boonecountygirl
Wiley Coyote
hal
Herman Cain
Mark Pellin
The Poulan Weed Eater Consumption Tax Example
You know, sometimes the best answer is also the simplest answer.
William of Ockham (Occam) was a 14th century English philosopher who came up with the ‘crazy’ notion that perhaps the simplest answer is the best one and it became known, oddly enough, as ‘Occam’s Razor’.
Same with the idea that perhaps the United States should go completely to a consumption tax to replace the current income tax system in its entirety.
The income tax might have made some sense back in 1913 when the 16th Amendment was passed making it ‘constitutional’ to tax people’s incomes when only the wealthy had much income and wealth to tax in the first place. (The 16th Amendment can be repealed just as easily as it was passed, you know….has anyone seen the good old 18th Amendment lately?)
For much of US history, incomes were modest by any standards, especially when we were primarily an agrarian nation and people worked on their farms to put food on the table.
But now that we have millions of people who own stocks in their portfolios and a far wider middle-to-higher income cohort in America in 2010 versus that of 1913, maybe it really is time to rethink what is the best way to tax people so that they can not monkey around with the tax code at all.
The simplest way is to make everyone pay their ‘fair share’ of the taxes we need to fund the federal government at the end of the line of consumption, i.e. at the cashier’s scanner.
Think of this:
Every time a person buys something at Wal-Mart, let’s say a ‘Poulan Weed-Eater’, it would be scanned and the receipt would pop out with the following information on it:
Poulan Weed-Eater: retail price, $200.
Federal Consumption Tax at 20%= $40
State Tax=$16
Total=$256.
Of Your Federal Tax Payment of $40:
$13.20 goes to pay for current Social Security payments for today’s retirees
$10.00 goes to pay for Medicare payments for current retirees
$5.20 goes to Medicaid
$4.00 goes to pay the interest payments on this enormous debt we have rung up
$7.60 goes to pay for roughly 2/3rds of the discretionary spending
$0.00 goes to pay for defense/homeland security
Roughly $12.00 is borrowed to pay for defense, homeland security and the rest of discretionary spending from the Chinese.
Thanks for shopping at Wal-Mart!”
This would help the average American clearly see where their tax dollars are being spent on each and every transaction they make every single day.
Just being able to make the connection between their tax dollar payments and where it actually goes would be an enormous help in getting people to see what we are dealing with nowadays in real-time. Today, people are just being fed distorted information from both sides merely and purely for tactical political gain and advantage.
There can be some limited exclusions for people below the poverty line to receive federal assistance to either repay this consumption tax or forego it altogether since so much of their resources go towards the basic necessities of food and shelter.
But that would be about it. No longer would anyone be able to manipulate the arcane and byzantine tax laws of this nation to their advantage. Everyone would clearly know and see what their tax liability is on each and every purchase and receipt printed out at the check-out counter or at the closing of a purchase of a home or automobile.
Imagine seeing the taxes you will pay on the next t-shirt you can buy for your kids from Wal-Mart which will have this emblazoned on it:
‘My Boomer Parents Got Everything They Wanted During Their Lifetimes and All We Got Was This Enormous $24 Trillion National Debt to Pay Off For the Rest of Our Natural-Born Days!’
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Bingo!
What you’ve described here Frank is pretty much exactly what the FairTax calls for…and is unbelievably close to becoming a reality. Not in the sense that it could happen tomorrow, but with over 60 actual Co-Sponsors of this bill in Congress, and still others who said they would vote for it if it came up, the opportunity to actually get this done edges closer each day.
Lest people “freak out” over the idea of such a high percentage sales tax, let’s include a very important piece of information here. The cost of tax compliance currently built into the price of a new good or service is roughly 22% of the retail price of that good.
Looked at another way, if you buy a product for $100, nearly $22 of that cost is simply the actual taxes paid by the manufacturer, the taxes of the companies responsible for the components the manufacturer used, the taxes of the companies used for shipping and distribution, and each of those entities actual labor cost for determining what tax they actually owe anyway.
Basically, once the income tax, payroll tax, corporate tax, capital gains taxes, etc, etc, are done away with in favor of a consumption tax, the actual price of that good at the retail level will be significantly lower than it is now. Adding a consumption tax to this new, lower price won’t hurt nearly as bad as upon first review…especially considering that your paycheck will also be increased do to the lack of any withholding.
