The Fair Tax

I'm just curious if people are aware of the Fair Tax and what they think of it. It would shake the status quo and take power from government which is one reason why it doesn't get much good press. The more I learn about it though it seems like a good idea.

We have a Sales Tax here in New Zealand other wise known as GST or Goods and Services Tax. It has never replaced income tax and hurts lower - middle income people because they pay a 12.5% tax on food and clothing and anything else . GST is just another way of increasing the tax burden on the population.

First the IRD takes there share out of my pay packet and then I still get taxed when I spend what is left over I get taxed again !



[edit on 27-1-2008 by xpert11]

But Xpert,

The Fair Tax the OP is talking about completely replaces Federal Income Tax and allows the individual consumer to regulate their tax burden..

It is an excellent idea and as the OP pointed out, will never make it as it really does make a lot of sense and virtually puts a major government entity out of business....

Fair Tax

Semper

Originally posted by semperfortis
It is an excellent idea and as the OP pointed out, will never make it as it really does make a lot of sense and virtually puts a major government entity out of business....

Well a quote comes to mind that goes along the lines of " Once tax is put in place it never goes away . "

Or in other words it just as well there is little prospect of the Sales tax being put in place because I would bet my boots that Federal income tax wouldn't be abolished. Out of all the country's that have a Sales Tax I am not aware of any of them have abolished income Tax.

Politicians are something else you have been warned.

whether the 'fair tax' is great or not, i think that the fact that it has the word tax in it turns most people off, and they dont even care to find out what it is.

The problem with the fair tax - and all other flat taxes - is that it ends up costing the most for those with the least to spend. $25 is a larger bite out of a $200 paycheck than $250 is out of a $1,000 paycheck. The reason for this is that the price of goods and the value of the dollars do not vary between the two paychecks - So the smaller paycheck is actually feeling MORE of an effect from the tax, while still working at the same percentage when taxed. There's also the problem that, if implemented as a sales tax, those with lower incomes actually tend to buy more frequently - little money means lower quality goods, after all. So they end up taxed a bit more.

The answer is to clean up our current tax system. It's supposed to be progressive, but nearly eighty years of certain someones trying to prevent the top 5% of the nation from paying a single red cent, paired with other certain someones constantly trying to make it more equitable without ticking off the first group...

Originally posted by The Walking Fox
The problem with the fair tax - and all other flat taxes - is that it ends up costing the most for those with the least to spend.
The answer is to clean up our current tax system. It's supposed to be progressive, but nearly eighty years of certain someones trying to prevent the top 5% of the nation from paying a single red cent, paired with other certain someones constantly trying to make it more equitable without ticking off the first group...

Please read FairTax.org, and concentrate on the "rebate", or "prebate" clause. This provision in John Linder's HR25, often called the "FairTax Bill", makes it so people who earn and spend at the povery level will NOT pay any federal tax at all. The poor will pay ZERO taxes. All the federal taxes will be paid by people who earn and spend above the poverty level. In fact, the obposite is true. Those who spend the most money will be paying the brunt of the taxes. HR25 is progressive, not regressive. There's nearly no overhead expense to these rebates, because the government already writes checks for about 1/3 of all citizens right now. A check to each adult (more likely an electronic transfer) will cost nearly nothing, compared to the ammount of money that's moving.
Please please read about the rebate (also called a Prebate) included in HR25, on FairTax.org. There's no way anyone can say HR25 is unfair to the poor. UNder HR25, the poor make out like bandits, and never have to complete a single tax form or wait in line to do it. FairTax.org.

Oh, and about "clean up our current tax system". It's been tried. It failed. Anything we do to "clean up our current tax system" will simply be ruined by future politicians again.

NOBODY that supports John Linder's HR25 will allow BOTH the current complicated system AND the simple national sales tax-with prebates systems to coincide. Before HR25 is voted on, there will be a "sunset clause" added to it, that will nullify it, if the income tax isn't outlawed by constitutional ammendment, within 5 years of starting HR25. There's no way HR25 supporters will allow BOTH the old and the new systems to both exist. If HR25 can't happen without the income tax, that HR25 won't happen.

reply to post by Generbur

The poor will pay ZERO taxes. All the federal taxes will be paid by people who earn and spend above the poverty level.

