Is The Fair Tax Really Fair?
By Justin Gardner | Related entries in 2008 Election, Money, TaxesThis is the “new idea” Huckabee is hawking as fiscal policy, and on its face it seems like it could be interesting. After all, everybody pays the same rate and its based on your consumption. But does it ultimately prove to be impractical and unfair?
The tax plan Huckabee has proposed, called the “FAIR tax,” would eliminate federal income and investment taxes and replace them with a 23 percent federal sales tax. The poor would pay no net sales tax up to the poverty level, and every household would receive a rebate equal to sales taxes paid on essential goods and services.
First off, what are essential goods and services? That seems like a mess waiting to happen because it will mean that a few lawmakers will have to decide what is “essential.” That doesn’t seem very “fair.”
So color me extremely skeptical, not only for that reason, but also for this…
Scott Sweezey, a programmer at the plant who lives in Bristol, said he doesn’t know how to make a consumption tax treat people fairly.“Low-income or retired would pay the same tax as somebody who has a million dollars,” Sweezey said. “I guess if you don’t buy anything, you don’t pay any sales tax, but if you do buy something, you pay sales tax.”
And that’s the rub. On its face it looks fair, but one of the most common tax rates among the middle class is 15%. That gets bumped up to 23% and you’re raising taxes on an income class that’s already diminishing. Also, since the rate for higher incomes is between 28% to 35%, they’re going to get a great deal from this change. But that’s essentially regressive taxation and that’s REALLY unfair.
Another thing, I doubt that Huckabee is going to cut out the tax breaks for mortgage interest, which is where a lot of people lessen their tax burden. That would be folly as a national policy, but if he gets rid of the IRS and the tax code, mortgage interest tax cuts go away too, right?
I also think Huckabee saying that the IRS will go away is naive…because who is going to enforce and punish the tax evaders? Like it or not, even if we have a so-called fair tax, people will still try to avoid paying their taxes. Where does that burden fall? The police? A new government agency?
Here’s another perspective…
Ken Schuhle, a Navy veteran from Dover, said it would eliminate loopholes that rich people exploit. “That way, everybody pays our share,” said Schuhle, who listened to Huckabee speak during lunch at the New Hampshire Veterans Home in Tilton.
So what we’re left with is a big question mark as to whether or not this is a good idea. Personally, I’m not liking it, but here’s the wikipedia page on the FairTax. Read it and tell me what you think.
This entry was posted on Saturday, December 15th, 2007 and is filed under 2008 Election, Money, Taxes. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
December 15th, 2007 at 11:31 pm
You neglected to mention the embedded corporate taxes (22%) the consumer pays NOW will be tossed out and EXCHANGED with the 23% Fairtax sales tax. So, prices will stay the same, but with the fairTax, workers (poor/middle/rich) now have their gross paycheck to buy the same-priced goods, and the illegals/tourists/criminals/rich/tax evaders add the base for taxes collected by sales. The FairTax is brilliant.
December 16th, 2007 at 3:04 am
The Fair Tax would be a 23% inclusive tax. Meaning that if something costs $1.00, the ratio is 77 cents price and 23 cents tax. 23/77 is 29.8%. Right now, sales tax is exclusive, ie, a 23% tax would make a $1.00 purchase $1.23. By making it inclusive, its really how we would consider a 30% tax today. The math is accurate, its just a different method of taxation.
I support Ron Paul’s view on the Fair Tax. If it came up in the House, he would vote for it, as it is light-years better than what we have now. It calls for the abolishment of the IRS. However, I would like to get rid of the IRS and Income tax entirely, and replace it with absolutely nothing! Its my money, government needs to get its grubby hands out of my pocket. I’m shelling out freakin’ $400 bucks a month in taxes, and I don’t have a say in how it gets spent. Its my money, I’ll spend it how I want!
