First off, FairTax was created by Tom Cruise’s wacky scientologists.
For those who never heard about it, the FairTax is a national retail sales tax that would replace the entire current federal tax system. It was originally devised by the Church of Scientology in the early 1990s as a way to get rid of the Internal Revenue Service, with which the church was then at war (at the time the IRS refused to recognize it as a legitimate religion). The Scientologists’ idea was that since almost all states have sales taxes, replacing federal taxes with the same sort of tax would allow them to collect the federal government’s revenue and thereby get rid of their hated enemy, the IRS.
The FairTax is a shell game tax hike.
Boortz and Linder contend that actual consumer prices would not rise under the NRST, but regardless, their proposed “tax-inclusive rate” is a 30 percent sales tax as most Americans understand it. But even this 30 percent number probably underestimates what Boortz and Linder’s proposal would entail. In fact, in order to meet their requirements, the effective tax rate could be as high as an astonishing 56 percent (tax-exclusive).
“Conservatives on the other hand, see problems and think about how we should fix them. That doesn’t say we’ve got all the answers or that all the solutions will work - but it’s more than just throwing your hands up in the air and saying “tax happens”" … or so a wise man once said.
Thought I’d share this with you guys. I don’t get over here to read you as much as I ought to Oliver, but I know you’re one of the good guys.
Here’s something of mine that seems to be a rather big hit today. It’s something I know you guys would get a kick out of.
How to get a Republican Horny:
http://thetimtimes.com/?p=108
http://www.flickr.com/photos/timtimes/1277152453/
It bothers me to see a guy as smart as Bruce Bartlett engaging in such fallacies like bringing Scientologists into the equation as though they were the architects of the national sales tax. It’s especially ironic considering that he favored a consumption tax in this piece he wrote in 2002.
The sales tax or Fairtax is a good first step in creating a discussion to overhaul our current tax system which is simply a mess, instead of tweaking it and adding to the mess with more and more credits and deductions.
What kills me is how liberals, who are forever railing about “the rich”, dismiss the notion of a consumption or sales tax in any form despite the fact that rich people consume far more in resources than anybody else (land, fuel, goods, services, etc).
Liberals love to rail about corporate welfare, but is the current tax structure that allows such welfare to be inserted into bills quite easily creating tax loopholes and write-offs that make no sense.
Why are Democrats afraid of this discussion?
Fair my ass. This is a regressive nightmare which will destroy the middle class once and for all. Why do these zipwads hate the middle class so much?
Why are Democrats afraid of this discussion?
(We’ll ignore the fact theat Mr. Bartlett is NOT a Democrat and proceed anyway.)
Who said anything about being afraid? The “Fair Tax” is usually dishonestly presented and its flaws glossed over by its proponents.
Tax reform? Sure, let’s talk. Phony solutions that won’t work? Don’t waste our time.
You had me at “Boortz and Linder contend…”
A national sales tax would hit the poor disproportionally, which is probably why Republicans like it so much.
“What kills me is how liberals, who are forever railing about “the rich”, dismiss the notion of a consumption or sales tax in any form despite the fact that rich people consume far more in resources than anybody else (land, fuel, goods, services, etc).”
They consume less as a percentage of their wealth. Therefore, they would be hit less.
“Why are Democrats afraid of this discussion?”
Why are you so fucking stupid?
We are discussing it. It doesn’t take a long discussion to conclude this is a bad proposal system.
Actually, there is a consideration here that people are not taking into account.
Yes, a consumption tax would hit the poor disproportionately. That is a direct hit.
But there is also an indirect cost to the poor as well.
The vast majority of charitable contributions occur as a result of the tax deductions that result from the contribution. Rich people plan for charitable contributions in their testamentary documents, as well as annually contribute millions to charities that pick up the slack in providing services to the poor, elderly etc. that government fails to.
Switching to a consumption tax/national sales tax would not only hit the poor directly, but will also virtually destroy the network of charities throughout the country, both because funds will dry up, but also because (with no IRS to make rulings) practically eliminate the difference between businesses and charities/non-profits.
They consume less as a percentage of their wealth. Therefore, they would be hit less.
That’s the most idiotic thing I have ever read. They have more. Therefore, they will consume more. As such, they will pay more. It doesn’t matter what percentage it is of their wealth.
