Fair Tax Proposal

[SamuraiBigEd]

I would like to introduce everyone here to the Fair Tax Proposal which can be viewed in it's entirety at Americans For Fair Taxation: Americans For Fair Taxation and is the best solution for our current tax crisis.

The proposal, in a nutshell, eliminates the I.R.S. and institutes a national sales tax which is inclusive of all state and local taxes. This takes away all of the loopholes, the hidden accounts, under-table dealings and every other way people have used to hide income and not pay taxes on it and makes the system fair for all involved. It also places tax burden on the drug dealers, prostitutes, money launderers, illegal gambling, mobsters, gangs, and any other illegal way to make money and not pay taxes on it.

I know I will get a lot of people arguing it is a regressive tax that places the burden on the poor; get that idea out of your head before it even starts! The tax is not on necessities, and is only levied on new purchases. The wealthy spend a far larger portion of discretionary income on luxury items than the poor. I have customers who have home theaters that are in the $250,000.00 range, I do landscape lighting and misting systems for them that can reach five or six figures, all of which will be taxed, so the regressive argument is totally inaccurate.

What it does do is make it fair and even across the board, everybody pays based on what they spend. The best analogy would be "Would you rather pay .39 cents of every dollar you make or .23 cents of every dollar you spend"! Do the math, it is easy.

 

[twospirits]

Its interesting, I never heard of it and yet its something I myself have expressed in the past that would be a system like it to replace the current tax fiasco.

Good post. i can see this topic get heavily debated.

TS out

 

[InstantKarma]

If something like this ever gets passed, I'm gonna alert someone to my ex-brother-in-law's house. lol

In all seriousness... I'll have to come back to this later when I'm sober enough to be serious.

 

[toasty]

Interesting. Everyone would like to pay less tax, no question about that, but I have a few questions/concerns about this:

1. How would the revenue stream under this proposal compare to what we currently have? I'm not really complaining if it's less, but if it's significantly less, there would need to be some way to phase it in over a period of time -- otherwise, I'd be concerned that the withdrawal of all of that revenue could have negative consequences (e.g., massive loss of jobs in the gov't sector, etc.).

2. What constitutes a "necessity" that would be excluded from taxation, and how does that differ from a "new purchase?" I would say that the overwhelming percentage of things that I need are purchased new, so I'm not understanding the distinction.

3. The part about all state and local taxes being wrapped up in this is really troubling, IMO, because it implies an incredible federal intrusion upon the rights of the states and their local governments to handle the matters that impact them specifically. I don't like paying taxes at all, but given my druthers, I'd rather pay them locally where it is much more likely to benefit me directly in a way that I can see and feel than giving money to the federal government and letting it filter down. Surely this wouldn't federalize all taxing and collection of revenue for everyone in the country, though (I'm hoping), so how do the fed and state/local DORs interact under this plan?

 

[Mrstickball]

Interesting. Everyone would like to pay less tax, no question about that, but I have a few questions/concerns about this:

1. How would the revenue stream under this proposal compare to what we currently have? I'm not really complaining if it's less, but if it's significantly less, there would need to be some way to phase it in over a period of time -- otherwise, I'd be concerned that the withdrawal of all of that revenue could have negative consequences (e.g., massive loss of jobs in the gov't sector, etc.).

2. What constitutes a "necessity" that would be excluded from taxation, and how does that differ from a "new purchase?" I would say that the overwhelming percentage of things that I need are purchased new, so I'm not understanding the distinction.

3. The part about all state and local taxes being wrapped up in this is really troubling, IMO, because it implies an incredible federal intrusion upon the rights of the states and their local governments to handle the matters that impact them specifically. I don't like paying taxes at all, but given my druthers, I'd rather pay them locally where it is much more likely to benefit me directly in a way that I can see and feel than giving money to the federal government and letting it filter down. Surely this wouldn't federalize all taxing and collection of revenue for everyone in the country, though (I'm hoping), so how do the fed and state/local DORs interact under this plan?

Hopefully I can answer your questions:

1. A FairTax system would collect about the same amount of revenue as the current tax system does....Despite the fact that you'd have lower taxes for most Americans. The reason for this is the egregious loopholes in our current system. Many wealthy people are in the 35-39% tax bracket, but due to deductions and other things, they pay far less. For example, Bill Gates (AFAIK) pays 18% in taxes. Comparatively, I make $30,000 a year and pay 25%. So it really wouldn't need a long phase-in process.
2. FairTax system is a consumption tax. That is, that when you go to the store and buy goods, you would get taxed at 23% instead of 7% or whatever your local sales tax is. Of course, in the process, you would keep 100% of your paycheck, so if you made $10/hr, you'd bring home $400 a week instead of $300. You would also get a prebate tax credit in the system, so if you were underneath the poverty line, you would not be required to pay the consumption tax at all.
3. I would imagine that local and state taxes would still exist. The idea is to remove all federal income taxation....This system only deals with federal taxes, and not state taxes. States would continue to operate as they do. Retailers would collect the fairtax at the register, and send it onto the feds, much in the same way they send sales taxes to the state under the current system.

