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Fair tax; taxing consumption

I'm Supposn

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I agree that it’s economically more desirable to tax consumption rather than income.

I am dubious of both the political and economic feasibility of replacing our entire, (both individual and corporate) income tax revenues with a consumption tax. It is certainly financially imprudent to attempt it in a single step. I advocate we transform our major sources of tax revenue incrementally.

Some suggest first eliminating individual income taxes and later attempt eliminating corporate income taxes. Mine is not the most popular opinion but I believe that eliminating individual and retaining corporate income taxes is economically illogical.

To whatever extent and rates we tax individuals’ incomes, we should continue to tax corporate incomes. Otherwise too many entrepreneurs will be further enabled to evade paying their fair share of income taxes.

I contend that after the enactment of some incremental tax source transfer step, it will become obvious that the consumption tax is approaching an unacceptable tax rate. If I’m incorrect, (i.e. a consumption tax can replace all income tax revenue), then incremental tax source transference will accomplish complete replacement of all income taxes.

Those who insist upon passage of an act to accomplish the entire transference in a single step are insisting that a federal fair tax never be enacted.

Respectfully, Supposn
 

phattonez

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It's insane how much we waste because we need to waste so much talent just trying to figure out tax code and how to get businesses to pay their taxes correctly. It's a drain on the economy and for no good reason. Just get a simple tax that is done only once. Right now our money can be taxed so many times by income taxes, capital gains tax, sales tax, payroll taxes, etc. Think about that. If you work at a company and spend the money that you make, then you are taxed 3 TIMES!

About corporate taxes, I see no reason for them to be so high. We are basically punishing a firm for being able to grow and become more efficient. Seems like a stupid policy to me.
 

I'm Supposn

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About corporate taxes, I see no reason for them to be so high. We are basically punishing a firm for being able to grow and become more efficient. Seems like a stupid policy to me.
Phattonez, I agree with the concept that all taxes upon commercial entities are generally and eventually paid by their customers.

Regardless, I still contend to whatever extent and rates we tax individuals’ incomes, we should continue to tax corporate incomes. Otherwise too many entrepreneurs will be further enabled to evade paying their fair share of income taxes.

Respectfully, Supposn
 

Korimyr the Rat

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Consumption drives the demand that our businesses need to maintain our economy. Discouraging consumption through taxation will do more damage to our economy than any level of income tax-- because income is self-rewarding-- destroying profits and therefore jobs.
 

I'm Supposn

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Consumption drives the demand that our businesses need to maintain our economy. Discouraging consumption through taxation will do more damage to our economy than any level of income tax-- because income is self-rewarding-- destroying profits and therefore jobs.
Korimyr the Rat, a general consumption tax, (that’s applicable to all or almost all purchases) can only discourage consumption to the extent that it diverts money into saving or investment. Hopefully some of savings will eventually be invested into USA’s domestic economy.

Economists’ definition of “investment” is narrower than the general use of the word. The economists’ definition is “investment” is the use of resources to produce additional goods and service products. Among those resources spent is money to buy goods and services for investment purposes.

Any consumption uses or consumes a nation’s resources but investment creates additional future goods and service products. That is why bank deposits or purchasing stocks, bonds or real-estate is not factored into the calculation of the gross domestic product, (GDP). Transfers of wealth, (unlike investing), does not produce additional goods and service products.

Certainly investment (as the word is used by economists) is the most economically beneficial consumption.

Respectfully, Supposn
 

DrunkenAsparagus

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If our tax code were simpler and not longer than the Lord of the Rings trilogy, it would be a lot harder for them to avoid paying.
 

ricksfolly

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I agree that it’s economically more desirable to tax consumption rather than income.
You probably don't even know what items you buy come under the consumption heading, so how can you be so sure...

People in the $30,000 - 40,000 range spent 90 percent on consumption things, so in effect they'd be paying 90 percent tax, with zero deductions.

I'd much rather get my deductions and pay 25 percent, thank you.

