The Fair Tax

[CDarwin]

Here's what it is, in case you don't know: http://en.wikipedia.org/wiki/Fair_Tax

 

My father's been harping on this to me for a while, and I'm wondering what any of you might think about it. Is it a good idea?

 

Personally, I'm skeptical. It seems like a good idea, but I'm afraid that government would lose the ability to use taxation as a social incentive, and if the 16th Amendment is repealed, might be tempted to raise tariffs if sales taxes come up short. I'm also not sure what effect it would have on the middle class.

 

The system wouldn't be so dissimilar from what we have in Tennessee, except that we pay state estate and gift tax and there is a state corporate income tax. I'm not so sure if that tells anything.

[Mr Skeptic]

Impossible. The government spent a long time making the tax system too confusing for people to realize just how much they are getting taxed. Look how much money the government gave me in my tax rebate!

 

Also, I suspect this will result in an increase in imports (including sending out tourists).

[john5746]

It should not be called Fair Tax, maybe Efficient Tax, since that would be the only advantage, IF it is true. As with the income tax, I think people with more wealth should be taxed at higher % brackets. That is fair. Bill Gates being taxed at the same % as someone working at McDonald's maked no sense to me. Sure, he pays much more tax, but that is because he makes so much more. He has so much more left over it has no impact on him.

 

Society sets the stage for people to acquire wealth, so the wealthy owe society, in addition to a baseline tax rate. If you want a sales tax, then no tax on food at grocery stores and add a luxury tax. I think this would lower consumption and increase the black market, so I doubt that it would really lower the amount of money for tax collections.

[ParanoiA]

The Fair Tax would finally tax the illegal domestic business culture - drugs, prostitution, and etc. Also makes it virtually impossible to lie about lowering or raising taxes. Today you have to wade through a million pages of tax code to figure out if you're being lied to.

 

I don't like the idea of payments to the poor and blah blah blah. Once again, let's go out of our way to complicate simple things. Just don't apply the tax on goods we consider to be necessities. Like food, clothing, that sort of thing. An active system like these payments they're talking about introduces corruption and creates the need for a department - yet another bottomless pit of shame. Why not keep it as simple and passive as you can?

 

And percentages are all that should matter. To make wealthier people pay a higher percentage is flat out wrong. You should never allow your government, or your damn neighbor for that matter, to decide how much money you "need" - when you're "rich" and when you have "plenty leftover". This is just lazy intellectual excuses to rationalize redistribution.

 

Bill Gates blows billions of dollars on philanthropy, so I'd rather see that money distributed by him than the fat cats in washington. More of his dollars will actually get to the people who need it - channeling it through the government will dilute it into more unaccountable, irresponsible "systems" of beaurocracy that feed the entitlement system we're all so proud of today.

[the tree]

The Fair Tax would finally tax the illegal domestic business culture - drugs, prostitution, and etc.

Sorry, could you explain that? I gathered that "Fair Tax" was your equivalent to our VAT which is naturally only paid by law-abiding retailers.

[Mr Skeptic]

And percentages are all that should matter. To make wealthier people pay a higher percentage is flat out wrong.

 

I don't see how it is wrong or even unfair to tax poor people less than rich people. In fact, it would be unfair to tax poor people as much as rich people. If you consider people like a "business" and living necessities like "costs of doing business", then taxing poor people who spend most of their money on necessities is like taxing a business based on its revenue rather than its profit.

 

To rephrase what I said, necessities and basic living expenses should be tax-deductible.

[ParanoiA]

Sorry, could you explain that? I gathered that "Fair Tax" was your equivalent to our VAT which is naturally only paid by law-abiding retailers.

 

Because a drug dealer or prostitute's income is not reported - obviously - so, they pay no income tax on their income. In case you don't know, our present income tax system in the US requires the citizen to report their income, which is conceptually bashed against what law abiding employers have reported paying to that individual. So, in the case of illegal businesses, they never pay taxes on their incomes.

 

With a sales tax solution, they will pay taxes on their merchandise like the rest of us, since they're not taxed on the income side any longer - rather the consumption side.

[D H]

I don't see how it is wrong or even unfair to tax poor people less than rich people. In fact, it would be unfair to tax poor people as much as rich people.

 

Don't confuse rates with amounts. If we tax everyone at a flat 20% of their income, for example, someone who makes 1 million per year will pay $200,000 in taxes. That is more than most people make, let alone take home.

