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Scott:

A reasonable proposition but not logical. In the first place legislation targeted to economic relief, especially of specific groups, is a terribly inefficient methodology. A change to the current tax laws requires an addendum, usually, to the tax code; a minor educational aspect for IRS and the public, and then it all folds into the existing system of collection and filing taxes. To create new targeted legislation every time a need appears necessary will frequently require a new bureacracy to administer that legislation, possibly creating new reporting requirements. The latter is especially pertinent given the strongly promoted goal of APT in doing away with the IRS. Much like their archenemy, the Fair Taxers, they propose IRS elimination as some sort of idealistic appeasement to the age, old cry of anarchists; "No government at all!"

With the IRS and accompanying reporting data gone there will be no way to identify those who belong to a targeted group. Should the Congress want to issue tax rebate checks they would have no database to ascertain the preferable receipients of said rebates. The Earned Income Credit flows seamlessly from the current withholding/filing process. How would targeted legislation to these same folks determine who those folks are? No doubt someone could figure out how to accumulate data on incomes and expenditures from APT transactional data but this adds to the complexity of implementing APT and decries Dr. Feige's contention that APT would not provide any explicit transactional data; only dollars collected.

We currently have, albeit far from perfect, a collection system that works quite well for the bulk of revenue receipts. In the business world one particular axiom keeps surfacing; the 80/20 rule; you do not allocate resources, time, talent and money to solve problems which represent only 20% of your business activity. The government ignores this rule for tax fraud and avoidance, not from an efficiency standpoint, but a from a fairness and law enforcement posture. To create an entirely new economic model, completely altering in many respects the psychology of the market place, as well as severely, potentially, impairing the options employed to steady our economy can lead to catastrophic results. The payoff is not worth the risks.

The other looming issue in your argument is that APT has a self-described rate limit beyond which the whole idea starts to break down. Word is that beyond .6% per transactor, 1.2% total, APT becomes infeasible. If we could hold to the .6% total then I would agree we would have elbow room. Should Dr. Feige's 50% reduction theory be wrong and we are closer to 70% reduction in transaction dollar levels, we start at the limit. There are many assumptions in Dr.Feige's 50% reduction calculation and he, very optimistically, plays down the likelihood of a further reduction in transactions caused by a new interest in avoiding taxable transactions.

Spending costly resources to validate an idea that at best is akin to replacing 2 remote controls with 1 universal one begs for "sterner stuff".

rubicon:

You sarcastic?! Who woulda thunk it? On the other hand, there has been much that you have posted here that could be viewed by any reasonable mind as ludicrous (I have never been known to avoid sarcasm, nor derision).

If you can fathom the potential extension of many of my doubts about the viability of APT, one would be surprised that you could classify many of them as flimsy. By your own admission, and that of Dr. Hermann, there are many unanswered questions regarding whether APT is workable or even sufficient in the long term. Notwithstanding the GE, Hawthorne, experiments, change for change sake is not generally progress either.

In the real world, whether in politics, government or business, uncertainty is often the hurdle that stands in the way of change. The potential ramifications, many bad, in implementing APT, pose obstacles that only the blindly faithful could casually overlook. Oh, I know, we only want to research and explore it right now. We understand that APT's promise may not deliver much, if any, of its proposed benefits; let us just spend valuable resources to determine if this 20% fix has merit.

We move boldly in the fields of science to extend and improve the quality of life. We, boldly, challenge the universe to explore what knowledge might be gleaned to improve the human experience. Tinkering with a new taxing methodology falls far short of the "sterner stuff" of boldly.

Ludicrosity notwithstanding, the absence of any renowned experts, from the various fields affected by APT, climbing on board, suggests that, if one can assume from a void, I may have many more supporters out there for my point of view. There were a few similar proposals, in addition to Dr. Feige's, submitted to the President's Advisory Panel on Federal Tax Reform. None seem to have stirred much interest; this should tell us something.

Dreams die hard and rubicon and Dr. Hermann earnestly believe in the APT promise. Though I often question the real basis for their support I do trust that it is well founded in their perceived benefits. Those clinging to an idea that they view as significantly altering the landscape of any activity are far from amenable to any naysaying. Their resistance cannot, prima facie, be taken as objective.

Doc:

Mixing metaphors is a common, often innocent, failing. Mixing number references can be more troublesome. You frequently compare APT's "tiny tax" rate with larger "embedded" tax rates passed through by those everpresent finaglers in the business world. I haven't, previously, given much thought to the Fair Tax premise of an "embedded" 22% factor in pricing, supposedly representing a factor for taxation offsets. A factor which you also cling to as a price savings which will occur with APT as well. My arguments have always centered on the thought that this "savings" will not take place because prices are more market driven than cost driven.