I’m with everyone who will make the argument that spending cuts are needed. I personally would love to see us move in both directions simaltaneously…lower spending AND make the current national embarrasment of a tax code obsolete.
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Now that I know the ‘Fair Tax’ is not the doomed ‘flat tax’ effort of the 80′s or ’90s, there is a lot to like about going to the consumption tax as a full replacement for the existing ossified and archaic tax system based on income.
here’s one other thing several investment types have told me: eliminating the corporate tax system tomorrow would lead to at least a doubling of the values of every stock on every stock exchange in America and perhaps a quadrupling of values within a year.
Why? Because once the present value models star whirring in your stockbrokers office, all of those future expected corporate tax payments of up to 38% on profits get compressed back down to today as increased cash flows and hence, a massive re-valuation upwards of the stock market.
How about that for making your nest egg look and feel better coming out of this horrendous recession that still feels like it is going on?
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Speaking to Frank and Christian….
Here is my opposing view on this….If you think consumption taxes won’t be monkeyed with…I’ve got a bridge somewhere in Arizona I’d like to sell you. Cass Sunstein and the rest of the “Nudger’s” and lobbyists will see to it that the products you buy will be taxed on the basis of the latest pet agenda, currently the Climate Change scam. So that weed-eater would be taxed at a rate much higher than the battery driven car you purchase. (They are already doing this by giving tax breaks to caulk your house or buy a Rinnai water system or solar panels.)
I cannot fathom why this subtraction/addition “Fair Tax” plan makes anything better. Visibility does not lower the tax rates.
Your idea, while sounding like the KISS method, would be bent and twisted like pretzels… on the basis of “fairness” which belies the name of the “Fair Tax.” You don’t honestly believe favored products would get the same tax as the incandescent light bulbs with the kind of corruption we have going on in the government? And what makes anyone think that the 20% rate today would not be increased to 30% next year…or 40% the year after that.
Buying an imported car? Pay import taxes, local taxes, plus 20%. Then pay license fees, insurance and taxes on gasoline to drive. Think that hurts the rich or the poor?
How do you plan to address services? Add 20% to your next haircut or dry cleaning bill? Add 20% to the price of excavating a tract of land?
Your plan doesn’t really address the other LOCAL taxes people pay already in sales taxes, property taxes, state income taxes, etc.
The only ONLY way to tax people fairly is a FLAT tax. And even then we would have to babysit congress to keep them from incrementally increasing it as time goes by.
My parents used to ask me, “Have you ever seen a tax go away?” I have not.
My opinion of the so called “Fair Tax” is that it is just another way to tax the rich….and disenfranchise the lower income population in our midst. I know Boortz and others try to sell it otherwise, but I don’t agree with them. The “Fair Tax” eliminates the interest deduction on mortgages. Take that away and then add this 20% to the price of a house and what have you got? A lot of people who can no longer afford a house.
And, by the way, wholesalers do not charge sales tax….only the retailers do. The wholesalers are having to pay employment taxes, yes. If you are going to pay for Social Security, Medicare, and unemployment insurance with a “Fair Tax” can you honestly say those costs are not going to go up? While you say the taxes already exist within the pricing structure, just making those taxes more visable does not make them go away or decrease.
I owned a wholesale business and I did not pay taxes on shipping….though I’m sure the shippers had to pay their own share of taxes. If you want to call that “built in” taxes, you can make that point. Again, making it more visable, does not make it go away. Are you eliminating fuel taxes? The states and the Feds collect fuel taxes.
Add to this nightmare the fact that Obama’s cute little debacle of healthcare is about to tax health insurance benefits to pay for medicaid and medicare. Will health insurance be exempt from the “Fair Tax?”
If your point is to slow consumption because you think we are consuming tootoo much, then don’t worry….Obama is curing all of us of thinking we can buy anything. We’ll all be broke by the time he is through with us. Maybe we can survive on the barter system.
On the corporate profits taxes, do you honestly think our government is giving that one up to replace it with consumption taxes? Exxon Mobile? No taxes on their profits? The way things are going, the government is going to own all of our businesses and property because no one is going to be able to afford to buy a house or a car or furnishings ….have you seen the foreclosure rates? Fannie and Freddie own most of the mortgages and thereby own how much property that used to be privately owned? How many builders are out of business now?
