here's the source, an article from 5-31. http://www.factcheck.org/taxes/unspinning_the_fairtax.html Time for a fisking.
This is the best opening shot? A complaint of mathematical semantics? And you gotta wonder exactly how they use self-referenced original research on the minor %15 who wrote them do not understand the difference between Inclusive and Exclusive tax. There's a real easy way to make people understand this. In fact, there's one major commodity that already uses Inclusive sales tax(among others). Goto the gas pump, tell me how much of what you pay in gasoline is tax. You can't because its calculated inclusively, not exclusively. When you see 2.97 a gallon for gas, that is with the taxes already in it. Not only that, the author of this critique is citing implications without actual substance. The ol wink and nudge form of debating where "intentional or not" people don't understand about fairtax because its not actually clear anyways. I would challenge the author of this critique to get a group of people together who may or may not oppose the Fairtax. Then ask them to understand how their taxes are currently calculated and see if THEY can do better than %15 of them not understanding it completely to %100. Okay, AFFT was rightly upset at how its plan was being mis-represented because before you can criticise it, you have to change how the bill is written. Read on. Hmm. If the Federal Government pays its own tax, wouldn't it cancel out? Of course. Let me break it down. The Panel accused AFFT of using bad math to make the Fairtax look good (because you know that the current system doesn't do that at all, right?) The Panel, however, did not actually cite any method, reference, study, or application to back up its claim on what the numbers would be. Instead, it just declared, on its own with no accountability for what is was declaring, that the bill as it was written had to be changed to 34% tax to be viable. That would be like your employer saying your health insurance, which costs you $100 a month, should actually cost $150 because he says he thinks it will cost that much to viably insure you. But then, he doesn't give any proof to his reasoning. No way to do homework on it. Wouldn't you complain too? Not only that, Factcheck even admitting they can't give any veracity to The Panel's claims, still run with their numbers over AFFT...Huh?
The author is trying to make it seem like one supporting Fairtax doesn't understand the true gravity of how much is being taxed. But the whole reason its called the 'Fair Tax' is that it taxes EVERYTHING to EVERYONE without exceptions or loopholes for 'special people.' The author also tries to make it seem that there is no counterbalance to this spike in the costs of goods, but he is clearly omitting the entire crux of the bill. Eliminate the IRS. Keep all of your paycheck. I would submit to you, if you got to keep all of your paycheck, would a 23%(30%, whatever) tax on goods really bother you compared to now? Consider: Instead of paying taxes directly out of your paycheck, you could be saving or investing that money and making interest on it without it being taxed until you actually bought something (instead of now when you have it taxed just because you made it in the first place). Not only that, I'd like to know what state lets %50 of its people not pay any sales taxes... Okay, the author is making a logic arguement about the conclusion Boortz drew. Author says, the Fairtax can't be revenue neutral because its not high enough to replace the money coming in from the Death tax, and that personal income is in fact not nested with an embedded tax by itself. This is partly correct, but doesn't really matter. AFFT says the Fairtax rate they wrote IS revenue neutral including the Death tax, and nobody has yet to produce hard evidence to the contrary; instead they simply say it would have to be a high tax but then give figures based on unrelated things to the Fairtax. The part that is correct by the author is that Corporate taxes are not passed onto the consumer alone, but the producer as well. In this case the producer would be the employees of the corporation. ... so? Its still all taxes that would go away. This is a common mis-understood aspect of the Fairtax. Competition immediately forces a drop in retail prices, and there's precedent to that. The same thing will happen with employee pay. If the company doesn't have to lower your pay %30 to make sure they cover the taxes on hiring you, how long can they hide that from you if all companies get that break? Boortz's example is a super-simplistic way to explain something that takes a volume to explain. Even the AFFT says that here. So whats the author's point? I don't see one. Here's another example of a seperate party saying "no thats not how it is" but then giving absolutely no data, reference, or legitimacy. (though obviously the author believes the Treasury, as will become clear the more we read.) Also, the author is trying to build 'poor sympathy' in order to cast the Fairtax in a bad light just by the language he is using, but ends up missing a couple of important points. While strickly speaking in percentages of income, the tax rate would -seem- higher, the fact is that people who make more spend more proportionally on the same goods and therefore would pay more in taxes. The chart from the Treasury Dept reflects the fact that the people who would end up paying little to no taxes(after getting their prebate check) would in fact be the lowest income earners. Again, no research material was given by the Treasury for someone to investigate for themselves to do their homework. The point of the Fairtax is to tax everyone in the same way instead of a special way for this person and a special way for that person. So the author totally misses the point in their analysis of this chart. Yes, some groups would end up paying less share and some would end up paying more share. But the reason its 'fair' is because everyone pays it the exact same way, rich or poor, and everyone gets a 'pre-bate check' the exact same way, rich or poor. This is in contrast to now where laws are made to exempt many groups, including the rich, but also the socially connected, and the business connected, or people just move that money out of taxable reach overseas.
