Posted on 12/18/2005 4:46:00 PM PST by FairOpinion
YES! 83% (8832 votes) A consumption tax would be great for the American economy. Do away with complicated income taxes!
NO! 17% (1761) A consumption tax would not be fair for low-income households. Keep the current income tax system!
We'll send your vote to your congressional representative and senators.
You are correct. It would not take a 23% FairTax rate to replace the income tax.
That is because the FairTax replaces all income taxes (individual & corporate totaling $1T) as well as all Social Security and Medicare Taxes (totaling $720B), plus it covers roughly $350B of net new spending to provide a Family Consumption Allowance -- often referred to as the "prebate" -- which offsets the tax on spending up to the poverty level for everybody.
Given my druthers, I'd rather a 6% witheld tax on all income to fund SS/M, a 12% Sales tax to fund everything else, and no "prebate". That would still have all the pro-business effects, eliminate the IRS and filing for individuals, and stop non-taxpaying voters from spending us into oblivion.
The most critical point to remember about home ownership is that people save down payments from income subject to the top marginal combined income & payroll tax rate.
Being able to save from untaxed income is very friendly to somebody struggling to put together that down payment.
http://www.jpfo.org/fairtax.htm
Be sure to read the responses as well. Another view besides the rosey scenario supporters give.
The problem with the 'fairer' flat tax is that .....it, like EVERY tax always does, can go up. By the time you add up what you're paying in local and state taxes, you'd eventually be back to square one re: paying 50% or more of your income in taxes.
With a national sales/consumption tax, only people that CHOOSE to spend (or can afford to) pay the tax. If you prefer to save your money and invest it for your retirement instead of shopping or spending it away, you CAN. Your choice. That would in turn help those that would otherwise be forced to rely on social security alone. Plus, it would do away with all the 'special' interest deductions, whereas the flat tax could still allow those (I think). Not a tax expert, but until or unless someone can convince me otherwise, I'm for the consumption tax.
Let's do it!
I was with you til you said "withhold"... why withhold? Withholding lessens the impact significantly and keeps the taxation of income in play.
Why do you choose 6% withholding on all "income" (whatever that means) instead of a appx 4% on consumption?
I, like you, would prefer no rebate. But I know that we will not get reform passed without it.
There are some legitimate concerns that people have regarding the FT, but at least they take the time to investigate it and learn whether it is a valid concern. You just make up your own answers -- not based in fact -- and then decide that you don't like the answers.
Help me, please. Would you call that approach ignorance or just plain stupidity?
It actually works quite nicely in Texas and Florida and their economies rank in the top 20 in the world -- much larger than many countries. Both of those states operate without an income tax, just a sales tax.
A companion bill starts the process of repealing the 16th, but reapealing an amendment will take years. As that is being done, there is no reason to begin benefitting from the FairTax.
The problem with your argument is that it encourages social engineering based on government's idea of what is good for society. I'd rather let 200 million Americans decide what's good for themselves than to let some anonymous bureaucrats of any quantity decide those things for me.
I have here, and in a different thread, simply attempted to point out the unintended consequences or your proposals.
If your proposal IS like the VAT (in which taxes are collected at each step of the supply chain and then offset with payments farther down the line) then please explain why we shouldn't learn from Europe on the subject?
If your proposal is NOT like the VAT (taxes collected only on the "end-user", whatever that means) then you will need an army of Revenue agents to determine what is or is not "end-use".
Let's say my company gives me a company car which I also use for personal use. Is this "consumption"? Of what type?
I think I'll keep my accountant on retainer while you are trying to decide.
Your degree matters not. Your experience is worthless.
You haven't read the FairTax bill and don't know what the provisions are.
The FairTax is NOT a VAT.
End user is the RETAIL consumer. Business is tax exempt.
There will always be cheaters. No one says that there won't be, but unlike the current system where one can easily underreport their income to get away with it, a consumption tax requires the collusion of the buyer and the seller and each will be wary of the other.
The current tax system has 140 filers whose veracity is always in question whether their return is ever scrutinized or not. The FairTax reduces the filer to about 10% of that number. Forty five states already operate a sales tax system and the FairTax will simply be one (1) (uno) (single) (solitary) additional line for the Federal return. The retailer as well as the state are paid for the collection and compliance activities. Being caught in a scheme to avoid taxes will result (in addition to any other criminal penalties) in the loss of the business being tax exempt. Sure some will try it, but I doubt many will.
Compare that to todays system where many are gaming the system. This system will also spread the burden over tourists, drug dealers, prostitutes and pimps as well as anyone else who doesn't report their income now.
If you are as educated as you claim, don't try so hard to play the fool here. Legitimate questions and concerns will be dealt with and answered. Foolish ignorance and trollish behavior will be handled in an appropriate fashion as well.
He probably spends somewhere around $200k/year to support he and his family (which will increase somewhat as college tuition rolls around for his three kids).
I can see how someone like him would find the "Fair Tax" fair...
You're right. I agree with people making decisions for themselves, etc., just as you say. But, I also believe a society, any society, should have the right to create the rules they want to live with and the obligation to provide for the general welfare of that society if that's what they want.
I'm still looking at the Fair Tax with an open mind, but with questions. I support Milton Friedman and Steve Forbes idea of a flat tax, or flatter tax than we have now. I may also find out I like the Fair Tax, but I'm not there yet. I vote against every tax increase and I firmly believe there is way too much money for government overall, which is partly responsible for the corruption in government. If these guys didn't have all that money, they wouldn't be attracting lobbyists like flies to a cow patty.
