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FairTax system

catholicauthor

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There is a new idea for taxes, the FairTax system. It is a way to end the IRS, and the income tax. Here is a summary of how it will work.

Basically, the Income Tax, and just about all other taxes will be removed. A new tax will be set up in its place, the FairTax. It will be a sales tax, taxing the goods sold in the marketplace, on the internet, and in all other american stores. The amount is 23% of the cost. Meaning: You pay $100 for a coat. The government gets 23 and the store gets 77. The government will give the members of our society the money it needs to make a living and buy basic nessecities, along with allowing the citizen to keep 100% of his income.

I am an incomplete source, for more information read The FairTax Book by Neal Boortz and John Linder, or go to www.fairtax.org.

So what are your thoughts about it?
 
T

The Real McCoy

catholicauthor said:
There is a new idea for taxes, the FairTax system. It is a way to end the IRS, and the income tax. Here is a summary of how it will work.

Basically, the Income Tax, and just about all other taxes will be removed. A new tax will be set up in its place, the FairTax. It will be a sales tax, taxing the goods sold in the marketplace, on the internet, and in all other american stores. The amount is 23% of the cost. Meaning: You pay $100 for a coat. The government gets 23 and the store gets 77. The government will give the members of our society the money it needs to make a living and buy basic nessecities, along with allowing the citizen to keep 100% of his income.

I am an incomplete source, for more information read The FairTax Book by Neal Boortz and John Linder, or go to www.fairtax.org.

So what are your thoughts about it?

I read that book.

Personally, I'm 100% in favor of the FairTax. Unfortunately, we seem to be a minority on here on this one.
 

justone

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The Real McCoy said:
I read that book.

Personally, I'm 100% in favor of the FairTax. Unfortunately, we seem to be a minority on here on this one.


No you are not. I pretty much sure the majority of taxpayers will agree with you.
Not reading the book -- I don't like this heavy kind of reading - I would add my own idea that the basic goods (basic food, clothes and a few more things) will not be taxed to satisfy the needy ones. Though there should be careful approach not to leave a loophole.
Once I calculated how much America spends on tax preparation = time X average wage, and I came to hundred billions per a year for UNPRODUCTIVE work. Provided the same amount of time is used for productive work, we would pay war in Iraq in 2 or 3 years. And millions would avoid tax time depression.

Why it cannot work:
1. Tax system is the Big Brother watching over you. Looking at your tax return the government can know a lot about you. Sometimes it will know more than your brother or sister.
2. Tax system is so complicated, and it designed so, that nobody can know, it and therefore the government can get you if it does not like you.
How else you would put Al Capone in jail?
3. You must fear the government because you always can do a mistake or miscalculation in spending your own money.
4. A huge amount of people are fed by the system. They would fight relentlessly. Taxpayers are too soft to withstand this organized and directed fight.
5. A lot of irrational programs based on review of your taxes, would have to die.
So you are going to turn around the history of 93 years of corruption around.
It will not work. So, what is a need to talk?
 

catholicauthor

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justone said:
I would add my own idea that the basic goods (basic food, clothes and a few more things) will not be taxed to satisfy the needy ones.


Actually, that is not the way it works. Everyone in America is given money to pay their basic needs.

Also, I forgot to mention something. The prices would not go up very much on most goods because there is already an embedded tax which causes prices to go up. (People amking and selling the product are taxed, therefore the cost of the product goes up) Removing income tax removes this, thus reducing prices by about 22% the new sales tax will rais the new number by 23%, so only a small increase!
 

justone

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catholicauthor said:
Actually, that is not the way it works. Everyone in America is given money to pay their basic needs.

Where do they give money? It seems I'va been quite a fool working and earning --- like a fool
 

catholicauthor

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justone said:
Where do they give money? It seems I'va been quite a fool working and earning --- like a fool

it's not working like that now...that's how it will work after fairtax is instated. The way it works is kinda like a debit card...the government gives you this little card and gives you money every month on the card with which you can pay for that month's groceries, rent, car payment...
 
T

The Real McCoy

justone said:
Where do they give money? It seems I'va been quite a fool working and earning --- like a fool

It's not really giving money... you 2 are both on the same page.. just looking at it differently. Included in the FairTax Act is a tax rebate for basic necessities.
 

justone

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The Real McCoy said:
It's not really giving money... you 2 are both on the same page.. just looking at it differently. Included in the FairTax Act is a tax rebate for basic necessities.

No, thank you. No tax rebate for me, no paperwork, no filing, no waiting--
none of it. The more money I make the richier I am the more goods I buy, the more sale taxes I am paying. No need of fairness for me. No paperwork is enough.
 

