Full Version: FairTax (h.r. 25)
Topic of debate:
Due to the intrusive nature and complexity of Income Tax and Coprerate Gains Tax,
should we pass the 'FairTax' (h.r. 25)??
(NOTE: please read about it before you place your vote.)
Information about it:
http://www.fairtaxvolunteer.org/smart/index.html
http://www.fairtax.org
http://www.fairtaxvolunteer.org/main.html
The Library of Congress: Thomas (search for hr 25)
Due to the intrusive nature and complexity of Income Tax and Coprerate Gains Tax,
should we pass the 'FairTax' (h.r. 25)??
(NOTE: please read about it before you place your vote.)
Information about it:
http://www.fairtaxvolunteer.org/smart/index.html
http://www.fairtax.org
http://www.fairtaxvolunteer.org/main.html
The Library of Congress: Thomas (search for hr 25)
I think that income tax is fairer than consumption taxes. The rich, by definition, can afford to pay more. This is true of consumption taxes too, but they can also afford to consume elsewhere with income generated here.
I would rather see the abolition of consumption taxes (except those on fuel & energy, which I think should be somewhat increased in the USA and extended globally to include aviation fuel; and those on harmful ingested substances, such as alcohol & tobacco) and concomitant increases in income and corporation tax, and I would rather see a move to tax companies on their income (i.e. turnover) rather than their profits to bring them in line with personal taxation.
(Edited to add:)
Plus, I don't see what is intrusive about the taxes you mention, and the complexity is only due to the number of exemptions, not to the taxes themselves. Complexity would be removed if there were not exemptions or offsetting - but you'd have to pay more tax, so I daresay you wouldn't be happy with that.
I would rather see the abolition of consumption taxes (except those on fuel & energy, which I think should be somewhat increased in the USA and extended globally to include aviation fuel; and those on harmful ingested substances, such as alcohol & tobacco) and concomitant increases in income and corporation tax, and I would rather see a move to tax companies on their income (i.e. turnover) rather than their profits to bring them in line with personal taxation.
(Edited to add:)
Plus, I don't see what is intrusive about the taxes you mention, and the complexity is only due to the number of exemptions, not to the taxes themselves. Complexity would be removed if there were not exemptions or offsetting - but you'd have to pay more tax, so I daresay you wouldn't be happy with that.
Ironically, this proposal is named "fairtax."
I am opposed to the fairtax proposal because it is not fair. How is it fair to tax people on their consumption level? Those who are richer make money above their needs(read purchases), almost by definition of the word "rich." It's fair to tax people on their income level.
I am opposed to the fairtax proposal because it is not fair. How is it fair to tax people on their consumption level? Those who are richer make money above their needs(read purchases), almost by definition of the word "rich." It's fair to tax people on their income level.
Here are some papers arguing for the 'fairtax' proposal:
http://www.fairtaxvolunteer.org/smart/industry_impact.html
Stable Government
The Underground Economy
Fairness and Federal Tax Reform
http://www.fairtaxvolunteer.org/smart/industry_impact.html
Stable Government
QUOTE
Some commentators have raised questions regarding the stability of a consumption tax as the principal source of federal revenue. They speculate that a tax on consumption might be a less steady tax base than our current income-based tax. Today, most theorists would expect to find that consumption, over time, is more stable than income. When income falls or even ceases, people borrow, dip into savings, or rely on gifts to maintain consumption levels. Similarly, when income is unusually high, people tend to either to pay down existing debts, or to save more.
It is indeed preferable to have a federal tax base that is relatively stable. A stable tax base gives rise to smaller variations in government revenue over time. A steady flow of revenue allows the government to more effectively budget and more easily avoid running deficits.
It is indeed preferable to have a federal tax base that is relatively stable. A stable tax base gives rise to smaller variations in government revenue over time. A steady flow of revenue allows the government to more effectively budget and more easily avoid running deficits.
The Underground Economy
Fairness and Federal Tax Reform
QUOTE
As a starting point towards understanding the advantages of the FairTax over the income tax, we can contrast the complexities of our current system, with the simplicity of the Americans for Fair Taxation's FairTax plan.
The simplicity of a tax system affects fairness in several respects. A fundamental notion of fairness is that citizens should be able to comprehend the laws that affect them. However, current tax law is beyond the comprehension of most taxpayers, including many of those who devote their entire professional lives to it. Today, we hold taxpayers accountable for knowing and complying with an intricate web of more than 7,000 individual Internal Revenue Code Sections, 10,000 pages of text, hundreds of thousands of pages of regulations and other pronouncements, and an equally weighty verbiage of court opinions interpreting the law. This complexity translates into frustration, unnecessary cost, wasted time and needlessly lost productivity. The complexity of the tax code disproportionately affects smaller businesses that do not have the time or the resources to delve into its mysteries. When taxpayers fail to adhere to the complexities of the law—often through innocent mistakes—they are punished with penalties, interest, and a great deal of frustration.
The complexity of current tax law disproportionately rewards those who can afford to aggressively pursue tax planning. The well-advised often view tax planning as a game that they can afford to play, using sophisticated tax planning devices, the cost of which is justified by the resulting tax savings. Skillful manipulation of the tax code can lead to huge gains in competitiveness, or to substantial increases in individual wealth. The ongoing manipulation of the tax code for financial gain can be seen in estate planning, in trust planning for children's education, in pension coverage and in many other facets of tax planning. In contrast, the FairTax is a highly visible tax system that cannot be avoided by sophisticated devices. Under the FairTax only one question is typically relevant: how much did the consumer spend on the purchase of a final good or service?
....The simplicity of a tax system affects fairness in several respects. A fundamental notion of fairness is that citizens should be able to comprehend the laws that affect them. However, current tax law is beyond the comprehension of most taxpayers, including many of those who devote their entire professional lives to it. Today, we hold taxpayers accountable for knowing and complying with an intricate web of more than 7,000 individual Internal Revenue Code Sections, 10,000 pages of text, hundreds of thousands of pages of regulations and other pronouncements, and an equally weighty verbiage of court opinions interpreting the law. This complexity translates into frustration, unnecessary cost, wasted time and needlessly lost productivity. The complexity of the tax code disproportionately affects smaller businesses that do not have the time or the resources to delve into its mysteries. When taxpayers fail to adhere to the complexities of the law—often through innocent mistakes—they are punished with penalties, interest, and a great deal of frustration.
The complexity of current tax law disproportionately rewards those who can afford to aggressively pursue tax planning. The well-advised often view tax planning as a game that they can afford to play, using sophisticated tax planning devices, the cost of which is justified by the resulting tax savings. Skillful manipulation of the tax code can lead to huge gains in competitiveness, or to substantial increases in individual wealth. The ongoing manipulation of the tax code for financial gain can be seen in estate planning, in trust planning for children's education, in pension coverage and in many other facets of tax planning. In contrast, the FairTax is a highly visible tax system that cannot be avoided by sophisticated devices. Under the FairTax only one question is typically relevant: how much did the consumer spend on the purchase of a final good or service?
QUOTE
The income tax is unfair because it taxes the principal means by which Americans can improve the standard of living for themselves and for their children. The income tax is biased against those who are seeking to improve their families' lot in life through savings, investment, and hard work, while it favors those with assets to consume.
The FairTax would improve the standard of living of the vast majority of Americans by rewarding an individual's decision to work, save and invest. Under current law, however, consumption of goods and services is favored over savings and investment. A taxpayer often enjoys no immediate benefit from savings and investing, and the fact that the taxpayer has already been taxed on his or her income means that there is also no incentive not to consume. The income tax system rewards the here and now, and penalizes taxpayers who seek to save for the future by taxing income when it is earned and also when it grows. Under the FairTax, those who benefit from tax-sheltered income, as well as those who profit handsomely from the complexities and confusion of the tax system, would no longer benefit from advantages that are not available to most taxpayers.
....The FairTax would improve the standard of living of the vast majority of Americans by rewarding an individual's decision to work, save and invest. Under current law, however, consumption of goods and services is favored over savings and investment. A taxpayer often enjoys no immediate benefit from savings and investing, and the fact that the taxpayer has already been taxed on his or her income means that there is also no incentive not to consume. The income tax system rewards the here and now, and penalizes taxpayers who seek to save for the future by taxing income when it is earned and also when it grows. Under the FairTax, those who benefit from tax-sheltered income, as well as those who profit handsomely from the complexities and confusion of the tax system, would no longer benefit from advantages that are not available to most taxpayers.
QUOTE
The FairTax would also replace the payroll tax. The payroll tax is imposed on the first dollar of wages earned, and therefore has a disproportionate impact on lower wage earners. In contrast, the FairTax would exempt all expenditures up to poverty level through a rebate system. Additionally, unlike the Social Security component of the payroll tax, which is only imposed on the first $76,200 of wages (2000), the FairTax would be imposed on all consumption over the poverty level, and would tax the consumption of affluent taxpayers.
The FairTax would eliminate the graduated income tax rate structure that penalizes people as they strive to earn more for their families. Because of the rebate system, however, high-consumption families would pay higher average tax rates. For example, because their first $22,500 was not taxed, a family of four spending $45,000 would pay an effective rate of only 11½ percent tax on their taxable purchases. A family that spent four times the poverty level ($90,000) would pay an average tax rate of 17¼ percent. The graph found in Figure 1 shows the effective tax rates that a family of four with various consumption levels would pay.
The FairTax would eliminate the graduated income tax rate structure that penalizes people as they strive to earn more for their families. Because of the rebate system, however, high-consumption families would pay higher average tax rates. For example, because their first $22,500 was not taxed, a family of four spending $45,000 would pay an effective rate of only 11½ percent tax on their taxable purchases. A family that spent four times the poverty level ($90,000) would pay an average tax rate of 17¼ percent. The graph found in Figure 1 shows the effective tax rates that a family of four with various consumption levels would pay.
Due to the intrusive nature and complexity of Income Tax and Coprerate Gains Tax, should we pass the 'FairTax' (h.r. 25)??
I answered no to this one. The biggest flaw I see with the "fair" tax is that it would not provide adequate income for the government to continue operating at its current levels. If I have overlooked that point somewhere in your sources please feel free to point it out.
While smaller government may be attractive to some, the simple reality is that isn't possible in today's society. How would the government continue to pay for things like the military and homeland security? Social programs such as welfare and social security would have to be cut, eliminated or passed on to states. Since states have no money to pay for these things they would have to increase taxes to do so. Therefore you would have effectively just redistributed tax revenues.
Secondly, what if some social programs were cut or eliminated? Most of these programs benefit the bottom tiers of the income ladder, but are paid for by the middle and upper classes. The loss of these services would hurt these very same low wage earners much more than it would hurt a middle class family. If welfare were to go away tomorrow it wouldn't phase me a bit, but I'm sure many families would be going hungry.
Finally, by taxing consumption you would actually hurt lower income families more than an income tax does. As a broad generalization we all pretty much have the same basic operating expenses in life; as you climb the social ladder you are able to afford more luxuries like cable, internet access, dining out, etc. However, we all walk into a store and pay $1.50 for a loaf of bread -- the poor family of 4 needs to eat the same as the upper middle class double income family of 4. If you were to tax consumption then both families would be paying more for that loaf of bread. Let's say the tax is 20%. That additional 20% amounts to a much greater portion of the poor family of 4's income than it does for the well-to-do family. This doesn't seem like much when you look at a single loaf of bread, but when you take into account the things that all of us buy: food, gas, utilities, phone, school supplies, clothes, it starts to add up very quickly and the scale is tipped against the poor.
This is the reason why we have a sliding scale for income taxes, to help equalize that burden. Admittedly the system isn't perfect and could use reform.
These articles you cite DO make a really good case for tax reform though. But, the idea of a "fair tax" is a misnomer as defined by these articles.
I answered no to this one. The biggest flaw I see with the "fair" tax is that it would not provide adequate income for the government to continue operating at its current levels. If I have overlooked that point somewhere in your sources please feel free to point it out.
While smaller government may be attractive to some, the simple reality is that isn't possible in today's society. How would the government continue to pay for things like the military and homeland security? Social programs such as welfare and social security would have to be cut, eliminated or passed on to states. Since states have no money to pay for these things they would have to increase taxes to do so. Therefore you would have effectively just redistributed tax revenues.
Secondly, what if some social programs were cut or eliminated? Most of these programs benefit the bottom tiers of the income ladder, but are paid for by the middle and upper classes. The loss of these services would hurt these very same low wage earners much more than it would hurt a middle class family. If welfare were to go away tomorrow it wouldn't phase me a bit, but I'm sure many families would be going hungry.
Finally, by taxing consumption you would actually hurt lower income families more than an income tax does. As a broad generalization we all pretty much have the same basic operating expenses in life; as you climb the social ladder you are able to afford more luxuries like cable, internet access, dining out, etc. However, we all walk into a store and pay $1.50 for a loaf of bread -- the poor family of 4 needs to eat the same as the upper middle class double income family of 4. If you were to tax consumption then both families would be paying more for that loaf of bread. Let's say the tax is 20%. That additional 20% amounts to a much greater portion of the poor family of 4's income than it does for the well-to-do family. This doesn't seem like much when you look at a single loaf of bread, but when you take into account the things that all of us buy: food, gas, utilities, phone, school supplies, clothes, it starts to add up very quickly and the scale is tipped against the poor.
This is the reason why we have a sliding scale for income taxes, to help equalize that burden. Admittedly the system isn't perfect and could use reform.
These articles you cite DO make a really good case for tax reform though. But, the idea of a "fair tax" is a misnomer as defined by these articles.
QUOTE(Cube Jockey @ Jun 10 2004, 03:08 PM)
Finally, by taxing consumption you would actually hurt lower income families more than an income tax does. As a broad generalization we all pretty much have the same basic operating expenses in life; as you climb the social ladder you are able to afford more luxuries like cable, internet access, dining out, etc. However, we all walk into a store and pay $1.50 for a loaf of bread -- the poor family of 4 needs to eat the same as the upper middle class double income family of 4. If you were to tax consumption then both families would be paying more for that loaf of bread. Let's say the tax is 20%. That additional 20% amounts to a much greater portion of the poor family of 4's income than it does for the well-to-do family. This doesn't seem like much when you look at a single loaf of bread, but when you take into account the things that all of us buy: food, gas, utilities, phone, school supplies, clothes, it starts to add up very quickly and the scale is tipped against the poor.
