Fairtax

[lockmat]

http://www.fairtax.org/site/PageServer

What's yalls take on it? Do you think it could actually happen?

From what I know so far, I like it.

"

What is the FairTax plan?

The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.

The FairTax Act (HR 25, S 1025) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.

The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.

The FairTax:

• Enables workers to keep their entire paychecks
  
• Enables retirees to keep their entire pensions
  
• Refunds in advance the tax on purchases of basic necessities
  
• Allows American products to compete fairly
  
• Brings transparency and accountability to tax policy
  
• Ensures Social Security and Medicare funding
  
• Closes all loopholes and brings fairness to taxation
  
• Abolishes the IRS
  

"

[westguy]

So it would probably tax the low-to-middle income class most heavily. We have a crazy tax system as is, but all sales taxes are regressive. Revenue-neutal? Well someone must possess a magic wand to get it to work because there is no way to get the tax rate down to a tolerable level.

[Guest danax]

I have a hard time feeling that any tax on wages is a good idea, especially when it appears that the income tax is

(link) and there's no law requiring the average wage earner to pay income . If "dollar for dollar federal revenue neutrality" means that the revenue collected would match that currently collected including income tax, then that would still be wrong. The correct calculation should subtract current income tax revenues. Even then, we would still never recover those triillions that were confiscated from us over the years.

[lockmat]

So it would probably tax the low-to-middle income class most heavily.

This is the answer they provide for that question: http://www.fairtax.org/site/PageServer?pag...four#regressive

I have a hard time feeling that any tax on wages is a good idea, especially when it appears that the income tax is

So then you'd like the fairtax? It eliminates federal income tax.

[lockmat]

Even then, we would still never recover those trillions that were confiscated from us over the years.

I don't think anyone is promising a refund. Or did I miss it?

[Guest danax]

I don't think anyone is promising a refund. Or did I miss it?

I'm sure no one is.

This proposal might be an idea that could come to pass if the Feds decide that too many people are finding out the truth that the income tax is voluntary, the 16th amendment was never fully ratified and that they've been strong arming our wages for decades. To get this passed with their revenue stream uninterupted, it would avoid the inevitable mass realization by the population that we'd been lied to big time and that would open of a huge can of worms regarding people's belief systems, and that is something that the Feds need to avoid, at all costs.

[cottonmather0]

One basic piece of the Fairtax proposal is a rebate (prepaid = "prebate") paid to poor families each month. I'm not sure exactly how it works, but it's meant to make the tax more progressive and have less of a disparate effect on the poor.

I like the idea of a consumption tax or national sales tax a lot, but the established interests are well entrenched and our current system is going nowhere. Too bad.

[lockmat]

I'm sure no one is.

This proposal might be an idea that could come to pass if the Feds decide that too many people are finding out the truth that the income tax is voluntary, the 16th amendment was never fully ratified and that they've been strong arming our wages for decades. To get this passed with their revenue stream uninterupted, it would avoid the inevitable mass realization by the population that we'd been lied to big time and that would open of a huge can of worms regarding people's belief systems, and that is something that the Feds need to avoid, at all costs.

I think the dollar-for-dollar federal revenue replacement part meant that all taxes that that brought in would still be reproduced under the proposed tax, settling any fear that there wouldn't be enough taxes produced for real/needed government expenditures.

[Guest danax]

I think the dollar-for-dollar federal revenue replacement part meant that all taxes that that brought in would still be reproduced under the proposed tax, settling any fear that there wouldn't be enough taxes produced for real/needed government expenditures.

That's what it sounds like. What I'm saying is to make it just, they would have to subtract the current income tax revenue since there's currently no law requiring wage earners to pay income tax.

[musicman]

So it would probably tax the low-to-middle income class most heavily.

i think currently the top 50% of taxpayers pay about 95% of taxes while the bottom 50% pay about 5%

[BryanS]

First, regardless of how you feel about the FairTax idea, read the book: Amazon Link (you can get a preview of some sections on Amazon; I would go to half-price books to get a copy, or borrow it from someone who has it.)

