Fair Tax debate ONLY

[David88vert]

This discussion has already happened on here.
Fair Tax

Here is some quick points copied to start:

http://money.cnn.com/2005/09/06/pf/t...ptiontax_0510/
Important Note: Wages will have to go down to compensate.
Important Quote: "It is practically and logically impossible for the government be collecting the same amount of money as before and have everyone suddenly be better off," says Daniel Shaviro, a tax law professor at New York University.


http://www.mises.org/story/1814
Important Note: The national retail sales tax rate under the FairTax plan is 23 percent. That is on top of state sales taxes that are currently collected by forty-five states. That is on top of the sales tax that many cities and counties also collect. That is on top of the special taxes that exist on hotel rooms in most areas of the country. I suppose that a national retail sales tax would also apply to gasoline. There is no mention of the federal gas tax anywhere in the Fair Tax Act of 2005. No list of taxes that are supposed to be eliminated under the FairTax includes the federal gas tax.
Important Quote: There shall be in the Department of the Treasury a Sales Tax Bureau to administer the national sales tax in those States where it is required pursuant to section 404, and to discharge other Federal duties and powers relating to the national sales tax (including those required by sections 402, 403, and 405). The Office of Revenue Allocation shall be within the Sales Tax Bureau.
Cliff Notes: Fair Tax advocates call for the IRS to remain.

http://www.mises.org/story/1975
Important Note: The taxes currently imposed by the states would be unaffected by the FairTax Plan. Thus, states that impose a state income tax or a state sales tax would continue to collect those taxes.
Important Quote: The FairTax will basically do away with not-for-profit entities.
Important Quote: Two examples of federal taxes that will still be with us under the FairTax are the excise tax on gasoline and the various taxes that one pays when purchasing an airline ticket. There is no mention of the federal gas tax anywhere in the Fair Tax Act of 2005. No list of taxes that are supposed to be eliminated under the FairTax includes the federal gas tax, which adds 18.4 cents to the price of a gallon of gas. So under the FairTax, we would have added to each gallon of gas federal excise tax, state excise tax, and federal sales tax. This is just the minimum. The states could also begin applying their sales tax to gasoline. A recent airline ticket I purchased had added to its price a federal excise tax of $15.28, a federal segment tax of $12.80, and a September 11th security fee of $10.00. And what about federal taxes on tobacco and alcohol? The FairTax will merely replace one visible tax with another while leaving intact the invisible ones.


Again, can you really trust Congress to stop collecting other taxes? Can you expect them to curb spending? Can you expect them to not raise the sales tax every year?

Is anyone here really that gullible to believe that Congress could pull this off correctly?

Also, under the current system, a person making $6000/yr (under the poverty level) pays NO income tax, and pays $420/yr in sales taxes if they spend all of their money. Under the Fair Tax, they would spend AT LEAST $1380 in sales taxes. Basically, you are increasing taxes on the poor. How are they supposed to be able to save and improve their lives? Even with the prebate, they will pay more initially than they currently do. And for those that live on a week-to-week check, life will be more difficult when inflation rises. Remember, not every one is a good money manager, many will waste their prebate and stay in debt.

There is no proviosion in the Fair Tax proposal to repeal the current taxes levied. So you would add 23% onto the cost of fuel. Read the proposal, it leaves a lot out of its explainations, PLUS state taxes would NOT be repealed at any point under the proposal.

For that matter, neither would state income taxes. You still would be paying more for fuel, tobacco, and alcohol - any way that you try to slice it under the current proposal.

Do you guys really think that it will save you money? Think about this. In order for the government to operate, they will need the SAME amount that they needed before. So it will not be lowering taxes, just changing who and where they will collect from.

Now if you are rich, it's simple, live in the US, buy your stuff from overseas, and have it shipped over - no taxes then for the rich, unless you implement some sort of import tax.

The poor get subsidized, so "no" real tax for them (due to "prebate").

Now who is left to collect the money from? The people that have enough not to get subsidized, but aren't rich or technically savy - i.e. the middle class.