December 16th, 2007 at 7:29 am
As I understand it, they’re not proposing that there will be exemptions for specific goods and services. Instead, there will be a calculation for how much each household needs to spend on basic goods and services (somewhat like the way the standard exemptions work now, but broader than that.) The prebate will be a preset amount like that, not a calculation of what specific items you purchased. http://www.fairtax.org/PDF/FairTaxPrebateExplained2007.pdf
The Fair Tax website (www.fairtax.org) has a lot of answers to questions- they do seem to have thought it out quite well (every time I think of a reason for concern, they seem to have addressed it.) I’m still a bit concerned about the laws of unintended consequences, things that no one would have been able to foresee though. Particularly because so many of our economic decisions are now structured around our current income tax system, so it’ll be quite a shakeup.
December 16th, 2007 at 11:17 am
Sounds a bit like the GST (Goods and Services Tax) that was bought in NZ. That runs at 12.5% add-on. Oh, Income Taxes were slashed by about 15% when GST was introduced.
There are no exceptions (well, other than financial charges and a few others) to the GST which makes it very simple.
And that, as far as I am concerned, is the secret.
The more complexity that you build in (like the “income exemption” spoken of) the greater the opportunities for avoidance. I hve a quiet chuckle every time I see a sale advertised “We will pay the GST”. Yep, sho’nuf you do. And the price I pay still includes the 12.5% GST :-)
Get rid of the IRS? Dream on laddie. It will never happen.
December 16th, 2007 at 11:22 am
the most inportant thing is that the power that the goverment has now will be removed. i.e. no mort inciteing class warfare, no more tradeing favors with corpations for tax brakes, AND NO MORE PENLTYS FOR LIVING THE AMARACAN DREAM! no longer will you be taxed on your investments. right now we punish thuos who aclumate weath, we punish comapanys every time they hire a new employee, we punish the rich the poor and the middle class every day with a tax system that would bring Marx and Linin Pride
http://www.fairtax.org
read, learn, and be enpowerd
December 16th, 2007 at 3:02 pm
First off, what are essential goods and services?
This is the Federal poverty level for a family of you size. There is no determination of specific goods or services. Your family gets a monthly rebate based on the sales taxes you spent on 1/12 th of your families federally determined poverty level.
December 16th, 2007 at 7:39 pm
Wow! Have you read about the FairTax, yet? If you did, you would have known that there are no determination of “essential goods and services”. That would be unfair, if so. The government shouldn’t be deciding what’s essential to some people and essential to others. That’s what Communism is for. However, what the FairTax does is provide a monthly rebate of the taxes paid up to the poverty level, which is decided by a third-party: the Department of Health and Human Services.
Please read up fully on your information.
December 16th, 2007 at 10:04 pm
To by upfront, I am a Ron Paul supporter, and wantt o drastically lower taxes, not just replace them. But the consumption tax would be be offset by ‘cost of living’. This would be determined by the poverty limit. So the poverty level is at 10,000 that means every person in the nation would receive a $2,300 refund each year (just enough to contribute to a campaign!). If the cost of living increased to 20,000, each person would receive $4,600. A millionaire would pay 23% on ALL of his earnings spent. So if he spent all of it on boats, houses, booze, lights, cruises and legal fees, he would have paid $230,000 in taxes that year, compared 40k (me) salaries, paying $9,200 in taxes. Consumption taxes forego the need for withholding, which I think is a terrible and evil practice.
December 17th, 2007 at 12:01 am
Exactly my point. Very few people will be deciding what is essential. And by the way folks, I didn’t mean whether Wonder Bread was essential or not. Specificity wasn’t my point, but I can understand how it could read that way. It was exactly how much, not exactly what. That doesn’t seem fair to me and this tax still feels regressive.
December 17th, 2007 at 6:06 am
Justin, that doesn’t make sense. No one is deciding what is essential. The only thing you could say is that there’s a determination of a minimum monetary amount for essential spending, and that makes the tax progressive because it means that those who only have enough income to cover basic living needs will pay no tax at all, and those who can afford to purchase more goods and services pay taxes on those transactions.