This is the reason why we have a sliding scale for income taxes, to help equalize that burden. Admittedly the system isn't perfect and could use reform.
This is the reason why we have a sliding scale for income taxes, to help equalize that burden. Admittedly the system isn't perfect and could use reform.
CJ, on your fairness point - this does say that it would rebate 'poor' people their consumption tax up to the poverty line. If we make that line more of a living wage, this seems like a totally fair tax to me.
QUOTE
Perhaps most importantly, to ensure that no American will pay tax on necessities, the FairTax plan provides a prepaid, monthly rebate for every registered household to cover the 23% consumption tax spent on necessities up to the federal poverty level.
I voted yes. I'm for either a consumption tax or a flat income tax. Anything other than the thousands of pages of tax code that we have today.
I keep reading about how the income tax if 'fairer' but it's not. The payroll tax is regressive against the poor (6.2% + employer match up to $90k or so I think), and the income tax only measures income. NOT WEALTH. John Kerry made less money than me a few years ago, but he had 11 vacation homes and I live in a 2 bedroom townhouse. Income does not equal wealth, so rich people don't necessarily pay more income tax. Earners pay income tax, which is why lowering income taxes encourages more earning (work).
QUOTE
I keep reading about how the income tax if 'fairer' but it's not. The payroll tax is regressive against the poor (6.2% + employer match up to $90k or so I think), and the income tax only measures income. NOT WEALTH. John Kerry made less money than me a few years ago, but he had 11 vacation homes and I live in a 2 bedroom townhouse. Income does not equal wealth, so rich people don't necessarily pay more income tax. Earners pay income tax, which is why lowering income taxes encourages more earning (work).
This is my point allso.
Plus eleminatiing the coperate sales tax (an invisable tax to the consumer) would free up all the revinue assosiated in filling out those forms which be a catilst in driving down the price of the final product.
And all of those people who have extrodanary amout of wealth, would be taxed when they buy something new.
QUOTE
Ironically, this proposal is named "fairtax."
I am opposed to the fairtax proposal because it is not fair. How is it fair to tax people on their consumption level? Those who are richer make money above their needs(read purchases), almost by definition of the word "rich." It's fair to tax people on their income level.
I am opposed to the fairtax proposal because it is not fair. How is it fair to tax people on their consumption level? Those who are richer make money above their needs(read purchases), almost by definition of the word "rich." It's fair to tax people on their income level.
No, it's not ironic at all. There is a common misperception of the definitions of the words 'fair' and 'just'. Also, as you state, richer people make more purchases, thereby will be taxed at a higher level.
(from dictionary.com)
Fair: "Having or exhibiting a disposition that is free of favoritism or bias; impartial:"
Just: "Consistent with what is morally right" or "Suitable or proper in nature; fitting"
The income tax might very well be 'just', in that it operates on the principle that those who earn more should pay more. However, this is not 'fair', in that it inherently discriminates against certain groups of people. Consumption taxes are inherently fair (they tax all eligible consumptions at the same rate, regardless of who makes the purchase), hence the moniker.
I don't bring this up purely for semantics--but to debunk the general perception of the 'fairness' of incomes taxes. They are, by design, inherently completely biased and unfair, although I will grant that they might be just. I think that it is important to dispel this notion in order to objectively consider such a change in the tax code.
Also, to counteract the general notion that consumption taxes are worse for the poor, who have little discretionary income. All of the consumption taxes I have seen address this with the exemptions they set up. Essentially, necesseties (which is where the poor spend almost all of their money) are exempt. Therefore, poor and lower middle income people usually end up better under a consumption tax than they do under an income tax.
Which, of course, brings up the following question--just what the heck would the difference between the two be? Well, to be honest--probably not much. But I do think it would end up being simpler, with fewer loopholes and exemptions added. It would also not have the various 'levels' built-in that the income tax does, further simplifying it. In fact, these are usually the arguments presented against it--it doesn't leave much room for legislators to fiddle with it, thereby taking away a good deal of their power (which I think is a very good thing).
The 'fairtax' would put those exemtptions in a fom of a universal rebate check each month, and it would be couclulated as follows:
([tax rate]*[poverty line])/12
And the poverty line would be calculated yearly, and by family size.
This rebate check would make the consumption tax progressive.
Plus all the millions of dollers going to fill out coperate gains tax, and income tax would be freed.
In addition, the price of the government would be up front, and visiable.
Futhermore, bussises to bussiess transations are exepted, wich would drive the price of our good down over seas.
([tax rate]*[poverty line])/12
And the poverty line would be calculated yearly, and by family size.
This rebate check would make the consumption tax progressive.
Plus all the millions of dollers going to fill out coperate gains tax, and income tax would be freed.
In addition, the price of the government would be up front, and visiable.
Futhermore, bussises to bussiess transations are exepted, wich would drive the price of our good down over seas.
You do realize that to make that calculation would require an ANNUAL census, do you not? That's quite the undertaking.
Of course the major concern with such a policy to me is the exemption of "bussises to bussises" transactions. That's a HUGE amount of revenue you are kissing goodbye. Which chunk of government are you proposing we collapse?
Of course the major concern with such a policy to me is the exemption of "bussises to bussises" transactions. That's a HUGE amount of revenue you are kissing goodbye. Which chunk of government are you proposing we collapse?
I voted yes and I've been ardently pushing this proposal around to co-workers and friends. It is far superior to income tax for one simple reason: think of all the illegal sources of income which go untaxed every year. A consumption tax would eliminate this loophole. Drug money, tax evasion, etc. Furthermore, no longer would multimillionaires be able to pay their lawyers to find ways around the tax system. Oooh, that's the one I want most of all.
This is, of course, why the FairTax act will fail. The truly wealthy will do all they can to ensure this bill is kept from every seeing the light of day.
HOWEVER... and this is quite a big however... what will the government do about purchases from out of the country? Will those be taxed? Maybe I should read further. What about eBay and other various online purchases? I have many questions now. Hmm... they've probably all been answered. I'll be back later after I've informed myself a bit more.
This is, of course, why the FairTax act will fail. The truly wealthy will do all they can to ensure this bill is kept from every seeing the light of day.
HOWEVER... and this is quite a big however... what will the government do about purchases from out of the country? Will those be taxed? Maybe I should read further. What about eBay and other various online purchases? I have many questions now. Hmm... they've probably all been answered. I'll be back later after I've informed myself a bit more.
At the last time I have looked, the 'fartax' bill has 51 cosponsors; most are Republican and there is one Democrat that I know of that is sponsoring it.
From Federalist Paper No. 21:
Most of the states would collect the tax because:
1. they already have a sales tax system implemented.
2. it would reduce the total over-head of the government.
3. states already have a system in place incase of fraud.
4. they would get a small percentage of the tax for their services.
Those who have already gathered/inherited wealth, and not taking much income would be taxed on what they buy.
Tourists, illegal aliens would be taxed too.
This alone would makes me consider seriously this bill.
QUOTE
You do realize that to make that calculation would require an ANNUAL census, do you not? That's quite the undertaking.
Of course the major concern with such a policy to me is the exemption of "bussises to bussises" transactions. That's a HUGE amount of revenue you are kissing goodbye. Which chunk of government are you proposing we collapse?
Business to Business transition taxes would filter down into the price of the product as an invisible sales tax. The idea here is to put the cost of the government at face value to the average citizen.Of course the major concern with such a policy to me is the exemption of "bussises to bussises" transactions. That's a HUGE amount of revenue you are kissing goodbye. Which chunk of government are you proposing we collapse?
From Federalist Paper No. 21:
QUOTE
There is no method of steering clear of this inconvenience, but by authorizing the national government to raise its own revenues in its own way. Imposts, excises, and, in general, all duties upon articles of consumption, may be compared to a fluid, which will, in time, find its level with the means of paying them. The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources. The rich may be extravagant, the poor can be frugal; and private oppression may always be avoided by a judicious selection of objects proper for such impositions. If inequalities should arise in some States from duties on particular objects, these will, in all probability, be counterbalanced by proportional inequalities in other States, from the duties on other objects. In the course of time and things, an equilibrium, as far as it is attainable in so complicated a subject, will be established everywhere. Or, if inequalities should still exist, they would neither be so great in their degree, so uniform in their operation, nor so odious in their appearance, as those which would necessarily spring from quotas, upon any scale that can possibly be devised.
It is a single advantage of taxes on articles of consumption, that they contain in their own nature a security against excess.
It is a single advantage of taxes on articles of consumption, that they contain in their own nature a security against excess.
Most of the states would collect the tax because:
1. they already have a sales tax system implemented.
2. it would reduce the total over-head of the government.
3. states already have a system in place incase of fraud.
4. they would get a small percentage of the tax for their services.
Those who have already gathered/inherited wealth, and not taking much income would be taxed on what they buy.
Tourists, illegal aliens would be taxed too.
This alone would makes me consider seriously this bill.
QUOTE
Due to the intrusive nature and complexity of Income Tax and Coprerate Gains Tax,
should we pass the 'FairTax' (h.r. 25)??
(NOTE: please read about it before you place your vote.)
should we pass the 'FairTax' (h.r. 25)??
(NOTE: please read about it before you place your vote.)
The only reason why our tax laws are complicated is because we have lawmakers who constantly try to create new loopholes for their donor friends. We are playing a cat and mouse game of trying to make some people pay their taxes, while they try to have new loopholes made. All of that makes for a complicated system. Now, for the estate and capital gains tax discussion....
The elimination of the estate tax is something that I find to be absolutely horrible. I will now state why since A.D. is all about backing up one's assertions. For one, “double-taxation” is a reality for ordinary working Americans since they are hit with income and payroll taxes.
The rich don’t have to face that. The way that a lot of people get rich is through stock holdings or capital gains, which are not taxed as income, at least not until the stock is sold. This bill purports to be fair, but does not address how millions of dollars could go through this Swiss cheese tax arrangement. Not only that, but only 2% of estates are eligible for the tax. 
It can be paid up to fourteen years after a person dies, and a few years before the said person is dead. Even those who are hit with the tax have a $2 million tax credit. When it comes to small businesses and farms, only 2 out 1,000 people actually leave estates that are eligible for it. The facts about the estate tax according to the folks at the Economic Policy Institute show me that we don't need to feel too much sympathy for this group in society. In regards to the topic question-I don't feel that the corporate capital gains tax is something that is a burden, quite the opposite. The idea that capital gains spurs investment is somewhat dubious, not only that-it's unfair to the rest of us!
QUOTE
In reality, it is all but impossible to increase investment through this route. To begin with, the effect of a tax cut on stock prices is not likely to be very significant, since a large portion of stock holdings (the one-third held by pension funds and similar institutions) is not currently subject to the capital gains tax. Also, since these institutions tend to be the most active traders, they play a disproportionate role in determining share prices. Furthermore, many individuals pay no taxes on capital gains, since stock shares can be passed along to descendants without capital gains liability.
Under the current system, when individuals accrue capital gains during their lifetimes, the gains are effectively taxed at a far lower rate than for other income because the tax can be deferred until the asset is sold. If an individual has a $100,000 capital gain on a stock or small business, he can defer paying taxes on this money until he sells the asset. On the other hand, if the individual receives $100,000 for working or from interest on savings, he has to pay taxes from the income immediately. This deferral of taxes constitutes a large subsidy to recipients of capital gains. While there is no evidence that this favorable treatment increases the money available for firms to invest, it does provide a large tax break to wealthy shareholders.
Under the current system, when individuals accrue capital gains during their lifetimes, the gains are effectively taxed at a far lower rate than for other income because the tax can be deferred until the asset is sold. If an individual has a $100,000 capital gain on a stock or small business, he can defer paying taxes on this money until he sells the asset. On the other hand, if the individual receives $100,000 for working or from interest on savings, he has to pay taxes from the income immediately. This deferral of taxes constitutes a large subsidy to recipients of capital gains. While there is no evidence that this favorable treatment increases the money available for firms to invest, it does provide a large tax break to wealthy shareholders.
You would also have people who instead of investing the money to spur economic growth, would use overseas tax shelters to try and outwit the tax system. So instead of billions of dollars being used for growth, we would see an exodus of wealth from this nation into tax shelters.
(Dean Baker: Economic Policy Institute article: http://www.epinet.org/content.cfm/tmp_epcaga)
This bill sounds like it would provide minimal relief to the majority of Americans, and allow billions to not be collected from the top members of our society.
Due to the intrusive nature and complexity of Income Tax and Coprerate Gains Tax,
should we pass the 'FairTax' (h.r. 25)??
The hope of avoiding "intrusive" actions by our government should not seduce my fellow libertarians into backing a special-interest tax plan: the end of income tax.
Taxes are needed to fund our government, and are also used to discourage actions. Once we have taxed things that we want to discourage (capital "thrashing", alcohol, cigarettes) -- we need to raise the rest of the taxes on things that will cause a minimal distortion in our economy.
I would argue that income taxes (at the current marginal rate) and estate taxes don't cause major distortions in our economy. The loopholes that let people avoid taxes do distort our economy.
I would love to get the government out of my life, out of my banking, and off my telephone. Let us start by repealing the "Patriot" Act -- not going to an untested special-interest tax plan.
should we pass the 'FairTax' (h.r. 25)??
The hope of avoiding "intrusive" actions by our government should not seduce my fellow libertarians into backing a special-interest tax plan: the end of income tax.
Taxes are needed to fund our government, and are also used to discourage actions. Once we have taxed things that we want to discourage (capital "thrashing", alcohol, cigarettes) -- we need to raise the rest of the taxes on things that will cause a minimal distortion in our economy.
I would argue that income taxes (at the current marginal rate) and estate taxes don't cause major distortions in our economy. The loopholes that let people avoid taxes do distort our economy.
I would love to get the government out of my life, out of my banking, and off my telephone. Let us start by repealing the "Patriot" Act -- not going to an untested special-interest tax plan.
QUOTE
The only reason why our tax laws are complicated is because we have lawmakers who constantly try to create new loopholes for their donor friends.
I really don't like this sort of reasoning. People seem to overlook that the tax system oversees nearly 300 MILLION people, in addition to hundreds of thousands of businesses and other non-person entities. These almost innumerable entities have different responsibilities, standings, and places within the tax system. While the argument could be made (I don't feel it has been done persuasively) that a consumption tax (or some other system) is a viable option, it ignores the reality that any system of taxation is going to have complications stemming from the necessities of a beauracracy, as well as the challenges imposed by the logistical nightmare that is the United States.