In reading your current post, alluding, once again, to the 15-25% pass-through rationale I had an epiphany. These suggested percentages are, as is customary, a percent of sales, in this case a percent of unit sales price. To the extent that tax costs are "embedded" in sales prices, if at all, these percentages seem far afield from reality. Assume a 35% federal income tax rate; assume also a 10% net profit before taxes; then the tax cost of each dollar of sales would be in the range of 3.5%. Even if you were to include all taxes which a business incurs you would be hard pressed to get much over 6% aggregate cost; this would assume another 25% of taxes on the 10% net profits. Admittedly this is still much larger than the "tiny tax" but when comparing numbers it is best to match apples with apples and not with oranges.

The other fallacy in your proposition is that the tax is no longer predicted on any notion of profit or any semblance of financial results. It is to be incurred on the basis of transactions, at the outset, obscure, nebulous activities that will befuddle management's ability to control. The uncertainty of total tax cost will likely cause an "embedded" rate far beyond the .3% APT rate, which in actuality for businesses is a .6% APT rate. This likelihood is even greater in that APT will create greater price inelasticity for most goods and services.

The normally small margins of market activities will make it imperative to include the impact of APT instead of the contrary.

We have again that mutation of trickle down theory. APT's "tiny tax" will cause a crescendo of transactions driving government revenues to astronomical proportions. No doubt APT will also end world hunger, cure AIDs, eliminate all wars and have a deterring effect on politician's promiscuity. Whenever significant dollars are involved businesses and those wealthy enough to pursue options will always seek to minimize taxes. All manner of creative ideas will surface to limit transactions thereby saving tax dollars and adding to profits. The failure to recognize the malleability of those with means has been the downfall of many a seemingly good idea.

You will garner little support from liberals for APT. Most will see through the fallacy of more revenues and will quickly perceive the furtherance of income inequality which is creating many of the problems we are now facing.

Surely a few shotgun pellets, but hardly necessitating a bomb shelter.

rubicon:

Revisiting: My derision is not meant to impart personal hurt but merely to needle. No doubt there is an element of wake up and think but for the most part it's just to poke a little fun.

I am flabbergasted by your suggestion that I am not objective and am biased. There is little question that after having apprised myself of the intricasies of APT I am not enamored. It is also true that whence commencing that review, I had a prejudice against any new taxing scheme that does nothing for correcting income inequality.

I have said much about my professional experience, at least a page or two, and that experience taught me that even when intuition suggests the futility of an exercise, it must, nevertheless, be carried out and carried out without imposing personal predilections; this is objectivity. The process is not perfect as the subjective looms around every corner but when charged with an analytical task, I, and any professional analyst, will peruse the data and will stay true to the premise that the data speaks louder than our individual voice. Being slightly more human than godlike, pure objectivity is probably unattainable unless one is ambivalent at the outset.

I have acknowledged some of the advantages of APT while strongly denoting the pitfalls I see. Highlighting the negative does not negate objectivity if those negatives are the result of an objective overview. To play down those negatives or pass them off as merely needing more research is not objectivity. It is simply the subjective; the unwillingness to rise above one's own perception and acknowledge imperfections or to just put them off as indeterminable at this time. The Fair Tax folks understand this and have gone to securing experts to survey the negatives and create offsetting answers suggesting why these questions are solved. It is unfortunate that they have employed the semantic tool of obfuscation to sell their idea. As we all know the classic example of this is their 23% tax. If an item untaxed sells for $1 and with tax, costs $1.30, the resultant tax rate is not 23%.

When attempting to scour up support for an idea you must have answers for the negatives or just the truly objective questions. Asserting that, "I don't think that will be a problem" or "there are many causes for 'x', but it will be solved by all those actions currently available" are not answers; they are avoidance; they imply that, though I have no idea of the answer, we should not let unanswerable questions stand in the way of progress; it will all be sorted out before final implementation.

To the zealot, those extremists with personal agendas, resulting from a hatred of the IRS or a disdain for wealth limitation or even a compulsion for eliminating taxes altogether, this avoidance will create little resistance for climbing on board. Those who do approach the subject more objectively will be turned off by the lack of answers, and even more so, by attempts to obscure and sidestep the issues.

The "experts" do not need to approach the question objectively. By the nature of their education and experience they are well-founded in the concept. The concept itself is not new, it has been discussed with a variety of applications before. The application to replacing most taxes might be a new twist but for the "expert" who is familiar with the process, the application to a new venue requires little additional research. This is likely the reason we see no "experts" either supporting or denouncing the concept - Dr. Feige, notwithstanding. We do not even see any further promotional efforts on the part of Dr. Feige. He developed and published the idea in 1999 and resurrected and submitted it to the President's Advisory Council in 2005. Other than that we see no other articles or papers from Dr. Feige, or any other "expert", on the subject. A couple of news articles in newspapers of renown, do not a groundswell make.

