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Fair Tax

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Deudalus

Golden Member
Jan 16, 2005
1,090
0
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You and I are both FairTax fans. But I must disagree with you on the state sales tax. It will not be included in the 23% federal tax. If a state has a sales tax, it will still be added separately from the federal sales tax.
I'm sure it will depend on how it works out.

23% is the highest sales tax I have heard of and from what I understood both were included.

Either way, even if it is close to 30% it would still be worth it to be rid of:

Income Tax
Death Tax
Medicare/Medicaid Tax
Social Security Tax
Payroll Tax
Capital Gains Tax

And on and on and on and on down the list.......
 

werepossum

Elite Member
Jul 10, 2006
29,873
460
126
Thank you for your answer.
The reason I asked the question is with the new, who is taking a hit. Who is the plan more "fair" for?

I am curious about how the tax burden shifts for everyone. Will the rich pay more or less taxes? Will the poor or middle class pay more or less taxes?
Most of that is quite hard to answer as the Fairtax does not treat people as groups based on income or wealth savings. For the poor - those at or below the federal poverty line - the short answer is that they make out like bandits because they are freed from all federal taxes, including the very "regressive" payroll taxes. The long answer is a bit more complicated, because since the Earned Income Tax Credit would also go away, the poorest people might not see much of a net advantage. In my opinion that is as it should be; such things should be handled by the states, as living expenses (and therefore the true poverty line) in rural Tennessee or Mississippi are radically different from those in urban New York or California.

For the rich, people like Warren Buffet, with very high incomes but comparatively low spending, will also make out like bandits. Conversely, trust fund babies like the Kennedy clan and high spenders like Paris Hilton will take a big hit as their expenditures near or exceed income, will be taxed at a higher rate, and can't be sheltered in tax-free municipal bonds. (Speaking of which, I can see municipalities taking a bit of a hit as well, as they will have to offer higher interest rates rather than tax-free earnings.) In general people whose income is primarily from capital gains (most rich people) will tend to pay higher rates if their expenditures are anywhere near income, and will pay less if their expenditures are significantly less than income. High earners whose income is primarily from wages (young doctors, celebrities, and professional athletes come to mind, but most of these people probably have tax shelters now) will see a tax break.

For the middle class, you'll get an immediate raise (your payroll taxes, roughly 13% - 14%) versus an immediate tax rate of 23% on new purchases. If your effective tax bracket (after deductions and exclusions) is roughly 10%, you'll theoretically break even. If your effective tax bracket (after deductions and exclusions) is over this level, you'll theoretically get a tax break. But within these generalities there will be significant differences in effective tax rates. The person that buys a new automobile will pay a higher effective rate than if he bought used. The person that buys American will pay a lower effective rate than if he bought imported goods. In theory the embedded taxes equal the FairTax, but that obviously isn't completely true because the income and payroll taxes are also being replaced and thus the effective embedded tax on a particular product varies with your income (and type of income - $100K of capital gains is taxed significantly less than $100K of wages.) Plus, marginal companies importing Chinese goods have very low embedded taxes compared to successful companies making goods in America - Caterpillar, for instance, would become much more competitive with imported equipment, whereas WalMart would be largely unaffected. So in reality, each individual's tax rate will vary considerably - but based on his or her choices, not on government's idea of who who should win and who should lose.

Forgot to add, state taxes are not included; the FairTax is strictly federal. Also, if actually implemented the FairTax might now be more like 30% because of our wild spending over the last decade, much lower tax revenues during the last couple years, and presumably continued high federal spending. However one way or another government must and will take the money. People who believe a federal government composed mostly of millionaires (or millionaires to be) is going to soak it to millionaires are in my opinion simply foolish, only people struggling to become millionaires will be hit hard. The truly wealthy will always have their shelters.
 
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Anarchist420

Diamond Member
Feb 13, 2010
8,645
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76
www.facebook.com
I don't see what's wrong with going back to what the Constitution originally intended--tarriff and excise taxes. A uniform tarriff (8.5% or so) and tax on the producing, selling, and purchase of excises would be good.

The FairTax sucks, and at 25% it's higher than the income tax for most people.
 

werepossum

Elite Member
Jul 10, 2006
29,873
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I don't see what's wrong with going back to what the Constitution originally intended--tarriff and excise taxes. A uniform tarriff (8.5% or so) and tax on the producing, selling, and purchase of excises would be good.

