Winners and Losers under the 'FairTax'

hripka | September 28, 2005 | self

[Always Right]

The next question is why would the fairtax expert ASSUME you will take a cut in pay? Simple, because if they don't, the fairtax will result in an immediate 15-20% inflation. See in order for prices to stay the same, ALL taxes must come out of the products, including all the federal taxes employees pay. It is all part of the deception of what fairtaxers call 'embedded taxes'. Those taxes include employee paid taxes, which they forget to tell you. This is why Boortz issued somewhat of a retraction to all his glowing claims.

[Sprite518]

1) it is the Latter because the Fair Tax is only applies in the US under new and retail purchases....

2)Yes, but the prices would be offset by the Embedded taxes..

3)The GDP is actually over 12.5 Trillion and not 11. What is the best way to increase tax revenue? It is not to raise taxes because that slows growth. It is to lower it because that allows more tax papers. For instance, business can hire more people thus more tax payers.

[balrog666]

If an employer is saving money by no longer having to pay employee FICA taxes(I believe its 7.5 percent),

That's 7.65% of payroll costs. If payroll is 30% of your total costs, that's all of a 2% change in your costs. Big whoop.

along with various other taxes....

That would be FUTA, another 0.8% of payroll. No big change there either.

So, just who is "lying" here?

[Sprite518]

When you wrote,

"If they don't, the fairtax will result in an immediate 15-20% inflation."


WOW what a range 15 to 20%! That is a 5% difference.......

Why are you assuming that 15 to 20% embedded cost are employees salaries? Even if that was the case, then employers could reduce that at any time. They would not have to have a fair tax. That is bogus point and you know it.

However, when you wrote,

"See in order for prices to stay the same, ALL taxes must come out of the products, including all the federal taxes employees pay."

That is correct, and this is how they come to that 23%....

Why is this so hard for you to understand?????

[samm1148]

Everyone on this thread has it wrong. The current problem is spending, not taxation. My take on this is: If this Fair Tax is instituted prices of consumed items rise. People will be probably be given a choice of either the old tax code or new. (I think that is what the Fair Tax proponents are shooting for?). As those clinging to the old code see prices rise and their friends take home checks increase they will switch over.

Then low and behold the Congress will come along and say we must build every hurricane/terrorist attack/ tornado survivor a mansion with tax dollars, we must have the internet up every child's a** and oh by the way Congress needs another pay raise.

So whoop bang the old tax code MINUS deductions will return. (Why do you serfs need those deductions anyway...we gave you a Fair Tax?)

The answer is controlled spending. I'd rather see an amendment to the Constitution limiting spending and oh by the way if you want to address taxes make it a requirement to have a super majority in both Houses EVEN IN TIMES OF NATIONAL EMERGENCIES to okay any tax hike.

[Always Right]

Why are you assuming that 15 to 20% embedded cost are employees salaries?

Where did I make that assumption? I did not. What I am saying is most of the embedded tax (not 'embedded costs' as you are trying to define some new term that your experts did not use) is borne by individuals. Individuals pay over $1.3 Trillion of the $1.8 Trillion of federal taxes.

[Always Right]

Everyone on this thread has it wrong. The current problem is spending, not taxation

Exactly. Cut spending. The way the government extracts the money is secondary.

[Sprite518]

You still missed my point......


If a company saves a lot of money instantly because they no longer have to pay that employees taxes, then why would they cut an employees income?????? The company just saved a lot of money by no longer having to pay those taxes, oh on top of compliance cost

[Sprite518]

You said it in Post 81 second line..

[groanup]

The FairTax Plan is snake oil and until the proponents are willing to argue their plan honestly there is no real point in debating it.

Let's take your post one step at a time:

But anyone who saved money before after paying taxes on it, will be HURT because the same money will be taxed again when it is useed for consumption

He says, conveniently omitting the fact that the MAJORITY of retirment money is in qualified accounts and the owners of those accounts have a huge contingent tax liability on them when they retire and begin to withdraw money. That liability would be wiped away by the fair tax. I'm sure that omission is simply neglect.

