The Fair Tax

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A national sales tax would place almost all of the tax burden on the middle class. Those making multi millions would get away with a very small percent of the tax load.
For example say Tiger Woods makes 100,000,000, spends 20,000,000 banks 80,000,000 he would only pay tax on 20% of his income You make 50,000 spend 40,000 You are paying tax on 80% of your income.
I believe a flat percent (say 25%on all income over 25,000) no deductions, no write offswould be a good place to start.
 
Augustwest: The article you reference cites the price of houses. It fails to reckon that the price of houses is artificially high due to the current tax benefits. I think that the price of houses would skydive if the current tax benefits were removed. That creates a whole slew of opponents for this code: the banks and mortgage lenders who supplie the inflated amounts to buy current houses.
 
BigG-

Point taken, and maybe housing is a poor example, but at the rate the Fed has been inflating the dollar in recent times, I can't see how prices won't continue to rise in other areas of the economy...
 
Disputing the disputers

We're likely to end up with both a national sales tax and an income tax.

Not much to say on this, other than they could institute a national sales tax at any time, without getting rid of income taxes. Tax rates can be adjusted at any time. If you say that they can just reintroduce the income tax, well, you're right. They're the legislature. Other than the limits placed on them by the president's veto and the court's overturning, the legislature can do whatever they pretty much want.

The rate of a national sales tax would be colossal. Remember, even the proponents admit they'd need a 23 percent tax rate to fund the current size of the federal government. However, they are starting out their new “fair†tax system with highly deceptive language.

23% inclusive. This translates to 30% of "raw price". Basically this translates to how the eurpeans do it. The sales tax is included in the published price. As least this way, when I buy a $19.95 DVD, when I pay I just pull out a $20 and get a nickel back. No having to remember to add 4.5% to the price or whatever.

It gets worse. A 1998 analysis by the William Gale of the Brookings Institute calculates that in reality (to pay all current government expenditures while also compensating for such factors as tax evasion), the national sales tax might have to run as high as 67 percent. AFT disputes that high figure. But they do not dispute that their initial “23 percent†tax rate would actually be achieved by adding 30 percent to the purchase price of goods.

Tax evasion? For a sales tax? That'd be pretty difficult, wouldn't it? And tax evasion doesn't happen for the income tax? 67% is a huge figure. Heck, income would probably rise, as all the illegal immigrants and "under the counter" workers would be paying federal taxes again.

There is no indexing with the sales tax. As goods become more expensive, you have only two choices: pay more in taxes or do without the things you need.

Well, from the original article,
The FairTax would provide every family with a rebate of the sales tax equal to spending up to the federal poverty level

And the poverty levels are adjusted annually.

Given the U.S. government's eternal spending spree, the mounting deficits, and a national debt whose true long-term obligations run into the tens of trillions, it's a virtual certainty that the federal government will inflate the currency in an attempt to keep Medicare and Social Security afloat and to keep its fiscal house of cards from collapsing. As your food, clothing, vehicles, and medical care get more and more expensive, you'll pay more and more and more sales tax.

I don't see how this would differ if you substituted "income tax" for "sales tax".

The FairTax is monumentally unfair to retiring Baby Boomers. People who have paid 1/4 or 1/3 of their income in taxes for 40 years will now have to pay an equally high tax on all the after tax income they've managed to put aside for their retirement

Aren't IRAs and 401(k)s pre tax income?

The national sales tax is subject to manipulation in even more direct ways than the income tax has been. Let's say that Congress or some powerful regulatory agency decides that fatty foods or sugar or potato chips are bad for you – wham! Suddenly there might a 200 percent tax on those items.

Like there isn't a national tax on cigarettes and alchohol right now? Again, Congress can do what it wants, whether it's getting the majority of it's income from sales tax or income tax.

The tax will be used to track your entire financial life. While H.R. 25 does not contain any requirement that every purchase be linked to an individual's ID, the trend toward tracking every purchase is growing. We expect that eventually, your “national ID cash card†will be required when you buy anything. Or giant databases will combine the records of your credit cards, store loyalty cards, radio-frequency ID tags on merchandise, government ID, etc. into one vast set of interlinked records, immediately accessible to – and subject to manipulation by – government agencies.

Again, not really on topic. Every state I've ever been in, and most cities, have all had sales tax and they don't track that individually. If anything, it's alot more anonymous than income tax.