After reading through several replies since I last posted, the question that still has not been answered satisfactorily crashfourit is how are we going to maintain current revenues with this so called "fair tax"? What group of government programs are we just going to completely cut? And how will cutting those programs not hurt the poor more than those who aren't?
Ultimate Joe brought up a good point that leads to a series of things. An annual census would be a big deal, doing one every 10 years is hard enough.
Ultimate Joe brought up a good point that leads to a series of things. An annual census would be a big deal, doing one every 10 years is hard enough.
By having simplicity and low compliance costs, "FairTax" proposal will free most of the money used to comply the the current income tax code, there by putting that money back into the economy (in the form of lower prices) which would be taxed when some one buys a new product. Also, savings would not be taxed (directly though) allowing individuals to invest in stock and bonds. The money generated with stocks and bonds would be taxed when some one takes the money and buys something new. It would also tax the tourists, and illegal aliens thereby generating more revenue.
Do you have any evidence, even conjectural, that the money saved and the new revenue streams created would even come close to the revenue that is lost. Does this proposal contain any guaranteed levels of revenue? I looked at the legislation, and while I didn't read it exhaustively (I have a life to live...) I didn't catch anything that projected revenues in comparison to the current system.
In short, do you have any research backing up your hypothesis that this won't work? If there is a financial shortfall, how would you deal with it?
In short, do you have any research backing up your hypothesis that this won't work? If there is a financial shortfall, how would you deal with it?
QUOTE(Ultimatejoe)
Do you have any evidence, even conjectural, that the money saved and the new revenue streams created would even come close to the revenue that is lost. Does this proposal contain any guaranteed levels of revenue? I looked at the legislation, and while I didn't read it exhaustively (I have a life to live...) I didn't catch anything that projected revenues in comparison to the current system.
Research papers with references are here (22 research papers total):
http://www.fairtaxvolunteer.org/smart/industry_impact.html
But I realy think what you are looking for is here (I may be wrong):
http://www.fairtaxvolunteer.org/smart/fairtax_current.html
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The FairTax would replace individual and corporate income taxes, payroll taxes and the estate and gift tax. Accordingly, the amount that these taxes raise ($1.7 trillion) is the amount that the FairTax would need to raise. Therefore, the rate required is 23%.
I got that from your first link. See, I thought the whole time you were planning to radically alter not only how people pay taxes, but how much they pay as well. I was wrong. What this plan suggests is that instead of taxing people, we just shift the burden on to the consumer entirely. A 23% consumer tax on goods would cripple (as far as I can imagine) any foreign export markets. I am curious though how you would go about protecting imports as well under such a plan. I've looked over all of the links you provided, and I see nothing substantive.
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American-foreign and domestically produced goods will be taxed equally, instead of foreign-produced goods enjoying a tax advantage as under current law.
People discuss issues like the trade deficit, and the cost of foreign goods, while often employing a very shallow argument. Lets say that the price of shoes (an industry which is predominantly import oriented) increases 15% How does this help the local economy? Shoes have become more expensive, and said shoes are still produced overseas. Just because they are no taxed differently than domestic products doesn't mean that people will stop buying them; nor does it mean that they will actually be cheaper to buy. A side-effect of a "Fair Tax" proposal would undoubtedly be a reduction in import costs for multinational corporations. The only way then to guarantee that those corporations would in fact lose their advantageous tax situation would be to impose trade barriers and artificial price controls. Now the U.S. already does this illegally whenever it can get away with it; but the scope of such interventions would surely grow; further damaging trade relations.
Lets put it in more simplistic terms. I don't buy American cars, for one reason. They're crap. This is not to denigrate American workers... A lot of "foreign" cars are in fact manufactured in North America. However, the best designed cars always come from Europe and Japan, and that's a fact. When was the last time you saw a FORD engine dominate on an international racing circuit doing well? (NASCAR has fought long and hard to keep international companies out of their circuit so it has no validity as a point of comparison.) The reason is that international trade barriers (and factors like patriotism and familiarity) make it impossible to compete with domestic companies (Ford, GM, etc.) on a price-per-vehicle basis. As such, these cars are designed to perform better, in terms of power, performance, and safety. (I know all about the safety bit, I worked for an AUTO insurance broker for a year...) It is for this reason that foreign companies are able to stay competitive in American markets. Nobody ever goes out to buy a cheap BMW. (Honda is I suppose a rare exception, with the Civic being hugely successful. This is perhaps attributed to the fact that while it is very cheap, it has also been marketed to a growing and influential group, and it's probably the best performing $9,000 car on the road.) Explain to me how making American cars a bit cheaper will improve that industry? More to the point; if foreign companies transfer production to American locations to enjoy these new tax 'breaks', what chance does the domestic market have, when it loses "price" as it's only advantage?
QUOTE(Ultimatejoe)
I got that from your first link. See, I thought the whole time you were planning to radically alter not only how people pay taxes, but how much they pay as well. I was wrong. What this plan suggests is that instead of taxing people, we just shift the burden on to the consumer entirely. A 23% consumer tax on goods would cripple (as far as I can imagine) any foreign export markets. I am curious though how you would go about protecting imports as well under such a plan. I've looked over all of the links you provided, and I see nothing substantive.
Manufacturing:
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Exports would no longer bear the burden of embedded income and payroll taxes and imports would bear the same sales tax burden as domestically produced goods. For the first time, exported and imported goods will have the same tax treatment. Imported goods will no longer be advantaged over domestically produced goods.
....QUOTE
Compliance costs will be much lower. According to the Tax Foundation, these expenditures will drop by as much as 90 percent under the FairTax. Instead of having to comply with the complexities of the income tax and the payroll tax, there will be one sales tax on the final purchase for consumption of all goods and services. Business to business transactions will not be taxed. There will be no more uniform inventory capitalization requirements, no more complex rules governing employee benefits and retirement plans, no more tax depreciation schedules, no more alternative minimum tax, no more capital gains tax and depreciation recapture and no more tax rules governing mergers and acquisitions.
As underlined, Business to Business transactions would not be taxed--allowing domestic companies to export products without the embedded taxes in the products price. Imports would be taxed at the final point of consumption at the same rate of domestic products--eliminating the need for tariffs.
QUOTE(Ultimatejoe)
More to the point; if foreign companies transfer production to American locations to enjoy these new tax 'breaks', what chance does the domestic market have, when it loses "price" as it's only advantage?
This would encourage domestic companies to design better cars than their foreign competitors.
Perhaps you missed the middle third of my last post. My concern, which the passages you cited (as well as the rest of the article which I did in fact read) fail to address the fact that:
Perhaps I wasn't clear on this point. The elimination of tarriffs does nothing to promote the value of domestic goods. The fact is that even before taxes, shoes are cheaper to produce in Indonesia than America. How will the "Fair Tax" proposal change this reality? Unless there is some nugget in there about removing minimum wage and workplace standards legislation that I missed; this bill does nothing to make the U.S. more competitive for manufacturing. What WOULD convince me is a demonstration that the tax burden that the current system creates is responsible for the difference in labour costs between the U.S. and oversea markets... and you're going to have a hard time finding a credible economist who will even try to prove that.
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A side-effect of a "Fair Tax" proposal would undoubtedly be a reduction in import costs for multinational corporations. The only way then to guarantee that those corporations would in fact lose their advantageous tax situation would be to impose trade barriers and artificial price controls.
Perhaps I wasn't clear on this point. The elimination of tarriffs does nothing to promote the value of domestic goods. The fact is that even before taxes, shoes are cheaper to produce in Indonesia than America. How will the "Fair Tax" proposal change this reality? Unless there is some nugget in there about removing minimum wage and workplace standards legislation that I missed; this bill does nothing to make the U.S. more competitive for manufacturing. What WOULD convince me is a demonstration that the tax burden that the current system creates is responsible for the difference in labour costs between the U.S. and oversea markets... and you're going to have a hard time finding a credible economist who will even try to prove that.
I vote YES.
1) The tax reform proposed is revenue neutral compared to our current tax system, it generates the same collections for the same GDP.
http://www.fairtaxvolunteer.org/smart/money_neutral.html
2) The burden is already on the consumer...corporations / producers already pay their tax burden from their gross reciepts, which come from the sale of goods to consumers. With no corporate / payroll taxes, those producers have a larger profit margin. Free market and competion will slim those margins, and save consumers money on the pre-tax price.
3) Imports are taxed at the point-of-sale, or at the border if brought over for personal use. More than likely, you'd see more foreign cars, etc. built in America, meaning more jobs for Americans. The owners of those companies are already multinational for the most part anyway. Check out the NYSE ticker HMC.
4) as a point of fact, its a consumption tax, but it's not a "tax on consumption.", it's a "tax on consumption OVER THE POVERTY LEVEL".
5) It helps poor people because: they pay NO taxes on consumption...not even those pesky hidden payroll taxes. Pre-tax prices go down, and everyone recieves a rebate. Someone who makes $750 a month and spends $300 a month on food under our current system would make at least $836, would recieve $178 a month 'rebate' and spend less than $250 a month on the same food. He'd have $314 more dollars of disposable income, per month. Furthermore, no matter how much more he worked, he'd be able to keep or spend every cent he made, rather than losing it to payroll or other taxes. Any job training or education is now 23% cheaper for everyone (it's not taxed).
6) I'd help me buy a house because, given the following.
I make roughly $50,000 a year. I pay approximately 16% in federal taxes, or about $8000. To save up $30,000 for a downpayment, it would take me 37+ weeks of work (assuming I spent none of it elsewhere). To make a payments on a $150,000 30Y loan at 6%, it would take me almost 13 weeks of work per year, even including the mortgage interest deduction.
Under FairTax, assuming a 2% drop in interest rates, and the same (used) home sale price, it'd take me 30 weeks to make a downpayment, and less than 9 weeks each year to make the monthly payments. Without the drop in interest rates, it'd take me 11 weeks.
7) At-the register sales prices stay about the same. No taxes on used goods encourage reuse, which is even better than recycling.
8) For $178 a month those people not on the census will find a way to get on the census. Those who don't need a different kind of reform.
9) It frees up the employees of the IRS to pursue terrorist funds and ensure strict compliance with the FairTax's only loophole: business expenses are not taxed. It frees up all the tax lawyers and accountants to give me really good service at restaraunts and grocery stores. Likewise the unemployment of tax-loophole lobbyists (most lobbyists are) would reduce the cost of housing for people like me in the Metro DC area. It frees up something like $300 *B*illion a year in tax compliance costs. Those companies that don't return most of that money to the consumer will be driven out of business by those who do.
10) Best of all, everyone gets to see exactly how much the government costs, every time they buy something new.
All of this is from the Fairtax.org website, or my own calculations. It may not work, but better economists than I seem to think it will.
1) The tax reform proposed is revenue neutral compared to our current tax system, it generates the same collections for the same GDP.
http://www.fairtaxvolunteer.org/smart/money_neutral.html
2) The burden is already on the consumer...corporations / producers already pay their tax burden from their gross reciepts, which come from the sale of goods to consumers. With no corporate / payroll taxes, those producers have a larger profit margin. Free market and competion will slim those margins, and save consumers money on the pre-tax price.
3) Imports are taxed at the point-of-sale, or at the border if brought over for personal use. More than likely, you'd see more foreign cars, etc. built in America, meaning more jobs for Americans. The owners of those companies are already multinational for the most part anyway. Check out the NYSE ticker HMC.
4) as a point of fact, its a consumption tax, but it's not a "tax on consumption.", it's a "tax on consumption OVER THE POVERTY LEVEL".
5) It helps poor people because: they pay NO taxes on consumption...not even those pesky hidden payroll taxes. Pre-tax prices go down, and everyone recieves a rebate. Someone who makes $750 a month and spends $300 a month on food under our current system would make at least $836, would recieve $178 a month 'rebate' and spend less than $250 a month on the same food. He'd have $314 more dollars of disposable income, per month. Furthermore, no matter how much more he worked, he'd be able to keep or spend every cent he made, rather than losing it to payroll or other taxes. Any job training or education is now 23% cheaper for everyone (it's not taxed).
6) I'd help me buy a house because, given the following.
I make roughly $50,000 a year. I pay approximately 16% in federal taxes, or about $8000. To save up $30,000 for a downpayment, it would take me 37+ weeks of work (assuming I spent none of it elsewhere). To make a payments on a $150,000 30Y loan at 6%, it would take me almost 13 weeks of work per year, even including the mortgage interest deduction.
Under FairTax, assuming a 2% drop in interest rates, and the same (used) home sale price, it'd take me 30 weeks to make a downpayment, and less than 9 weeks each year to make the monthly payments. Without the drop in interest rates, it'd take me 11 weeks.
7) At-the register sales prices stay about the same. No taxes on used goods encourage reuse, which is even better than recycling.
8) For $178 a month those people not on the census will find a way to get on the census. Those who don't need a different kind of reform.
9) It frees up the employees of the IRS to pursue terrorist funds and ensure strict compliance with the FairTax's only loophole: business expenses are not taxed. It frees up all the tax lawyers and accountants to give me really good service at restaraunts and grocery stores. Likewise the unemployment of tax-loophole lobbyists (most lobbyists are) would reduce the cost of housing for people like me in the Metro DC area. It frees up something like $300 *B*illion a year in tax compliance costs. Those companies that don't return most of that money to the consumer will be driven out of business by those who do.
10) Best of all, everyone gets to see exactly how much the government costs, every time they buy something new.
All of this is from the Fairtax.org website, or my own calculations. It may not work, but better economists than I seem to think it will.
Speaking as an environmentalist, there are some things I like about a consumption tax. We are consuming ourselves into oblivion -- the earth cannot mangae the levels we are consuming for much longer. If this type of tax encourages people to reduce reuse recycle I'm all for it. However it has been mentioned that it won't generate enough tax funds for needed programs.
Some modifications I'd make, if I was the ruler of the world:
1) tax goods not most services
2) higher taxes for the types of consumption that are the most harmful to the planet. Ex: polutants (direct and indirect) such as gasoline, insecticides, etc. ; wasteful products such as disposable anything
3) lower taxes for food and necessary products than non-necessary items, such as tvs and stereos.
