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A FairTax Tale
Nealznuze ^ | 5-11-07 | Neal Boortz

Posted on 05/11/2007 5:30:56 AM PDT by Dick Bachert

I have a little scenario I would like to paint for those of you out there who just insist on finding something wrong with the FairTax. Admittedly, the FairTax isn't perfect. No tax plan is. How, after all, can you come up with a perfect way for a government to take its operating funds from its subjects? If you know an easier and more equitable way to do it, by all means, let me know!

I'm going to ask you to crank up your imagination for a moment here ... and by "you," I mean those of you who think that this FairTax thing is a bad idea and you're not prepared to come on board.

I want you to imagine a scenario. Don't worry about whether or not this scenario is possible .. Just accept it as I present it, and then consider the alternative picture I'm going to also present. Simple as that.

Let's imagine that the FairTax is the law. We've been operating under the FairTax since the day you drew your first paycheck. It's all you know. Here is your imaginarily "reality."

On every payday you get your complete paycheck. There are no deductions. If you earn $2,000 per week, you get a check for $4,000 every two weeks. You never have to save receipts or create any records pertaining to federal taxes. You can invest money without paying any taxes on it. You don't have to pay taxes on the money you earn through your investment portfolio. You pay no taxes on any money you put in your savings account. When you die you get to leave your entire estate, everything you own, to whomever you wish. The federal government will take no taxes from your estate. Your death is not a taxable event. When you go to the store to buy an item, and the price tag says $19.99, you will had a $20 bill to the cashier and get one penny back. The price tag is the price. There are four people in your household. You, your spouse and two rug rats. At the beginning of every month you get a check or a credit to your checking or charge card account in the amount of $506.00 to compensate you for the federal sales taxes that are included in the price of everything you buy; right up to the poverty level.

All in all .. not such a bad deal. You keep all of the money you earn and you get five hundred bucks a month from the feds. Plus .. you only pay taxes when you spend money.

Now .. .here comes some politician who has a grand scheme for a new tax system. He wants to explain it to you. Here's his great idea ..... give him a listen and tell us what you think.

The plan is simple. First the federal sales tax is going to be removed from the price of everything you buy. This will mean that everything will cost 23% less than it does now. But ... he's going to levy an income tax on every single individual and business who plays any role at all in bringing those products to the marketplace. These people and companies are all going to pass the cost of these taxes down the economic line to the final consumer of the products they manufacture. These taxes will end up embedded into the prices of products in our retail marketplace, bringing those prices right up to the current level. So .. no loss, no gain.

Next your political benefactor is going to take away your $500 per month prebate from the government. In its place he's going to tax every penny you earn. It doesn't matter where the money comes from. Your salary, your investment income, winnings at the track ... whatever you earn and however you earn it, it's going to be taxed.

Wait! He's not through. He's also going to tax your wages for Social Security and Medicare. He's going to try to soften the blow by telling you that your employer is going to match the taxes he takes out of your paycheck, but you're employer has made it clear that this money is all going to come out of the money he has budgeted to hire you. You'll probably lose out on your next raise while the boss his accounting in order.

There are some more nifty ideas in your congressman's tax reform plan. When you die your family is going to have to file a complicated estate tax return. A huge amount of the wealth you have managed to build during your life is going to be sent to the government. Your survivors may well have to sell the family business in order to come up with the money to pay for these death taxes.

One more thing .. you're going to have to keep records of all of your financial transactions. Every year you're going to have to spend no less than about 30 hours or spend hundreds of dollars to hire someone to fill out tax forms for you. If mistakes are made you will be hit with a huge penalty and interest. Oh .. and the government is going to have access to all of your financial records to make sure that you are paying everything you "owe."

The question, of course, is why does this politician want to change the tax system in this way? Power, that's why. They want to be able to enact little changes to the tax code that will benefit certain constituents ... which constituents will then benefit the politicians -- with money or with votes. Under the FairTax system these politicians have no power to favor one group of voters over another for the benefit of votes. The new system would give them that power.

Your choice, my friends. If we had the FairTax now ... would you be willing to make the switch?


TOPICS: Business/Economy; Culture/Society; Government; News/Current Events
KEYWORDS: fairtax; irs; taxreform
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To: Always Right
The bottom line, a $100 untaxed item will be $130 under the fair tax.