The author is taking a pessimistic view, of course. The one thing the pessimist is neglecting in this analysis is the force of the market; competition and capitalism forces reactions. He also tries to trivialise the 'economic arguement' by simply reducing its credibility to 'extremely technical.' Whats wrong with a reason being extremely technical? Pay careful attention about how he worded this last paragraph. I submit to you, what matters to you more; how much of a share of something is? or how much it actually costs? The authors doesn't say it will cost people more money(which it won't), but only that some people will pay bigger share than others. The author clearly has a class envy chip on his shoulder as his only criteria for 'fair' is that the people who make more money pay should for everyone else. In fact, the author states this much in this final conclusion. Even though in the analysis he concludes with says the economy grows, peoples' money is worth more buying power, and wages go up.... he says none of that is fair because the %5 of the people in America who now pay more than %50 of all the income taxes would only end up paying %46 of the taxes instead. Now, what exactly is this guy's standard for being fair? Based on this, is he even qualified to tell us whats fair?
Now THAT's a little light reading From what I've read the fair tax is a good deal. I wish the Libertarian party would bend a little and consider supporting a plan like the Fair Tax. I need to read the book and the bill to speak with any detailed knowledge. It's in paperback now and only 10 bucks. I'm going to pick up a copy of it and consider purchasing a few to hand out to friends and family.
i'm always worried what people will think if i share stuff like this. Hope you were at least entertained. ;p
Interesting read... been meaning to bone up on the subject. Seems like it would be a good idea, it also seems like it would never happen in our lifetime.. as Garth said in Wayne's World "We fear change..."
Yeah, there are too many special interest groups out there enjoying the 'features' in the current, massive tax code for this to ever happen. It would be nice though.
$77*30%=~$23=$100*23%=So what? Say my item sells for $105 ($100+tax) now. If it cost me $90 to make and sell for $105 ($100+tax) I gross $10 after sales tax. After income tax I net $6. With the removal of sales tax on my raw materials and a bottom line reduction of only 20% in my production cost (pre sales tax) it’ll cost me $72 ($90*.80) to make my item. If I sell it for an embedded tax total of $105, even with a 30% sales tax ($72*1.30=$93.60) I’ll NET $11.40. At $105, embedded taxes would have to be 37.5% ($72*1.375=$99) to knock my profit back down to my old $6. These are fair numbers to use because depending on the industry, the removal of taxes in my raw materials is going to lower production costs. Using his example, think about all the taxes that go into building a house. Wood, wires, concrete, appliances... those items have been taxed numerous times. This guy is ignoring this. New home prices will come down, then back up with one final sales tax. He wants us to think prices will stay the same and then be subject to 30%. In the industries where the production costs don’t come down, final prices could increase without effecting our pockets because of our income tax break. That's a lot of money back in my pocket! Now consider that they're using voodoo math to get away from 23%! Targeting people that make between 15-200K? No shit! That’s what, 99% of the people in the US that aren’t a plague?! Nobody is getting a raw deal except for illegal immigrants and others that don’t currently pay income tax. The main point is to collect taxes from people who are BUYING more. And don’t forget about the prebate... Going a step further, today I’m paying too much income tax that I wont see again until next year. I’m losing interest by not having it in my IRA. Or for those that live with credit card debt, you’re losing ____%. That’s money you could be using to pay down your card. So I lose income to taxes and then lose the interest on that income. Tax reform would be nice, but that's the least of my worries. I give the US ten more years...
I don't think the republic our founding fathers built will be around much longer. The land will be here, but the system we had is just about gone. It won't be the same. In the direction we're going before too long it will take a revolution to bring the power back. What is the population going to be by then? Who knows... it won't be people like us. So who is going to be there to take control? If it makes it that long... There's always the threat of terrorism.
