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Childish behavior |
Posted on 02/16/2008 3:30:21 PM PST by xcamel
One solution to the nation's long-term fiscal problems that has gained support in recent years is the idea of replacing all federal taxes with a 23 percent national retail sales tax called the FairTax. Unfortunately, the administrative problems inherent in this proposal make it impossible to take seriously, says Bruce Bartlett, former deputy assistant secretary for economic policy at the U.S. Treasury Department.
For example, under a FairTax scheme: A worker now netting $800 per week would immediately get a $200 raise and start taking home the full $1,000 gross wage that he is paid; instead of paying income and payroll taxes, workers would pay their taxes when they buy things.
The FairTax would impose a 23 percent tax on all goods and services (this is not really correct, but for now we'll accept it at face value for analytical purposes).
Whether he is better off or not depends on what his effective tax rate is: Assuming he spends all his income and no more than that, he will be no worse off if he now pays 23 percent of his income in taxes. That is, his effective tax rate is 23 percent; in this case, the FairTax is a wash, the worker is no better off or worse off in terms of taxes than he is now.
But what if the worker is now paying less than 23 percent of his income in federal taxes? In this case, he is clearly worse off, says Bartlett: The prices of the things he buys will rise by more than his income rises from the elimination of income and payroll taxes. Conversely, if one is wealthy and in a tax bracket above 23 percent, that person would be much better off. His income and payroll taxes would fall by much more than the prices of goods and services he consumes would rise.
Source: Bruce Bartlett, "Why the FairTax Won't Work," Tax Notes, December 24, 2007.
For text:
Yep. Put it out there in the light. Let people see how greedy their government has become.
You don't take into account personal exemptions and deductions and brackets. Someone who earns $50K and has a house and family, will not pay 1 cent of tax at the 25% rate, let alone his whole salary as your analysis implies.
What about when I spend the money I’ve already saved (i.e. already paid income tax on)...won’t this kind of tax benefit those who are younger or who have no savings more than those who do? Older folks would be double taxed, so to speak.
Seems to me the concept would slow down the economy because perception is everything, and when people “perceive” of an item as expensive they don’t spend as much. Add 30% to every item, service, etc...and people’s perception will be that it costs more, thus they won’t spend, and the economy will take a hit.
I’m definitely not an economist, just an ordinary person trying to think how other ordinary people would think about the FT.
And as far as eliminating the IRS, yeah maybe, but they’d have to establish some other huge bureaucracy to collect the tax from the retail/service sector. So you’d just be exchanging one bureaucracy (IRS) for another (FT collectors.)
No more IRS...what a campaign issue.
agreed..
FIY.. SS, medicare/medicaid are not now, nor have they ever been “income taxes”
Well, here’s the thing. Over the years, too many people have way too much invested in doing things the old way, and they cannot, or will not, take the nessary steps to convert fully from the old system to a new system, of ANY kind. Once assessed, some form of the income tax shall be with us forever, because that is just about the only lever that can be manipulated to generate funds (and a quick revenue flow) on a short-term basis.
Like for example, if you don’t file income tax forms (whether you had income or not) you can’t participate in the Great Tax Refund boondoggle. Earned Income Credits are supposed to offset the grief of having to have a “less than living wage”, but it is income redistribution by any other name, and amounts to a welfare payment, as there is nothing in which the recipient participates, other than paperwork.
And now this recent big stimulus package, will only be paid out to the low-income (less than $75,000) tax-filers, but they now have to file, where they may have been out of the system for years, because of low annual wages.
The IRS exists in large part for catching the unwary, and this has been sometimes an even more important function than to merely raise revenue. If revenue were the objective, then a simple tax rate of, say, 20% to cover all the payments into Soshsecurry and Muddycare, and all the other government-mandated programs, applied to EVERYBODY at all levels, large and small, would yield a revenue stream more than adequate for most current and future needs, if the Federal Government would only keep the contract they now have with the electorate.
But somebody will want to change it, and launch into some grandiose scheme to “help the deserving” (i.e., whoever has the largest bloc of votes and/or campaign cash to deliver).
There shall never be sufficient oversight to stop that chiseling.
Excellent post. Let capitalism dictate how much money we send the government. If your product is too expensive you have to lower the cost to sell it. Less revenue going to the government then.
For every $1.30 I gross on my paycheck, the IRS takes 23% and I have $1.00 left to spend on the item.
In each case, the tax is 30 cents for every $1.30 earned under the IRS and 30 cents for each dollar spent under the FairTax. It doesn't matter what percentage you claim. The tax is 30 cents. The tax is 23% if applied to the $1.30 gross income. The tax is 30% if applied to the net after taxes. This is not a hard concept. To compare IRS and FairTax rates, the same base should be used. IRS and FairTax are both 23% of the $1.30 dollar gross. IRS and FairTax are both 30% of the $1.00 net. Most people are smart enough to understand the percentage depends on the base used.
I suspect that people who continue to insist the rates are different or somehow dishonest are not as stupid as they seem. They just don't want to discuss the pros and cons of IRS tax and Fair Tax. The Fair Tax is a winner for many reasons. I agree it is easy to demagogue and will be a hard sell.
A tax is money the government takes. People have no choice. Pay or go to jail. SS is a tax . So are..property taxes, fees on your utilities, gas, car tags, marriage licences, inspection stickers, tolls, tire disposal, cigarettes, alcohol, park fees ........to name a few.
Corporate taxes go away under the fair tax, don’t they?
“Already been proved over and over again that embedded taxes account for less than 8% of the average retail price.
Why must you turn Free Republic into a house of lies. The truth is posted below.
“Every employee of any company involved in American commerce is also a provider of a service, and, as such, the employee incurs a tax liability as a result of his or her work. This tax liability is incorporated into what the employee charges the employer for their services, and is eventually incorporated into the final retail cost of the employer’s product or service. Each employee is essentially a separate business entity providing a product, be it physical or mental labor, to the employer.
The extensive research behind HR 25, The FairTax Bill, shows that the average embedded taxes in every consumer product or service is about 22%. In some industries, such as leather goods, the embedded tax is smaller. In other industries, such as homebuilding and construction, the embedded tax is higher, but it averages out to somewhere between 22 and 23%. With the passage of The FairTax Bill, those embedded taxes disappear. These embedded taxes include the combined tax burdens of all entities involved in bringing those goods or services to market, and that includes you, the employee, and the taxes you incur as a result of your employment.”
You might want to check your math:
$1.00 + .30 = $1.30
23% of $1.30 = .30
30% of $1.30 = .39
In other words, for ever dollar spent, an additional 30 cents would be charged. That's 23%, not 30%.
There are many solid arguments against fairtax. Thinking the tax rate is higher than advertised when it is you that messed up the math isn't one of them.
By the By ... They are taken out up front by your employer before you see your check. Based on your income and taken out with the income tax. All part and parcel of the same government scheme. Thank you.
Which according to the lead researcher included employee paid taxes, not just corporate and business taxes as fairtax.org implies in their grossly misleading statements.
Total scam.
Math isn't your strong point, is it?
(See post 73)
Nope. I oppose the FT.
AA) Companies will immediately deduct all the embedded taxes from what they sell.
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