You type something that dumb and you have the balls to call me stupid?
Quaker, when was the last time any prominent Democrat proposed major tax reform? Any reform that is proposed is merely attacked. I have never seen any alternatives. I’m prepared to discuss the issue. Do you have any ideas?
Would the fair tax include stocks, bonds, mutual funds, investment real estate and other investment instruments that rich people like to purchase with their excess earnings?
Why are Democrats afraid of this discussion?
Why are Republicans so delusional that they think people are “afraid” of anything they think is stupid? We’re “afraid” of Fred Thompson. We’re “afraid” of the surge. We’re “afraid” of the Fair Tax.
I’m afraid you’re getting a bit boring, Jay.
Why are Republicans so delusional that they think people are “afraid” of anything they think is stupid?
So you think tax reform is stupid. Wonderful.
Wow, Jay. Doesn’t look to me like he’s saying tax reform is stupid. I guess you need to hone your reading comprehension skills.
At the same time, how the fuck is the Fair Tax fair? On it’s own, it’s totally regressive. Take the example Bartlett uses : If the Fair tax adds .30 to an item that costs $1, a person with $2 to spend is going to feel that tax more than a person with $10 to spend.
Bartlett makes this point exactly but Jay comes back with this stupidity: “rich people consume far more in resources than anybody else (land, fuel, goods, services, etc).”
Um, doofus, that doesn’t make land, fuel, goods and services with a sales tax tacked on any less expensive for poor people proportional to their income.
What a moron.
So you think tax reform is stupid.
Yes, Jay, that’s exactly what I said. Did you get that bike for your 12th birthday this weekend like you had been asking for? The one without the training wheels?
I continually wonder if Jay just pretends to be this stupid for the sake of squeezing the v1.0 wingnut talking points out, or if he really is that stupid.
Yes, in this unfair “Fair Tax” in absolute numbners a rich person buying a yacht will pay more in tax than a poor person buying a new water heater to replace the rusted out one in their basement.
But in the case of the rich person, they will STILL have cash left over from the purchase they CHOSE to make with DISPOSABLE INCOME, while the poor schmuck will now have to decide whether to pay the gas bill or his kid’s doctor bill this month, because with the tax on the necessity he HAD to buy, he now can’t afford both.
Nice try, Rheinhard, but you know that Jay will just read as far as the second paragraph, say to himself “See, I was right,” and then stop reading.
To the simple-minded. the world really is that simple.
What would this so-called Fair Tax do to McDonald’s Dollar Menu? That is where it will impact the most lower-income Americans.
Tax reform=good. Across-the-board-dumbass-ideas=not so much.
Quaker, when was the last time any prominent Democrat proposed major tax reform?
Beats me.
When was the last time any Republican proposed tax reform that wasn’t a load of snake oil?
Keep in mind that the same people who are pushing a 30 percent (or more) increase in the cost of everything are the same people who wail about the inflationary effect of raising the minimum wage.
When you get beyond Bartlett’s account of the Scientology link, he’s dead on about the flaws in the so-called Fair Tax.
“Tax reform=good. Across-the-board-dumbass-ideas=not so much.”
I think this just about sums it up. I wonder if there’s some larger generalization to draw from this?
Liberals believe this:
Finding Workable Solutions to Problems = Good
Conservatives believe this:
Across-the-board-dumbass-ideas=EFFING GO FOR IT.
How else does one explain
The Fair Tax, Iraq, Massive and Unaccountable Government Eavesdropping, Open Ended Detention in Guantanamo, Social Security “Reform,” etc. etc.
August, I just pulled that accusation that you think tax reform is stupid out of my ass. I figured since that’s what idiots like Frameone do all the time, that it was acceptable practice around here.
Yes, in this unfair “Fair Tax” in absolute numbners a rich person buying a yacht will pay more in tax than a poor person buying a new water heater to replace the rusted out one in their basement.
Well that’s based upon the Fair Tax. I don’t necessarily support the Fair Tax. However, I do support a consumption tax, which by the way, can be made progressive, contrary to the rantings of a complete and total dumbass like Frameone.
Jesus, Jay, if you don’t support a Fair tax why the fuck would you suggest that it’s “a good first step in creating a discussion to overhaul our current tax system”?