Here's the list of Consumption expenditures headings (sub headings not included)

Durable goods
Motor vehicles and parts
furniture
Nondurable goods
Food and Beverages
alcoholic beverages
clothing
gasoline
Services
housing
household
transportation
health
recreation
personal care
financial services
education
social services
travel

If you want to see the complete list and total expenditures for 2008 buy the 2010 World Almanac, and book of facts, and go page 55.

ricksfolly
 

ricksfolly

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I agree that it’s economically more desirable to tax consumption rather than income.
You probably don't even know what items you buy come under the consumption heading, so how can you be so sure...

People in the $30,000 - 40,000 range spent 90 percent on consumption things, so in effect they'd be paying 90 percent tax, with zero deductions.

I'd much rather get my deductions and pay 25 percent, thank you.

Here's the list of Consumption expenditures headings (sub headings not included)

Durable goods
Motor vehicles and parts
furniture
Nondurable goods
Food and Beverages
alcoholic beverages
clothing
gasoline
Services
housing
household
transportation
health
recreation
personal care
financial services
education
social services
travel

If you want to see the complete list and total expenditures for 2008 buy the 2010 World Almanac book of facts, and go page 55.

ricksfolly
 

The_Patriot

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Too bad that a consumption tax isn't going to pass the Constitutional prohibition on putting taxes or duties by the federal government on goods exported from any state. Article I Section IX Clause V says, "No Tax or Duty shall be laid on Articles exported from any State."
 

I'm Supposn

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Ricksfolly, why would anyone list what’s applicable to a general sales tax? (That differs among the jurisdictions levying such taxes). Listing what’s not applicable would be shorter than a list of what’s taxable.

I don’t understand the point you were attempting to make when you wrote:
. “People in the $30,000 - 40,000 range spent 90 percent on consumption things, so in effect they'd be paying 90 percent tax, with zero deductions.. ....I'd much rather get my deductions and pay 25 percent, thank you."?

Respectfully, Supposn
 

I'm Supposn

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Too bad that a consumption tax isn't going to pass the Constitutional prohibition on putting taxes or duties by the federal government on goods exported from any state. Article I Section IX Clause V says, "No Tax or Duty shall be laid on Articles exported from any State."
Patriot you may be; you’re mistaken about what’s within the U.S. Constitution and what it means.

Respectfully, Supposn
 

The_Patriot

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Patriot you may be; you’re mistaken about what’s within the U.S. Constitution and what it means.

Respectfully, Supposn
It plainly says No Tax, so it must mean that no tax can be levied by the federal government on anything that is exported from any state. It's plain English that anyone can understand.
 

I'm Supposn

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It plainly says No Tax, so it must mean that no tax can be levied by the federal government on anything that is exported from any state. It's plain English that anyone can understand.
Excerpted from article 1, section 9 which deal with the limits upon the U.S Congress:
“No Tax or Duty shall be laid on Articles exported from any State.

No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another: nor shall Vessels bound to, or from, one State, be obliged to enter, clear, or pay Duties in another”.

Patriot, the wording do not limit U.S. Congresses’ right to tax any goods or services products. It certainly prohibits the favoring for, or discrimination against any state(s) within interstate or intrastate, or foreign commerce.

(I don’t have our current phone bill handy but I do know if the federal government still does), but we certainly have taxed telephone services. The Feds also taxes alcoholic beverages and I suppose we tax other products. If you would have given some thought before you wrote your message, I suppose that this is nothing that you’re unaware of. I suppose it just escaped your mind when you wrote your message.

Respectfully, Supposn
 

The_Patriot

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Excerpted from article 1, section 9 which deal with the limits upon the U.S Congress:
“No Tax or Duty shall be laid on Articles exported from any State.

No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another: nor shall Vessels bound to, or from, one State, be obliged to enter, clear, or pay Duties in another”.

Patriot, the wording do not limit U.S. Congresses’ right to tax any goods or services products. It certainly prohibits the favoring for, or discrimination against any state(s) within interstate or intrastate, or foreign commerce.

(I don’t have our current phone bill handy but I do know if the federal government still does), but we certainly have taxed telephone services. The Feds also taxes alcoholic beverages and I suppose we tax other products. If you would have given some thought before you wrote your message, I suppose that this is nothing that you’re unaware of. I suppose it just escaped your mind when you wrote your message.