So... what does that $100 "untaxed" item cost today? It's certainly more than $100...

81 posted on 05/11/2007 10:02:58 AM PDT by kevkrom ("Government is too important to leave up to the government" - Fred Dalton Thompsn)
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To: Always Right
90% of home builders will be in bankruptcy as they wait around for thie equilibrium.

Somehow I doubt that. I've seen how fast housing prices can move -- in both directions -- based on changing economic conditions, or even perceptions.

82 posted on 05/11/2007 10:04:27 AM PDT by kevkrom ("Government is too important to leave up to the government" - Fred Dalton Thompsn)
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To: Always Right
I personally don't spend 40 hours reading every instruction for every form. Nor do I charge myself $25-40 per hour to do such.

100% true. No doubt.

But when GM's tax return is 6 feet high and thousands of pages long, I wonder how much time and money was spent to complete it.

83 posted on 05/11/2007 10:05:12 AM PDT by Phantom Lord (Fall on to your knees for the Phantom Lord)
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To: Smokin' Joe
England is a monarchy, with subjects.

Tony Blair, and Gordon Brown will be very surprised to discover this. Along with the rest of parliment and the British people.

84 posted on 05/11/2007 10:09:05 AM PDT by Phantom Lord (Fall on to your knees for the Phantom Lord)
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To: Dick Bachert
I agree with one of her, the income tax amendment should never have been passed. And repeal would be a good thing, and accomplish by itself most of what the Fair Tax does, and is indeed a pre-requisite to any benefit of the Fair Tax.

Sales taxes are a form of excise taxes, and were always constitutional.

The sweeteners (prebate, and socsec takeover) are actually deal killers for me. The prebate is unconstitutional government charity, as would be socsec after the Fair Tax pays for it.

Forced savings for retirement is a different issue, and objectionable on it's own. Converting socsec into private accounts is vastly preferred to making it a charity (which likely would result in eventually refusing benefits to anyone with a big enough pension/401/IRA).

Making paying taxes less onerous without reducing the overall flow of taxes to the government is counter-productive to reducing government, or making it accountable.

85 posted on 05/11/2007 10:10:21 AM PDT by slowhandluke (It's hard work to be cynical enough in this age)
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To: Always Right
How can you support the idea of an ‘Income’ tax over the FairTax?

Because I see it as killing my business.

Bing bing bing bing! Personal greed and selfishness over what is really a better system.

86 posted on 05/11/2007 10:10:43 AM PDT by Phantom Lord (Fall on to your knees for the Phantom Lord)
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To: Always Right
The reason you must speak of the rate in an inclusive manner is so it can be compared apples to apples with the current income tax, which is an inclusive calculation.

And a $100 item today will be a $100 item tomorrow under the Fair Tax, not $130.

87 posted on 05/11/2007 10:12:46 AM PDT by Phantom Lord (Fall on to your knees for the Phantom Lord)
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To: Phantom Lord; Always Right
But when GM's tax return is 6 feet high and thousands of pages long, I wonder how much time and money was spent to complete it.

And that is but a small part of the entire picture. How much was wasted on avoidance efforts for example.

88 posted on 05/11/2007 10:13:41 AM PDT by Bigun (IRS sucks @getridof it.com)
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To: Phantom Lord
And a $100 item today will be a $100 item tomorrow under the Fair Tax, not $130.

Only if everyone takes a paycut. Otherwise you are full of crap as usual.

89 posted on 05/11/2007 10:15:54 AM PDT by Always Right
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To: Phantom Lord
Along with the rest of parliment and the British people.

Who remain, along with Tony Blair, subjects of the Crown.

90 posted on 05/11/2007 10:16:16 AM PDT by Smokin' Joe (How often God must weep at humans' folly.)
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To: Always Right; Phantom Lord
Only if everyone takes a paycut.

Once again proving that "There are none so blind as those who will not see."

91 posted on 05/11/2007 10:21:26 AM PDT by Bigun (IRS sucks @getridof it.com)
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To: Smokin' Joe
Who remain, along with Tony Blair, subjects of the Crown.