Kandahar

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I like Steve Forbes' plan for a flat income tax better. No matter how you slice it, a national sales tax disproportionately harms the poor and discourages consumption. While discouraging consumption might be good for certain individuals' personal finances, it's not good for the US economy. Also, a national sales tax would make more expensive purchases unaffordable for a lot of people: Houses, cars, college tuition, etc.

I agree that the federal tax code is ridiculously complex and unfair, but I don't think this is necessarily the best solution (although it'd certainly be an improvement over what we have now).
 
T

The Real McCoy

Kandahar said:
I like Steve Forbes' plan for a flat income tax better. No matter how you slice it, a national sales tax disproportionately harms the poor and discourages consumption. While discouraging consumption might be good for certain individuals' personal finances, it's not good for the US economy. Also, a national sales tax would make more expensive purchases unaffordable for a lot of people: Houses, cars, college tuition, etc.

Well, college tuition/education falls under "investment" and isn't taxed under the FairTax. As for more expensive items like cars, what would make them less affordable than they are under our current system where a chunk of everyone's paycheck is immediately taken away, and with the payroll, income and corporate taxes the car company pays, and all the taxes paid by the plethora of companies that supply the automaker with materials and parts that are imbedded into the cost of each car?



Kandahar said:
I agree that the federal tax code is ridiculously complex and unfair, but I don't think this is necessarily the best solution (although it'd certainly be an improvement over what we have now).

I like Forbes' Flat Tax too but I just personally find the FairTax a better deal.
 

LaMidRighter

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I read the fairtax book myself and was very impressed. I love the idea and hope that it builds momentum. Count me in as far as the growing "minority" on this thread.
 

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Taxes are not suppose to be fair. Fair would be no taxes.

Taxes are suppose to finance the state so the state can improve areas of the nation for all its citizens. This includes areas that private enterprise will not touch (unless pushed or subsidised) and keeping a minimum health, education and living standard. Thats what makes the western world different from most 3rd world countries.. that is the backbone of our western democracy.

Flat tax is just another way of rich people getting to pay less in tax. Do the math and you will see that Flat tax benifits only one area of society. That is unless you add a few loopholes and limits to prevent such things, but that would make it as "fair" as the present system.

As for Fair Tax... sounds like some kind of socialist thing.. the state paying for the basics...?

There is nothing wrong with the present tax system in the US or Europe per say. The idea of proportional taxation is the best way to do things to improve society and the nation as a WHOLE and not indviduals only. And improving society as a whole is the whole idea of having a society is it not? Or do you all belive in the survival of the fittest and richest idea that we lived with for thousands of years? "Screw the guy next to me, its all about me me me"

The problem comes when a tax system gets loopholes, exceptions and so on to satisfiy political campaigns. Get rid of the loopholes and exceptions and the system will not only be less complicated but also more fair.

Why do you think the tax system is so complicated? Because there is a whole industry that lives off it being complicated. And that industry pays alot of money to politicans to keep it that way (directly and inddirectly). And this happens in all countries...

Plus the more complicated a tax system is, the more loopholes there are for the well off to avoid paying thier fair share of the tax burden. Its not about the number of dollars one person pays, but if that person pays the amount that is due or not.
 

catholicauthor

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justone said:
No, thank you. No tax rebate for me, no paperwork, no filing, no waiting--
none of it. The more money I make the richier I am the more goods I buy, the more sale taxes I am paying. No need of fairness for me. No paperwork is enough.

Sorry, but it's not a rebate. Hope I don't disapoint you :2razz: So seriously, without rebates our tax system will be a ton less confusing. The government giving money to the people to help pay for their groceries doesn't appeal to me, seee below for why.

PeteEU said:
Taxes are not suppose to be fair. Fair would be no taxes.
If that is the case, then where would the government's money come from? The government needs taxes to support itself, and we need the government to support ourselves.

PeteEU said:
As for Fair Tax... sounds like some kind of socialist thing.. the state paying for the basics...?
This is the one part that I generally disagree with in the FairTax system. The governments eems to think that it needs to support us and buy our food for us, but it really doesn't. Here are the reasons why:

1. The FairTax book itself says that the cost of items will not go up. By definition, the people who are currently having a difficulty making a living must be alive. Therefore, on their current pay check and with the current amount of time they have they are capable of getting by. But with an increased income, and items being sold for about the same, they will be able to make a better living! So really, the government doesn't really need to pay for the basic nessecities of the people.