Respectfully, Supposn
All of the clauses are self-contained, except for declaratory clauses like Article I Section VIII Clause I. Thus, Clause V and VI are two completely separate and distinct limitations placed on the government. They are not used together as you would imply. When cases are brought forth concerning the constitutionality of a law both sides only cite the clause that supports their position. This is what I've done and according to Clause V it plainly states No Tax or Duty. It doesn't get any clearer then that. Since you posited that the clauses cannot be used in a vacuum then does Article I Section IX Clause II apply to this case of No Taxes or Duties exported from any state? No, because they deal with two completely different subjects. For reference here is Clause II, "The Privilege of the Writ of Habeas Corpus shall not be suspended, unless when in Cases of Rebellion or Invasion the public Safety may require it."

As for the telephone tax, it was a luxury tax placed on phones back when they were a luxury item and to support the Spanish-American War. It had a built in sunset provision, but it still doesn't make it a constitutional tax.
 
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All of the clauses are self-contained, except for declaratory clauses like Article I Section VIII Clause I. Thus, Clause V and VI are two completely separate and distinct limitations placed on the government. They are not used together as you would imply. When cases are brought forth concerning the constitutionality of a law both sides only cite the clause that supports their position. This is what I've done and according to Clause V it plainly states No Tax or Duty. It doesn't get any clearer then that. Since you posited that the clauses cannot be used in a vacuum then does Article I Section IX Clause II apply to this case of No Taxes or Duties exported from any state? No, because they deal with two completely different subjects. For reference here is Clause II, "The Privilege of the Writ of Habeas Corpus shall not be suspended, unless when in Cases of Rebellion or Invasion the public Safety may require it."

As for the telephone tax, it was a luxury tax placed on phones back when they were a luxury item and to support the Spanish-American War. It had a built in sunset provision, but it still doesn't make it a constitutional tax.
I WISH that the constitution was interpreted that strickly. But it aint. I am quite sure that it would be interpreted by our current Supreme Court to mean that individual states do not have a right to tax goods being exported out of their state.

Not that the federal government can't tax good being transported between the states. If the fed couldn't levy taxes on goods that potentially would be transported/exported between states, then we wouldn't have tobacco/gasoline/alchohol excise taxes.

I believe that Supposn is correct on this one.
 
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The_Patriot

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I WISH that the constitution was interpreted that strickly. But it aint. I am quite sure that it would be interpreted by our current Supreme Court to mean that individual states do not have a right to tax goods being exported out of their state.

Not that the federal government can't tax good being transported between the states. If the fed couldn't levy taxes on goods that potentially would be transported/exported between states, then we wouldn't have tobacco/gasoline/alchohol excise taxes.

I believe that Supposn is correct on this one.
Just because the Supreme Court decides one way doesn't mean that theirs is the only interpretation that is valid. Section IX is a limitation placed on the federal government and Section X is the limitations on the states. Just because the government ignores the limitations placed on it by the Constitution doesn't make it necessarily legal or right.
 

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Just because the Supreme Court decides one way doesn't mean that theirs is the only interpretation that is valid. Section IX is a limitation placed on the federal government and Section X is the limitations on the states. Just because the government ignores the limitations placed on it by the Constitution doesn't make it necessarily legal or right.
Oh, in theory I agree with you 100%. But in reality, whatever the Supreme Court decides, whether it is right or wrong, goes. Like it or not, we are stuck with their constitution mangling interpretations and there is nothing that can be done about it short of a revolution.
 

ricksfolly

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Too bad that a consumption tax isn't going to pass the Constitutional prohibition on putting taxes or duties by the federal government on goods exported from any state. Article I Section IX Clause V says, "No Tax or Duty shall be laid on Articles exported from any State."
The problem with a consumption tax is it will impact the poor and middle class far more than the rich and super rich. People earning $30,000 to $40,000 spend 90 percent on everyday consumption items.