The answer is not changing of the way that taxes are collected - you have to change the amounts. In order to do that, you have to have a government that controls its spending, and we definately don't have that. Find a way to hold the government accountable for the amount that it spends - then you will lower taxes.

Read Bootz's book - all of it. Try the chapter, "Questions and Objections". Boortz even says that it will have to be about 30%, rather than 23%. That's a big difference. At under 31%, the budget will not be met in 10 years, unless there were increases. The math doesn't lie.

The federal gas tax is 18.4 cents/gallon. The Fair Tax act does not repeal that set of taxes. So now you would pay 23% more on top of the current federal tax, and then state taxes on that (another 15 cents/gallon here in GA). So if you paid $3.00 including taxes before, you would pay 3.69 afterwards. Another big difference.

Now for the real deal. Guess what, that whole promise of prices dropping (removal of embedded taxes), and you getting your full salary - it isn't going to happen. If you get paid $50K, and $10K is taken out, do you think that the company can lower it's prices if you get the whole $50K? Of course not. They are paying out the same amount. The only way it would work is if you got $40K - not $50K - a 20% drop. Boortz knows this and Harvard economist Dale Jorgenson admitted it when questioned.
Don't get me wrong - I LOVE the IDEA of a Fair Tax, but it is going to need a lot more work polishing out the problems BEFORE it could be implemented. I can't support it until then. After the big problems are worked out and solved, then I would reconsider it.

Let's look at this scenario:
A company make cabinets. They did buy material tax exempt. Now under Fair Tax, they have to pay 23% - because there are no exemptions. It now cost them more to make the cabinets, plus they are paying the same wages to their workers. Finally, shipping services are no longer $100K/yr - due to the Fair Tax collected on services - they jump to $123K/yr. Now tell me, how will the company NOT raise prices? They have no choice, so your 23% raise just got eaten up by higher prices. Even Boortz says that this is not a plan that will save people money.

Also, non-profits like churches will now be taxed, as will all companies and our own federal and state governments. Services will be taxed, like doctors and lawyers. So your simple out-patient surgery that would have run you $1,000 out-of-pocket, will now run you $1,230. That additional $230 might not hurt you if you make $1 million/yr, but for the middle class, that's a large increased cost. If you are in the middle class, not everything is covered by Medicare.

Now go get Jaimecbr900 so we can restart our discussion.

[David88vert]

Has anyone ever read Bruce Barlett's article from earlier this year? He made a few simple observations and published them. Most major financial magazines picked up on it and distributed it. He probably knows more about economic advancement than anyone on here. He was the Deputy Assistant Secretary of the Treasury for economic policy from 1988 to 1993.

-------------------------------------------------------------
Unfortunately, like all things in life that are too good to be true, so is this one. Here are a few problems with the FairTax.

True rate. When people hear about a 23 percent national sales tax, they naturally equate it to the state sales taxes they are familiar with. If a state sales tax is 5 percent, then this means that if someone buys something for $1 they will pay $1.05 at the checkout. Thus they assume that the FairTax would cause a $1 product to cost $1.23 if it were to be enacted.

In fact, the rate is not 23 percent, but 30 percent. The 23 percent rate is arrived at by treating the tax as if it were already part of the price instead of being on top. Thus if a product were to sell for $1 and the FairTax added 30 percent, the 30-cent tax comes to 23 percent of $1.30. This is how a 30 percent rate is deceptively turned into a 23 percent rate.

Governments must also pay. The FairTax would apply to all government purchases at every level. Only education spending is exempted.

States would have to pay 30 percent more on every highway and bridge they build, local governments would have to pay 30 percent more for police and fire protection, and even the federal government would have to pay the tax to itself when it buys weapons and ammunition for troops.

Taxes would have to be increased at the state and local level to pay the FairTax to the federal government. The FairTax rate would also have to be higher to pay for the additional federal spending it will require. However, FairTax supporters exclude this higher spending from their calculations. The 23 percent rate is designed only to be revenue-neutral, not spending neutral. Thus the federal deficit would either rise by more than $200 billion per year or spending would have to be cut by this much.

