Fair Tax

[charby]

So I went to a Fair Tax lecture/rally last night led by Rep Steve King -IA and Retired Congressman John Linder -GA.

I had known a little bit about the fair tax movement, but I learned a lot on how it works. I really like the prebate which each household person in the US would get a check each month to cover the sales tax covered up to the determined poverty level. This takes care of the poor being punished.

Also it would make American made products sold in the US cheaper because it would remove the taxes paid by businesses.

If you want to read some more see http://www.fairtax.org/

[HankB]

One of the most passionate arguments against implementing the Fair Tax (and abolishing the income tax) I heard revolved around all the H&R Block accountants and IRS employees who suddenly would have nothing to do.

I'm sorry, but unemployment among people who depend on others' misery for their livelihood isn't a big concern of mine, nor should the tax code be used as a jobs program for compliance agents.

[charby]

Mr King and Mr Linder last night basically said the biggest fighters of the fair tax are the lobbyists that lobby for tax adavantages.

[Boomhauer]

One of the most passionate arguments against implementing the Fair Tax (and abolishing the income tax) I heard revolved around all the H&R Block accountants and IRS employees who suddenly would have nothing to do.

Too *expletive deleted*ing bad. We didnt keep wagon and buggy whip makers in business for the sake of their jobs once the car became viable. When an industry or career field becomes obsolete it disappears.

[Boomhauer]

Mr King and Mr Linder last night basically said the biggest fighters of the fair tax are the lobbyists that lobby for tax adavantages.

There's too much profit in the current tax system for such individuals and politicians (no more ability to say "vote for me and i will use the gov't to hold a gun to these guy's heads and take their money and give it to you")

[Blakenzy]

Good stuff!

[MechAg94]

I think my biggest fear about it is that they would create it and then not get of the income tax.  I guess that and politicians playing games with what and how different things are taxed.

I like the idea though.  No income tax would be nice even if sales taxes went up.

[lupinus]

One of the most passionate arguments against implementing the Fair Tax (and abolishing the income tax) I heard revolved around all the H&R Block accountants and IRS employees who suddenly would have nothing to do.

I'm sorry, but unemployment among people who depend on others' misery for their livelihood isn't a big concern of mine, nor should the tax code be used as a jobs program for compliance agents.

I say boohoo. Use their skills for something else.

[Perd Hapley]

I really like the prebate which each household person in the US would get a check each month to cover the sales tax covered up to the determined poverty level.

I lost all enthusiasm for the Fair Tax when I found out about that. I don't see how so many conservatives and libertarians can gloss over the idea of giving everyone a monthly government check. Why doesn't that bother more people?

[Blakenzy]

I lost all enthusiasm for the Fair Tax when I found out about that. I don't see how so many conservatives and libertarians can gloss over the idea of giving everyone a monthly government check. Why doesn't that bother more people?

A more palatable approach would be to rescind any sales tax for "essential" items, i.e. food, medicine, housing, basic clothing... perhaps education/schooling... for everyone.

[charby]

I lost all enthusiasm for the Fair Tax when I found out about that. I don't see how so many conservatives and libertarians can gloss over the idea of giving everyone a monthly government check. Why doesn't that bother more people?

Because many of them do care about the poor and don't want to adversely effect them with a 23% tax. All it is 23% of the poverty level annual income paid in 12 monthly installments.



Since my household is just Charby and Mrs Charby we would get a payment each month of $289.99 per month as a prebate on the taxes we would spend making purchases. More than likely just looking at how much we spend each month on purchases, such as food, gasoline, utilities and clothing, we are going to be paying close each month to what we already pay in federal income taxes. Not what is taken out each month, but what we really pay at the end of the year after deductions.

Actually a fair tax will encourage me more to invest because the income tax will be gone and I won't have to wait until I am 59.5 to withdraw from my retirement accounts. I've always had a goal of retiring between 55-60 and a fair tax may actually allow that to happen.

[charby]

A more palatable approach would be to rescind any sales tax for "essential" items, i.e. food, medicine, housing, basic clothing... perhaps education/schooling... for everyone.

True but if you read the fair tax information only newly built houses will be taxed and only on the building materials and labor to build it. Used houses will be sales tax free.

I think the prebate covers the tax on food, clothing and medicine.

[Perd Hapley]

Because many of them do care about the poor...

   Yeah, I'm sorry. I didn't realize that finding fault with the fair tax (as proposed) meant that I actually wanted the Fair Tax to be imposed on poor people. Silly me, I thought it meant that I don't want the annual tax return check to become a monthly phenomenon on which all Americans become more dependent than ever before.

[charby]

   Yeah, I'm sorry. I didn't realize that finding fault with the fair tax (as proposed) meant that I actually wanted the Fair Tax to be imposed on poor people. Silly me, I thought it meant that I don't want the annual tax return check to become a monthly phenomenon on which all Americans become more dependent than ever before.

So how do you keep the poor from being exploited in the tax?

[charby]

They only thing I don't like about it is that housing rent is taxed but there is no sales tax on a used house.

[French G.]

I'd happily pay a national sales tax or a reasonable(not Norway 28%) VAT if and only if the income tax vanished. But pols would love to get one and keep the other.

[roo_ster]

So how do you keep the poor from being exploited in the tax?

Keep the rate low so that nobody is exploited.