I read the book... and the basic principal is that you would strip away all taxes, as we know them today, and replace them with one big sales tax - on everything. Food, medicine, cars, homes, etc, you name it. I want to see how many politicians out there would stand up and say: taxing medicine is a good idea.

...It won't work simply because ordinary people cannot spend at the rate required to sustain/replace the current revenue our government receives under the current system. Here is an example... Right now, today, I pay ~$26,000 a year in taxes (income, social security, medicare, etc.) Not to mention, sales tax, school taxes, city taxes, etc, etc, etc... Now... my credit card bill, each month, is about ~$1000 to $1500. Let's just say $1500... x 12 = $18000 / year in "spending" that could be "taxed" under the "fairtax." These goods, that I purchase, are made by corporations that also pay tax, so they are "inflated" in the eyes of the FairTax people (just means the tax rate would be higher than what I figure in the next sentence). In order to replace my $26,000 contribution.... my $18,000 of annual expenses would have to be taxed at a rate of 144% to generate the equivalent revenue. Anyone out there want to pay a 144% sales tax? Anyone? You'd pay $144 in tax on your $100 grocery bill. That is just nuts. Now in actuality, this rate would be lower, but that would mean that I would have to pay tax on my mortgage, my second largest expense... but even accounting for that... you're looking at a hefty tax rate. Not to mention, instead of just having a $18,000 annual credit card bill, that would sky rocket to ~$44,000 (18K + 26K in tax). You thought you had a high credit card bill now!

Here's the other problem... right now, when I make purchases on my credit card, both the item and the associated sales tax is charged to my card. Under the fairtax, a huge amount of sales tax, will be charged to your card. I am responsible, I pay my bill... but what happens when everybody racks up huge credit card bills - and then defaults? Who's left holding the bag? The credit card companies/banks... who then have to write off those losses... and then their stock tanks, or they go bankrupt... then your 401K goes down the toilet... not to mention, the revenue stream our government is so dependent upon, dries up... our entire economy could implode under this system.

[RedScare]

I'm curious how the FairTaxers propose to handle the massive Black Market that will be created when goods are taxed at 31.25% (23% fair tax + 8.25% local tax). Don't think it will happen? How many times will you pay $1,312.50 for that $1000 TV, when you can buy it from a black marketeer for just $1000...especially knowing that all of your neighbors are only paying $1000?

[westguy]

I'm curious how the FairTaxers propose to handle the massive Black Market that will be created when goods are taxed at 31.25% (23% fair tax + 8.25% local tax). Don't think it will happen? How many times will you pay $1,312.50 for that $1000 TV, when you can buy it from a black marketeer for just $1000...especially knowing that all of your neighbors are only paying $1000?

The big discount retailers could also negotiate lower prices on those items. Discounting a $1000 TV to $900 would lower the tax burden another $31.25, right? Who would reap all the benefits from this policy? Some corporation from a state with a major Presidential contender who is currently trying to pimp this system?

[TheNiche]

I'm curious how the FairTaxers propose to handle the massive Black Market that will be created when goods are taxed at 31.25% (23% fair tax + 8.25% local tax). Don't think it will happen? How many times will you pay $1,312.50 for that $1000 TV, when you can buy it from a black marketeer for just $1000...especially knowing that all of your neighbors are only paying $1000?

Take the leap to all-digital currency.

The big discount retailers could also negotiate lower prices on those items. Discounting a $1000 TV to $900 would lower the tax burden another $31.25, right? Who would reap all the benefits from this policy? Some corporation from a state with a major Presidential contender who is currently trying to pimp this system?

What's a consumer going to do with the savings? Sit on them for the entirety of their lifetime, vowing never to spend them for the purposes of consumption?

[westguy]

Take the leap to all-digital currency.