Rebate problems. The FairTax rebate would also add $600 billion to federal spending annually. Although its supporters say it is just like the one we get when our tax withholding exceeds the taxes we pay on our tax returns, the FairTax rebate is more like Social Security because it comes in a monthly check.

Although FairTax supporters tout the generosity of the rebate, it is extremely modest because it is based on the poverty level income - a figure that bears no relationship to the actual cost of living. As a consequence of the way the poverty rate is calculated, childless couples would get a monthly rebate of $391 per month, but a single mother with two children would only get $329 per month.

Prices will rise. Finally, FairTax supporters assume away many of the problems with their plan by asserting that prices will fall by 22 percent once all income taxes are abolished. Prices at the checkout would be about the same with the FairTax as they are now, they say, but everyone would come out ahead because their net wage will now equal their gross wage.

If this were so, it's hard to see why the rebate is needed, since there seems to be only winners and no losers under the FairTax. In reality, for prices to fall by 22 percent, business costs would also have to fall by 22 percent, which means that all workers would have to take a 22 percent pay cut.

It's unlikely that workers would agree to this. It is far more likely that the FairTax will raise the price of everything by 30 percent. This has been the case in every country and every state with a sales tax. The idea that prices will fall is just a pipe dream.

[BanginJimmy]

Important Quote: "It is practically and logically impossible for the government be collecting the same amount of money as before and have everyone suddenly be better off," says Daniel Shaviro, a tax law professor at New York University.

Actually it is when you consider that more than 12 million people are currently earning wages illegally in this country as it is. It will also eliminate all of the loopholes that exist. Remember also that people get returns of some of all of the federal income tax.

Important Note: The national retail sales tax rate under the FairTax plan is 23 percent. That is on top of state sales taxes that are currently collected by forty-five states. That is on top of the sales tax that many cities and counties also collect. That is on top of the special taxes that exist on hotel rooms in most areas of the country. I suppose that a national retail sales tax would also apply to gasoline. There is no mention of the federal gas tax anywhere in the Fair Tax Act of 2005. No list of taxes that are supposed to be eliminated under the FairTax includes the federal gas tax

it still doesnt change the price of the things you buy by more than $0.01 per dollar. The fair tax eliminates the taxes that are paid by the companies and added to the price of it before it gets to the store. Right now there is no sales tax on gas. It is all excise taxes and it would not be affected by the fair tax

The taxes currently imposed by the states would be unaffected by the FairTax Plan. Thus, states that impose a state income tax or a state sales tax would continue to collect those taxes.

This has already been covered. No the fair tax does not eliminate state taxes in the 45 states that do impose an income tax.

various taxes that one pays when purchasing an airline ticket. The states could also begin applying their sales tax to gasoline. A recent airline ticket I purchased had added to its price a federal excise tax of $15.28, a federal segment tax of $12.80, and a September 11th security fee of $10.00. And what about federal taxes on tobacco and alcohol? The FairTax will merely replace one visible tax with another while leaving intact the invisible ones.

1. no sales tax is added to airline tickets, and no tax will be added there either.

2. Nothing is stopping the states from charging a sales tox on gas now, why would a new tax code change that?

Also, under the current system, a person making $6000/yr (under the poverty level) pays NO income tax, and pays $420/yr in sales taxes if they spend all of their money. Under the Fair Tax, they would spend AT LEAST $1380 in sales taxes.

now that you are done with the copy and paste I see you really dont know much about the fairtax. One of the biggest benefits of the fairtax is that every month you will receive a prebate of the tax that would be imposed for the basic necessities. For a family of 4 it works out to be about $656 a month. Over 12 months that family that makes 6k per year will nearly double their annual salary. For a single person with no dependants they will receive $245 a month. That single person would receive 2940 in prebates. If they ONLY made minimum purchases they would make ~1600 more a year. For that same person making 6k per year they pay 420/yr in sales tax PLUS another 2k per year in income taxes.