You once posited that; Art A Layman, it seems, places a high value in constricting or limiting wealth accumulation. I submit he has failed to make a legitimate case for this. I would submit that were this an official debate, with judges making the final determination on which of us has presented the most credible arguments, I would be adjuducated as having won, hands down.

You speak haughtily of human freedom. This would portend a significant degree of control over events affecting individual human endeavors. I have oft pointed out that most of us do not exert control over much of anything associated with our economic wellbeing. Beyond my protestations, look at what is happening today. Forget the harangues of those who attempted to game the system taking advantage of ridiculous mortgages. What of the family with a fixed mortgage and a home equity line now faced with a declining value in the security supporting those; now faced with a possible layoff and meager unemployment benefits, providing little more than gas money for job seeking; now faced with the very real prospect of not enough resources to even feed that family; now faced with having to draw down 401Ks, reducing their retirement nesteggs, with potential tax penalties for early withdrawals; now faced with having to divest themselves of their stock portfolios with losses on their investments due to the shrinking stock market, etc., etc., and so on. Did these people obuse those human freedoms? Did they, in making their free choices, create their own problems? Or are they victims of a government laissez-faire attitude toward the amoral, if not immoral, actions of our economic system? Is their pending suffering the result of some natural order which seeks to sort out the weaklings in our society?

Why are the Fed and the federal government seeking to intervene with one program and another? If the government, by itself or through intermediaries, has no moral authority to intervene in the affairs of man, especially the economic affairs, why is it doing so, or attempting to do so? Of course if you argue that to avoid catastrophe, the government has a moral imperative to intervene, you have created a huge hole in your argument that the government does not have this moral authority. If they have a responsibility to step in during an embroglio, it logically follows, that they have a responsibility to avoid a disaster from ever happening. Laissez-faire in many human interactions can be fatal.

Let's direct our attention to Dr. Hermann and his proclaimations of the huge variety of tools available to the Fed to maintain stability to our economic system. Where are those voluminous varieties? They are trying the few and have a couple more in the bag but to date all have been ineffectual; producing nothing but brief respites; hiccups. They have just offered $200 billion in loans to holders of potentially worthless mortgage paper, accepting that paper as collateral. Most "experts" agree that the total universe of worthless paper is two or three times that amount. Should the Fed follow this action further, or should they merely suffer losses on this $200 billion, their abilities going forward could be limited to only interest rate adjustments in a future or continuing saga. For less than $10 billion they could effect an APT approach by simply issuing checks to all taxpayers equal to the adjusted gross incomes on file from 2005. Making the refunds taxable could further emulate APT. Why do you think they don't take that approach? That solution would do a lot more for consumption than a paltry $1,200. Could it be a concern for rampant inflation?

Rubi, we are facing gloom and where gloom exists can doom be far behind? Those with wealth and those in the driver's seat, who will decide which of us will sacrifice our jobs, our livelihoods, so that they might live have much less to worry about. Yea, they likely took some stock market hits, their fortunes and incomes may have suffered reductions, the amount of which might have bankrupted the rest of us, but they will survive. They will survive because they inurred to themselves a greater share of the benefits of my labor - and those many like me - than they apportioned to us. Us, that drive the engine of consumption and further their absconding of wealth.

Am always puzzled by your determination of the, slow death of European socialism. If we look back 60 years ago Europe was flattened. They had little in the way of economic resources. We spent billions helping them back on their feet. During that 60 years they have grown and grown and have been for quite awhile a viable economic power. They have done this with an eye to the social welfare of their citizenry. They have avoided, culturally and economically, the debilitating nature of greed; of touting individual freedoms without an eye for collective betterment. At the same time their culture is not dissimilar from ours in everyday lives. Other than having been sold on these fancy mortgage packages they seem to be muddling along fine and none of their central banks are in frenzy trying to avoid a major recession. No doubt if our economy continues to self-destruct it will impact them, but far less than a similar situation would have had 10 or 20 or 30 years ago.

An objective view of the world economy is unlikely to foster delusions of grandeur for the US economy. We are, and have been, slipping into a consumption economy. That might not be as problematic if we were still producing much of what we consume but that is becoming less and less the case. Adding insult to injury we continue this axiomatic belief that only individual freedom and individual achievement counts. We are the only culture in the world who holds to this postulate that the individual is more important than society as a whole. Our evolution as a country is often referred to as an experiment. No other democratic culture, in history, existed as long as ours has. That cannot be construed to mean that our experiment is infinite.

