Do you support the Fair Tax?

[ronpaulvoter]

What are your thoughts on the Fair Tax?

www.fairtax.org

Although it does not reduce tax revenue for government, it does claim to be much simpler and make compliance much easier. It also claims to eliminate the IRS and oppressive tax laws and that an ordinary working person would not have to keep the reams of papers now required for an income tax. To do this, a Constitutional amendment must be passed.

However, before accepting it, there are questions that need to be addressed. The first and most important: If the Fair Tax is implemented, will it absolutely guarantee that ALL income and production taxes (including state and local taxes) be permanently eliminated and no new ones be imposed?

Another problem is the taxation of services. In that case, all self employed people would have to keep similar records of their services just as they would with an income tax.

Still another: Would the Fair Tax remain simple, or would it over time suffer the same fate as our current income tax?

Are there any other pitfalls?

What do you think of the Fair Tax? Vote in the poll.

 

[Stinger]

What are your thoughts on the Fair Tax?

www.fairtax.org

Although it does not reduce tax revenue for government, it does claim to be much simpler and make compliance much easier. It also claims to eliminate the IRS and oppressive tax laws and that an ordinary working person would not have to keep the reams of papers now required for an income tax.

Resulting in a huge decrease in the cost of implementation and documentation and compliance.

To do this, a Constitutional amendment must be passed.

The only way to make sure the politicians can't screw with it later or add back in an income tax to run concurrently.

If the Fair Tax is implemented, will it absolutely guarantee that ALL income and production taxes (including state and local taxes) be permanently eliminated and no new ones be imposed?

Whatever is stated in the amendment.

Another problem is the taxation of services. In that case, all self employed people would have to keep similar records of their services just as they would with an income tax.

Records no different than what someone selling a product sells, a bill of sale, an invoice and a billing statement at the end of the month attached to the tax remittance.

Still another: Would the Fair Tax remain simple, or would it over time suffer the same fate as our current income tax?

Depends on the amendment.

The question is will politicians, mostly liberals, be willing to give up the power the progressive income tax and corporate tax systems give them?

 

[ALiberalModerate]

Its a horrible idea. Think about it this way, your mortgage interest deductions, deductions for child care expenses, pre-tax contributions to 401ks, employer medical insurance premiums being pre-tax....forget about all of that, it would be gone.

In return, you get a 23% sales tax applied to your new home purchase. Thats on top of your state and local income taxes, sales taxes, property taxes, and personal property taxes, all of which are currently at least partially deductible under the current system, all of which would be double and triple taxation under a national consumption tax.

 

[Stinger]

Its a horrible idea. Think about it this way, your mortgage interest deductions, deductions for child care expenses, pre-tax contributions to 401ks, employer medical insurance premiums being pre-tax....forget about all of that, it would be gone.

:rofl................................GOOD!!!!!!!!!!!!! No more reporting my private information to the government, no more compliance cost, no more IRS to have to pay for, my 401k is STILL untaxed and I don't pay tax on it at the end, and anyone who buys a house to get a mortgage deduction is engaged in folly.

In return, you get a 23% sales tax applied to your new home purchase.

And all the other hidden taxes taken out of the production of that home and my entire paycheck coming into my pocket.

Thats on top of your state and local income taxes, sales taxes, property taxes, and personal property taxes, all of which are currently at least partially deductible under the current system

Not for most anymore.

, all of which would be double and triple taxation under a national consumption tax.

Nope.

 

[Iriemon]

The so-called Fairtax seems to come up as a debate topic every few months.
Rather than regurgitating the same stuff over and over and wasting hard drive space, I'll refer you to prior thread various aspects of it including the issues you have raised have been debated in nauseating detail.

http://www.debatepolitics.com/economics/20134-fair-tax-good-tax.html

http://www.debatepolitics.com/archives/19649-consumption-tax-expenditure.html

http://www.debatepolitics.com/polls/17536-fairtax-act.html

http://www.debatepolitics.com/archives/2727-fairtax-plan-debate-5.html

But in short, the Fairtax is a federal tax and will not eliminate state taxes.

