices of everything we currently purchase — and that 22% will go away when the FairTax is enacted, as discussed above. Furthermore, he claims the FairTax rate as an outright 30% when, in fact, it is lower (no matter how you choose to calculate taxes, out of every $100 spent, $23 will go to taxes under the FairTax as presently proposed in Congress).
This same individual claims the FairTax falls short — short of what, he does not specify — but I will assume he means of falling short of current income tax collections. Calculations from Dr. Lawrence Kotlikoff of Boston University shows that the proposed tax rate should be as proposed in the law ($23 out of every $100 spent). If it is determined that is too low, the law can be changed; and — contrary to the current system — if the tax is raised, it is raised upon everyone based upon how much they choose to spend… there is no favoritism or lobbying possible under the FairTax because there are no exemptions — just the “prebate” — to offset spending on necessities. Additionally, the 1-5% adjustment being claimed is far less than the 10%+ adjustment that would have to be made to his favored 10% Flat Tax.
This video shows how easy it is to create a Popvox Account and show support for HR25 The Fair Tax.