Au contraire. Just as landlords add their taxes into the calculation of rents, so that tenants pay property taxes too, retailers will include all the taxes that have been previously paid at various levels so that the final cost of goods will include taxes paid by the R&Fs. Rich and famous. It may be true the poor would not pay a tax directly, but no one escapes taxes.

HR25 is progressive, not regressive. There's nearly no overhead expense to these rebates, because the government already writes checks for about 1/3 of all citizens right now. A check to each adult (more likely an electronic transfer) will cost nearly nothing, compared to the amount of money that's moving.

This is pure rhetorical nonsense. There are 50 million social security beneficiaries but so far, the SS Trust Fund is in the BLACK. There are 2 million Federal employees, 1.6 million Armed Forces who also receive Federal checks, but this is for work done or for money paid in.

NOBODY that supports John Linder's HR25 will allow BOTH the current complicated system AND the simple national sales tax-with prebates systems to coincide. There's no way HR25 supporters will allow BOTH the old and the new systems to both exist. If HR25 can't happen without the income tax, that HR25 won't happen.

[See My Foot Note.]

I don’t believe that is necessary at all. Presumably the same Congress that passed and the same president who signed HR25 into law would also repeal the current Internal Revenue Code.

The real problem with this proposal is that it will not raise sufficient revenue to meet the governments obligations. We need $400 b. to pay interest on the Debt; we need $700 b. to pay various Defense expenses; we need at least $150 b. for the Dept of Homeland Security, and about $50 b. for general operating including Congress and the prisons and etc. That comes to about $1.3 T.

We currently pay about $1.75 T. in SS and Medicare/Medicaid expenses, which is supposed to be in Trust Funds but which has already been spent rather that raise taxes. Borrowing on the future. Adding that $1.75 T. to the $1.3 T. and you need $3 T. in revenues. $8 T. of our $14 T. GDP is consumer spending which would presumably be the FAIR tax base. Disregarding how much of the consumer spending is by “prerebate” poor people, you’d need a FAIR tax of 37.5% which I do not believe anyone would agree to. In reality, it is more likely 40% would be needed to meet our minimal fiscal and contractual obligations.

That is why the FAIR tax is DOA - Dead On Arrival.


Foot Note. The 16th Amendment also cured a serious defect in our original Constitution that limited the Federal government's revenues to taxation by states based on the census. That proved unworkable. Prior to 1913, the Federal government was limited to excise taxes, import duties and rent and sale of Federal lands. Not nearly enough revenue to run a modern nation-state.

[edit on 2/2/2008 by donwhite]

Generbur the notion that the poor or low income people wouldn't pay any taxes if the Fair Tax was implemented is clearly false. Every time a person on a low income purchased food , clothing or paid a bill they would be paying taxes. If the percentage added on by the sales tax is to high then low - middle income earners could end up worse off.

Put another even if some one kept there full pay check and just buy essential items such as clothing food would they end up paying more in taxes then they do now ?

Folks- Bare with me a second. Poverty level for a couple with two children right now is $27,000. Let's assume the family spends every dime they earn, buying the bare essentials to live on at the poverty level (medicine, food, heat, shelter...). After HR25 comes, roughly $6300 (23 percent) of all the money they paid for this modest living would go to pay Uncle Sam. You're right, the land lord would charge the HR25 tax rate for that retail good or service.

Aaah,,,, but let's suppose every couple with two children, regardless of how much they earn and how much they spend, gets back at the end of each year, that exact same $6300. That is, the poverty family would be completely reimbursed the entire ammount they paid out in consumption tax to Uncle Sam. They'd be totally "untaxed".

So what about a "rich" couple with two children with incomes and spending habits of say 100,000? They'd pay in that same year $23,000 to Uncle Sam for all those HR25 taxes, right? But wait! The rich family would ONLY get back the same lousy little $6300 in the "prebate" that the poverty family gets back, so after all the dust settles, the rich family would pay for that year about $23,000 minus $6300, or a net expense to Uncle Sam of $16,700. This tax burden the rich family gives to Uncle Sam amounts to $16,700 divided by $100,000 or 16 percent of their income, which we assume they completely spend.

So it boils down to: Poor people pay nothing. $100,000 income couples pay $16 percent.