What's a consumer going to do with the savings? Sit on them for the entirety of their lifetime, vowing never to spend them for the purposes of consumption?

Wal-Mart is large enough to negotiate down to the lowest production costs, and no competitor can possibly match the advances they've made using IT. It makes no sense to tax their competitors' sales more because they are not as large.

[RedScare]

Take the leap to all-digital currency.

So you think anti-taxers are going to allow computers controlled by the federal government to control their money? This is an improvement over the hated IRS how?

Besides, I know how to make change in pesos....and you will learn.

[BryanS]

31.25%. 18K in annual expenses, + 12K in mortgage expenses. 30K in expenses. Comes out to $9375 tax bill. My current tax bill is on the order of 26K. That would be a reduction of my taxes by 64%. How is the government, that runs record deficits today, going to "make it" when its revenue stream is cut to that level? or even 50% or 40%?

[TheNiche]

Here's the other problem... right now, when I make purchases on my credit card, both the item and the associated sales tax is charged to my card. Under the fairtax, a huge amount of sales tax, will be charged to your card. I am responsible, I pay my bill... but what happens when everybody racks up huge credit card bills - and then defaults? Who's left holding the bag? The credit card companies/banks... who then have to write off those losses... and then their stock tanks, or they go bankrupt...

That's not really a big deal. You've taken more money home, so you can more easily pay off the credit card. You may need higher credit limits, but that's pretty easy to pull off when everyone takes home so much more money and when taxes on corporations no longer exist.

then your 401K goes down the toilet... not to mention, the revenue stream our government is so dependent upon, dries up... our entire economy could implode under this system.

The government sacrifices tax revenue by not taxing the 401(k) wages. Reclaiming that lost stream of revenue actually keeps offsets the consumption tax.

The problem with a consumption tax is definitely the inflationary effect. The redistributional effects, especially from older to younger, would be ridiculous. Older people vote more, so that pretty much ends the discussion.

[RedScare]

The big discount retailers could also negotiate lower prices on those items. Discounting a $1000 TV to $900 would lower the tax burden another $31.25, right? Who would reap all the benefits from this policy? Some corporation from a state with a major Presidential contender who is currently trying to pimp this system?

Your example still costs $1181.25 from WalMart. My friendly black marketeer will still save me $181.25. And he delivers!

[TheNiche]

Wal-Mart is large enough to negotiate down to the lowest production costs, and no competitor can possibly match the advances they've made using IT. It makes no sense to tax their competitors' sales more because they are not as large.

So what you're saying is that the consumption tax punishes people for buying the same goods at higher prices, and that it might remove inefficient providers of goods from the economy.

Is that bad?

[TheNiche]

So you think anti-taxers are going to allow computers controlled by the federal government to control their money? This is an improvement over the hated IRS how?

Besides, I know how to make change in pesos....and you will learn.

Because the IRS and the current tax system is incredibly inefficient.

Privacy is a whole other matter altogether, and it doesn't really bother me. If someone really wants to engage in a black market, they're welcome to barter goods on which taxes have already been paid.

[lockmat]

Your example still costs $1181.25 from WalMart. My friendly black marketeer will still save me $181.25. And he delivers!

How many people shop on the black market? Sure it may be more than I think, but not enough to make a difference.

31.25%. 18K in annual expenses, + 12K in mortgage expenses. 30K in expenses. Comes out to $9375 tax bill. My current tax bill is on the order of 26K. That would be a reduction of my taxes by 64%. How is the government, that runs record deficits today, going to "make it" when its revenue stream is cut to that level? or even 50% or 40%?

Their answer:

How can the FairTax generate lower net tax rates for everyone and still pay for the same real government expenditures? The answer is two-fold. Firstly, the tax base is dramatically widened by including consumer spending from the underground economy (estimated at $1.5 trillion annually), and by including illegal immigrants, those who escape their fair share today through loopholes and gimmicks. In addition, 40 million foreign tourists a year will become American taxpayers as consumers here. Secondly, not everyone's average net tax burden falls. For households whose major economic resource is accumulated wealth, the FairTax will deliver a net tax hike compared to the current system.