Yep, TV, Sports, and People Magazine all do their part to pussify or pacify the masses, and keep the electorate dumbed down and clueless. Not to hijack but: Below is an excerpt from a related story in LAWEEKLY where Ray Bradbury talks about how Ferenheit 451 was misinterpreted: LINK TO FULL STORY: http://www.laweekly.com/news/news/ray-bradbury-fahrenheit-451-misinterpreted/16524/ EXCERPT: His fear in 1953 that television would kill books has, he says, been partially confirmed by television’s effect on substance in the news. The front page of that day’s L.A. Times reported on the weekend box-office receipts for the third in the Spider-Man series of movies, seeming to prove his point. “Useless,” Bradbury says. “They stuff you with so much useless information, you feel full.” He bristles when others tell him what his stories mean, and once walked out of a class at UCLA where students insisted his book was about government censorship. He’s now bucking the widespread conventional wisdom with a video clip on his Web site (http://www.raybradbury.com/at_home_clips.html), titled “Bradbury on censorship/television.”
I'm hesitant to make another (http://www.wrxatlanta.com/forums/showthread.php?t=12898&page=3) post about the Fair Tax, but my issues that I posted about in the other thread didn't get fully addressed to leave me warm and fuzzy. First and foremost, the Fair Tax idea seems to be a good one if you're starting a nation from scratch. Converting from the current system to the Fair Tax doesn't seem feasible. Am I opposed to the Fair Tax as described by Boortz, et al in his book? Yes. It seems to lack the full understanding of the logisitcs required to undertake such a transition. 1) When making the first pre-bate check, where does this money come from? In the other post I estimate $350 million dollars (I think) that the federal government is to send out before earning a nickel. Where does that money come from? What organization (now that the IRS is gone) sends out the checks? What organization (now that the IRS is gone) ensures that checks are sent to the right people? What organization checks to ensure that gt9729b in Atlanta doesn't also claim a prebate check at his other residence in FL? Sure we all have SSN, but the SSA isn't assigned to dole out checks, if they are, someone has to pay them to do that. Nobody does this work for free. Also, with government programs to aid the poor such as food stamps now, it's trying to say that you can't use this money for booze, drugs, consumer electronics, etc. Which of those vendors don't accept cash? 2) The part that affects me personally is the concept of savings. As it stands, I (and many others, I hope) have put away some money in retirement vehicles to fund the years after I work. )This also GREATLY AFFECTS those people that are already retired and currently operating on a fixed income generated from their savings.) Implementing the Fair Tax really hoses all those diligent savers by decreasing their nest eggs by 23%. Boortz's best offering is "sorry"? No, that doesn't cut it. The federal government should not get 23% of my savings because of the new tax plan. 3) I agree wholeheartedly with Boortz's statements regarding the "levelled playing field" in terms of internation business. I do feel that many corporations will setup camp (back) in the US with the new code. But, at the same time I do see how the Fair Tax would affect other industries (especially those that rely on foreign dollars). With newly decreased buying power under the Fair Tax, I can easily see international tourism dollars heading elsewhere. While that may not affect many of us directly, talk to those people in Orlando and other tourist destinations. 4) 5) etc. My other post has other concerns regarding the transition (tax free items for some time - who audits, etc.), fraud, small business sales enforcement, etc. I don't want to fully retype those, so I'll give a link to that thread. By the way, I'd rather go with exclusive tax numbers (as opposed to a 23% inclusive tax) because (most) sales taxes are currently exclusive. Businesses don't typically set their prices taxes included. http://www.wrxatlanta.com/forums/showthread.php?t=12898&page=3
These are fairly common concerns. My thoughts on this. $350 mil is a drop in the bucket. Do what they always do. Let the treasury department worry about it. Offer a special bond for supporters of the fair tax. Let us pay for it. I'll contribute. As for the dumbasses that would waste their money on dooze, drugs, and crap, who cares? GOOD. It's not our problem. Assuming they buy illegal drugs the drug dealer is now paying his fair share. Before he wasn't paying income tax and only contributing the 5% sales tax. HA! This is a problem, but you should consider that most people that are retired and/or living on savings/interest still have a taxable income. They pay taxes on their interest. For flat broke people, they're living on the system already. People on tight budgets, making almost no interest, and are not working don't buy super expensive things. There are a few people that get screwed, but they're already screwed. For you and me, we'll see an increase in our bank account that can go into savings. And after we retire we won't be getting taxed on our interest so a smaller amount will grow faster. Is your point that Orlando is going to lose money? They would RAKE in the cash from this. All the people that don't pay income tax (illegally) would be forced to contribute. The boost from non-income tax paying people would dwarf a loss from tourism. As far as taxing is concerned, there isn't a line between tourism and illegal visiting. The US is where foreigners come for low prices because we don't collect enough tax at/before the register. We collect it from the honest working resident's paychecks. That's not fair! The transition to this would be a project, but we have thousands of pages of tax codes that change ever year, fraud, small business reporting problems, and waste millions in IRS crap already. The revision would result in far less administration and net a HUGE return. I like paying inclusive tax prices. It keeps the numbers simple. Gas is an example of an inclusively taxed item. It makes things easy and easy to compare. But what do I care? I think the US is going to explode in ten years.