But the only thing that is being decided is what the minimum expenditure rate is, for the amount that will be untaxed via the prebate. That means the adjustment is strictly made according to how progressive you want the tax to be. The higher the prebate amount, the more people on the lower end of the scale get exempted.
December 17th, 2007 at 9:12 am
The current method of determining the poverty level is a joke. Somehow I doubt that the people supporting the “Fair Tax” have any proposals in place to improve it because it would show how regressive their tax is in spite of claims to the contrary.
December 17th, 2007 at 12:10 pm
It’s unfortunate someone can be allowed to write an article on this topic with sufficient understanding. Not trying to offend, Justin, but it’s really quite easy to grasp. Shoot me an email and I’d be glad to walk you through it!
Regards
December 17th, 2007 at 12:47 pm
The Fair Tax is a red herring. It’s switching one hated, intrusive, exploitative system for one that can be made to appear (for political reasons) to be kinder and gentler and otherwise more benign, but that would inevitably have to turn out to be just as equally intrusive and exploitative.
Read the entire Fair Tax proposal and you will see how it will be a disaster just like the current income tax. Why? Simply because you will need a huge regulatory bureaucracy to enforce it and dole out the compensation checks, just like the income tax and social security require huge workforces to process and enforce. It doesn’t reduce any paperwork or filing requirements: if you undertake any commerce, you must maintain detailed records for the Fair Tax Authority (whatever it would be called). If you want the “rebate” you’ll have to keep all your receipts for everything you buy and provide it to the Fair Tax Authority. Of course, they know most of the people that would become eligible for the “rebate” check wouldn’t go through that level of accounting effort.
Smuggling and buying abroad would become rampant, just like in Europe (with its VAT). Look at how many people buy IT products from out of state vendors to save a measly 8%, then imagine a population obsessed with buying out of the country all manner of small durable goods in order to save 30%. Under the fair tax, are we going to have to carry our receipts around with us to prove we’ve paid all our taxes?
Finally, nothing in the Fair Tax proposal precludes the federal government from reinstating an income tax, so, just like Europe, we would possibly end up with both a fair tax *and* an income tax. The only way to preclude that possibility is to simultaneously repeal a certain amendment.
Finally, no analysis of the Fair Tax takes into consideration that net and gross margins vary wildly according to industry, and that in taxing all industries revenues at the same rate will cause all sorts of dislocations in commerce. Expect the lowest gross margin products (most consumables) to experience massive price rises under the fair tax.
December 17th, 2007 at 12:59 pm
This is soooooo tiring! READ the book. You don’t need ANY deductions. You will no longer have to spend hours and hours to minimize your taxable income, because you’re no longer taxed on the amount of income you make. It’s a NO brainer. And….everyone, poor, rich and middle class will receive exactly the same amount of prebate, based on the number of people in your family. That is, of course, if you are a legal citizen.
December 17th, 2007 at 1:57 pm
Dear Ken Schuhle,
I am a Navy Vet myself, if you are a Vietnam Rivereen like I am, then welcome
home, if not then welcome anyway.
First of all thank you for helping to spread the word about HR-25/S-1025, which
has been named the FairTax Bill. In reading your comments above, I’m not sure
which is upsetting you the most, Gov. Huckabee or FairTax. You may want to
re-think your FairTax time lines a little more. FairTax is not Gov. Huckabee’s bill,
Congressman Linder’s, Neal Boortz, Alen Greenspan’s or any one individuals bill.
They did not create this bill. If anything it’s a tax payers bill. You would know
this had readed the FairTax book.
The bill came out of 23 million in research at 7 major universities. We love
debate on this bill and that is good but, (and I say this with all due respect to
you), the same old criticisms get tiring when you know they are obviously coming
from someone who has obviously not done his research.