4) to make sure the government is able to run necessary programs with decreased funds, drastically cut the budget for the department of war (misnamed the Dept. of Defense) and other government programs that harm the planet and the people on it.
Kind of a Utopian vision -- but if we are going to tax consumption, we might as well find a way to make it benefit the planet at the same time.
Some modifications I'd make, if I was the ruler of the world:
1) tax goods not most services
2) higher taxes for the types of consumption that are the most harmful to the planet. Ex: polutants (direct and indirect) such as gasoline, insecticides, etc. ; wasteful products such as disposable anything
3) lower taxes for food and necessary products than non-necessary items, such as tvs and stereos.
4) to make sure the government is able to run necessary programs with decreased funds, drastically cut the budget for the department of war (misnamed the Dept. of Defense) and other government programs that harm the planet and the people on it.
Kind of a Utopian vision -- but if we are going to tax consumption, we might as well find a way to make it benefit the planet at the same time.
BRAVO SWM28WDC !!!
THe only thing I would add is that we could take the IRS and employes and put them to work auditing the government to stamp out waste fraud and abuse, including entitlement fraud.
Well put jenreiautter. I take issue on a some of the rest of the post but as you said this tax would be a real jumpstart for reuse as probably a boost for recycling as well.
However, reducing the department of defense in the face of a massive terrorist threat against our nation is probably a bad move IMHO.
THe only thing I would add is that we could take the IRS and employes and put them to work auditing the government to stamp out waste fraud and abuse, including entitlement fraud.
QUOTE
Speaking as an environmentalist, there are some things I like about a consumption tax. We are consuming ourselves into oblivion -- the earth cannot mangae the levels we are consuming for much longer. If this type of tax encourages people to reduce reuse recycle I'm all for it. However it has been mentioned that it won't generate enough tax funds for needed programs.
Well put jenreiautter. I take issue on a some of the rest of the post but as you said this tax would be a real jumpstart for reuse as probably a boost for recycling as well.
However, reducing the department of defense in the face of a massive terrorist threat against our nation is probably a bad move IMHO.
The tax is designed to be revenue neutral, it does not address changing the size of government. It is supposed to raise exactly the same amount of taxes as it replaces. It also takes it from a broader and more stable index, consumption has been more constant than income for the last half century. (somewhere on the site, don't have the exact link)
Half of our GDP is in services, not taxing them would require the rate on goods to be doubled. I don't understand the reasoning for not paying for services, and don't see why those who produce products should be unfairly penalized vs those who produce services.
The FairTax act doesnt propose to remove excise taxes (fuel, alcohol, tobacco, etc.) so it doesn't prevent excise taxes from being attatched to pollution generation. I tend to agree with you on this idea, but on the grounds that I believe in sustainable capitalism, especially as it pertains to labor and environment, but it has almost nothing to do with the argument. To attempt to garner widespread support for what is obviously a superior taxation method, it is necessarily a very narrow (but huge) issue. I tend to have a holistic view on energy and waste and money...tax laws and complience with them waste American's time and effort to the tune of $250 Billion a year....more than twice what we've spent on the entire Iraq war... (neat site: www.costofwar.com ) Another relevant comparison for you ... the US consumes about $250B worth of oil every year.
The FairTax taxes everything equally for the reason that it doesn't let the fox in the henhouse as regards to lobbyists and tax-preferred status. The essentials such as food, clothing, shelter are 'untaxed' through the rebate. If you allowed food to go untaxed, the guy who spends $1000 a month on lobster, caviar, and filet mignon would benefit more than the guy who spends $300 a month on rice and beans for his family of 8.
The only 'loophole' is that money spent on improving capacity of production (e.g. business expenses) INCLUDING personal education, is not taxed.
I'm all for cutting federal spending, though I agree, now is not the time to cut defense...but that's a horse of another color altogether. The FairTax Act does not, and cannot, alter the amount of money collected.
To that end though, since most, if not all, federal taxes are visible at the point-of-sale, it is much more apparent to the consumertaxpayervoter the real cost of government. More than likely you'd see much more pressure to reduce taxes via reducing spending via the democratic process.
(Thanks for the Bravo!)
As far as entitlement fraud, again, not directly related to the topic, but since everyone with a SSN recieves the same monthly rebate, there is no additional need for fraud enforcement. I for one believe that there'd be reduced need for fraud investigations due to the increased spending money at lower income levels, and reduced disincentives to work. Likewise, with widespread pressure to reduce taxes, federal & even state money for programs would become more 'precious' and carefully monitored.
A good PDF primer on Fair Tax
A few more relevant links, including a FAQ
Half of our GDP is in services, not taxing them would require the rate on goods to be doubled. I don't understand the reasoning for not paying for services, and don't see why those who produce products should be unfairly penalized vs those who produce services.
The FairTax act doesnt propose to remove excise taxes (fuel, alcohol, tobacco, etc.) so it doesn't prevent excise taxes from being attatched to pollution generation. I tend to agree with you on this idea, but on the grounds that I believe in sustainable capitalism, especially as it pertains to labor and environment, but it has almost nothing to do with the argument. To attempt to garner widespread support for what is obviously a superior taxation method, it is necessarily a very narrow (but huge) issue. I tend to have a holistic view on energy and waste and money...tax laws and complience with them waste American's time and effort to the tune of $250 Billion a year....more than twice what we've spent on the entire Iraq war... (neat site: www.costofwar.com ) Another relevant comparison for you ... the US consumes about $250B worth of oil every year.
The FairTax taxes everything equally for the reason that it doesn't let the fox in the henhouse as regards to lobbyists and tax-preferred status. The essentials such as food, clothing, shelter are 'untaxed' through the rebate. If you allowed food to go untaxed, the guy who spends $1000 a month on lobster, caviar, and filet mignon would benefit more than the guy who spends $300 a month on rice and beans for his family of 8.
The only 'loophole' is that money spent on improving capacity of production (e.g. business expenses) INCLUDING personal education, is not taxed.
I'm all for cutting federal spending, though I agree, now is not the time to cut defense...but that's a horse of another color altogether. The FairTax Act does not, and cannot, alter the amount of money collected.
To that end though, since most, if not all, federal taxes are visible at the point-of-sale, it is much more apparent to the consumertaxpayervoter the real cost of government. More than likely you'd see much more pressure to reduce taxes via reducing spending via the democratic process.
(Thanks for the Bravo!)
As far as entitlement fraud, again, not directly related to the topic, but since everyone with a SSN recieves the same monthly rebate, there is no additional need for fraud enforcement. I for one believe that there'd be reduced need for fraud investigations due to the increased spending money at lower income levels, and reduced disincentives to work. Likewise, with widespread pressure to reduce taxes, federal & even state money for programs would become more 'precious' and carefully monitored.
A good PDF primer on Fair Tax
A few more relevant links, including a FAQ
So how is that I can expose a gap in the reasoning of the proposed legislation, namely the collapse of domestic markets due to the elimination of all trade tarriffs, and people can just throw the legislation back out and consider said gap closed? Is nobody going to even attempt to explain how this problem would be avoided?
Price of goods imported to the US = cost of materials + cost of labor +cost of shipping + cost of foreign income & corporate tax + foreign corporate profit + US National Sales tax
Price of goods made in the US = cost of materials + cost of labor + cost of shipping (less) + cost of income & corporate tax ($0, less) + domestic corporate profit + US National Sales tax
ALL GOODS & SERVICES Sold for consumption in the US are subject to an additional 30% tax, regardless of where they are made. (30% on the end is equivalent to 23% inclusive). US citizens are 'untaxed' on the first $774 of consumption each month.
Goods & Services exported from the US leave without paying taxes.
Goods & Services imported to US include whatever hidden taxes from the country of origin and are taxed at the Point of Sale.
Hidden taxes are those taxes exacted during the production process that add to the cost of goods, such as the income tax associated with the labor used to produce the good, payroll taxes, etc.
Price of goods made in the US = cost of materials + cost of labor + cost of shipping (less) + cost of income & corporate tax ($0, less) + domestic corporate profit + US National Sales tax
ALL GOODS & SERVICES Sold for consumption in the US are subject to an additional 30% tax, regardless of where they are made. (30% on the end is equivalent to 23% inclusive). US citizens are 'untaxed' on the first $774 of consumption each month.
Goods & Services exported from the US leave without paying taxes.
Goods & Services imported to US include whatever hidden taxes from the country of origin and are taxed at the Point of Sale.
Hidden taxes are those taxes exacted during the production process that add to the cost of goods, such as the income tax associated with the labor used to produce the good, payroll taxes, etc.
I prefer the income tax over the so-called fair tax. I wish we would stop propagandizing our laws and taxes. Death tax, fair tax, let's get a name that is accurate, not a name designed to sell a product.
I would like our taxes to be simplified again. Congress streamlined taxes in 1986 and we have been adding levels of complexity each year recently.
I would rather get rid of payroll taxes, making it easier for companies to employ people. The part of those taxes that the employer pays is the most insidious hidden tax we pay. It makes us feel that we are paying half as much as we are in reality. An employer looks at the cost of employing someone in total when considering making a hire.
This consumption tax would create its own black market. The drug dealer or prostitute, or movie pirate is no more going to pay the consumption tax than he would pay the income tax.
I think this tax would discourage consumption, but I think it would be neutral when applied to imports. Every product would compete on a level playing field.
I don't see how it would be easier collecting this tax than an income tax. It would however encourage people to purchase outside of the American market whenever possible.
I would like our taxes to be simplified again. Congress streamlined taxes in 1986 and we have been adding levels of complexity each year recently.
I would rather get rid of payroll taxes, making it easier for companies to employ people. The part of those taxes that the employer pays is the most insidious hidden tax we pay. It makes us feel that we are paying half as much as we are in reality. An employer looks at the cost of employing someone in total when considering making a hire.
This consumption tax would create its own black market. The drug dealer or prostitute, or movie pirate is no more going to pay the consumption tax than he would pay the income tax.
I think this tax would discourage consumption, but I think it would be neutral when applied to imports. Every product would compete on a level playing field.
I don't see how it would be easier collecting this tax than an income tax. It would however encourage people to purchase outside of the American market whenever possible.
Consumption Tax:
Most e-commerce must go the mail/parcel services, so one solution is to tax those services instead of taxing an item coming form a foreign nation.
But one thing this legislation has against it:
Whole sale/black market abuse potential
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Some supporters of a consumption tax actually see it as more equitable than the income tax. William Andrews, a Harvard law professor, makes the argument that taxing income—whether from labor or capital—taxes people on the basis of what they contribute to society. Taxing consumption, he argues, taxes what they take out.
Most e-commerce must go the mail/parcel services, so one solution is to tax those services instead of taxing an item coming form a foreign nation.
But one thing this legislation has against it:
Whole sale/black market abuse potential
The "one thing"?
You mean aside from the horrible inflation and collapse of domestic markets? Did I miss your solution to that problem?
You're going to tax the mail? That's interesting. Your math is funny. While a tremendous amount of E-Commerce (as well as anny other commerce) does send stuff through the mail, or private couriers, it would be extremely foolish to equate the volume of material with the billions of dollars which change hands. The only way to tax e-commerce would be taxes on the transactions themselves, which this legislation would rule out.
You mean aside from the horrible inflation and collapse of domestic markets? Did I miss your solution to that problem?
QUOTE
Most e-commerce must go the mail/parcel services, so one solution is to tax those services instead of taxing an item coming form a foreign nation.
You're going to tax the mail? That's interesting. Your math is funny. While a tremendous amount of E-Commerce (as well as anny other commerce) does send stuff through the mail, or private couriers, it would be extremely foolish to equate the volume of material with the billions of dollars which change hands. The only way to tax e-commerce would be taxes on the transactions themselves, which this legislation would rule out.
QUOTE
You mean aside from the horrible inflation and collapse of domestic markets? Did I miss your solution to that problem?
Inflation? Hard to say. Everyones got more cash, and interest rates are low, adds to inflation. Economy more efficient (less tax compliance costs), more productivity out of workers (no disincentive to work more hours, second job, etc.), subtracts from inflation. Most importantly, foreign investment in US, and increase of exports from US, definitely subtracts from inflation.
Why do you keep saying domestic markets would crash? Any imported good pays our (US) sales tax, any exported good doesn't pay our (US) sales tax. Any imported good comes to our shores with the hidden taxes of the country of origin. Therefore....I buy a Ford, I pay MSRP (no hidden taxes anymore, 20%+ cheaper) plus Sales tax (30%). I buy a Volkswagen, I pay MSRP (including the income and payroll taxes of the German or Mexican workers) plus Sales tax (30%). It makes everything relatively cheaper to buy American, good for domestic markets. Prices go up a little, or don't change at all, depending on who you listen to. More cash in your pocket, how is that bad for Domestic Markets? (at least US domestic markets, Canadian Domestic Markets have to fend for themselves).
No corporate tax, no corporate income tax, no tax on business expenses? Except for the few, very low profit margin things that benefit from really cheap labor, everything would be made here. Those Nikes from Indonesia? They come over cheap, it's the Advertising and Endorsements that cost money....and that's done on Madison Ave, NYC....good for our economy.
The black market? no, i don't expect the drug dealers and prostitutes to collect sales tax on their illegal transactions. I do expect them to pay sales tax when they buy their cars, rent their apartments, go to the grocery store, etc. Right now, we never get any of their money.
E-commerce: sales taxes would be assessed for goods and services bought for consumption by people in the US. I didn't see anywhere that goods and services sold over the internet would be exempted.
There is no more simple, efficient, and effective tax plan out there. Smarter men than I have calculated it to collect the same amount per year, to be easier to collect, and much easier to understand.
Please explain your reasons for believing this act would cause rampant inflation and collapse of domestic markets. You did once before, but I don't believe you'd read the FAQ or anything else associated with http:www.fairtax.org
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You do realize that to make that calculation would require an ANNUAL census, do you not? That's quite the undertaking.
We already require annual tax returns. An actual census would not be required. Those who did not want to be counted could feel free to not recieve their monthly prebate.
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That's a HUGE amount of revenue you are kissing goodbye. Which chunk of government are you proposing we collapse?
The tax, as proposed, is revenue neutral, it raises as much as our current tax scheme. The IRS would eventually be eliminated.
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I didn't catch anything that projected revenues in comparison to the current system.
