I can actually see both sides of this.
Sales taxes are regressive....and hurt those with lesser incomes far more than those higher up the economic scale.
Perhaps...but don't most of the Fair Tax plans state that items like food and necessities are untaxed, therefore leveling the playing field?
That's why the NRST includes what is called the Family Consumption Allowance, which is essentially the personal exemption/standard deduction of the income tax translated into sales tax terms. Everyone is eligible for it, and it actually makes the tax progressive, rather than regressive, based on the level of consumption.
Gabz, I really respect you and agree with so many of your posts it isn't funny. I have a favor to ask: please please please take a really good look at the proposed NRST--basic necessities aren't taxed, the costs of tax compliance are removed from EVERY STAGE of production and prices are lowered, the government is OUT of your pocket and doesn't need to know what you have or what you earn, and a huge politicized sick behemoth (current tax law) is given the swift death it has earned.
There are provisions for that too. The tax is not on everything. It would replace a lot of existing taxes as well rather than being lumped on top. Depends on which proposal you read.
Hi Gabz.
I see that you have already been responded to by more than a few posters but I would like to add a few comments too.
As kevkrom said, the FCA or prebate, refunds in advance the amount of tax that a household at the poverty level would pay in sales tax if they spend their entire income on taxable goods essentially making them tax free. This eliminates the REgressiveness of the typical sales tax and makes it very PROgressive.
There are no confusing 'this_is_taxed_this_isn't' rules. If it is new, it's taxed. If it's used, it isn't. No exceptions.
As Judith Anne pointed out, when the costs of imbedded taxes are removed, prices will fall driven both by competition and customer demand. There won't be much difference between the prices now and the prices after the change. What will change is that you will get your whole check without the federal government taking it's cut first. You will get a check to cover your tax expenditures up to the poverty level.
As your income now becomes your own, you will decide when and if you will pay tax at all. Buy used goods, grow vegetables in your garden, make your own clothes -- you pay no tax. But if you want to be free from doing it yourself, buy new and pay the tax -- you'll have more money in your pocket to do it.
But, this change will cause the economy to boom and you now have all of your money. You won't have a bigger chunk taken when you work overtime. There will be overtime and new jobs aplenty as people enjoy the extra cash in their paychecks. It'll be your money, not the Feds.
Education is tax free and the cost of education will come down meaning that if your kids are now trapped in a failed inner school, a little extra work on your part means that you can now send your child to a private school that is now out of reach.
Gabz, the benefits of this idea are practically boundless. What I like most is getting rid of the IRS. There will no longer be withholding of taxes, no tax filing, no audits of individuals. It's a major step in moving back to being free of government intervention in our lives and the growing trend toward more government that will burden our children and our children's children.
Can you think of a better gift for them than ridding them of the IRS?
"Sales taxes are regressive....and hurt those with lesser incomes far more than those higher up the economic scale."
Actually, the exact opposit is expected to happen. Think about it, 100% of paychecks are given to the recipient, the price of goods fall as embedded taxes are removed and a prebate check is sent to EVERYONE. Worst case scenario is that it is break even for the lowest end of the economic scale. It then removes economic barriers to improving one's lot in life.
If someone can't afford the new car with the lower price, then 30% Sales tax (exclusive) they can still buy the used car tax free. Could that person afford the new car under today's tax rate? That same person will see 100% of their paycheck and receive the prebate.
Check out Neal Bortz commentary when you get a chance. I'm hoping he'll get off his butt and get his book published soon. He is supposed to cover this point in great detail.