*To be continued*
 
Firethorn: Your post indicates you see a lot of "chicken little" "what if?" stuff in the Zelman article. I also noted the non sequiturs. Imho, a 23% across the board sales tax would be an excellent trade for the convoluted taxation system we have now.
 
Adminsitrative costs for a federal flat sales tax would be significantly less than the costs of the IRS right now. most of the IRS would be done away with.
 
Continued...

Therefore, the national sales tax will eventually be used to track – and manipulate – what we purchase. Instead of merely being profiled by Wal-Mart or Safeway, your buying habits will be available in detail to the Department of Homeland Security, the Department of Health and Human Services, the FBI, the Bureau of Alcohol Tobacco Firearms and Explosives, university researchers – you name it.

Can't they already do this by tracking checks & credit card trails? They don't need to collect any information from you to collect the sales tax, the company you bought it from reports that they sold the item and pays the tax.

Katherine Albrecht of the consumer-privacy group CASPIAN points out one way in which the social engineering and people-tracking aspects of the national sales tax might go together: As databases come to hold more information on each individual American, the tax could be manipulated to fit the person, rather than the item: “A welfare mother puts her RFID-enabled ID card under the scanner (or waves her RFID-chip implanted hand across the scanner) and the system says, 'Oh, you're a person who's taxed at the one percent rate.'†On the other hand, a person with a $100,000 salary flashes his card or waves his chipped hand and the system recognizes someone who's “rich†enough to be taxed at the 50 percent rate.

The whole IDEA is to simplfy the tax code. It would be a bigger nightmare to try this over the income tax. Unpractical, and would be fought in the legislature.

A national sales tax will create a huge black market. A punitive sales tax on everything you buy will lead to enormous black markets. You'll soon see gang violence and vast new prisons being built to house the millions of people illegally trading DVDs, cigarettes, canned foods, TV sets, and clothing. This will be true even if the underlying prices of goods drop – as the FairTaxers assure us will happen. If people can evade a 30+ percent tax – they will. Even if the price of items is 20 or 25 percent lower than today (a claim we'll examine in a moment) people will still want – and go after – their 30 percent black-market discount.

Like black market cigarettes and booze? People like public commercial stores. Whether brick&mortar, internet, or catalog, they'll charge the tax. And this is why they only charge for new items. Once the item is sold with the tax, it's no longer "new" according to the law. So they'd have to pose as a business in order to get "pre-market" non taxed items. Minor black market.

Although the tax is initially only to apply to services and new items, here's another projection: Swap meets, farmers' markets, gun shows, and garage sales will automatically come to be considered prime places for black market activity. Either the tax will eventually be extended to used items, or all such free markets will eventually be heavily regulated and patrolled – or banned outright as havens for the new anti-sales tax criminals and resisters.

As these items were generally bought through retail channels, the tax has already been paid, the goods are considered used, and tax doesn't apply. If congress changes it to apply to the used item market, then you have a point. As is, this tax system would help the reuse market, as used items would have a price advantage over new. Also, this assumes another liberal legislature looking to tax more things. Resistance to this would be huge.

Again, that's true as far as it goes. But merely because one form of tax “avoision†goes away doesn't automatically mean no tax avoision is possible. People who are motivated to keep their own money will always invent thousands of clever ways to do so; we're astonished at the FairTaxers' naivete in assuming there will be no black marketeering.

I assume tax evasion will continue. Sure, Black Markets will "grow", but income tax fraud/evasion will dissappear. Knock the F of of the BATF and put them in charge of enforcing the sales tax. They have the most experience, already dealing with items with a national tax.

The national sales tax will give government another reason to make cash purchases illegal. Because buying with cash will make it easier to evade the sales tax, taxing authorities will quickly conclude that buying with cash is a sure indicator of criminal activity.

Cash helps all sorts of 'illegalities' anyways. Buying illegal drugs, weapons, rino horns, ivory, babies, etc... I haven't heard any serious yells about making cash illegal despite this. Besides, the moment you walk into Walmart for something, you're paying the tax. Unlike now where you work in a bar "under the table", get paid cash out of the till, and get welfare because you're "unemployed".

This tax is designed to put every single American household on welfare. The FairTax is regressive – that is, the poorer you are, the more you pay, proportional to your income.

