While I'm generally in favor of FairTax, I'm glad to see this post. I've always felt something didn't quite add up with this. I mean, if the government is taking in a certain amount of money via the current tax system, and after the FairTax they are still taking in the same amount of money, how can everyone be paying less taxes? You can alot a certain amount for the overhead that is eliminated, and you can also expect a certain amount of growth, but I don't think the proponents are counting on the growth in their models, and the elimination of the overhead doesn't account for all the benefits they are touting. It just doesn't add up.
As I say at the end of the letter, this plan is still worth debating without the windfall pay increase for every wage earner. And there won't be any income or payroll taxes taken out of the new lower salary. And efficiences can cause the amount to rise back up later to everyone's benefit.
The point is that we need to discuss this plan honestly.
Yes it does add up. You have to remember the stupid people did exactly the same thing years ago with the Social Security tax. The tax withholding was out of hand and visible to the voting public so they "hid" 1/2 of it by reducing the actual witholding from the paycheck and forced the employeer to pay the other half. The stupid "sheeple" had been sedated even though they didn't realize that the money the employer was forced to pay was in fact, money directly out of their pockets.
The only fair tax is a tax on retail sales with no exceptions to the tax. Other than that, it can be manipulated by politicos and will quickly become the exact copy of our IRS fiasco we now have.
Your forgetting (for some reason) the 1/4 - 1/5 of the current (untaxed) economy that avoids paying social security, Medicare, and income tax entirely.
But anytime ANY of these people makes a purchase after the Fair Tax begins, that exchange is taxed.
Now ole Rob claims that almost all of the current "underground" (untaxed) purchases (he makes a incorrect assumption that the underground econmy is only drug dealers and prostitues!) are used goods and from pawn shops that would not be taxed, but that is wrong.
The economic boom from the fair tax would not really come from taxes that Americans pay. As demonstrated, that would be basically a wash. The boom comes from imports. The US imports a huge amount. As the system is today, the import competes price wise with the domestic product which has the embedded taxes. When the import item is sold, that embedded tax equivalent is shipped out of the country as an added bonus to the overseas producer. With the Fair tax the imported product must compete with the domestic product at a price that does not include embedded taxes and the importer losses the bonus while still incurring the added costs of transportation and handling.
The net effect would be to spur domestic production of goods and services. Since we realistically would still import heavily, stopping the flow of embedded tax equivalent out of the country would be like "tax gravy" to the federal government. Just look at our current trade imbalance and picture 22% of that flowing into the Federal government. Goodbye budget deficits. I was a flat tax man until I carefully examined the system and came to this realization. This aspect of the Fair tax must be hammered home to people because it has such a potential impact on our domestic economy and is the real way to protect jobs in America.
You know the problem isn't taxes it is spending. The state and federal governments are out of control. Besides the Social Security crisis no one talks about the continued rise of Federal and State taxes. At some point x after 2020 people won't be able to pay the combined Social Security/Federal-State income taxes.
But the rise is fueled by uncontrolled spending. Spending by the Federal and State governments should be frozen where they are now.
I'd rather see new admendments to the Constitution requiring 4/5's of the house and 2/3 of the Senate required to raise spending over a certain point. No "state of emergency" garbage either for lawyers to get around.
More people paying.
The Fair Tax plan has never claimed to be a tax cut. Individuals, who are the only ones who pay taxes, will still pay the same amount of taxes, but at the register instead of a paycheck deduction.
The benefit comes from the elimination of the IRS. It also comes from the fact that companies do not have to waste precious productive time contemplating the tax implications of every business decision. This frees up time and money for new product development, purchases of equipment, hiring of more employees,and improvement of production and marketing techniques.
Individuals will see the embedded taxes disappear from the retail price, and be transferred to a sales tax. This means prices stay about where they are now. There is no tax on savings, capital gains, or the sale of used products. Additionally, now foreign citizens who shop in America will pay taxes. Participants in the underground economy, who pay no taxes, will be forced to pay them when they buy a loaf of bread, a new car, a dishwasher, etc.
So, prices remain the same, taxes remain the same, The IRS vanishes, and businesses free up time and money to improve their business. It's a winning deal for everyone.
One of the main increases in revenue will be seen as a result of the currently "untaxed", namely illegal aliens, drug and arms dealers, cash under the table earners,etc., finally paying their share. Also, having done payroll for years, I can tell you that you can look at the amount withheld from your check for Soc Sec and see how much your employer will be saving, as that is the amount they must match, as well as 2.5% for Medicare.
So, as I see it, the reason it is called the Fair Tax is because, well, it's FAIR! I get really tired of standing in line at the grocery store behind Mr. Local Drug Dealer and his current honey paying for t-bones with an ebt card when even the infant is wearing high dollar sneaks and driving off in a Lexus SUV. Let him and everyone else pay his taxes in a more equitable manner.