FairTax Plan

[TipsyMcStagger]

Originally posted by: Lazy8s
It's a good idea and is we were starting a new country it would be worth a try. The problem is it taxes people twice. Anyone who has had their money taxed this supposed 23% already would then have it taxed again when they spent it. I doubt any retired people would appreciate their entire life savings getting taxed twice. And don't say they can just buy used, someone shouldn't have to buy everything used just because we change tax plans. I live in atlanta and I called Boortz to ask this. Needless to say when I told Belinda my question I didn't get put on the air.

When you're talking about the "taxed" twice concept, you're not considering the removal of embedded taxes within the company (corporate income tax, the costs to consult and comply with the tax rules which companies pay CPAs at about the same price as lawyer rates, payroll taxes etc.). When those are removed, the company can actually sell their product at a lower price and earn the same profit. The amount of embedded taxes eliminated is roughly the same % as the % sales tax rate under the fair tax plan - hence the price remains the same. Belinda probably didn't put you on the air because he explains the concept about once a week already.

For people bitching about their savings being taxed twice (ROTH IRA's). Can't congress can change the tax rules on those anyway? It's not exactly set in stone. In the future they could pass tax law to exclude people receiving over a certain dollar amount from their ROTH IRA per year from receiving any social security benefits (scoff as you will about the likely meager social security benefits, but the lack of receiving those in terms of cash flow could be like getting hit with a 20-30% tax on your distributions). There's no guarantee that your ROTH won't be "taxed twice" in the future under the current system.

 

[mugs]

Originally posted by: TipsyMcStagger
For people bitching about their savings being taxed twice (ROTH IRA's). Can't congress can change the tax rules on those anyway?

Most of my life savings is not in any kind of account with tax advantages.

 

[Lazy8s]

Originally posted by: TipsyMcStagger

Originally posted by: Lazy8s
It's a good idea and is we were starting a new country it would be worth a try. The problem is it taxes people twice. Anyone who has had their money taxed this supposed 23% already would then have it taxed again when they spent it. I doubt any retired people would appreciate their entire life savings getting taxed twice. And don't say they can just buy used, someone shouldn't have to buy everything used just because we change tax plans. I live in atlanta and I called Boortz to ask this. Needless to say when I told Belinda my question I didn't get put on the air.

When you're talking about the "taxed" twice concept, you're not considering the removal of embedded taxes within the company (corporate income tax, the costs to compare and comply with the tax rules which companies pay CPAs at about the same price as lawyer rates, payroll taxes etc.). When those are removed, the company can actually sell their product at a lower price and earn the same profit. The amount of embedded taxes eliminated is roughly the same % as the % sales tax rate under the fair tax plan - hence the price remains the same. Belinda probably didn't put you on the air because he explains the concept about once a week already.

For people bitching about their savings being taxed twice (ROTH IRA's). Can't congress can change the tax rules on those anyway? It's not exactly set in stone. In the future they could pass tax law to exclude people receiving over a certain dollar amount from their ROTH IRA per year from receiving any social security benefits (scoff as you will about the likely meager social security benefits, but the lack of receiving those in terms of cash flow could be like getting hit with a 20-30% tax on your distributions). There's no guarantee that your ROTH won't be "taxed twice" in the future under the current system.

You are right. He gave the explination you gave about twice a week already when the book first came out and it not only ignores the question but it assumes everyone will ignore fundamental economics. I mean he even tried to get companies to pledge to lower sales costs to get the idea to sell. The simple answer is: Yes you get taxed twice. Boortz blazes past that by trying to convince you that companies will reduce the cost of their items by the 23% because this is a free market. The fact of the matter is a lot of markets (telecom anyone?) are not truly free markets, a lot of markets have artificial demand markups (diamonds) and anyone who has taken Econ 102 knows that no company in the world is going to see that people now have a much larger disposable income and continue to charge the same amount. It's how we get inflation. In case you missed what inflation is, the more money people have to spend the more companies raise prices. If you really buy Boortz's argument you are overlooking one of the most fundamental forces in the world economy. I understand why people like the idea of the Fairtax but the bottom line is there is no way to implement it that doesn't screw anyone that has already earned a taxed income.

Sure we MIGHT get taxed twice now but at least it's not guaranteed, that's not really an argument. I mean we MIGHT get wiped out by a global flood if the polar ice caps melt but we aren't all eating the barrel of a gun as a better alternative.

 

[Throckmorton]

I don't get why people say prices will be the same. That might be true if the FairTax was replacing taxes on businesses, but it also has to replace income tax...

 

[JS80]

Originally posted by: Turin39789
won't work and will never happen. just another fantasy to give us a nef thread.

Personally I think we should have unicorns give birth to golden griffons and use those to pay for our government. Is as likely to happen.

Actually the plan WILL work, but will never happen because it's not in the politicians' interest to do so. Politicians are elected solely to target a group of voters and promise them something by stealing from another group of voters, and taking this away from them would actually require politicians to do some real value added work.

There are too many special interest groups that draw from the well for this to ever get enacted. I would dare to venture that another revolution would be needed for something drastic like this to happen.

 

[BoomerD]

It's not in the interest of MOST Americans for the Fair Tax to go through.

it sure sounds good, but the devil is in the details, and the rich are the only ones who will really benefit from such a taxation scheme.

 

[JS80]

Originally posted by: BoomerD
It's not in the interest of MOST Americans for the Fair Tax to go through.

it sure sounds good, but the devil is in the details, and the rich are the only ones who will really benefit from such a taxation scheme.

