What do you think of this Fair Tax proposal?

[hapaboy]

IMHO, this Fair Tax proposal is fair and reasonable and should be supported by all of us, irrespective of our political orientation.

In essence, the bill would do away with federal income tax entirely, and replace it with a 23 per cent consumption tax on all purchased goods, excepting specific necessities, e.g., food. No more taxes withheld, no April 15 pressure, no need to maintain various expense records, etc. The bill includes provisions for protecting people with low incomes.

http://www.fairtax.org/

 

[spect8or]

Sounds pretty good to me.

One hell of a battle to get it implemented though.

Lots of this sort of thing to overcome:

"I don't know if anything really dramatic like that is politically feasible," said Linda Volhein, executive director of Florence Crittenden Services of Arizona, a non-profit group. She dislikes both the flat tax and national sales tax ideas because of the potentially harsh effect on lower-income Americans.

http://www.azcentral.com/business/articles/0403MyMoney03.html

 

[AAAintheBeltway]

Before we get too excited, let's look at the ramifications. How will you feel about paying a 25 or 30% sales tax on your next car? Boat? How about your next house?

One of the key ways the tax code keeps people unaware of what they are paying is the withholding provision. You get used to it and don't really pay attention. People start having to write big checks and there will be a revolt. That's why this will never pass.

 

[dougcs]

While I think there is merit to a national sales tax and IMO, I would pay less taxes than under the current system.

However:

1. Will rents be taxed. If yes, how will homeowners be taxed and how complicated will that paperwork be?

2. How will cross border purchases be managed: I see a possible great shift of purchasing patterns to Mexico and Canada to get many items and avoid the big sales tax back home. For example, I can see big traffic in buying clothes and other items like that from foreign countries. Remember, the 23% gets added on top of the 7 % or so tax imposed at the state and local level.

Let's see, gas is now $2.00 per gallon; so under the new tax it goes to $2.50. Will this lead to people buying smaller (less profitable to GM, F, etc who already are on shaky ground) and lead to people buying more FOREIGN cars?)

ANd, does the basis for the 23% include the local taxes already imposed.

3. Based on what you see in Europe that has a close cousin to this tax, it seems to depress economic activity although Europe has many other deterrents.

4. I don't buy the argument about less time to fill out the IRS forms. Most people use 1040ez and the standard deduction(IMO) and it takes very little time to do so.

5. As already pointed out, given the choice between buying a new car and adding thousands to the bill or keeping their old one, will more people keep their old ones?

6. Will stock sales be taxed? If so, how?

7. Should people add 25+/- % to their already high and getting much higher medical bills? Granted there is some tax built into these costs now and even if it is more than the 25% (resulting in a net reduction of total costs), do you think the providers will be nice and give it up and how do you think people will react when told they have to pay this tax when they do not pay a [visible] tax now. IMO, given the current crisis in healthcare costs, this item could easily be used by opponents of this tax to kill it.


8. Implied in this proposal is elimination of the IRS-does anyone really think that will happen, maybe it gets renamed but I doubt it goes away.

9. Why will members of congress give up their current meal ticket-ie, the dreaded complex 1000s of pages long tax code THEY CREATED mainly to payback their big donors.

IMO, this makes for good campaign rhetoric but is very unlikely to get passed.

DS

 

[domi93]

income tax:
15k to 100k year : 12%
over 100K : 17%

Corporate tax:
12.5%

national consumption tax:
8.5%

dividends,capital gain,property,death,saving tax:
0%

 

[dgabriel]

It may be a good idea in theory, but will be a disaster in practice. Some of the consumer economy will go unreported, people will pay cash, merchants will agree to make unbooked cash transactions, a great deal of tax will go uncollected.

I would support a 25% flat tax across the board on income, with a minimum earnings threshold. Maintain the mortgage deduction. Abolish all other deductions and loopholes. NO special treatment.
Drop the estate tax and keep capital gains at 15%.

Same rate for corporations and abolish ALL incentives, abatements, and corporate welfare.

I hate the graduated tax system. People say why should a person earning 40k pay the same rate as a person earning 400k. My answer: the 400k earner will pay 10X the 40K earner.