The FairTax sucks, and at 25% it's higher than the income tax for most people.
LOL The buying, selling, and purchasing of excises? That made me laugh.

The FairTax is of course both a tariff and an excise tax, in that it is a tax levied only on sales of imported and domestic goods and services. Until the Sixteenth Amendment no federal tax could be applied directly unless apportioned to each state according to its population by the census. Thus the FairTax is exactly returning to our Founding Fathers' idea of funding government. It looks obscenely high because government has grown obscenely big, but remember that you pay payroll taxes of almost 7%, and your employer has to pay a like amount, in addition to your income tax requirements. And of course the death tax, but that affects only the newly rich. The savvy rich shelter their estates in trusts, and most of us leave far too little money to pay the death tax. Interesting side note - during the medieval ages one's legal status, free or unfree, was a topic of hot debate because if you were unfree, you owed more services and/or rents to your lord and could not leave the land and your assigned work without permission. One big proof of your status in England was whether your parents had paid the death tax to the local lord, as free men could bequeath their estates at will but the unfree must pay a tithe (or best chattel, best suit of clothes, etc.) to the local lord for permission to pass their estates to their wives or children - and of course the lord retained the right to give your estate to another instead if he so wished. We are truly in the new serfdom - and we seem to like it, lining up with pennies in hand and necks properly noosed.
 

werepossum

Elite Member
Jul 10, 2006
29,873
460
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I meant buying, producing, and selling excises. Sorry about that.
Oh - I thought you were joking. An excise tax is simply a sales tax on a domestically produced product or service, although admittedly an excise tax is often collected at the initial sale (i.e. from the manufacturer, who passes along the cost as part of the cost of his product or service) and is usually levied individually, by product category. Like tariffs, excises are often levied on some products and services but not others, or at different rates. Taxes on domestically produced cigarettes are excise taxes, whereas taxes on imported cigarettes are tariffs or duties. For another example, in my own Tennessee every state-licensed corporation pays an excise tax of a few percent of taxable income - a sales tax on corporations - although it is barred from charging tariffs. Tariffs and excise taxes have the same effect on the cost to the consumer as do retail sales taxes - raising the cost of the product - but with the political benefit of being largely invisible to the voter.
 

wiseoldowl

Member
Mar 23, 2010
29
0
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I'm sure it will depend on how it works out.

23% is the highest sales tax I have heard of and from what I understood both were included.

Either way, even if it is close to 30% it would still be worth it to be rid of:

Income Tax
Death Tax
Medicare/Medicaid Tax
Social Security Tax
Payroll Tax
Capital Gains Tax

And on and on and on and on down the list.......
You are right it will be worth it no matter what. If you look at the actual bill HR25, it states the proposed federal rate is 23%. Also go to FairTax.org and go through their Q&A section.
 

QuantumPion

Diamond Member
Jun 27, 2005
6,010
1
76
People shouldn't be punished for consuming more. Maybe 12% FairTax, but 25% is ridiculous. Plus on top of that, 5% for state sales tax.
So punishing people for consuming more is bad, but punishing people for working harder and making more is good?
 

wiseoldowl

Member
Mar 23, 2010
29
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How do you think the FairTax bashers would react if the tables were turned? In other words, what if the FairTax was our current system of taxation and our federal government was trying to replace it with an income tax, a corporate tax, an estate tax, a gift tax, a capital gains tax and payroll taxes.

(1) Would they support this bill if they were now required to fill an income tax return by April 15th of each year?

(2) Would they support this bill if they were now subject to an IRS audit?

(3) Would they support this bill if the estimate to operate this new IRS branch was over $12-Billion each year?

(4) Would they support this bill if they were now required to keep track of all financial transactions, and failure to do so could be subject to fines, interest or even imprisonment?

(5) Would they support this bill if only certain people will be able to take advantage of certain loopholes; mainly wealthy Americans?

(6) Would they support this bill knowing they may need to hire a tax accountant because of the complexity of the new tax codes?

(7) Would they support this bill if it created a withholding and payroll tax that would reduce their take home pay by as much as 30 or 40 percent?

(8) Would they support this bill if taking on a second job to fill your family needs would result in a greater up-front percentage being deducted from their paycheck?

(9) Would they support this bill if they would no longer receive their monthly prebate check?

