What's so fair about fair tax?

Question

This morning, I've heard on the news that the government want to kick the income tax in replace of the fair tax. This tax would make many pay checks higher, but it will also make the sales higher as well. I always like the income tax because it give me money I really need every year, but I'm not sure the fair tax would give the similar benifict. Would it be fair to pass the fair tax if it would mean the lower income people would have the short end of the stick?

Answer 1

The Fair Tax is a taxation method created by John Linder and Neil Boortz. It's basically a modified national sales tax. This tax method would replace all federal taxes, including social security, medicaid, estate taxes, etc.

The Fair Tax's aim is to tax people based on their consumption, rather then their income. As we all know, there are many loopholes, tax rates, and shelters for lowering or reducing your income taxes if you know all the rules. This method's aim is to remove all that by taxing products and services bought, rather then monies earned. So the $25 Million that a movie star gets to film a movie is tax free, but when he buys that $50,000 diamond ring, the 400 suits, the armored Hummer, etc, all that is taxed at 23%.

Supposedly, the actual cost of products manufactured in this country wouldn't increase though, because the increase in the sales tax would be offset by the lowering of costs of manufacturing the item (remember, the company would no longer have to pay income taxes or employment taxes).

The fast food employee working and earning minimum wage would get to keep all the money they make, and not have to fill out any paperwork (i.e. prepare tax returns) to keep it. Though they'd have to pay the additional tax on items they purchase. The Fair Tax also uses the concept of "prebate" to pay people back for monies spent on the essentials of life: Food, some clothing (basics, not designer wares), housing. This should allow people who make very little but spend very little to effectively not pay any tax.

For individuals to not have to file taxes has many benefits. Mainly, one doesn't have to worry about knowing the "rules" in order to get the biggest tax breaks. Another benefit, is it would effectively tax illegal immigrants, as they would pay tax when they spent money, but they wouldn't be "in the system" of getting the prebates. Another side benefit would be taxing of people making money illegally (e.g. drug dealers) as all those bling bling cars they buy would be taxed.

So to answer your question, in theory the lower income people wouldn't get "the short end of the stick" per se, rather the poor people that spend all their money on the non-essentials of life - expensive cars, video games, TVs, cell phones, etc would get the short end of the stick. But of course, that would be their choice. It really all boils down to personal choice and personal responsibilities for those choices. If you choose to live frugally, save money, you'll build wealth without the government taking it away. If you chose to live like you make a million when you make a thousand, then you'll have to live with those decisions.

Answer 2

The other part of the fair tax that is of interest to lower income people is the "prebate". A calculation will be made on the amount of tax that would be paid on the "essentials." Food, a small amount of clothing, etc. Each month, that amount would be deposited in the account that you name. In essence, if you live simply, you would pay no tax. Also, the tax would not be paid if you bought any big ticket items used. A car, a house even - no sales tax!

What this tax does - something we've never done in this or any other country - is tax wealth. Live simply - no tax. Splurge - buy expensive cars, boats, houses, etc - and pay big. No more tax shelters. You think rich people pay income tax?

Answer 3

The Man summed it up nicely. I hate having to pay more than the average American's total yearly salary every year in just FEDERAL income taxes.

Let alone the sales tax, state income tax, FICA, etc! If you add it all up, we pay more than 50% of our annual income in all the taxes combined.

But hey, the gov't has to get the money to wage war from somewhere, right?

Answer 4

the income tax does not give you money every year. It returns your money you overwithheld unless you are low-earning enough to get earned income credit. A flat tax is the true answer.

Answer 5

A National Sales Tax, which is the same basic thing if not the same thing, cuts out the loop holes. I don't like it because I don't want Food, Medicine, and Clothing taxed. They aren't here in PA and it allows us to get buisness from border states. Sure we might still get that BUT we would likely lose the buisness from Canada.

Answer 6

Fair tax means everyone pays the same amount.

We all enjoy the same basic services (roads, schools, police, etc.)

If I earn 200,000 year and you earn 20,000 I can expect to pay 50,000 a year more than you in income tax (not to mention higher property taxes)

Is that Fair to me? It isn't my fault you don't make more... it is your fault. I shouldn't have to subsidize your inability to earn more money.

So, yes lower income people would have to pay more and higher income people would get to keep more.