 

[Pabst]

Quote from dgabriel:

It may be a good idea in theory, but will be a disaster in practice. Some of the consumer economy will go unreported, people will pay cash, merchants will agree to make unbooked cash transactions, a great deal of tax will go uncollected.

I would support a 25% flat tax across the board on income, with a minimum earnings threshold. Maintain the mortgage deduction. Abolish all other deductions and loopholes. NO special treatment.
Drop the estate tax and keep capital gains at 15%.

Same rate for corporations and abolish ALL incentives, abatements, and corporate welfare.

I hate the graduated tax system. People say why should a person earning 40k pay the same rate as a person earning 400k. My answer: the 400k earner will pay 10X the 40K earner.

I agree wit ya. A simple flat tax will be fairer and much easier to enforce than any national sales tax. Besides, why should a merchant have to serve as an unpaid tax collector for the Federal government.

 

[dougcs]

Quote from Pabst:

I agree wit ya. A simple flat tax will be fairer and much easier to enforce than any national sales tax. Besides, why should a merchant have to serve as an unpaid tax collector for the Federal government.

I'm gonna be dissappointed if the national sales tax doesn't get passed. I'm thinking of all the ways to beat it:

Purchasing coops for clothing, etc. since businesses don't get taxed, it seems if the coop buys them (no tax) and then the members buy from the coop.

Trips to Mexico. Border towns will boom. Black markets will boom as will smuggling. Who will be the next Elliot Ness?

I wonder how a "new" home will be defined. Seems you could buy some property, erect a trashy shack on it and then "make improvements to it" to make it into a McMansion.

Same question on how a "new" car is defined. How about all those new "used" cars, used for 10 miles by the dealer to get around the sales tax on "new" cars. Of course if that doesn't work, I can see companies being setup to buy new cars (no tax), using them for a day and then selling them without charging the tax.


DS

 

[kjkent1]

Quote from Pabst:

I agree wit ya. A simple flat tax will be fairer and much easier to enforce than any national sales tax. Besides, why should a merchant have to serve as an unpaid tax collector for the Federal government.

Merchants already serve as unpaid tax collectors for the Federal government visa vis payroll taxes. And, anyone who has ever worked for a government taxing authority will tell you that auditing sales tax is enormously easier than auditing income. So, your enforcement theory doesn't hold with the facts.

As for fairness, what could possibly be more fair than taxing a person on what he/she consumes, and not on what he/she saves?

The primary advantage to taxing consumption is that the government can modify the tax on various items to stimulate or dampen various economic sectors.

A national sales tax is a better idea in every way that matters, in my opinion.

 

[Pabst]

Quote from kjkent1:

Merchants already serve as unpaid tax collectors for the Federal government visa vis payroll taxes. And, anyone who has ever worked for a government taxing authority will tell you that auditing sales tax is enormously easier than auditing income. So, your enforcement theory doesn't hold with the facts.

Business is not a just collector of payroll taxes but most importantly a contributor to S.S.

I oppose all sales taxes as regressive to consumers and onerous to business.

As for fairness, what could possibly be more fair than taxing a person on what he/she consumes, and not on what he/she saves?

As far as "fair", where was it ordained that saving is holier than consumption? Those NBA players with six cars in the garage are more stimulative to the economy than J. Paul Getty with his brown bag lunch. The coming re-valuation of equities will make one point crystal clear: a society that invests billions in GM securities but won't buy the companies products is playing a fools game. Why is saving cherished? So that lenders (those who saved capital) may achieve a "risk free" rate of return by subsidizing indebted governments and corporations. What if those savings turn to dust? My Sony flat screen will outlast many 401k's. Saving vs. consumption produces no clear economic winner. In fact I could argue that as Americans have yielded to the saving mantra it has coincided with bloated asset prices that exceed intrinsic valuations and will contribute to a boom-bust much like that fabled "saver" nation, Japan.


The primary advantage to taxing consumption is that the government can modify the tax on various items to stimulate or dampen various economic sectors.

Oh swell. Back to the 1960's as we allow the Federal government to reactively late in the curve "engineer" a sector by sector plan for growth.
Under that scenario not only can Big Brother continue to spend my tax money unwisely but now has the tools to tax me accordingly to how unwise they perceive my spending to be. I can't WAIT to see the lobbying on those "modifications"