A FairTax Tale

I have a little scenario I would like to paint for those of you out there who just insist on finding something wrong with the FairTax. Admittedly, the FairTax isn't perfect. No tax plan is. How, after all, can you come up with a perfect way for a government to take its operating funds from its subjects? If you know an easier and more equitable way to do it, by all means, let me know!

I'm going to ask you to crank up your imagination for a moment here ... and by "you," I mean those of you who think that this FairTax thing is a bad idea and you're not prepared to come on board.

I want you to imagine a scenario. Don't worry about whether or not this scenario is possible .. Just accept it as I present it, and then consider the alternative picture I'm going to also present. Simple as that.

Let's imagine that the FairTax is the law. We've been operating under the FairTax since the day you drew your first paycheck. It's all you know. Here is your imaginarily "reality."

On every payday you get your complete paycheck. There are no deductions. If you earn $2,000 per week, you get a check for $4,000 every two weeks. You never have to save receipts or create any records pertaining to federal taxes. You can invest money without paying any taxes on it. You don't have to pay taxes on the money you earn through your investment portfolio. You pay no taxes on any money you put in your savings account. When you die you get to leave your entire estate, everything you own, to whomever you wish. The federal government will take no taxes from your estate. Your death is not a taxable event. When you go to the store to buy an item, and the price tag says $19.99, you will had a $20 bill to the cashier and get one penny back. The price tag is the price. There are four people in your household. You, your spouse and two rug rats. At the beginning of every month you get a check or a credit to your checking or charge card account in the amount of $506.00 to compensate you for the federal sales taxes that are included in the price of everything you buy; right up to the poverty level.

All in all .. not such a bad deal. You keep all of the money you earn and you get five hundred bucks a month from the feds. Plus .. you only pay taxes when you spend money.

Now .. .here comes some politician who has a grand scheme for a new tax system. He wants to explain it to you. Here's his great idea ..... give him a listen and tell us what you think.

The plan is simple. First the federal sales tax is going to be removed from the price of everything you buy. This will mean that everything will cost 23% less than it does now. But ... he's going to levy an income tax on every single individual and business who plays any role at all in bringing those products to the marketplace. These people and companies are all going to pass the cost of these taxes down the economic line to the final consumer of the products they manufacture. These taxes will end up embedded into the prices of products in our retail marketplace, bringing those prices right up to the current level. So .. no loss, no gain.

Next your political benefactor is going to take away your $500 per month prebate from the government. In its place he's going to tax every penny you earn. It doesn't matter where the money comes from. Your salary, your investment income, winnings at the track ... whatever you earn and however you earn it, it's going to be taxed.

Wait! He's not through. He's also going to tax your wages for Social Security and Medicare. He's going to try to soften the blow by telling you that your employer is going to match the taxes he takes out of your paycheck, but you're employer has made it clear that this money is all going to come out of the money he has budgeted to hire you. You'll probably lose out on your next raise while the boss his accounting in order.

There are some more nifty ideas in your congressman's tax reform plan. When you die your family is going to have to file a complicated estate tax return. A huge amount of the wealth you have managed to build during your life is going to be sent to the government. Your survivors may well have to sell the family business in order to come up with the money to pay for these death taxes.

One more thing .. you're going to have to keep records of all of your financial transactions. Every year you're going to have to spend no less than about 30 hours or spend hundreds of dollars to hire someone to fill out tax forms for you. If mistakes are made you will be hit with a huge penalty and interest. Oh .. and the government is going to have access to all of your financial records to make sure that you are paying everything you "owe."

The question, of course, is why does this politician want to change the tax system in this way? Power, that's why. They want to be able to enact little changes to the tax code that will benefit certain constituents ... which constituents will then benefit the politicians -- with money or with votes. Under the FairTax system these politicians have no power to favor one group of voters over another for the benefit of votes. The new system would give them that power.

Your choice, my friends. If we had the FairTax now ... would you be willing to make the switch?

Did you make the statement in Post #98 that it makes no difference if the NRST is included in the mortgage?

