Fair tax right!? Not so fast.

I'd like to put my take on fair tax since its a very strong belief among many fellow ATSers on here and is a corner stone to the advocates for ending the IRS, or the "FED". I have not read too much into this but Iv managed to gain the basics to what fair tax really is and what it stands for. Might I say I am very concerned for something like this if it was to be implemented and I have reasons that I would like to bring up to fair tax proponents over here. Ill first give the definition for fair tax:

The FairTax is a proposed change to the federal tax laws of the United States that would replace all federal income taxes[1] with a single national retail sales tax. The plan has been introduced into the United States Congress as the Fair Tax Act (H.R. 25/S. 296). The tax would be levied once at the point of purchase on all new goods and services for personal consumption.

en.wikipedia.org...

In other words ending the income tax, social welfare, medicare, and placing that tax on goods and services. Sounds great right? Well no not to me. Although it should be noted many advocates claim its just changing the tax system, but the goal here is in part to end the need for social welfare and medicare.

First of all, your merely moving the cost of taxes from one place to another. Essentially all taxes will be placed on goods and services, so that $30,000 chevy you always wanted would be increased to $40,000. Your paying the replacement, moving your cash earned around, and even though you now have a choice to spending, your ultimately paying the same burden. But hold on did I get something wrong? Thats a 30% increase, not a 23% increase!? Well actually this is the biggest mistake folks make regarding fair tax, they assume that 23% equivalence to taxes will be just that... a 23% increase.... but thats wrong. The real tax rate proposed that would replace sufficient funds rivalling the then obselete income taxes would be 30%, so your paying nearly a third extra for that Chevy you always wanted.

Now folks may think now that because they are not paying taxes, they will get to paying that Chevy off easily. Well another aspect fair tax does not take into account is the fact the proportion of the products we purchase and the nature of them aswell. For example, larger luxury purchases such as houses or cars will cost the tax payer more under fair tax than if they were to be on income taxes. That is, fair tax does not take into account the major purchases in our life times. Fair taxes only really take into account the smaller minor purchases from day to day where we pay an extra 30 cents for bread. Saving for that house over time would be less costly and time consuming if not under the fair tax system. In addition, we cannot avoid purchasing goods and services from a day to day basis. Sure, if your the "colonist" type, living off the woods, you could avoid the costs of taxes in the commercial world, although thats unlikely for most of us. We depend on goods and services, and under this fair tax system, by the least, we will still bear the burden of taxes under the fair tax system as we did under the income tax system. It will not be any more different, other than the fact you get to choose to live off into the wilderness and not have to pay taxes. As much as having merely that "choice" it wont make a difference to the vast majority of us.

There is something else significant that proponents of the fair tax have not taken into account. The cost of products itself. As much as we could argue the end to income taxes outweigh the increases in the cost of goods and services we are missing out two key factors here, tourism and international sales. American businesses would loose out significantly under the fair tax system, in particular those in the tourism industry. The increase in cost of goods and services may verywell drive tourists away from spending in this nation and creating cash flow.

Tourism accounts for $122.7 billion dollars a year to the economy, and this will greatly suffer under the new fair tax system where by many businesses, in particular small businesses will suffer. Lets not forget our own people, crossing the borders of Mexico and Canada themselves for the sake of purchasing cheaper products. I tell ya under this tax system Id be willing to take a 6 hour drive north across Indiana and Michigan into Canada just to get cheaper goods, and I wont be the only one. This will loose the country more billions out of the economy.

In addition the sales of US goods internationally will greately suffer. Sure, the prices can remain the same for international sales when transitioning from income taxes to fair taxes however lets take into consideration the cost of running these products in the US, the cost of employees, the cost of resources, materials, that will increase by nearly a third under the fair tax system will cost businesses who attempt to sell their products across international lines. Remember that the rest of world has no existence of fair tax, so the conditions for american businesses will greatly negative.

Businesses will loose out in the international market and competing with the likes of China, India and Russia will be more so complicated. Unless businesses plan to end their investment in creating fully american products, in place for cheaper resources overseas just to keep up with the international market, businesses will loose out. And if folks think "patrioitsm" will make these business owners consider otherwise, forget about it. I dont blame the employer for moving his business base down to mexico to benefit more from the new fair tax system, however our economy will end up suffering.

Lastly, I think the biggest reason of all, replacing the IRS. There will nevertheless be another agency to handle the fair tax system of these United states in place of the IRS, this is inevitable, and will in place make that agency the scorn in place of the IRS, and so begins another cycle of replacing the unconstitutional fair tax system with another system in 2033.

