Posted on 04/04/2006 2:17:28 PM PDT by Eaglewatcher
The FairTax (HR 25 in the US House and S 25 in the US Senate) is a federal retail sales tax that replaces the entire federal income and Social Security tax systems, including personal, gift, estate, capital gains, alternative minimum, Social Security/Medicare, self-employment, and corporate taxes. The FairTax allows Americans to keep 100 percent of their paychecks (minus any state income taxes), ends corporate taxes and compliance costs hidden in the retail cost of goods and services, and fully funds the federal government while fulfilling the promise of Social Security and Medicare.
More FairTax benefits:
No tax on used goods. No tax on business inputs. With the FairTax, if you choose to buy any new good or service, the sales tax is charged just as state sales taxes are computed today. If you choose to buy used goods - used car, used home, used appliances - you do not pay the FairTax. If, as a business owner or farmer, you buy something for strictly business purposes (not for personal consumption), you pay no FairTax. So, in deciding what to buy, you get to choose whether or not you pay the FairTax.
No federal sales tax up to the poverty level means progressivity like today's tax system. Furthermore, to ensure that no American pays tax on necessities, the FairTax plan provides a prepaid, monthly rebate for every registered household to cover the consumption tax spent on necessities up to the federal poverty level. This, along with several other features, is how the FairTax completely untaxes the poor, lowers the tax burden on most, while making the overall rate progressive. However, the FairTax is progressive based on lifestyle/spending choices, rather than simply punishing those taxpayers who are successful. Do you see how much freer life is with the FairTax instead of the income tax?
All Americans take home their whole paychecks. Not only do more Americans have jobs, but they also take home 100 percent of their paychecks (except where state income taxes apply). No federal income taxes or payroll taxes are withheld from paychecks, pensions, or Social Security checks. Retail prices no longer hide corporate taxes or their compliance costs, which drive up costs for those who can least afford to pay. Did you know that hidden income taxes and the cost of complying with them currently make up 20 to 30 percent of all retail prices? It's true. According to Dr. Dale Jorgenson of Harvard University, hidden income taxes are passed on to the consumer in the form of higher prices - from 20 to 30 percent higher than they would otherwise be - for everything you buy.
Tax criminals - don't make criminals out of honest taxpayers. Today, the IRS admits to 25 percent non-compliance with the code. However, this does not take into account the criminal/drug/porn economy, which conservative estimates put at one trillion dollars of untaxed activity. The FairTax taxes those engaged in the underground economy capturing their income at the cash register. The substantial decrease in points of compliance - from every wage earner, investor, and retiree, down to only retailers - also allows enforcement to concentrate on following the money to criminal activity, rather than making potential criminals out of every taxpayer struggling to decipher the code.
The income tax exports our jobs, rather than our products. The FairTax brings jobs home. Most importantly, U.S. exports are not burdened by the FairTax, as they are with the current income tax. So the FairTax allows U.S. exports to sell overseas for prices 22 percent lower, on average, than they do now, with similar profit margins. Lower prices sharply increase demand for U.S. exports, thereby increasing job creation in U.S. manufacturing sectors. At home, foreign imports are subject to the same FairTax rate as domestically produced goods. Not only does the FairTax put U.S. products sold here on the same tax footing as foreign imports, but the dramatic lowering of compliance costs in comparison to other countries' value-added taxes also gives U.S. products a definitive pricing advantage which foreign tax systems cannot match.
YOU are in charge! The FairTax moves us from a system that taxes what we earn to a system that taxes what we spend. Under the FairTax, you control your tax liability, not the government. The FairTax puts "we the people" in charge of our money, and puts us all on the path to economic freedom!
To enact the FairTax and unleash the full economic potential of the U.S., we must apply Vocal and Persistent pressure on Congress each week.
Email, call or fax your members of Congress today. Send them this simple message: "Please support replacing the federal income tax code and become a co-sponsor of HR 25 or S 25, the FairTax."