[RedScare]

How many people shop on the black market? Sure it may be more than I think, but not enough to make a difference.

Their answer:

How can the FairTax generate lower net tax rates for everyone and still pay for the same real government expenditures? The answer is two-fold. Firstly, the tax base is dramatically widened by including consumer spending from the underground economy (estimated at $1.5 trillion annually), and by including illegal immigrants, those who escape their fair share today through loopholes and gimmicks. In addition, 40 million foreign tourists a year will become American taxpayers as consumers here. Secondly, not everyone's average net tax burden falls. For households whose major economic resource is accumulated wealth, the FairTax will deliver a net tax hike compared to the current system.

And that number will rise dramatically once a 31.25% tax is applied to legal purchases. How these losers think that the black market will shrink, rather than expand, is beyond me. Niche, there are no taxes previously paid on services, a significant portion of the economy.

Examples where the black market will thrive:

Lawn maintainance

Household repairs

Home additions

Farmers Markets

Flea Markets

Shade tree mechanics

As you can tell from the list, upper middle class and wealthy individuals...those who do not normally consort with small businesses...will pay the tax. The lower middle class and poor...and those who do not mind doing business with sole proprietors...will save money by cutting out the middleman. This is already common in poor neighborhoods. It will expand as consumers cannot afford the taxes.

Edited February 13, 2008 by RedScare

[lockmat]

And that number will rise dramatically once a 31.25% tax is applied to legal purchases. How these losers think that the black market will shrink, rather than expand, is beyond me. Niche, there are no taxes previously paid on services, a significant portion of the economy.

Does quality on the black market suffer? Are people willing to give that up?

[crunchtastic]

If someone really wants to engage in a black market, they're welcome to barter goods on which taxes have already been paid.

But it's a sales-tax based system. If you're not going to make the money on the tariff---there are too many enterprising 'families' and too much money at stake at that point, to prohibit a massive black market.

Lots more things will be falling off the back of trucks.

[lockmat]

But it's a sales-tax based system. If you're not going to make the money on the tariff---there are too many enterprising 'families' and too much money at stake at that point, to prohibit a massive black market.

Lots more things will be falling off the back of trucks.

If a black market becomes so prevelant, I think it'll be b/c of perception, which I think will be a wrong one. Prices will adjust and settle to what they were before.

Plus, w/ the taxes also waived for corporations and business, won't that help drop prices or at least prevent them from inflating dramatically?

Edited February 13, 2008 by lockmat

[crunchtastic]

Does quality on the black market suffer? Are people willing to give that up?

No. Think of it like buying cigarettes from Indian tribes. The only difference is the tax stamp.

Forgeries and knock offs are part of a black market, but the real-deal goods are always there.

[crunchtastic]

If a black market becomes so prevelant, I think it'll be b/c of perception, which I think will be a wrong one. Prices will adjust and settle to what they were before.

Like Red mentioned about making change in pesos; this is where Houston will thrive. I could see a huge quasi -legitimate second economy, such would be the stength of international consumers here. Add into the mix the newly lax trucking laws and the ever-corruptible border patrol? Homeland Security's utter inability to secure our ports?

Success!

Edited February 13, 2008 by crunchtastic

[westguy]

So what you're saying is that the consumption tax punishes people for buying the same goods at higher prices, and that it might remove inefficient providers of goods from the economy.

Is that bad?

Why do you want to put retailers out of business with a policy that enhances what their competitor already does best? That seems so artificial.

[crunchtastic]

So what you're saying is that the consumption tax punishes people for buying the same goods at higher prices, and that it might remove inefficient providers of goods from the economy.

Is that bad?

well, yes. if you're depending on sales tax rather than income tax, you've just reduced your tax revenue.