First of all letting the treasury department worry about it is not a solution. Ulitimately that money will come back to the taxpayers to take on. I like the idea of selling bonds to pay for it, but ultimately the federal government has to eat $350 million dollars. And, rest assured, the federal government will not eat that bill, taxpayers will, somewhere. And c'mon, do you really want to just let people starve in the streets? The US seems to me to be inherently against just letting its own citizens die in the streets. Don't tell me to send them to soup kitchens, either, because their donations will likely decrease significantly now that sending them a check isn't a write off. Folks that are retired are taxed on the interest that they generated. Granted, those taxes would be eliminated, but that still does not offset the 23% "depreciation" incurred by the Fair Tax. Effectively, that makes $100K in the bank $77K. Do you want to work for free this year? I don't. I already worked for that money and paid taxes on it once. I don't want to pay another 23% on it, do you? No, the federal government would come out ahead, not Orlando. First and foremost, Orlando loses money because the prices are effectively 23% higher for foreign visitors. A family of 4 would have to purchase the equivalent of what a family of 5 now purchases. Given the numbers cited in the link provided (questionable source, but it was a quick google search) http://www.hotel-online.com/News/PR2002_2nd/May02_OCTourism.html Foreign tourism generated approximately $600 million dollars for Orlando. The Fair Tax would send this money to the FEDERAL government, not Orlando. Revenues generated from the taxes get sent to DC. So, assuming that local tourism stays the same and international tourism decreases, overall revenues decrease for the tourism industry on the local level. Sure, the federal government gets more money, but tell that to the people that have put their futures in the industry. Either way, I don't think that the tourism industry should really affect the decision, but I did want to to point out that the Fair Tax won't help everyone across the board. I don't disagree with the fact that the current tax code is both cumbersome and costly. However, I don't see how the new tax code is either fluid or cheap. Enforcing, auditing, and implementing the Fair Tax is not quite as easy as Boortz makes it seem. Sure, it seems easy to just find all the people in the US (census data), send them checks (state and local tax commissions), and audit them (again, state and local tax commissions), but those organizations are already staffed and put in 40 hrs a week doing what they do now. Who's going to pay them to do the fed's work? Absolutely not true. Right now, we, as a wild generalization, have NO idea what gas really costs. How many loaves of bread does a gallon of gas cost? How many rent payments? I'll bet 95% of the people on this forum (myself included) don't know all of the gas taxes. Granted, if everything were taxed either exclusively or inclusively it would be easier to compare, but now, no way. Putting consumer goods on a tax inclusive basis dilutes consumers' ability to discern the actual cost of the good or service because all taxes are included. Take private sales of used goods for instance. In the classified ads, ebay, etc., goods are sold at a cost. The $8.99 for the watermelon at Publix means that the watermelon only costs $8.99. How's that gallon of gas stack up now? It's far easier on the consumer to compare goods if taxes are levied after the fact.
I wouldn't call it a 'write off'. Even if your tax bracket is 35% sending them a $1000 check only gives you a $350 tax break. You're still effectively giving away $650.