The Queen's word is still law? I am sure they will be surprised to hear that.

In a semantic sense they may be subjects of the Crown, but the Crown has no legal power over the country.

92 posted on 05/11/2007 10:23:23 AM PDT by Phantom Lord (Fall on to your knees for the Phantom Lord)
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To: Always Right
I said: So... what does that $100 "untaxed" item cost today? It's certainly more than $100...

While you're still trying to figure that one out... also figure out how much someone needs to earn, before taxes, to pay for that $100 "untaxed" item (plus taxes).

Keep adding it up, and you'll see that that $100 item already costs $130 today.

93 posted on 05/11/2007 10:33:07 AM PDT by kevkrom ("Government is too important to leave up to the government" - Fred Dalton Thompsn)
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To: Always Right

Its STILL better than the income tax. And it still takes power away from politicians.


94 posted on 05/11/2007 11:19:33 AM PDT by Little Ray (Rudy Guiliani: if his wives can't trust him, why should we?)
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To: kevkrom
While you're still trying to figure that one out... also figure out how much someone needs to earn, before taxes, to pay for that $100 "untaxed" item (plus taxes).

Which set of assumptions do you want me to figure it on. Wages stay the same, after tax prices go up. Wages are reduced, after tax prices stay about the same. Or some fairytax reality where everyone pockets more money and miraculously prices stay the same. It is a waste of time to compute anything if you are going to have fairytale assumptions.

95 posted on 05/11/2007 11:27:18 AM PDT by Always Right
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To: Always Right
New home sales will not be impacted at all. The NRST will be financed as part of the mortgage. The increase in monthly payments is more than offset by the increase in the paycheck.

I have posted several times the studies that show the impact is nil.

The cost of new materials will go down as well. I am working on a policy study to transition over three years on pricing so that the price volatility will be minimal.

Try to keep in mind that after one hundred years of the Income tax we have a society that is better quipped now to handle the FairTax through electronic networks. We should be able to advance our society forward rather than cling to a system that hurts people.

96 posted on 05/11/2007 11:34:09 AM PDT by Hostage (Fred Thompson will be President.)
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To: kevkrom

Post #96 for how new homes are not affected.


97 posted on 05/11/2007 11:36:45 AM PDT by Hostage (Fred Thompson will be President.)
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To: Hostage
New home sales will not be impacted at all. The NRST will be financed as part of the mortgage.

Whether it is included in the mortgage makes no difference.

The increase in monthly payments is more than offset by the increase in the paycheck.

So you are assuming workers will keep all the money so suppliers will not see those savings from the elimination of income tax? You do realize that means prices in labor, materials and supplies will not come down and will you add the sales tax on the end prices will go up?

I have posted several times the studies that show the impact is nil.

Because the study includes bogus assumptions. Unless workers take a pay cut in the amount of the income tax they use to pay, prices go up. There is no way around that.

The cost of new materials will go down as well. I am working on a policy study to transition over three years on pricing so that the price volatility will be minimal.

Good luck with that. When you get some realistic assumptions, get back to me.

98 posted on 05/11/2007 12:11:07 PM PDT by Always Right
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To: Always Right
Check out the FairTax website:

http://www.fairtax.org/site/PageServer?pagename=about_faq

#17
How does the FairTax affect wages and prices?

Americans who produce goods and earn wages must pay significant tax and compliance costs under the current federal income tax. These taxes and costs both reduce after-tax wages and profits and are then passed on to the consumers of those goods and services in the form of price increases. When the FairTax removes income, capital gains, payroll and estate and gift taxes, the pre-FairTax prices of these goods and services will fall. The removal of these hidden taxes may also allow wages to rise. Exactly how much prices will fall and wages will rise depends on market forces. For example, in a profession with many jobs and too few to fill them, wages will likely increase more than in fields where there are too many employees and not enough jobs.

99 posted on 05/11/2007 12:41:26 PM PDT by GeorgefromGeorgia
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To: Always Right

I can see you have no desire to understand and communicate. You just want to register your opposition based on what you believe whether or not what you believe is wrong.

I will communicate ‘bother’ you no further.


100 posted on 05/11/2007 1:08:42 PM PDT by Hostage (Fred Thompson will be President.)
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