Your Opinion Of "FairTax" Proposal?

[jyl]

What do you think about the so-called "FairTax" tax reform plan?

If you haven't heard, the proposal is to
(1) eliminate all existing federal taxes including personal and corporate income taxes, estate and gift taxes, social security and payroll and medicare taxes, alternative minimum tax, self-employment taxes, and all other taxes and tax-like fees. Repeal the 16th Amendment so that there can never be a federal income tax.
(2) replace them with a 30% federal sales tax on all consumer purchases of "new" goods or services. 30% means that to a $100 purchase you add $30 of federal sales tax, to make your after-tax purchase $130, plus any state and local sales tax. Purchases of "used" goods by consumers, and any purchases by businesses, would not be taxed.
(3) Give every American a cash payment equal to the federal sales tax on poverty-level expenditure. This would vary according to family size and state, but for example $10K for a single adult and $23K for a two-adult. two-income family in the Lower 48 states.

The claim is that this FairTax will be revenue-neutral, i.e. bring in as much money as the existing federal taxes that it replaces; that businesses will pass on their tax savings (under FairTax, businesses will pay no federal taxes at all) in the form of lower prices; that the cash "poverty-level tax" payments make the FairTax progressive.

[Dixie]

Beats what we have now.

[red-beard]

It would ignite the economy like nothing else can, and would require about 3 times as many workers from outside the country.

[strupgolf]

Originally Posted by jyl

What do you think about the so-called "FairTax" tax reform plan?

If you haven't heard, the proposal is to
(1) eliminate all existing federal taxes including personal and corporate income taxes, estate and gift taxes, social security and payroll and medicare taxes, alternative minimum tax, self-employment taxes, and all other taxes and tax-like fees. Repeal the 16th Amendment so that there can never be a federal income tax.
(2) replace them with a 30% federal sales tax on all consumer purchases of new goods or services. 30% means that to a $100 purchase you add $30 of federal sales tax, to make your after-tax purchase $130, plus any state and local sales tax. Purchases of used goods by consumers, and any purchases by businesses, would not be taxed.
(3) Give every American a cash payment equal to the federal sales tax on poverty-level expenditure. This would vary according to family size and state, but for example $10K for a single adult and $23K for a two-adult. two-income family in the Lower 48 states.

The claim is that this FairTax will be revenue-neutral, i.e. bring in as much money as the existing federal taxes that it replaces; that businesses will pass on their tax savings (under FairTax, businesses will pay no federal taxes at all) in the form of lower prices; that the cash "poverty-level tax" payments make the FairTax progressive.

Wow, now its up to 30%. Used to be 17% when first proposed. Also, in #2 above, do you mean to say "purchases of used goods by consumers", such as buying a used car for example, or did you mean "purchases of goods used by consumers", as in food, clothes,etc. A big difference in meaning when it comes to this fair tax.

[Mule]

It's a definite improvement.

[sammyg2]

Sounds like a great way to build up a huge black market. Plus it opens the door for the 20 million illegals in this country to make money here tax free and send it back home where it can be spent to bolster their economy and not ours.
The problem with our tax system isn't the system, it's the freaking tards who spend the revenue like it's going out of style.
Put me down as "NO".

[cashflyer]

Would a 30% tax make acquisition of goods and services by the poor and poverty classes even more difficult?

Would the people who are prone to pissing away their money be able to improve their lot in life by having the extra in their check each week, or would they still piss it away?

These two elements, to me, mean that the poor will still be poor, but even more unable to buy goods due to the higher tax.


Is item 3 a "redistribution" of wealth? You know, like communism?

Do the corporation haters and democrats think that any business is going to lower it's prices? Or do you think they will see the non-payment of taxes as a better profit margin? Don't businesses hire accountants to minimize or eliminate their tax burden already?



Side note:
For some reason, South Carolina has started calling "sales tax" by a new name in some of their publications... calling it a "transaction tax".

[Rearden]

I'd like to give it a try.

[jyl]

Originally Posted by strupgolf

Wow, now its up to 30%. Used to be 17% when first proposed. Also, in #2 above, do you mean to say "purchases of used goods by consumers", such as buying a used car for example, or did you mean "purchases of goods used by consumers", as in food, clothes,etc. A big difference in meaning when it comes to this fair tax.

Consumers' purchases of "new" goods, and of services, will be taxed at 30%.

That includes food, clothes, cars, furniture, and all other goods; also haircuts, dental and medical visits, car repair, house painting, and other services.

If a consumer buys a "used" good, e.g. a used car, that will not be taxed.

As I read it, the new vs used distinction also applies to houses.

[cashflyer]

Wow... I didn't consider homes. Think about a $200k home, that now costs you $260k.
Looks like another boom for manufacturers of single-wides and Jim Walter shacks, because that's all many will be able to afford.

And add to your 30% federal tax the state sales tax. Here in SC, it ranges from 6% to 9% depending upon county.

Will this tax proposal do away with state property taxes? Or do I also get to pay property taxes on my house that cost 30% over actual value?


Oh... but I keep forgetting about all that extra money I will be bringing home with no income tax taken out.

[lendaddy]

I see a few problems.

1) huge black market

2) lag in price drops. For instance a guy that owns a small business and barely turns a profit every year will not be able to drop his costs 30% since he's not paying any direct corporate tax as it is.

3) overseas tax contribution. Currently when we export a portion of the sales price goes to corporate tax, hence foreign consumers are paying indirectly into our tax system. Under the fair tax they will not. But, our exports should be more competitive and thus more money should flow into our companies and be paid out in wages/dividends that will eventually be taxed.