Right, I'm just saying that there will be less incentive to send those checks to charities once benefits are removed. So, charitable organizations would end up taking a hit with the Fair Tax also. EDIT - Shouldn't have been "write-off" should have been "deduction". How is education handled under the Fair Tax? I don't remember reading about it in the book. I assume that private education costs would fall under the 23% tax, correct?
You're probably best off reading the publications on the FairTax site rather than the condensed stuff in the book. Here's the info on charitable contributions (and they do make a good case): http://www.fairtax.org/PDF/TheImpactOfTheFairTaxOnCharitableGiving.pdf and education: http://www.fairtax.org/PDF/TheImpactOfTheFairTaxOnEducation.pdf
Woah, hang on. you've got some good questions there, let me see if I can process them here: The flow of tax collection would be managed by the states who would then pay the treasury directly. The federal government, either by the treasury itself, or another branch, would be charged with its distribution. It could be conceivably handled exclusively at the federal level, or it could be shifted back to the states (though i doubt that will happen due to getting uniformity in processing) As far as check sent to the 'right people,' if you mean the statistical stuff, there's enough powerful automation already in use today that assures millions of checks get places where they need to go on time. Credit card companies, Social Security checks, all that stuff is already in place and would merely be adapted. And the simplest thing is that EVERYONE gets these checks, rich or poor. None of this "person X gets a check, but person Y doesnt." The fair tax is fair because it applies to everyone in this case. The increase is sales tax is designed to be transparent to the government; meaning the same amount of money going in now has to keep going in when the Fair Tax passes. The tax rate in the bill will cover the administration costs for managing this system, which I guarantee you is a drop in the bucket compared to the IRS and its workforce, which is the 2nd biggest branch of the federal govermnent. And your last statement doesn't click with me... The prebate is not a government handout, its taxes you already pay built into retail goods and services. The Fairtax wouldn't effect foodstamp program. (unless i'm not understanding what you're asking. I am an idiot after all, ;p) Ahhh, this is the most common worry to be explained. Let me assure you, you stand to gain just as much on your savings as anyone else. The point of the Fair Tax is to eliminate embedded costs and compliance costs, not to screw over people who save. Consider this: If you pull money out of your savings now to buy a new WRX, you may think you're only paying %7 sales tax on it, but you're also paying the dealerships' income tax on profits, on its employees it has to pay, the corporate taxes that Subaru of America passed onto the dealership, etc etc. The cost of goods will go down drastically with the Fairtax. Most of the best figures used by Americans for Fair Taxation say at least 22% of the cost of goods is some kind of tax cost passed onto the retail level consumer. Worst in some industries is as high as 31% So while on the surface, it seems you may be getting the short end of the stick, the fact is, your out of pocket cost at the dealership isn't going to change much. The Car's cost will drop at least 22%, and the sales tax will take up the slack by being calculated inclusively. In fact, buying power is expected to increase in almost all forms of retail(except certain textiles is some studies), meaning your savings will be worth more. Also, 401ks will not be taxed when you draw them back out anymore. Also, remember, everyone still gets the prebate, including retirees. Buying power increases slightly. Again, because the imbedded costs of income tax goes away, the prices overall will be transparent to tourists. In fact, the Fair Tax being shifted directly to retail means that millions of tourists will now be paying for Social Security when they buy stuff! This tax system will also tax black market dollars that currently escape the income tax; even a drug dealer needs shirts, shoes, the light bill in the apartment. All the money circulated on the black market will get taxed as soon as someone tries to spend it. *reads link* Well, Fraud becomes an interesting problem because currently you can engage in tax fraud by yourself pretty easily. Currently, sales tax is I believe the LEAST of where most forms of tax fraud occurs. Under the Fairtax, or any nationalised sales tax, 2 parties must commit to the fraud, the business AND the consumer. The business owner faces loss of business