SUPER rich would be taxed the entire 23 percent. The richer (the more they spend), the closer to the 23 percent their "after the dust settles" tax percentage is. Isn't that progressive? The rich pay a higher percentage than the poor?

Have you gone to FairTax.org yet? See:
www.fairtax.org...

While I got the floor, I suppose you'll come back with: Well... the filthy rich don't always spend all they make. What if they only spend a little and live at the poverty level? Huh? What then?

Answer: Then why would you be jealous of them? Whatever they did with the difference, it's of no concern to you or me. Did they give it to charity? Did they invest it in a factory that provides jobs to poor people? Did they send children to college? More power to them!

We need to stop punishing people for working. HR25 makes everyone a winner (except tax lawyers and H&R Block employees). Granted, you young kids will be bigger winners than us old farts (I transfered large amounts to a Roth IRA several years ago, before I knew), but I still want it to happen.

Prices will NOT rise, and spending power will NOT drop. Oh, imported items will rise in price, sorry. I forgot about that. Companies will return to the US, since there will no longer be a tax break for headquartering overseas.

How about watching some videos? Go to YouTube.com and search for FairTax. Heck, 65 representatives have co-signed the bill. Even a Democratic presidential candidate (Mike Gravel) (or has he withdrawn yet?) agrees with the HR25 plan.

And to think you guys are alive now to see it all happen. :-)

posted by Generbur
Folks- Bare with me a second. Poverty level for a couple with two children right now is $27,000. Let's assume the family spends every dime they earn, buying the bare essentials to live on at the poverty level (medicine, food, heat, shelter...). After HR25 comes, roughly $6300 (23 percent) of all the money they paid for this modest living would go to pay Uncle Sam. You're right, the land lord would charge the HR25 tax rate for that retail good or service.

Aaah,,,, but let's suppose every couple with two children, regardless of how much they earn and how much they spend, gets back at the end of each year, that exact same $6300. That is, the poverty family would be completely reimbursed the entire amount they paid out in consumption tax to Uncle Sam. They'd be totally "untaxed".

First, most poor people pay more in FICA - social security and medicate taxes - than they pay in income taxes. There are no exemptions for the FICA taxes. 7.65% of wages matched by the employers. 15.3% if self employed.

Second, $27,000 a year is $520 a week. $6,300 a year is equal to $121 a week, net. NO poor person can afford to have his spendable income cut by $121 a week. Down from $520 to $400! That won’t get it. He cannot wait until April 15 to get a check for the whole amount. The super-simple plan has too many problems. 1) How to get that money BACK to the poor guy? 2) It does not raise sufficient revenues.

Give it up.

[edit on 2/2/2008 by donwhite]

Oh. I forgot a couple more points I should make. The numbers quoted above (30 to 40 percent) might be right, PROVIDED you run the calculation BEFORE the purchase, as is usually done with sales tax. That is, $23 is 30 percent of $77, yes, for the $100 purchase. That's the standard way we calculate and consider sales tax, yes. It was proably a bad idea to state the HR25 rate the same way, because it's so hard to get people to wrap their brains around "inclusive and exclusive" percentages. But the original HR25 researchers stated "23 percent", because that's the number we'd be using for the exact same purchase paid right now under the income tax. That is, a person would pay the $100 for the item and THEN pay Uncle Sam the $23 in income tax for that $100 her earned.

Regretfully, the researchers overestimated the public. I really wish they'd stated it as "23/30", so it wouldn't give skeptics quite the chance to assume they're lying. That is, at least the exclusive rate would be shown.

Whatever the rate will be (you decide and we'll go with YOUR rate), the entire idea is to be completely revenue neutral. That is, whatever the rate must be, Uncle Sam won't get a dime more or less than they get now.

With that in mind, why does it matter what the rate is? If it's really 40 percent (exclusive), then all that means is she should have done this decades ago, when the federal government was much cheaper.

So your statement that people won't tolerate a 40 percent sales tax... Did I mention that prices won't go up? Oh, except for things made overseas. If prices won't go up, then why be concerned about the details? And purchasing power won't go down.

Right now, the overhead wasted expense of simply complying (hiring lawyers to figure it out) with the current tax code cost each legal US citizen $900. What will you do with your $900 when it's no longer needed to pay tax lawyers?

Filled your 1040 out yet? How long did it take? Including filing the receipts all year? What will do do with that time?