I alway ask myself when reading criticisms on FairTax, what is really the
motivation behind this criticism? We know something is alway behind it, when
the writer doesn’t come with solutions of his/her own. What do they feel would be
a “Fair” way to tax the American people? The onlypeople that can’t support this
HR-25/S-1025 bill once they fully comprehends it and answer their questions,
are power hungry politicians, people who make a living on “K” Street in
Washington,DC, people who make a living working the tax
codes, people who are against the FairTax bill because someone the dislike is for
the bill and people who don’t like to read and do their homework. The FairTax bill
is not perfect, there is no such thing, but the FairTax bill is light years ahead of
what we are living under now.
Merry Christmas
Mike
December 17th, 2007 at 5:52 pm
There are millions of people in this country who pay no federal tax at all … nothing. Some are illegal, some are wealthy, etc. That means the rest of us, estimated at roughly 60 to 70 percent pay the entire tax burden. With FairTax, everyone pays thereby spreading the burden to a larger group and thereby reducing the percentage of federal taxthat each of us have to pay to meet current spending. And yes, there will be a black or underground economy just like now with tax avoiders, but it will be nearly impossible for anyone to completely live off the underground ecomony and avoid taxes unlike now. So, the tax base will be bigger.
Billions are spent out of our pockets in meeting tax filing compliance each year. These costs go into the prices of the products and services you currently buy. This compliance cost would go away and present not only a direct savings to many of us, but in the prices we pay. This is especially important for the thousands of small businesses who together employ more than anyone in this country. On a corporate level that would be removing thosands to millions per year in compilance costs that are passed along to the consumer. This would remove the need for many of the lobbyist on K Street who specifically fight for tax considerations for their customers. It won’t stop lobbying, but it should substantially slow it down.
Yes we will have to beware of what our federal government might do to bastardize the FairTax plan to meet their desires. However, the simplification of FairTax should make changes much more apparent and at least give us the chance to rant about it like we did the Amesty Bill. Yes folks, we can have an influential say in our government if we work together.
Look at the global economies that are growing and successfully competing against the US. Why are they growing? Because they have fitured out that by lowering (substantially) or removing taxes from their corporations, they help keep development costs and hence selling prices down. This reduced corporate tax environment attracts corporations who need these cost breaks to develop products that are price competitive and will sell. And, with their growing economies they don’t have to devalue their currency just to improve their exports, etc. The devaluation of our currency that is currently going on means your dollar buys you less. Folks, you have to look at the big picture. In the US the opposite is happening. More taxes are being heaped on businesses. Now do you think for a moment that these businesses are paying these taxes out of their profits? No! You and I are paying these taxes in the form of higher prices to cover their tax bill. This is why many US companies are having a hard time competing here or abroad. It forces many to leave this country to be able to compete. It’s not all because of labor costs. These additional tax costs are stated in FairTax as embedded taxes. When these are removed, then prices can come down and companies can compete on a level playing field. They will have no need to leave the US and many companies will either return or new ones come back. Does anyone have a problem with more jobs? And, if people in the US receive their full pay check required by FairTax, rather than one with income taxes removed, they have more buying power. Would you buy more if you had more to spend? Would you buy more if your savings and retirement accounts weren’t taxed or maybe you’d like to retire sooner?
Lastly, is FairTax perfect? Of course not. Is it better than the current 66,000 pages of tax code used regularly by members of our federal government to compensate some of their big supporters with loopholes and tax havens that you and I have no access to? Absolutely it is. This is why FairTax will help us get this worsening tax problem under better control. There will be cheats and attempts to change it, but FairTax will present a format that will result in more exposure for those attempting to beat it. By the way, FairTax calls for the repeal of the 16th admendment. It would repeal the IRS and yes it’s dooable.