It *might* make it simpler for some (before Congress gets its mitts into it and within 10 years makes it just as complicated as the current tax code is) but you are essentially trading paperwork for income information tracking for paperwork for sales information tracking. Also a unique aspect of the fairtax is that it only taxes sales of new final products, which of course will distort the cost of new stuff compared to used. Would you really pay 30% more for a new house when you can buy and equivalent used house an not pay the 30%? What would you think that 30% penalty would do to the housing industry?

The fairtax is presented with a lot of misleading gimmickery to make it appear appealing. For example, they call it is a 23% tax when in reality it is a 30% tax added to the price of a good or service. (For example, something that costs $100 would cost $130 after the Fairtax, but since $30/130 = 23% they say it is a 23% tax). And even 30% is going to be way too low to replace current revenues much less balance the budget.

Putting that aside, my biggest objection to a sales based tax is that it effectively reduces the tax burden on the richer and puts it on the poorer, because the rich can generally afford to save and invest a significant portion of their income (which is not taxed) while the poorer can't. It is regressive, much less progressive. The fairtax addresses that to some extent with its tax rebate (which even the wealthiest get) but the effect is still a transfer of the tax burden from the wealthiest.

I could support a sale tax if there was some percentage tax on high incomes (as many European countries do) or a tax on assets or something to make the overall effect progressive -- or at least not regressive.

 

[Kandahar]

I'm not opposed to a sales tax in principle...I just don't see any way to make it progressive (or at least, not horribly regressive). If you can figure out a way to do that, I'm listening. Otherwise, I oppose the Fair Tax and any other national sales tax as a way of replacing the income tax.

 

[Stinger]

I'm not opposed to a sales tax in principle...I just don't see any way to make it progressive

The more you spend the more you pay.

(or at least, not horribly regressive).

The prebate.

If you can figure out a way to do that, I'm listening.

They have but you'd have to do the reading yourself.

fairtax.org

Is the FairTax progressive? Do the rich pay more and the poor pay less as a percentage of their spending?

Absolutely, as you can see in Figure 6 below -- where the graph shows annual expenditures for a family of four and the corresponding FairTax effective tax rates. The poor actually pay less than zero-percent retail sales tax on their spending. Much like with the earned income tax credit of today, the rebate may give them more money than they actually spend on retail taxes. Especially if they are frugal and buy mostly used products. On the other hand, the wealthy approach a maximum of 23-percent retail sales tax on their spending.

Figure 6: Annual expenditures vs. FairTax effective tax rates, for a family of four

Otherwise, I oppose the Fair Tax and any other national sales tax as a way of replacing the income tax.[/quote]

 

[Kandahar]

The more you spend the more you pay.

Paying a higher dollar amount doesn't make it progressive.

The prebate.

Meh...I'm skeptical. The prebate sounds like just another welfare program. And it doesn't take into account big-ticket purchases like houses and college tuition, which I think *must* be exempt from any sales tax.

They have but you'd have to do the reading yourself.

fairtax.org

Is the FairTax progressive? Do the rich pay more and the poor pay less as a percentage of their spending?

Absolutely, as you can see in Figure 6 below -- where the graph shows annual expenditures for a family of four and the corresponding FairTax effective tax rates. The poor actually pay less than zero-percent retail sales tax on their spending. Much like with the earned income tax credit of today, the rebate may give them more money than they actually spend on retail taxes. Especially if they are frugal and buy mostly used products. On the other hand, the wealthy approach a maximum of 23-percent retail sales tax on their spending.

Figure 6: Annual expenditures vs. FairTax effective tax rates, for a family of four

That's all well and good, but a couple of graphs don't actually make it progressive. I still haven't heard HOW the Fair Tax would be progressive, aside from the prebate (which would only make it progressive up to the amount of the prebate).

Besides, I'm inherently suspicious of a plan that claims to be revenue-neutral, yet shows nearly EVERYONE paying a much lower effective tax rate under the Fair Tax than under the current system.

And the graphs don't intuitively make much sense. Maybe you can tell me where I'm misunderstanding them. But it seems obvious to me that a poor family is going to spend nearly 100% (or more) of their income, and will therefore be taxed on it. A middle-class family will be able to save a little, but will still spend probably 80-90% of their income, and will only be taxed on that 80-90%. And a wealthy family might be able to save much more and only have to spend 40-50%, and will therefore only be taxed on that 40-50%. That sounds pretty regressive to me, hence my problem with sales taxes.