(10) Would they support this bill if it resulted in prices of goods and services to increase by 15 to 20 percent as a result of corporations passing on the new taxes they must now pay?

(11) Would they support this bill if the earnings from their investments were now taxed.

(12) Would they support this bill if the cost of college tuitions will no longer be tax free?

(13) Would they support this bill knowing that trillions of dollars of investments will move offshore resulting in a huge number of lost jobs?

(14) Would they support this bill because it would give more power back to government where it belongs.

(15) Would they support this bill knowing that lobbyists will now be able to offer favors to congressmen if they vote a certain way to alter this new code. (deductions for this or exemptions for that)

(16) Would they support this bill knowing it will be easier for the Federal Government to raise taxes by manipulate the code?

(17) Would they support this bill if it were 60,000 pages in length and consisted of 1200 plus different tax forms?

(18) Here is the best one. Would they support this bill if illegal aliens, and those profiting from the underground economy would no longer be paying taxes.

Do you think the FairTax bashers would start up a grassroots effort to support this new bill? I don’t think so.
 
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bobsmith1492

Diamond Member
Feb 21, 2004
3,875
3
81
Fundamentally a flat sales tax (I think that's what we're talking about?) makes sense; reward people for saving, investing, and producing; punish (tax) for spending.
 

werepossum

Elite Member
Jul 10, 2006
29,873
460
126
People shouldn't be punished for consuming more. Maybe 12% FairTax, but 25% is ridiculous. Plus on top of that, 5% for state sales tax.
Realize that, counting your payroll taxes, everyone with an effective tax rate of about 11% breaks even at the least, even if you spend every penny you make. Everyone with a low income tax rate should come out ahead, considering that the prebate will be greater than their actual spending. Those making more money and being taxed at a higher rate would pay less in tax if they live frugally, or pay more in tax if they live profligately. Although no tax plan can be a benefit to everyone, the intent of the FairTax is to be revenue neutral and value neutral. Society overall pays the same rate. You get the same prebate whether you are a bum or a millionaire. If you want to save, fine, it's tax free until you (or your children) spend it. If you want to spend it, fine, spend it. If you want to buy a house, fine, buy a house.

Freedom is good. I don't think a majority of Americans will ever again prefer freedom to the triple-breasted woman that is government, though.

One caveat, though - we cannot come close to funding our current and projected levels of government spending at 23%, any more than we can come close under our current tax scheme. We simply do not have the discretionary income nor the wealth production. Funding this level of government, once it cannot be done on credit, will require a drastic reduction in what we tend to consider our non-discretionary income - the size and cost of our housing, our food, our automobiles, our energy use. In other words, our standard of living.
 
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ShawnD1

Lifer
May 24, 2003
15,990
2
81
....

25-30% of the cost of a purchase, so unless you spend as much as you make, you're stating a moot point.
Roughly 2/3 of Americans spend every dollar they make.
http://hr.cch.com/news/hrm/100906a.asp

Some Americans actually spend more than their income.
http://articles.sfgate.com/2006-01-08/business/17275537_1_savings-rate-personal-savings-red-ink

This is especially true for students. Right now my tax rate is 0% because my tax deductions cancel out my income tax. If we switched to a sales-tax only system, I could see a taxation rate of about 25% on my savings. I'd probably get it back when filing taxes for the year but that's still several thousand dollars out of my bank account for a period of time. If I happen to be living on borrowed money, I still need to pay interest on that sales tax that I'm getting back. Fucking bullshit.
 

BurnItDwn

Lifer
Oct 10, 1999
25,678
1,199
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That makes sense, but why have prebates or tax exemptions?
Maybe it's so the obscenely rich still have their loopholes so that they can get out of paying taxes. (I don't mean people who make 500K ... as they are getting shafted by the IRS, I mean people who make 5M or more ..... who have teams of accountants, lawsmiths, and advisers figuring out how to not have to pay any tax, while still not having to go to jail)


Maybe prebates could replace food stamps or the like???

