Fair Tax by Hero

Ok the problem I have with a "Fair Tax" is this, the tax is "fair" to who exactly? Every time the tax code changes there are winners and losers and I'm sure the losers don't see the changes as being "fair."

So who wins and who loses by this proposal? The Government needs $X a year to operate. Taxation is about paying for X and the Tax code about who pays what part of X. Since X is not getting any smaller if I pay less towards X then someone else pays more.

So who pays less and who pays more?

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Monday, January 7, 2008 12:08 PM

HERO

Quote:
Originally posted by Fletch2:
Who wins, who loses?

Biggest losers are the rich and the poor.

The rich can get by with no income (or set things up so it appears they have no income) and thus many will pay little. But they do buy things...thus under this system they would be taxed.

The poor don't pay taxes. They would now be forced to pay a large tax on essential things...like food. The plan offsets this by writing a check to everyone for the amount of tax they would pay up to the poverty line, thus eliminating the burdon on the poor (unless they blow their check, in which case they will be in serious trouble).

H

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Monday, January 7, 2008 12:16 PM

Then why not just exempt essentials? When the Value Added Tax was introduced (and that is effectively what we are discussing here right not just a basic sales tax) the EEC exempted food, energy, kids clothes and books from the extent of the tax.

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Monday, January 7, 2008 1:49 PM

Keep the Shiny side up

Quote:
Originally posted by Hero:
Mike Huckabee(R) is big on the Fair Tax idea.

In short this is scrapping the Income Tax and just about every other form of tax we pay in favor of a 30% consumption tax (ie a national sales tax).

Hard on the poor? Don't worry, everybody gets a check to offset what they pay up to the poverty line. So a family making $30,000 pays around 7% while a fella earning $125,000 will net out at around 19%.

Now me, I like the idea. I'm thinkin some of you Ron Paulies ought to consider it as well (cause the war can't be your only issue).

Couple of points for consideration.

The poor folk still have to pay the Fair Tax at point of purchase, and wait for a refund somewhere down the line. You can consider this either enforced savings or an interest-free loan to the government. Currently, if their income is low, they don't pay much in income tax withholding, just SS, medicare, and unemployment, plus can get Advance Earned Income Credit added to their check.

Social Security will require a complete rewrite, since individuals won't be paying into their own accounts any more. The money would just come out of the Fair Tax pool. How do you then determine who's eligible, and for how much? Pretty much the same problem for Medicare.

People who have made business or personal finance decisions based on the current tax laws are screwed.

Could probably come up with a few more complications without much trouble.

Not saying that a consumption tax isn't an alternative, but it ain't gonna be as simple a change as some would have you believe.

"Keep the Shiny side up"

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Monday, January 7, 2008 2:07 PM

LEADB

Quote:
Originally posted by Fletch2:
Then why not just exempt essentials? When the Value Added Tax was introduced (and that is effectively what we are discussing here right not just a basic sales tax) the EEC exempted food, energy, kids clothes and books from the extent of the tax.

What is essential? Water from the faucet? What if I fill my swimming pool with it? Bottled water? Wait, my well isn't acceptable drinking water, so why are you taxing -my- purchase of bottled water??? (Just an example, my water is fine). Drinks are essential, yes? Water, milk... what about soda? Beer? Wine? A really smooth bourbon? Food is essential, yes? Wheat. Bread. Sugar? Chocolate? Fine chocolates? So where do you draw the lines? Instead of having a complex, impossible to understand income tax, we have a complex, impossible to understand consumption tax. I kinda like the 'tax everything, then send the rebate.'

I'm more concerned about how the impact to investment this will have. I buy a silver spoon, that's taxed. I buy a silver coin? Wait, that's an investment vehicle. I buy 100oz silver ingot. Clearly an investment vehicle. I buy a box of wheaties, it's taxed. I buy a bag of wheat to grind at home, it's taxed. I buy a bushel of wheat to re-sell. Investment? I buy two tons of wheat to re-sell, clearly commodity trading. So, there will either have to be some form of complexity or we'll have some serious impacts to certain investment/commodity trading activities.

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Monday, January 7, 2008 2:12 PM

KIRKULES

I like the idea of the "fair tax", "flat tax" and many other ideas that would be better than our current system. The problem is that they will never happen. The current system has to many special interest perks and loop holes that those who receive them will never give them up. Also their is the problem of the 16th Amendment. I would never support the "fair tax" unless the 16th Amendment was simultaneously repealed. Can you you imagine the Dems in power with the "fair tax" and still having the constitutional power to impose an income tax again. Wouldn't take but a few years and the Dems would have us paying both the "fair tax" and income tax at the same time.

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Monday, January 7, 2008 2:35 PM

It works well in all countries that have a VAT. What happens is the retailer effectively pays the tax to the government -- since he in effect is the point at which the tax is charged. He knows what is exempt and what isn't, he prices all goods to show the price of the goods with the tax were applicable. So if you buy a soda or a fine whiskey the price you see is the price you pay, you have no idea if that includes tax or duty or anything else and you don't need to know because you actually just pay what it says on the label.

I am a little skeptical of the idea that this in some way makes rich people pay taxes. I'm assuming that companies will be exempt the tax or can claim it back otherwise it will be a compounded tax on industry.

Like you say some people skip income tax by making it appear they have no income. But the kind of person that can make that happen can just as easily dodge a consumption tax. All that will happen is that instead of all income going to some shell company for tax reasons the rich guy will get his shell company to buy him things and "lend" them to him. Chances are the company will be able to claim the tax back on company purchases.

