Posted on 12/24/2007 7:55:05 AM PST by Alex Murphy
WASHINGTON — Mike Huckabee, one of the most conservative Republicans in the 2008 presidential race, has embraced one of the most radical ideas on the campaign trail: a plan to abolish all federal income and payroll taxes and replace them with a single 23% national sales tax.
The idea -- dubbed the "fair tax" by proponents -- has been a political asset for Huckabee; its well-organized backers have helped catapult him from the back of the presidential pack to its top tier.
Sales tax proponents have tapped into seething voter hostility toward the Internal Revenue Service to become a below-the-radar political force, popping up at campaign events and candidate forums in Iowa and elsewhere.
The efforts on Huckabee's behalf by sales tax advocates helped spur his surprise second-place showing in an August Iowa straw poll -- the breakthrough that marked the beginning of his rise in the state and nationwide.
He is the only major presidential candidate to make the idea central to his campaign. "The first thing I'd love to do as president: Put a 'going out of business' sign on the Internal Revenue Service," he said at one debate.
Some wonder, however, whether his embrace of the plan eventually could turn into a liability.
The sales tax proposal has been around for years but languished on the fringes of practical politics and policy. Tax professionals generally regard the idea as impractical, regressive and even "crackpot," as one critic puts it.
It has gone nowhere in Congress. The 2005 Presidential Advisory Panel on Federal Tax Reform soundly rejected the idea. And many politicians shy away from it because it is easy for opponents to portray it as a huge tax increase -- as Democrats did in a 2006 Senate race in South Carolina.
(Excerpt) Read more at latimes.com ...
Source?
or “says you”
No, I don't.
For every $100 you pay the doctor, you actually had to earn a bit over $130 at the 28% income tax rate
After the FairTax, how much will my $100 doctor visit cost?
Even many of those who oppose the FairTax complain that using the FairTax calculator their effective tax rate is “too low”.
To get a sense of how the rate drops you might spend some time looking into it on the FairTax website.
As I mentioned it has been calculated and posted many times in past years on these threads and you’d be welcome to find one of them.
The amount of tax revenue generated in that manner by the income tax is quite low.
It would have been a lot less if you were originally under the FairTax than under the income tax - but then again, you’d be a lot more wealthy overall then too.
... and our country would be better off also.
If you remain under the income tax you can bet that you’ll be paying more in income tax - savings or not - than under the FairTax so you’re worried about the wrong thing. You could very easily be paying IT at a higher rate on your savings earnings there.
That depends upon your effective tax rate - which might be zero (or less). It depends on your consumption pattern.
No, it doesn't. The price of the visit will not depend on a prebate I get or don't get.
Try again?
$100, but you’re only going to get $77 worth of healthcare... I hope it isn’t anything serious...
better way...
“Bend 30 friggin percent over”
Thank you for the detailed response.
Obviously we agree that the entitlements are bad programs. I think changing their tax base moves us further away from reforming them. We also disagree about the concept of “regressive” taxes. I don’t see how you can leave out the benefits. I think you absolutely MUST subtract the present value of the benefit from the tax paid. The NET is the actual tax paid. Then you can compare the net tax paid to the income and you will see that it is not “regressive”. Leaving out the benefits makes such a calculation impossible.
Suppose we had a tax system where the poor paid 10% of their income in taxes, and the rich paid 50%. You would say that was ‘progressive’. According to your definitions, it would still be ‘progressive’ if the rich were sent checks for 90% of their original tax. Because you say we shouldn’t count the benefits. In fact, it would be ‘regressive’ since the effective tax rate for the rich would now be only 5%.
My example of a family of four earning $100K was to illustrate the absurdity of how the FairTax can be gamed into a clearly middle-class family paying a low effective tax rate. A family of four has a prebate that cancels out the first $26K in retail purchases. So $100K - $10K - $10K - $20K - $26K = $34K FairTaxable spending, and a FairTax collected of $7,800 at 23%. At 25% it jumps to $8,500 on the same $34K FairTaxable spending.
Whether people are voting individually to increase benefits and thereby higher FairTax rate, or they are voting for politicians promising them those things is immaterial. The result is the same — the cost/benefit ratio for this $100K family favors such an expansion of benefits, and if it favors this family at $100K, then clearly it benefits all the families of lesser income even more. A super-majority of voters will elect a Congress that gives them what they want. That tax burden will land on the backs of those to whom the prebate is a small portion of income — the very wealthy.
The receipt only states the marginal tax rate which is much higher than the effective one.
So my $100 doctor visit will become a $130 visit, after the FairTax?
I don’t think that mixing benefits into whether a tax is regressive or not is the proper approach to determining the “bite” of a particular taxation since the benefits can be changed independently of the tax rates and speaking of SS the benefits don’t come for a long time after the tax (if ever) and are eaten up by inflation in recent years pushed by the government - which is merely another type of tax. You’re welcome to think your own type of “regressive” or “progressive” - and I’ll stick with mine because I think it’s more realistic and relates to the tax itself rather than (shudder) government largess.
I think the MC law is more likely to drive the country into poverty but - since the benefits are independent of the imposition of the taxes - those can be altered by congress before we get to that point if sufficient pressure is brought to bear. We’re very close to that now with SS in that we’re running out of wage earners to tax and so something must be done fairly soon. The FairTax seems like a reasonable way to proceed ... but I’d still like to see both SS and MC eliminated.
That’s the problem with entitlements, though, as soon as the taxpayers at large get them and can be led to believe that others pay for them (which happens in spades with the IT despite what you might think) then it is very difficult to correct the situation. I don’t think it would be any more difficult under the FairTax and, in fact may be easier since the action in the bill actually works to reduce the FairTax rate over time even assuming an annual projected increase in the social insurance. With the IT there is not that much leeway and we’re running out of “tax room” with too few supporting too many.
At least with the FairTax the tax base is expanded giving us more time to hopefully work on hammering upon congress to bring both laws to something within reason (and reduce the FT rate further). The tax burden is already falling more and more heavily upon the high earners all the time and there’s no relief within the IT system for those who could help boost economic progress by saving and investing while for the most part the incentives within the FT indeed do that very thing which will help boost overall economic growth.
I’ll get back to you about your “family of four” (F4), most likely example after the holidays since there’s a lot of family activity right now. I do have some comments to make about that.
It’s also not an entitlement but a tax refund as stated in the bill.
And now it'll be a $130 visit under the FairTax, right?
Everyone gets it, no matter how much or how little they spend. They're "entitled" to it. That's an entitlement.
You never answered, which ones are not taxed?
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