 

[Donc]

Am I for it? Yes ,it could use some tweaking, but I think it would be a hell of a lot better than what we have now.

 

[Cold Highway]

Sounds better than what we have now.

 

[Stinger]

Paying a higher dollar amount doesn't make it progressive.

With the prebate it does, but then I am not one that supports progressivism in taxation, I think we should all be treated equally.

Meh...I'm skeptical. The prebate sounds like just another welfare program.

Why on earth would you say that?

And it doesn't take into account big-ticket purchases like houses and college tuition,

It's not suppose to.

which I think *must* be exempt from any sales tax.

Why?

That's all well and good, but a couple of graphs don't actually make it progressive.

No, the facts the graphs are based on do.

Besides, I'm inherently suspicious of a plan that claims to be revenue-neutral, yet shows nearly EVERYONE paying a much lower effective tax rate under the Fair Tax than under the current system.

Then go satisfy your suspicions by reading up on it.

And the graphs don't intuitively make much sense. Maybe you can tell me where I'm misunderstanding them. But it seems obvious to me that a poor family is going to spend nearly 100% (or more) of their income, and will therefore be taxed on it.

The prebate takes care of that.

 

[Iriemon]

Sounds better than what we have now.

Am I for it? Yes ,it could use some tweaking, but I think it would be a hell of a lot better than what we have now.

I might agree with this, because as our tax system stands now it has regressive elements built into it (for example the wealthier don't effectively pay the efffective 12.6% SS tax and get the special low investment income rate).

But IMO the problem we have is not based on the nature of a tax based on income as opposed to expenditures but because it has been so corrupted by Congress.

An example is the investment tax I spoke of. When the tax code was simplified in 1986, the investment tax income rate was the same as the earned income tax rate, with a max of 28%. That was a great accomplishment by Reagan and the Democratic Congress, though the 28% rate was simply too low and record deficits were the result.

Now, 20 years later, the max earned tax rate has increased to 35% while the investment tax rate has been about halved to 15%.

Of course there are many other examples of loopholes for the wealthier built into the tax code.

The tax code needs to be revised and simplified again. But that doesn't require a switch to a sales tax.

 

[Iriemon]

The more you spend the more you pay.

Unless you spend it on investments, which are not taxed.

The prebate.

The prebate makes the fairtax progressive but only at the lower income levels. The very wealthier who can afford to invest can pay lower rates than middle incomes folks who cannot but who don't proportionally benefit much from the prebate.

Is the FairTax progressive? Do the rich pay more and the poor pay less as a percentage of their spending?

Absolutely, as you can see in Figure 6 below -- where the graph shows annual expenditures for a family of four and the corresponding FairTax effective tax rates. The poor actually pay less than zero-percent retail sales tax on their spending. Much like with the earned income tax credit of today, the rebate may give them more money than they actually spend on retail taxes. Especially if they are frugal and buy mostly used products. On the other hand, the wealthy approach a maximum of 23-percent retail sales tax on their spending.

Figure 6: Annual expenditures vs. FairTax effective tax rates, for a family of four

Here is one of those little deceptions the fairtax folks push.

The graph is accurate only if you assume that 100% of income is spent. It does not reflect the fact that the wealthier can afford to save a percentage of their income, which is completely untaxed, and thereby lowers their effective tax rate.

 

[Iriemon]

Besides, I'm inherently suspicious of a plan that claims to be revenue-neutral, yet shows nearly EVERYONE paying a much lower effective tax rate under the Fair Tax than under the current system.

Your suspicion is correct. The Fairtax's claims to be revenue neutral is based on accounting gimmickery. For example, a big chunk of the revenues the fairtax folks count is based on tax revenues from Goverment expenditures being taxed at 30%. While it is true that that will raise revenue, what that also means is that the Govt will have to spend 30% more to maintain the same level.