From fairtax.org FAQ #6
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Does the FairTax rate need to be much higher to be revenue neutral? The proper tax rate has been carefully worked out; 23 percent does the job of: (1) raising the same amount of federal funds as are raised by the current system, (2) paying the universal rebate, and (3) paying the collection fees to retailers and state governments. Unlike some other proposals, this rate has been independently confirmed by several different, non-partisan institutions across the country. Detailed calculations are available from FairTax.org.
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If there is a financial shortfall, how would you deal with it?
Same way we do now, deficit spending. Note however, that national consumption is more stable than national production.
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What this plan suggests is that instead of taxing people, we just shift the burden on to the consumer entirely. A 23% consumer tax on goods would cripple (as far as I can imagine) any foreign export markets. I am curious though how you would go about protecting imports as well under such a plan.
The burden is currently on the consumer, it's just not obvious, they are "hidden". A company that pays taxes, pays taxes out of the revenues it made from the consumer, and the wages it didn't pay workers. Exported goods are NOT taxed, not even with the aforementioned hidden taxes, giving a very serious competitive edge to US products abroad. Imported goods ARE taxed, paying for the US government, PLUS whatever hidden taxes from their country of origin, placing them at a disatvantage to domestic goods.
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if foreign companies transfer production to American locations to enjoy these new tax 'breaks', what chance does the domestic market have, when it loses "price" as it's only advantage?
They now become the domestic market...Millons of dollars spent on building infrastructure here, and millions of jobs added to our economy. Competition will keep their profit margin from being too large, and that's usually going to the US stock market anyway.
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A side-effect of a "Fair Tax" proposal would undoubtedly be a reduction in import costs for multinational corporations. The only way then to guarantee that those corporations would in fact lose their advantageous tax situation would be to impose trade barriers and artificial price controls.
If they are imported to the US for business purposes, they only pay the hidden taxes of the country of origin. Once they pass to the consumer, they pay the sales tax. Goods from other countries pay hidden tax of other country, plus domestic (US) sales tax. Goods manufactured here pay only domestic sales tax...giving us a 20+% price advantage...it won't make up for ultra-cheap unskilled labor, but gives us an advantage for the better paying jobs required to make a more complex product.
UltimateJoe, thank you for providing an actual debate, not much point in having one when everyone agrees.
You defended my proposal better than I did, SWM28WDC.
One thing is sure, we may never know if it works if we don't "take a leap of faith," and try it, then we can fix the problems when they raise their ugly head.
Oh, BTW there are about 51 sponsors for this legislation in the house.
One thing is sure, we may never know if it works if we don't "take a leap of faith," and try it, then we can fix the problems when they raise their ugly head.
Oh, BTW there are about 51 sponsors for this legislation in the house.
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If they are imported to the US for business purposes, they only pay the hidden taxes of the country of origin. Once they pass to the consumer, they pay the sales tax. Goods from other countries pay hidden tax of other country, plus domestic (US) sales tax. Goods manufactured here pay only domestic sales tax...giving us a 20+% price advantage...it won't make up for ultra-cheap unskilled labor, but gives us an advantage for the better paying jobs required to make a more complex product.
Your entire defense of this proposal (at least in the area of international flows) revolves around this hidden costs assesment. You are making a critical oversight in your argument however. The fact is that high-skilled high tech industry which cannot be located elsewhere only makes up a small portion of the U.S. manufacturing economy. The gross manufacturing sectors are much more migratory. I'm curious where you get 20% from?
Anyways, what I was trying to say is that a consumption tax would do nothing to alleviate foreign competition; in fact it would exacerbate the problem.
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Economy more efficient (less tax compliance costs), more productivity out of workers (no disincentive to work more hours, second job, etc.), subtracts from inflation. Most importantly, foreign investment in US, and increase of exports from US, definitely subtracts from inflation.
This is debatable. Inflation is a tricky act to predict. What is interesting is your take on exports. You suggest exports would increase; and on the surface this would appear to be true. This tax proposal seems to assume that along with a massive increase in productivity, a massive increase in consumption would take place. I just don't see that happening. With the consumption tax in place the cost of goods for consumers will go up; so in effect the consumption rates probably wouldn't change dramatically. Unless the manufacturing sector (for example) started to shed excess jobs, increased productivity would lead to increased inventories and massive price drops. On the other hand, if industries did choose to shed excess jobs, the costs of goods will be passed on to the unemployed. Even if they are exempted from this tax, they still won't have the money to purchase these goods.
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We already require annual tax returns. An actual census would not be required. Those who did not want to be counted could feel free to not recieve their monthly prebate.
I think you're misunderstanding how the census works. For the poverty rate to be determined, the IRS (or whatever organization is responsible for administering a consumption tax) would need to determine where the poverty line is (it's comprised of numerous variables), and tax returns would not be sufficient for an accurate or fluid determination of the tax threshold. If the government could collect accurate demographic data from tax returns, it would have no need to probe financial indicators when it conducts the 10-year census.
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Imported goods ARE taxed, paying for the US government, PLUS whatever hidden taxes from their country of origin, placing them at a disatvantage to domestic goods.
There is a massive trade-deficit in the United States. What this means is that the U.S. imports more than it exports. An increase in the price of imported goods will not just make domestic goods more competitive, it will raise the cost of consumption dramatically.
The problem with my argument is that the Fair Tax would eliminate import taxes and tarriffs; which also directly contradicts what you have said. If these tarriffs are eliminated, you could very well see the collapse of numerous domestic industries. If they are increased as you suggest the U.S. runs the risk of alienating trade partners, not to mention invalidating numerous trade agreements.
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The fact is that high-skilled high tech industry which cannot be located elsewhere only makes up a small portion of the U.S. manufacturing economy. The gross manufacturing sectors are much more migratory. I'm curious where you get 20% from?
Demand for domestic products would increase due to the lower priced American made products. American made products would be ~20% cheaper than they are now due to the elimination of the 'hidden' taxes. Unless foreign governments adopt a pure consumption tax, foreign produced goods would contain those taxes. From fairtax.org FAQ #17, (and elsewhere, this was easiest to find):
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How much do prices for goods and services go down under the FairTax? All goods and services already contain the embedded costs of the current tax system in their prices. When these embedded taxes are removed, prices come down. Dale Jorgenson, Ph.D., chairman of the Economics Department at Harvard University, has projected an average producer price reduction of 20 percent in just the first year after the adoption of the FairTax. In addition, the FairTax lowers compliance costs by an estimated 95 percent and the removal of these costs will force prices down even lower.
All this has the effect of making American-made products more attractive to the consumer. I'm not sure how this exacerbates the trade deficit.
I agree, no one can predict inflation, I just think there are more facets of this tax scheme that are anti-inflation than there are things that encourage inflation.
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This tax proposal seems to assume that along with a massive increase in productivity, a massive increase in consumption would take place. I just don't see that happening. With the consumption tax in place the cost of goods for consumers will go up; so in effect the consumption rates probably wouldn't change dramatically.
I'm not sure if I would use the word 'massive' - it's a revenue neutral proposal, so most people end up paying about what they pay now in taxes...in total, it's a bit more progressive than the current one, due to the elimination of the payroll tax, and the use of the prebate. It also removes most of the loopholes the very rich use to avoid taxes. Most economists quoted by the proponents of the tax predict that at-the-register prices for consumers wont change, or won't change much.
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Unless the manufacturing sector (for example) started to shed excess jobs, increased productivity would lead to increased inventories and massive price drops. On the other hand, if industries did choose to shed excess jobs, the costs of goods will be passed on to the unemployed. Even if they are exempted from this tax, they still won't have the money to purchase these goods.
I still believe the evidence points to increased exports and at least similar domestic consumption, which means increased productivity can be realized as profits.
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think you're misunderstanding how the census works. For the poverty rate to be determined, the IRS (or whatever organization is responsible for administering a consumption tax) would need to determine where the poverty line is (it's comprised of numerous variables), and tax returns would not be sufficient for an accurate or fluid determination of the tax threshold.
From the Department of Health and Human Services:
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The poverty guidelines are the other version of the federal poverty measure. They are issued each year in the Federal Register by the Department of Health and Human Services (HHS). The guidelines are a simplification of the poverty thresholds for use for administrative purposes — for instance, determining financial eligibility for certain federal programs.
This is currently done without an annual census.
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There is a massive trade-deficit in the United States. What this means is that the U.S. imports more than it exports. An increase in the price of imported goods will not just make domestic goods more competitive, it will raise the cost of consumption dramatically
Again, it's revenue neutral, most people have about as much purchasing power after enactment that they do now, even before any of the benefits predicted come to fruition. With the exception of clothes, I can't thing of any generally foreign produced necessities. Food, shelter, transportation, technology, medicine, all have domestic producers. It will only raise the cost of consumption for those who choose to purchase new foreign produced goods.
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The problem with my argument is that the Fair Tax would eliminate import taxes and tarriffs; which also directly contradicts what you have said. If these tarriffs are eliminated, you could very well see the collapse of numerous domestic industries. If they are increased as you suggest the U.S. runs the risk of alienating trade partners, not to mention invalidating numerous trade agreements.
From the fairtax.org FAQ #2:
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Exactly what taxes are abolished? The FairTax is replacement, not reform. It replaces federal income taxes including, personal, estate, gift, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes.
Nothing in the fairtax.org site mentions changing tarriffs, that'd be a different debate altogether. Domestic industries would benefit from simplified tax compliance (no small deal here, especially for smaller businesses), as well as removal of corporate taxes.
QUOTE(SWM28WDC)
Demand for domestic products would increase due to the lower priced American made products. American made products would be ~20% cheaper than they are now due to the elimination of the 'hidden' taxes. Unless foreign governments adopt a pure consumption tax, foreign produced goods would contain those taxes. From fairtax.org FAQ #17, (and elsewhere, this was easiest to find.
The prices will also go down because of the simplicity of the tax, eleveating the billions used just to fill out the income tax forms.
The fairness of a spending/consumption/sales/value-added tax depends on the precise definition of what gets taxed. If it were a tax on everything that one uses money to purchase, it might be considered fair. It would also be functionally equivalent to an income tax, since all domestic trade - still the vast majority of trade - involves the same amount for buyer and seller. However, as currently proposed it looks like just another way to tax the necessities of life and business while exempting money used for passive investment. Gee, I wonder which way the overall burden shifts under such a system, relative to the current one. Upward, do you think, or downward? Oh, gee, what a surprise that the poor would pay more and the rich less. 
Even exemptions implemented as rebates don't make up for the tax's inherent regressiveness. Why should the poor overpay during the year while the rich do not?
As for the claim that domestic goods would be 20% cheaper: bollocks. The entire federal budget is roughly 20% of GDP (two trillion out of ten). Even if the entire federal government - not just the IRS - could do exactly what it does today for free, it wouldn't result in goods becoming 20% cheaper. The administrative savings are being way oversold here, and the regressiveness dishonestly swept under the rug.
Even exemptions implemented as rebates don't make up for the tax's inherent regressiveness. Why should the poor overpay during the year while the rich do not?As for the claim that domestic goods would be 20% cheaper: bollocks. The entire federal budget is roughly 20% of GDP (two trillion out of ten). Even if the entire federal government - not just the IRS - could do exactly what it does today for free, it wouldn't result in goods becoming 20% cheaper. The administrative savings are being way oversold here, and the regressiveness dishonestly swept under the rug.
Lower consumer prices would be from elimination of the 'hidden' payroll taxes in the supply chain, as well as reduced cost of complying with tax laws.
Corporations don't pay taxes...the money comes from their revenue, which comes from the price * volume of the things they sell. Not paying taxes (and most of them don't anyway now...you have to make a profit to pay taxes) allows them to either have more profit (and lose out to competitors) pay better wages (and steal productive workers from their competitors) or lower prices (and sell more than their competitors). Right now, taxpayers spend 30% MORE on complying with tax laws (and tax avoidance) than they do on taxes.
Please take a moment and read this.
I understand that without inspection this seems like a huge boon to the rich at the expense of the poor, this is a great place to debate that. Here are some facts from the above link:
Income for a family of four / 2000 tax rate / fairtax rate
$22,500 / 20% / 0%
$45,000 / 25% / 11.5%
$67,000 / 28% / 15%
$90,000 / 33% / 17%
This includes no savings, standard deductions, and hidden payroll taxes including employer's share...taxes you already pay through reduced wages, but don't know it.
The site details how the necessities of life are untaxed, more fairly and completely than they are untaxed now. You cannot exempt food from the sales tax, that benefits those who eat expensive food more than those who don't. The rebate allows you to live at the poverty level without paying ANY taxes, not even the hidden taxes currently embedded in every product you buy.
Products used for production, business expenses, and EDUCATION, are not subject to the sales tax.
Money you invest in a bank, bond, stock or fund, is not taxed (though the fees would be), allowing everyone to save money much easier. This invested money is then returned to the economy, creating jobs and boosting production.
Corporations don't pay taxes...the money comes from their revenue, which comes from the price * volume of the things they sell. Not paying taxes (and most of them don't anyway now...you have to make a profit to pay taxes) allows them to either have more profit (and lose out to competitors) pay better wages (and steal productive workers from their competitors) or lower prices (and sell more than their competitors). Right now, taxpayers spend 30% MORE on complying with tax laws (and tax avoidance) than they do on taxes.
Please take a moment and read this.
I understand that without inspection this seems like a huge boon to the rich at the expense of the poor, this is a great place to debate that. Here are some facts from the above link:
Income for a family of four / 2000 tax rate / fairtax rate
$22,500 / 20% / 0%
$45,000 / 25% / 11.5%
$67,000 / 28% / 15%
$90,000 / 33% / 17%
This includes no savings, standard deductions, and hidden payroll taxes including employer's share...taxes you already pay through reduced wages, but don't know it.
The site details how the necessities of life are untaxed, more fairly and completely than they are untaxed now. You cannot exempt food from the sales tax, that benefits those who eat expensive food more than those who don't. The rebate allows you to live at the poverty level without paying ANY taxes, not even the hidden taxes currently embedded in every product you buy.
Products used for production, business expenses, and EDUCATION, are not subject to the sales tax.
Money you invest in a bank, bond, stock or fund, is not taxed (though the fees would be), allowing everyone to save money much easier. This invested money is then returned to the economy, creating jobs and boosting production.