BTW, the more you incite discussion of this tax that never will happen, you just make it that much surer that it will never happen. You know what is said about bringing issues out into the day light, huh?
entitlement payments ($800B)The FairTax bill requires Social Security payments to be increased by the amount of the FairTax.
Federal and military pensions ($300B ?)Pensions would be an "employee benefit" and would be taxable.
block grants to State and local government ($600B)I'm assuming the state and local governments are actually going to spend the money. If the amount doesn't increase, the "real" value of these grants are reduced. That might be a good idea, but it's kinda hard to compare two systems when one is cutting the amount of government.
educational and research grants ($100B)Again, the money spent for research grants (research is not "tuition for primary, secondary, or postsecondary level education; or job-related training") would be taxable. If the government doesn't increase the amount of these grants, the "real" value of them declines.
probably other stuff that is not a "purchase" and is not an "employee compensation"Like what?
At the State and local government levels, 3/4 the wages paid are to educators -- and not subject to FairTax.The amount that state and local governments would pay under the FairTax has been studied. The conclusion was the states "would pay $346.2 billion in NRST to the federal government, an amount about 50 percent greater than current state and local general sales tax revenues."
At the State and local government levels, 3/4 the wages paid are to educators -- and not subject to FairTax. So those employees will cost 7.65% LESS than they do today.Their wages wouldn't be taxable, but the building they taught in would be. The desks the students were sitting in would be. The books they were reading would be.
Yes well, I know for a fact that my "gibberish" makes more sense to the people I know than your "gibberish" does.
Perhaps so. Giant steps have been take recently to bring down our republic and integrate it into a larger socialist domain and I suspect that will continue a while longer.
[The FairTax bill requires Social Security payments to be increased by the amount of the FairTax.]
Wrong. "This section makes sure that the cost of living adjustment for Social Security benefits includes
price increases, if any, caused by the FairTax." You see the "if any" part ? No increase in SS benefits if there is no increase in prices.
[Pensions would be an "employee benefit" and would be taxable.]
Wrong again. Contributions INTO a government pension are taxable. Payments FROM a pension are not.
[I'm assuming the state and local governments are actually going to spend the money. If the amount doesn't increase, ...]
The FairTax has no provision for increasing block grants to State and local government. Let's stick to the actual provisions of HR25, shall we ?
[Again, the money spent for research grants (research is not "tuition for primary, secondary, or postsecondary level education; or job-related training") would be taxable.]
Wrong again. If the grant for research is to a not-for-profit organization, then there is no FairTax. There is no FairTax on contributions to not-for-profit organizations in general. A for-profit company like Genral Dynamics would charge the FairTax on a research CONTRTACT but a University would not charge FairTax on a research GRANT. Is that clear ?
[Like what?]
How about foreign aid ? Or Katrina relief ? Or anytime the government is just handing out money rather than purchasing stuff ? Sure, the recipient may not be able to buy as much stuff with the government check, but that doesn't automatically mean the government check must be larger.
[I can play that game. Let's suppose a person retiring tomorrow with $2,000,000 in after-tax savings. Do you think they'd be better off with the FairTax?]
I've already said closer than 4 years to retirement starts to see a problem. That is a far cry from "anybody over 50".
[Try your example without the 401(k) (or, even better, factor it into the outcome) and see how your numbers turn out.]
The 401k grows rax-free under both PIT and FairTax for ten years. At the end of 10 years it is worth $600K. It provides the same $4,200 per month income for 25 years. Together with the A-T savings income and my pension and SS benefits:
PIT:
A-T income stream: $2,800
401k income stream: $4,200
Pension: $1,800
SS: $2,200
Total: $11,000 per month $132,000 per year ($80K taxable income)
Income Tax: $1,500 per month $18,000 per year
Purchasing power: $9,500 per month
FairTax:
A-T income stream: $5,400
401k income stream: $4,200
Pension: $1,800
SS: $2,000
FCA: $200
Total: $13,200 per month $158,400 per year
Income Tax: $0
FairTax paid: $2,700 per month
Mortgage + PropTax: $1,400 per month $17,000 per year
FairTaxable purchases: $9,100
Purchasing power: $10,500 per month
So the FairTax is only going to allow me an extra $1,000 per month in purchasing power. That's not a lot, but I'm sure I'll find a use for it.
