Lets discuss the FairTax, shall we?

[Cuppa-LettuceNog]

There have been numerous topics both condemning and advertising the Fair Tax. These topics tend to focus on only one part of the Fair Tax, and also tend to spin the facts to agree to their viewpoint. In this topic, I would like to only explain the fair tax, give some details, and leave the discussion on it's merit for the replies. For this reason, I will leave my own opinions in a reply to this topic and leave the opening post Neutral.

The Fair Tax (HR 25/S 1025) is a proposed re haul of the United States Taxation system. Described in detail by the book "The FairTax Plan", the FairTax would eliminate, completely, all forms of tax as we know it; income, gift, etc. In it's place, a 30% sales tax would be levied on all items and services. What previously would have cost $100 will not cost $130. On an Item that costs $100 dollars after the sales tax is applied, $23 dollars of it will go to the government.

To avoid taxing the bare necessities of life, every month an advance tax rebate will be given out equaling the cost of living immediately above the poverty line. Furthermore, "investment spending", E.G bank deposits, college tuition, funds invested in new businesses, would not be taxed, nor would exports.

It has been estimated that, do to not having to worry with rebates, charitable donations would increase.

It has also been estimated (as was the case with other nations that implemented a flat tax) that tax evasion would go down dramatically; for example, drug dealers would no longer be able to avoid paying taxes, since even illicit funds would be taxed.

The most important issue is one over how much the government will still be making after the shift. Also known as "revenue Neutrality", it, along with numerous other issues, are a number of things amongst the fair tax that are hotly debated, with no one clear answer available. Therefor, I will safe going into detail on them.
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There we go. If any one would like to give their opinions, discuss, or debate the FairTax, feel free.

My personal opinions are as follows.

[Cuppa-LettuceNog]

I'm against it, as the ability to avoid taxation is quite high; by buying goods oversees from non-mainstream retailers, once can effectively avoid it. A person needs only to have items sent to him as "gifts" from someone in Canada, and voila; no tax.

Furthermore, the appeal for an increase in black market trade is tremendous. I recently stole an Ipod, one that retails for $300 dollars, and sold it for 100. However, after the Fairtax, that same $300 dollar Ipod goes for $390 dollars. This means that stolen goods are even BETTER of a value after the tax as they where before, and therefor people have a higher incentive to buy stolen merchandise.

Finally, theres the fact that it's possibly unconstitutional; taxing under-18s full tax, even though those individuals don't even get the benefits an over-18 tax payer gets. It's like if you charged full tax to a town that you didn't provide with Roads, Police, Firefighters, or Schools.

[Tri-Nitro-Toluene]

At 3/13/08 03:43 AM, Cuppa-LettuceNog wrote: Finally, theres the fact that it's possibly unconstitutional; taxing under-18s full tax, even though those individuals don't even get the benefits an over-18 tax payer gets. It's like if you charged full tax to a town that you didn't provide with Roads, Police, Firefighters, or Schools.

The vast majority of money that kids have is from their parents, ergo, they aren't getting taxed, the parents are. Your point only stands if the kids in question have jobs, and if they have jobs, why shouldn't they get taxed like everyone else? They make use of public services such as roads, police, firefighters and the like as much as anyone else, so if they have the ability to contribute why should they not?

[Drakim]

If I've spend the last 5 years saving up money, paying income tax normally, and FairTax replaces the income tax, then I'll have to pay taxt AGAIN, when using my money.

Infact, my wealth would go down 25%, which is a pretty big thing, considuring I've already paid X% tax on the money already.

Maybe if it had been from the start, but such as switch today would be vastly unfair.

[gumOnShoe]

Aside from my previous point, which has already been raised in the post above mine, I don't like the rebate situation. If you don't spend that much money, you actually make money off of the government.

"free money" from the govenment isn't a good thing. I know it isn't actually free, but look at the way people treat refunds from the grovernment now. A monthly one would just seem like a paycheck. And yeah, who gets the rebate checks? If kids are paying it for buying things as well, then shouldn't they get a rebate as well?

[TheMason]

My concern is that it would put homeownership out of the reach of the poor and middleclass. I mean, who has the $30,000 to pay the sales tax on a $100,000 house? What they would have to do is mortgage that money; roll it into their home loan. Now they are really getting screwed because they are paying interest on their sales tax.