I also think taxes play a part in buying decisions for some products, such as where someone buys something and when to make the purchase. Taxes have been used for social engineering for years, and the results have not always been bad. For example, we would not have as much of the low income housing we have today were it not for the tax breaks provided to investors to build them. Or, one reason people will buy storm windows and insulation is because of tax savings.
Regardless, I'm still learning about it. Thanks for the response.
Currently, a family of four with a gross income of $40,000/year and taking only the standard deductions and exemptions pays exactly $0 in Federal Income Taxes.
Under the "Fair Tax" plan, given that they "consume" their entire earnings the family would see the cost of their purchases rise from 40,000 to $49,200.
In return, they would get "prebates" of $4335.00 (at a poverty rate of $18,850 for a family of four).
In other words, this family of four would end up paying $4665 in taxes under the "Fair Tax" plan
In exchange for what? The five or six hours that they now spend filling out a 1040? I don't get it.
"Let that nest of vipers in DC work a few shell games and we'll be paying income tax, VAT, and a flax tax at once"
Yes, you will be.
I would rather eliminate the need for individuals to file -- along with the IRS. As long as it is up to the individual to file, the IRS will never go away.
By "all income", I mean all employee compensation (including benefits), all interest and dividends, all capital gains, and the shareholder's earnings in any corporation. (That last one might be tough to manage a witholding on.) Basically, all income except SS and Disability payments. No exemptions and no deductions except those. Limiting what is included in "income" narrows the tax base and drives any rate upward.
4% of Consumption ($9T) would just barely cover the employee side of SS/M revenue ($360B). 6% of all income ($12T) covers both employer and employee sides of SS/M by replacing the full $720B. The 12% FairTax on the $9T Consumption raises the $1.1T needed to replace Individual and Corporate Income Taxes.
The part of the FairTax I think would do the most good for the country is the complete elimination of taxes and unproductive compliance costs that businesses have to build into prices. I think removing it would allow prices to fall 10% on average, but more important would be the pro-business environment that would make the USA the most attractive locale in the world for business. Resulting in higher employment and wages, more capital, less welfare, etc.
"I, like you, would prefer no rebate. But I know that we will not get reform passed without it."
If it won't pass without the prebate, then at least a lower FairTax rate means a smaller prebate. It's hard to be happy about anything that will perpetuate this huge block of non-taxpayer voters.
It is a pet peeve of mine that people will agree to the fairness of something in the abstract, but are ultimately completely self-serving. This may be off-topic, but it is still tax reform, so maybe not:
A few weeks ago, I conducted a very unscientific and loaded-question poll. I asked everyone I met, Dems and Republicans, this simple question:
"If you got a raise, or were considering getting a second job for extra money, would you rather
A) the extra money was taxed at a higher rate than your current income, or
B) the extra money was taxed at a lower rate than your current income ?"
I was SHOCKED that the answer was unanimously (B)
Not really shocked, of course, but it certainly begs the question of why people would prefer to pay LOWER taxes as their own income increases, but don't see the contradiction in thinking higher taxes on other people's higher incomes is appropriate.
I think this is a psychological trap America was lead into by FDR and other admirers of socialism. The American Dream has been taken from these people (or maybe it's been bought from them very cheaply). The American Dream, to me, has always meant admiring the achievements of others and trying to achieve them myself. Instead, most of America embraces envy and out of angry spite, feels those more successful people should be punished.
Anytime a politician tells one group of people the "solution" to funding some program is to tax somebody else, that is demagoguery and hate speech as far as I am concerned.
If your cousin is paying "north of $2 million", then his income would need to be north of $6 million.
Where is all that income going ? If it will never be spent, then it doesn't really do him any good. What is the point of earning money if it is never enjoyed ?
When he, his kids, or his heirs eventually spend it (plus all the tax-free earnings on the savings), the FairTax would take 23% of it.
Depending on the source of his income, he may or may not end up significantly better off money-wise under the FairTax. Psychologically, of course, he'd be much better off with the FairTax.
First, I wonder why you think it is fair for anyone to pay zero in income taxes. Doesn't your hypothetical family of four have any obligation to support the country ?
Second, a family of four with $40,000 income is paying 7.65% in Payroll taxes, even if they pay nothing in Income taxes. So they would be spending, at most, 92.35% of their income, which is $36,940. Buying all the same items at the same pre-tax prices, and adding the FairTax, they would pay $47,974. You must be looking at an old HHS poverty table. The figure for a family of four for 2005 is $5,902. So they would have spendable income totaling $45,902 available to buy those items. So they come up $2,072 short of being able to buy everything they used to be able to buy.
Third, most reasonable people will admit the competition amongst businesses will force the businesses to pass along most of their own tax savings as lower prices. That means if prices fall to $35,902 from their current $36,940, then this family would be able to buy all the same items as before. Ergo, prices need to fall $1,038 or 2.8% for this family to break even.
Fourth, this family likely purchases used (rather than new) vehicles, and they would be buying those vehicles without FairTax applied.
Bottom line is that this family is unlikely to be worse off.
"In exchange for what ?" This is really priceless.
People pay taxes to support their country. Did you think citizenship, defense, judiciary, (higher) education, etc. was all supposed to be FREE ?
1. Would you like to pay $30,000 for your new Toyota? Yes 95%
or
2. Would you like to pay $30,000 plus $7,500 extra sales tax for your new Toyota? No 3%
Undecided. 2%
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