1) what is the plan to disassemble the IRS? I've yet to see that. Until everyone on the IRS payroll have been fired as legal pick pockets, FairTax is only AnotherTax.
The IRS is disbanded, funding is ended, taxpayer records are destoyed. The tax administration and collection side of things are turned over to state tax authorities, all but five already having retail sales tax divisions in place. The states will be compensated out of NRST revenues for administrating the system.
2)So no instead of only the poor and elderly getting a monthly entitlement from the government, now everyone will! What good will come of that?
No execptions or exemption from the sales tax, all goods and services are taxed. Simplicity, low cost, and no one's family is required to report income, expenditures or anything else to government about the financial dealings. No reporting or tax filings for the citizen is a biggy and one of the primary gains associated with repealing the income tax system.
That FCA is the equivalent of personal exemption of the income tax, with one interesting caveat. Every person in the country pays the same tax rate and gits hit in the face with it every time they buy anything at all. Increase government largess, they increase the taxes on every constituent not just the one small group or another today.
One tax everyone pays, one rebate limited to the taxrate on necessity spending (i.e. that price of fixed basket of goods and services that defines povertyline expenditure) based only on household size, not income, actual expenditure or any measure of wealth.
3) The proposal is that NEW goods and services are taxed. People will start buying used cars and garage sale microwaves which are not subject to this exhorbitant tax. This will put every business out of business except the secondary market.
Why aren't they out of business today?
Those businesses are having to pay income & payroll taxes and all the costs associated withthem. A cost that of necessity has to be recovered in the price of goods and services today. Under an NRST that goes away. The payment differential between used and new causing any sudden rush away from new will mere assure product prices fall by the amount that business no longer have to put out under the income/payroll tax.
Remember all federal income and payroll taxes are repealed. True for you the citizen and true for the business. The business no longer has to contend with either tax, resource expended in tax planning, accounting, reporting, litigation go away. In their place is the single rate retail sales tax based only on gross sales revenue, and that only from businesses involved in retail trade.
Costs throughout the chain of production fall with the repeal of income and payroll taxes. The result will be a lowering of product pricing commensurate with the savings realized by business in competing for your paycheck dollars. Competing not only against other retailers but incompetition with the options of saving and investing tax free, and as you point out, buying used.
The ultimate consequence is a much more productive and efficient economy, increased living standards and expansion of domestic and foreign trade in both goods and investment as the US become a favored tax haven among industrial nations.
Chairman of the House Ways and Means Committee,
Rep. Bill Archer (R-TX)
August 12, 1996
- "A recent survey was done, in Europe and Japan, of the major corporations and I was astounded at the results. They were asked, 'If the US abolished its income tax and went to a sales tax, would that have any impact on your decisions?' Eighty percent of the corporations said they would build their factories in the United States of America. Twenty percent said they would move their international headquarters to the United States of America."
Think for a moment of what tax burdens removed from our manufacturing means to the prices of our exports coupled with the fact that imports will be subject to the same retail sales tax as our own domestic products under the NRST. No longer will there be a favored tax status for imports (their VATs are removed from there prices by credits from their home nations). Foreign imports will be fully taxed for the first time equivalently to our own domestic goods. That is called leveling playing fields and providing incentive for industry to flood into this county instead of fleeing from it.
That my friend is a prescription for reversing trade balances with the rest of the world, going from chronic trade deficits we have had for generations to a strong international trade surplus and rising value of our hard earned dollars.
4) The burden of paying this tax is on the purchaser. Does this mean we have to save every receipt to prove we paid the tax? If a business can't prove that the tax was collected on something I purchased from them, then can the feds comes after me to pay the tax again if I can't produce proof that I paid the tax?
No the liability for remitting the tax is on the seller. The seller is required to collect the tax from you the purchaser, and he is liable for remitting it to the state tax authority keeping receipts of his business sales revenue for monitoring and auditing by them.
The citizen has no more responsibility once he has paid the business any more than the state and local retail sales taxes you pay today.
5) No matter how you cut this, it is a 30% tax, not a 23% tax. The tax is calculated on 23% of the total sale price of the [new] product or service. Since the sale price is inclusive of the tax, for instance an item that cost $1.00, the price has to be marked up to $1.30, not $1.23. Right now at my state's 5% sales tax, a $1.00 item is a total sale price of $1.05. The tax is added to the sale price. Not so with FairTax. The 23% tax is figured into the gross sale price. So a $1.00 item is now $1.30. 30 cents is 23% of $1.30. You can turn that sideways and longways but it is still a 30% sales tax.
Convince me otherwise! :-)
There are some factors you left out of you figuring, Today, you are required to pay Uncle both income and payroll taxes in order to have enough to buy those same goods and services.
For a family of four at median income that amounts to having to earn roughly 25%+ more than your takehome pay just to be able to buy anything now, and that is on top of the embedded business taxes in the price of everything we buy spoken of above.
Under the current income/payroll tax you get hit with 25 cents individual income & SS/Medicare taxes
Plus around 22 cents embedded costs associated with product prices in the dollar of goods you purchase, leaving 78 cents for the base (taxfree) price of the product
Under the income/payroll tax system, the cost to you, the typical citizen today to buy that 78 cent widget is
- 25 cents for federal individual taxes
- 5 cents for state sales tax on the embedded tax price
- 22 cents for federal business tax costs
- 78 cents for the base (taxfree) product.
=========================
- $1.30 total
Under the NRST the cost to buy that 78 cent widget is
- 23 cents NRST
- 4 cents state tax on the base product price
- 78 cents for the base (taxfree) product.
================================
- $1.05 total
And you receive you full gross paycheck plus the FCA for your household with no income or SS/Medicare taxes taken out to spend or invest as you please.
I know which I favor.
Thanks to both of you for replying to my post. Good info!
25 cents for federal individual taxesSo you're dropping everyone's salary by the amount of their payroll/income taxes? I thought I got to take home my entire check with the FairTax.
22 cents for federal business tax costsA gross overestimation. Let's do the math: 22% of everything sold in the US plus exports would mean the "federal business tax costs" would be $2.31 trillion! The total taxes paid by businesses in 2003 was $488.25 billion, and most of that was payroll taxes which virtually every economist agrees is really paid by labor through lower wages. That leaves a minimum of $1.8 trillion for business tax compliance costs! Most reasonable economists put the number around $100 billion.