2. The government giving money to the poor is only continueing the cycle of poverty. F. Ex... Joe is poor. He receives government money to help him buy his basic needs. Because the government pays for him, Joe doesn't need to work. Joe's kid, George, knows his father didn't have to work, and so he thinks that he doesn't either. He signs up for a government check, and each month he does no work but lives off what the government gives him. Thus the cycle of poverty will continue.

That's my only problem with the system. Other than that, it is very fair. The rich get taxed more than the poor, because the rich will buy more and thus pay more taxes.
 

catholicauthor

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Kandahar said:
...a national sales tax disproportionately harms the poor and discourages consumption.

Didn't see this when I was posting before...

A national sales tax will not raise the prices by much, if at all. The current tax system has an "embedded tax" in every purchase made, because the producer has to pay tax, the retailer has to pay tax, the advertisers have to pay tax...the list goes on. This amount of "embedded tax" amounts to about 22% of the total cost. So currently, out of the cost of a one hundred dollar coat, the government gets twenty-two and the retailer/manufacturer gets seventy-eight.

Under the new system, this "embedded tax" will diminish, because the stores and manufacturig plants no longer have to pay those taxes. The prices will go down by 22%, leaving the one hundred dollar coat at the price of seventy eight dollars. The new sales tax will kick in, and raise this by 23% of itself, coming to about $95.94 See? In this case the price went down. Consumption is not discouraged! It is encouraged!

Also, you say it "disproportionately harms the poor..." this cannot be the case. The rich definitely buy more than the poor, because they have more money, and therefore they pay the bulk of the taxes. Also, with prices changing very little, the poor will benefit from 100% of what they earn working, instead of the lessened ammount they receive now.
 

Kandahar

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catholicauthor said:
Didn't see this when I was posting before...

A national sales tax will not raise the prices by much, if at all. The current tax system has an "embedded tax" in every purchase made, because the producer has to pay tax, the retailer has to pay tax, the advertisers have to pay tax...the list goes on. This amount of "embedded tax" amounts to about 22% of the total cost. So currently, out of the cost of a one hundred dollar coat, the government gets twenty-two and the retailer/manufacturer gets seventy-eight.

Under the new system, this "embedded tax" will diminish, because the stores and manufacturig plants no longer have to pay those taxes. The prices will go down by 22%, leaving the one hundred dollar coat at the price of seventy eight dollars. The new sales tax will kick in, and raise this by 23% of itself, coming to about $95.94 See? In this case the price went down. Consumption is not discouraged! It is encouraged!

I definitely see where you're coming from, and perhaps I was a bit hasty in saying that the price of goods will generally increase. However, there are some big-item purchases, such as real estate, where there's not really a "producer." These items, therefore, don't have much in the way of hidden income tax costs, and would increase the price dramatically.

catholicauthor said:
Also, you say it "disproportionately harms the poor..." this cannot be the case. The rich definitely buy more than the poor, because they have more money, and therefore they pay the bulk of the taxes.

I don't doubt that that's true. However, the poor spend nearly 100% of their income as it is (and often more than 100%). The wealthy generally do not do this (if they did, they wouldn't be wealthy for long). Therefore the poor cannot afford this.

catholicauthor said:
Also, with prices changing very little, the poor will benefit from 100% of what they earn working, instead of the lessened ammount they receive now.

The same thing could be accomplished with a flat income tax with generous personal deductions.
 

catholicauthor

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You see, the poor get enough to buy their personal needs (housing, food) from the government in the form of a bonus. No rebate forms to fill out, just money given. Basically, you live in your hous as the head of the family with three other people. You get X money to pay for your needs, plus your income. So obviously the poor benefit.

As for real estate, people sell their house based on what it's worth land wise, and that price will rise. But then again, the government is giving that money and you get extra money from income so you'll end up having more money to pay for real estate, too.
 

LaMidRighter

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Kandahar said:
I definitely see where you're coming from, and perhaps I was a bit hasty in saying that the price of goods will generally increase. However, there are some big-item purchases, such as real estate, where there's not really a "producer." These items, therefore, don't have much in the way of hidden income tax costs, and would increase the price dramatically.
The idea adressed in the book is to only tax on new purchases, so if you are buying a home from someone you will pay the advertised price(of course local and state governments will find a way to get taxes from you), so if you bought a used product from anyone you wouldn't pay the national sales tax, however you will pay taxes on goods and services at retail stores.



I don't doubt that that's true. However, the poor spend nearly 100% of their income as it is (and often more than 100%). The wealthy generally do not do this (if they did, they wouldn't be wealthy for long). Therefore the poor cannot afford this.
But remember that the poor are spending nearly 100% of their net income, if they could get the 40+ dollars that are witheld every check then they would be 40+ dollars better off and could therefore treat themselves to something decent, or save, maybe even start to invest a little.