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Family Income -- $22,500
FUTA (Federal Unemployment Tax) -- N.A.
OASDI (Social Security) -- $1,395
HI (Medicare) $326
Income Tax -- $593
Total Tax -- $2,314
Effective Tax Rate -- 10.0%
Sales Tax -- $0 (After Rebate)
Effective Tax Rate -- 00.0%
FUTA (Federal Unemployment Tax) -- N.A.
OASDI (Social Security) -- $1,395
HI (Medicare) $326
Income Tax -- $593
Total Tax -- $2,314
Effective Tax Rate -- 10.0%
Sales Tax -- $0 (After Rebate)
Effective Tax Rate -- 00.0%
I support the fair tax idea. I think it is the best solution for the future of our country. However, As someone who fits closely to the income listed above I have to take issue with their numbers.
They fail to take the Earned Income Tax Credit into account. Due to the Earned Income Tax Credit my family of three got a Refund of approximately 2000.00 when we only paid in about 1000.00.
So, adding that to your numbers, would mean my effective tax would be closer to 5%. As for unemployment, I pay into that every check and I do not believe I get a refund on it so why is it N/A?
I for one am willing to give up that Earned Income Tax Credit because I believe that the fair tax will be much more beneficial to all Americans in the long run. Just showing people how much the Federal Government costs them every time they go to the store should be a boon in public outcrys over absurd expenditures. This is likely to lead to slowly decreasing the size of government and thus decreasing the amount needed to run government. After the debt is paid down it would allow for reduced taxes.
Also, I would hope that the filing for refunds on sales tax would be VOLUNTARY. No reason to force people to file for the recovery of small amounts, or worse, file when they know they will get nothing back. That just perpetuates the Bureaucracy.
Lastly, We need a measure in this bill that requires a 2/3rd of better yet, 3/4ths majority in the House and Senate to raise taxes, or make ANY changes to the tax code. There is no reason to allow the continued manipulation of the tax code for the gain of politicians supporters. If a tax code change is TRULY to the benefit of all Americans then a 3/4ths majority should not be hard to achieve.
Hey OLS- you got 2000.00 back when you only paid 1000.00- doesn't that make you a welfare recipient then? 
Though I am all for a simpler code- I do pay my tax prepare guy over a K a year, would love to be able to prepare my own taxes LOL
Though I am all for a simpler code- I do pay my tax prepare guy over a K a year, would love to be able to prepare my own taxes LOL
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Hey OLS- you got 2000.00 back when you only paid 1000.00- doesn't that make you a welfare recipient then?
No, but it does make me one of those on the receiving end of wealth redistribution.
I may not agree with it, but I'll take it until someone gets enough sense to get rid of it (or better yet, until I make too much to qualify for it any longer).
QUOTE(SWM28WDC @ Jul 6 2004, 03:30 PM)
Lower consumer prices would be from elimination of the 'hidden' payroll taxes in the supply chain, as well as reduced cost of complying with tax laws.
There are certainly costs there, but enough to make a 20% difference? Not even close. You'll need to provide some proof of that claim (not shift the burden by requiring disproof).
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Corporations don't pay taxes...
Oh yes, there's a suggestion we can all be sure is 100% based in idealism and not greed.
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Not paying taxes (and most of them don't anyway now...you have to make a profit to pay taxes) allows them to either have more profit (and lose out to competitors) pay better wages (and steal productive workers from their competitors) or lower prices (and sell more than their competitors).
You make it sound like these are three discrete choices, with perfectly predictable consequences for each and no room for combination or compromise between them. That's a fallacy (the excluded middle) and it's dishonest. Companies can have more profit without losing out to competitors if those competitors have other disadvantages, if purchase decisions are based on factors other than rational choice (as the economists use the term), if substitution costs are high (ditto) and for a host of other reasons. Labor markets aren't perfectly fluid, so your second possibility isn't as simple as you make it out to be either. Then there's market saturation and that old supply/demand curve. Even if they could sell for a lower unit cost, there might be greater profit in selling fewer units at higher margins.
The fact is that very often neither your first option (which you present as something companies would want to avoid) nor your second/third (which you present as things they would embrace) apply. Real life does not conform to such simplistic models, transparently designed to support a choice already made. Not taxing companies is a form of mercantilism, giving US companies a temporary and artificial advantage vs. foreign ones, decreasing the need for innovation and meaningful competition and hurting US business in the long run...while at the same time eliminating 10% of federal revenue. It's just a giveaway.
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Right now, taxpayers spend 30% MORE on complying with tax laws (and tax avoidance) than they do on taxes.
And your source for that would be...?
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Income for a family of four / 2000 tax rate / fairtax rate
$22,500 / 20% / 0%
$45,000 / 25% / 11.5%
$67,000 / 28% / 15%
$90,000 / 33% / 17%
$22,500 / 20% / 0%
$45,000 / 25% / 11.5%
$67,000 / 28% / 15%
$90,000 / 33% / 17%
Revenue-neutral my foot. This is simple math, kid. Eliminating a substantial portion of revenue from corporate and payroll taxes, then cutting the remainder by half or more, leaves a huge shortfall. Even if all this magic you believe in were real, it would be ridiculous to expect economic activity to double from all this "stimulation" (self-stimulation by its proponents).
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The site details how the necessities of life are untaxed, more fairly and completely than they are untaxed now.
...and fails to account for the issue already raised about the poor giving the government an interest-free loan during the year (until they get their rebate) while the rich do not.
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The rebate allows you to live at the poverty level without paying ANY taxes
Wrong. You pay the taxes, and get paid back months later.
I've seen a lot of tax-reform scams in my time, but this one pretty much takes the cake. It's a cynical attempt to fool people who don't understand economics (or even basic math) with high-sounding but ultimately empty rhetoric. It's despicable.
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QUOTE
Corporations don't pay taxes...
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Oh yes, there's a suggestion we can all be sure is 100% based in idealism and not greed.
The reality of it is that companies do not pay taxes. Consumers do. Every tax dollar paid out by a company is covered in the costs of their products. This extends to all the regulation costs, licensing fees, processing fees, etc. Not to mention the massive costs of trying to comply with all the tax laws, regulations, etc. (and get the best deal you can in the process).
If you eliminate these costs too businesses, their prices may or may not go down based on a multitude of factors. But if you increase these costs to businesses I guarantee their prices will go up.
Those price increases disproportionally harm lower income families. If a new regulation or tax costs a business an additional 5% to do business then they will raise their prices accordingly. If their product is say, baby formula, that additional 5% cost to the consumer (lets say $0.50 a can, at 8 cans a month of $4.00 a month) will have a much bigger impact on the family that earns $20,000 a year (and has a $200.00 a week for budget (a total reduction on 2% in available money for their family's food) then it will have on the family earning 1,000,000.00 a year (with lord knows what for a food budget).
Of course this assumes the company can do that without loosing market share to foreign companies assuming this hypothetical cost is not applied to them (as is usually the case). If they can't raise the price because of this then companies typically go to the next choice, cut labor.
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giving US companies a temporary and artificial advantage vs. foreign ones, decreasing the need for innovation and meaningful competition and hurting US business in the long run...while at the same time eliminating 10% of federal revenue. It's just a giveaway.
I agree here, which is why I support FAIR trade. However, it the foreign companies that currently have the artificial advantage in that they don't have to deal with many of the regulations and requirements we place on our domestic businesses. To me, a change to this fair tax would not give American Companies and unfair advantage, but would level the playing field a little better.
Regarding the 20% reduction in pre-tax prices. Letters 3 & 4 address your question.
I listed three possible alternatives regarding what would happen to the money saved by corporations not paying taxes. Im sure reality would be some mix of the three. None of the alternatives seem that bad to me: 1) higher corporate profits = booming stock market, strong dollar. 2) higher wages = more money in my pocket 3) lower sale price = more purchasing power.
I'm not sure how untaxed corporate profit gives US companies a "temporary and artificial" advantage over foreign one is supposed to be a valid argument. If in fact it is "temporary and artificial", then it's irrelevant, and shouldn't be argued over. I believe that the advantage will last as long as foreign governments charge corporate taxes. I don't think its artificial, either. It's a real and concrete advantage to operate without having to deal with taxation. The companies are still "paying taxes" through the fact that their product is taxed. Would you feel differently if every company had to pay 23% on gross receipts rather than having the consumer pay 23% at the register? It's a wash either way.
Lower operating costs don't decrease the need for innovation, they just shift the whole domestic market towards better efficiency.
Poor writing on my part, US taxpayers spend an additional 30% complying with the tax codes. From here.
Revenue Neutrality
platypus, i appreciate the debate, but don't call me 'kid'. It's not constructive.
I doubt that the 4 salaries listed account for a complete representation of ALL salaries in this country.
If you read the literature on FairTax, you will often hear the tax rebate referred to as a "Prebate". That's because it arrives every month, physically or electronically, PRIOR to consumption. The government's actually giving you a free 30-day loan.
I listed three possible alternatives regarding what would happen to the money saved by corporations not paying taxes. Im sure reality would be some mix of the three. None of the alternatives seem that bad to me: 1) higher corporate profits = booming stock market, strong dollar. 2) higher wages = more money in my pocket 3) lower sale price = more purchasing power.
I'm not sure how untaxed corporate profit gives US companies a "temporary and artificial" advantage over foreign one is supposed to be a valid argument. If in fact it is "temporary and artificial", then it's irrelevant, and shouldn't be argued over. I believe that the advantage will last as long as foreign governments charge corporate taxes. I don't think its artificial, either. It's a real and concrete advantage to operate without having to deal with taxation. The companies are still "paying taxes" through the fact that their product is taxed. Would you feel differently if every company had to pay 23% on gross receipts rather than having the consumer pay 23% at the register? It's a wash either way.
Lower operating costs don't decrease the need for innovation, they just shift the whole domestic market towards better efficiency.
Poor writing on my part, US taxpayers spend an additional 30% complying with the tax codes. From here.
Revenue Neutrality
platypus, i appreciate the debate, but don't call me 'kid'. It's not constructive.
I doubt that the 4 salaries listed account for a complete representation of ALL salaries in this country.
If you read the literature on FairTax, you will often hear the tax rebate referred to as a "Prebate". That's because it arrives every month, physically or electronically, PRIOR to consumption. The government's actually giving you a free 30-day loan.
QUOTE(SWM28WDC @ Jul 7 2004, 05:22 PM)
I'm not sure how untaxed corporate profit gives US companies a "temporary and artificial" advantage over foreign one is supposed to be a valid argument. If in fact it is "temporary and artificial", then it's irrelevant, and shouldn't be argued over.
The advantage might be temporary, but its effects would last much longer. It's a matter of what incentives are created. If the system rewards true competition and innovation, then the economy will benefit. If the system takes away that incentive by ensuring markets overseas even if companies remain inefficient and complacent, the economy will eventually suffer...and by the time the effects become manifest it will be too late to do anything about it. Mercantilism such as you suggest is inherently anti-capitalist, with all that implies.
QUOTE
Poor writing on my part, US taxpayers spend an additional 30% complying with the tax codes. From here.
Yeah. "Poor writing." Uh huh.
QUOTE
platypus, i appreciate the debate, but don't call me 'kid'. It's not constructive.
Neither are cooked figures, logical fallacies, and ignoring or dismissing points you don't like in favor of relying on mere repetition to grind opponents down. Matthew 7:3, my boy.
QUOTE
I doubt that the 4 salaries listed account for a complete representation of ALL salaries in this country.
There is no income distribution for which removing 10% of the revenue base and cutting the rate on the remainder by half will be revenue neutral. Basic math again.
QUOTE
If you read the literature on FairTax, you will often hear the tax rebate referred to as a "Prebate". That's because it arrives every month, physically or electronically, PRIOR to consumption. The government's actually giving you a free 30-day loan.
So who calculates the prebate? Who ensures at the end of the month that what the government sent at the beginning was actually the right amount? "Prebates" end up being very much like income withholding, both in terms of who pays how much and in terms of jacking those administrative costs right back up to where they were before.
QUOTE(overlandsailor @ Jul 7 2004, 02:30 PM)
The reality of it is that companies do not pay taxes. Consumers do. Every tax dollar paid out by a company is covered in the costs of their products.
Yeah, some reality. If I as an individual sell you something, nobody would argue that you're really the one paying the taxes, but if I incorporate then that changes? Right. Even I can see how to drive a fleet of trucks through that loophole. People already shift personal costs and investments to shell corporations because of the preferential tax treatment those corporations receive. This plan would just encourage them to do that even more because there'd be even more bang for the buck. That supposed revenue neutrality, already looking pretty questionable, just receded even further into the distance.
It's still a plan so broken that even ignorance cannot explain its' advocates zeal. For that explanation one has no choice but to consider deliberately misrepresented self-interest.
Platypus - stop with the belitting name calling. It is against the Rules of this forum.
TOPICS TO DEBATE:
Due to the intrusive nature and complexity of Income Tax and Coprerate Gains Tax, should we pass the 'FairTax' (h.r. 25)??
TOPICS TO DEBATE:
Due to the intrusive nature and complexity of Income Tax and Coprerate Gains Tax, should we pass the 'FairTax' (h.r. 25)??
As I understand it, the advantage to American industry vs. foreign industry is the lack of hidden taxes, including employer's share of OASDI, FICA, etc. in all American-produced products. Lack of corporate taxes is also beneficial, but something like 60% of American Companies pay NO taxes each year already (Wall Street Journal). Compare individual income and corporate income taxes below. It's a matter of TAX ACCOUNTING for enough business expenditures to eat all of your profits, ergo no taxable income. If foreign companies have no hidden taxes in their product, the FairTax allows American products to compete fairly with them. If foreign products do contain hidden taxes, the Fairtax gives an advantage to American industry. FairTax does not address protectionist tariffs, it's out of the scope of the project.
Poor writing, i'm sorry, I do make mistakes.
I have attempted to debate this argument as honestly and fairly as I can, I'm not out to mislead anyone. I'm not poor, I'm not rich. I already don't pay FICA, because I'm a local government employee (firefighter) with a pension, so I'd gain less by FairTax than most. I like the simplicity and honesty of the system.
Some math for you, with links to .gov sites for you to check up on me. The numbers are from 2002, the latest year I can find full data for.
