Do you support the Fair Tax? For informartion visit www.fairtax.org?

Question

The FairTax plan is a comprehensive proposal that replaces all federal income and payroll taxes with an integrated approach including a progressive national retail sales tax, a rebate to ensure no American pays federal taxes up to the poverty level, dollar-for-dollar revenue neutrality, and the repeal of the 16th Amendment.

This nonpartisan legislation (HR 25/S 25) abolishes all federal personal, gift, estate, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes and replaces them all with one simple, visible, federal retail sales tax – collected by existing state sales tax authorities.

The FairTax taxes us only on what we choose to spend, not on what we earn. It does not raise any more or less revenue; it is designed to be revenue neutral. So it is also cost neutral – the final cost for goods and services changes little under the FairTax. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration....

Answer 1

This is the dumbest idea ever put forth. I would welcome it as my taxes would go down significantly under such a proposal. I think anyone supporting this idea should really evaluate what they are paying in taxes now and compare it to what this proposal would cost

Answer 2

The traditional problem with progressive sales tax is that it hurts the poorest the most. Note, I said "hurts" and not "costs." Yes, a rich person buying a $1M necklace is going to pay more in sales tax than a poor person buying milk.

However, if the sales tax was progressive and was waived for the poorest, it partially overcomes the traditional issues.

However, implementation would be very difficult. Suppose I make two $500 purchases. Do I pay sales tax on $500 times 2? Or the sales tax on $1000? The later may carry a higher tax because it's progressive.

Should every merchant need to confirm that you're a card-carrying "poverty case" before calculating your sales tax? Very hard to implement.

The current tax, as it's supposed to be, places the burden on those that HAVE the most money. In practice, I agree, it doesn't work. But if you earn $1M, it's pretty clear that you can AFFORD to spend more of that, in taxes, than someone that makes $100 a year.

Answer 3

It sounds nice at first blush, but let's look under the hood a bit and see what the reality is.

The "prebate" feature for people with limited incomes is interesting, but the reporting requirements will be massively complex to prevent fraudulent claims. It would be necessary to track all incomes from all sources for all citizens and all family units in real time to have any hope of fighting fraud. The IRS has enough trouble matching up incomes from W2s, 1099s, and other sources once a year. How much computing infrastructure would be needed for real-time tracking of the incomes of over 300 million citizens, how much would it cost, and how would you pay for it? Who would keep the databases up-to-date as people are born and die. Remember, this must be tracked in REAL TIME!

With a necessary consumption tax rate of over 25%, the gains from black marketing activity would make it much more worth the risk. It's already a problem with alcohol and tobacco in high-tax areas. With high taxes on goods, black marketing would skyrocket. Since organized crime and gangs are the primary benefactors of black marketing activity, they would rapidly gain strength in areas where they had little penetration previously -- Mainstream America.

The IRS wouldn't go away. They would only shift their focus from collecting taxes on incomes to collecting it on goods and services. Reporting requirements for businesses would increase massively -- for reporting incomes of employees, interest and dividends of investors and sales to customers and the paying in of taxes collected.

To fight black marketing, it's pretty much a certainty that any taxed goods would have tax stamps affixed to prove that taxes were collected -- same as is done with alcohol and tobacco today. Imagine the IRS getting authorization to enter your home at any time to verify that everything there was properly tax-paid! If the tax stamp on your y-fronts came off in the wash, they'd probably assess the tax on your dirty undies on the spot.

The well-to-do can cut their tax bill simply by not spending their money as much. This will hurt businesses and transfer a disproportionate share of the tax load to the poor who have little control over how much they MUST spend just to survive.

The current system is bad enough as it is. I'm not at all interested in the problems that a "consumption tax" will cause. Always consider "The Law of Unintended Consequences" first. Reviewig the so-called "Fair Tax" plan, this has NOT been fully thought out yet.