How Socratic of you. What an idiot.
How about just saying: I don’t support the “fair tax” because it’s regressive unlike a consumption tax which can be made progressive?
Of course, you’re sort of well versed in changing horses mid-stream, aren’t ya?
But since you’ve brought it up, how does one make a consumption tax progressive?
Me: “They consume less as a percentage of their wealth. Therefore, they would be hit less.”
Jay: “That’s the most idiotic thing I have ever read.”
You are too fucking stupid to figure out if something is smart or not, so your opinion in meaningless.
Poor people spend more as a percentage of their income, therefore a consumption tax would hit them harder.
Right now the tax system is more or less balances:
http://media3.washingtonpost.com/wp-dyn/content/graphic/2007/04/13/GR2007041301521.gif
You want it so the poor would pay a higher percentage of their income as a tax than the rich do. That would hurt the economy, something the right always bitches about when it comes to taxes.
August: “Why are Republicans so delusional that they think people are “afraid” of anything they think is stupid?”
Jay: “So you think tax reform is stupid. Wonderful.”
Shut the fuck up, you ignorant piece of shit. You have lost any right to be heard in this debate, because you are either completely fucking stupid, or so intellectually dishonest that your opinions are meaningless.
Shut the fuck up, you ignorant piece of shit.
Oooh. You must get such a rise talking so tough in the comments section of a blog!
However, I do support a consumption tax,
In addition to, or in place of, the current income tax?
Jay is inherently ignorant.
But a progressive consumption tax might be a good idea. It would actually produce the desired result of rewarding people for saving.
But you have to understand the Repugs would never go for this as their true aim is a free ride for the wealthiest.
I should add a progressive consumption tax would be pretty tough to monitor accurately.
In addition to, or in place of, the current income tax?
In place of. I think the entire current tax code needs to be scrapped.
The way you can make it progressive is by levying the tax on total consumption, rather than individual purchases. People would calculate their total income, subtract their total savings and pay taxes on the difference. The first $20-$25K of consumption would be tax-free (allowing for lower income people to not have to worry about taxes on things like food, clothing and other necessities), and from there the tax rates would be progressive rather than flat. The more you spent and the less you saved, the higher your tax rate would be.
“They consume less as a percentage of their wealth. Therefore, they would be hit less.”
That’s the most idiotic thing I have ever read. They have more. Therefore, they will consume more. As such, they will pay more. It doesn’t matter what percentage it is of their wealth.
Jay, you are possibly the stupidest human on the face of the planet. Anyone who would say what you said above is unable to comprehend anything at all. I though of explaining why the statement you decry as “stupid” is actually true, but you’re too stupid to understand it. Of course, you’ve demonstrated that idiocy over and over, but I kept thinking you were amenable to reason. I now realize that you are incapable of understanding anything. I’ve never seen a better example than you of the old saying, “Often wrong, but never uncertain.” You’re also an asshole, as so many stupid but certain people are.
Mike - Another Internet tough guy.
Yawn.
Reasons a move to a consumption tax is a stupid idea
- No mortgage tax deduction: Watch the housing market implode.
- Consumer economy is 2/3 of the economy, add a 30% tax and watch it stop. Don’t forget the state taxes aren’t going away. Expect a huge black market.
-Most Americans would pay more tax under a flat tax (I’m not calling it a fair tax, it’s not).
-It isn’t equal tax for everyone. The poor and middle class spend more than they make (that’s why they are poor) and will pay a great proportion of their income to a flat tax.
-Any “savings” from eliminating the IRS will be countered by trying to counter the black market.
-Tariffs will have to be increased to make up for the lost revenue, as everybody travelling abroad will load up their luggage with foreign goods. Which of course contravenes trade agreements.
Only two types of people think the flat tax has merit: Multimillionaires and morons.
Take a guess what category Jay is in.
Apparently, Enlightened Liberal goes to the same School of Stupid that Frameone attends because he’s just as fucking dumb as his cohort.
For those that can actually read, I am not an advocate for a flat tax.
I mean, really. Were you dropped often as a baby or is it just an act?
I’m guessing some of the braniacs here have never heard of the term compromise.
For what it’s worth, I think Jay’s skeletal idea for a new tax system (e.g., the progressive consumption tax) is something worth thinking about. It’s certainly more interesting and seemingly fair than a strict flat tax or blanket consumption tax.