The fairtax proposes to eliminate these taxes. Facts from GPO
Income taxes from Table 2.1
Individual Income Tax.....................$858,000M
Corporate Income Tax....................$148,000M
Payroll Taxes from Table 2.4
On Budget Social Insurance.............$185,000M
Estate and Gift Taxes -Table 2.5..........$27,000M
TOTAL..........................................$1,218,000M
The fairtax plans to raise this money by taxing consumption in the US.
According to Table 2.5.5. Personal Consumption Expenditures by Type of Expenditure from the Dept. of Commerce, Americans spent $7,385,000M in FY2002. However this number includes imputed consumption of owner-occupied housing, and educational expenses, which totaled $810,000M and $188,000M respectively. This leaves a 'tax base' of $6,376,000M.
$1,218B / $6,376B = 19%
The fairtax also proposes to pay each US citizen with a SSN a monthly tax rebate, of 1/12th the tax rate x the poverty level for their family size, PLUS an adjustment to remove the "marriage penalty". Assuming, conservatively, that 250M people receive the most they can (i.e. they were all single adults), which was about $2000 per year, this is another $500,000M the tax would have to raise.
$1,718B / $6,376B = 27%
Now, I must explain tax-inclusive and tax-exclusive. I don't mean to merely be repetitive here, but I think it needs to be repeated.
Consumers in the US must pay an additional 27% for what they buy. They must spend $8,094B to recieve $6,376B worth of goods and services. This 27% is the tax-exclusive rate, which is the way we are comfortable expressing sales taxes. If I want a $1 candy bar, I must pay $1.27 for it, under fairtax.
To compare this rate to the income tax that it would replace, we must state it as a tax-exclusive rate. In this case it is equal to $1,718B / $8,094B or 21%, which is a few points UNDER what FairTax has predicted. I trust their math better than mine, but I think they are intentionally being conservative. In this case, I must earn $1.27, of which I pay 21%, or $.27 in taxes, before I can buy that $1 candybar.
That is why the 27% sales tax compares to a 21% income tax rate. However, the effective rate is lowered by the prebate, which effectively removes the taxes paid on the necessities of life. This monthly prebate is calculated by taking the poverty level calculated by the USDHHS for each family size, multiplying it by the tax rate (21% by my calculations), and dividing it by 12 for a monthly payment. Fairtax.org calculates this number to be $178/mo for a single person in 2004 in this FAQ. There is also a correction amount to prevent a marriage penalty: a married couple's prebate size is twice a single person's, and increases at the same rate for additional dependents. Administration is simple, as the only information required is SSNs, Married or Single, and a Routing number. Whoever or whatever replaces the IRS would administrate it.
Please restate your final paragraph (not the inflammatory one-liner), as I'm not sure what you're arguing about.
If you are debating whether or not corporations pay taxes, I believe we've covered that. First, more US companies do NOT pay taxes than do. Second, those that do, pay taxes out of revenues at the expense of some combination of profit, wages, investment, or price.
If you are debating whether or not this will lead to increased tax evasion, I offer this FAQ.
Poor writing, i'm sorry, I do make mistakes.
I have attempted to debate this argument as honestly and fairly as I can, I'm not out to mislead anyone. I'm not poor, I'm not rich. I already don't pay FICA, because I'm a local government employee (firefighter) with a pension, so I'd gain less by FairTax than most. I like the simplicity and honesty of the system.
Some math for you, with links to .gov sites for you to check up on me. The numbers are from 2002, the latest year I can find full data for.
The fairtax proposes to eliminate these taxes. Facts from GPO
Income taxes from Table 2.1
Individual Income Tax.....................$858,000M
Corporate Income Tax....................$148,000M
Payroll Taxes from Table 2.4
On Budget Social Insurance.............$185,000M
Estate and Gift Taxes -Table 2.5..........$27,000M
TOTAL..........................................$1,218,000M
The fairtax plans to raise this money by taxing consumption in the US.
According to Table 2.5.5. Personal Consumption Expenditures by Type of Expenditure from the Dept. of Commerce, Americans spent $7,385,000M in FY2002. However this number includes imputed consumption of owner-occupied housing, and educational expenses, which totaled $810,000M and $188,000M respectively. This leaves a 'tax base' of $6,376,000M.
$1,218B / $6,376B = 19%
The fairtax also proposes to pay each US citizen with a SSN a monthly tax rebate, of 1/12th the tax rate x the poverty level for their family size, PLUS an adjustment to remove the "marriage penalty". Assuming, conservatively, that 250M people receive the most they can (i.e. they were all single adults), which was about $2000 per year, this is another $500,000M the tax would have to raise.
$1,718B / $6,376B = 27%
Now, I must explain tax-inclusive and tax-exclusive. I don't mean to merely be repetitive here, but I think it needs to be repeated.
Consumers in the US must pay an additional 27% for what they buy. They must spend $8,094B to recieve $6,376B worth of goods and services. This 27% is the tax-exclusive rate, which is the way we are comfortable expressing sales taxes. If I want a $1 candy bar, I must pay $1.27 for it, under fairtax.
To compare this rate to the income tax that it would replace, we must state it as a tax-exclusive rate. In this case it is equal to $1,718B / $8,094B or 21%, which is a few points UNDER what FairTax has predicted. I trust their math better than mine, but I think they are intentionally being conservative. In this case, I must earn $1.27, of which I pay 21%, or $.27 in taxes, before I can buy that $1 candybar.
That is why the 27% sales tax compares to a 21% income tax rate. However, the effective rate is lowered by the prebate, which effectively removes the taxes paid on the necessities of life. This monthly prebate is calculated by taking the poverty level calculated by the USDHHS for each family size, multiplying it by the tax rate (21% by my calculations), and dividing it by 12 for a monthly payment. Fairtax.org calculates this number to be $178/mo for a single person in 2004 in this FAQ. There is also a correction amount to prevent a marriage penalty: a married couple's prebate size is twice a single person's, and increases at the same rate for additional dependents. Administration is simple, as the only information required is SSNs, Married or Single, and a Routing number. Whoever or whatever replaces the IRS would administrate it.
Please restate your final paragraph (not the inflammatory one-liner), as I'm not sure what you're arguing about.
If you are debating whether or not corporations pay taxes, I believe we've covered that. First, more US companies do NOT pay taxes than do. Second, those that do, pay taxes out of revenues at the expense of some combination of profit, wages, investment, or price.
If you are debating whether or not this will lead to increased tax evasion, I offer this FAQ.
QUOTE(SWM28WDC @ Jul 8 2004, 08:05 PM)
That is why the 27% sales tax compares to a 21% income tax rate.
So, if we accept this huge bag of assumptions and simplifications, the "fair tax" is comparable to a 21% income tax. Where does a 21% income tax fit into the grand scheme of things? I suggest you go check the IRS stats to see how many people currently pay 21% or more (total rate, not marginal rate) and how many pay less. I'd certainly make out like a bandit under this system, with my high income, but I'd feel pretty guilty about all those poorer people whose tax bills would increase.
QUOTE
If you are debating whether or not corporations pay taxes, I believe we've covered that.
Yes, we have, and the outcome was not favorable to the "fair tax" proponents.
QUOTE
If you are debating whether or not this will lead to increased tax evasion, I offer this FAQ.
That "answer" in the FAQ is little better than assuming magic will happen. For example, they claim that "the increased fairness, transparency, and legitimacy of the system will induce more compliance" as though tax evaders are interested in fairness or legitimacy. The transparency point hardly counts either, since the "fair tax" leaves corporations with no taxes to evade and thus no need for concealment. They also say "because tax rates decrease, tax evasion is less profitable" but 27% is not a decrease for most people. The whole FAQ is a similar exercise in misinformation. Consider this:
QUOTE
Is the 23% FairTax higher or lower when compared to the income taxes people pay today? Most people are paying that much or more today – much of it is just hidden from view. The income tax bracket most people fall into is 15 percent, and all wage earners pay 7.65 percent in payroll taxes. That’s 23 percent right there, without taking into account the 7.65 percent employer matching! On top of that, you have to add in all of the taxes embedded in the goods you buy (another 20 to 30 percent).
"Tax bracket" refers to marginal, not total rates which are actually lower. Also, payroll taxes max out at a less-than-spectacular income level and "20 to 30 percent" is a gross overestimate of the taxes embedded in other goods (except for a few such as alcohol, tobacco, and gasoline). It's obviously in their interest to exaggerate regarding the taxes people pay now, so of course they do so. Then of course there are the groundless and meritless attempts to associate the "fair tax" with progress:
QUOTE
Cars replaced the horse and buggy, the telephone replaced the telegraph, and the FairTax replaces the income tax.
...
Do women have the right to vote in this country? Did we pass Prohibition? Did we repeal it? Do Blacks enjoy freedoms far beyond the lunch counter and mass transit? Do free-market economies dominate Eastern Europe, peoples once under the boot of communism? All these were grassroots efforts that effected significant changes in our nation and the world. Is the current income tax system any less a yoke around the necks of otherwise free peoples? We think not.
...
Do women have the right to vote in this country? Did we pass Prohibition? Did we repeal it? Do Blacks enjoy freedoms far beyond the lunch counter and mass transit? Do free-market economies dominate Eastern Europe, peoples once under the boot of communism? All these were grassroots efforts that effected significant changes in our nation and the world. Is the current income tax system any less a yoke around the necks of otherwise free peoples? We think not.
Then there are the transparent appeals to authority, claiming a strong basis in economic theory without actually quoting or even paraphrasing so much as one actual economic theorist:
QUOTE
As a wide range of economists agree on the economic expansion the FairTax delivers, charitable contributions benefit also.
...
Even a cursory study of history shows that nation/states that relied on consumption taxes flourished and prospered
...
Even a cursory study of history shows that nation/states that relied on consumption taxes flourished and prospered
One more piece of dishonesty buried in the discussion of charity also deserves mention. Note how they claim there's a charity exemption to mollify people who believe there should be one, but there's no mention of how it is to be administered and it's not factored into their tax-rate calculations. This is classic "have your cake and eat it too" chicanery of the kind Dubya is known for: promise the moon, try to avoid questions about how you'll pay for it, and hope nobody notices the disconnect.
This "fair tax" proposal remains a scam, SWM. I know it sounds good on the surface; the people who put together the site are undoubtedly a lot better at advertising than at policymaking. It doesn't hold up to an informed and rational analysis, though. Don't be taken in by pretty words and empty promises.
[quote]So, if we accept this huge bag of assumptions and simplifications, the "fair tax" is comparable to a 21% income tax.[/quote]
Please back up your statement with relevant facts. You saying something doesn't make it so. You've questioned every fact I've put up here, yet your statements contain none. Please tell me what assumptions and simplifications I've made. I used the numbers right out of the US Gov't websites & reports, and came up with a number very similar to that proposed in the FairTax website. Tear that apart with math if you will, i'd respect that.
[quote]Yes, we have, and the outcome was not favorable to the "fair tax" proponents.[/quote]
By who's estimation? Yours? Mine?
[quote]as though tax evaders are interested in fairness or legitimacy. [/quote]
... Almost 40 percent of the public, according to the IRS, is out of compliance with the present tax system, mostly unintentionally due to the enormous complexity of the present system (from same FAQ)
[quote]The transparency point hardly counts either, since the "fair tax" leaves corporations with no taxes to evade and thus no need for concealment.[/quote]
Corporations are taxed an additional 29% over the price of the goods sold, this is collected at the point of sale in the form of a national sales tax.
[quote]They also say "because tax rates decrease, tax evasion is less profitable" but 27% is not a decrease for most people[/quote] You say 27% is not a decrease, yet in previous posts you claimed there was no way to raise enough money by cutting out corporate income tax and halving taxes on individuals? Which is it?
[quote]The whole FAQ is a similar exercise in misinformation. Consider this:[/quote] and then you go on to quote from the FAQ, but fail to counter meaningfully any points made therein: the fact explicitly says "tax bracket"; payroll taxes do not either "max-out" (Medicare taxes of 2.9% of the employees income must be paid on ALL income) nor is it a "less-than-spectacular income level" when Social Security (12.4%) maxes out...it's $87,900 a year, more than at least 80% of the population makes. In fact, in all but the highest income quintile, payroll taxes are higher than income taxes.
[quote]"20 to 30 percent" is a gross overestimate of the taxes embedded in other goods [/quote] Please provide references to back this statement.
[quote]Then of course there are the groundless and meritless attempts to associate the "fair tax" with progress:[/quote]
The grounds were to provide comparisons of feasibility with other seemingly insurmountable political changes.
[quote]claiming a strong basis in economic theory without actually quoting or even paraphrasing so much as one actual economic theorist:[/quote]
It's a FAQ. Just like anywhere else, if you want details you must look further.
Dale W. Jorgenson, Ph.D., Harvard University
Joseph Kahn, Decisions and Ethics Center, Stanford University
Arthur P. Hall, Ph.D., Senior Economist, The Tax Foundation
Your claiming that there are none is groundless and meritless.
[quote]Note how they claim there's a charity exemption to mollify people who believe there should be one, but there's no mention of how it is to be administered and it's not factored into their tax-rate calculations[/quote]
They never claimed a charity exemption. They claimed "charitable contributions benefit also." Current charitable donation laws rebate the donor at their marginal rate, effectively allowing the donation to be made with pre-income-tax dollars. Under FairTax the donations (and all other purchases) would be made with pre-income AND payroll tax dollars. For further info read this policy paper.
[quote]It doesn't hold up to an informed and rational analysis[/quote]
I would like to hear one, seriously. You use words like " tax-reform scams", "despicable", "high-sounding but ultimately empty rhetoric", "cooked figures". I believe you to be capable of intelligent debate. Show me where the numbers don't add up. Show me where the burden of taxation is moved from and to. The god's honest truth is that I don't think it will change the purchacing power of individual Americans that much. It will lower the cost of government, and lower the cost of compliance with tax laws. It will encourage foreign investment in American workers. It will encourage savings on the part of American citizens.
Please back up your statement with relevant facts. You saying something doesn't make it so. You've questioned every fact I've put up here, yet your statements contain none. Please tell me what assumptions and simplifications I've made. I used the numbers right out of the US Gov't websites & reports, and came up with a number very similar to that proposed in the FairTax website. Tear that apart with math if you will, i'd respect that.