As long as we are dreaming out loud here….I’d vote for a flat rate income tax ( a la Jack Kemp) and get rid of all of the other Federal taxes. Congress would not listen to that idea and they sure as heck are not going to agree to the Fair Tax unless they get kickbacks and favors from and for their pet lobbyists. Shoot me if you want to…I cannot see how replacing X taxes with Y taxes changes anything for the better, lowers the impact to the consumers, keeps corruption out of the system, or makes life any easier for us.
I’m skeptical….do you think? What we are likely to get is a VAT tax added onto all of the other taxes…So we will get that consumption tax, but without the other tax deductions the “Fair Tax” plan describes.
We agree on one point. The whole tax system needs to be tossed into the dumpster and we need to start over. A Flat tax of 10% on income is my choice with no option to increase it.
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Wow Cheryl. This will take me a while to respond to, which I don’t have right now as I’m getting ready to leave for a meeting.
I would first like to invite you to actually look at the FairTax proposal at fairtax.org. Much of what you have argued in good faith aren’t actually elements of the bill…or simply a misunderstanding of how certain elements are applied.
One brief example….
You mention that the mortgage interest deduction would be gone. Who cares! What that deduction allows you to do is pay your mortgage interest with pretax dollars. Under the FairTax, ALL of your purchases are made with pretax dollars!
It’s like being given a steak for free at a restaurant, but you get mad because you aren’t then able to use your 10% off coupon.
Additionally, did you know most homeowners don’t even take the deduction? I don’t. My standard deduction is bigger.
Trust me…I’ll answer your concerns more fully tonight. This is my biggest political issue/cause. I know you are a thoughtful and rational person so the discussion will definately be worth having.
Until then, have a great day.
~Christian
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Me, too…can’t discuss til later this evening….but will look forward to the debate.
Thanks Christian
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Cheryl:
all good points….especially about being ‘skeptical’ that the rates will all stay the same or not go up.
The first comment I would make to you is this: ‘If you were living with an abusive, alcoholic, heroin-addicted wife-beater, who also never bathed, brushed his teeth or generally groomed himself…for the past 40 years, mind you!, wouldn’t you at least consider leaving him and trying to find someone who is a little bit better and simpler to live with?’
same with the current convoluted and distorted and completely broken income/payroll tax in America. It, too, started out (sorta) simply in 1913; (it had like 36 brackets only to be reduced to like 7 the next year) but virtually no exemptions/exceptions and exclusions.
why? Because politicians had not had time yet to distort and pervert it yet.
that is just life….as Forrest Gump would say: ‘It Happens!’
Shift to the Flat Tax for a moment: It sounded like a great idea when people trumpeted it in the 80′s. But, Dick Armey and the others started offering exemptions right off the bat for mortgage interest deductions; charitable donations and so on and et.al. so that when all was said and done, there was no way it was ever going to be revenue-neutral as it was purported to be.
Chalk that up as a good idea that turned dumb and died.
But the consumption tax immediately has these benefits:
1) the corporate income tax is repealed.
2) stock market values would double overnight (why? no 38% corporate tax to eat into profits anymore)
3) it is simple
4) rich people truly pay ‘their fair share’ in the sense that they will never buy a used Gremlin when a nice and shiny bright yellow Lamborghini will do….and even if they don’t, that just adds more to our savings rates and investment capital available for new products, companies and jobs.
5) The US becomes a ‘tax-free zone’ for manufacturing once again…perhaps some of the jobs overseas now will return?
6) everyone will pay into the system, not just the 1% of the highest-earning taxpayers who know pay close to 40% of ALL income taxes. We don’t want an Oligarchy to rule this nation, do we? They tried it in 402 BC Athens after the fall of Athens to the Spartans in 403 BC and it didn’t work very well….Athenian democracy returned in 401 BC.
we could go on forever on this but I won’t.
I just don’t think going home to the ;warm and comfy’ (sic) confines of the current income tax system that is smelly, dirty, rotten and looks like the county landfill is the way to go.
I really don’t.