Remember, not every one is a good money manager, many will waste their prebate and stay in debt.

and this is the govt's responsibility why?

A company make cabinets. They did buy material tax exempt. Now under Fair Tax, they have to pay 23% - because there are no exemptions. It now cost them more to make the cabinets, plus they are paying the same wages to their workers. Finally, shipping services are no longer $100K/yr - due to the Fair Tax collected on services - they jump to $123K/yr. Now tell me, how will the company NOT raise prices? They have no choice, so your 23% raise just got eaten up by higher prices. Even Boortz says that this is not a plan that will save people money.

business purchases are tax free. therefore those materials that were purchased to build the cabinatel would NOT cost 23% more, neither would the transportation costs.

[David88vert]

Actually it is when you consider that more than 12 million people are currently earning wages illegally in this country as it is. It will also eliminate all of the loopholes that exist. Remember also that people get returns of some of all of the federal income tax.
There are many illegals paying tax right now that do not collect a rebate at all. I personally know more illegals paying income tax right now, than not paying tax. And none of them get rebates. The reason is because they believe that will help them get green cards later. I'm not sure tha it does, but I know that they believe it and pay it. They use the same SS# for several people and all of the employers take out the taxes. None of them see a rebate of course. So not all of it is necessarily an increase.

it still doesnt change the price of the things you buy by more than $0.01 per dollar. The fair tax eliminates the taxes that are paid by the companies and added to the price of it before it gets to the store. Right now there is no sales tax on gas. It is all excise taxes and it would not be affected by the fair tax
Under the Fair Tax, you would pay sales taxes on the gas. Read the propsal again. It is very clear that it would go up substantially.

This has already been covered. No the fair tax does not eliminate state taxes in the 45 states that do impose an income tax.
Agreed.

1. no sales tax is added to airline tickets, and no tax will be added there either.
All services would be taxed except education. Flights are a service.
2. Nothing is stopping the states from charging a sales tox on gas now, why would a new tax code change that?
Georgia has a 15 cent tax right now on gas, and that wouldn't change, nor would anything stop the state from changing it. Remember when Purdue suspended it for a few days?




now that you are done with the copy and paste I see you really dont know much about the fairtax. One of the biggest benefits of the fairtax is that every month you will receive a prebate of the tax that would be imposed for the basic necessities. For a family of 4 it works out to be about $656 a month. Over 12 months that family that makes 6k per year will nearly double their annual salary. For a single person with no dependants they will receive $245 a month. That single person would receive 2940 in prebates. If they ONLY made minimum purchases they would make ~1600 more a year. For that same person making 6k per year they pay 420/yr in sales tax PLUS another 2k per year in income taxes.
So you agree that it is a redistribution of wealth by your own statement. Do you realize how little a single mother with 2 dependants would get? Only $337. Think that would really help? Do you have a child, and know what it costs to have one? Do you think that people only want to barely exist (minimum purchases)? Interesting...


Remember, not every one is a good money manager, many will waste their prebate and stay in debt.
and this is the govt's responsibility why?
It's not. Just realize that it won't necessarily help anyone. It's not God's gift to all.


business purchases are tax free. therefore those materials that were purchased to build the cabinatel would NOT cost 23% more, neither would the transportation costs.
In order to keep the costs down, they would have to pay the employees less. Thus, production costs would rise, as no one would work for 30% less. Shipping services would be taxed under the proposal as it is currently written (yes, I know that would probably change before passage). Additonally, gas costs would increase, raising the cost of getting gods to market.

Don't get me wrong, again, the idea is great, but there is a lot to work out ahead of implementation. Much is left out of the actual proposal. For example, the site says that it will repeal the 16th amendment and abolish the IRS. The actual document does not list that at all. It call for the creation of a new tax collection agency.

You said there were no cons to it. I have presented some. Nothing comes for free. The real solution is to rein in government spending. Collection of taxes only treats the symptoms, not the problem. If you want to improve the system, make the govenment be accountable for it expenditures. If Fair Tax could do that, I'd back it 100%.