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Fair Tax

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Patranus

Diamond Member
Apr 15, 2007
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Another fair point was made to extend a pre-bate for necessities to every household based on the amount of people living there.

That would be perfectly fine for me.
Why not simply exempt food/rent/utilities (NOT CABLE TV) from this?
Just collect it at time of sale and eliminate 99% of the IRS (gotta keep some to enforce the new health care legislation).
 

Deudalus

Golden Member
Jan 16, 2005
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Why not simply exempt food/rent/utilities (NOT CABLE TV) from this?
Just collect it at time of sale and eliminate 99% of the IRS (gotta keep some to enforce the new health care legislation).
That is another possibility which I brought up earlier.

I have no problem making the necessities for life tax exempt.
 

Patranus

Diamond Member
Apr 15, 2007
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That is another possibility which I brought up earlier.

I have no problem making the necessities for life tax exempt.
Well the "pre bate" rout requires more government bureaucracy when there is really no need for it when you can just exempt food like it is currently exempt from sales tax.

Also if you go the "pre bate" rout the "progressives" will demand that the "poor" will get a higher "pre bate" while the "rich" shouldn't get any. This would essentially put us back to square 1.


Here is a question, would you tax the purchases of business for what they consumer - essentially a VAT tax?
 
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Hacp

Lifer
Jun 8, 2005
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Well the "pre bate" rout requires more government bureaucracy when there is really no need for it when you can just exempt food like it is currently exempt from sales tax.

Also if you go the "pre bate" rout the "progressives" will demand that the "poor" will get a higher "pre bate" while the "rich" shouldn't get any. This would essentially put us back to square 1.


Here is a question, would you tax the purchases of business for what they consumer - essentially a VAT tax?
You exempt food and you'll get a lot of fat people. No exemptions. No prebate. Everyone pays the same rate. That is the only fair way.
 

HumblePie

Lifer
Oct 30, 2000
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The poor spend most of what they earn on necessities which they would be reimbursed for.
And you are now requiring the poor to save every receipt, every document, and every iota of information of every purchase they dollar they spend. Get real. Organizational skills aren't exactly the best among the poor for a reason. If they were, they wouldn't be poor now would they?

Realistically do you think they would spend all the money required to do this? This is not to mention that those countries have taxes too.

Do you really think they are going to fly to Italy and buy a Ferrari there to save 9% in taxes?

Once again do you really think this is feasible? Think about what you are saying..

Actually both are very feasible and happen now a lot more often than you think. I know of people personally that are very rich and do this right now. Why? There are many reason.

A) because it's cheaper for one when they do it. Rich people are rich for a reason. They know how to get things cheaper than your average consumer. Now, not all rich people are this savy, but there is a difference between what I call "old money" and "new money." If you know the sayings, then you know what I mean.

b) because they have the money if they want to say "f-you" how they wish. Government says they can't do things the way they want anymore. They have the luxury of going elsewhere out of spite even if it isn't much of a cost saving. I've seen this happen as well. Then they find ways to make it a cost saving. Which they do.

Look, I know people that do this. It takes money to make money and keep it. There is a reason for that.

Despite your claims of "feasibility" has nothing to do with reality and motivations for people. The reality is, if a flat tax system or hybrid of one is implemented, it will do nothing to affect the rich and how much tax they pay. It will affect the poor. It will most affect the middle class. Those people with just enough to not get rebates. With just enough to save a few pennies here and there. With just enough to buy luxury item or two on occasion. These are the people that would be hit hardest. You know, the average working Joe.
 

werepossum

Elite Member
Jul 10, 2006
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And you are now requiring the poor to save every receipt, every document, and every iota of information of every purchase they dollar they spend. Get real. Organizational skills aren't exactly the best among the poor for a reason. If they were, they wouldn't be poor now would they?




Actually both are very feasible and happen now a lot more often than you think. I know of people personally that are very rich and do this right now. Why? There are many reason.