And the graphs don't intuitively make much sense. Maybe you can tell me where I'm misunderstanding them. But it seems obvious to me that a poor family is going to spend nearly 100% (or more) of their income, and will therefore be taxed on it. A middle-class family will be able to save a little, but will still spend probably 80-90% of their income, and will only be taxed on that 80-90%. And a wealthy family might be able to save much more and only have to spend 40-50%, and will therefore only be taxed on that 40-50%. That sounds pretty regressive to me, hence my problem with sales taxes.

Exactly so, said better than I.

 

[WI Crippler]

I don't see any reason we need to tax one class of people a higher percentage of their income(or net worth) than another class. But I don't know if I fully trust this fair tax business either. People have made good arguments against it. I'm not sure what the right or even better solution would be at this time other than to just keep cutting taxes and providing more and more tax exemptions for people to claim.

 

[Iriemon]

I don't see any reason we need to tax one class of people a higher percentage of their income(or net worth) than another class.

We've had debates ad naseum regarding the pros and cons of progressive tax in other threads. IMO there are sound reasons for a progressive tax structure. If anyone is interested in this debate I will refer them to the thread.

But I don't know if I fully trust this fair tax business either. People have made good arguments against it. I'm not sure what the right or even better solution would be at this time other than to just keep cutting taxes and providing more and more tax exemptions for people to claim.

If you are among the wealthiest Americans and your goal is to maximize your personal wealth, then this position makes perfect sense.

 

[WI Crippler]

If you are among the wealthiest Americans and your goal is to maximize your personal wealth, then this position makes perfect sense.

Well I am not one of the wealthiest in America, but it makes sense to me.

 

[ALiberalModerate]

:rofl................................GOOD!!!!!!!!!!!!! No more reporting my private information to the government, no more compliance cost, no more IRS to have to pay for, my 401k is STILL untaxed and I don't pay tax on it at the end, and anyone who buys a house to get a mortgage deduction is engaged in folly.

If its a choice between losing deductions for kids, childcare, mortgage interest, some state taxes, and so on, then I will take spending a couple of hours each year on my taxes. Its worth it to me.

The fact is, a national sales tax means a 23% (most economist say it would have to be 26%) sales tax on the purchase of your home. Thats just one purchase. To put that into real terms, say you purchase a 200,000 dollar a home, that national sales tax will mean that your payments will be about 300 dollars a month more than they would have been. Moreover, in a lot of markets its going to take you about 5 to 10 years before you even build any equity in your home because of that sales tax premium.

Plus you still we pay property taxes on it. Plus you will pay all your state and local taxes. The difference is that none of it will be deductible. Moreover, I did not buy a home for the mortgage interest deduction, but the mortgage interest deduction certainly helps.

Right now, I can deduct child care expenses, have deductions for a our kids, and deduct my state income taxes. None of that would exist with a national sales tax. Moreover, we adopted this year so we will get some tax advantages for that.

The thing is, if I was single, earning what I earn now, a national sales tax would probably save me some money. However, if you are raising a family, its going to cost you money. Anyway, you slice it, you are going to pay more in taxes than you pay now. Why should anyone go for that. I would rather spend a few hours each year on our taxes than pay more just to simplify it.

 

[Voidwar]

The Fair Tax, is fairly silly.

The thing to tax is income, since someone can avoid your Fair Tax by making their money here then spending it outside of your taxation jurisdiction.

The most sensible idea is to tax income at a flat rate, and all income is income. Its like a surcharge for doing business under the shelter of the U.S. Economy and infrastructure. A flat percentage of income (no deductions) is The Fair Tax, and a problematic and avoidable sales tax or VAT is NOT the answer. I think a good starting point would be 20%, of the first dollar, and 20% of the millionth dollar.

 

[Voidwar]

If its a choice between losing deductions for kids, childcare, mortgage interest, some state taxes, and so on, then I will take spending a couple of hours each year on my taxes. Its worth it to me.

Those things are choices you have made. Why should the government be able to influence your choices with the tax code ? Why should the government give deductions at all ?

However, if you are raising a family, its going to cost you money.

What if the singles want to stop subsidizing the breeders ?

Theres is a difference between "Costing you money" and "no longer recieving an unjustified subsidy".