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Cheryl,
I’ve been up a very, very long time attempting to respond to you as effectively as I can. I actually posted the results as a new post here:
http://pundithouse.com/2010/08/the-fairtax-answering-a-critic
Forgive the length. I hope I do justice in answering some of your questions, while perhaps sparking others!
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[...] post was originally a comment response to Cheryl on Frank Hill’s post HERE. As it turned out longer than expected, I figured I’d bring the discussion to the forefront. [...]
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A note to Frank, who wrote the original article. This is not about going home to the same abusive drunk. This is whether or not the replacement husband is any better than the first. So far, I don’t think so. However, I do appreciate your article and opening this up for discussion. Keep in mind that I am giving my opinion based on what I have read. I do not have the Fair Tax book in front of me, so my sources are on the web, including the FairTax website.
Thank you Christian for your detailed reply. I really do appreciate the time you took to answer the questions I posed and my skepticism. So here we go with my counterpoints:
Christian: “The Flat Tax, however, retains the invasive income tax administration apparatus and can easily revert to a graduated, convoluted mess, as it has many times over many years. It still requires individuals to file their income with the Federal government, a responsibility eliminated by the FairTax. It also retains much of the cumbersome rules of the current tax code in order to determine what “income” actually is.”
Cheryl: You say there is “no perfect tax system.” I say there is. Or at least close to perfect. And that is a Flat Tax that is based on tithing. If you want people to pay for the privilege of being a U.S. citizen, then 10% of each person’s income would address that. No matter what the income is, $3000.00 per year or $300,000.00 per year, each person would contribute their 10%. Now that is what I would call “simple.” Using this Flat Tax, I would eliminate payroll taxes, business taxes, etal. The Flat Tax would take the place of all other Federal taxes, as you say the Fair Tax would.
Christian: “Furthermore, the Flat Tax eliminates neither payroll taxes nor business taxes, thus retaining a level of complexity as well as the hidden cost of business taxes in the prices of the products we buy. Remember, businesses don’t pay taxes; they simply transfer taxes from the final customer to the government.”
Cheryl: If I were queen, would have eliminated the payroll and business taxes with the Flat Tax. LOL
The points being sold by the Fair Tax people sound so great on the surface. As usual with such a large and complicated tax system, the devil is in the details. It is touted as “simple.” So simple that we will no longer have to go through the complicated federal tax forms and will no longer have to file income taxes. Yet, with the Fair Tax, every single purchase transaction in the U.S. would have to be tracked. (This is a bastard kin to every person’s health information tracked by the Federal government.) Every loaf of bread, every gallon of milk, every candy bar, every shirt, every shoe, every bottle of aspirin, every, every, everything would be tracked by the Feds. Every cash register in the U.S. will be tied into a Federal data bank. Every business bank account will be tracked to prove the reporting. The Feds will not be content to have just businesses taking on this tracking responsibility. When discrepancies occur in reporting, who is going to be held responsible? The consumer. In order to prove who bought what and where, the next obvious step is ID buying cards. So while Sam’s or your local grocery now keeps track of what you buy, with the Fair Tax, the Feds will track what you buy. Now you can say…oh, that is not in the Fair Tax Bill. But you have to look at how this is going to be implemented.
Christian: “You are correct. The FairTax is a federal revenue collection bill. You want state tax reform? Elect good Governors and state legislators. You want property tax reform? Elect good Mayors, city council members, and county commissioners.”
Cheryl: My point there is that the Fair Tax is not lessening the tax burden on people, but rather just another way of collecting burdensome taxes in addition to all of the other taxes we are paying to States and localitites. In other words, it is not helping the over-taxed situation we have. It is just shifting from income to consumption and handing the Federal government either the same amount or more. You point out that it is not a “tax cut” bill. So IF the reasoning to change the tax system is to slow the growth of the Federal government, or to starve the beast, this bill doesn’t get there. The Fair Tax Bill just rearranges the source of revenue from income to consumption.
Christian: “Yes, the mortgage interest deduction goes away, but who cares? All that does is allow the interest to be paid with pretax dollars. Under the FairTax, all purchases are paid with pretax dollars!”