 

[SamuraiBigEd]

Hopefully I can answer your questions:

1. A FairTax system would collect about the same amount of revenue as the current tax system does....Despite the fact that you'd have lower taxes for most Americans. The reason for this is the egregious loopholes in our current system. Many wealthy people are in the 35-39% tax bracket, but due to deductions and other things, they pay far less. For example, Bill Gates (AFAIK) pays 18% in taxes. Comparatively, I make $30,000 a year and pay 25%. So it really wouldn't need a long phase-in process.
2. FairTax system is a consumption tax. That is, that when you go to the store and buy goods, you would get taxed at 23% instead of 7% or whatever your local sales tax is. Of course, in the process, you would keep 100% of your paycheck, so if you made $10/hr, you'd bring home $400 a week instead of $300. You would also get a prebate tax credit in the system, so if you were underneath the poverty line, you would not be required to pay the consumption tax at all.
3. I would imagine that local and state taxes would still exist. The idea is to remove all federal income taxation....This system only deals with federal taxes, and not state taxes. States would continue to operate as they do. Retailers would collect the fairtax at the register, and send it onto the feds, much in the same way they send sales taxes to the state under the current system.

Correct on all points, but we may actually see an increase in revenue since it eliminates the lack of taxation on all sources of hidden income.

The tax rate would be a maximum of 23%, inclusive of all state and local taxes, which means if the tax rate is 15% and your state and local are 8.125% as it is here that exceeds 23% so all you would pay is 23%.

Necessities are the same as they are now. The things you currently do not pay sales tax on like food and medicine.

A perfect example of the loopholes is a statement made by David Geffen in the 90's, "I can pay less in tax now than when I made less than $250,000.00 a year", he was a billionaire at that point. He is one of the few wealthy Americans I have heard who actually want the loopholes gone and believes he should pay his fair share.

 

[rjoudrey]

Ed, I like your proposal, except 1st I would like to see our taxes spent on the right things.

 

[soulfetcher13]

Ed, I like your proposal, except 1st I would like to see our taxes spent on the right things.

Absolutely right. The Fair Tax aka the Consumption Tax is a fantastic idea and should be instituted, but it needs language which says things like wheel tax can't go on social security and so on and so forth. It must become illegal to take from one pot and go in the other. Interestingly enough, it always seems its the entitlement spending that always needs a "bailout."

 

[rjoudrey]

I am not opposed to certain entitlement spending. Maybe all Americans should have the same entitlements whether they work for Joe the Plumber or the Federal Government. That way nobody gets special treatment but we do the right thing for seniors, etc. That way we would all have a vested interest to see that the system is sound.

 

[soulfetcher13]

I am not opposed to certain entitlement spending. Maybe all Americans should have the same entitlements whether they work for Joe the Plumber or the Federal Government. That way nobody gets special treatment but we do the right thing for seniors, etc. That way we would all have a vested interest to see that the system is sound.

We do all have a vested interest to take care of ourselves, we don't need the government to do it for us. I am not opposed to certain entitlement spending, per se, this country should take care of its own, to a certain extent, but not to the extent we become dependent on anybody else to solve our problems for us, we betray our own personal liberty otherwise. Imo

 

[SamuraiBigEd]

Ed, I like your proposal, except 1st I would like to see our taxes spent on the right things.

One problem at a time, that is going to take a lot of work and people getting off their butts to vote these idiots out of office...all of them!

We do all have a vested interest to take care of ourselves, we don't need the government to do it for us. I am not opposed to certain entitlement spending, per se, this country should take care of its own, to a certain extent, but not to the extent we become dependent on anybody else to solve our problems for us, we betray our own personal liberty otherwise. Imo

Well put.

 

[rjoudrey]

We do all have a vested interest to take care of ourselves, we don't need the government to do it for us. I am not opposed to certain entitlement spending, per se, this country should take care of its own, to a certain extent, but not to the extent we become dependent on anybody else to solve our problems for us, we betray our own personal liberty otherwise. Imo

Well if you are handicapped, or mentally ill (which includes stupid), or otherwise can't take care of yourself, what should we do?

 

[soulfetcher13]

Again, we are a great. with the ability to take care of those who can't. But there is a difference between those who can't and those who wont.

 

[IOWA]

But the rich will just buy outside the country then... easy enough with ebay and the like.

 

[rjoudrey]

Again, we are a great. with the ability to take care of those who can't. But there is a difference between those who can't and those who wont.

What do we doe with those (stupid) who won't?

 

[rjoudrey]

But the rich will just buy outside the country then... easy enough with ebay and the like.

We are all buying outside the country, what's your point. Thats how we got all screwed up!

 

[toasty]

Well if you are handicapped, or mentally ill (which includes stupid), or otherwise can't take care of yourself, what should we do?

Definitely a fair question. There are certain things where it is just more logical to have the public sector handle them than private individuals, like infrastructure, fire & police. For other matters, in the abstract, survival of the fittest and allowing the market to take over where it can seems like a pretty fair and reasonable way to go about it. The problem is that when you have people like this that can't take care of themselves, there is a price associated with letting them fall.