 

[ALiberalModerate]

Those things are choices you have made. Why should the government be able to influence your choices with the tax code ? Why should the government give deductions at all ?



What if the singles want to stop subsidizing the breeders ?

Theres is a difference between "Costing you money" and "no longer recieving an unjustified subsidy".

Simply put, we all have a vested interest in supporting families. Across the board this is true, whether we are talking about education, social problems, the economy, or what, we all have a vested interest in supporting families and thats why we have a tax code that does that.

If you don't like "breeders" getting deductions, then try to convince a majority of Americans of your position. Good luck with that.

 

[Stinger]

If its a choice between losing deductions for kids, childcare, mortgage interest, some state taxes, and so on, then I will take spending a couple of hours each year on my taxes. Its worth it to me.

Why, you don't pay more tax. Why is a DEDUCTION so sacrosanct to you?

The fact is, a national sales tax means a 23% (most economist say it would have to be 26%) sales tax on the purchase of your home.

And you ignore the fact you are buying you house with now pre-income pre-FICA tax dollars.

You need to go an read up on it before you start doing hypothetical math
http://www.fairtax.org/PDF/TheFairTaxTreatmentOfHousing.pdf

Right now, I can deduct child care expenses, have deductions for a our kids, and deduct my state income taxes. None of that would exist with a national sales tax. Moreover, we adopted this year so we will get some tax advantages for that.

So what, you won't be paying an income tax to deduct them from, why is deducting from a with held tax more attractive to you than just paying it as you spend YOUR money with in the end you will be paying less?

However, if you are raising a family, its going to cost you money. Anyway, you slice it, you are going to pay more in taxes than you pay now. Why should anyone go for that. I would rather spend a few hours each year on our taxes than pay more just to simplify it.

You REALLY need to educate yourself on it before you make such baseless assertions.

You on the one hand say that the 23% rate won't bring in the same revenues and then on the other hand say we will be paying in more revenue than we are now. OK let's say you are right, what do we do then, we LOWER the 23% to 20%.

 

[Kushinator]

Interest, children, homestead, etc... are not dropping tax payments per say. A tax deduction only deducts the amount of income to be taxed.

Not to mention it is estimated to cost over $200 billion per year to keep the IRS nicely funded and able to pry into your lives. (heard it on the debates last night, i think it was Mitt)

About 2 weeks ago, someone on another board came up with IMHO the greatest tax idea i have ever heard. The basis of it is.............. Following the Constitution!!!

By Jason Dean: Link

Prior to the passage of the 16th amendment, direct taxes were to be "apportioned." Correct me if I'm wrong, but my guess is that this meant that the federal government had the authority, as delegated by the Constitution, to assess a tax against its member states on the basis of population. Is that correct? And if so, then it would be up to these individual states to determine the method in which its taxes or fees would be collected, in order to pay the tax assessed by the federal government. Am I right?

If so, then I am even more troubled by these so-called "Fair Taxers" and "Flat Taxers." Why is it that no one advocates the repeal of the 16th, with the government simply assessing tax liabilities to the states? Then states could determine whether to implement sales taxes, income taxes, VAT taxes, user fees, etc., or any combination thereof... Why is it that these tax reformers seek a monolithic solution? It seems that if the federal government is going to exist, and it does need some revenue to fund its constitutionally mandated/permitted roles, then the best way to fund it would be a diverse selection of alternatives chosen at the state level.

I wish i can take credit for this idea, but it is what it is. None the less, tax competition between states??? An amazing idea...

 

[rathi]

Although the fairtax has many good points, its not the optimal solution. Simplifying the current income tax system would be a much simpler solutions. Get rid of most or all of the deductions, credits and other stuff and you can dramatically cut the cost of collecting taxes.

 

[Stinger]

Although the fairtax has many good points, its not the optimal solution. Simplifying the current income tax system would be a much simpler solutions. Get rid of most or all of the deductions, credits and other stuff and you can dramatically cut the cost of collecting taxes.

Still allowing tax avoidence , still requiring we give up our privacy (I thought the liberals were all about keeping ourselves private from the the government), still taxes your money before you get it, and still leaves in place a system the politicians can use to their advantage.