Everybody should feel the sting of taxation and gov't spending, in proportion to how much the gov't spends.  Let none be spared.

[TommyGunn]

One of the most passionate arguments against implementing the Fair Tax (and abolishing the income tax) I heard revolved around all the H&R Block accountants and IRS employees who suddenly would have nothing to do.

I'm sorry, but unemployment among people who depend on others' misery for their livelihood isn't a big concern of mine, nor should the tax code be used as a jobs program for compliance agents.

From what I understand accountants will still have plenty of work to keep them employed even without the income tax.

So how do you keep the poor from being exploited in the tax?

The fair tax is intended to replace already imbedded taxes.  Say you buy a $10.00 widget.   Some of that is already taxes because the manufacturer has to pay taxes.   The "fair tax" is designed so that the manufacturer won't have to pay those taxes, and the fair tax itself will be approximatly a 1<=>1 replacement tax.  So the $10.00 widget will still wind up costing you $10.00, or very close.
Now, a criticism is that manufacturers won't lower the price they'll just keep it there and the "profit" will go into the coffers....and the fair tax will be added on.
Maybe but this is where competition is supposed to work.  Some company will lower their price and sell more, to make up the difference, and then other companies will follow suit.
Another point is that costs of foods will be rebated to the people to ameliorate the effect on the poor.

God forfend we should "exploit" the poor!  Everyone knows, THAT'S what we have RICH people for!

[grampster]

In order for the Fair Tax to work, there would have to be a constitutional amendment that prohibits all federal taxes including the income tax.  23% seems high.  Why was that number picked?  What guarantees did the pols provide that won't increase?

[drewtam]

In order for the Fair Tax to work, there would have to be a constitutional amendment that prohibits all federal taxes including the income tax. 

Agreed.

23% seems high.  Why was that number picked?  What guarantees did the pols provide that won't increase?

I think that is about the right number to achieve the ~18% of GDP that is historically typical.

I remain unconvinced that a sales tax will have the huge benefits claimed. I would yield that it must have some benefit. The evidence is that some European countries (i.e. Suisse) at equal wealth to the US are able to sustain higher tax revenue to GDP ratios using a sales and VAT tax scheme without significant ill effects.

[Perd Hapley]

So how do you keep the poor from being exploited in the tax?

I could come up with some ideas, but I'm not the one endorsing the Fair Tax. A better question is, how do you keep the monthly govt. cheese check from becoming a form of dependency? And doesn't it bother you that every American household would be waiting for the government to come through with their monthly check, so they will have the money they've budgeted to spend that month? All I'm saying is, if you want to reform the tax system, watch out for the obvious, "unintended" consequences (not least of which is giving the national government more control over interstate and intrastate commerce).

But if you insist, I could suggest that food, medicine, clothing, housing be exempt from the Fair Tax. That would still leave electronics, entertainment, tools, automobiles, stationary and office supplies, jewelry, sporting goods, etc. I could suggest that people under a certain income level be given a Fair-tax-exemption card they could show when making purchases. I could suggest that the government charter privately-run, tax-free stores, where poor people could buy their necessaries. Or just don't collect Fair Tax on anything, at any store, until a certain point in the year (maybe it wouldn't help the poor that much, but at least it would be better than all of us getting govt. checks). Probably all of these will have their flaws, but so does the current plan for a Fair Tax.

I think I'd be more inclined to favor an end to with-holding, along with a flat tax on income above a certain level, and an end to most (or all) exemptions. Personally, it would help me if my state government would not charge personal property tax on my two vehicles (2-driver household), especially since they are more than ten years old, and not worth much.

[purequackery]

It is not dependency to get a check that offsets taxes that you pay.  At most there's a short-term TVM issue that would need to see slight adjustment.

2011 Fed direct revenue 2.3 tr.  http://www.usgovernmentrevenue.com/fed_revenue_2011USrn
2011 gdp 15.32 tr.  https://www.google.com/search?q=u.s.+gdp

Total existing federal taxes as percentage of GDP is seen as 15%.  How does that compare with the 23% fair tax proposal?

[Perd Hapley]

It is not dependency to get a check that offsets taxes that you pay.  At most there's a short-term TVM issue that would need to see slight adjustment.

Strictly speaking, no. But that assumes that all of those people will pay somewhere near that much in taxes. It also misses the point. Under the Fair Tax, as proposed, we will all look to Washington to give us our checks each month. If they can't or won't pay us, we'll be in trouble. The criticisms that have been made about income tax withholding apply to this twelve-fold.

[RoadKingLarry]

In order for the Fair Tax to work, there would have to be a constitutional amendment that prohibits all federal taxes including the income tax.  23% seems high.  Why was that number picked?  What guarantees did the pols provide that won't increase?

The way  I've heard it explained is that "Fair Tax" law would include the elimination of fed income tax before it took effect.

[Balog]

My objection to a national sales tax is that it gives fed.gov an excuse to clamp down on private sales and internet commerce hard. Can you imagine the huge expansion in bureaucracy when ever Craig's List deal has to run through the fed.gov's tax collectors?

I hate income tax as much as the next guy, but "Every person pays %10 on everything over $X in a year, on both income and capital gains on investments" has the advantage of utilizing existing bureaucracy instead of creating new, and only requires fed monitoring of two things they already track ie income and cap gains.