Food, entertainment, cars, gasoline, appliances, TVs computers, services, repairs, just to name a few.

ricksfolly
 

ricksfolly

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Too bad that a consumption tax isn't going to pass the Constitutional prohibition on putting taxes or duties by the federal government on goods exported from any state. Article I Section IX Clause V says, "No Tax or Duty shall be laid on Articles exported from any State."
Good. It was a bad idea from the start, especially for the poor and middle class. The fact that it was backed by Forbes, a super rich guy, should give you some idea who benefited the most.

ricksfolly
 

The_Patriot

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Oh, in theory I agree with you 100%. But in reality, whatever the Supreme Court decides, whether it is right or wrong, goes. Like it or not, we are stuck with their constitution mangling interpretations and there is nothing that can be done about it short of a revolution.
Not entirely true. If the states pass nullification laws against it there's nothing the federal government can do. The states also have the power to determine the constitutionality of the federal government's laws. BTW I do agree with you.
 

I'm Supposn

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Patriot, the federal government always has and continues to tax some products.

The federal courts have not and will not rule that federal taxation of goods or services is beyond the power of the U.S. Congress.

Respectfully, Supposn
 

Spartacus FPV

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IMO you cannot tax a corporation, any increase will simply be reflected in their prices as they pass the costs down to their consumers. A fair tax is a regressive tax, now I don't care if a tax is regressive or progressive, however regressive taxes are far harder to implement simply because the burden shifts from the few in the top 1% paying > 90% of the tax burden to the many who outnumber the wealthiest and would vote against it.

As a capitalist I support a consumption tax because it makes one's participation in internal revenue optional, and encourages savings which leads to the Capital that Capitalism requires. Currently we have no capital, and our system is rather based on debt that produces wealth through fractional reserve banking.

As a libertarian I support it because it would eliminate the need for our harrasing Internal Revenue Service, for only black market sales (under the table) would constitute tax evasion.

However, in order to afford/balance our current budget the sales tax rate would be obscenely high. The only way for such a rate to be as fair as its name suggest would be to cut far more government spending than the majority would allow.

So either way, I do not see it as politically possible; Despite what merits it would have. In my ideal "Free Country" where the government's sole purpose is the defense of our rights, a national sales tax of 6-10% would be more than enough to cover police, law courts and defense.
 
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Spartacus FPV

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The problem with a consumption tax is it will impact the poor and middle class far more than the rich and super rich. People earning $30,000 to $40,000 spend 90 percent on everyday consumption items.

Food, entertainment, cars, gasoline, appliances, TVs computers, services, repairs, just to name a few.

ricksfolly
Do you have a source for that statistic? Its my understanding that on average a houshold spends 34.1% on rent/mortgage alone, and only 12.4% on everyday commodities like food, and 3% on the electronics you listed.

How The Average U.S. Consumer Spends Their Paycheck |

You're right that it would effect the poor/average consumer more than the super rich, but not to the extent that you think. The biggest impact would be in energy costs, since they spend 17% on travel. However MUCH of this is the result of gasoline taxes which nearly double the cost and said taxes would be eliminated by the Fair Tax.
 
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I'm Supposn

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Rick’s Folly, there’s been little or no mention of the federal taxes that are now imbedded and concealed within USA’s total aggregate sales transactions. All corporate income taxes are eventually paid for by the final purchases.

Employers' portions of FICA payroll taxes are paid by the customers and because the tax is based upon payrolls, they additionally inhibit creation of jobs and thus affect median wage.

To the extent that any potions of these revenues are replaced with a consumption tax, the purchasers’ burdens of the consumption tax will be mitigated by the reduction of the other imbedded and concealed taxes within sales transactions.

Respectfully, Supposn
 

I'm Supposn

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The problem with a consumption tax is it will impact the poor and middle class far more than the rich and super rich. People earning $30,000 to $40,000 spend 90 percent on everyday consumption items.
Food, entertainment, cars, gasoline, appliances, TVs computers, services, repairs, just to name a few.
ricksfolly
Rick’s Folly, The extent of any differences upon segments of our population would depend upon the extent of income tax revenue that would be shifted to a consumption tax.

I believe as you do, wealthier taxpayers will do very well with a consumption tax. They now do very well with an income tax. Our present tax systems are so infested with inequities that the shifting from income tax to consumption tax would not cause significant differences of wealthier taxpayer’s net federal taxes.

Middle income earners would not profit or lose much of anything. They’ll wonder what all the arguments were about. I doubt that we could replace all income taxes with consumption tax revenue. It’s conceivable that lower income earners might not file or pay income taxes but I believe that upper middle income earners will always pay income taxes.

Respectfully, Supposn
 
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