The thing that most gets me regarding the understanding of this system is that the advocates have not seen this system in place. Is it any wonder why the turn of the century, the 20th century, placed income taxes? Folks cite how wonderful of a time things were before income taxes, as if any of them even had their parents born in that era, which was nearly a century ago, accounting for the conditions during the 19th century with 21st century needs. Is this really a wise comparison? At the beginning of the 20th century we had some 90 million folk, still a large existence of resources in our land, we were still had land needing settlement and lastly the military expenditure was a fraction of the worlds during that time. Today we have some 300 million folks, limited resources military expenditure half that of the worlds with the same adovates for this fair tax pushing for stronger defense, the every aging population and the costs of our involvement globally. Not to mention, in all that time since the implementation of the income tax, never once was the fair tax place forth into any state of faction in the United states. The "fiscal" conservatives looked up to such as Reagan, bush snr never dared implement the fair tax at a time their popularity and power were at the highest. Do they know something fellow conservatives dont? Or will we be applying another conspiracy theory to that to compensate for further pro-fair tax argument?

I would like to hear these concerns responded to from fellow ATSers.

[edit on 20-6-2009 by Southern Guardian]

I'm not a big advocate of fair tax either. It does not support a smaller government...it maintains the size we have now...BUT...people who support fair tax..well some...are completely against NAFTA.

It angers me when I see people say they are for smaller government but yet they will support things like this.

If we want to tax something...TAX IMPORTS. Raise tariffs and repeal NAFTA. Protect American workers and keep jobs here! If companies can pay people lesser wages in other countries they will always leave because everyone in this country always buys the cheapest to save money.

And..well..you know how i feel about the Federal Reserve! Obama's decision to give an agency even more power...that is completely NOT transparent and cannnot account for trillions of dollars...an agency that has destroyed the value of our money for decades....it's flat out disgusting.

Everyone should be outraged by this move.

A fair tax favors the rich. The only way I could support it...it would have to be tiny...1 percent or something to that effect....and the poorest would be exempt. End the wars....raise tariffs.......decrease the size of government and actually cut bogus programs/strip the executive branch of the power it has taken over the decades...and especially recently.

That's how I would do it.

Originally posted by David9176
If we want to tax something...TAX IMPORTS.

Agreed. We need to invest in this nation, promote small businesses. Taxing foreign good will promote better competition for our businesses because right now things aint looking too good.

And..well..you know how i feel about the Federal Reserve! Obama's decision to give an agency even more power...that is completely NOT transparent and cannnot account for trillions of dollars...an agency that has destroyed the value of our money for decades....it's flat out disgusting.

I do somewhat agree and disagree. It is saddening to have such agencies abused by government, however agencies of the nature of the IRS are inevitable, the best thing we can do is hold the individuals accountable behind those agencies.

A fair tax favors the rich. The only way I could support it...it would have to be tiny...1 percent or something to that effect....and the poorest would be exempt.

Yes I went onto fairtax.org and I tell ya, the fact the working class couple would have to spend more time saving up for that house of theirs, as opposed to the fat cat who coulding give a damn spending an extra thousand since his gaining so much in pay from fair tax. It just doesnt work out.

End the wars....raise tariffs.......decrease the size of government and actually cut bogus programs/strip the executive branch of the power it has taken over the decades...and especially recently.

That's how I would do it.

End wars.. check, raise tariffs, check again (agreed), decrease size in government. To me it isnt the size of government, it is whether government works. But thats where me and you agree to disagree David.

The income tax will never be replaced with a single national sales tax, value added tax or any other kind of tax. Not saying those type of taxes won't come in to being sometime in the future, but they will be in addition to the income tax.

The income tax doesn't pay for medicare, medicaid, welfare or any other services. The income tax goes to the national debt and not much else.

but the goal here is in part to end the need for social welfare and medicare.

These entitlement programs should be ended, but the likelihood of that is slim to none.

What you are forgetting is that the $30,000 Chevy will no longer cost $30,000 because Chevy no longer has to pay the price markup in the materials that they use to make the car or truck or whatever.

It actually will make businesses cheaper to operate because now there is no long payroll tax and the same as the Chevy the products they are purchasing to make their products are cheaper.

What people are forgetting is that we are triple quadruple and quintupled taxed. We eliminate all that then products become cheaper, or stay the same cost.

I don't necessarily agree with the fair tax as written but I definitely support something like it.

The main thing about the fair tax, is that you get to keep 100% of your paycheck. Which means if you bring home 25k you keep 25k.

There would be no need for welfare or social programs the burden of taking care of yourself after retirement is upon you. It also leaves people more money to donate to charity.

The very very very best thing about it, its completely fair to everybody. Everybody pays what ever the tax rate is.

reply to post by Southern Guardian

To me it isnt the size of government, it is whether government works. But thats where me and you agree to disagree David.

Well, let me ask you this..do you think government works now? It's not that I'm a pro big business guy either..I am not. Anti-trust laws should be enforced but they are not. Corporations have been able to spread all across the world and have helped put a strain on our nation's sovereignty and well being.