I have stated numerous times my position. With reguard to the point you made about new home sales not being impacted by a 30% sales tax, including the sales tax in the mortgage will not make a difference to the fact that new homes will be at a huge price disadvantage to existing homes. You seem hellbent at taking my words out of context to make some non-point. The price disadvantage new homes will have under the fairtax will hurt sales. More people will opt to buy existing houses. Why don't you try to dispute my point instead of trying to invent a new point?????

I will state it again, and if you do not understand you need to work on your reading comprehension.

If you go into a store and see an item that has a price tag on it of $100, when you go to the register, it will ring up for $100. The NRST is NOT added at the register. If a store elects to not reduce prices based on savings from the removal of the embedded taxes that is their choice. But it will also lead to them going out of business because their competitor across the street will do so to try and get their customers.

This illustrates your problem. You can't answer a simple and completely verifiable question.

Now everyone that goes to Post #98 can see the answer to the question:

Did you make the statement in Post #98 that it makes no difference if the NRST is included in the mortgage?

is yes. You made that statement.

The next question asked of you by me was to show your calculations that it makes no difference if the NRST is included in the mortgage. And you have dodged and evaded like some wild animal caught in a trap.

Real estate finance is a quantitative field. We hardly ever qualify buyers based on anything but numbers.

So let's try it again.

Where are your calculations showing that it makes no difference if the NRST is included in the mortgage?

is yes. You made that statement.

I made the statement in context of the point you were trying to dispute. What the impact of mortgages on home sales is YOUR point. YOU brought it up. You support it. From the point I made about competitiveness of new homes versus existing homes under the fairtax, it makes no difference. Why do you insist on taking a statement out of context???

You make statements that are not backed up except by hot air.

You made no calculations involving the NRST in a mortgage.

Real estate finance is a quantitative field. It is not for those that engage in blowing hot air.

We now have you on record in your previous post that you make statements in ‘context’ in response to quantitative questions. That doesn’t cut it. I will summarize this conclusion in future posts on FairTax threads as we see you again attempt to disrupt the discussion.

Here is the context that you leave out:

Always Right (post 70): I really don't see how new homes will be able to compete against existing homes sales under this scheme. The way it is set up, new homes will be at a 30% disadvantage from existing homes the day after this is passed.

Hostage (post 96 response to post 70): New home sales will not be impacted at all. The NRST will be financed as part of the mortgage.

Always Right (post 98 response to 96): Whether it is included in the mortgage makes no difference.

I am and always was talking about competitiveness between new homes versus existing homes. You are ignoring my comment and trying to change the discussion talk about people being able to qualify for a mortgage for the full price with the sales tax. Whether the same amount of people will qualify to buy a new home was your point. I don't know whether that will be true or not. You have never demonstrated that one way or the other. There are far too many variables to make a real determination, although for retirees whose income is not subjected to income tax, I have my doubts if that will be the case. That however was not my point. My point was about new homes being at a disadvantage against existing homes. You wish to continue to ignore my point and want to debate some other point.

Your context is hot air.

You need to do the calculations first. Once you have the quantitative analysis finished, then you can interpret the results.

Your problem is you jump into your ‘context’ interpretations without results. Your interpretations are based on nothing but hot air.

You have admitted you performed no calculations regarding the NRST as part of mortgage financing. But yet you have a ‘context’ about those calculations, meaning you have a hot air opinion.

That’s all we need to know about you. You don’t make the cut.

The problem is you misrepresent the clear history of this thread. You brought up an unsupported point about mortgages in post 96 not me. And you have been whining and crying and repeating the lie about it being my point ever since. It was YOUR point. YOU support it. I don't give a rats ass about it, it has nothing to do with anything I said. You continue IGNORE my point and have done so this whole thread.

This is my last reply on this stupid subject unless you bring something more to the table. So far you have brought NOTHING. You are not honest in your arguements.

The income tax taxes the productive more and rewards dependency. If you're over a certain tax bracket, you're also punished by being taxed more simply because other people pay little or no income tax at all. So yes, its a redistributive scheme. Which is exactly why politicians like the income tax - it allows them to do social engineering via the tax code.