The book is about $10 off Amazon.com. Search for "FairTax Boortz". I read it in just over one day, while riding to Ohio.

Oh, you might say: Well... we need to lower the budget of the federal government! Yea!

Answer: Once the cost of the federal government is on each and every sales receipt, and it's "in your face" all the time, the people will vote out the porkers and vote in Ron Paul. That is, reducing the budget for Uncle Sam will be far easier once HR25 is passed and in place, and the percentage (is it really 40 percent? Wow!) will be out in the open.

Quote: First, most poor people pay more in FICA - social security and medicate taxes - than they pay in income taxes. There are no exemptions for the FICA taxes. 7.65% of wages matched by the employers. 15.3% if self employed.

I forgot to mention the HR25 plan will eliminate not only the high-overhead income tax, but also replaces personal, estate, gift, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes.

See:
www.fairtax.org...

Give it up? Maybe for now. It's pas this old man's bed time. :-)

posted by Generbur
Oh, you might say: Well... we need to lower the budget of the federal government! Yea! Answer: Once the cost of the federal government is on each and every sales receipt, and it's "in your face" all the time, the people will vote out the porkers and vote in Ron Paul. That is, reducing the budget for Uncle Sam will be far easier once HR25 is passed and in place, and the percentage (is it really 40 percent? Wow!) will be out in the open.

Every Republican candidate that ever ran for president swore he would cut the Federal budget. Every president since Richard Nixon has seen the budget larger when he left office than when he entered into the office. Every one. Bush43 is the worst. ONLY the Democrat Bill Clinton balanced the Federal budget. Why do Republicans FORGET this simple fact of political life?

If you will look at the Federal budget you will see there is almost no room for PORK. SS, Medicare/Medicaid, Defense, Interest, Homeland Security and Veterans Department consume over 90% of the Federal budget. Where is the pork?

[edit on 2/2/2008 by donwhite]

When a sales tax is introduced the price of living goes up and consumer demand would go down. A sales tax is an artificial way of increasing or adding to the cost of living . Remember that a sales tax would add to existing housing and energy costs e.t.c. So all things considered including what I have posted above you wouldn't want go above say 15% in terms of the level of taxation.

Note that while the people that spend the most pay the most GST everyone pays the same 12.5% tax rate on what they buy. I cant claim GST back on food and other living expenses this what most of my money is spend on. A tax rebate wont help someone who is struggling to pay the bills half way thou the year.

But all of the above does not matter unless you can prove Don wrong because if the fair tax wont produce enough revenue the idea is dead on arrival .

posted by xpert11
When a sales tax is introduced the price of living goes up and consumer demand would go down. A sales tax is an artificial way of increasing or adding to the cost of living. Remember that a sales tax would add to existing housing and energy costs etc. So all things considered including what I have posted above you wouldn't want go above say 15% in terms of the level of taxation. Note that while the people that spend the most pay the most GST everyone pays the same 12.5% tax rate on what they buy. A tax rebate wont help someone who is struggling to pay the bills half way thou the year.

But all of the above does not matter unless you can prove Don wrong because if the fair tax wont produce enough revenue the idea is dead on arrival.

When World War 2 began, the US Congress imposed much higher taxes on the public. Indeed, I lie not, the highest bracket rate was 91%. Everyone paid taxes. We all had a $600 annual deduction. My first (1950) minimum wage job - 75 cents an hour - saw me paying out slightly less than $5 from my $30 a week pay, leaving me just a few cents more than $25 net or as we called it, “take home pay.” But you cannot imagine a better time in which to live. Aside: A furnished room cost $7 a week, or $9 with 1 meal, supper or a brown bag lunch. Sandwich, fruit and a dessert. Public transportation was 15 cents per ride and service was frequent. Neighborhood theaters charged 25 cents, downtown first runs were fifty cents. You could live on my pay. End.

By the bye, the top tax rate was lowered to 70% by JFK, and then to 50% by Jimmy Carter. Reagan lowered it to 28% but had to raise it shortly thereafter. I believe it is now 33%. This experience - been there, done that - gives the LIE to those who say high taxes stagnate the economy. Having lived all through this era of maximum economic progress and high tax rates, I know those advocates of low or no taxes are LIAR, LIAR, PANTS on FIRE. Copyright © 1997 by Gordon Korman.