Posted on 08/03/2005 4:51:43 PM PDT by RobFromGa
A simple question...
So, under the FairTaxI get to keep my whole paycheck, prices for everything I will buy will stay the same even with the taxes included, and I get a prebate check from the govt every month. And businesses pay no taxes.
Where is the extra money coming from...
What is wrong with this reasoning below?
1. Right now the government collects $X in the form of all taxes.
2. All taxes are really paid for by consumers in the end result, either directly, or in the cost of their purchases which allow businesses to collect money in order to pay taxes. Companies do not really pay taxes they jsut collect them and pass them on.
3. The FairTax will collect the same $X per year in the form of taxes but using a different method.
4. Under the FairTax, the price paid for goods will not rise because getting rid of all the taxes built into goods will cause the prices to drop, then the FairTax will add onto the new lower price, resulting in the same price paid by consumers.
5. So, for a given taxpayer, shopping (consumption) will be revenue neutral. Ie. Prices are the same as before.
6. And each given taxpayer will get a "prebate" check every month that they are not getting now.
7. And each taxpayer will pay no taxes on capital gains, or on savings.
8. And, each taxpayer will no longer pay any taxes on income, or payroll taxes.
9. And, there will be no Fair Taxes on any purchases made for a business.
Are these all true so far?
Again, I get to keep my whole paycheck, prices for everything I will buy will stay the same even with the taxes included, and I get a prebate check from the govt every month.
Where is the extra money coming from???
This is what she said about savings:
9. You state that the tax is fair to Baby Boomers. How do you answer a critic who points out that a Boomer has already paid income tax on a lifetime of savings, then will be forced to pay a large sales tax any time he uses *those same after-income-tax funds*?
FIRST, PRICES WILL DECLINE ONCE THE 22% IMBEDDED TAXES ARE REPEALED. SECOND, THEY WILL GET THE REBATE TO PAY THE TAXES UP TO THE POVERTY LEVEL. IF THEY HAVE AN IRA OR 401K OR PENSION PLAN IN WHICH THEY MADE DEPOSITS WITH PRE-TAX DOLLARS, WITH THE IDEA BEING THAT THEY WOULD PAY TAXES ON IT WHEN THEY DREW IT OUT, THEY WILL BE BETTER OFF. WITH THE FAIRTAX THERE WILL BE NO TAXES TO PAY WHEN THEY TAKE THEIR MONEY OUT. SO THESE INCOME TAXES SAVED HAVE TO BE CREDITED BACK AGAINST THE TAXES YOU SAID THEY PAID UNDER THE INCOME TAX SYSTEM. I AM A BABY BOOMER AND I STILL WORK (57 YEARS OLD). I AM LOOKING FORWARD TO GETTING TO KEEP 100% OF MY PAYCHECK.
Yes, I have read it.
I am not trying to be combative at all, I am asking questions that will be asked. If you can't convince those of us that are pre-disposed to want this then you hav no chance with the general population.
The book IMHO takes an attitude of "Trust us, it'll all work out, don't you hate the IRS" tone all the way through it. And they tend to claim everyone who raises objections or questions is a tax luddite. Yet, when they are asked questions like this in public, they dance and skate around the questions.
What if the projections are wrong? What is the accuracy band on these predictions?
The rebate is not on the income tax, it's on the sales tax. See the faq here: http://www.fairtaxvolunteer.org/smart/faq-main.html#3
So, I guess you WERE just yanking our chain.
Funny I have NEVER heard any fairtaxer make that claim. What I HAVE heard them say is that on average prices won't rise or something closely akin to that.
You'd never create enough government "income" from a tariff tax to replace the income tax.
If you think I am yanking your chain, then so be it. Seems mighty thin-skinned to me though. Your references to the Berlin Wall and the moon and the American Revolution are off-target. Reagan tax cuts were, by comparison, very easy to explain and easy to repeal if there had been a disasterous mistake.
I looked at your link to table 2. it is good information, do you know where the personal expenditures line came from? Are we sure that "business expenses" are not in that line, only personal expenditures? Travel costs, marketing/printing costs, etc.
If you don't want to discuss this with me any more because I am not serious enough for your tastes, then fine.
"The thing that worries me about it is Greenspan weighing in a few months back suggesting that we have both a sales tax and an income tax."
I agree - there is a risk of that happening. However, the support for the FairTax would dry up immediately if that direction were taken.
That means that we have to have substantial popular support to get the FairTax passed in relatively pure form. I say relatively pure because there has probably never been a bill passed in history with exactly the same wording that was submitted.
the way, Rob. Laurence Kotlikoff is one of the economists who has now endorsed the Fair Tax plan.He's also said that the rate required would have to be 30% inclusive, not 23%.
15-26% embedded tax is the range in the Boortz book for a range of 25 industries (p54, Figure 5.1)
So the claim is that prices will remain in the +/- 5% range.
"What will replace that lost revenue? Remember we are trying to be revenue neutral here. I assume that the organized, productive persons will have to pay more than he does now to make up for the repeal of the LUP surtax?"
You will pay more for imports, which is part of the answer to your question. In addition, illegal immigrants will move from a tax preferenced position to a tax disadvantaged one.
That would be a far more correct statement than "Everything we buy retail will cost the same as it does now..." but I'll just continue to say that, in general, prices won't rise.
You're doing terrific work here, and I'm really glad to see this spirited discussion. My comments were directed more towards our leader John Linder and his reference to the Fair Tax as a tax on wealth. Yes, the Fair Tax reaches wealth, but only when consumed. As it should be. Keep up the great work.
"The same thing could be said about 65 year old Ma and Pa Kettle, who have paid income and payroll taxes faithfully for forty five years are who retired yesterday to begin their long awaited retirement and enjoy the fruits of their long hard slog through life."
Ma and Pa Kettle will be well protected by the rebate if they are at the lower end of the economic ladder. If they are at the high end and they choose to invest in equities, they will do very well, as the stock market will increase substantially during the first couple of years under the FairTax.
I agree that if prices were to remain about the same, in the +/- 5% range that would be perfectly acceptable tradeoff to get rid of the IRS. I would even go 10%.
Thanks!
Personally, I suspect those costs are higher than generally thought butsince I cannot prove that I will refrain from making that claim.
It should be fairly easy for many service businesses though. Esp. ones that don't use many manufactured supplies. Boortz books claims 26% embedded cost for most service businesses.
"I'm saying why can't we use tariffs instead of an income tax, and isn't that basically a much simpler consumption tax than the convoluted, unworkable NRST?"
Convoluted, unworkable NRST? Surely you jest.
We currently have a system which, according to CCH, runs in excess of 60,000 pages. The FairTax bill, as currently written, is a little over 100 pages.
Which system would you think would be appropriate to describe as "convoluted, unworkable"?
BTW, Money magazine used to do an annual test of the tax system in which they sent the same hypothetical tax data to professional preparers all over the country. The last time they did that, which I believe was for tax year 96, they received 47 1040s prepared by 47 different preparers and they received 47 different answers as to the amount of taxes due. And these were tax professionals!!!
Our tax system today is far worse than it was then from a complexity standpoint.
Which system would you now describe as "convoluted, unworkable"?
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