Principled, thanks for the welcome.
First off, the tone of my post is a bit harsh, as this was taken verbatim from a letter that I had planned to send to the Fair Tax Organization. I probably should have softened it bit before posting it here. I did not intend it to be a harsh attack against my fellow FReepers who support the Fair Tax, but to only raise my objection to having my after tax retirement savings and assets unfairly double taxed.
Yes, I’m well aware of the “hidden tax” included in the retail price of goods and services due to the fact that businesses are pressed to pass some of the federal income tax and fees on to their customers. But how much of this cost winds up in the retail price can vary greatly depending on how the cost is managed. The cost can instead be passed on in the form of lower dividend payments, lower wages and salaries, less money for R&D, etc. It would be wrong to assume that there will be an immediate 10% drop in retail price of everything when the Fair Tax goes into effect.
You mention a possible solution would be to give individuals a credit on their after tax savings and assets similar to the proposed transitional inventory credit for businesses to help resolve this double tax problem. But I have not seen that officially proposed by the Fair Tax Organization. There has to be a solution because I have a substantial amount of after tax savings of which I would not allow to be unfairly double taxed.
But again, until a solution is put in place, I would MUCH prefer the Flat Tax instead.
NO softening needed.
The 10% in prices is an average of course already IN PRICES. At least that’s what the average was for the several years I calculated it in the 90s and first half of this decade.
But it isn’t just income taxes and fees. FICA is big [which of course remains under the flat income tax.] Nevertheless, the 10% is the average in prices right now. Look it up yourself. So it does make sense that prices would drop about that much right away.
Taxes can only be paid by individuals thru higher prices, lower wages, or reduced ROI. That’s it. The part that’s in prices is around 10%. All other tax costs are elsewhere and elsewhere is where we would expect other tax costs to disappear from.
When you take your after-tax savings out to spend, you’ll be taxed again [’bout 10%] and if you leave it to heirs they’ll be hit about 50%. Even if you give it away you’ll be hit w/ a substantial tax. Under the nrst you get hit with none of that - but as it is now you do get hit again [30% or so - whatever is rev neutral.] So you are so much not worse off under the nrst and may even be better off [but let’s hope not that means you’ve died!]
If you have any pre-tax savings, however, you will surely be better off than expected. If you ONLY have post-tax savings you are in a complete minority. Almost nobody has exclusively after tax investments.
Notwithstanding the above, it isn’t a good idea to double tax anything - in fact it is a fundamental principle of the NRST to tax things only once. So I am asking them to change it. Now I DID soften the letter far more than yours - which was probably not read.
Synthesist,
I believe that you are making fair and reasonable points.
That being said, and with respect (and at the chance of seeming harsh), I’m completely unmoved.
The current system double, triple, and sometimes quadruple taxes us.
An example of triple taxation under the current system (The Death Tax being a fairly recent, and very financially painful, example for me):
My grandfather paid taxes on every dime we inherited, however, because it became “income” upon transfer, it was taxed again.
I took some of those double taxed monies and purchased federally taxed gasoline.
Voila, a triple tax upon a single dollar.
Double/Triple/&c. taxation is one of the main reasons to remove the current Progressive tax and replace it with a system that, after a certain amount of time, would create a single point of taxation - at purchase.
If the Fair Tax were to pass tomorrow, I would gladly pay a sales tax on goods/services moving forward as America (and in turn myself and my family) would be better for it - even on my pre-taxed monies.
It’s an individual choice, however, and I don’t see anything wrong with you wanting a credit for the money that you have paid taxes on - however - this move will begin the corrupting process of adding “loopholes” to what is supposed to be a simple 5-page Tax Bill.
Best,
Noam;ibgu