Not that I want to douse the flames of anger that are licking up the sides of this comments section…
Being called dumb by jay is like being called unethical by Tom Delay. And it seems like Gravypan is cut from the same cloth. You folks get shrill when you’re in the minority.
By the way, still waiting for you to prove that more people were in poverty after 10 years of the Great Society. Chop chop zippy.
“Oooh. You must get such a rise talking so tough in the comments section of a blog!”
Do you get a rise acting so ignorant? Or is it not an act? Are you truly this stupid?
“Mike - Another Internet tough guy.
Yawn.”
Why are you here? You obviously have nothing to add to this debate, so why post?
Jay, how deep do you plan on digging that hole for yourself, exactly?
I just hope it’s deep enough that we don’t hear your drivel anymore…
“I’m guessing some of the braniacs here have never heard of the term compromise.”
Unfortunately, that seems like the s one thing the Democrats are good at, comprising.
But sometimes you need to stick to your guns cause the other side is wrong.
“Can you say, ‘hit piece,’ Mr. Bartlett?” According to Bruce Bartlett’s WSJ article:
BB (hereinafter meaning Bruce Bartlett, with apologies to a true great, BB King): “It was originally devised by the Church of Scientology in the early 1990s as a way to get rid of the Internal Revenue Service”
Me: This seems like a scientific approach to the review of FairTax; Scientologists are kooks, the FairTax must be a kooky idea.
BB: “In reality, the FairTax rate is not 23%. Messrs. Linder and Chambliss get this figure by calculating the tax as if it were already incorporated into the price of goods and services. (This is known as the tax-inclusive rate.)”
Me: Hmmm, I wonder what income tax rates begin to look like, if calculated, “externally” - as a percentage of what’s left of taxpayers’ income? Care to tell us THAT, BB?
BB: “This is only the beginning of the deceptions in the FairTax.”
Me: Oh, like their website, FairTax.org, hasn’t already thoroughly debunked most of these “straw men” that have been floated (all, that is, except this newest Scientology angle - and I doubt that they’ll spend much time on that one - preposterous).
BB: “the federal government would have to pay taxes to itself”
Me: The idea here is to prevent government from competing with the private sector. But why even mention this, when later you say, “but its tax collection will also be … higher.”
BB: “The FairTax rate, however, is not high enough to finance the higher spending it imposes.”
Me: Didn’t do your research: “…The Beacon Hill Institute at Suffolk University and Laurence Kotlikoff, Professor of Economics at Boston University, have teamed up to provide a sound methodology for estimating the FairTax base and computing the FairTax rate. Their paper demonstrates that the 23 percent rate specified by the Fair Tax Act (HR 25) is eminently feasible and suggests what led Gale and the President’s Advisory Panel on Federal Tax Reform6 to reach the opposite – and incorrect – conclusion. (See Paper )” See also: Tax Panel rebuttal + Wm Gale rebuttal
BB: (Regarding the blanket 30% increase attributed in multiple places in your article, “tanks,” “newly-constructed homes,” the added amount that would be paid by “state and local governments.”)
Me: Nowhere do you point out the price efficiencies that would be gained under FairTax. Kotlikoff and associates found that these ranged from 20% - 30%, and averaged them to 22% across the economy. Thus, we’re ALREADY PAYING an embedded 22% in our retail prices. If you believe in market competition (do you?), then you must allow for the elimination of these embedded taxes - which means relative price stability (due to lower costs of doing business - for every business entity contributing at every stage of production). Thus, representing an add-on of 30% is blatant demogoguery.
BB: “Aside from the incredible complexity and intrusiveness of tracking every American’s monthly income — and creating a de facto national welfare program — the FairTax does not include the cost of this rebate in the tax rate.”
Me: The only purpose for tracking income, is for social security payouts. That “incredible complexity and intrusiveness of tracing every American’s … income” - last time I checked - is what the current income tax system, and theIRS, are all about. FairTax bases “prebates” on family size. Prebates are sent to ALL American families to untax the necessities, thus eliminating wasteful bureaucracy,and corruption-producing tax code rules and regulations.
BB: “the FairTax does not include the cost of this rebate in the tax rate.”