And please, read the book and the code before you start making claims that you don’t understand. Jason, we see your miscalculated arguement all the time. (From HR 25 the FairTax bill,‘‘(1) FOR 2009.—In the calendar year 2009, the rate of tax is 23 percent of the gross payments for
the taxable property or service.) That’s 23% of gross. You present the example then reverse the computation. If something costs $1 (gross) and 23% is the tax, then the tax portion of the dollar is 23 cents. No one in FairTax said anything about 23% of $.77 which is as you stated 29.8%. However, by changing the example, you added this percentage to the $.77 and then an added an additional 23% of $1 to that to come up with your $1.29 total. Do you work for the IRS? I don’t know what tax plan you are talking about … maybe GST, but you are not talking about FairTax. It’s unfortunate that you are attempting to mislead people in this way. FairTax supporters only ask that you at least read the “entire” book and/or the “entire” bill and then do the math. Then again you may have another agenda altogther.
Merry Christmas and may we be blessed in the coming year with some tax honesty and common sense in our government.
Gary
December 17th, 2007 at 6:18 pm
Wow!? I’d like the detractors of the ‘Fair Tax’ to truly consider WHAT is unfair about everyone paying their fair share of taxes!?
With each passing year our taxes get more and more obscure. It seems to me the ones that complain about removing this unbearable yoke (IRS) are – somehow – benefitting from out-of control taxation or they are ‘bleeding liberals.’
Let the people (us) keep what they work so hard for.
December 17th, 2007 at 6:22 pm
I see my comment is “awaiting moderation.” Is this applied everytime we comment?
Last week my replies were posting immediately. What gives?
December 17th, 2007 at 6:29 pm
“Under the fair tax, are we going to have to carry our receipts around with us to prove we’ve paid all our taxes? ”
Sara, please explain that one. I think you are being economical with the truth.
December 17th, 2007 at 6:54 pm
Justin, I have written 2 previous comments that didn’t publish. Not sure this will either. Why are my comments “awaiting moderation”? I have not read anything on the blog about this. Last week I was able to comment freely. How long is this gonna last?
December 17th, 2007 at 7:33 pm
How is it regressive if everyone is being taxed on their consumption. People with more income will consume more and therefore pay more.
December 17th, 2007 at 9:24 pm
How difficult is is to understand?
Every single consumer becomes a tax-payer instead of the current system where income taxes are paid only by those that are employed. That gives us a much bigger tax base as it includes ALL consumers, residents, tourists, illegal aliens and anyone else who spends money here in the good ol’ USA.
We currently have Federal and State (some states) income taxes, SS taxes, Medicare taxes, FICA, etc. deducted from our paycheck. We also pay taxes on everything we buy, we pay taxes on our investments when we cash in.
So, to recap, we currently pay taxes on what we EARN, we pay taxes on what we BUY, we pay taxes on what we CASH IN. Add up all that and I guarantee you it’s a lot more than 23 percent! It’s triple taxation! A tax on tea was all it took to kick off the Boston Tea Party! Where’s the outrage now?
Under the Fair Tax, there will be no more income taxes and we take home almost our entire paycheck. More money to invest ( no capital gains taxes, investment taxes, inheritance taxes, etc.) or spend as we see fit. Can someone tell me how this is bad for us?
No more payroll, Medicare or Social Security taxes will mean less paperwork for businesses and labor costs will be lower. Business -to- business purchases are not taxed, taxes are paid by the final user- the consumer. Businesses will be able to flourish without the crushing taxation and needless paperwork. A simple end of month report stating how much they collected in sales tax is all that will be needed.
The Treasury Dept can take over the function of the soon- to-be defunct IRS. There are too many government agencies whose functions overlap. I look forward to the day when the Fair Tax Act is signed into law and we can celebrate the demise of the 16th Amendment.
December 17th, 2007 at 10:00 pm
It amazes me how stupid people so vocal can be. Please research a subject before you make stupid comments. Read the Book, look @ fairtax.org, or just do a little research. If you want this economy to explode in a positive way just pass the Fairtax and look out.
December 18th, 2007 at 8:30 am
Ernie, well put! We are still waiting for someone against the ‘Fair Tax’ to come up with a lucid, logical rebuttal.