Cheryl: My view on the mortgage interest deduction is that it assists more people with property investment for the primary home. When you say “who cares,” I am hearing you say you think that “pretax” dollars saves so much money for people that this is at least a wash and maybe a boon to the home owner. But as I stated before, the dollars we have are still taxed, just on consumption not on income. So eliminating the mortgage interest deduction doesn’t help anyone who has a mortgage with interest. I am saying, there are no “pretax” dollars in the Fair Tax Bill unless you stick your money under a mattress somewhere and purchase nothing for the rest of your life. Money is still taxed, just in a different way.
More on the subject of housing: The idea that only new home purchases will be taxed while “used” homes will not be subject to the Fair Tax will throw the new home housing industry into a collapse. (All of the articles I’ve read on critiquing the Fair Tax say the sales tax number is more in the 30% range rather than the 20% or 23% touted by the proponents, but for our purposes we’ll use the 23%. )
Here is one reason why I think this turns into a nightmare: Lets say a builder wants to put a house on the market for $250,000.00. Now the builder is selling a new house, so he has to charge sales tax on that house, so add another 23% to the purchase price. We are now up to $$307,500. That house sits next to a “used” house. The “used” house which was built before all of this added tax is priced at $250,000.00. Next comes the realtor who gets 6% commission on the sales. But under the Fair Tax, the realtor’s 6% commission is now subject to the Fair Tax and that is 23% of the 6%. 6% of $307,500.00 is $18,450.00. But add 23% onto the 6% and you have a commission + taxes that is now $22963.50. Add that to the $307,500.00 sales price and you now have a house price of $330,193.50. The builder doesn’t pay income tax. The realtor doesn’t pay income tax. But the home buyer just got soaked. A previously priced $250,000.00 home is now $330,193.50 with no negotiating or wiggle room. The so-called Fair Tax is $62,013.50 that just went to the Federal government on the sale of one house. Why do we want to give the Federal government $62,013.50 on the sale of a house? Unless of course the builder and realtor drop their prices to compete with the “used” houses, they have no negotiating room. Do they lower their standard of living so they can sell a new house? I could use cars as another example of the same scenario. New cars and new homes will necessarily be out of reach for more people. Plus, unless you are paying for a home outright, the mortgage you apply for will include interest on taxes you are paying to the Federal government. How does that make things better for you? Same applies if you are borrowing to buy a car. As for rich people being the only ones buying new cars and new houses because they can afford to hand over this much more to the government, that remains to be seen. Rich people I know are rich because they have been frugal and wise with their money. I think the demand for “used” will go up which will cause the prices of “used” to go up…as in supply and demand.
How about renovations. You want a new faucet, pay the government 23% more for it. You want a new roof, pay the government 23% more for it. You need a new water heater? I can see the greedy little politicians rubbing their hands together with glee. You say this will be covered by not paying income taxes. I think if you add 23% to everything you do in your life, you will be paying a heck of a lot more than the income taxes you were paying. Add 23% to a plane trip, a cab ride, a night in a hotel, a meal at a restaurant, on and on and on. I can see this as an economy killer and less disposable income for people to make choices on what they can and cannot buy.
One reason politicians will go for this is because close to 50% of the population is not paying income taxes now. This is a way to get into those pockets. Where my Flat tax idea is better is that both rich and poor will pay their 10%, no matter how much or how little.
Christian:”Quite the contrary. Under the FairTax, because of the rebate I mentioned earlier, the marginal tax rate paid by those at poverty level is zero. Those spending at twice the poverty level pay an effective tax of only 11.5 percent — a rate much lower than the income and payroll tax burden they bear today.”
Cheryl: I stick to my guns on this. Good for the rich, bad for the poor. Also, creating class differences in the tax system, which we have now…just another twist on it. I’m referring to answers on this one from another site: Article on the Fair Tax below
“Instead of simply not taxing staple items like food, health care, transportation, or clothing, they want the federal government to send each of us a check every single month. Think of the dependence this would create. It’s very hard to imagine a “limited government” — which many of the FairTaxers say they want – buying the loyalty of every American household with a monthly government payment of $478.83 – or any other substantial amount.
The purpose of the rebate is to make essential consumption (as measured by spending up to the poverty level) exempt from the tax. We do not want to tax the poor. This is similar to the earned income credit (in the income tax) that doesn’t tax income below a certain level. Only the poor will not have to pay a tax preparer to fill out a complicated form in order to qualify for it. many have paid $200 to file that return.