Me: Somebody told ya wrong - like Prego spaghetti sauce, “It’s in deah.” That extra 5% you then introduce is the amount that Kotlikoff DEDUCTS from the 23% to derive the rate sans prebate.
BB: “Rejecting all the tricks of FairTax supporters…”
Me: Hey, you calling me a trickster?
BB: “…professional revenue estimators have always concluded that a national retail sales tax would have to be much, much higher than 23%.”
Me: Then, why hasn’t William Gale, and the president’s Tax Panel, delivered their economic methodology (substantiating higher quoted tax rates) to Kotlikoff or FairTax.org? Hmmm?
BB: “Perhaps the biggest deception in the FairTax, however, is its promise to relieve individuals from having to file income tax returns, keep extensive financial records and potentially suffer audits.”
Me: Huh? What’s to deceive? Individuals do not file income tax returns. Businesses don’t either; businesses will file basically an expanded state sales tax return. Individuals would keep financial records, but not for the purposes of filing a return. And working families would not be subject to audit unless they ran a business.
BB: “the idea of making April 15 just another day, this seems to be a major selling point for their proposal”
Me: Duh. Like that’s bad to get out from under the thumb of an intrusive government that has been proven arbitrary in the manner in which it administers the current tax code?
BB: “In short, the FairTax is too good to be true, and voters should not take seriously any candidate who supports it.”
Me: Sorry, BB. Your commentary is too bad to be credible. Next time, at least familiarize yourself with the research and rebuttals to the demogoguery that is sure to assail it.
Readers should expect these assaults on FairTax to increase as this eminently workable - in fact, URGENTLY REQUIRED - tax plan gains adherents.
FairTax on the Web - August 31, 2007
we live in a world where multi-millionaires such as Leona Helmsley leave $12 million to their friggin pets and paris hilton is sitting on several million. how can anyone seriously argue against the inheritance tax?
You obviously have nothing to add to this debate, so why post?
Actually, I added quite a bit. I’ll repeat what I wrote. Maybe you can respond or comment:
I think the entire current tax code needs to be scrapped.
The way you can make it progressive is by levying the tax on total consumption, rather than individual purchases. People would calculate their total income, subtract their total savings and pay taxes on the difference. The first $20-$25K of consumption would be tax-free (allowing for lower income people to not have to worry about taxes on things like food, clothing and other necessities), and from there the tax rates would be progressive rather than flat. The more you spent and the less you saved, the higher your tax rate would be.
Now, would you care to comment on that or are you and the others just more content to hurl insults?
incredibly vague jay. what exactly is considered “consumption” and by whom? who will be tracking this “consumption?”
Too bad the threads here too often morph into name calling. Many people would like to see the IRS and it’s requirements (giveaways) disappear.
Most of the alternative proposals being put out there create as many and likely more divisive problems than what we currently have.
A system is needed that addresses all 3 levels of taxation (federal, state and local) rolling them into one.
I know many here don’t like Ron Paul, but it is this issue and his non-interventionalist policies that allow me to overlook his other shortcomings.
There are no answers in the current political make-up. It’s going to take someone like Paul, with overwhelming public support, to even allow any chance to improve the situation. There will be a lot of maney and entrenched interests working against significant change.
chum, I don’t know if I agree that change is needed, at least in the way taxes are collected. This whole argument comes down to “I don’t want to do IRS forms”. Of course to people like Steve Forbes, who would save millions annually, it is something else entirely.
Good question Brif. I saw something on a website that described it like this:
“One way to think of a consumption-tax system is simply as an income tax that allows unlimited deductions for savings and that taxes all withdrawals from savings, much like independent retirement accounts (IRAs).”
By no means, is the IRS going to go away with new tax laws in place. The system would however, encourage saving which our current tax system does not. In addition, it is more than just “IRS forms.” People with lower incomes often qualify for credits and refunds they are not aware of and are content to send the 1040-EZ form, and shy away from the 1040 because there’s too much to do. Tax preparation has become a billion dollar industry in this country, and what drives it is the complexity of the tax code.
let me understand what you’re proposing jay. you want to replace our current income tax system with a tax solely on income? yeah you can say you’re really taxing “consumption,” but the basis for your tax system by your own description is still income. that kind of a system is way more regressive than what we have now.