Dunno honestly .....
 

werepossum

Elite Member
Jul 10, 2006
29,873
460
126
Roughly 2/3 of Americans spend every dollar they make.
http://hr.cch.com/news/hrm/100906a.asp

Some Americans actually spend more than their income.
http://articles.sfgate.com/2006-01-08/business/17275537_1_savings-rate-personal-savings-red-ink

This is especially true for students. Right now my tax rate is 0% because my tax deductions cancel out my income tax. If we switched to a sales-tax only system, I could see a taxation rate of about 25% on my savings. I'd probably get it back when filing taxes for the year but that's still several thousand dollars out of my bank account for a period of time. If I happen to be living on borrowed money, I still need to pay interest on that sales tax that I'm getting back. Fucking bullshit.
You would not get it back - you would not file federal taxes. (Of course, under glorious new revolution you will have free college anyway.) People who are living off of savings would definitely take a hit if we switched to the FairTax, although by design the cost of goods (at least American-made) would also decline due to the embedded taxes as well as removal of the considerable cost of tax compliance.

But on a larger note, you can't possibly think that developing tax policy for the benefit of those who spend all they make or more is a good idea. That just promotes a society on the brink of collapse.
 

nonlnear

Platinum Member
Jan 31, 2008
2,497
0
76
But on a larger note, you can't possibly think that developing tax policy for the benefit of those who spend all they make or more is a good idea. That just promotes a society on the brink of collapse.
There are plenty of people in places of power who believe that a society on the brink of collapse is a very good thing. A crisis is a terrible thing to waste!
 

werepossum

Elite Member
Jul 10, 2006
29,873
460
126
There are plenty of people in places of power who believe that a society on the brink of collapse is a very good thing. A crisis is a terrible thing to waste!
So true. A man one paycheck away from financial disaster is a man who really needs big government.
 

ShawnD1

Lifer
May 24, 2003
15,990
2
81
You would not get it back - you would not file federal taxes. (Of course, under glorious new revolution you will have free college anyway.)
College is already damn near free in Canada (entire year's tuition was $4200, and that includes everything). What kills my savings is everything else. I pay almost $600 just to ride the bus for 8 months. I still need to buy new clothes when my clothes wear out. I still eat food. I still eat fast food as well. I still pay rent. The cost of living doesn't magically decrease when people decide to stop working and go back to school.

The only thing that separates working people and students is income. One of my ex girlfriends was a registered nurse and her lifestyle was very similar to most students. She lived in a small single bedroom apartment. She did not own a car. She mostly cooked her own food. She took the bus everywhere. How can the Fair Tax differentiate between my registered nurse friend with a very good income and a student like me with no income at all? We're buying the exact same things!
 

wiseoldowl

Member
Mar 23, 2010
29
0
0
Roughly 2/3 of Americans spend every dollar they make.
http://hr.cch.com/news/hrm/100906a.asp

Some Americans actually spend more than their income.
http://articles.sfgate.com/2006-01-08/business/17275537_1_savings-rate-personal-savings-red-ink

This is especially true for students. Right now my tax rate is 0% because my tax deductions cancel out my income tax. If we switched to a sales-tax only system, I could see a taxation rate of about 25% on my savings. I'd probably get it back when filing taxes for the year but that's still several thousand dollars out of my bank account for a period of time. If I happen to be living on borrowed money, I still need to pay interest on that sales tax that I'm getting back. Fucking bullshit.
Since you have no idea of how the FairTax works, why don’t you study up on it before you make your uneducated comments. Number one, savings under the FairTax are not taxable. Number two, saying you would probably get it back when filing taxes for the year but that’s still several thousand dollards out of your account for a period of time MAKES NO SENSE. There are no forms to file. The only thing you get back is the prebate and that comes automatically at the beginning of each month. Since you are a student the prebate will probable cover the tax on most everything you buy.
 

ShawnD1

Lifer
May 24, 2003
15,990
2
81
wiseoldowl said:
The only thing you get back is the prebate and that comes automatically at the beginning of each month. Since you are a student the prebate will probable cover the tax on most everything you buy.
What is my cost of living? You're the government and I'm the person you're sending the prebate to. How do you know how much should be given to me? Right now it's as easy as the government not taking any money in the first place (I don't pay income tax since I have no income). Under your Fair Tax idea, the government gives me money based on how much they think I'm going to spend? I want you to try doing this. Honestly guess what my living expenses are. If you can't do it, then the government probably can't do it right either.


Number one, savings under the FairTax are not taxable.
So your suggestion is that the government should somehow be able to monitor what goes in and out of my bank account in order to determine which money is savings and which money is not savings? That's really the only way this could be done. If they're not monitoring my bank account and I'm not filing taxes to explicitly tell them what I'm earning and spending, how do they know when I'm spending my savings and should be given a tax rebate for this amount?
 

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