Posted on 01/22/2008 3:43:13 AM PST by xcamel
Look up the word “fair” in Webster’s dictionary and you’ll find this definition: “Free from favoritism or self-interest or bias or deception.” Ironically, the so-called “fair tax” proposal that has been getting some attention lately is fraught with favoritism, self-interest, bias and deception.
The phrase “fair tax” is a new way to refer to the old proposal to create a national retail sales tax. Such a tax would replace essentially all federal income and payroll taxes with a national sales tax levied on all purchases. So instead of having Social Security and Medicare taxes taken out paychecks and filing those April tax returns, Americans would pay a national sales tax on every purchase they make. There are four myths about this tax proposal that must be dispelled in order to have a meaningful debate about its merits.
The first such myth is that the rate would need to be set at 23% in order to raise enough money to run the federal government. Not so fast. Under the proposal if you buy a $100 item the tax would be $30. Most of us would describe that as a 30% tax. But proponents would have us believe that the tax rate should be calculated by dividing the tax amount by the total purchase price including the tax. So divide $30 by $130 by and you get 23%. That is truly fuzzy math at its finest.
The second myth that needs to be addressed is that the IRS could be abolished because the federal government would no longer collect income and payroll taxes. That might technically be true but a new massive bureaucracy would have to be created in its place. This new agency would be in charge of sending every single American an approximately $450 check at the beginning of every month that presumably reimburses them for taxes they pay on their income up to the federal poverty level. This new agency would also be charged with making sure that anyone who sells anything is collecting the tax. So the guys who live out in the country near my home who shell the pecans that grow on my trees would have to start charging me sales tax and send that money to the federal government. And for each of these types of services that aren’t taxed or retailers that aren’t discovered, the tax rate on other purchases has to be that much higher.
This brings me to the third myth – that a 30% rate would be adequate to run the federal government. There is no way that a national retail sales tax could pay for current federal programs without setting the rate at least 45%. The allegation that a 30% rate is sufficient relies on some strange assumptions such as requiring government to tax its own spending and even taxing free services like free checking accounts and free care at veterans’ hospitals. It also assumes that every single transaction is taxed, including lots of things that aren’t taxed currently. So, imagine adding $90,000 to the purchase of a $200,000 home or adding $450 to your $1,000 monthly rent. Better yet, imagine adding $4,500 for every $10,000 paid in college tuition.
Fourth, and most importantly, it is a myth that the tax is “fair.” A deeper look at the proposal clearly shows that it would raise taxes substantially on most Americans while giving the wealthy a substantial tax cut. That’s because most Americans must spend most or all of their incomes to make ends meet, while better-off people can afford to spend a much lower share of their incomes. According to the Institute on Taxation and Economic Policy, the typical middle-income North Carolinian who earns about $34,000 per year would pay an additional $3,800 in federal taxes. The state’s wealthiest 1% of taxpayers whose average income is over $700,000 would get a tax break of around $150,000 per year.
It’s not fun to be in the role of defending the current federal tax system because it is confusing and not always fair. But ideas for replacing it need to be grounded in sound tax policy principles. An idea that relies on myths and gimmicks to get attention is not one worth considering.
Elaine Mejia is the Director of the N.C. Budget and Tax Center
I’m sure the government will never miss your tiny little contribution.
Buy one year's worth at historically high prices, genius, and pay the cost to store it. LOL!Interesting. Maybe he already has a tank but what will the price of diesel be one year from now exactly?
$84 today, and dropping like a rock, er iraq even...
Whatever.
My tactical reserve from October ran out a couple of weeks ago, so we are now living bi-weekly or semi monthly or some such, planning on a drop. Time will tell.
Then, please, make all my purchases exempt.
Well, the first year should work out fine.
I think any tax can get out of hand, it’s always happened anyway. Taxes that are for just one thing but stay on for another, increases, etc. I can see it happening with any tax or fee.
I still have 4 contracts open... which has come in very handy lately. At least I don’t have to store it.. (one is B20 winterized)
crickets
And you still, to this day, haven't even named ONE. ROTFLMAO!!!
Please don't do anymore stand up comedy on this forum. I can't take it.
And one thing the Fair Tax opponents never seem to discuss is the psychological incentive a massive pay increase would have on the economy.
Working people would get about a 30% increase in take home pay with the Fair Tax, before the prebate.
It would be great to have a tax system that enourages savings and investment rather than buying things. Real wealth comes from saving and investment, not spending.
Bad FR form to post a quote without a source, but you knew that.
and you do it anyway..
Depends on what the meaning of "gross" is.
Only in the FairTax FairyTale.
You know you made the claim. You can lie to the rest of the forum but you and I know the truth.
post up or shut up, liar.
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