Have you ever heard "you can't get blood from a turnip"? The fairytax solves that problem by creating a huge bureaucracy to dispense a check to every duly registered household in the US so that thousands of newly created fairytax collectors can extract Caesar's share (for a nominal fee) and send it back to Caesar.

Under the FairTax plan, is the low income household paying the tax, or is the government (wealthier, big spending taxpayers)?

If SS and Medicare deductions begin with the first dollar a worker earns, then even the poorest worker among us has money deducted from his check and sent to Washington. If corporate income taxes and the individual taxes of every worker involved with making and marketing a product are reflected in the final price of a product or service, then every single person who purchases that product or service is contributing to the system. Doesn't matter if they're citizens, illegal immigrants, rich, poor, or tourists.

The thing about social engineering is that government can't, not do it. The FairTax, itself, is a huge social engineering project. To claim that the income tax is a scheme to allow politicians to carry out their social engineering plans while denying the social engineering aspect of the FairTax is just plain dishonest.

Well, according to the links earlier in this thread, the "fair tax" proposal gives a government "rebate" back relative to your income (and soon to come other things I suspect). It looks to me - and I am still investigating it - this puts 100% of the population potentially in the public feeding trough. That is no different than what we currently have, except the vote buying potential gets even larger.
What would be insane is making a dramatic change that only increases the potential for abuse, while making the public think it is better.
A bit like nominating a liberal to runs as a Republican.

I will have to qualify my comments with the fact that I have spent very little time investigating "Fair Tax", and my opinion so far is formulated by a small sample of information.

If an item has a price tag of $100 you will pay $100 and the retailer will keep $77 and $23 will go to the NRST.

So it is a 30% tax added to $77. Thank you. What is wrong with the $130 example, BTW? Does that just make it too clear? A $130 item, the retailer will keep $100 and send $30 for this tax. What is so hard about being honest about what the tax rate is?

Getting desperate?

Let’s summarize:

You made the statement that it makes no difference if the NRST is included in mortgage financing. You performed no calculations to support this statement and yet you drew conclusions without performing the calculations. Your conclusion is therefore unsubstantitated.

When the light is shown on your unsubstantitated inferences, you immediately attempt to discredit those that point this out.

So it is a 30% tax added to $77. Thank you.

Yes and no. To compare apples to apples, the FairTax needs to be stated in inclusive terms because the income tax rates are inclusive.

If you want to go with an exclusive comparrison, fine, also calculate the income tax and FICA on an exclusive basis and provide those rates as well.

A rebate isn't a government check. Its more like a negative tax cedit designed to boost your buying power.

A rose by any other name...

Sort of like the earned income tax credit - except one has to work to get an earned income tax credit.

States which have no income tax are better run than states that have an income tax.

Really? How so? I lived in Nevada for 7 years. No state income tax, but all the problems associated with a predatory industry like gamboling.

Living in a civilized society, I appreciate taxes are the price of civilization. Therefore, I want the least objectionable tax and the least obtrusive means of collecting it. The Fair Tax fits those criteria far better than the income tax.

Looks good on paper, as long as you accept what the sellers of the fairytax say and ask no doubt creating questions.

The consumption tax doesn't target investments and savings. It only taxes consumption. When you buy an item, you pay a tax to acquire it. We're already familiar with such a tax: the sales tax. I find its implications less troubling than the income tax, which invades my personal privacy and assumes the government has first claim to my assets regardless of whether or not I spend them.

The sales tax, as we know it, works because it is relatively low - it just ain't worth the average guy's effort to evade. Add 30% to what is already collected, expand the tax to include activities exempt from the sales tax by the states, and that changes dramatically.

The FairTaxers persistent denial of the climate their tax creates for a flourishing black market is stunning. Failure to acknowledge that counter measures government WILL take to recover lost revenues will becomes burdensome and intrusive for the average guy is disturbing.

What is disturbing is your defense of the Income tax where 200+ million individuals have to be tracked and monitored for compliance.

Whereas the FairTax enforcement needs only to focus on about 3000 retailers, the enforcement is much more manageable under the FairTax.

But I don't expect much from you when you showed you can't even separate the notions of 'production costs' from 'market risk factors'.

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.