Personally, I think it is pointless “debating” Jay until he can show that he understands what marginal income is and how it affects tax policy.
et me understand what you’re proposing jay. you want to replace our current income tax system with a tax solely on income?
No. It is taxes based on consumption - ie, spending.
And it is only regressive it the tax is at one level (ie flat). This wouldn’t be, because it is based on how much you spend and also exempts the first $20-$25K of those expenditures.
A system is needed that addresses all 3 levels of taxation (federal, state and local) rolling them into one.
Federalism? Bah!
no jay, the system as you describe is too vague to be a “consumption” tax. you still haven’t described what exactly constitutes “consumption.” most recently you mention taxing withdrawals from “savings.” what do you mean by “savings?” are you honestly proposing that the government monitors my bank account for every withdrawal that i make?
Brif, consumption = spending.
At the end of the year, you take your total income, subtract what you have saved and pay tax on the difference. By exempting the first $25,000, you help lower and middle income families whose consumption (ie spending) each year is dominated more by necessities such as food, housing, clothing, etc. At that point is where the progressivism kicks in. The more you spend and the less you saved, the higher your tax rate would be.
The devil of course, is in the details, but that’s an overall view of it.
Soooooo, when the rich person gets to the cash register the cashier will carefully analyze the amount of purchases over the year and assess the proper tax?
Or will everyone get ripped off all year and you will file a tax form to get a rebate? Oh Noes! Here comes the IRS!!!
And in this scheme, capital gains escape any form of taxation. Which will destroy the middle class, because the tax revenue will have to be made up by— guess who! The people who consume all of their income (or more)!
“At the end of the year, you take your total income…”
then it is a tax based on income, you just said so.
based on the system you describe, the middle class would get hammered by taxes because by far their biggest expense is housing.
Brif, the New American Foundation has a lot of information about the consumption tax. Take a look.
then it is a tax based on income, you just said so.
No, it is not. You took one portion of what I wrote and left the rest out!
based on the system you describe, the middle class would get hammered by taxes because by far their biggest expense is housing.
You’re really not paying attention. I said more than once that the first say, $25,000 of expenditures would be exempt. That would for the most part, cover housing, clothing and food for middle and lower income families.
Let’s do it with numbers. Joe Blow makes $50,000 last year. Of that $50,000, let’s say he saved $5000. That means he would have spent $45,000. Now, let’s also say that $12,000 of that was for rent. He spent $9000 on food, and another $2000 on clothes. That $23,000 would get deducted from that $45,000, leaving $22,000 worth of expenditures that would be taxed. These aren’t hard figures, but you’re apparently not misunderstanding the process.
“Joe Blow makes $50,000 last year. Of that $50,000, let’s say he saved $5000. That means he would have spent $45,000.”
uh, jay, if joe blow saved $5000 and spent $45000, he wouldn’t have any money left to pay his taxes.
Now that we’ve got off to “a good first step in creating a discussion to overhaul our current tax system” by way of the rejecting out right the Fair Tax, I’d suggest this is also an interesting take on the consumption tax:
http://www.mises.org/story/1768
What’s the response?
At the same time, I don’t see how a consumption tax in any represents a simplification of the tax system. Seems just as much paperwork and calculations would have to be done to figure out what one owes.
And how does one grow the economy by encouraging savings and discouraging spending? I understand that higher savings rates mean more money for investment but if people are saving more, that means they’re spending less. How does less spending grow the economy?
It’s amazing to me to see thousands of bits expressed one way and the other in a argument over something NEITHER SIDE has bothered looking at or understanding.
Then, when one commenter puts something logically and factually based out there (thanks, Ian) it’s totally ignored?
The FairTax is fair to everyone, every time.
Normal sales taxed based consumption taxes are regressive, it’s true. However, typically NRST (national retail sales tax) plans do not include any sort of “de-taxation”, because of the near impossibilty of figuring need based relief on a case by case basis. The result then, is a piecemeal de-taxing of certain items based on which industry can get the most leverage in DC, and who can scream their product is ‘a necessity’ the loudest.
The FairTax doesn’t try to dictate what is a necessity, it doesn’t care what you spend you money on. It only untaxes every nickel spent up to the national poverty level, with a pre-funded tax rebate (also called the “prebate”).