But the “rebate” isn’t similar to the earned income tax credit because it’s intended to go, month after month, to every American household. If the intent was really to avoid taxing essential spending to place less burden on the poor, one could simply not levy the sales tax on stable items like food, medicine, school supplies, or clothing. ”
Finally, Christian….this is a shell game where you throw money into the Federal government and after they spend it on God knows what else it will turn into yet another ponzi scheme, just like we have now. I trust it about as far as I can throw a 350lb. linebacker…..NOT. I cannot see anything better and I can see a whole lot worse with the Fair Tax. There are as many or more complications in the Fair Tax as there are in the current income tax policies we have today.
As you say, there a many facets of the Fair Tax that would take days to go through. That is one of the reasons I say it is NOT simple and it is going to be yet another convoluted failed tax scheme that needs to go into the dumpster. My opinion, Christian. No offense intended toward you. There are a lot of people jumping onto this bandwagon. I’m just not one of them. We will just have to agree to disagree maybe…
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Cheryl: why anyone keeps going home to the same abusive drunk spouse (which is the income/payroll tax example here) is completely beyond me.
it is out-dated, corrupt and rife with so many exceptions and exemptions so as to be almost laughable. In fact, I used have people come into the congressional offices and literally ‘laugh’ at how stupid Congress was in trying to pass some tax bill cause they had already figured out how to get around it.
here’s why the individual would be better off under the consumption tax, even if it is 23%: No payroll taxes, now at close to 16% combined between individual and corporation, either means more disposable income to the employee or profit to the company or both. That coupled with even the lowest tax threshold of 10% puts the consumption tax below the base level of 26% of income that is taken from the individual nowadays and sent to the government ostensibly on their behalf. (there is no Social Security trust fund account)
Not-so-wealthy people don’t buy Lamborghinis; they buy used cars or from family. So 23% of a $1000 car is $230. The rich guy pays $23,000 consumption tax on the speed car.
that is about as progressive of a tax as they come.
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Frank, I am not defending the current tax system. I am not suggesting we keep the same income tax system. I thought I made that clear. I am only saying that in my opinion the Fair Tax is no better and I listed reasons why I think what I think. I am not looking for another “progressive” tax system. I am looking for a system that is equally fair to each individual. No graduated curves, no Federal tracking system for purchases, no opportunities for politicians to keep tweaking anything, no funny business with new or used goods, etc.
People are creative. Another example of a builder of new houses could go like this: He builds a house and lives in it for 3 mos. and it is thereby “used” and he can sell it without the “new” tax. While he is living in one house for 3 months he can be building another. When the first house sells, he moves into the next one for 3 mos. Etc.
I can see that you are sold on the Fair Tax Bill. That is your option. I am not sold on it as a viable better solution to abolish the current system we have. Not intending to get anybody’s goat….just pointing out what I think are valid opposing points to it. If this Fair Tax is supposedly revenue neutral, but just another way to collect taxes, it does not then accomplish a goal of mine…which is to get the Federal government off of our backs and reaffirm States rights. It doesn’t shrink the Federal government, but turns it into a tracking device to monitor all of our purchases. I don’t see that as any better than the income tax system we have now. In fact, I see that as much more invasive. And you can bet money that Queen Michelle, or some other control freak, will be “nudging” higher taxes on salt and soda pop…..whether you see it in the Bill as it is written now or not. They’ll have to do that to justify cutting health costs. Look at the taxes on cigarettes. Same same. You will not be able to convince me otherwise on that. There is no question that the “Fair Tax” rates will be manipulated in the same ways that the other taxes have been.
I hope some smarter solution arrives in the meantime and we can get away from both the graduated income tax we have now with all of its caveats… and the so-called Fair Tax idea where all of our purchases will be tracked by the Feds. There has to be a better way.
