Posted on 02/11/2006 8:54:52 AM PST by Eaglewatcher
Recent letters have expressed concern that the poor or middle class might be harmed by adoption of the FairTax (www.FairTax.org) based on a deep misunderstanding of both the FairTax and the current system. We cannot assess the effects of the FairTax without comparing it to the reality of our current income and payroll tax system.
One cannot buy a loaf of bread without paying the income taxes of the baker. The price of that loaf of bread contains the cost of the flour, and the income of the baker, but it also contains the taxes the baker pays. After all, the baker does not have a money tree from which to pluck dollars to pay his taxes, he must get those funds from his customers, like any other business.
Further, the price of that loaf of bread contains the taxes of the miller, the farmer, the trucker and the grocer and those of all their employees. Those income and payroll taxes cascade through the production process and eventually make up more of the cost of that loaf of bread than the profits of any of those who worked to produce that bread.
Those many layers of taxes on productive work make up the embedded tax component of the price of bread or any other goods or services we buy. On average, that embedded tax component is 22.4 percent of the price of everything we buy, from a loaf of bread to brain surgery. So, the true tax burden on the working poor is 28.4 percent, (their FICA tax of 7.65 plus plus 22.4 percent of their remaining take-home pay, which goes to pay the embedded taxes hidden in the price of everything they buy).
Even if the poor paid the entire 23 percent FairTax, they would be better off than now, but they don't. The FairTax provides a rebate of all tax paid on spending up to the federal poverty line to everybody. This cancels out all taxes for those living at or below the poverty line, $25,660 a year for a married couple and two children.
For the same family earning twice the poverty line ($51,320), half their taxes are rebated, yielding an effective rate of 11.5 percent. And even at triple the poverty level, $76,980, their effective rate is only 15.3 percent, still far better than the 28.4 percent the poorest of the poor pay now.
So, who loses? The idle rich, illegal aliens, criminals, "off-book" workers and others who escape the current system through evasion or legal loopholes. Tax lawyers and lobbyists who make their livings from the complexity of the current system will also come up short. Foreign goods sold in the U.S. will no longer get a free ride while production of American-made goods and services bear the whole tax burden.
But those of us who work for a living, or who get by on a fixed income, will be far better off.
Tabor, of Chesapeake, is co-state director for FairTax.org in Virginia.
You are the only one providing this hype, strawboy.
Besides, today the IRS must keep track of all earners...over 100 million people? Even with all the small businesses, there are far fewer than that...so it would reduce the number of folks to monitor, plus making it much more simple to monitor--hence cheating rates should actually go down.
Where do I sign up? I'm all for it.
You're basically right - and check the link I gave in #52 to quantify that.
In addition - though often not mentioned - is the fact that the illegal economy which now evades the income tax will becomes losers under the Fairtax since hey'll pay when they buy at retail. In addition, the economy will expand greatly offering far more benefits to most people.
Even the prebate helps many.
Maybe you're not smart enough to understand? Why not indicate something specific?
No, they're not - at least not the payroll part of things. Payroll costs will be passed on in the cost of things just as at present.
there is plenty of room from the business income tax and compliance cost side of things for prices to drop considerably, though.
THere is nothing indicating that prices will be higher at all. There is plenty of evidence indicating the prices will remain nearly constant.
If you haven't already seen this thread, you should look here, to see where the whole fallacy of the price drop is exposed as a massive misrepresentation of $1.3 Trillion in revenue which is double counted as both price drops and wage increases:
| JORGENSON EXPLODES FAIRTAX MYTH (FR Exclusive) |
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| Posted by RobFromGa On News/Activism 08/25/2005 12:40:44 AM EDT · 703 replies · 9,234+ views |
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Yeah, OK, if you say so.
This illegal economy is paying taxes right now whenever they purchase something at retail-- because they are paying the embedded taxes. THey will continue to pay these same taxes under FairTax but they won't be hidden to use your words.
THings that they buy illegally will still not be taxed under either plan.
Nam Vet
I would think that someone who is idle would spend alot less than someone trying to run a business.
Why not indicate something specific? Can you?
Someone please contact me when NOTAX.org is being taken seriously, because the only fair tax is NO TAX!
Whose taxes are they paying? Not their own taxes. They're paying for the taxes and tax costs of suppliers in the chain of production.
So currently, the illegal income earner pays only the embedded tax costs in prices we all pay which represent the taxes and tax costs of the production chain. Where do illegal income earners pay their share of FICA and their own income taxes?
THey don't.
Under the nrst they would pay their full share of taxes when they buy legal stuff.
big spending rich people like britney spears will be hit, I doubt some idle rich guy with millions in the bank that does nothing but watch tv all day long will pay a dime.
the people who will really be hit are small businesses who purchase tremendous amounts of products but don't make much profit.
Actually, the amount of retirment savings inside IRA's and 401 k's dwarfs the amount in taxable accounts. This point has been made to these SQL's (status quo lovers) over and over again but they ignore it because it erodes one of their favorite bogus arguments.
Are you looking for a tax scheme to help you out personally? That is not the intent of the nrst - it is the intent of the income tax. Support the income tax all day if you like.
And hope the hell the business man will voluntary lower the price of that loaf of bread after he has the luxury of paying lower taxes.
Do you think business will voluntarily lower prices? That would be stupid. He will be forced to do so or go out of business (supposing he's in a competitive market - 'course if he's in a monopoly he already charges what he pleases).
The simplest answer is limit the tax code to one 8 1/2 by 11 page of instructions with twenty blanks to fill out on the one page form to mail in!!!!!!! Cutting BS is always the simplest way.
Where do I sign up? I'm all for this.
Can you explain why you believe this?
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