Government is responsible for this...both parties. Everything is just too big IMO. Good government is responsible..both physically and socially. It's just not happening right now...and hasn't for a very long time.

You see SG, the problem with many here...and really everywhere...they dont realize that they do agree on things...everyone is just focused on the things they don't agree with.

And with that, Congress does nothing. Who speaks out against NAFTA? No one...but a scant few. Who in this country supports jobs leaving the USA? No one except the rich.

Another thing I'd like to bring up....the audit the fed bill.

Ron Paul as you know has a bill HR 1207 to audit the fed and he is most likely the only real conservative in Congress.

The companion bill in the Senate, S604 (I think), was written by Bernie Sanders, a self declared Socialist..the only one that has declared this that I know of.

Both want the same thing. I don't agree with much of what Bernie Sanders does...but I think he's legitimate....and it proves that both sides CAN agree to do things and actually make some real progress!

reply to post by inthesticks

These entitlement programs should be ended, but the likelihood of that is slim to none.

They should be phased out...but not completely ended either. Some people are just not able to work...and therefore cannot get medical coverage which they will obviously absolutely need if they have no income.

Casualties of society should be helped...but there should be no welfare state either.

For instance, my father is on both. He cannot work at all, is in constant pain and very strong painkillers due to an automobile accident that wasn't his fault. He cannot lift his arms above his shoulders. He has bulging disks and bone spurs in his spine. Eventually he may become paralyzed....not to mention...he also has cancer and is undergoing radiation treatments.

Is is fair for him to be left to rot? No way.

So the Fair Tax applies to governmental spending as well (with the exemption of education). So roads and bridges and ammunition etc. all cost 30% more? And then state governments have to pay the 30% more to the federal government so they raise their taxes....and it goes on and on?

Also, I don't want a "monthly rebate" check. And I don't want this "rebate" based on the poverty level (not cost of living) because thats just a ridiculous figure.

The Fair Tax will only help those below the poverty level and the extremely wealthy. It will destroy the middle class.

Not Fair.

reply to post by awake_awoke


No what Southern Guardian fails to mention is that there will be no payroll tax, corporation tax, etc. The Fair tax will get rid of all federal government taxes. You keep 100% of your pay check.

By eliminating all federal taxes you only pay what it cost for the companies to make the products, then add the fair tax to it.

The way it works is that Company A makes product 1. Company B buying product from Company A. Company B is paying for Companies A's payroll tax, and all the taxes they have to pay. So Product 2 produced by Company B cost more because they are paying for Company's A taxes.

Businesses don't pay taxes we the consumer pay the companies taxes. That is how companies turn a profit. All costs are factored into the cost of making the product then they mark up the cost of the product to make a profit.

The fair tax, eliminates all that. Instead when you buy the product at the store you pay the tax at the time of purchase.

Southern Gaurdian conveniently left out two important things. All Federal Taxes would be eliminated and you will keep 100% of your pay check.

This is the Fair Tax website so you get the other side of the story

The Fair tax would also require that the 16th amendment be repealed so States couldn't even take income tax.

I don't support this legislation for a few reasons the first one being that in order for this to be enacted the 16th amendment needs to be repealed at the same time as the inception of this new tax plan, and the rate needs to be set at a fixed percentage combining state and federal sales tax.

Two things will happen, business will flock back to America because there is no tax burden, they will be able to hire more people. Second, people have 100% of their pay checks. Which means its easier to do your budget and it makes it more affordable to live.

For instance, a person making 16,000 dollars a year takes home $1333.33 a month. Currently the government takes 15% of that $16000 then refunds it to you.

Also, products will be cheaper because companies no longer have as high of overhead. And as I stated earlier, it is fair, everybody pays the same amount of tax.

The rich end up paying more tax because they have more buying power.

Originally posted by Hastobemoretolife
What you are forgetting is that the $30,000 Chevy will no longer cost $30,000 because Chevy no longer has to pay the price markup in the materials that they use to make the car or truck or whatever.

What makes you think the business to business system will not be affected by fair tax? For the moment income taxes applies to all aspects of industry, and inorder for this new system to compensate where income tax left off, and bear in mind im basing this over equal to, not better, all that applied to income tax would have to be replaced by a national sales tax. At the end of the day Chevy will be paying no different from what it did under income tax. Either pay 40 grand for those robots under income taxes, or 52 grand for it under fair tax (which ofcourse it will be compensated for increase in its own product price increase but the cost will end up no different) I see your point, pay roll taxes to cost, but the fair tax will charge by the least the equivalent to compensate for the gains in income taxes. It will make little difference unless you limit what you purchase.

The main thing about the fair tax, is that you get to keep 100% of your paycheck. Which means if you bring home 25k you keep 25k.