They can't really make an exception on this because that would set the stage for arguments for other exemptions...

[Al6200]

At 3/13/08 10:51 AM, gumOnShoe wrote: Aside from my previous point, which has already been raised in the post above mine, I don't like the rebate situation. If you don't spend that much money, you actually make money off of the government.

The rebate is small and is designed to cancel the sales tax for poor people. For said poor people, a certain amount of money has to be spent on food, rent, basic entertainment, education expenses, etc. It's not an option just to "not spend".

"free money" from the govenment isn't a good thing. I know it isn't actually free, but look at the way people treat refunds from the grovernment now. A monthly one would just seem like a paycheck. And yeah, who gets the rebate checks? If kids are paying it for buying things as well, then shouldn't they get a rebate as well?

Their parents would get an enhanced rebate.

[JayBirdSlim]

Well I'll get involved in this thread too.. in the flattax thread Elfer did a basic break down of the Canadian flat sales tax which seems similar to what is proposed here, though maybe not exactly, and it sounds fairly sound. In the Canadian (and Elfer correct me if I misrepresent) they only tax "luxury" items which doesn't include "grocery store" foods (though I'm the sure the breakdown is a little more complicated), clothing, housing etc... all the essentials but they do tax non-essential items such as cars, ipods, games, music etc...

Now it seems that's a fairly good way to go about it. (though I'm sure as I think about it I'll find someone that gets screwed that is not rich) Is that the same premise as the Fairtax? If so it seems pretty cool. However if things like food, shelter etc are taxed then yeah that totally screws the poor. As for the point about when you spend your savings it gets taxed again. Well sure it does when you spend it on "luxury" items but then again it gets taxed again in the US anyway in most states, we do have a slaes tax. My general income gets taxed as income then when I go to spend it it gets taxed again with a sales tax associated with what I'm buying. So transitioning to a new system that eliminates one of those seems ok.

So does it tax essentials the same as non-essentials? (I guess is my question)

[MortifiedPenguins]

At 3/13/08 12:03 PM, TheMason wrote:

They can't really make an exception on this because that would set the stage for arguments for other exemptions...

One could argue it would be an investment, and thus tax free.

[Al6200]

At 3/13/08 12:03 PM, TheMason wrote: My concern is that it would put homeownership out of the reach of the poor and middleclass. I mean, who has the $30,000 to pay the sales tax on a $100,000 house? What they would have to do is mortgage that money; roll it into their home loan. Now they are really getting screwed because they are paying interest on their sales tax.

I don't think the sales tax would be on a house. Then again, this is why I oppose fairtax, much more complicated than a flat income tax, and inarguably little fairer.

They can't really make an exception on this because that would set the stage for arguments for other exemptions...

Well, not really. Today's sales tax has exemptions on things like food. The problem with exemptions is that loopholes are created that will force people to throw their money around in awkward ways to reduce taxes.

[Cuppa-LettuceNog]

At 3/13/08 04:19 AM, Tri-Nitro-Toluene wrote:

The vast majority of money that kids have is from their parents, ergo, they aren't getting taxed, the parents are.

Correction; kids without jobs.

Your point only stands if the kids in question have jobs, and if they have jobs, why shouldn't they get taxed like everyone else? They make use of public services such as roads, police, firefighters and the like as much as anyone else, so if they have the ability to contribute why should they not?

Because they do not receive all of the benefits and rights of adults.

Currently, Children who work (for example, me) DO bay into FICA. But we do not have to do our taxes; our parents cover that. Now, if a child gets EMANCIPATED, then, I believe, they pay full taxation. However, unless the fair tax plans to legally allow any working person to get emancipated, and also allows said children to be given all the constitutional rights they are denied, then it's simply not fair.

Remember the whole, "no taxation without representation" thing? Well, when you take a group of Americans that are LEGALLY BARRED from suing people, yet tax them for the cost of the courts, that's taxation without representation.

[Cuppa-LettuceNog]

At 3/13/08 07:26 AM, Drakim wrote: If I've spend the last 5 years saving up money, paying income tax normally, and FairTax replaces the income tax, then I'll have to pay taxt AGAIN, when using my money.

How so? The year it gets implemented, no Income tax will be levied.

Infact, my wealth would go down 25%, which is a pretty big thing, considuring I've already paid X% tax on the money already.

Like I said; you won't be taxed the year the fair tax shoots up.