 

And percentages are all that should matter.

 

Just playing devil's advocate here: why not go even further? We don't charge fees on a toll road based on income, we base it on how much damage a vehicle does to the road. Eighteen wheelers do more damage than a car, so truck drivers pay more than does the driver of an automobile. A rich person's brand new luxury car does the same damage as the poor person's fifteen year-old beater; they pay the same fee.

 

One reason is that the rich do benefit more from government largesse than do the poor. For example, the schools that train their employees and the roads that bring their employees to work help enrich the employer.

 

To make wealthier people pay a higher percentage is flat out wrong.

Why? Because you say so? Liberals say with equal conviction that the rich "owe" proportionately more of their income than do the not-so-rich.

 

I would love to see a study that compares how much various income groups benefit from government largesse compared to the taxes they pay to the government. I suspect that the upper middle class, not the rich, are the biggest losers.

 

Back to the "fair tax". One way to make this tax progressive would be to classify goods one a scale from necessities to out-and-out luxuries. Don't tax food in a grocery store and basic clothing at all. Jewelry and luxury yachts, whatever makes liberals feel good. One problem with this scheme: What about the $60,000 pair of jeans or the $75,000 pair of boots: Basic clothing or a luxury? Who decides?

[ParanoiA]

I don't see how it is wrong or even unfair to tax poor people less than rich people. In fact, it would be unfair to tax poor people as much as rich people. If you consider people like a "business" and living necessities like "costs of doing business", then taxing poor people who spend most of their money on necessities is like taxing a business based on its revenue rather than its profit.

 

To rephrase what I said, necessities and basic living expenses should be tax-deductible.

 

Because poor and rich are subjective positions that can be and are exploited regularly. Such as the SCHIP program where people making 3 times the poverty level are considered "poor" enough to qualify. This is silly. Judging everyone's personal economics is another sticky mess of corruption. Why the propensity to stick our noses in everyone's business?

 

Businesses have various levels of expenses based on their individual histories - debts left from previous owners, past economic catastrophes, and etc. You judge someone making 6 figures like they're "not hurting any", while they continue to pay off the 7 figure debt they had to incur to generate their 6 figures. Or you rob someone of their hard earned profit the FIRST year they actually get off the bottom of the barrel.

 

To judge someone's income fairly, you'd have to judge their expenses as well. All of this is extremely personal, subjective and quite frankly an aggregious deviation from the principles of a free society. I prefer to be as objective as possible, and it's quite possible to be FAR more objective than that.

 

Why not a more passive approach where basic necessities are not taxable? Everyone enjoys their necessities tax free - mainly benefitting the poor, without invading privacy, personal information and insulting hard working successful people by insisting they keep paying the majority of the tax bill while being badmouthed by the poor who aren't paying anything at all.

[Saryctos]

fair tax would hurt the poor far more than the rich simply because poor households are usually spending all of their income on things they need to live, where as the rich(or anyone with 'spending money') can afford to hold onto their money and save up(which wouldn't be taxed). And if you're in the poor house, you'll be paying max price for just about everything since you won't have enough free time(from forseeably* working constantly) for do-it-yourself projects which can decrease costs.

[DrDNA]

It should not be called Fair Tax, maybe Efficient Tax, since that would be the only advantage, IF it is true. As with the income tax, I think people with more wealth should be taxed at higher % brackets. That is fair. Bill Gates being taxed at the same % as someone working at McDonald's maked no sense to me. Sure, he pays much more tax, but that is because he makes so much more. He has so much more left over it has no impact on him.

 

Society sets the stage for people to acquire wealth, so the wealthy owe society, in addition to a baseline tax rate. If you want a sales tax, then no tax on food at grocery stores and add a luxury tax. I think this would lower consumption and increase the black market, so I doubt that it would really lower the amount of money for tax collections.

 

You mean you believe that it is fair that Bill Gates has so many loopholes at his disposal that he doesn't have to pay any tax at all while those poor souls at Mikey D's have to pay 30% or more in income tax?

That is asinine.

The current system is ripe for abuse and abuse is what happens. It is broken beyond repair.

[Saryctos]

You mean you believe that it is fair that Bill Gates has so many loopholes at his disposal that he doesn't have to pay any tax at all while those poor souls at Mikey D's have to pay 30% or more in income tax?

That is asinine.

The current system is ripe for abuse and abuse is what happens. It is broken beyond repair.