4) Huge amounts of tax money being held by shady business. Times get tight and the books get re-calculated..maybe sales weren't so great last month This certainly happens even today at 4-8% but imagine once it's 30%(awful tempting).

5) New car = 30% tax, Used car = no tax. But bigger than that is new house = 30% tax, used house = no tax. What will this due to the auto and construction industries?

[MRM]

I heard it would apply to all housing. Remember, it applies to services, too. So all you lawyers and accountants and computer consultants, think about charging and collecting a federal sales tax means to you. I'm interested but leaning away from it. I think I like the flat tax idea better.

[WI wide body]

This appears to me to be much like two other things that in theory sounded good, but when the clever guys got done with them they have been a spectacular disaster for our nation: Deregulation and globalization.

The one thing that we can be sure of if our nation went to a tax system based on taxing consumer goods is that it would increase jobs. Because the size of the black market that a nationwide consumer goods tax is certain to create (and the required attempt at policing) would make the size of the IRS look like a pebble among a hot air ballon gathering!

[lendaddy]

I am also interested but leaning away. I have a friend that's a libertarian radio host and he hooked me up with one of the big wigs in the fair tax to answer my questions. The responses were very angry and defensive rather than honest and informational . Sort of like how they call it a 23% tax when it's really 30%, the dishonesty makes me wonder what else they're hiding.

Even with all that I am sure it's better than what we have but it'll never happen.

[Rearden]

Originally Posted by lendaddy

Sort of like how they call it a 23% tax when it's really 30%, the dishonesty makes me wonder what else they're hiding.

http://www.fairtax.org/site/News2?news_iv_ctrl=1541&page=NewsArticle&id=8248

[lendaddy]

Originally Posted by Rearden

http://www.fairtax.org/site/News2?news_iv_ctrl=1541&page=NewsArticle&id=8248

I get the calculation and it's actually correct...but they know damn well that 99% of the public assumes 23% means $0.23 on the dollar just like their state sales tax is calculated. It's an attempt to use public ignorance to make the tax look smaller.

If you take a $1 item to the counter the clerk will demand $1.30. To the public that's a 30% sales tax.

[jyl]

I have a few thoughts so far - I'm still thinking about this issue:

(1) I'm not convinced that a 30% federal sales tax rate would in fact be revenue-neutral.

The FairTax idea has been around for a while and independent studies say the rate would have to be more like 40%, to actually replace current federal tax revenue.

(2) Even if the rate is 30% rather than higher, I also am not convinced most consumers would be better off.
- Take taxpayers in the upper 25% of incomes (i.e. in 2005 their income was over $62K/yr). Their average federal income tax rate in 2005 was 16%.
- Suppose they spend 90% of their income (i.e. they have a 10% savings rate). If the FairTax imposes a 30% federal sales tax, then that is 27% of their income (30% of 90 = 27% of 100).
- In other words, I don't see why FairTax is good for most of us on PPOT. Pay 27% instead of 16%?
- You can go to the tables at http://www.taxfoundation.org/news/show/250.html and look at your particular situation.

(3) I know that if FairTax passes, we're going to want to start a bunch of small businesses "on paper" to make untaxed "business purchases". For example, a catering business should let us buy our food, drink, fuel, small appliances, etc without paying FairTax. We live close enough to Canada that making major purchases there and bringing them back will be attractive, to avoid FairTax. Since we live in a "used" house, we won't have to pay FairTax on our housing, unlike those suckers who buy new houses. In fact, I'm not sure who'd ever buy new houses, 30% FairTax on on $400K is nuts. I doubt we'd ever buy another new car in our lives, not going to pay 30% FairTax on a $30K or $40K car, tough luck for Detroit I guess.

[Moneyguy1]

Wayne...

I LOVE lower taxes, but do not love the billions we are paying annually to the note holders. The way out of that? I haven't a clue but it is not to "cut spending and cut taxes even further" forever. When one backs out the programs that by law are paid for with taxes, the cutting of other programs might do things such as put our infrastructure in even worse shape, cut research in energy and medicine and a host of other projects, some of which are even worth while!!

All I can say is that it is a problem with multiple possible solutions, none of which will be totally accepted. I will add that what we have now has made a lot of accountants very wealthy.

[carnutzzz]

There is a LOT of misinformation in this thread.

Frankly, it's in ALL of our best interests to read John Linder's and Neil Boortz's book on the subject matter. It covers all of the questions/misconceptions in this thread. Only then can you debate the concept.

For instance- no, a $200k house does not now "cost you" $260k, etc.

For those that say "it will never happen" -that's unfortunate. Vote into power those that do want to make it happen.

The FairTax would be one of the best things to ever happen to this country.

Simplify the tax system, generate MORE revenue by making more people pay instead of squeezing the few that do.

Brilliant.

[WI wide body]

Originally Posted by carnutzzz

There is a LOT of misinformation in this thread.

Frankly, it's in ALL of our best interests to read John Linder's and Neil Boortz's book on the subject matter. It covers all of the questions/misconceptions in this thread. Only then can you debate the concept.

For instance- no, a $200k house does not now "cost you" $260k, etc.

For those that say "it will never happen" -that's unfortunate. Vote into power those that do want to make it happen.

The FairTax would be one of the best things to ever happen to this country.

Simplify the tax system, generate MORE revenue by making more people pay instead of squeezing the few that do.

Brilliant.

"Brilliant" is getting your info from Neal Boortz.