[The portion of mortgage interest representing the cost of financial intermediation services is taxable under the FairTax. ]
So my mortgage interest rate falls from 6% to 4.5% due to the removal of the income taxes the bank must pay, my mortgage interest falls from $12K to $9K, and then I pay FairTax on the financial intermediation portion which is about $1200 (30% of $4,000) and my net outlay falls from $12K to $10.2K.
Thanks for clarifying. That's another $2K per year I can add to my savings.
[You showed an example where someone at the extreme margin would show limited gains ...]
You think my numbers are at the extreme margin ? I had no idea I was so well-off -- considering I still can't afford better than a townhouse in SoCal. And you consider a 50% improvement in purchasing power on the A-T savings to be "limited gains" ? It sounds like a significant gain to me.
Wrong. "This section makes sure that the cost of living adjustment for Social Security benefits includes price increases, if any, caused by the FairTax." You see the "if any" part ? No increase in SS benefits if there is no increase in prices.You're wrong. I don't see the language you quoted anywhere in the bill. Read Title III, Sec. 303 (the one entitled "Sales Tax Inclusive Social Security Benefits Indexation"). It states:
if the Consumer Price Index (as so prepared) does not include the national sales tax paid, then the term `CPI increase percentage', with respect to a base quarter or cost-of-living quarter in any calendar year, means the percentage (rounded to the nearest one-tenth of 1 percent) by which the product of--Basically, either the CPI includes the FairTax or the bill adds it on. Either way "the FairTax bill requires Social Security payments to be increased by the amount of the FairTax."
`(I) the Consumer Price Index for that quarter (as so prepared), and
`(II) the national sales tax factor [the exclusive FairTax rate],
exceeds such index for the most recent prior calendar quarter which was a base quarter under subparagraph (A)(ii)
Wrong again. Contributions INTO a government pension are taxable. Payments FROM a pension are not.Really? Where do you read that? The bill states that the "terms 'wage' and 'salary' mean all compensation paid." That sounds like when it's distributed. A hint is that the bill specifically requires pension payouts to be reported as wages to the SSA.
The FairTax has no provision for increasing block grants to State and local government. Let's stick to the actual provisions of HR25, shall we ?The bill requires state and local governments to pay the FairTax so it is a provision of HR25.
Wrong again. If the grant for research is to a not-for-profit organization, then there is no FairTax.Again, you are wrong. Not-for-profits pay the FairTax on their purchases unless they are for resale. (Are you sure you are up on the specifics of the FairTax?)
How about foreign aid ? Or Katrina relief ? Or anytime the government is just handing out money rather than purchasing stuff ? Sure, the recipient may not be able to buy as much stuff with the government check, but that doesn't automatically mean the government check must be larger.Not automatically, no.
You don't answer direct questions, do you? In case those questions just happened to be in your blind spot, here they are again:
How does keeping the communistic income tax take us away from socialism?
How does paycheck confiscation take us closer to freedom?
Here's another that you can ignore.
How does being considered guilty until you prove yourself innocent comport with the American system of justice that holds that you are innocent until proven guilty?
If there is anyone who is a shill for the advancement of socialism, it's you. Thanks for outing yourself.
You think my numbers are at the extreme margin ? I had no idea I was so well-off -- considering I still can't afford better than a townhouse in SoCal.The median income for nonelderly childless households (that seems closest to your situation) was ~$44,000 in 2002. $125,000 may not be much in SoCal, but you'd be a real playa here in Houston (a really nice 3,500 sq. ft starter castle in the suburbs would cost you about $300k).