The same thing could be accomplished with a flat income tax with generous personal deductions.
no argument here.
 

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catholicauthor said:
There is a new idea for taxes, the FairTax system. It is a way to end the IRS, and the income tax. Here is a summary of how it will work.

Basically, the Income Tax, and just about all other taxes will be removed. A new tax will be set up in its place, the FairTax. It will be a sales tax, taxing the goods sold in the marketplace, on the internet, and in all other american stores. The amount is 23% of the cost. Meaning: You pay $100 for a coat. The government gets 23 and the store gets 77. The government will give the members of our society the money it needs to make a living and buy basic nessecities, along with allowing the citizen to keep 100% of his income.

I am an incomplete source, for more information read The FairTax Book by Neal Boortz and John Linder, or go to www.fairtax.org.

So what are your thoughts about it?

I have read the website and book and studied the proposal. It is a lot of smoke an mirrors. The proponents suggest they can eliminate income taxes, we get to keep all the extra money, and add a 23% consumption tax, and prices won't go up. That is nonsense.

The concept that you can add a 23% federal consumption (sales) tax without causing prices to increase proportionatley is just hooey. Their argument there are current "hidden" taxes that will prevent prices from increasing is based on the assumption that incomes will fall proportionately with the revocation of the income tax (though they avoid telling you that), which is a very questionable assumption. And even if it is true, the idea of a 25% sales tax is a lot less enticing if you take a 25% decrease in income along with it.


A 23% tax rate will not be nearly enough of a tax based on what the government currently spends, especially in light of the various rebates they discuss in their plan. It will have to be more like 30-35% -- and that is the "internal rate". The real external add-on rate will have to be in the neighborhood of 40-50%.

A consumption tax will in all likelihood be no less complicated than an income tax by the time Congress gets done messing around with it. And the compliance requirements in a consumption tax to avoid cheaters will probably be greater than compliance costs now. An income tax does not have to be complicated either. It could just be: 1) report all sources of money you received this year. 2) Pay x% tax. It is Congress creating endles loopholes, exemptions and deductions (which mostly benefit the wealthy, which is why guys like Cheney and Kerry only pay taxes at a 13% rate) make it complicated, and there is no reason to expect they wouldn't do the same with a consumption tax.

The real effect of the fair tax is to move more of the tax burden to the middle class from the wealthy class. The wealthy can afford ot invest more, which is not taxed, so their effective tax rate is lower. The middle class spend more on necessities, can afford to invest less, so their effective tax rate is higher.

The fair tax was debated in detail in an earlier thread, if you want to read more about these points.

http://debatepolitics.com/showthread.php?t=2727&page=4
 

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from reading a little about the fair-tax system i dont think it is the best way to go. it would do too much damage to the economy and may cause inflation. instead i thin we need to slightly raise taxes and incorperate a negative income tax to the upper class. also if we stop all the wars we will save money(since 51% of the US budget goes to defence). this will help get the money where it belongs, in the hands of people who need it.

though i think i may read more into the fair-tax system.
 

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Liberal Pot Smoker said:
from reading a little about the fair-tax system i dont think it is the best way to go. it would do too much damage to the economy and may cause inflation. instead i thin we need to slightly raise taxes and incorperate a negative income tax to the upper class. also if we stop all the wars we will save money(since 51% of the US budget goes to defence). this will help get the money where it belongs, in the hands of people who need it.

though i think i may read more into the fair-tax system.

In FY2005 the government spent 22% of its $2.4 trillion in outlays on defense; proportionately this is a much smaller percentage than earlier decades.
 

Liberal Pot Smoker

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well most people dont support the war, and that 2.4 trillon would probably be better spent within our country
 

Iriemon

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Liberal Pot Smoker said:
well most people dont support the war, and that 2.4 trillon would probably be better spent within our country

The vast bulk of the $2.4 trillion is spent within our country. The biggest programs include SS, Medicare, and Medicade, which together account for more than half of Government expenditures.

You can see what the Govt spends its money on (and how much it borrows) at http://cbo.gov/budget/historical.pdf

I agree with you on the Iraq war; we are spending about $100 billion annually and defense spending has increased 50% since 2000 (about $150 billion annually).

We spend more on defense than the next 20 countries combined. If we can't defend our country spending that much more on defense, to me it says something about the efficacy of our military and defense spending.
 

catholicauthor

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There was something in the book about eliminating medicare and medicade...
 
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