Well, as a consumption tax, if the poor consumes more, yes, they'll pay more. You have to include the ~$500 monthly "refund". This makes the tax into a standard progressive. Somebody who spends less than poverty make money, spend exactly poverty pay 0%, spend double poverty, pay effectively 11.5%. Spend 100x poverty, it'll round to the stated 23%. As far as putting every household on welfare, that's easier(and therefore cheaper) than trying to figure out who makes "enough" money to not get the check. It'd make being a fugitive harder, as you'd have $500 less to live on per month.

But the “rebate†isn't similar to the earned income tax credit because it's intended to go, month after month, to every American household. If the intent was really to avoid taxing essential spending to place less burden on the poor, one could simply not levy the sales tax on stable items like food, medicine, school supplies, or clothing.

What about a house, or utilities? Where do you stop? What's essential? They're trying to keep it simple. And at least some rich people spend tens to hundreds of thousands of dollars on just clothing, and some do it for food. So then you say "clothing less than x dollars". You're getting complicated again.

Some religious people will be penalized. The monthly rebate check is to be paid by the Social Security Administration, based on the number of SSN holders in a household. Tens of thousands of Americans (for instance, the Amish, or those who believe the SSN is the biblical Mark of the Beast) do not have social security numbers. Therefore, they would have to pay the heavy national sales tax without being compensated in any way. When we asked AFT how their proposal addressed this inequity, their reply was one sentence long: “There is no requirement that any individual apply for the rebate.â€

Yep. Tough luck. Like how they loose out on medicare & social security. Do they even pay social security? Can I turn in my number?

A working-class religious family of four, forced to absorb $478.83 more than its neighbors for basic expenses each month simply to remain true to its faith, would have considerable incentive to make its purchases on the black market or otherwise go underground to survive.

If they're that religious, they'll make adjustments. Either lobby for a exemption for people without SS numbers, increase the price of amish goods, or something. Don't the Amish produce most of their own goods?

The economy would very likely collapse. Just before the FairTax went into effect, the economy would boom as Americans raced out to buy cars, electronic gear, or even to stock up on food. They would not believe that prices on everything would drop the very next day, or the very next week, after the sales tax was imposed. Their spending would reflect their quite rational fear that prices would simply jump 30 percent.

And prices would rise due to shortages until the tax went into effect, or stores would run out of items, and people will go home disappointed(for a couple days). Or you could put a line in where the tax increases .5% a week until it reaches the desired level. That'd be about a year for it to reach the proposed level. How much did the economy 'suffered' in florida with the hurricane?

The day the tax went into effect, the American economy would collapse. Eventually, the economy would restabilize, and some prices would drop, as AFT claim. But some industries producing high-ticket items, like the automobile industry, furniture manufacture, or construction, might never recover – even if removal of the income tax did allow prices to drop and Americans to keep more of their paychecks.

They seem to be assuming that enough 'big ticket' items are available to saturate the market for years. I say that the companies will "pre-sell" to their hearts content, to be delivered later. They'll have a windfall of cash.
 
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Me, I like the idea.....

Imagine: drug dealers, prostitutes, rich Massachusetts senators all would pay when they bought a TV or a boat or a Gulfstream jet.

At the least, it would be better than what we have now.
 
I would love to see this take place, but not to tax some less or more heavily than others. It has already been mentioned that families would receive rebates in relation to the poverty level, so taxing them less wouldn't be necessary.

Does anyone else see a large opening for a "Black Market" to evolve to avoid paying the sales tax?
 
Continued Again...

You'll pay a higher sum for your new home. If the tax passes as written, new homes would suddenly become 30 percent more expensive than existing ones (because all new construction, but not existing homes, would be subject to the tax). Two homes could sit side-by-side – each with four bedrooms, two baths, and comparable features – and one would cost $50,000 or $100,000 more than the other, simply because it was being marketed by its builder, rather than a resident.

Actually, because new homes cost 30% more, the used home is worth more too. Current home owners will have a good value jump. Not 100% advisable, but you have to remember that workers will have ~40% more income. And these people seem to forget that it isn't that the cost of goods will go down, it's that everybody will have more income

No one would want new homes. Construction would dry up. The lack of new homes and the price differential between new and existing ones would in turn create demand for existing homes and push their prices up. Eventually, Congress might feel compelled to save the construction and building materials industries by imposing the sales tax on “used†homes, as well. Or the upward thrust of “used†home prices might, by comparison, make new homes desirable again. Housing markets would eventually stabilize, but only after traumatic disruption.

tramatic disruption, just like after a hurricane, toxic waste discovered in your back yard, they decide to build a prison next to your house, or any of the other thousand things that affect home prices.