 

do you really think people who work at McD's are paying 30% income tax???

Most of those loopholes come from congress pushing through tax changes too fast, trying to cash in on the wealthy. Problem is, when you don't write new tax code correctly the poorer people end up at the short end of the stick.

[ParanoiA]

do you really think people who work at McD's are paying 30% income tax???

 

No I think he meant drawing 30% income tax... When I was making around 20 grand a year trying to support my wife and two kids, I actually made money at tax time. We were among the first to file since we would be looking at raking in around 3 grand or so - after only paying in maybe a grand over that year.

 

Ask any poor person, they all know about earned income credit and the great pyramid of payout.

 

fair tax would hurt the poor far more than the rich simply because poor households are usually spending all of their income on things they need to live, where as the rich(or anyone with 'spending money') can afford to hold onto their money and save up(which wouldn't be taxed).

 

Several of us have advocated the necessites to be non-taxable. Presumably that would be food, shelter, clothing.

 

However, you're saying they spend all of their income on things they need to live. I don't think so. I say that from the perspective of someone who was poor. We didn't pay most of our money to live.

 

We paid fines by the state for not having insurance on our car, or not paying for our tags (because we thought eating was more important)....yes, I guess they thought we were "against" insurance rather than being too broke to buy any...so they punish you with your wallet for being poor.

 

We paid two months rent and multi-hundred dollar deposits just to get crappy apartments - rundown slums for our labor - since our credit history sucked and had problems paying bills..from being poor, obviously.

 

I could go on, but the point is that being poor costs you more money because you're financially untrustworthy to every business entity out there. The government stacks and layers tax obligations and laws that hit the poor right where it hurts - and then punishes them with even MORE money when they fail to meet these obligations from not having enough money in the first place.

 

Not saying you don't have a point, but I think people misunderstand how the poor get screwed.

[Saryctos]

Not saying you don't have a point, but I think people misunderstand how the poor get screwed.

 

Definately, I certainly understand what you're saying, as I worked for jackson hewitt(tax prep company). I didn't do the tax returns, but worked on the computers and went through the training course*if I ever needed to do it.

 

I should have worded it a bit diferently, as what the overall meaning was that poor people tend to actually spend their income. Thus, taxing spending would hurt them more than the wealthy who can afford to hold onto money.

[bascule]

The Fair Tax would finally tax the illegal domestic business culture - drugs, prostitution, and etc.

 

On the flipside all the income that normally goes to untraceable transactions would be lost. This includes not only transactions for illicit goods but things like Craigslist and eBay.

 

Seems like a lot more people would want to start buying things on the gray market, as they would be substantially cheaper. Not necessarily a bad thing, unless you consider tax revenue...

 

And while I'm at it, let me chime in with my "This tax unduly burdens the poor"

[DrDNA]

No I think he meant drawing 30% income tax... When I was making around 20 grand a year trying to support my wife and two kids, I actually made money at tax time. We were among the first to file since we would be looking at raking in around 3 grand or so - after only paying in maybe a grand over that year.

 

Ask any poor person, they all know about earned income credit and the great pyramid of payout.

 

 

 

Several of us have advocated the necessites to be non-taxable. Presumably that would be food, shelter, clothing.

 

However, you're saying they spend all of their income on things they need to live. I don't think so. I say that from the perspective of someone who was poor. We didn't pay most of our money to live.

 

We paid fines by the state for not having insurance on our car, or not paying for our tags (because we thought eating was more important)....yes, I guess they thought we were "against" insurance rather than being too broke to buy any...so they punish you with your wallet for being poor.

 

We paid two months rent and multi-hundred dollar deposits just to get crappy apartments - rundown slums for our labor - since our credit history sucked and had problems paying bills..from being poor, obviously.

 

I could go on, but the point is that being poor costs you more money because you're financially untrustworthy to every business entity out there. The government stacks and layers tax obligations and laws that hit the poor right where it hurts - and then punishes them with even MORE money when they fail to meet these obligations from not having enough money in the first place.

 

Not saying you don't have a point, but I think people misunderstand how the poor get screwed.

 

Ha! Both you and the government are being fooled.

And you need to go back and look at what you actually paid out vs what you got back. Just because you got a large refund check is absolutely meaningless. I have been back and forth on both sides ("poor" and "rich" and "poor" and "rich" and "poor" again). I can assure you that the poor are paying a larger percentage of their income than the wealthier individuals. What you don't see is the money hidden in tax shelters. Much of the upper middle class is able to hide their wealth in "corporate holdings" which are sheltered. Many entrepreneurs own almost NOTHING in their own names. This includes vehicles, boats, multiple houses, ranches, etc..... And many make a very small salary on paper from the businesses they own. Yet they are able to live extravagantly.