You are wrong. Here is the structure:

Current
Poor people: pays no income taxes. Pays sales tax.
Middle class: gets dicked - no tax shelters, pays the most.
Upper Middle class: gets dicked - AMT kills any tax deductions they have.
Ultra Rich: pays no taxes through tax shelters.

FairTax
Poor people: pays no tax. Their prebate check will cover any fairtax they pay on goods.
Middle class: can choose to pay no tax by saving money. More incentive to make more, invest, accumulate wealth.
Upper Middle class: same as middle class.
Ultra Rich: no more tax shelters. Larry Ellison wants to buy a $500 million yacht? bam pay 23%. $1 million buggati? 23%. Lobster dinner with kobe steak? 23%. No more tax shelters.

 

[Specop 007]

Originally posted by: foghorn67
Spending has to be cut. Bottom line. Nobody seems able to do that.

Missed the latest thread in P&N about Bush stopping childrens healthcare?

Most of the idiots over there just cant come to grips with the fact we need to cut spending. They just want to spend spend spend.

 

[Queasy]

Originally posted by: JS80

Originally posted by: BoomerD
It's not in the interest of MOST Americans for the Fair Tax to go through.

it sure sounds good, but the devil is in the details, and the rich are the only ones who will really benefit from such a taxation scheme.

You are wrong. Here is the structure:

Current
Poor people: pays no income taxes. Pays sales tax. Hammered by payroll taxes
Middle class: gets dicked - no tax shelters, pays the most. Hammered by payroll taxes
Upper Middle class: gets dicked - AMT kills any tax deductions they have.
Ultra Rich: pays no taxes through tax shelters.

FairTax
Poor people: pays no tax. Their prebate check will cover any fairtax they pay on goods.
Middle class: can choose to pay no tax by saving money. More incentive to make more, invest, accumulate wealth.
Upper Middle class: same as middle class.
Ultra Rich: no more tax shelters. Larry Ellison wants to buy a $500 million yacht? bam pay 23%. $1 million buggati? 23%. Lobster dinner with kobe steak? 23%. No more tax shelters.

Added italics.

 

[Linflas]

I am for it only if the the 16th amendment to the Constitution is repealed. If that does not happen I guarantee we would be lucky if it took 5 years for the idiots in Congress to re-establish an income tax on "the rich" so they would pay their "fair share".

 

[ElFenix]

Originally posted by: mugs
I'm still getting taxed more than people who don't have money saved no matter how you look at it. I can buy the same $50 worth of stuff as some guy with no savings under the FairTax, but I'm buying it with money that has already been taxed (income tax) and the other guy is buying it with money that hasn't been taxed.

you're focusing too much on the legal burden of who pays the tax, rather than who actually pays the tax. if the cost of goods goes down so much that the price is the same pre and post fair tax, what is the difference to you?

 

[Queasy]

Originally posted by: Linflas
I am for it only if the the 16th amendment to the Constitution is repealed. If that does not happen I guarantee we would be lucky if it took 5 years for the idiots in Congress to re-establish an income tax on "the rich" so they would pay their "fair share".

The language in the Fair Tax bill is written so that the Fair Tax would not be enacted until the start of year after the 16th amendment is repealed.

An income tax could still be added back though. Just like an VAT or federal sales tax could be added right now. The only reason they aren't is because the Congress Critters know that this would seriously piss off the voters and they like their positions of power. That's why they scheme and plot behind closed doors and pick specific targets to raise taxes on. The general public doesn't realize that if Congress raises taxes on business that the business aren't paying the taxes. The general public doesn't care if the Congress raises taxes on the 'rich' because most people aren't 'rich'.

 

[TheAdvocate]

Propaganda for the "massive middle class tax increase" that it is.

It's already been explained here numerous times, but the same dittoheads keep ignoring it.

Look at who the sponsors are for this plan - the super rich. Tell you all you need to know, if you have any concept of self interest.

 

[imported_Lothar]

Originally posted by: Queasy

Originally posted by: Lothar

Originally posted by: Queasy

Originally posted by: Glavinsolo
2) When products that have embedded taxes are changed over to fairtax system how exactly will we know they are at the same price point when those taxes have been taken out. It would be an easy way for companies to artificially raise the price of their good or service.

The same market forces that are in play today that drive prices down will be in play after the Fair Tax. One example used is that of the airline industry after one federal tax was removed from all airlines. It took less than a day for the marketplace to reduce ticket prices because one airline dropped their prices with the tax while others thought they could keep it the same. The other airlines quickly followed suit and dropped prices.

The pressure to drop prices by the amount of embedded taxes that are removed will likely be great because the public will know and will be putting pressure on those companies to do so.

That would not work in industries with little to no competition.

Microsoft will cut prices of Vista by 30% after this "FairTax" law is passed?
My electric company and Comcast will reduce my bills by 30%?

Wishful thinking...

MS - who knows. they march to the beat of their own drummer. public pressure may come into play though.
Electric company - likely because of public pressure reinforced by gov't pressure.
Comcast - competition from satellites and phone companies plus public pressure plus FCC pressure.

1.) Microsoft has no reason to lower Vista prices. Public pressure/competition? Linux hasn't even made a single dent in Windows market share.

2.) My electricity market has already been deregulated. Public pressure didn't work here either. There is only one supplier of electricity in my area

3.) Comcast is a monopoly in MANY apartment complexes.
~10-13% of the profit Comcast reports each year alone is from exclusive deals with apartment complexes.


What I find disturbing is the idea that people supporting the "FairTax" are saying it will automatically lower prices by the same amount.
Is there something mandated within the proposed "FairTax" legislation that will automatically require all companies to lower prices by 25-30% after it's passed?
If companies don't comply will they be fined? The bill in the current form doesn't seem to have any teeth for industries that are monopolies/duopolies.