Posted on 08/03/2004 8:09:52 AM PDT by CSM
BUT WHAT ABOUT THE POOR*?
OK ... let's put on our sensitivity hats for a few minutes here and think of the consequences of the Fair Tax Act on our nation's poor, poor, pitiful poor. After all, they can hardly afford a 23% sales tax when they're living paycheck-to-paycheck in the first place, right? We're actually going to forget, just for now, that poverty is largely a behavioral disorder and consider how they would survive under the fair tax.
We begin with a reality check. Right now, for the most part, those whom we define as "poor" aren't paying any income tax anyway. In fact, many of them are getting checks from the government. The absurdly named Earned Income Tax Credit, for example. So right now the government is actually supplementing their income. How can they endure a 23% sales tax?
The implementation of the Fair Tax would fail in short order if, as the question presupposes, the net effect on the poor would be the that they would be paying today's prices for a gallon of milk or a loaf of bread, plus a 23% sales tax. But ... that would be far from the reality under the Fair Tax. Under the Fair Tax the poor won't only survive, they'll positively thrive! The Fair Tax could turn out to be the best poverty-fighting tool devised in this country since the concept of hard work.
Let's begin by considering two realities.
First, remember, please, that the poor, along with everybody else, will no longer have Social Security taxes or Medicare taxes withheld from their paychecks. Whatever they earn, they get on payday. For most of them this means an immediate 10 to 15% increase in their earnings.
Second. Don't forget the 22% in imbedded taxes. It's lurking there in virtually everything poor Americans have to buy. As soon as the competitive forces of the free market work their magic these people will be paying 20% or more less for virtually retail purchase, including the basics of food, clothing, shelter and transportation. Yes .. they'll have to pay the new national sales tax, but when you factor in the lower prices caused by the disappearance of the embedded taxes you'll see that the total price paid for consumer goods will remain very nearly the same.
So ... just considering these factors, the Fair Tax delivers a winning hand to people living in or near to what we call poverty. They get every penny they earn on payday, and when you factor in the Fair Tax and the lower prices, they're actually spending less of their money for a retail purchase than before.
Pull out the calculators. Say that a single mother with two children spends $45 a week on groceries. The removal of the 22% embedded tax would bring the price of those groceries down to $35.10. The sales tax would be $8.07. This brings the total price to $43.17. That's less than would have paid under today's tax system. This single mother, whom we'll consider "poor," has just received a 10% to 15% increase in her weekly paychecks, and she's paying less at the grocery story for her basic necessities.
Well, at this point you should be thoroughly convinced that the Fair Tax would actually benefit, rather than harm the poor. But, then again, maybe not. So, here's the clincher.
The Rebate
Under the Fair Tax plan every consumer will receive a check from the federal government every single month equal to the sales tax that person would be expected to pay on the purchase of the basic necessities of life for that month. The size of the monthly payment will be based on the government's published poverty levels for various sized households.
Here's an example of how the rebate payments would have worked in 2003.
Let's say you're a married couple with two children. The Fair Tax Act sets forth a formula for computing the poverty level, based on government figures, which negates any marriage penalty. Under the Fair Tax Act in 2003 you would have been granted an annual consumption allowance of $24,240. This is what the government would assume you would have to spend during that one year to buy the basic necessities of life for your family. The sales tax on this amount would equal $5,575. The government will rebate this amount to you in 12 equal monthly installments of $465. What about a single woman with one child? Her monthly rebate in 2003 would have been $232. The lowest payment would be to a single person with no dependents. That person would receive $172 per month.
Now ... bear in mind, this rebate isn't only paid to the poor. It is paid to everyone, rich and poor alike. The purpose here is to make sure that no American has to pay the Fair Tax sales tax on the basic necessities of life. Unlike the present income tax system, the Fair Tax treats each and every person in this country exactly the same. This, of course, presents somewhat of a problem to politicians who like to use the tax code to foment class distrust or outright warfare.
OK ... let's add it up for America's lower income citizens:
They get their entire paycheck. Even with the sales tax, and considering the drop in prices, they'll be paying essentially the same for everything they buy. They get a check from the federal government every month to rebate any sales taxes they had to pay. Though their tax returns aren't that complex, let's also include the time these the poor (all of us, really) will save by not having to keep tax records or file tax returns.