Every ’single’ person gets the same tax relief, regardless of income, race, sex, or location. Every married couple gets the same tax relief, every time, every situation. Every single parent with one kid gets the same relief.
What could possibly be more ‘fair’?
Taxation based on consumption, which is somewhat dictated by wealth and income… relief based on merely existing.
http://www.fairtax.org
http://www.fairtaxgroups.com
“And how does one grow the economy by encouraging savings and discouraging spending? I understand that higher savings rates mean more money for investment but if people are saving more, that means they’re spending less. How does less spending grow the economy?”
I suppose that depends on how you define ‘grow the economy’.
The more you save, the more you invest (or the more your bank has to loan). Your investments and your bank’s loans allow businesses the financial ability to start and grow. Larger businesses hire more people. More businesses compete for employees and raise wages.
More employees making more money…..that’s economic growth.
Most people are going to spend that more money eventually, and also economic growth.
What are you going to do about Social Security and Medicare (16%)?
“Actually, I added quite a bit.”
Not any more.
“Now, would you care to comment on that or are you and the others just more content to hurl insults?”
So you think income tax is too complex, but you like the simplicity of your plan.
“At the same time, I don’t see how a consumption tax in any represents a simplification of the tax system. Seems just as much paperwork and calculations would have to be done to figure out what one owes.”
At a personal level:
Right now you work all year and your employer takes the fedral government’s cut before they even write your check. Then, in April you get to spend a couple hours to a few days and several dollars trying to figure out how much of your money you should tell the federal government they should give you back. or, you ge to spend time and money figuring out how much more you owe them.
Under the FT, all of that goes away. You submit a form that tells the SSA that you are a ’single’, and you’re done. Everytime you spend a dollar, the store sends 23 cents to the government for you.
At a business level:
You run your business all year scared you might accidentally break some rule buried in 70,000 pages of tax law. Everytime you hire an employee you have to pay the federal government 7.65% of his salary out of your pocket just for the pleasure of hiring him. You probably even get to pay a tax accountant and/or a tax lawyer to make sure you don’t screw up somewhere. You also have to pay taxes on the profits your company makes, and you have to be careful not to make too much money, otherwise you’ll face a windfall profits tax.
Under the FT, all of that goes away. If you sell retail goods or services, you remit 22.75% of your total sales to the taxing authority in your state. You get to keep that .25% for your troubles.
Both situations sound pretty simple to me.
“The FairTax is fair to everyone, every time.”
Not even close.
The less income you have the more you consume as a percentage of that income.
Also, the more income you have the less it would affect you if you have to pay a certain percentage of that income in taxes.
Therefore, if you want to raise money without harming the economy, you need a progressive tax plan, like the current income tax system.
You don’t need to rebuild it, just modify it slightly and make it more simpler.
For instance, make all forms of income taxable as income. This would include wages, inheritance, investments, etc.
“Both situations sound pretty simple to me.”
It’s simple alright, poor and middle class people will have to pay a lot more in taxes meaning they won’t spend as much meaning the economy will grind to a halt. Meanwhile, rich people will be able to buy their stuff overseas, therefore avoiding the tax altogether.
“What are you going to do about Social Security and Medicare (16%)?”
The programs stay in place, the method of funding changes.
Your paycheck will no longer reflect a 7.65% deduction for SSA and Medicare, youu employer will no longer have the burden of matching those taxes, and will have an extra 7.65% in his budget to spend on salaries, instead of taxes for the privledge of having employees.
DO NOT MISUNDERSTAND ME!!
The programs do not go away. HR25 has nothing to do with SSA or medicare/caid. The Ft merely throws away all the piecemeal methods of taxation (business taxes, income taxes, profit taxes, estate taxes, capital gains taxes, payroll taxes, etc) and replaces them dollar for dollar with a 23% tax on ever dollar spent at the retail level.
“The less income you have the more you consume as a percentage of that income.”
Yes, certianly. So this would harm someone who spends 100% of his income, right?
Wrong
If a person at the poverty level spent every dime he made in income, he wouldn’t pay a cent in taxes.
Let’s put some real numbers in this discussion.
Adam makes $10,000 a year….he’s basically dirt poor and just barely scraping by.
Under the FT he’ll pay 23% of that $10,000 in federal taxes or $2300 for the year.