A) because it's cheaper for one when they do it. Rich people are rich for a reason. They know how to get things cheaper than your average consumer. Now, not all rich people are this savy, but there is a difference between what I call "old money" and "new money." If you know the sayings, then you know what I mean.

b) because they have the money if they want to say "f-you" how they wish. Government says they can't do things the way they want anymore. They have the luxury of going elsewhere out of spite even if it isn't much of a cost saving. I've seen this happen as well. Then they find ways to make it a cost saving. Which they do.

Look, I know people that do this. It takes money to make money and keep it. There is a reason for that.

Despite your claims of "feasibility" has nothing to do with reality and motivations for people. The reality is, if a flat tax system or hybrid of one is implemented, it will do nothing to affect the rich and how much tax they pay. It will affect the poor. It will most affect the middle class. Those people with just enough to not get rebates. With just enough to save a few pennies here and there. With just enough to buy luxury item or two on occasion. These are the people that would be hit hardest. You know, the average working Joe.
The FairTax is not a VAT; the only paperwork required is reporting how many people live in your household and their Social Security numbers. Even the poorest can do that, as it's a mere subset of the same information required to file for government bennies. The prebate is not a direct, one-for-one payment; it is simply a payment to make sure no one pays any taxes on the basic necessities of life. If your household can get by on less than the federal poverty line - and most people can't, most people at the poverty line spend everything they make just to keep body and soul together - you still keep the prebate, no questions asked. If your household earns less than the federal poverty line for its size, then you get a small profit at the expense of the rest of us, which you almost certainly need. Outside of that, you do what you want with your own money - buy stock, buy a house, by fancy cars, the rules are the same for everyone. No more government leading you by the nose to do as it thinks best. And the only people who get hosed are those who have previously saved a lot of money, as that money was already taxed once as income and would now be taxed anew.

Patranus, the whole idea behind the FairTax was to eliminate the government's ability to unfairly reward or penalize using the tax code. Only two pieces of info are required - the total amount needed to fund government, and the federal poverty line for each family size. Everyone gets the pre-bate, everyone pays the same rate, everything new (including services) gets taxed. Once you start exempting things from the FairTax, it would rapidly become just another vehicle to reward and punish.
 
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Deudalus

Golden Member
Jan 16, 2005
1,090
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And you are now requiring the poor to save every receipt, every document, and every iota of information of every purchase they dollar they spend. Get real. Organizational skills aren't exactly the best among the poor for a reason. If they were, they wouldn't be poor now would they?
Where the fuck did you get this?

They wouldn't have to save any receipts. They would have to do that now if they actually paid taxes. But under the Fair Tax you don't save receipts.

Necessities are tax free, everything else is subject to a sales tax. Or you can do pre-bates where every household in the country gets a check at the first of every month based on the taxes they will spend on necessities.

There is no saving of anything.

Despite your claims of "feasibility" has nothing to do with reality and motivations for people. The reality is, if a flat tax system or hybrid of one is implemented, it will do nothing to affect the rich and how much tax they pay. It will affect the poor. It will most affect the middle class. Those people with just enough to not get rebates. With just enough to save a few pennies here and there. With just enough to buy luxury item or two on occasion. These are the people that would be hit hardest. You know, the average working Joe.
Everyone would get the rebates for necessities spent regardless of income. Or you could go the other route which would be to make necessities sales tax free.

Either way considering the lower your income the higher amount of your income you spend on necessities, there is absolutely no way that the poor would have a higher tax burden.
 

Fern

Elite Member
Super Moderator
Sep 30, 2003
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I'm advocating a flat sales tax for everything outside of necessities that we buy.

That means no more income tax.

The flat sales tax would wind up being around 18% with 8% going to the state and 10% going to the feds.

That means if I buy a 100,000 car I would pay 18,000 in taxes on it.
A "Fair Tax" and no income tax?

Well, that will never happen. The government will NEVER drop income tax. Never.

A government will not drop a revenue source.

Fern
 
Jul 10, 2007
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Nobody has offered that strawman as being fair or reasonable.

So, uhh, what sort of spending would be taxed? Stocks, bonds, real estate? That's where big earners spend the majority of their money...