 

Besides, nothing that you have mentioned has much at all to do with federal income taxes.

 

 

The current tax system is just asking for people to hide income and wealth. Period.

[Mr Skeptic]

Edit: Deleted because I misread Bascule's post 15

[ParanoiA]

I can assure you that the poor are paying a larger percentage of their income than the wealthier individuals. What you don't see is the money hidden in tax shelters. Much of the upper middle class is able to hide their wealth in "corporate holdings" which are sheltered. Many entrepreneurs own almost NOTHING in their own names. This includes vehicles, boats, multiple houses, ranches, etc..... And many make a very small salary on paper from the businesses they own. Yet they are able to live extravagantly.

 

And yet, after all of that maneuvering, they still cover the major major major majority of the total income tax burden:

 

 

Besides, nothing that you have mentioned has much at all to do with federal income taxes.

 

No, and it wasn't supposed to. It was a reply to Saryctos. Was just trying to make the point that the poor are not just struggling to buy food, clothes and shelter - they're also struggling because they get kicked while they're down - like ridiculous punishment scenarios where everyone gets charged money for not complying with rules because they didn't have enough money.

 

When I hear the liberals going on and on about the poor and how we need programs I just want to puke. They would do the poor a better service by staying at the state level and making some sense out of the regulations and tax structure that punish the poor the most.

 

The current tax system is just asking for people to hide income and wealth. Period.

 

As Bascule pointed out, this proposed fair tax system is too. I still like it better, however. than income tax - much better. Principly it makes more sense to me too. But I'm open for other ideas as well.

 

I'll also admit to preferring simplicity over complexity. A simple tax code is a transparent tax code. And we are in bad need of transparency, and I want to see thousands of tax geeks hit the streets unemployed. No one should be able to make a living off the complexity of a tax code. That's your first signal something is way off. And now that it's ingrained, it's here to stay. For books of reasons that you probably already know...

[Sisyphus]

So how do y'all feel about property taxes?

[Pangloss]

And while I'm at it, let me chime in with my "This tax unduly burdens the poor"

 

That is, of course, the cruz of the issue -- the fact that low wage earners would have to pay tax. But it's worth noting that they would only do so on items they actually purchase, which would actually give them an additional, built-in incentive to stop trying to "keep up with the Joneses", which IMO is the number one "burden" the "poor" face in this country. I'm not talking about the true homeless, I'm talking about the "working poor", who're great at buying XBox 360 and terrible at saving for the future.

 

But my opinion on the subject is that it's probably a bad idea, not because it's morally wrong (it isn't), but because it's politically unacceptable. Thank your nearest politician for creating generations of Entitled Americans that don't know their own worth. That's not to say that adjustments couldn't be made -- I think they can be.

 

The other thing that I think is important is that it isn't really necessary to change the system. Even if it's "broken", so what? Who is hurting?

 

Incidentally, Neil Boortz, the co-author of the book that is mainly responsible for promoting this approach, is the Libertarian radio talk show host who awakened my personal interest in politics and critical thinking over 25 years ago while sitting in a Fotomat booth wondering if I should go stick with college. He still hosts his daily show on (I believe) WSB in Atlanta, and pre-dates the Rush Limbaugh CTR crowd by at least a couple of decades.

 

Two of his popular talking points on this issue have stuck with me over the years:

 

- People who say, "I didn't pay taxes this year, I got money back!"

 

- Corporations don't actually pay tax. YOU pay their tax when you buy their products.

 

Great stuff.

 

BTW, bascule has a good point about people avoiding sales tax. I haven't paid sales tax on most most goods for years, and in fact off the top of my head I think the only things I pay sales tax on on a regular basis are gasoline and groceries.

[CDarwin]

Responses to the ebay and "drop the taxes on necessities" points from the Fair Tax Plan:

 

Apparently the former case would be accounted for.

 

The FairTax would apply to Internet purchases and would tax retail international purchases (such as a boat or car) that are imported to the United States (collected by the U.S. Customs Service).

 

Supposedly the latter would be unnecessarily complicated. Offering a necessities prebate would also provide an incentive for families to spend less by allowing them to keep what ever money they don't end up spending. That's the notion.