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Our purchases are NOT tracked by the FED. Under the FairTax, the FED contracts with the States to collect and remit the tax. So, you purchase some item at Lowes. Lowes will collect the State Tax and the FairTax and detail them on your receipt. At the end of the month, they complete their sales tax report, compute what they took in in tax, take off a on-quarter of one percent fee for administration, and remit the net to the state, just like they do now for the state part. Then, the states, once per month, remit the FED part ot the FED. In essence, the FED will get 50 Direct Deposts per month. They do not know who bought what. (ps. There is a separate FED dept to track internet purchases and be sure that these are remitted.). Since the big box stores and chains have no incentive to help you cheat, most of the tax is collected under the normal process of buying and selling, since the big box stores and chains sell most of the goods and services. In addition, it is the STATES that do the auditing, just like they do now.
As to your second concern about manipulation of rates. Even if this happens, it will be right there on the receipt and will not be hidden in the cost of the item as it is now.
You are correct that the FairTax does nothing on the Spending Side of the FED. This is about collection. We still have to address the Spending Side. It is kind of like getting your pay by direct deposit or check. Neither affects the way you spend your pay but direct deposit is much more efficient and easier to manage than checks.
While I agree that the FairTax is not Utopia, it is 1000% better than what we have now. After all, what kind of system taxes your savings and investments and productivity?
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Cheryl:
there is nothing magical about a Flat Tax that will ‘guarantee’ that it will always stay low or without exemptions. Dick Armey used to trumpet one in the ’80s and ’90s which sounded great….until he added on mortgage interest deductions; charitable deductions; health insurance premiums from the corporate level and so on and on and on…..
the Flat Tax basically has already had its turn at the plate and failed to gin up enough interest to pass.
it is the consumption tax time to try…
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Cheryl,
At the end of the day…
I would rather pay tax on what I SPEND rather than what I EARN. What I earn is not the governments business!
I would rather not pay tax on my investments.
I would rather not have to file any paperwork yearly with the government and have to read books and books of rules to figure out what I owe (which still happens under the Flat Tax).
I would rather my employer or my business not make decisions based on the tax consequences of doing something or not.
I would love illegal immigrants to suddenly see their cost of living in the US go up because they don’t get the prebate.
I would love to see US products more price competitive overseas by stripping out the cost of the current system built into their price.
I would love to see the US become a capital magnet for foreign investment. That means JOBS.
I would love to go from 60,000 pages of tax rules to one that is 132 pages.
There is efficiency and cost savings in the FairTax compared to current.
I agree totally that government is way to big and we have to get spending under control. Why can’t we both do that AND pass a better, more visible, less costly to administer way of collection that frees most people from ever dealing with the government again?
It seems, respectfully, that your biggest opposition to the FairTax is that it doesn’t do what you want it to do. That’s like not wanting to buy a Ford because it won’t fly you to Europe for the weekend.
Can’t you just see the benefits for what they are?
At the same time, you are promoting a “flat tax” that doesn’t exist and that suffers from the same problems you have with the FairTax! Without any of the benefits I mentioned above!
We need to grab coffee some afternoon. I’ll buy.
OH! PS. To your homebuilder who lives in a house for three months and then sells it…
Property or services originally purchased for a business purpose that are
subsequently converted to personal use are subject to the sales tax at the fair market value on the
date of the conversion. The person using or consuming the property is liable for the tax and has
the responsibility to remit the tax to the state sales taxing authority. Example: If a business
owner purchased a $20,000 car for business purposes and two years later decided to give the car
to his or her teenager, then they would have to pay the sales tax on the value of the car at the
time, say $15,000.
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The flat tax has been tried already in 1913 it is the current federal income tax. How is that working out?
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very perceptive point, Mr. Pierce!
take a look at the first income tax table…it is a dizzying array of like 39 different brackets, almost for every difference in income of $1000 or so.
Congress came to their senses (if you can believe that) around and reduced it to maybe 7 brackets and there is stood for many years.
Here’s my favorite example; Hoover raised taxes and tax rates in 1930, ostensibly to reduce the budget deficits (during the Great Recession That Was Soon to Become the Great Depression Because of Dumb Decisions Made at Precisely the Wrong Time and in the Wrong Place!) and guess how much was actually collected in 1931 by the IRS?
5%.
5-measly-%!
Lessons learned from history? I wonder….
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Our income tax code is all about the government exercising power and control over American households and businesses. FairTax would empower us to control our tax burden through our consumption habits and eliminate all federal taxes on business and investment. It would instantly make America the best place in the world to invest or operate a business.
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