Purchases made outside the US, like buying my private jet in Bermuda? My beach house in the Bahamas? Do I pay taxes on the clothes I have custom tailored in London? What if I just sell my Aspen ski lodge to one of my corporate entities, call it a business expense, even though only my cronies and I are the only ones who will ever use it... any tax on that?

Like Guitar Daddy says, it's advocated for the rich, by the rich in an effort to shift the tax burden even further down the scale...

Hacp must think he's rich, or will be some day... Trust Fund?
i'm far from rich but i like the idea.
it gives us individuals direct control over how much we get taxed. it encourages savings.
it's just more fair.
 

Fern

Elite Member
Super Moderator
Sep 30, 2003
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-snip-

As for the black market, the IRS’s 2004 estimate of revenue lost due to tax evasion was over $260 Billion. Like any tax system, there will be tax cheats under the FairTax, but it will be much more difficult to do so. With the FairTax you will need two to tango, the buyer and the seller.
No, you don't need two to cheat on any fair tax system.

Google 'VAT fraud' and you'll the various methods employed, and it's big money too.

Otherwise, with a 'fair tax' only levied at retail level cheating becomes even easier.

An example:

Let's say it's a sales tax of 25% (many would argue to be revenue neutral it might be higher, particularly if you start exempting items and giving prebates)

For a $100 bucks I start a new corporation (you could do this without incorporating but this way it's easier to conceal your identity)

I open a store in a town somewhere. I sell products basically at cost. So, I sell a lot. I collect the 25% fair tax on these products. With my low costs (+25%) I sell about $500K worth of product.

While I collect the fair tax I do not remit it, so I keep $125K (25% of $500K) tax free.

Move, do it again etc.

One reason the VAT system taxes at every level, is to track products at every level. When the gov loses track of products fraud as I described above becomes very easy, likelwise for 'black market' operations.

As a CPA, I've seen occasions where local businesses go years without remitting the sales taxes they collect. I can think of one that got away with it completely.

I don't think that currently many 'steal' the sales tax, but as that rate becomes higher the temptation becomes greater.
-------------------

One thing that bothers me about the fair tax that no one mentions - the weathy are getting a huge exemption. They've already bought a ton of stuff, and it will never be taxed to them. People without much in the way of material possessions now will be hit with a tax on everything they buy.

That strikes me as unfair, and just another way to cement the existing the upper class and prevent others from reaching that level.

Fern
 
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Zebo

Elite Member
Jul 29, 2001
39,386
2
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Fair tax would be pretty much what we have now except I'd lower the 39% to 32% and make another bracket over 1M and call it 55%. LT Cap gains would be 28% or apply payroll taxes to them take your pick. Inheritance would be 100% over 3M 0% under that. Should not have dynasties.
 

werepossum

Elite Member
Jul 10, 2006
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460
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it'd be nice if people would actually figure out what it is they're arguing against before arguing against it.
No one on the Internet has that kind of time! LOL

I fear Fern is right - but then I can't see ANY Congress of either party throwing away its biggest fear tactic, fundraiser, and societal designing tool anyway. I think it's much more likely we'll get an additional fundamental tax or two, such as a VAT, imputed income tax, or a "wealth tax" on savings, which will require even more resources for compliance, include even more opportunities for an honest mistake to cost you big time, and allow the government to more finely tune its preferred winners and losers. This also allows government to alternately raise them - for instance, raise the income tax in 2012, institute a VAT in 2016, then raise the income tax again in 2020. Hey, we haven't raised income taxes in eight years! The more different tax revenue streams, the easier to hide the overall cost of government and the easier it is to reward your political allies and benefactors or to punish their competition.

I really think we're headed toward a Red China model of massive government and crony capitalism - only instead of executing crooks we'll give 'em a bailout. But the good news is there will be lots of American Idols, one or two for every night of the week, lots of sports, and every election will feature two government party candidates to choose from.
 