December 18th, 2007 at 5:55 pm
Thanks! Every time I read an article against the Fair Tax I’m reminded of the old saying.. “Some people just can’t see the forest for the trees”. I think it was never more true than in this struggle. This hue and cry about the poor people paying more taxes than the rich is a bunch of hooey. Rich people simply spend more money and therefore pay more in taxes. In this Fair Tax scenario, everyone wins because how much or how little you pay in taxes is up to YOU, the consumer, not the government.
December 19th, 2007 at 10:12 am
Justin, Thanks for writing about the “Fair tax”. How about an update in view of all the info posted?
December 19th, 2007 at 1:44 pm
Personally, I’ve always wanted a sales tax to replace the current income tax system, but if I have to take Huckabee to get it, I’ll pass.
December 19th, 2007 at 5:12 pm
It’s only ‘fair’ to give credit when it’s due. I am with you and others in this thread on sharing the rax burden equally.
What is the logic in overtaxing those that already contribute to society?
There is none. Except in the mind of those people that see the “rich” as a never ending money pool for their programs. I am truly fed-up of the mantra that the “poor” would pay more taxes. With the ‘Fair Tax’ they would begin to know what it is like to be responsible for one’s choices.
I know many “poor” people that are a drain on the system and get all for nothing, while the rest of us work to support them!
Bob, Huckabee may not be my first or second choice. In fact, I am disappointed that on my first presidential opportunity to vote I can’t find a candidate that resonate with my values and beliefs completely.
Both Romney and Giuliani are out of the question. Thompson is ok, but he is way behind to get the nomination. Huckabee? That will do. I surelly don’t want any of the democrats for the next 4 years.
December 19th, 2007 at 5:24 pm
Sara, how about elucidating that red herring you threw out there about “Europeans having to carry their tax receipts with them”?
Don’t be afraid to name names (which country, which tax receipts, in what context?)
December 19th, 2007 at 9:11 pm
I agree with you, Bob. Huckabee may not be the best choice but if it comes down to him and Hillary I’ll take Huckabee. We know where Hillary stands on the Fair Tax. Hopefully, the Fair Tax will be enacted regardless of who is in the White House.
December 20th, 2007 at 9:52 am
Ernie, Bob won’t vote for Huckabee and you would, so….where do the two of you see eye to eye?
Personally, a democrat would never go for the ‘Fair Tax.’ Things have to be unequal for them to champion, and this tax goes against the liberal grain.
January 12th, 2008 at 3:07 pm
Is the Fair Tax Good for You?
The implementation of the Fair Tax is predicated upon all active businesses entities, including US corporations, sub-chapter S corporations, limited liability corporations, sole proprietorships, trusts, and partnerships reducing their prices for services and new products by 23%.
It is also predicated upon a Federal sales tax of 30% being imposed on all consumers, Federal, State, and Local governments, and non-profit organizations on the purchase of services (including medical, legal, and insurance) and new products (including houses, food, and prescription drugs).
Business entities and investors will be exempted from paying the Federal Sales Tax on any new products or services constituting part of the business activity.
The Fair Tax proposal is defined as being “revenue neutral” in that it will take in the same approximate amount of Federal sales tax revenues as comes in from the existing business income taxes, payroll taxes and personal income taxes.
Shortcomings to the average working American appear to be that:
(1) NO GUARANTY OF PRICE REDUCTIONS: It appears to be intuitively obvious to the casual observer that most of tax savings, reduced costs and increased profits resulting from the elimination of the estimated 23% embedded cost will flow to the bottom line and be passed onto executives and investors, not the customers or employees.
There is no legal requirement for businesses to reduce prices by the amount of any embedded cost elimination savings and no way to measure what they actually do.
Examples of windfall profits by US corporations in the past have a dismal track record. Look at the deregulation of the electric power generation and distribution industry that generated record profits and obscene long-term price increases to consumers; and Healthcare industry advocates stating that the “free market” healthcare HMOs were more efficient but required a 12% bonus to offer Medicare Part C over and above what Medicare was already obtaining from the healthcare industry for beneficiaries using Medicare Parts A and B.