Nor does it have a provision for increasing federal spending that gets subject to the tax, but does anyone seriously doubt that this would happen?
I do not answer every question that I deem stupid of meant as a purposeful distraction.
YOU brought up socialism.
The Income Tax is one the the tenets of the Communist Manifesto.
How are they unrelated, stupid, or meant to distract?
It goes to the heart of your assertion that the FT will lead to increased socialism.
You just can't answer because you are a fraud. Admit it.
[Your analysis is still lacking. You still have to PIT example paying too much in IT. (And why, exactly did you add pension and SS to the scenario?)]
$18,000 is too much income tax for $80K taxable income ? Or the $80K is too much taxable income for a single-filer starting with $132K ? I completely excluded the A-T account's withdrawals of principal, as well as half the SS income, then also deducted the mortgage and property tax. $80K seems about right.
I added the pension and SS to show that the ordinary income tax owed on the 401k withdrawals would be at a relatively high marginal rate. It isn't like it is going to be anybody's sole income. It would be misleading to pretend there was no SS or pension -- that would be a rude shock to find out I had applied too low a tax bracket to my 401k withdrawals.
[$125,000 may not be much in SoCal, but you'd be a real playa here in Houston (a really nice 3,500 sq. ft starter castle in the suburbs would cost you about $300k).]
Yep, that might be a plan after I retire. In the meantime, my 1300sf 2bd townhouse is worth $450K and a 2000sf house with a yard starts about $750K.
I'm glad you finally see why the 30% figure is incorrect for government employees.Don't flatter yourself, I didn't say that.
At the State and local government levels, 3/4 the wages paid are to educators -- and not subject to FairTax.Where is that written? Only education tuition is tax exempt not public educator's wages, salaries and benefits.
Their wages salaries and benefits aren't exempt here:
`(4) EDUCATION AND TRAINING- The term `education and training' means tuition for primary, secondary, or postsecondary level education, and job-related training courses. Such term does not include room, board, sports activities, recreational activities, hobbies, games, arts or crafts or cultural activities.Nor are educators wages salaries and benefits exempt here:
`(17) WAGES AND SALARY- The terms `wage' and `salary' mean all compensation paid for employment service including cash compensation, employee benefits, disability insurance, or wage replacement insurance payments, unemployment compensation insurance, workers' compensation insurance, and the fair market value of any other consideration paid by an employer to an employee in consideration for employment services rendered.You aren't really very up to speed on what the Fairtax really is are you.
Chewck the links in #503, #504, & #505 and you disabuse yourself of the notion that "all those" living below poverty are somehow doing without funds. That's BS as these figure clearly show.
The lowest average annual income levels are $16,500, $20,500 and $20,600 and they go on up from there. to pretend they will pay no tax under the FairTax is nonsebse. They'll pay plenty - $3,795 in tax for the lowest one shown if he's foolish enough to spend everything on taxable items.
Most readers are intelligent enough to discern that the "anti" crown has their own self-interest agenda and couldn't care less about the country as a whole.
May of the arguments they present don't stand up to common sense let alone any sort of intensive analysis - like "the government taxing itself" conundrum since that's already being done.
It's nice of you SQL Squad members to help out.
Purchasing power: $10,500 per monthThat's a pretty good deal. Not many people can retire with more after-tax purchasing power than their gross pay BEFORE retirement....Who's going to be paying all the taxes in your scenario?
You're a joke and the farttax is a joke. Bye, bye.
May of the arguments they present don't stand up to common sense let alone any sort of intensive analysis - like "the government taxing itself" conundrum since that's already being done.For the hundredth time, it's not a matter if they do it currently, it's a matter of where is the money going to come from to allow the government to pay the FairTax. Wherever the government taxes itself currently, the tax rate is higher so the government can pay it. You Fairies are trying to tax the government but not give them the money to pay it. It's a shell game.
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