Oh, and that tax applies to your remodeling supplies, too.

Only fair. And it makes it so you don't get a market where the construction crew will knock down all but one "wall" and rebuild a house (but it's still the old one!) like happens in florida due to the construction codes.

This process of constantly adjusting the tax in vain attempts to undo such unintended consequences will take place all across the economy – and go on for decades.

Like this doesn't happen with all the rest of the taxes? I'd hope the only adjustments would be to the raw % rate charge, and the poverty index. KISS, remember?

Claim #1: Goods would be cheaper. Proponents of the new tax say that their claimed 23+ percent tax rate wouldn't be so painful because goods would be cheaper. Without an income tax, businesses could charge less for the items they manufacture.

I'd say their workers would take home more money, but ok. They pay half of FICA/Social Security, so that's about 6% of their labor costs cut. I'd have to call my mom to see about other taxes(She's a business accountant and one of her tasks is payroll).

And what about products and services whose prices are already set (or “supportedâ€) by the government? Americans already pay three times the typical world rate for sugar, for instance, solely because of government price supports. Neither the income tax nor free markets have anything to do with it. Would powerful industries with high-paid lobbyists urge the federal government or state governments to set their prices considerably lower? Not likely.

One of two things will happen: either the price controls are left in place, or they're gone, and the domestic sugar market would have to compensate. Which I don't think there is much of, I remember reading that despite the price controls, foreign sugar still beats domestic.

What the FairTaxers don't tell you is that it would do so by making one enormous class of goods cost 30 percent more than competing goods. Here's the plan: imported products, which would not benefit by the planned repeal of the income tax, would suddenly be that much more expensive than their domestic counterparts.

I agree with Kerry on this one! This eliminates the "tax savings" for outsourcing manufacturing!

Yet placing a 30 percent or higher penalty on foreign goods essentially forces us to carry U.S. companies on our backs – even when they're less efficient, less innovative, or produce poorer goods. Competition from overseas has often forced American manufacturers to improve their products (as Japanese autos did in the 1970s). Without competition, companies become complacent and sloppy – and their customers are the ones who ultimately suffer.

American produced goods have to pay the very same 30%, so the only difference would be any tarrifs (mostly eliminated?), and shipping (part of the cost of outsourcing). If an american company can't compete with that advantage, they deserve to be eliminated.

Claim #3: Ordinary Americans would be freed from record-keeping and tax filing. Initially – if indeed Congress were to abolish the income tax – this might be true. But not in the long run!

We believe her when she explains that this is how the law is intended to work. We simply don't believe this is the way the law will work in the long run. No, when a business is caught not charging sales tax, eventually the federal government will seek to make criminals out of business customers – who are, after all, “conspirators†in tax evasion, black marketeering, and racketeering.


But that's small potatoes. As this is an inclusive tax, you paid it to the business. They'd hit the business up, as they're the ones with the money. This clause is the same one states have for mail order. How many of you know that you're supposed to pay state sales tax on internet, catalog, and mail order purchases? They even have a form to fill out. The biggest tax evaders here? The home crafts market. They don't pay income tax much as it is. The sole propriator home improvement contractor (ever been offered a 20% discount for paying cash?).

As we've noted above, the possibilities for using a national sales tax as a social engineering tool or as a carrot/stick for corporations are plentiful. To hungry politicians those temptations will prove irresistible. No matter how a “pure†a national sales tax is initially, it will soon become as complex, punitive, and manipulative as any other mega-billion dollar cash cow.

The original income tax was easy, and was corrupted, this might be corrupted too, but it would be difficult in many ways to overcomplicate. We'd simply have to keep lobbying. And as the corporation is simply collecting the sales tax for consumers, they don't have the motive to cheat. Everything to lose, nothing to gain. They simply have to take their gross sales, and multiply by .23 to get what they have to give to the government. No deductions, no different rates, nothing.
 
SLCDave,

A black market that already exists for:

Tobacco Products,
Alcohol Products,
Firearms,

All these items are federally taxed. Put the BATF in charge of enforcing the sales tax. You already have some evasion for state/city sales taxes, but they press on. A national one would be harder to avoid.
 