Jul 10, 2007
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First of all, under the FairTax, all goods and services are taxed except college tuition, and used goods. The prebate which is determined by family size, (for example: $415 per month for a couple and $559 for a family of four) is meant to offset the tax on necessity item such as food, clothing and utilities.

Prebates are fare because every legal citizen will receive the same prebate at the beginning of each month based on family size. Notice I said legal family.
doesn't obama want to extend amnesty to illegals currently in the US?
 

Fern

Elite Member
Super Moderator
Sep 30, 2003
26,907
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The other thing I don't believe has been mentioned yet is the effect this would have on our economy.

Such a large tax at purchase would have the effect to discourage purchases. Some mention this as a good idea. But purchases are what drives our economy. You'd better have another good economic model ready before you 'blow up' the current one. And the transition is gonna be a bitch.

To those who think it's a good thing to discourage purchases - (1) you have just as much control over how much (income) taxes you pay now, work less, make less, pay less, and (2) the government needs it's money and it WILL get it, if enough people curtail their purchases the gov will just keep jacking up the rate to get the money it wants. The gov will NOT do without. There's ZERO reason to believe the FairTax will alter the behavior of our government, and that spending behavior is the real root of our problem.

As for the simplicity, yes it will be easier on the average citizen. But it could be also that way with income tax. In many European countries most people don't even file income tax returns, whatever is withheld on your wages is your tax. In other countries like France, you just give the 'IRS' your W-2 etc and they prepare your tax return for you. We could have a far simpler system. But here again, the root problem is our government. They don't really want it simple, they're too busy handing out welfare money and disguising it as 'refundable credits' (because "welfare" is a politically unpopular term) and other bastardizations of our income tax system for their political purposes. I don't believe they'll ever give that up.

Fern
 

Fern

Elite Member
Super Moderator
Sep 30, 2003
26,907
173
106
-snip-
I really think we're headed toward a Red China model of massive government and crony capitalism - only instead of executing crooks we'll give 'em a bailout. But the good news is there will be lots of American Idols, one or two for every night of the week, lots of sports, and every election will feature two government party candidates to choose from.
Geez, I'm thinking that the 'tomorrow' you envision looks an awful lot like the 'today' I'm seeing.

Fern
 

Deudalus

Golden Member
Jan 16, 2005
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The other thing I don't believe has been mentioned yet is the effect this would have on our economy.

Such a large tax at purchase would have the effect to discourage purchases. Some mention this as a good idea. But purchases are what drives our economy. You'd better have another good economic model ready before you 'blow up' the current one. And the transition is gonna be a bitch.
It would be a boon on our economy because people like myself wouldn't be sitting on their wealth worried about what the IRS is going to do to them at the end of the tax calender.

Doubling sales tax is not that big of a deal. Me having to set aside 1/3rd or more of my income to sit in in a bank just to turn over to Uncle Sam at the end of the year is a drain on the economy.

I'd much rather save 1/2 of what I have to give Uncle Sam and spend the other half. That would stimulate the economy.

To those who think it's a good thing to discourage purchases - (1) you have just as much control over how much (income) taxes you pay now, work less, make less, pay less, and (2) the government needs it's money and it WILL get it, if enough people curtail their purchases the gov will just keep jacking up the rate to get the money it wants. The gov will NOT do without. There's ZERO reason to believe the FairTax will alter the behavior of our government, and that spending behavior is the real root of our problem.
They do the same thing now.

I would greatly prefer they raise a sales tax 2% across the board and me know about it than slip some obscure message into page 73,281 of our tax code via some random bullshit bill and me not know about it.
 
Jul 10, 2007
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(1) you have just as much control over how much (income) taxes you pay now, work less, make less, pay less
it's not easy for those working on annual salary. i can't exactly negotiate my hours and say pay me less if i come in less, or pay me more if i come in more more.

the best way i can manipulate my income right now is via my 401k contributions and deductions by itemizing my return.
neither of which is a good way because i can't touch my 401k (without penalty), and if i want to up my donations to reduce my taxable income, then i've lost that money anyway.

fair tax is better.
 

wiseoldowl

Member
Mar 23, 2010
29
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Roughly 18% from everything that I have read and understand.
The bill in the house is HR25. The tax rate is 23% inclusive. This means when you purchase an item priced for $1.00 you pay $1.00 and 23% or 23-cents goes to the government. The tax return the merchant must file will be very simple; line (1) enter total gross sales for the month; line (2) tax to be paid 23% of line (1)
 

werepossum

Elite Member
Jul 10, 2006
29,873
460
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Geez, I'm thinking that the 'tomorrow' you envision looks an awful lot like the 'today' I'm seeing.