The US pharmaceutical industry manufactures prescription medications around the globe, is given Federal government protection from allowing people to purchase prescription drugs outside the US, and gives Americans the highest prescription drug prices in the world.
It appears that the preponderance of profits resulting from savings for any purpose (elimination of “embedded costsâ€, moving jobs off shore, reducing employee wages and benefits, and importing manufactured products) went straight to executive perks (bonuses and salaries, stock option plans, and executive retirement programs) and investors with very little to none to employee salaries or reduced customer prices for products or services.
Anyone who seriously thinks a 23% reduction in costs will not disappear long before it hits the consumer prices doesn’t understand the current implementation of capitalism, business organization and tax regulations, and corporate protectionism existing in the US.
(2) IMPACT ON MOST WORKING AND RETIRED AMERICANS: The Fair Tax program is a reverse “Robin Hood scheme†that shifts the raising of tax revenues to finance the US Government operations from the business community (reduced to zero) and higher income Americans to the Middle Class, retirees, and children.
(3) If the average cost of ALL new products and services does not decline by 23%, then the 30% Federal sales tax on the allegedly reduced prices from elimination of embedded taxes will increase the costs/prices of new goods and services over and above the current costs/prices for new goods and services.
(4) The Fair Tax proponents allege that it will raise the same amount of Federal Revenue as the current tax code. This means that the revenue from Federal business income and payroll taxes currently paid by businesses will be paid by individuals and State and Local governments under the Fair Tax. By default, individuals will pay more in taxes over their lifetime under the Fair Tax, not less.
Also, the Fair Tax will probably result in everyone (children, working persons, and retirees) not in the top 5% of income brackets to pay the 30% Federal sales tax on every service and new product they buy from “cradle to graveâ€. Since this group spends just about all their available lifetime income on goods and services subject to the Fair Tax, their effective tax rate will be close to 30%.
CONCLUSION: Great for business (taxes go to zero), great for high income earners (top 5%) who do not spend the bulk of their income and disastrous for the remaining 95% of Americans. It is also disastrous to Federal, State, and Local Governments; and non-profit entities (now exempt from all sales taxes).
In addition, State and Local governments will have to increase taxes to offset the Federal Sales taxes they pay, and non-profit entities will have less income available to provide services.
In closing, I have grave reservations that any savings achieved by corporations from not paying the business portion of the Federal payroll taxes and business Federal income taxes will result in wage increases or reduced prices for the products and services they sell.
January 13th, 2008 at 2:07 pm
The Fair Tax is illegal, because people who already saved money that was taxed when it was earned, will be taxed again on the same money when they eventually spend that money.
January 13th, 2008 at 9:40 pm
Under the current tax system, we will be taxed on any money from our savings that we eventually spend. We pay taxes on what we earn, what we spend, and any investments/savings that we eventually cash in and spend. Eliminating the income tax will give us more money to spend/invest and we will only be taxed on what we spend, not what we earn.
As for money that was already taxed before it was saved/invested under the current system and how that will be affected in a change to the Fair Tax system, that’s a good question. Anybody care to comment on that?
January 14th, 2008 at 4:13 am
The worst possible problem with the “fair” tax is that we have a consumer economy. Add 30% to the price of everything and a lot less will get sold. It will be a disaster. BTW, it’s 30% and they are using typical republican funny math (or just plain lying) when they say 23%. Another big problem is that 30% is no where near enough to pay our bills, watch the debt skyrocket. Of course, that’s no problem to republicans either.
January 14th, 2008 at 9:37 am
It’s close to impossible to prevent savings to be exempted from taxing once that money hits the market. However, the *return* that that would result from the elimination of the income tax would be fabulous!
I’d love to see the day I’m in a position to control the funnelling of MY money in venues of MY choice rather than the government’s. Income tax at both levels is the biggest rip-off.