liscence or worse; so is he going to take that risk for the consumer? Not as likely. Also, having the tax calculated inclusively helps to discourage trying this. As far as small business sales enforcement, I find it will be infinetly easier to monitor, police, and enforce tax compliancy on a few hundreds of thousand of businesses compared to 150 million individuals in the workforce. Tax compliance is covered by the states in the bill; the states would be responsbile for its collection and auditing of businesses, and payment to the federal government. The federal government would only audit the states if needed. As far as tax free items, there would be none except for used goods and for business to business purchases(such as raw materials). All new goods from diapers to vicodin to tires would be taxed. Everyone pays the Fairtax the same. Businesses buy retail would pay the same tax as a person from Park Ave, the same as a person from College Park. The Fairtax is fair for 3 main reasons: 1:Everyone pays it on everything the same way 2:Everyone prebates 3:Everyone gets to keep all of their paycheck, meaning everyone can save and invest money completely tax free
That's what I'm getting at. Basically, the process you describe above has to be paid for by someone. All of these tasks would have been performed by the IRS, and now with its dissolution, it'd be passed on to other organizations. The 23% Fair Tax doesn't pay anyone to administer it as you describe above. Those state departments are already full-time, fully-staffed government organizations. More people would need to be hired to handle the implementation of the Fair Tax. The states can't just handle this "for free". So, it doesn't seem responsible to describe the transition to an IRS-less federal government without estimating the costs incurred in increasing the states' responsibilities. As above, "adaptation" you describe is not as easy or cheap as you imagine. I don't think that the authors did an accurate assessment of the magnitude of the transition effort required to be under the Fair Tax. See above re: staffing administrative agencies. What I was trying to say was that I've ASSUMED that welfare would be eliminated and replaced by this as welfare is (as is my understanding) our current method of bringing up the lowest class. I didn't think that both the Fair Tax and food stamps would be in place simultaneously. If this is the case, please disregard, but, the intent of food stamps is that the government is willing to pay for some of the necessities of life. The prebate as presented by the Fair Tax is intended to pay for the necessities of life but there are no checks to ensure that the prebate isn't spent on something fanciful. That's what I was trying to say. I guess the hangup here is that I don't feel as though the cost of goods will go down drastically as you describe. My money in savings has already undergone an income tax, and then it would undergo a 23% sales tax? I must not be putting something together, but that just doesn't seem fair. I do feel as though the Fair Tax does an excellent job in getting money out of products and services that pass through untaxed as is. Hell, personally, I think there's a lot to be had by just adding sales tax on all internet sales based on destination address (but that's a whole separate argument). I hardly agree with Boortz, et al's argument about the need for 2 parties in collusion to commit fraud. Why can't any vendor just mask the fact that they're not paying the tax, but show it on a receipt? That's not hard. Vendors can charge the same prices as their competitors, claim less sales tax per purchase, and overall claim less sales during the fiscal year to account for the discrepancy. I don't think it'd be that hard. I agree with you that there are fewer businesses that wage earners making auditing easier, but the Fair Tax eliminates the auditing arm of taxation in the IRS. As above, states cannot simply perform the duties of auditing the system for free. I hate to be the broken record here, but the checking to ensure that sales are indeed business to business on a "raw materials" basis cannot be done as freely as assumed. The auditing, dispensation, and compensation for the equivalency described by moose still bears its cost. (I'm referring to the statement that was made about how small business owners would claim at year's end to receive deductions in "proving" that the lumber purchased at home depot was going to another business and not a consumer, for example). All the while the small business is losing interest on the money that the Fair Tax is so intent to protect. ...oh, and if you've made it this far, I appreciate y'all's willingness to try and explain (convince?) me of the Fair Tax.
