I don't really see how you can address it. The 401K is just tax deferred, so you would pay taxes on income, so shifting to a sales tax really doesn't have much effect on it. However, the taxes have already been paid on the Roth IRA and spent by the government. I don't see how the government is going to suddenly give all those tax dollars back to people, and I really don't see any other fair solution.
This country was run on import/excise taxes from its inception until 1916. It served us well then and wouldn’t hurt us now IMO.
Taxes were very low prior to 1916. The nice thing about low taxes is that they don't have a large effect regardless of where you collect them.
Every other country uses this system.
I'm not sure what you mean. Every other country gets a large portion of it's tax revenue from taxes on imports?
I don’t see compliance costs being more onerous to a business than the current collection of state sales taxes.
I read somewhere that only about 60% of goods and services in the US are taxed by a sales tax. The fair tax takes that to 100%. There are a lot of services that are not taxed that would be taxed under the fair tax.
The compliance costs for a sales tax will likely be considerably less than the compliance costs under our current system, however while our current tax system is irritating, the compliance costs aren't really as high as some would lead you to believe. Companies still need to do bookkeeping and report profits and track where their funds go. They have to report such things to stockholders, and the government's concerns about money laundering and people and organizations funding terrorists aren't going to go away. Deducting payroll taxes is not a big burden, and there is far less reporting overhead on reporting payroll than reporting each and every sales transaction.
I would think that a flat personal income tax with no corporate tax would have far less conformance costs than either a the current income tax or the Fair Tax, so in my mind conformance costs savings really isn't a benefit of the Fair Tax when comparing it to other options, because I don't limit the options to the current tax system and the Fair Tax.
You will never get rid of tax fraud. I think compliance/enforcement will be significantly less costly because there will be less opportunity to fudge, and there will be fewer entities reporting taxes.
The number of entities reporting taxes decreases significantly, the number of taxed transactions skyrockets.
However, the biggest problem is likely going to be directly imported goods.
How many people do you know that don't buy bigger ticket items on-line or from catalogs to avoid paying sales tax when it is cheaper than shipping?
That is to avoid paying a relatively low tax of what 7% or so. What do you think happens with a sales tax of 30% on top of the state sales tax.
It should be a great boon to Mexico and Canada as they import our goods at a low price due to no business or sales taxes, and then sell them back to Americans over the Internet. What are shipping costs compared to 37% in state and federal sales taxes?
International shipping companies will either make a huge fortune, or be crushed out of business by governmental regulations as the government attempts to stop people from buying things from outside the US and having them shipped to them at home.
What about Ebay? New items get taxed, used items do not. It will probably be good for the environment since fewer things will get thrown away, but I also expect that a lot of new items will get sold as used items to avoid a 30% sales tax.
This will after all create a huge market for used goods, and a lot of stores will be selling both, so how does the government audit that? They track every item produced or imported?
If you restore or repair a used item and then resell it, how does that get taxed. There is definitely a service and likely materials involved. Do people fixing things up need to track the time and materials invested and come up with a value for those that get taxed?
Taxing the sale of new items only avoids double taxation, but it creates an enforcement nightmare.
I also think that the savings/investment rate of individuals will tend to increase because the tax will be visible on consumption, thus discouraging some.
However, they will also be receiving much more money in their paychecks, and most people seem to spend up to if not beyond their means. I think a lot of people will hang onto used items longer, or resell used items rather than throw them away because of the more visible tax on new items. That is good for the environment, but not necessarily good for the economy. It is much harder for the economy to grow when people don't want to buy new things.
Such a high sales tax will also encourage people to do a lot of things themselves. Paying that tax will encourage me to do a lot more of the work on my car myself. It will encourage me to do home remodeling myself. I do have some experience in both working on cars and in home remodeling, but it's a lot more efficient for me to go get paid to do what I do well, and then pay someone else to tear my car apart and put it back together, and the same goes for some home improvement tasks.
A high sales tax encourages self sufficiency, but it also discourages efficiency at the same time.
While avoiding double taxation is admirable, inflating the costs of new goods compared to used ones is not good for the economy.
I would think that a flat personal income tax with no corporate tax would have far less conformance costs than either a the current income tax or the Fair Tax,
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well I would think it would be a lot cheaper to tax corps instead of people for several reasons:
1) a lot more people than corps
2) corps already have accountants and can benefit from economies of scale
3) a registered corp is less likely to engage in illegal activity than people
Your points about new versus used is valid.
Your point about selling to Mexico and thenpurchasing across the internet just means that customs would have to collect the tax, which they do already for any import duties we already have.
All businesses but cash businesses already use POS systems(and we know why they don’t). A few clicks of the mouse and you have sales tax reports. I don’t see any problem with doing the same thing for the Fair Tax.
Every other country imposes import duties on a wide variety of products. We used to, years ago, get most of our federal revenue from the same. Norway, for example, imposes a 400% VAT on imported alcohol.
The biggest problem I see is that all individuals/families should pay some tax. We currently have almost 50% of filers who don’t owe/pay tax - so anything they get from the government is essentially “free”. That MUST change. Those people vote Democrat because the Dems promise more giveaways.
Think healthcare/insurance. If you don’t currently pay federal taxes, and you believe the government runs efficient healthcare systems in other nations as Michael Moore has told us, and then you see 2 politicians, one of whom is promising “free” government health insurance/care, what would you do ?
We will NEVER even get close to constitutional principles if we don’t make people understand that the government cannot provide “free” anything.
And the best way to do that is to remind them every time they open their wallets. What we have now, the witholding process, does more to encourage this dissonance.