Yes but then you pay right back into the goods and services industry. You make 1000 dollars, you get to keep over 200 in taxes, but then whats the use when your grocery budget increases by 30%? Sure you can cut out more food but seriously? Do you know that the cost of medical insurance increases as well? As if we have not got enough of a burden on us already?

There would be no need for welfare or social programs the burden of taking care of yourself after retirement is upon you.

Certainly, although do you apply this everybody? This individual with a disability whether its by birth, by service to country or why a criminal offense inflicked upon them, what about them? Social programmes go beyond pensions my friend. I fully agree that we should take care of our retirement, but you cannot deny the inevitable circumstances to a portion of the population we cant ignore.

It also leaves people more money to donate to charity.

And have we actually tested this system in modern times? You tell me why, everytime one of the "fiscals" are in power they back away from the fair tax? They know its an unrealistic system which they themselves will never be called upon. Its just used as a political tool sorry. There are some who take it seriously, but I doubt anybody is really confident about this system let along not knowing the full outcome.

[edit on 20-6-2009 by Southern Guardian]

Originally posted by David9176
They should be phased out...but not completely ended either. Some people are just not able to work...and therefore cannot get medical coverage which they will obviously absolutely need if they have no income.

Exactly, pay for our own retirement, own insurance of our houses, goods. However we cannot deny circumstances by which the individuals are not in control of, we should be a society that is self sufficient, but at the same time we should be a society that looks out for its citizens in unquestionable situations.

Charity? That aint going to assure social assistance for those mentioned above. If charity did work out we wouldnt be having our vets lying under bridges or our 9/11 heros having being kicked out due to the corrupt health insurance industry.

reply to post by Southern Guardian

It will make little difference unless you limit what you purchase.

I don't think you are understanding it. I understand what you are trying to say though.

Income tax is taken out of your check every time you get paid. Which means you have less money to live off of until you get a rebate, if you qualify. Under the fair tax you have 100% of your paycheck at the time you receive it.

Certainly, although do you apply this everybody? This individual with a disability whether its by birth, by service to country or why a criminal offense inflicked upon them, what about them? Social programmes go beyond pensions my friend. I fully agree that we should take care of our retirement, but you cannot deny the inevitable circumstances to a portion of the population we cant ignore.

There would still be disability payouts. You are trying to tie health care in all of this and the only thing that is going to lower health insurance premiums is tort reform.

Take this example from Texas and what happen when they implimented tort reform, it caused insurance premiums to almost stagnate. Less malpractice claims and solved what was once problem area's.

Also, look at California Tort reform, the only people arguing against tort reform are lawyers. Wonder why that is? Because the more money a lawyer can sue for the more money the lawyers make.

Also, without tort reform and we go to a single payer system guess who is going to be paying for those multi-million dollar payouts? We the taxpayer, which means taxes go up because it adds to the cost of health care.

And have we actually tested this system in modern times? You tell me why, everytime one of the "fiscals" are in power they back away from the fair tax? They know its an unrealistic system which they themselves will never be called upon. Its just used as a political tool sorry. There are some who take it seriously, but I doubt anybody is really confident about this system let along not knowing the full outcome.

No, it is not an unrealistic system. It is a very realistic system. The reason why is because big business has the politicians in their pocket. Big business doesn't like competition, the more barriers to entry means less competition, for said business. Which means big business makes more money. Why

As I have said though I do not agree with the way the fair tax legislation is written and do not support it, and I'm not going to be like countless politicians that support reform even though "its not perfect". I on the other hand will not support legislation unless it is as close to perfect as possible.

If this benefited the rich and big business in anyway the republicans could have passed this legislation 1999.

And yes a flat tax system has been tried and it works damn well, example Hong Kong

And also look at Russia.

Hong Kong is the fastest growing city in the past 50 years.

Edit to add - Like I said I don't agree with this legislation because for one 23% is damn high. Also, what the progressive income tax allows the government to do is, control behavior. What the a flat/fair tax doesn't allow though is uncontrolled government spending.

Example, look at all the farmers that are getting paid to not grow crops on perfectly good land, tax subsidies allow them to do that.

A progressive income tax is nothing but a control mechanism.

Edit to add II - I would also like to point out that without welfare and a drastic decrease in entitlement programs more money would be able to be payed out to the truly unable to work. Which helps out the family caring for them tremendously.

There are lots and lots of reforms that need to take place to make life way easier. Taxation is just one point, there are many many others, like health care, that needs to be reformed too, but we do not need to go to a single payer system, in order to reform health care, we need to get tort reform under control, do something about FICO scores(I equate FICO scores to slavery) and credit reporting, and the big thing is monetary policy.

We can't get rid of the central bank because I don't want somebody like Madoff handling my money, but we can take the central planing element out of the central bank though.

And lots more things.

[edit on 20-6-2009 by Hastobemoretolife]

[edit on 20-6-2009 by Hastobemoretolife]