no problem! I'm excited about it cause i think its such a good idea. I prefer people willing to gnaw on the idea for a while anyways... Well, I had to re-check the legislation, but if its the cost you're worried about, then I have to raise the question now; Who do you think pays for the operating costs of the IRS? *re-reads* Ah. The businesses (and states) collect a tax processing fee to account for their role in being tax collectors. So if I sell you a gallon of milk, I would not only be collecting the Fairtax, but a Fairtax processing fee for the accounting work i'll have to do when paying it to the state. (and from the state to the federal government.) The costs are accounted for in the tax. This compliance cost is laughable compared to the compliance costs of following current income tax code. The average American spends something like 50 work hours a year trying to comply with the income tax code. The actual dollar figure is $265,000,000,000 and if you spread it over the entire populace its like $1000 for every adult and child, working or not. Well, I gave you a few examples of administrative bodies that do handle such things, handle them timely, and with a very low error rate. And now I gave you the cost component of the processing up there. Oh, i see. Food stamps are welfare which is wealth redistribution. The Fairtax is a taxation method and only that. It doesn't mess with anything else, not Social Security, Fica, or any other social program. The Fairtax would be used to fund those in place of the income tax. The prebate would not be a welfare plan, either but essentially a tax refund for the poverty level of spending. The Fairtax prebate DOES NOT pay for the necessities of life. It refunds the taxes only on those necessities. If you consider, the poverty level of spending is what the government says is the absolute lowest amount of money you can spend in a month(on everything, food, bills, shelter, etc)and survive is about $1300, then your prebate will be %23 of $1300, which would be a check of about $300. Well, its sometimes tough to conceptualise, but no business pay any taxes ever. Think about this: if Coca Cola all of a suddent has a tax increase from the government, how are they going to pay for it? From their profits? No of course not, a business's job is to make money, not lose profits. So Cocacola must either A:cut other costs,or B: raise prices. So who ends up paying for this tax on Coca Cola? The consumer and the employee, not the company. Therefore, no business actually pays any tax, they merely pass the cost on to others in the transaction and collect the taxes. You think under the Fairtax, your saved money would be unfairly double taxed anew, right?. The reality is your money is already being double-taxed now. Think about it; if you spend your savings right now on some Coca Cola with current taxes, what happens? 1: you've already had to pay income tax on your money, 2: you're paying Coca-cola's income tax, Coca-cola's employee's income taxes, their profit tax, their capital gains tax, etc etc etc. This is the part that is called "embedded taxes." The research by many economists says that at its LOWEST, the embedded tax is at least 22% of the cost at the register, and as much as %31 in some cases. If all of a sudden Coca Cola has a %22 percent drop in the tax compliance costs of a bottle of Coke, then the actual price of the product will drop too because of free market economics. The Fairtax would then replace the 'embedded taxes' you were paying anyways when the price was higher. And don't forget, all used goods are tax exempt, including cars, built houses, consignment, etc....Your savings would get a significant bump in buying power on those things. If you just don't believe that the costs are that high in stuff we buy, and that they'd go down, then there's not much I can counter that with other than you might be inclined to do some reading on their research. The tax in Inclusive. it will not be shown on a receipt, it will be part of the cost of the item. If its $10 on the tag, its $10 at the register. The tax is collected by the State. The Vendor can't 'claim' less sales tax per purchase. The value is fixed for all goods, the tax rate doesn't change. As far as claiming less in sales, that would be risky for them. You see, the bill mandates documentation of all non-taxed business purchases. If Coca Cola made a business purchase of 70,000,000 million cans tax free, but only declares having sold 10,000,000 and tried to launder the rest, then under the Fairtax, the State has auditing power. If they go in, and see the books don't match the inventory, Coca Cola's in trouble. In this case, to try and overcome this, 2 businesses would have to collude to tax fraud, the raw material supplier and the manufacturing purchaser. So again, I ask ya, whats easier to keep track of and audit? 150 million people by one federal bueracracy? Or the 20 million businesses, distributed across all 50 states at the local level? ;p (had to fix my earlier number goof) Oh, I also just read that the Fairtax bill authorises forming a bounty system where rewards can be given for reporting tax fraud. Cool, i didn't catch that before. I sense a distaste for Boortz, though. Lets not talk about him again and stick to teh Fairtax and its creamy nougot center. I forgot the states would handle the audit, but yeah, i went over it up there^^^ about admin compliance costs, which will be minimal given the simplicity of the system. Um... I'm checking the legislation because i don't know if the business exemptions simply omit the tax, or get refunded it seperately. I believe its the former, and all documentation on the legality of the purchase is beared by the businesses in said transaction. Also, keep in mind the small business under the Fairtax doesn't have to pay income tax, profit tax, income tax for its employees, an accountant to make sense of it all, etc.