Under the FT, he’ll receive a $196 monthly check that eliminates taxes up to the poverty level…those checks total $2348. He gets $2348 to cover a $2300 tax burden.
So, not only does Adam get to keep all of his $10,000 paycheck (no payroll or income taxes) he also makes $48 off the rebate.
(and before you try to suggest he’s too poor to pay income tax, the standard decuction is less than 10K, right? he might get a refund in april, but he’s not getting off the hook for money over the standard deduction, nor is he getting ANY of those payroll taxes back)
now, how does that “hurt the poor”?
Some interesting tidbits from the flat tax web site
“Yes, the FairTax is fair, and in fact, much fairer than the income tax. Wealthy people spend more money than other individuals. They buy expensive cars, big houses, and yachts. ”
So basically a 23% sales tax will apply on the sale of homes. At the same time, the mortgage interest deduction is lost. So the day the flat tax is initiated the value of homes will fall about 1/3.
Need I go on? What flat tax morons miss about these scams is that the tax system is the way it is for some good reasons, and also some bad reasons. Tax incentives are there to encourage things that society sees as good (home ownership, having children) and to discourage things that society sees as bad (sin taxes). Economics 101 says that if something is taxed higher, people will do less of it. By taxing ONLY consumption, people will consume less or work to evade consumption taxes. By taxing all activities at some level, a fully balanced economy is reached. You’ll never convince the true believers, but anyone who has studied this issue objectively has found it to be a scam.
“More employees making more money….. Most people are going to spend that more money eventually.”
Which brings us back to the example laid out by Rothbard that i linked to. Savings are deferred consumption so there really is no such thing as tax free savings. At the same time, people will adjust their spending such that the consumption tax becomes a de facto tax on income.
And again, you are talking people making more because savings create investment which create jobs, but if people are discouraged from spending in the first place what’s driving demand? … you’re argument seems to be missing one side …
“It’s simple alright, poor and middle class people will have to pay a lot more in taxes.”
see the above response
“… meaning they won’t spend as much meaning the economy will grind to a halt.”
the poor and middle classes have more of their income to spend (no payroll taxes no income tax withholding)….and since they tend to spend all of their income, I don’t see the economy slowing down. Hell, most people credit the $300 rebate check everyone got a few years back as a benefit to the economy….imagine a coupe with one child getting an extra $450 bucks every month to help cover the 23% of every dollar they spend on federal taxes….
“Meanwhile, rich people will be able to buy their stuff overseas, therefore avoiding the tax altogether.”
Can you buy new houses overseas? How about new cars? If you can, how do you get them registered here? I don’t see a millionaire trotting over to Korea to pickup toilet paper and toothpaste.
Besides…what would be the point? Nothing is going to cost more, in fact many things will cost less. Since businesses are having to pay profit and payroll taxes thay can compete in the market for your dollar from a lower starting point. Wal-Mart et al. have proven that the market will beat a path to the lowest price possible. 22% of the current retail price of nearly every item (on average) is the burden of the current system. Take the current system out of the retail price, add the FT in…and the after FT price is effectively unchanged.
Meanwhile, overseas tax structures are still in place. If it’s cheeper after the FT over there…..it’s probably cheeper right now. What keeps richs people from buying everything overseas as it is?
“And again, you are talking people making more because savings create investment which create jobs, but if people are discouraged from spending in the first place what’s driving demand?”
The same thing that drives demand now….greed.
The need to have the newest, fastest, bestest. (or at least, newer, faster, and better than the jerk next door)
Why does anyone buy a brand new Lexus when a 15 yr old corolla does the same job? Why does the PS3 sell so fast, when it’s not anymore or less of a distraction as the PS2 and the PSone sitting next it?
If you have more money in your pocket and prices don’t change, what would stop or slow your consumption rate?
I would agree with you if the FT caused a 30% increse in cost, as Bartlett suggests. However, that’s not the case. See the above comment to see why.
“So basically a 23% sales tax will apply on the sale of homes. At the same time, the mortgage interest deduction is lost. So the day the flat tax is initiated the value of homes will fall about 1/3.”
Thanks for the softball
Why does it matter that you lose the mortgage dedcution?
What are you deducting it from? Your income tax burden.
Under the FT, you no longer have a income tax burder….why would you complain that you