Why tax income? Why not a sales tax?

Question

And don't site Karl Marx with and progressive tax , “FAIR” UNDER THE INCOME TAX IS DEFINED AS MAKE MORE , PAY MORE…… “FAIR” UNDER THE FAIRTAX IS DEFINED AS SPEND MORE, PAY MORE.

Answer 1

There is no reasonable equity of distribution under the current INCOME tax system. What's more, the TAX CODE has become a TINKERERS' PARADISE for 53% of the lobbyists who game it in Washington DC. It's a lucrative business, and the U.S. TAXPAYER pays for ALL of it in higher prices (a hidden tax which is incomprehensible to the average working person). Prices AFTER FairTax would look SIMILAR to prices BEFORE FairTax - NOT 30% HIGHER as opponents contend; competition would see to it.

So, the FairTax rate on new items would be 29.9% (on the new, reduced cost of items because business isn't taxed under FairTax - thus lowering retail prices by 20% to 30%), or 23% of the "tax inclusive" cost - this is the way INCOME TAX is figured.

The effective tax percentages that would be paid are calculated by crediting the monthly "prebate" (rebate of tax on necessities) against all likely spending that citizen families (sized 1-member, and greater) are likely to spend. (Dept. of HHS would serve as the basis upon which prebates would be calculated. A single person might receive ~$200/mo. A family of four might receive ~$500 - in addition to receiving their WHOLE paycheck.)

With regard to these effective percentages that different income groups would pay under the FairTax, Prof.'s Kotlikoff and Rapson (10/06) have said,

"...the FairTax imposes much lower average taxes on working-age households than does the current system. The FairTax broadens the tax base from what is now primarily a system of labor income taxation to a system that taxes, albeit indirectly, both labor income and existing wealth. By including existing wealth in the effective tax base, much of which is owned by rich and middle-class elderly households, the FairTax is able to tax labor income at a lower effective rate and, thereby, lower the average lifetime tax rates facing working-age Americans.

"Consider, as an example, a single household age 30 earning $50,000. The household’s average tax rate under the current system is 21.1 percent. It’s 13.5 percent under the FairTax. Since the FairTax would preserve the purchasing power of Social Security benefits and also provide a tax rebate, older low-income workers who will live primarily or exclusively on Social Security would be better off. As an example, the average remaining lifetime tax rate for an age 60 married couple with $20,000 of earnings falls from its current value of 7.2 percent to -11.0 percent under the FairTax. As another example, compare the current 24.0 percent remaining lifetime average tax rate of a married age 45 couple with $100,000 in earnings to the 14.7 percent rate that arises under the FairTax."

Study: http://snipurl.com/kotcomparetaxrates

Further,

"...once one moves to generations postdating the baby boomers there are positive welfare gains for all income groups in each cohort. Under a 23 percent FairTax policy, the poorest members of the generation born in 1990 enjoy a 13.5 percent welfare gain. Their middle-class and rich contemporaries experience 5 and 2 percent welfare gains, respectively. The welfare gains are largest for future generations. Take the cohort born in 2030. The poorest members of this cohort enjoy a huge 26 percent improvement in their well-being. For middle class members of this birth group, there's a 12 percent welfare gain. And for the richest members of the group, the gain is 5 percent."

Study: http://snipurl.com/kotftmacromicro

Answer 2

Unless there was special provisions for the poor, which don't pay tax and in fact sometimes get paid by the govt, their tax rate would go up.

There are also concerns that -

Makers of luxury / expensive goods would be impacted, at least in the short term.

Huge change of tax system - much harder than just playing around with the tax rates, credits, etc.

Note that a flat tax - 10% on all income - meets your definition of fair, since it's 10% of whatever one makes - make more, pay more.

PS - The below answer ignores the fact that time and time again, we've seen that lower tax rates actually produce MORE TAX for the govt because of the increased economic activity and growth. One day, maybe the Dems will look at the facts and catch on, but usually their desire to control the pursestrings and dole out the goodies to the captive voters prevails.

Answer 3

I believe my tax instructor in college said it best:

"Because the leaders in Congress YOU ELECTED decided to do this."

Very good answer, but also the tax code is a way for the President and Congress to control fiscal policy and give tax breaks to economic activities it wishes to encourage (like buying a home or investing in the stock market), while discouraging other activities (like moving out of the country, evading taxes, etc.)

By raising taxes on the wealthy, the President and Congress slow down the economy and investment into the nation. By lowering taxes on the wealthy, they speed up the economy through creation of jobs and boosting exports and raising salaries, among other things.

I support the Fair Tax as well. If you set the flat tax at 20%, you still keep 80% of your income, regardless of how much you make, and you pour that back into the economy anyway. When growth is needed, cut the tax to 15% and initiate deficit spending. When the economy is fine and to ward off inflation, raise the tax gradually back to 17%, or whatever suits the economy best.

Answer 4

Mostly because the wealthy don't spend nearly as much of their income as the poor and middle class do. They'd get a healthy tax break while the poor and middle class would be left to pick up the slack.

The wealthy didn't get that way by spending their money but by hanging on to it. They spend a far smaller percentage of their total income than anyone else. That's why the wealthy would love a stiff national sales tax; they'd save a TON. On the other hand, the poor would be decimated and the middle class would buckle at the knees.

Graduated income taxes are the fairest of all taxes since they are based solely upon the taxpayer's ability to pay the tax. Sales taxes are the worst of all possible taxes since they fail to take into consideration the taxpayer's ability to pay. They should be abolished completely, IMHO.

Answer 5

any tax is wrong do you understand what tax is ? it is person or organization taking advantage of the general public. in the case of income tax , income tax is purely a war tax , x% goes to fund war x % goes to pay war debt , u don't see any of that money in school or roads or nothing, tobacco pays for highways lottery and some food taxes goes to school, are we fools? if a general public stood up againt income taxes we would rid of it, the reason mercenaries are paid so well is coz of this tax, its a good thing coz most of my friends left the military to get contracted with private contractors, knowing that they get more than ceos and that money comes from the american "sheep" because the wolf is just feeding off you little kiddies who are blindfolded into a tax system that doesn't benefit the general public. unless ur china or military affilliated.

Answer 6

Income tax falls on the shoulders of the rich, sales tax falls on the shoulders of the poor.

Answer 7

In the good ole USA, we do BOTH! LOL