Sorry for the delay in replying, I've been out of town on business. So the costs of compliance are already included in the estimated 23%? Is that the case? What I was trying to get at was the costs for administration of the Fair Tax. Yes, the current system is expensive, but the current system has a source of that money accounted for. If the Fair Tax didn't include that, the the 23% would need to be escalated. If the powers-that-be feel that the 23% will cover the administration of it, then that's great, but I just don't feel that it has that covered. As I attempted to communicate in my post, the state and local tax agencies are already fully burdened with collecting and administering their own state and local taxes. Making them be the "new IRS" would inherently force their costs to rise. I just want to make sure that this is accounted for somewhere. I do feel as though the compliance costs are far less than they are currently, especially for businesses. I personally, didn't spend nearly that in doing my taxes but can easily see how businesses are being affected by the current tax system. That being said, transition is always difficult. What I have a problem with about the Fair Tax is the transition, not the plan itself. As I said earlier, I like the concept of a Fair Tax if things were to be starting from scratch, but we're not, so I'm currently not convinced that the kinks have been worked out to my satisfaction. Regarding the food stamps issue, thanks for the clarification. The Fair Tax prebate is meant to cover the TAXES associated with the necessities, not the necessities. Got it. Just want to make sure that this isn't the "sole" source of income for those on the poverty level and only to have that money be blown on beer. I have a complete understanding of the Coca-Cola analogy and have felt that way anyone has always laid the responsibility for anything on "Corporate America". Although, I don't really like your statement about businesses not paying taxes, I'd prefer to say that business are solely made up of customers, employees, and investors, who must bear the brunt of the load. I agree with you though, people often think that corporations are just some building somewhere that makes money. Ultimately, those corporate taxes do come out of someone's pocket somewhere. My money is currently taxed twice as it stands now, an income tax and a sales tax (along with other embedded taxes). The money that I've put in savings and other vehicles has already undergone the income taxes and would currently be victim to the interest earned, and the other "double" taxes that you mention. I understand and accept that. Under the proposed plan, prices would drop an estimate 23%, the Fair Tax would then re-coup the imbedded taxes through a retail sales tax of 23%. Part of the reason that I feel that my money in savings would have a decreased buying power is twofold: I don't feel as though prices would utlimately stay the same. Basically, I feel that the embedded taxes are not 23% of the cost of the goods and services that I purchase nor do I feel that 23% is an adequate sales tax. In other words, I think that the embedded taxes are less than 23% and that the national retail sales tax would have to be higher than the proposed 23% to sustain itself. That makes prices go up. Comparing my assumed increased prices to the already-taxed money in savings and I, the consumer lose the difference. Of course, this view is welcome to different opinion and can easily be countered by research, but as of now, it is my personal view of the matter. Just as Fair Tax suppporters claim that the 23% embedded tax is the LEAST that would come out, there are others that disagree. I am just one of those "others". I have several objections to the points mentioned above. Regarding the tax being inclusive and not shown on the receipt, wasn't one of the main arguments against the current system its "invisibility" through withholdings, etc.? After all, wasn't your question in your other thread, "How much did you pay in taxes?" Really, if you don't show the consumer what is going to tax, how does that require two parties for collusion. The consumer is oblivious. And, to reinforce the point, I'd be willing to bet that when asked, "how much did you pay in taxes last year?" most people will assume that you're talking about income tax, not sales tax? So with the implementation of the Fair Tax, how much will you be paying next year in taxes? Don't tell me 23% either. I agree that compliance will be much more easily assured for large Wal-Mart, Target, etc. corporations that do business in the electronic world. But, the service based industries, small businesses, restaurants, etc. would still be able to defraud the government of the tax fairly easily in my opinion. ...and regarding the bounty system, that'd go over like a turd in the punch bowl in the private sector. I'm curious to see what happens after the first false accusation. Is this really giving Joe Citizen a police badge for tax fraud? That's just not wise, in my opinion. In summary, I still feel as though there needs to be a more thorough transition plan to make this work. Ultimately, that's the biggest roadblock in convincing me of the Fair Tax's viability.
Well then the easiest way i think to lay out that point is to say 'taxes only occur on individual wealth.' There is no such thing as corporate wealth, as all its money is made of of stock holders. Same thing for its employees. So whenever a so-called corporate tax is levied, its actually alway collected from the individual wealth of the investors, or the components that comprise the company(like employees). As far as the rest of your concerns, tho... I'm afraid i can offer you absolutely no argument to convince you. These seem to be things you believe and feel, and the only thing you can do about that is to look at the research yourself til you've researched it to your satisfaction. The pile of data on this that AFFT has is truly complete, so if you have a willingness to look at the numbers by the economists, the research, and the recommendation of http://www.fairtax.org/site/PageServer?pagename=about_research http://www.fairtax.org/site/PageServer?pagename=about_research_tax <--- this one of particular interest about wether or not the tax rate is really enough to cover it all.