 

So how do y'all feel about property taxes?

 

Make your own thread.

[DrDNA]

No, and it wasn't supposed to. It was a reply to Saryctos. Was just trying to make the point that the poor are not just struggling to buy food, clothes and shelter - they're also struggling because they get kicked while they're down - like ridiculous punishment scenarios where everyone gets charged money for not complying with rules because they didn't have enough money.

 

When I hear the liberals going on and on about the poor and how we need programs I just want to puke. They would do the poor a better service by staying at the state level and making some sense out of the regulations and tax structure that punish the poor the most. .

 

It appears that you and I agree on most issues related to this. Those so called "programs to help the poor" are simply vehicles to control other peoples' $$ so they can manipulate it towards areas that gives them leverage. People need to wake up.

And most of the money just goes towards administering the money. What a waste. The only people getting rich are the politicians, the tax law firms, investment firms and the money managers.

 

 

I'll also admit to preferring simplicity over complexity. A simple tax code is a transparent tax code. And we are in bad need of transparency, and I want to see thousands of tax geeks hit the streets unemployed. No one should be able to make a living off the complexity of a tax code. That's your first signal something is way off. And now that it's ingrained, it's here to stay. For books of reasons that you probably already know...

 

I agree. I think transparency is the key to fairness. As long as people can hide it they will, and others will make a profit off of hiding it, and they will lobby and win to widen the holes..... what a mess. The current system is AWFUL.

[Sisyphus]

 

Supposedly the latter would be unnecessarily complicated. Offering a necessities prebate would also provide an incentive for families to spend less by allowing them to keep what ever money they don't end up spending. That's the notion.

 

This might be tangential, but isn't "people spend less" another way of saying "recession?" Frugality is one of those things which is good for the individual but bad for the economy as a whole. Just a thought, that may or may not be relevant.

[bascule]

Responses to the ebay and "drop the taxes on necessities" points from the Fair Tax Plan

 

And what happens when people simply don't report those purchases? You think people are going to voluntarily pay tax on the couch they bought on Craigslist?

[john5746]

The Fair Tax would finally tax the illegal domestic business culture - drugs, prostitution, and etc. Also makes it virtually impossible to lie about lowering or raising taxes. Today you have to wade through a million pages of tax code to figure out if you're being lied to.

 

I don't like the idea of payments to the poor and blah blah blah. Once again, let's go out of our way to complicate simple things. Just don't apply the tax on goods we consider to be necessities. Like food, clothing, that sort of thing. An active system like these payments they're talking about introduces corruption and creates the need for a department - yet another bottomless pit of shame. Why not keep it as simple and passive as you can?

 

The Tax Code gets more complicated as your wealth increases. Why? Loopholes.

 

Keep it simple? Sounds good to me, not sure about EVERYONE else though. Religious items, things "for the children", for education, media, farming, investment, etc. The arguments will be endless.

 

As for illegal activity - the black market will increase. People will always try to avoid paying taxes and the wealthy are far more innovative than illegal aliens, etc.

 

 

And percentages are all that should matter. To make wealthier people pay a higher percentage is flat out wrong. You should never allow your government, or your damn neighbor for that matter, to decide how much money you "need" - when you're "rich" and when you have "plenty leftover". This is just lazy intellectual excuses to rationalize redistribution.

 

Bill Gates blows billions of dollars on philanthropy, so I'd rather see that money distributed by him than the fat cats in washington. More of his dollars will actually get to the people who need it - channeling it through the government will dilute it into more unaccountable, irresponsible "systems" of beaurocracy that feed the entitlement system we're all so proud of today.

 

Well, at least he agrees with me. The article below was specifically about estate tax, which is a DOUBLE tax, but the point is the same.

 

LINK

 

 

Why? Gates' date=' 78, says the wealthy should pay the tax because they owe a special debt. Their riches, he says, would not be possible without a strong society supporting capitalism.

 

"Most of the things that have generated the enormous advances in our economy are things that started on some campus or in some laboratory," Gates said in an exclusive interview last week. "And most of those are because the government financed it."[/quote']

 

I agree with you that the wealthy do pay most of the tax currently - and that is how it should be. If we go to this "FAIR" tax, what will the distribution look like then? Who will pick up the slack? The government will keep on spending.

So, the arguments should be on the spending side, not the revenue side. The wealthy will be OK, don't worry so much about them.