You seem hell bent to couch the economic welfare of, at least, US citizens, in ethereal terms. There is nothing ethereal about our economic, nor our taxation system. Neither functions with some sort of heavenly divine full of equal opportunity for all. Capitalism, by its nature, is a winner take all proposition. The fact that we may have multiple winners does not portray it as a utilitarian value. If there is any meaning at all to, government of the people, by the people, for the people, that meaning is justice for all and an opportunity for all to enjoy a relatively equal share from the Horn of Plenty.

Let me leave you with a quote from the Chairman of the Federal Reserve under FDR. Yes, he is one of those two-handed economists, but those appointed as Chairman of the Fed are considered to be a cut above. In discussing the events giving rise to the Great Depression he said this:

Marriner S. Eccles, who served as Franklin D. Roosevelt's Chairman of the Federal Reserve from 1934 to 1948, noted this in his memoir "Beckoning Frontiers":

"As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth -- not of existing wealth, but of wealth as it is currently produced -- to provide men with buying power equal to the amount of goods and services offered by the nation's economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

Follow that with a quote from Professor Krugman, perhaps of lesser renown:

I'm sure that Mr. Bernanke and his colleagues are frantically considering other actions that they can take, but there's only so much the Fed - whose resources are limited, and whose mandate doesn't extend to rescuing the whole financial system - can do when faced with what looks increasingly like one of history's great financial crises.

Would that the masses shared more equitably in our countries profound wealth, the storm could be more easily weathered. Change cannot be easily mastered when so many voices are silenced.

Scott:

Enjoy the respite; it is NCAA tournament time and between brackets and games my time is limited for a week or so.

Let me congratulate you for recognizing that the primary resistance to APT, or any other single rate taxation system, will be political rather than technical. There are issues that overlap in these two constraints but I will summarize those later. I have, in my numerous, vociferous posts, presented them before. My position has always been that the political (social) issues will be a far greater hurdle than any technical application issues.

Am not surprised that you would agree with rubicon. Am surprised that you would invoke Thomas Paine quotes as supporting your viewpoint. If you were to review most of Thomas Paine's writings you would realize that he holds far closer to my views than those of you and rubicon.

One must first look at the form of government that Paine was railing about. No doubt he believed that any form of government was a "necessary evil", but he did believe that "representive democracy" was the best and only viable and fair form of government. His animosity toward government was directed primarily at the form of government that existed during his lifetime, primarily in Europe; those composed of monarchical and aristocratic rule with the adherence to hereditary continuation by virtue of birthright.

Paine believed that society, acting as a collective force, rather than government, could best achieve equality and fairness. His perception of "freedom" was much less based on individual "freedom" than on societal "freedom". He had an abiding faith that society itself would function to correct inequities and provide for the welfare of all men, rich and poor. In his view "poor" was more akin to working folks, those relying on their labors to exist as opposed to their property. He voiced no opposition to individual "freedoms" but seemed focused on how those "freedoms" affected all of society.

You should read his, The Rights of Man, the second part, where he advocated for a progressive taxation system. Read also his, Agrarian Justice, where he advocated a guaranted minimum income for all, derived primarily from estates upon their passing to heirs. Ever present in his pleas for fair treatment was his interest in providing an annual stipend for all over the age of fifty, increasing at age sixty. He also believed that upon coming of age (21 years) every man should receive a stipend. He so believed in the ultimate fairness of men, he asserted, that though available to all men, this guaranteed income would be declined by most of those who did not need it. He argued vehemently for the doctrine of Noblesse Oblige long before the term ever appeared in the lexicon.

He did always seem to suggest that the collection and maintenance of the funds to provide the above should be held separate from the funds for running the government, in some sort of societal construct.

He was a great thinker, a great writer. He had the ability, through words, to bolster significant change. He was, as Jefferson, Adams, Hamilton, etc., limited to the knowledge of his time. Though many of his beliefs could be considered universal and absolute, the machinations for achieving those beliefs were less so.

I doubt he would have embraced APT, since his progressive taxation ideas were predicated on the responsibility of property owners based on the property they owned rather than on the activities of managing that property. His belief that the holders of landed property owed to all men a remittance based on every man's "natural right" to the land, would not have abided a process whereby those of property can accumulate more and more without an increasing remuneration to all men.

You must take care not to take words or terms written a couple of hundred years ago and ascribe to them today's meanings. His use of security is much broader than the way we use the word today. His security encompassed stability and in his mind stability was accomplished through fairness and equity as effected by society. Remember too, that most of those supporting revolution in those days, believed that should societal or governmental grievances reach a fever pitch, a new revolution would occur.

There are many great quotes from many great men available. One ought to chose from those which in total appear more consistent with viewpoint being posited. Cherry-picking, works best when one is picking cherries; not so much when one is philosophizing.