Posted on 08/26/2005 3:40:57 AM PDT by Man50D
This article is about taxes, which is, without question, the most boring subject in the known universe. So why even bother to bring it up? In an attempt to make April 15 just another beautiful spring day for all Americans, Georgia Congressman John Linder and his buddy, libertarian talk show host Neal Boortz, have devised a "fair tax" plan. This plan abolishes the IRS and income taxes in favor of a national sales tax, which, they say, will be about 23 cents to every dollar. Both sides of this issue have hotly debated how well this "fair tax" would work in practice, but on the surface, it seems like something every one of us should support.
The fair tax seems simple at first glance. It would dismantle the IRS and our national income tax and replace it with a national retail sales tax that would be the same for everyone, regardless of income. For an example of how this would work, go and grab your last paycheck. Look at how much you earn per hour. This is your pre-tax, or gross, pay. This is how much money you make, not how much the government actually lets you keep. The U.S. government takes a good chunk of your hard earned pay for income taxes and Social Security, leaving you with a fraction of what you actually worked for. Under the fair tax plan, you get to keep every red cent you worked to earn. If you worked seven hours for seven dollars an hour, your paycheck would be, you guessed it, $49 even.
Linder introduced House Resolution 25, the FairTax act of 2005, into congress in January. The bill would repeal all federal income and payroll taxes, including personal, gift, estate, capital gains, alternative minimum, Social Security/Medicare, self-employment and corporate taxes and it would replace all these taxes with a national consumption tax. The bill also has a built-in rebate system, which would send a check to each head of household in order to cover the taxes on necessary goods.
Sounds great so far, right? Here's the catch. The government would up the national sales tax to around 23 percent. Right now, depending on which county you live in here in Georgia, you pay about six or seven percent. Although it sounds like a lot, people actually end up saving money. Without income taxes pulling down your gross pay, a few cents more to every dollar is a small fraction of what the government takes from you now, especially if you are not in one of the higher tax brackets.
What does all of this translate to? No more IRS intruding on your life every year. No more terrifying fear of being audited. No more agonizing trips to H&R Block to have the riot act read to you by Ned from Accounting. Even better, people who pay no taxes now, like illegal aliens, would end up paying as well, adding more than an estimated one trillion dollars to our government's tax revenue.
This plan has been fairly well detailed in Boortz's and Linder's new book, "The FairTax Plan." For more information, visit their Web site www.FairTax.org.
Ping
While I tend to agree with a NST, I find it interesting that the base rate has moved up from 18% in 2001(?) to what it is today. Talk about inflation!
/internationale drain down the sewer non-citizen's-vested interest-banking.....?
RE: "The government would up the national sales tax to around 23 percent."
TO ALL:
Everything you buy has an embedded tax of about 22%. (on the average) Corporations pass all their taxes on to the consumer, in the price of theri products and services.
Passing the FairTax will eliminate this embedded tax, as corporations will no longer be taxed. Freee market pressure from competition will cause prices to drop accordingly.
The book is a mis-representation of the FairTax plan, see attached thread before you buy into the "keep your ahole paycheck myth: Jorgenson Explodes FairTax Myth (FR Exclusive) in which I describe what I learned from Dr. Dale Jorgenson.
When stated in this manner, comparing the Fair Tax to existing sales taxes, it is more correct to state the Fair Tax rate as 30% (its tax-exclusive rate), not 23% (23% is the inclusive rate, which is used to compare it with an income tax.) So for the example of Georgia at 6%, the total sales tax with a Fair Tax in place would be 30% + 6% = 36%.
Everything we buy has an embedded tax of about 22% right now. This will disappear with the elimination of corporate income tax, and market pressure will cause prices to fall by...22 percent.
23% percent has been deemed revenue neutral, with a rebate check to cover basic nessecities.
This rebate will keep the poor and the elderly from getting wiped out by this tax. It's a good idea.
The federal govt has the check writing capacity to cut a monthly rebate check to everyone with a social security number. They already cut 50 million checks per month, no problem. This could also be electronicaly debited to you.
The cost of cutting these checks can be covered by the elimination of the billions of dollars per year that it costs to operate the IRS.
Information is power. The left wants the income tax because they can invade the privacy of every individual and business in the country.
I'd love to hear people wining about high taxes and government spending every time I hit the check out stand.
The "keep your whole paycheck myth" is untrue. Jorgenson Explodes FairTax Myth (FR Exclusive) in which I describe what I learned from Dr. Dale Jorgenson.
There ain't no such thing as a free lunch. Purchasing power for every wage earner cannot go up 25% plus with the passage of a tax bill, and that is what the FairTax Book would have you believe.
Read my letter to Linder/Boortz on the attached thread to understand where the mistake was made in selling the FairTax plan. It might still be a workable tax plan, but there is no "keep your whole paycheck".
but there is no "keep your whole paycheck".
yes there is . period.
and I will be able to decide EXACTLY how to spend or save it , and thusly control my tax rate.
I think it's ridiculous to claim the Fair Tax would abolish the payrates established in existing union contracts. If union workers keep their current payrate, non-union employers would face the threat of worker riots if they slashed their workers pay.
My employer likes the Fair Tax because he won't have to waste money on an accountant or face the threat of IRS thugs. He hates taking money out of my paycheck and giving it to sleazy parasites in Washington D.C.
That's a good letter you wrote. You make some excellant points.
However, the resulting business boom from elimination of corporate taxes would create additional jobs, resulting in upward presure on wages, wouldn't it?
I could see a lot of manufacturing coming back to America, if they didn't have to contend with income taxes.
Demand for employees would cause wages to go up, not down.
No there isn't. exclamation point.
Did you read the thread I linked. question mark.
I didn't say they could do it. I said that the economist that developed the model assumed that the wages would go down, to the amount that wage earners are now getting as take-home pay. He knew that if businesses were going to save money on "embedded taxes" they couldn't turn around and pay those now-removed taxes to the wage earner and still have the business be able to lower prices.
Did you read my letter to Linder/Boortz on this subject at the other thread?
I don't see it. You state that employers end up losing money by their workers not being taxed, and thus have to lower wages, but why?
Under both plans, the employer pays out, say, $8 an hour. The only difference is the employer splits it up on payroll, giving you your share and the government its share. Under the Fairtax, they simply write you the check. In both cases, the employer is paying $8 an hour.
So that balances out. Now, the manufacturer/employer is either being taxed, and making say a $1.00 profit on a ($5.00 + 6% = $5.30) product, or not being taxed and making $2.15 (since the tax burden will only be on the customer at this point) profit on a ($5.00 + 29% = $6.45) product. Now the manufacturers have another $1.15 in profit margin, which will make one of them come up with the idea to reduce the price to nudge out its competitors. Before you know it, a price war starts and the profit is whittled down to $1.50 per product. Meaning the cost of the product will now be ($4.08 + 29% = $5.26). Obviously the numbers will vary in practice, but this seems the general common-sense outline.
I'm no expert in economics, but this is just how it appears to me when you write it down on paper. It seems to work out for both the workers and the companies, especially companies who are no longer being double-taxed.
Corporate taxes are, in total, less than 2% of revenues. Their elimination, which I support as a reform to the present tax system, will have negligible effects on the prices of most businesses. The real tax money to be saved is in the payroll and income taxes.
I wasn't trying to debate the longer-term effects, positive or negative, of the FairTax plan at this point. I am just trying to get an honest debate going on what the Plan is saying will happen to wages and prices at the time of introduction. The longer term points are worthy of debate, I just haven't looked at that much, yet.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.