Maybe if it had been from the start, but such as switch today would be vastly unfair.

??

[Cuppa-LettuceNog]

At 3/13/08 10:51 AM, gumOnShoe wrote: Aside from my previous point, which has already been raised in the post above mine, I don't like the rebate situation. If you don't spend that much money, you actually make money off of the government.
"free money" from the govenment isn't a good thing. I know it isn't actually free, but look at the way people treat refunds from the grovernment now. A monthly one would just seem like a paycheck. And yeah, who gets the rebate checks? If kids are paying it for buying things as well, then shouldn't they get a rebate as well?

A) You would be having to be living without basic human necessities to make money; they refund up to the poverty level.

B) Kid's don't get rebates. The "poverty" rebates pay for basic food, shelter, and clothing; since kids do not pay for these things, they don't get the poverty rebate. If a kid is emmancipated, then I assume he DOES get the rebate.

[Cuppa-LettuceNog]

At 3/13/08 12:03 PM, TheMason wrote: My concern is that it would put homeownership out of the reach of the poor and middleclass. I mean, who has the $30,000 to pay the sales tax on a $100,000 house? What they would have to do is mortgage that money; roll it into their home loan. Now they are really getting screwed because they are paying interest on their sales tax.

The house would not be taxed. If you think about it, I'm not buying a "new" item when I purchase the house; the original owner already "bought" it, and therefor a tax was already paid on it. If you are constructing a house, the lumber, bricks, etc would have already been taxed.

I mean, I didn't mention it in the origional post, but already taxed items (all items bought before the FT are considered already taxed) will not be taxed upon resale.

They can't really make an exception on this because that would set the stage for arguments for other exemptions...

There are other exemptions; already paid merchandise.

[MortifiedPenguins]

At 3/13/08 08:12 PM, Cuppa-LettuceNog wrote:

At 3/13/08 04:19 AM, Tri-Nitro-Toluene wrote:

Remember the whole, "no taxation without representation" thing? Well, when you take a group of Americans that are LEGALLY BARRED from suing people, yet tax them for the cost of the courts, that's taxation without representation.

A: We already do get taxed (if you recieve enough income and qualify in the approite State and Federal Taxable Income Range. Likewise, they(and me) also get the wonders of Medicare and Social Security withheld.

B: Taxation without representation isn't mentioned in the the Constitution of the United States (and to my knowledge, most State Constitutions, though yours might I'm not sure of your residence or it's legal constitution) thus what your using is nothing more then a buzzword with no legal precedence.

[Cuppa-LettuceNog]

At 3/13/08 11:04 PM, MortifiedPenguins wrote:

A: We already do get taxed (if you recieve enough income and qualify in the approite State and Federal Taxable Income Range. Likewise, they(and me) also get the wonders of Medicare and Social Security withheld.

But we don't go through all the taxation bullshit that 18 +'s go through. I personally don't worry to much about my taxes, but how much they take from me is actually quite small, and so I assume a person who was 18 and making as much as me would be paying quite more. The only thing that really hit's me is the FICA (payroll) tax, which isn't as bad as everyone makes it out to be =/

B: Taxation without representation isn't mentioned in the the Constitution of the United States (and to my knowledge, most State Constitutions, though yours might I'm not sure of your residence or it's legal constitution) thus what your using is nothing more then a buzzword with no legal precedence.

It does, however, have a military precedence.

After a cause was heralded as a reason to go into a massive civil war against the reigning powers, said revolutionaries try not to do the exact same thing that led to the initial revolution.

It's sort of the reason that we pay taxes to the Democratic Republic of the United States of America, and the the Autocratic Monarchy of the Supreme Kingdom of George Bushia.

[Al6200]

I'd like to see a national

FairTax vs. Income tax debate, and see how they rebuke each other on issues like fairness, implementation, etc.

[TheMason]

At 3/13/08 04:36 PM, Al6200 wrote:

At 3/13/08 12:03 PM, TheMason wrote:

I don't think the sales tax would be on a house.

It would almost have to be...or at least there would have to be an exemption for the first $250K.

Well, not really. Today's sales tax has exemptions on things like food.

In many places there is not an exemption on food...just a reduction in sales tax by 1-2%.

I just don't like the idea of the fair tax, but then again my tax burden was only 7.5% last year! This is another thing, I do think the "fair tax" will screw the poor. With the current tax structure the poor are not taxed all that badly. But you introduce a sales tax...and the poor will see their tax burden probably double.