Take people with paranoid schizophrenia, for example. Uncontrolled, someone with PS really can't be a productive member of society and some can frankly be dangerous. Sooooo... do you provide them with healthcare on the front end and bear that cost in the hope that they can become a contributor to the economy, or do you decline to pay for that treatment, but deal with the indirect consequences of that decision -- higher crime, increased homelessness and vagrancy, decreased property values, etc.

The point is, society bears that "cost" somehow for those that can't take care of themselves for whatever reason, whether it be in terms of dollars or some other measure. Let them fall, and you may have short term savings, but may see greater consequences that don't justify the savings.

 

[rjoudrey]

Definitely a fair question. There are certain things where it is just more logical to have the public sector handle them than private individuals, like infrastructure, fire & police. For other matters, in the abstract, survival of the fittest and allowing the market to take over where it can seems like a pretty fair and reasonable way to go about it. The problem is that when you have people like this that can't take care of themselves, there is a price associated with letting them fall.

Take people with paranoid schizophrenia, for example. Uncontrolled, someone with PS really can't be a productive member of society and some can frankly be dangerous. Sooooo... do you provide them with healthcare on the front end and bear that cost in the hope that they can become a contributor to the economy, or do you decline to pay for that treatment, but deal with the indirect consequences of that decision -- higher crime, increased homelessness and vagrancy, decreased property values, etc.

The point is, society bears that "cost" somehow for those that can't take care of themselves for whatever reason, whether it be in terms of dollars or some other measure. Let them fall, and you may have short term savings, but may see greater consequences that don't justify the savings.

Finally, someone who really gets it. Preventative care, be it, health or just simple providing a means of support will always pay off in the long run. People that focus only on the up front costs are just fooling themselves. I think deep down inside they just want to use genocide to solve the problem.

 

[SamuraiBigEd]

But the rich will just buy outside the country then... easy enough with ebay and the like.

That is easily fixed, any online purchase generated from within the U.S. regardless of selling location would be charged tax through ebay or wherever it is purchased.

Also, you buy something significant from outside the U.S. you will get hit when you try to bring it in unless it is illegally smuggled in.

 

[aaron.adley]

I'm in favor of tax simplification, but not abandoning our current program.

In the end, we'd either go more socialist (YUCK) or have something similar to what we have now in the end. No matter what they change it to, someone will complain and we'll end up with some of the same exemptions again.

 

[SamuraiBigEd]

The IRS is beyond fixing, it needs to be taken out back and put out of our misery.

I don't see how a national sales tax would be considered socialist, and there is no opportunity for exemptions the way it is written.

The easy way to look at it is would you rather pay 32 cents of every dollar you make or 23 cents of every dollar you spend? The math speaks for itself.

 

[mpw]

...we may actually see an increase in revenue since it eliminates the lack of taxation on all sources of hidden income...

If I earn $1,500,000, but 'hide' a third of my income under the present system, and therefore only pay an Income Tax of 25%(for example only), I pay $250,000 in taxes.

Under this new system my income will not change, but I'll be taxed on goods and services (non-essential) at 25% so unless I spend $1,000,000 on luxuries the tax will decrease.

And to make your statement above true, I'll need to spend in excess of $1,000,000 to see any increase on previously evaded or avoided 'hidden' income taxation.

What happens if I manage to live on just $750,000 a year; surely the tax revenues will fall, while my savings swell?

Or am I missing something?

Not saying it's not a fair way of taxing people per se, just that it's not the quick fix this sort of thing is often sold as.

...The easy way to look at it is would you rather pay 32 cents of every dollar you make or 23 cents of every dollar you spend? The math speaks for itself.

That equation only works if 23% of spending buys the same amount of public services as 32% of earnings nationwide; if somebody on $100,000pa currently pays $32,000 in taxes and spends $50,000 dollars then saves the remainding $18,000; what's to say next year he won't spend the same $50,000 and save $38,500 and only pay $11,500 in taxes?

 

[heywood]

Laywers, who always seem to manage a way to make themselves wealthy out of any situation would never let this happen. Remember, we have a laywer in the house now

 

[burton71]

If I earn $1,500,000, but 'hide' a third of my income under the present system, and therefore only pay an Income Tax of 25%(for example only), I pay $250,000 in taxes.

Under this new system my income will not change, but I'll be taxed on goods and services (non-essential) at 25% so unless I spend $1,000,000 on luxuries the tax will decrease.

And to make your statement above true, I'll need to spend in excess of $1,000,000 to see any increase on previously evaded or avoided 'hidden' income taxation.

What happens if I manage to live on just $750,000 a year; surely the tax revenues will fall, while my savings swell?

Or am I missing something?

Not saying it's not a fair way of taxing people per se, just that it's not the quick fix this sort of thing is often sold as.


That equation only works if 23% of spending buys the same amount of public services as 32% of earnings nationwide; if somebody on $100,000pa currently pays $32,000 in taxes and spends $50,000 dollars then saves the remainding $18,000; what's to say next year he won't spend the same $50,000 and save $38,500 and only pay $11,500 in taxes?

You pretty much hit the nail on the head.