So, my friends, if you're looking for some reason to oppose the Fair Tax plan, you're going to have to find a better excuse than its effect on the poor.
*Please note that I titled this chapter "But what about the poor?" and not "But what about the less-fortunate?" Look, I can't be expected to write this entire book without getting in a few digs at the language of political correctness, can I? To say that the poor are poor because of a lack of good fortune presupposes that those who aren't poor were just lucky. Sorry, but for the vast majority the benefits of an affluent lifestyle aren't a matter of luck, they're the result of attention to education, hard work and good decision making. Luck counts on the Las Vegas Strip, not Main Street.
No. It is based on the Federal poverty level.
Why do you care if they give them millions? Are you for or against freedom?
Ya, and Donor X wouldn't talk with Candidate A and say, "Look for a $10 Million credit to your account shortly."
The federal poverty level varies by area.
I understand your concerns, and you make a valid point about the problems with varying standards in different states. In Michigan, all food is exempt, unless it is served in a restaurant.
To raise another point, the cheese in mac and cheese and the potatos in potato chips would be exempt anyway, because they are for business use. The business use exemption, while preventing the compounding of tax, requires that "business use" be defined and enforced. This creates a whole other set of problems.
"Why do you care if they give them millions?"
Because, if they give to Kerry or someone like him, I would not line their pockets by going to their movies, etc.
"Are you for or against freedom?"
No, I feel we have a freedom to boycott people/artists, etc. as punishment for something. How about having the newspapers just tell what Natalie of the Dixie Chicks said without naming her or the group? People boycotted them or do you not think that they should have been able to do that?
that would depend on legislation put forth. I'm not sure what they do in London.
I can't see the local governments collecting vat on items that are sold in garage sales, etc.
Talk is cheap and when it comes to donations, frequently exaggerated.
"In Michigan, all food is exempt, unless it is served in a restaurant."
I know, but why should that be? The food is food, it is an essential, because it was prepared? What about frozen dinners, they are prepared, just need to be heated.
"To raise another point, the cheese in mac and cheese and the potatos in potato chips would be exempt anyway, because they are for business use. The business use exemption, while preventing the compounding of tax, requires that "business use" be defined and enforced. This creates a whole other set of problems."
The business is not consuming the cheese or potatos, they are processing them for resale. The consumer is the one that pays the taxes on the "finished product".
First off you have NEVER shot anything out of the water to my recollection and secondly why is it wrong to describe someones purchase of a $2.00 gallon of milk $1.54 for milk and $.46 Tax as a 23% tax when that is EXACTLY what it is?First off, he was talking about the tax added on to the price, which would be the exclusive rate. Second, what if $0.16 of that $2.00 was state sales taxes? Are my federal sales taxes still 23% of my $2.00 purchase?
No, the Federal/National poverty level is an average of all states. This is similar to the national unemployment level, the number is different from individual areas.
"I can't see the local governments collecting vat on items that are sold in garage sales, etc"
I was not talking about that, I was talking about used cars/boats/homes. Items you usually by used and still pay taxes on.
That's the beauty of having certain items exempt from taxation--in a bureaucracy that list will only grow and benefit everyone. It's a self-controlling entity--if the list grows, the government gets less money, but if the list is too small the politicians don't get elected.
On the other hand, politicians will use Boortz's rebate scheme to payoff their constituents--no difference from what's being done today.
If I had to guess, I would say because eating in a restaurant is considered a luxury.
I can hear the 'Rats now. Their mantra would be "Three million people will lose their jobs if we institute a national sales tax!", and never once mention that the ones who will lose their jobs will be tax accountants and lawyers and bureaucrats.
"That's the beauty of having certain items exempt from taxation--in a bureaucracy that list will only grow and benefit everyone. It's a self-controlling entity--if the list grows, the government gets less money, but if the list is too small the politicians don't get elected."
Problem is that it then starts to recreate what we currently have, a tax system that is complicated.
"On the other hand, politicians will use Boortz's rebate scheme to payoff their constituents--no difference from what's being done today."
How would that happen?
But what about those that are displaced from their homes due to flood, hurricane, tornado, etc. that have to eat in a restaurant? Seems unfair to me.
How is the embedded tax going to be completely dissolved as Boortz suggests?
And also, how would this tax system affect the overall tax revenue to the treasury?
Simple--your "rebate check" gets bigger.
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