[quote]Yes, we have, and the outcome was not favorable to the "fair tax" proponents.[/quote]
By who's estimation? Yours? Mine?
[quote]as though tax evaders are interested in fairness or legitimacy. [/quote]
... Almost 40 percent of the public, according to the IRS, is out of compliance with the present tax system, mostly unintentionally due to the enormous complexity of the present system (from same FAQ)
[quote]The transparency point hardly counts either, since the "fair tax" leaves corporations with no taxes to evade and thus no need for concealment.[/quote]
Corporations are taxed an additional 29% over the price of the goods sold, this is collected at the point of sale in the form of a national sales tax.
[quote]They also say "because tax rates decrease, tax evasion is less profitable" but 27% is not a decrease for most people[/quote] You say 27% is not a decrease, yet in previous posts you claimed there was no way to raise enough money by cutting out corporate income tax and halving taxes on individuals? Which is it?
[quote]The whole FAQ is a similar exercise in misinformation. Consider this:[/quote] and then you go on to quote from the FAQ, but fail to counter meaningfully any points made therein: the fact explicitly says "tax bracket"; payroll taxes do not either "max-out" (Medicare taxes of 2.9% of the employees income must be paid on ALL income) nor is it a "less-than-spectacular income level" when Social Security (12.4%) maxes out...it's $87,900 a year, more than at least 80% of the population makes. In fact, in all but the highest income quintile, payroll taxes are higher than income taxes.
[quote]"20 to 30 percent" is a gross overestimate of the taxes embedded in other goods [/quote] Please provide references to back this statement.
[quote]Then of course there are the groundless and meritless attempts to associate the "fair tax" with progress:[/quote]
The grounds were to provide comparisons of feasibility with other seemingly insurmountable political changes.
[quote]claiming a strong basis in economic theory without actually quoting or even paraphrasing so much as one actual economic theorist:[/quote]
It's a FAQ. Just like anywhere else, if you want details you must look further.
Dale W. Jorgenson, Ph.D., Harvard University
Joseph Kahn, Decisions and Ethics Center, Stanford University
Arthur P. Hall, Ph.D., Senior Economist, The Tax Foundation
Your claiming that there are none is groundless and meritless.
[quote]Note how they claim there's a charity exemption to mollify people who believe there should be one, but there's no mention of how it is to be administered and it's not factored into their tax-rate calculations[/quote]
They never claimed a charity exemption. They claimed "charitable contributions benefit also." Current charitable donation laws rebate the donor at their marginal rate, effectively allowing the donation to be made with pre-income-tax dollars. Under FairTax the donations (and all other purchases) would be made with pre-income AND payroll tax dollars. For further info read this policy paper.
[quote]It doesn't hold up to an informed and rational analysis[/quote]
I would like to hear one, seriously. You use words like " tax-reform scams", "despicable", "high-sounding but ultimately empty rhetoric", "cooked figures". I believe you to be capable of intelligent debate. Show me where the numbers don't add up. Show me where the burden of taxation is moved from and to. The god's honest truth is that I don't think it will change the purchacing power of individual Americans that much. It will lower the cost of government, and lower the cost of compliance with tax laws. It will encourage foreign investment in American workers. It will encourage savings on the part of American citizens.
[quote=SWM28WDC,Jul 9 2004, 12:29 AM]You've questioned every fact I've put up here, yet your statements contain none.[/quote]
That would be because you're the one making a proposal, and therefore the burden of proof lies with you; opponents are under no particular obligation to introduce additional data except as it suits their purposes for refutation. Nonetheless, and contrary to your claim, I have provided quite a few facts - not numbers, perhaps, but numbers are not the only facts. There have been facts about basic math, the nature of corporate taxation, evasion, etc. For the most part, though, simple analysis using the facts you've provided has been sufficient to make my points.
[quote]Please tell me what assumptions and simplifications I've made.[/quote]
For assumptions try perfect compliance. For simplifications try "forgetting" to account for the cost of a charity "benefit" (oh no, can't call it a deduction). I was agreeing to accept your numbers despite those for the sake of argument, though, so maybe you should take what you can get.
[quote]I used the numbers right out of the US Gov't websites & reports[/quote]
Yes, "it came from the government" always works. Did you know that there are two separate measures of unemployment at BLS, another at census, and at least a couple of others (that I know about) available from government websites? Of course, everyone uses the one that suits their purposes. Why do you (actually fairtaxvolunteer) use personal consumption numbers from Commerce to compare with revenue numbers from IRS, and additionally exclude a trillion dollars without properly justifying the number or explaining why it should not count as income? According to the government numbers you cite, without fiddling or dissembling, the "fair tax" would need to raise $1.2T plus the cost of the prebate, charitable-giving exemptions, and other necessary adjustments - almost double the number actually used - to be revenue-neutral. Yes, fairtaxvolunteer used government numbers...used them like I use a handerchief to blow my nose.
[quote]Yes, we have, and the outcome was not favorable to the "fair tax" proponents.[/quote]
By the fact that my reductio ad absurdum from 8:30am yesterday remains unaddressed. You were the one to claim victory prematurely with "we've already covered that" and yet you're also the one who has left a challenge unanswered.
[quote]... Almost 40 percent of the public, according to the IRS, is out of compliance with the present tax system, mostly unintentionally due to the enormous complexity of the present system (from same FAQ)[/quote]
Note how the 40% figure, and especially the "mostly unintentionally" part, are not backed up by anything. Even if they were correct, those aren't necessarily the people I was talking about. The point remains that people who deliberately evade taxes - whose transgressions are typically greater and add up to the majority of lost revenue - pretty obviously do not care about fairness or legitimacy and will not change their behavior on that account.
[quote]Corporations are taxed an additional 29% over the price of the goods sold, this is collected at the point of sale in the form of a national sales tax.[/quote]
Those taxes are paid by the consumer, not the producer, and so you don't get to credit them twice. You might as well count them several times, and claim that a lower tax rate would suffice, but that might be too easy for people to see through.
[quote]You say 27% is not a decrease, yet in previous posts you claimed there was no way to raise enough money by cutting out corporate income tax and halving taxes on individuals? Which is it?[/quote]
Basic math strikes again: this time it's the difference between average and median. Most people are taxed at less than 27% (addressing the median) but most dollars are taxed at more (addressing the average). There's no contradiction there.
[quote]then you go on to quote from the FAQ, but fail to counter meaningfully any points made therein[/quote]
I had already done that; the latter part of my post was meant to highlight the "selling not telling" nature of the marketing copy put out by fairtaxvolunteer. Do I have your permission to make that point? I happen to think it's pretty topical, but this wouldn't be the first time I had been held to a unique standard on this site.
[quote]nor is it a "less-than-spectacular income level" when Social Security (12.4%) maxes out...it's $87,900 a year, more than at least 80% of the population makes.[/quote]
Is that a decent income? Yes. Is it a stellar income? No. More importantly, when you consider how far many incomes extend above that line (there's that average vs. median thing again) it turns out that a great deal of income is exempt. What percentage of Bill Gates's income is subject to social security taxes, for example? How many median incomes does that balance out? I will concede, though, that for the Average Joe the full figure does apply.
[quote][quote]"20 to 30 percent" is a gross overestimate of the taxes embedded in other goods [/quote] Please provide references to back this statement. [/quote]
No, it's your claim (by proxy). You back up the number.
[quote]It's a FAQ. Just like anywhere else, if you want details you must look further.
Dale W. Jorgenson, Ph.D., Harvard University
Joseph Kahn, Decisions and Ethics Center, Stanford University
Arthur P. Hall, Ph.D., Senior Economist, The Tax Foundation
Your claiming that there are none is groundless and meritless.[/quote]
Imitation ("groundless and meritless") is the sincerest form of flattery. Yes, we all know that if you round up a hundred economists you'll probably get two hundred opinions. Some people around here continually repeat the most amazing nonsense that they got from some laissez-tricher economist or other. The question is not whether you can dig up a few outliers, but what the consensus would be and whether the rationales they can provide stand up to scrutiny. No attempt has been made to meet that challenge; all we have instead is appeal to (dubious) authority.
One of the things I occasionally do IRL is technical "due diligence" on business plans. That entails making sure that the numbers add up, that the capability claims are credible, that references to protocols and algorithms are valid and appropriate, etc. It does not entail me constructing a detailed counterproposal; as I've pointed out, the burden of proof remains with those making a proposal. If I ever saw a proposal where the numbers had been cooked this badly, where the signal to noise ratio (where signal is verifiable facts and noise is buzzwords and such) was this low, my recommendation to investors would not be to forget it. I would recommend that they remember it, so they could preemptively deny consideration to the authors in the future and not have to waste their time or mine with further analysis. That's how bad it is. So I've thrown in a few choice words - directed at the original authors, not you. Boo hoo. I have also, whether you like it or not, tried to address directly several of the more glaring flaws in the proposal, and that's more than such a proposal deserves.
That would be because you're the one making a proposal, and therefore the burden of proof lies with you; opponents are under no particular obligation to introduce additional data except as it suits their purposes for refutation. Nonetheless, and contrary to your claim, I have provided quite a few facts - not numbers, perhaps, but numbers are not the only facts. There have been facts about basic math, the nature of corporate taxation, evasion, etc. For the most part, though, simple analysis using the facts you've provided has been sufficient to make my points.
[quote]Please tell me what assumptions and simplifications I've made.[/quote]
For assumptions try perfect compliance. For simplifications try "forgetting" to account for the cost of a charity "benefit" (oh no, can't call it a deduction). I was agreeing to accept your numbers despite those for the sake of argument, though, so maybe you should take what you can get.
[quote]I used the numbers right out of the US Gov't websites & reports[/quote]
Yes, "it came from the government" always works. Did you know that there are two separate measures of unemployment at BLS, another at census, and at least a couple of others (that I know about) available from government websites? Of course, everyone uses the one that suits their purposes. Why do you (actually fairtaxvolunteer) use personal consumption numbers from Commerce to compare with revenue numbers from IRS, and additionally exclude a trillion dollars without properly justifying the number or explaining why it should not count as income? According to the government numbers you cite, without fiddling or dissembling, the "fair tax" would need to raise $1.2T plus the cost of the prebate, charitable-giving exemptions, and other necessary adjustments - almost double the number actually used - to be revenue-neutral. Yes, fairtaxvolunteer used government numbers...used them like I use a handerchief to blow my nose.
[quote]Yes, we have, and the outcome was not favorable to the "fair tax" proponents.[/quote]
By the fact that my reductio ad absurdum from 8:30am yesterday remains unaddressed. You were the one to claim victory prematurely with "we've already covered that" and yet you're also the one who has left a challenge unanswered.
[quote]... Almost 40 percent of the public, according to the IRS, is out of compliance with the present tax system, mostly unintentionally due to the enormous complexity of the present system (from same FAQ)[/quote]
Note how the 40% figure, and especially the "mostly unintentionally" part, are not backed up by anything. Even if they were correct, those aren't necessarily the people I was talking about. The point remains that people who deliberately evade taxes - whose transgressions are typically greater and add up to the majority of lost revenue - pretty obviously do not care about fairness or legitimacy and will not change their behavior on that account.
[quote]Corporations are taxed an additional 29% over the price of the goods sold, this is collected at the point of sale in the form of a national sales tax.[/quote]
Those taxes are paid by the consumer, not the producer, and so you don't get to credit them twice. You might as well count them several times, and claim that a lower tax rate would suffice, but that might be too easy for people to see through.
[quote]You say 27% is not a decrease, yet in previous posts you claimed there was no way to raise enough money by cutting out corporate income tax and halving taxes on individuals? Which is it?[/quote]
Basic math strikes again: this time it's the difference between average and median. Most people are taxed at less than 27% (addressing the median) but most dollars are taxed at more (addressing the average). There's no contradiction there.
[quote]then you go on to quote from the FAQ, but fail to counter meaningfully any points made therein[/quote]
I had already done that; the latter part of my post was meant to highlight the "selling not telling" nature of the marketing copy put out by fairtaxvolunteer. Do I have your permission to make that point? I happen to think it's pretty topical, but this wouldn't be the first time I had been held to a unique standard on this site.
[quote]nor is it a "less-than-spectacular income level" when Social Security (12.4%) maxes out...it's $87,900 a year, more than at least 80% of the population makes.[/quote]
Is that a decent income? Yes. Is it a stellar income? No. More importantly, when you consider how far many incomes extend above that line (there's that average vs. median thing again) it turns out that a great deal of income is exempt. What percentage of Bill Gates's income is subject to social security taxes, for example? How many median incomes does that balance out? I will concede, though, that for the Average Joe the full figure does apply.
[quote][quote]"20 to 30 percent" is a gross overestimate of the taxes embedded in other goods [/quote] Please provide references to back this statement. [/quote]
No, it's your claim (by proxy). You back up the number.
[quote]It's a FAQ. Just like anywhere else, if you want details you must look further.
Dale W. Jorgenson, Ph.D., Harvard University
Joseph Kahn, Decisions and Ethics Center, Stanford University
Arthur P. Hall, Ph.D., Senior Economist, The Tax Foundation
Your claiming that there are none is groundless and meritless.[/quote]
Imitation ("groundless and meritless") is the sincerest form of flattery. Yes, we all know that if you round up a hundred economists you'll probably get two hundred opinions. Some people around here continually repeat the most amazing nonsense that they got from some laissez-tricher economist or other. The question is not whether you can dig up a few outliers, but what the consensus would be and whether the rationales they can provide stand up to scrutiny. No attempt has been made to meet that challenge; all we have instead is appeal to (dubious) authority.
One of the things I occasionally do IRL is technical "due diligence" on business plans. That entails making sure that the numbers add up, that the capability claims are credible, that references to protocols and algorithms are valid and appropriate, etc. It does not entail me constructing a detailed counterproposal; as I've pointed out, the burden of proof remains with those making a proposal. If I ever saw a proposal where the numbers had been cooked this badly, where the signal to noise ratio (where signal is verifiable facts and noise is buzzwords and such) was this low, my recommendation to investors would not be to forget it. I would recommend that they remember it, so they could preemptively deny consideration to the authors in the future and not have to waste their time or mine with further analysis. That's how bad it is. So I've thrown in a few choice words - directed at the original authors, not you. Boo hoo. I have also, whether you like it or not, tried to address directly several of the more glaring flaws in the proposal, and that's more than such a proposal deserves.
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