8/14 Update: A few rambling ill-thought out concerns and questions:
Will a fair tax bring in enough revenue to support the war, baby boomer Medicare & welfare, national security and other essential federal government programs ... much less the non-essential ones?
I like the “idea” of a fair tax but I am concerned that people will buy less because of increased costs and a sales tax would need to be expanded to things like groceries and other things that poorer folks need ... once the government gets a foot in the door there is no telling what they will do.
I also think that there will still need to be some sort of IRS to determine what, if anything, is exempted form a sales tax and to administer enforcement of the taxing rules.
These are just some thoughts off the top of my head ... don’t want to think about it too much
J
8/9: Anyone ever heard of
fairtax.org? It came up in last Sunday's republican debate. Mike Huckabee came out as strongly in favor of it, and Romney not so much, at the debate. Originally I was not in favor of a national sales tax but think that I could be persuaded. Anyone like or dislike the idea?
8/9: Anyone ever heard of fairtax.org? It came up in last Sunday's republican debate. Mike Huckabee came out as strongly in favor of it, and Romney not so much, at the debate. Originally I was not in favor of a national sales tax but think that I could be persuaded. Anyone like or dislike the idea?
While many who are invested in the current income tax system seek to demagog the well-researched FairTax plan, its acceptance in the professional / academic community continues to grow. Failure to enact the FairTax - choosing instead to try to "flatten" a NON-FLATTENABLE income tax system - will result in an irrevocable economic meltdown!
ReplyDeleteHere is why the FairTax MUST replace the income tax. It's:
• SIMPLE, easy to understand
• EFFICIENT, inexpensive to comply with and doesn't cause less-than-optimal business decisions for tax minimization purposes
• FAIR, loophole free and everyone pays their share
• LOW TAX RATE, achieved by broad base with no exclusions
• PREDICTABLE, doesn't change, so financial planning is possible
• UNINTRUSIVE, doesn't intrude into our personal affairs or limit our liberty
• VISIBLE, not hidden from the public in tax-inflated prices or otherwise
• PRODUCTIVE, rewards, rather than penalizes, work and productivity
Its benefits are as follows:
FOR INDIVIDUALS:
• No more tax on income - make as much as you wish
• You receive your full paycheck - no more deductions
• You pay the tax when you buy "at retail" - not "used"
• No more double taxation (e.g. like on current Capital Gains)
• Reduction of "pre-FairTaxed" retail prices by 20%-30%
• Adding back 29.9% FairTax maintains current price levels
• FairTax would constitute 23% portion of new prices
• Every household receives a monthly check, or "pre-bate"
• "Prebate" is "advance payback" for monthly consumption to poverty level
• FairTax's "prebate" ensures progressivity, poverty protection
• Finally, citizens are knowledgeable of what their tax IS
• Elimination of "parasitic" Income Tax industry
• NO MORE IRS. NO MORE FILING OF TAX RETURNS by individuals
• Those possessing illicit forms of income will ALSO pay the FairTax
• Households have more disposable income to purchase goods
• Savings is bolstered with reduction of interest rates
FOR BUSINESSES:
• Corporate income and payroll taxes revoked under FairTax
• Business compensated for collecting tax at "cash register"
• No more tax-related lawyers, lobbyists on company payrolls
• No more embedded (hidden) income/payroll taxes in prices
• Reduced costs. Competition - not tax policy - drives prices
• Off-shore "tax haven" headquarters can now return to U.S
• No more "favors" from politicians at expense of taxpayers
• Resources go to R&D and study of competition - not taxes
• Marketplace distortions eliminated for fair competition
• US exports increase their share of foreign markets
FOR THE COUNTRY:
• 7% - 13% economic growth projected in the first year of the FairTax
• Jobs return to the U.S.
• Foreign corporations "set up shop" in the U.S.
• Tax system trends are corrected to "enlarge the pie"
• Larger economic "pie," means thinner tax rate "slices"
• Initial 23% portion of price is pressured downward as "pie"
increases
• No more "closed door" tax deals by politicians and business
• FairTax sets new global standard. Other countries will follow
The time for sitting around, pontificating, is over. We have NO CHOICE but to demand Congress Scrap The Code - NOW!
I don't think a national sales tax would be psychologically palatable unless it is phased in over time. A lot of people would complain, I think, if the net cost of everything suddenly increased by 23%. If it costs $30 to take the family out to eat, it would be nearly $37 with the FairTax. Groceries, haircuts, oil changes, everything would cost a lot more.
ReplyDeleteA 23% sales tax would be almost $1 on every $4 spent, and that's on top of the state and local sales tax, which in many places is over 7%.
I'm not entirely opposed to a national sales tax, but I don't think it would be easy to implement smoothly.
And instead of giving everyone a monthly "prebate," maybe it would be better to exclude certain essentials -- like gas or groceries -- from the tax.
BruceA,
ReplyDeleteLet me make a couple points here. Food clothing etc are all taxed at the federal level today as are most purchases made by average Aemrcians. Why do I say that? Let me ask a question. Can Americans who itemize on their tax returns deduct mortgage interest today? Of course the answer is yes. If Congress took that deduction away tomorrow, those 34% of Americans who itemize would all claim that congress was now taxing their interest, yet all Congress would have done is end the deduction from taxable income. So inother words, anything that is not deductible today is in fact taxable. Are food and clothing deductible today?
For example, if you are in a 25% marginal income tax rate today, after adding in just the employee share of payroll taxes you pay a total of 32.65%. In order to have $100 in your pocket to buy this week's groceries (or clothes, pay rent, etc.) you must earn $148.48 before taxes.
Under the FairTax, you will earn the same $148.48. Some say that the pretax prices of groceries will drop from removing embedded taxes but assuming they don't drop, the groceries will cost $100 and after paying the FairTax the total will be $130. You will be ahead by $18.
At the same time the FairTax adds tax at the end of consumption, it removes the tax on income.
Where the combination standard deduction/personal exemption removes base levels of income from taxation today, the prebate does the same thing for the FairTax except the prebate is larger at every family size.
Today, 34% of Americans get some additonal relief through itemization that requires record keeping, and reporting. This is a regressive benefit in that the poor and middle class typically do not get to take advantage of itemization.
Under the FairTax, almost every item that is deductible today is simply tax free without the record-keeping. Why deduct mortgage interest to recover taxes paid on it (current system) when you can simply pay it tax free FairTax. And those benefit goes to 100% of Americans, not just the 34% of Americans who can itemize.
Now of course the FairTax is MORE visible to everyone than the current system, but that is a good thing. You cannot have responsible government (regardless which party is in power) if half of Americans think their goodies are free.
Regarding exemptions for items in place of the prebate, that is a prescription to lobbyists expansion. Every special interest will be lobbying Congress to get their goods/services exempted and it will be up to government to determine what necessities are when the fact is that your necessities are probably not the same as mine.
Bruce A, this was addressed in my initial post. Bulleted item 5, reduction in prices 20% - 30%.
ReplyDeleteWhy? Because the cost of doing business drops precipitously when businesses no longer have to deal with income and payroll tax compliance (and pass it along to you and me in higher prices).
This one should be a "no brainer." I'm worried about the ability of many Americans - educated under the public education banner - to think critically.
If you haven't joined FairTax.org, get with it - RIGHT NOW. Then, recruit everyone you know.