"A national sales tax would place almost all of the tax burden on the middle class. Those making multi millions would get away with a very small percent of the tax load.
For example say Tiger Woods makes 100,000,000, spends 20,000,000 banks 80,000,000 he would only pay tax on 20% of his income You make 50,000 spend 40,000 You are paying tax on 80% of your income.
I believe a flat percent (say 25%on all income over 25,000) no deductions, no write offswould be a good place to start."

What you fail to recognize is that the 80,000,000 that Tiger "banks" or invests then goes into businesses as Capital (stock, loans, . . .). Capital then helps businesses expand and grow. As businesses grow, new jobs are created, employees receive more money and benefits, see this flash presentation:
http://www.flashbunny.org/content/taxcutquiz.html

Also by your math, Tiger is paying $4,000,000 in tax.
Your person spending 40,000 is paying 8,000 in tax using a 20% rate. Right now in this country, 20% of the population is paying 80% of the taxes. Attacking Tiger for putting money into our economy is class warfare and is what stalls enormus economic growth. Tiger's 80,000,000 is also providing us all with a better economy. I don't understand why we look down on high earners in this country. No one ever got a job from a poor person.

I believe this system will expand our economy exponentially.

I would also like to point out that the Jewish association for firearms ownership article is wrong about having both the Sales tax and the income tax. Income tax was allowable by a constitutional ammendment. The national retail sales tax law would repeal the sixteenth ammendment, making the income tax unconstitutional.
 
Back when John Tower was the Senator for TX and I was still a Texan I wrote him suggesting that a National Sales tax might not be a bad idea and explained my reasoning.

Senator Tower wrote me back and stated that it was a good idea but that it would take a Constitutional Amendment to make it happen.

What did he know then that the Congress doesn't know now? It did take an amendment to make the income tax legal.

Any lawyers or constitutional scholars here that might address this issue...
 
Well, I did some preliminary arithmetic on my own income and spending and it looks like I would save about 66% on taxes with the National Sales Tax scheme, at a 23% rate, plus I would be able to save up to 20% more of my income than I'm currently saving. So it looks good. I'm skeptical, however, that the rate would remain at 23%, or that other taxes would not be imposed.

Has anyone done an evaluation of the big picture with regard to how much annual revenue this would generate to the federal .gov?

I would also suggest legislation that each year's budget may not exceed the actual cash receipts in sales tax for the previous year, or some equal lookback period. In other words, .gov may not spend more that it reasonably expects to collect. It needs to be a zero sum arrangement.
 
23% was supposed to be the break even point where we would generate exactly as much in revenue as we do now with our current system. Further research done by Harvard economists have begun to lower that number to 18 or 19%.
 
The 23% figure dates from before the Bush tax cuts and would raise federal revenues to the same level as it was before the Bush tax cuts. So 23% would effectively be a tax increase now.

There is significant tax overhead included everything we buy today. The way things work is when you purchase any goods or services everyone along the supply chain includes thier taxes in the prices they charge. If thier taxes go down they can either reduce thier prices and make the same amount as they do now after taxes or they can leave thier prices the same and have more after tax income. But in most cases compitition will force prices down. It is easy for me to believe that the current tax premium on goods and services is on the order of 20% to 25%. All you have to do to confirm this is talk to any businness owner and ask them. They will tell that if thier taxes increase they will raise the price of the products and pass this on to thier customers.
 
What's not fair, is 50% of wageearners paying for 96% of the government, while the other 50% pay 4%. (Guess which group is for more & more 'free stuff' from the government ?)

What's not fair is 20% of wageearners paying for 80% of the government.
(This is what we have now....) :fire:
 
A national sales tax would place almost all of the tax burden on the middle class. Those making multi millions would get away with a very small percent of the tax load.
I guess we know what Bush will be proposing once he gets re-elected.
 
I like the idea of a flat rate income tax. Just seems to fit my simple mind.

Every year at a date certain before the end of the session congress would have vote on one tax rate for everyone and everything for the next year. Then every two years our politicians would then have to campaign and answer why that tax rate was chosen.

Seems accountability and consequences would be tightly linked.
 
I agree with the Fair Tax plan.

And I vote.
And I work.
And I pay income taxes and fees and surcharges and bonds and any other thing "Administrative Law" can dream up.

I'm for anything that lets me keep MY money and spend it as I wish.

http://fairtax.org/

Vick
 
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