[Al6200]

Let's say that a person (individual, in this case) must spent X amount of money to stay alive: that includes food, shelter, basic entertainment, etc. The fairtax will tax say 23% of that.

Every person gets a rebate check for 23% of the basic living expenses, just enough to ensure that no one ends up paying taxes on basic goods.

Unless someone is a drug dealer, I see no reason why the tax rates would really spike up.

[MortifiedPenguins]

At 3/14/08 05:48 AM, Cuppa-LettuceNog wrote:

At 3/13/08 11:04 PM, MortifiedPenguins wrote:

But we don't go through all the taxation bullshit that 18 +'s go through. I personally don't worry to much about my taxes, but how much they take from me is actually quite small, and so I assume a person who was 18 and making as much as me would be paying quite more. The only thing that really hit's me is the FICA (payroll) tax, which isn't as bad as everyone makes it out to be =/

Really it isn't so much the age, as it is for what you can purchase at that age.
Capital Gains(or losses), interest return, investments or if you even made more money then your previous year.
The government is happy to take your money whatever your age.

It does, however, have a military precedence.

Unless we live in a junta, that means absolutely nothing.

[The-evil-bucket]

FairTax would murder the economy. Why would anyone buy anything that had a huge tax on it? Tax evasion would go up, not down, with people creating their own little economies. People would buy stuff under the table more than ever.

And then the rebate check. All this money bouncing around. Looking at history, the more places money goes, the more gets skimmed off, lost, stolen, or otherwise misplaced.

[Cuppa-LettuceNog]

At 3/14/08 09:24 AM, TheMason wrote:

It would almost have to be...or at least there would have to be an exemption for the first $250K.

As I stated in our PM's, houses are not taxed. Pre-Fairtax houses would automatically be considered "paid", and since the cost of material to build the house would be taxed on Post-Fairtax houses, selling the whole house would not be considered selling a new item, but "reselling".

I just don't like the idea of the fair tax, but then again my tax burden was only 7.5% last year! This is another thing, I do think the "fair tax" will screw the poor. With the current tax structure the poor are not taxed all that badly. But you introduce a sales tax...and the poor will see their tax burden probably double.

Agreed. Of course, the EXTREMELY poor won't be bothered by it at all =/

[Cuppa-LettuceNog]

At 3/14/08 08:19 PM, The-evil-bucket wrote:

People would buy stuff under the table more than ever.

Why would a company sell anything under the table?

And then the rebate check. All this money bouncing around. Looking at history, the more places money goes, the more gets skimmed off, lost, stolen, or otherwise misplaced.

Exellent point.

[Cuppa-LettuceNog]

At 3/14/08 05:48 PM, MortifiedPenguins wrote:

Really it isn't so much the age, as it is for what you can purchase at that age.

?

Capital Gains(or losses), interest return, investments or if you even made more money then your previous year.
The government is happy to take your money whatever your age.

But there is still currently a difference between adult and juvenile taxation.

Unless we live in a junta, that means absolutely nothing.

Of course it does. After the U.S wages a war to prevent something from happening, it doesn't go off and do that thing it just fought to prevent. LEGALLY it doesn't guarentee a thing, but in REALITY, Britain didn't follow WW2 by rearming the Rhineland and invading Poland, Lenin didn't follow the Bolshevik Revolution with capitalism, and the U.S didn't follow the war in Afghanistan by hijacking planes into prominent New York buildings.

[therealsylvos]

The biggest problem with it is that the government will abuse it to preform social engineering.
We don't like bullets, 50% tax on ammo
We don't like alcohol, 70% tax
cigarettes? 80% tax
trans fat, 90%
etc.

[Cuppa-LettuceNog]

At 3/16/08 01:20 AM, therealsylvos wrote: The biggest problem with it is that the government will abuse it to preform social engineering.
We don't like bullets, 50% tax on ammo
We don't like alcohol, 70% tax
cigarettes? 80% tax
trans fat, 90%
etc.

Uhhhhh... dude? They already do that.

And believe me, it sucks. I live in California, and when I used to smoke, all those taxes levied against cigarettes to pay for anti-smoking programs went straight to the consumer (me).

[therealsylvos]

At 3/16/08 01:28 AM, Cuppa-LettuceNog wrote:

Uhhhhh... dude? They already do that.