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Monday, January 7, 2008 7:38 PM

The only fair tax is a flat income tax. No exemptions, no loopholes. Period. People below the poverty level should be exempt, ( I don't know that that is at the moment or I'd use it) but there would be no such things as EIC, or any other stuff.

Everyone pays something to support the nation. period. no more fat cats living it up and paying nothing, no more taking from the rest of us to give to someone else.

Just a plain, flat tax. Easy to figure, easy to collect. Course that would mean we didn't need the IRS anymore, which is probably why we don't have it already,

Bad_karma
Great and Exalted Grand Pooba, International Brotherhood of Moonshiners, Rednecks, and Good Old Boys.

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Monday, January 7, 2008 8:58 PM

JEWELSTAITEFAN

The national sales tax is the fairest tax.

The wealthy don't have much income, so they currently pay little tax for their wealth.

High-income people currently have the greatest tax burden under income tax.

Grocery, medical expenses, primary educational expenses should not be taxed. Prepared food (restaurants), luxury items, should be taxed. Higher education, shelter (rent/mortgage) are debateable. Tax authorities can be encouraged to shift now-taxed grocery to a non-taxed status, or provide subsidy to the poor.

Taxing the usage of money will start to make revenue from the wealthy, shifting the tax burden off of the working population, encouraging consumerism and a stronger economy.

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Tuesday, January 8, 2008 12:35 AM

Any "Fair" tax is going to be unfair to the person that ends up paying more under it. I think we'd have to see far more information on how this breaks down to know just who that is. Hell is in the details and exemptions, "cash back" checks and other fixes will greatly change the look of the system.

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Tuesday, January 8, 2008 4:21 AM

Keep the Shiny side up

Quote:
Originally posted by badkarma00:
The only fair tax is a flat income tax. No exemptions, no loopholes. Period. People below the poverty level should be exempt, ( I don't know that that is at the moment or I'd use it) but there would be no such things as EIC, or any other stuff.

Sorry, but it's still not simple.

How do you identify who's below the poverty level? Take their word for it at point of sale? Issue a card (Then how do you verify their income to determine if they're eligible?)? What if they get the card and then get a better job? Counterfeit cards, anyone?

You'd still need employers reporting what they paid, and an organization to check on who is exempt.

How does a self-employed person prove they're making so little they're under the poverty level. Does the guy making $1.00 over the poverty level pay Fair Tax on all his purchases, and the guy $1.00 below pay none? Is that Fair?

"Keep the Shiny side up"

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Tuesday, January 8, 2008 4:32 AM

Keep the Shiny side up

Couple more points to consider.

States that currently collect income tax generally do so based on the Federal income reporting system, and often on information from the Federal returns. They'll either have to each require their own reporting system, or also go to consumption taxes.

A Federal consumption tax of 30%, plus existing local sales taxes, plus whatever the States decide to do, is gonna push the total up around 40%. At this point, an under-the-counter economy is gonna look awful good to many folks - barter, or off the books, or other ways to disguise transactions. So the need for an enforcement agency will still be there.

"Keep the Shiny side up"

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Tuesday, January 8, 2008 8:07 AM

SICKDUDE

You make some very good points, Geezer.

One little comment to add to the thread. A lot of people here think that government and taxes are inherently susceptible to corruption. Shouldn't they hate this idea? Sales taxes are nearly invisible, unlike income tax. You put your gum down at the register, you pay your $1.30. Come the end of the year, there's no way to figure out how much tax you actually paid. If one was truly worried about keeping an eye on government taxation and spending, seems like this is the wrong direction....

"Your gratuitous jello awaits." - Dr. Helen Magnus, Sanctuary

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Tuesday, January 8, 2008 9:20 AM

CITIZEN

Quote:
Originally posted by badkarma00:
The only fair tax is a flat income tax. No exemptions, no loopholes.

Except of course with a flat tax the less you earn the more the tax effects you. Doesn't sound very fair to me.

More insane ramblings by the people who brought you beeeer milkshakes!
No one can see their reflection in running water. It is only in still water that we can see.

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Tuesday, January 8, 2008 12:56 PM

Well, it isnt fair that Im paying for someone else to hasve children either, Citizen.

Why do I have to pay more because I'm responsible enough not to have children I'm in no financial situation to support and care for? Why must I subsidize someone else's lifestyle because of their refusal to take responsibility for their own actions?

It IS fair, because everyone pays their share, and it's a fair share. We all enjoy the benefits of living here. Everyone should pay their own way.

Bad_karma
Great and Exalted Grand Pooba, International Brotherhood of Moonshiners, Rednecks, and Good Old Boys.

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Tuesday, January 8, 2008 12:59 PM

Geezer it is exactly that simple. I'm not refering in any way to a sales tax, but a flat income tax. Simple as that.

My point had nothing at all to do with point of sale taxes. Hence the statement INCOME tax;)

I don't like consumer based taxation, because I do consider it unfair.

Bad_karma
Great and Exalted Grand Pooba, International Brotherhood of Moonshiners, Rednecks, and Good Old Boys.

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Tuesday, January 8, 2008 5:20 PM

Keep the Shiny side up

Quote:
Originally posted by badkarma00:
Geezer it is exactly that simple. I'm not refering in any way to a sales tax, but a flat income tax. Simple as that.

Oh, crap.

Sorry. I've been so inundated with the fair tax stuff that I made an invalid assumption.

But flat tax still has the problem of determining exactly what is "income". For wage earners it's pretty simple, but for self-employed, partnerships, and corporations, not so much. And still there is Social Security, Medicare, and Unemployment, unless you want to roll that into the flat income tax figure.

"Keep the Shiny side up"

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Tuesday, January 8, 2008 6:42 PM