John Linder refers to the FAIR TAX very often as a "tax on accumulated wealth". He did this again last week on the air with Boortz at a luncheon with FairTax supporters in the audience.

How is it anything but a tax on accumulated wealth? That is the one true feature of the fair tax that everyone should be able to agree on. Tax me when I spend my money not when I'm trying to earn it. Let me build up a nest egg first and then you can have some of it when I spend (over and above basics). The greatest feature of the fair tax. It penalizes conspicuous consumption not the fruits of one's labor.

He also stated that he can't believe the Democrats are not all for it because it will heavily impact people like Teresa Heinz-Kerry who have a lot of money accumulated. They continue to refer to the plan as a financial "bonanza" even though obviously there can't be a bonanza for everyone and collect the same amount of money.

Is this not true? It is a well known fact that Heinz-Kerry lives off of the income from municipal bonds. That means she is paying NO income taxes while I'd venture to say almost everyone on this thread is working until May or June for the Federal Govenment. Under the fair tax Kerry would pay her fair share or go without the finer things (as they say).

The financial bonanza is documented by the very same economist you guys are endlessly quoting in your rebuttals to the wage/price debate. Or are you just selectively quoting?

Is there snake oil about?

[balrog666]

You still missed my point...... If a company saves a lot of money instantly because they no longer have to pay that employees taxes, then why would they cut an employees income?????? The company just saved a lot of money by no longer having to pay those taxes, oh on top of compliance cost

You missed it completely. If the employee keeps his entire salary, the company saves a whopping 2%. Big whoop.

And no price change results, so prices go up 30% to the consumer, so consumption falls, so tax revenues fall, so the FAIRTAX tax rate goes up. Rinse, lather, repeat.

And there are no compliance savings. The company still compiles and reports payroll to the Social Security Administration and still computes its profit & loss.

[Sprite518]

"The current problem is spending, not taxation. "

What country are you living in? Perhaps you work for the government?

"prices of consumed items rise"

How in the world did you come up to this conclusion?

"
The answer is controlled spending. I'd rather see an amendment to the Constitution limiting spending and oh by the way if you want to address taxes make it a requirement to have a super majority in both Houses EVEN IN TIMES OF NATIONAL EMERGENCIES to okay any tax hike"

Agree here but I still think we are an over taxed society..

[groanup]

Everyone on this thread has it wrong.

No question about it. But the debate here is about the method of taxation. You need to start another thread if you want to go off topic.

[Blood of Tyrants]

Like I said, if you are give with even PART of the reason being that you get a deduction then it is a selfish reason. I give whether I get a deduction or not.

[Blood of Tyrants]

Maybe because he is an accountant who makes a living off of a 300,000 page tax code.

[Always Right]

You said it in Post 81 second line..

Ummmm, no I said nothing about embedded costs in the second line. I was talking about inflation, which is mostly due to the 30% sales tax you are adding to the costs of goods.

[RobFromGa]

Rob, when these small business owners come to you to have their taxes done, I am sure they are concerned with how they pay taxes and how much they pay. You keep telling them that they can't live without your services.

I am a small businessman who pays an accountant less than $600 per year to do my annual corporate taxes. I do the quarterly returns myself and it takes about two hours per quarter total. I do my own 1040 and it takes about 8 hours. I will not save anything substantial in compliance costs with the FairTax and most small business is the same.

[RobFromGa]

The financial bonanza is documented by the very same economist

Please provide a link to Jorgenson's claims of financial bonanza.

[Sprite518]

Yes he is benefiting off the current tax code. So I guess I can see why he does not want a change? However, I do not think he is an accountant. I remembering him mentioning something about being involved in building new homes..

[Blessed]

>Retirees will take it in the rear under the fair tax. All the money they saved over their whole career will overnight see a reduction in purchasing power of roughly 20%.<

But they will have 20% more money available because they will pay no income tax on the distributions from their 401K plans.It becomes a wash for them except they gain flexibility and have more total assets.