And believe me, it sucks. I live in California, and when I used to smoke, all those taxes levied against cigarettes to pay for anti-smoking programs went straight to the consumer (me).

This is true, however I doubt they have such a large tax on everything. By allowing such a huge tax it becomes much easier for them to do it.

[MortifiedPenguins]

At 3/16/08 01:12 AM, Cuppa-LettuceNog wrote:

At 3/14/08 05:48 PM, MortifiedPenguins wrote:

Of course it does. After the U.S wages a war to prevent something from happening, it doesn't go off and do that thing it just fought to prevent. LEGALLY it doesn't guarentee a thing, but in REALITY, Britain didn't follow WW2 by rearming the Rhineland and invading Poland, Lenin didn't follow the Bolshevik Revolution with capitalism, and the U.S didn't follow the war in Afghanistan by hijacking planes into prominent New York buildings.

Actually Lenin did allow small usage of Capitalism, but thats beside the point.

See, your arguing things that happened right after the event.

No Taxation withour Representation happened in 1776, it's 2008.

Were taking 200+ years here. It's pointless to even try.

[Cuppa-LettuceNog]

At 3/16/08 09:45 AM, MortifiedPenguins wrote:

See, your arguing things that happened right after the event.

No Taxation withour Representation happened in 1776, it's 2008.

Were taking 200+ years here. It's pointless to even try.

We're talking 200+ years in a nation founded on the ideals of these men, who's laws all stem by a document written by these men, and which constantly asks itself "would these men approve?", these men who fought and gave their lives for the ideal of "No Taxation without Representation".

[CatherineElizabeth]

Fair Tax = Fail. (PDF)

Just a few quick facts on the Fair Tax:

1. The Fair Taxers will frequently tell you the tax rate is 23%. However, what they don't tell you (and what most don't even realize) is that 23% is the INCLUSIVE rate. The actual assessed rate you will see at the cash register will be 30% because all sales taxes are assessed at the EXCLUSIVE rate.

2. The mathematical models used in the Fair Tax assumes a 0% evasion rate. Our current income tax has an evasion rate of about 20%. Sales taxes have the highest evasion rates of any taxes, and the estimated rate (done by the tax panel in the link) is 30%. If you were to use this evasion rate to calculate the tax rate the Fair Tax would need to be in order to remain revenue neutral, the assessed rate would have to be 49%.

3. The Fair Tax rebate, a check that is sent to every household that pays them back money up to the poverty level, would become the largest entitlement program ever costing 600 billion dollars at MINIMUM. Ironically, the people who generally support the Fair Tax are the ones who go ape shit over welfare.

4. The Fair Tax is not a progressive tax. The tax burden will fall the most for the insanely rich (less than 1% of the population), fall moderately for the moderately rich, fall for the poor (buying big items like houses and cars will still hurt them as these purchases will cost 30% more if we ignore evasion rates), but increase for the middle class. Even more irony here because the Fair Tax is viewed by its proponents as the saviour of the middle class from the oppressive grips of the Income Tax. Also, it is foolish to think that a static rebate level can keep the claimed progessivity of a tax through a graduated income bracket.

5. Sales taxes, due to their high evasion rates and difficulty in enforcing and collecting tax revenue, tend to require a high degree of governmental beauracracy and administration in order to work effectively. The Income tax has a similar problem, so don't expect the Government to magically shrink if the Fair Tax is passed.

6. You also have to take into account that the Fair Tax will be assessed over county and state sales taxes, so the price of goods and services will be even higher than most would expect.

7. A frequent Fair Tax lie you will hear is that your take home pay will increase and the prices of goods will drop due to imbedded taxes being removed. The Fair Tax would theoritically bring the price levels back up to the original price so you magically increase you wealth by doing nothing, or so say the Fair Tax Proponents. What they don't tell you is that if wages were to remain the same, prices couldn't drop because there wouldn't be enough revenue made by businesss to support the wages. In a Fair Tax regime, either prices must come down, or wages must come down (most likely a combination of both). Even this scenario ignore the different elasticites of the demand and supply curves for different products, so the amount of taxes consumers would be burdened with in the price of their goods will be different,

The Fair Tax is a load of shit and it was specifically designed to lure in saps with little knowledge in economics to make Neil Boortz some extra money on all his Fair Tax propaganda books.