Fern
LOL Yes, despite all the Tea Party rage I'm betting that tomorrow looks a lot like today, just more so. Cloudy with increasing socialism and government control. (Which aren't quite as scary as multiple American Idols, granted.)

I agree that some purchasing would be discouraged, but I think not that much. Remember, you'd suddenly have the additional income from your payroll taxes. The official line is that overall costs would stay the same, as the FairTax is designed to be revenue-neutral and thus the taxes removed equal the taxes added, but in actuality only American-made goods pay the bulk of the embedded taxes. Thus American-made goods would decrease in true adjusted cost while imported goods would increase in true adjusted cost.

If the federal government's soul revenue stream was the FairTax and we had health care divorced from the employer, then American manufacturers could compete on at least equal footing with other nations. (That would in fact be the only way I would ever support single payer health care.) A two-tiered system of import duties (comparable countries versus those with non-comparable, low labor costs and/or environmental regulations) could also be implemented as a way of protecting our standard of living, with of course the understanding that we could afford less stuff if it's not made in cheap labor countries. But of course that too would be subject to government financial gerrymandering and abuse.
 
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wiseoldowl

Member
Mar 23, 2010
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Why not simply exempt food/rent/utilities (NOT CABLE TV) from this?
Just collect it at time of sale and eliminate 99% of the IRS (gotta keep some to enforce the new health care legislation).
If you create a list of taxable and non taxable items, you open the door for tax lobbyists; plus, it is much simpler to tax everything and issuing a prebate to offset the tax on spending up to the poverty level.

With the prebate, everyone receives the same amount which is based on their family size and not their income. Since the wealthy are buying stake instead of hamburger and their electric bills are probably much higher, you would be giving the wealthy a larger tax break if you were to exempt such items.
 

Patranus

Diamond Member
Apr 15, 2007
9,280
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Patranus, the whole idea behind the FairTax was to eliminate the government's ability to unfairly reward or penalize using the tax code. Only two pieces of info are required - the total amount needed to fund government, and the federal poverty line for each family size. Everyone gets the pre-bate, everyone pays the same rate, everything new (including services) gets taxed. Once you start exempting things from the FairTax, it would rapidly become just another vehicle to reward and punish.
I really don't understand this idea of a "pre-bate".
The only thing that is accomplishes is more government bureaucracy.

There is a system in place with sales tax to not tax the "necessities of life". This cost nothing to implement and accomplishes the same thing.

Average annual expenditures is roughly $49,000 for 1 consumer unit consisting of 2.5 people.

If you eliminate the income tax that is roughly $63,000
~12% is spent on food
~34% housing
~11% retirement
~6% health care

So "essentials" cover roughly 66% of expenditures the remaining are on "luxury" items.

34% of $63,000 = ~$21,400 spent.

There are roughly 307,000,000 Americans so that equates to 123,000,000 consumer units each which could spend 2,632,200,000,000 total per year.

Now, the current federal budget is 3.5 trillion.

As you can see, this wouldn't work because if you taxes 100% of discretionary income, still cannot pay for the cost of government with a fair tax.

This figure also doesn't include state/local spending.
 

wiseoldowl

Member
Mar 23, 2010
29
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And you are now requiring the poor to save every receipt, every document, and every iota of information of every purchase they dollar they spend. Get real. Organizational skills aren't exactly the best among the poor for a reason. If they were, they wouldn't be poor now would they? QUOTE]

Under the FairTax there is no need to keep. It doesn't matter how much you earn or spend. What is your point?
 

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