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'll stop posting that graphic when the anti's stop posting lies. Based on past history, I expect I'll get plenty more chances to post it.
1) Same old pissin’ match about “inclusive vs exclusive rate” instead of “the government should or should not tax INCOME, the measure of what you provide to the economy”.
2) Class warfare about “the rich not paying as high of a percentage of their income as the poor”.
3) Concerns about the pre-bate. Seriously, it’s NOT THAT HARD TO UNDERSTAND!
Keep it up dave, but aim at the kleptocratic FTers and quote liberally (so to speak).
I used it in another thread, but mine didn’t have the ** in it.
Guess it was acceptable.
Ah, the ol’ “market competition never lowers prices” argument.
No, the seller isn’t a fool, and if he can sell his product for $98 and still make a profit while his competition tries to sell it for $100, he won’t do that, now, would he? He’d maybe miss out on that 2 bucks per sale, even if he increased his sales by 50%. That wouldn’t be smart, would it?
Then his competition, knowing that he COULD sell it for $77 and still make the same profit, wouldn’t lower HIS price to $96, etc...
Is this what you’re arguing?
Oh, I think the socialist revealed herself PLENTY when she made the class warfare argument about “percentage of income paid in taxes”.
True. A tax like the fair tax would at least be legitimate under the Constitution; unlike the current gamey contraption we call the “IRS”.
How will we stop an immigration amnesty bill?
Under the current system, there are a LOT of people who think they're GETTING MONEY FROM THE GOVERNMENT when they get their tax refund. This is because of the "pay upfront in stealth" withholding.
If you want to keep the current system, I propose we DEMAND that withholding cease, and that tax day be moved to October 31st - right before election time, you write one big check to the fedgov.
Sales tax now is NOT charged on items intended for resale.
An economist at the University of Missouri came up with a plan whereby anyone making over a certain amount of money got more votes. Will never happen, but it's a fun idea.
uh... dude... do you think businesses pay taxes now, or do they collect them from the
customer in higher prices
employee in lower wages
stock holders in lower dividends
Yes, the CONSUMER IS FOOTING THE ENTIRE BILL for the fedgov.
Read Boortz’ book and come back to argue from a point of knowledge instead of ignorance. That’s not an insult.
A simpler plan would be that only those that are tax PAYERS instead of receivers get to vote.
Bring your photo ID and your tax statement to the poll.
What about the states that don't have a ST?
Tax is theft.
FT is a tax.
FT is theft
Try < 5%
I PROMISE to have my executor resell all my stuff.
OOOOHHHHH that’s heavy duty! Tandem axles can carry quite of bit of that stuff.
PubliusMM: “The FT is deserving of closer examination, and represents, IMO, the only viable alternative to the current model yet presented.”
Fair enough (pun intended). I never meant to imply the Fair Tax is a VAT. It’s similar in some ways, but it’s not a VAT.
I’m not a Fair Tax opponent. I just don’t see how it will ever happen. Like you’ve stated, it’s an obvious tax that strikes at the heart of our politicians’ power. That’s why I think it’s a pipe dream. Pipe dreams aren’t necessarily a bad thing so long as one realizes they are just that...pure fantasy. It wouldn’t break my heart to see the income tax abolished at some point, but I’m not going to hold my breath.
No, we’re arguing that the price of Diesel is unlikely to decline at all (inclusive of course).
You wrote “This article loses all credibility with this statement. Fair Tax opposer’s are deliberately leaving out one very important fact. The Fair Tax ill eliminate the hidden/embedded 23% Corporate income taxes and associated compliance costs known as the inclusive rate. The $100 item will then cost $77 and the $23(100*.23) will be the tax rate applied externally to the $77 as the tax exclusive rate of 30%. Consequently the price will remain at $100.”
That is why I am opposed to this plan, the outright DECEPTION that is being employed.
“Consequently the price will remain at $100.” That is BALDERDASH.
For every dollar I get back from Income Tax Witholding, FICA witholdings AND the the money I save on reduced cost of products due to corporate taxes coming out, I MUST PAY THE SAME AMOUNT IN SALES TAXES BECAUSE BY DEFINITION, THIS IS REVENUE NEUTRAL!!!
Stop the deception.
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