- Joined
- May 20, 2005
- Messages
- 5,980
- Reaction score
- 30
- Gender
- Male
- Political Leaning
- Conservative
New book on this subject. Penned by Neil Boortz. A Libertarian talk show host out of Atlanta. Not saying you should check out his site.
Iriemon said:The current tax on corporations is on profit, which is (roughly) revenues (from sales) less expenses. A company can have billions of revenues, but if it has billions in costs and no profit, it pays no tax. You are replacing the tax on profit with a what is essentially a tax on revenues. Huge difference. Last year taxes on corporations raised $189 billion. The fair tax plan will have to raise roughly $2,400 billion with the sales tax. Huge difference. For someone to argue that it will not effect prices is hogwash. Go to Europe and buy something and then tell me a sales tax makes no difference.
Now, it may not have a major effect on the pre-tax price of goods, in fact in may (as some have argued in the fair tax thread) have a deflationary effect as the overall increase in price lowers demand. But the total price of everything that is taxed will go up by roughly the amount of tax.
It would be nice if things actually worked this way, but unfortunately businesses that are not honest are often not run out of business unless the are so bad they get caught with a really big scandal like Enron.
If you are talking about a huge Govt bureaucracy to enforce the law to prevent cheating, that kind of cuts against the argument for a VAT on the grounds that it simplifies everything and reduces bureacracy.
IndiConservative said:I like it because it lets you choose your taxes by your spending.
It will take another smaller bureaucracy to enfore it no doubt.
Its really a situation that no one can predict until it happens unfortunately.
Personally it would help me (if it worked well) because I don't spend a lot as it is. So I suppose I'm a bit biased.
I realise businesses are not that honest but if you notice the price rise on something 25%. I think you would notice they were ripping you off.
Iriemon said:The underlying concept here, that there is a "hidden" tax of 25-30% as the fairtax website proclaims, is something I don't understand. ...
gdalton said:Ok so I see some of the arguments here revolve around a few particular things, the most common being where does this current imbedded tax of 22-25% come from and will the prices of products really be reduced when it is removed. Another argument is this actually being a regressive tax structure shifting the burden of tax to the middle class. Let’s see if I can shed a little light on this. ...
Iriemon said:of the roughly $1.6 trillion in hidden taxes that will be eliminated
Iriemon said:Also, as others have pointed out, this level of tax depends upon everyone spending every dime they have on taxable items. A big if. If not, revenues go down, and the tax rate will have to be even higher.
Iriemon said:I guarantee you, with a 30% add-on sales tax (or more, if we are going to balance the budget), people will try to find away around it, big time.
Iriemon said:In theory, an income tax is incredibly simple too. Write your income down. Pay x% tax. But we know what the IRS code looks like, right? Do you think a sales tax will be any different? Within no time, Congress will pass an equivalent mind boggling array of exemptions, deductions, and classifications, and the sales tax will be just as complicated as the income tax.
Iriemon said:Now a family of 4 making $150,000. They spend $100,000, twice as much as the first family, and save $50,000. They pay $23,000 for sales tax, after rebate, $19,000. Their effective tax rate is only 12.7%. The wealthy pay less tax as a percentage of their incomes. At a more realistic 40-50% sales tax, the discrepancy is even more pronounced. If you are wealthy, and think regressive taxes are the cat's meow, this sounds like a great deal. If you are in the $50k category and spend more of your income, it’s not so great.
gdalton said:The $1.6 trillion represents total revenue generated by taxes that includes income tax along with the embedded taxes or hidden taxes. In other words the “hidden taxes are only a part of the $1.6 trillion.
No actually they do the calculations on the amount we actually spent in 2003, I don’t believe everyone spent every dime they earned in 2003
http://www.fairtax.org/pdfs/Statement_to_Tax_Panel.pdf
Are you assuming that people do not already commit tax fraud?
Now this is a valid point. The only thing we can do is try to control our representatives with our votes. I know it may sound naïve but this is how our system works.
They still paid $11,500 more in taxes then the other family. Because it represents a smaller percentage of their income is not a convincing argument to me when they still pay more then twice as much as the other family. And again the rate was based on the amount of purchases people are currently making, so in actuality the lower income family who is now bringing home their entire check could still spend the same and save money.
Morris Minor said:It's not an add on tax; it's inclusive. Unlike state sales taxes, you will not see it added to your shopping bills as a line item.
Remember also that only individuals pay taxes - even under our present sorry system. For example, you could tax Microsoft at a rate of 95% on its profits. Microsoft will not, in fact cannot pay that tax. You pay it.
This is why the Fairtax is such a great idea: it's completely transparent, its cost of collection is very low and it will also fix the Social Security funding fiasco (which is whey the left will eventually have to buy into it). By the way, the book is # 1 on the NY Times best seller list.
Dezaad said:We leave the part now of fairly well established economic theory to less well established. Concentration of wealth toward the top tends to cause overproduction.
gdalton said:Ok, here we go again. I can see that Irieman has actually put some thought into his arguments and does have some valid points however I have done a little math of my own and found a few interesting things.
1st About this deficit problem, we have actually cut the deficit by about $150 billion in the last two years alone with out raising taxes.
But even if you still don’t believe the FairTax can help us out on this issue take a look at the past 18 quarters, or 4.5 years. If we had been using the FairTax plan the federal revenue would have been higher in every quarter except one. That’s right the FairTax would have brought in more money then our current system did, but even with our current system we have managed to reduce the deficit. So that covers the deficit and the idea that the FairTax rate would actually have to be higher for it to be revenue neutral.
2nd You can check and re-check the math, after the imbedded taxes are removed from all products and goods those products and goods can be sold for less, after you add the FairTax the price is basically the same.
The companies will not need to reduce the pay of their employees to make these price breaks, the removal of tax burden will accomplish these reductions and the addition of the consumption tax will bring prices back to present levels.
So you’re not going to pay anymore then a 1% difference for your goods and services.
3rd The idea that even though the government will make enough money to run on, the poor will be relieved of all tax burden including SS and Medicare and the middleclass will have a few extra bucks a month to put away in savings, some how non of this matters because we are not taking enough from the rich.
Sure they may pay the same taxes and actually pay twice as much or more than the average family this doesn’t matter because the percentage compared to their overall income is lower. This is crazy thinking here, basically your saying you don’t care that everyone else is coming out ahead, we need to screw the rich as much as possible. Why? Because someone works hard and achieves something they should be punished? Sorry I don’t see how that makes any since unless you admit it is out of jealousy for what some one else has.
Ok now after all of that fun stuff let’s take a look at how much the FairTax will help our economy. How many businesses around the world would be willing to relocate there manufacturing plants and head quarters to a country that basically removes their corporate tax burdens? How many jobs do you believe this will create? More jobs means more spending, so how long do you think it will take us to make up that deficit of ours? Did you know we ship off about $10 trillion worth of business to other countries that have less severe tax structures(yes I realize that they also get cheaper labor), how many of those jobs do you think will come back to the U.S. if we had the FairTax?
gdalton said:Iriemon, I appreciate the debate and respect your views and arguments but now we are just going around in circles aren't we. All of your new points are the same as your old points and we have both made are arguments so I will leave it for anyone to look back through the posts and see what has been said.
I am still concerned about the inflationary response the new plan might cause. So can anyone give me any arguments for or against this problem?
gdalton said:First I would like to thank Irie for setting me straight, I should have posted my math, and after re-checking all of my research and math I see that I have made a mistake. I got too caught up in trying to win an argument that I did not double check myself, so Irie I apologize for my mistake and I thank you again for setting me straight.