Fair Tax - Does fairtax.org try to have it both ways?

Question

On one hand they are suggesting the new Fair Tax will be collecting taxes from the underground economy (illegals, criminals, etc) that we are not currently collecting because they will now have to pay tax at the register. Ok, that makes perfect sense.

However, on the other hand, they make such a big deal about all the embedded taxes we are already playing (22% supposedly) and that with the Fair Tax at 23%, the net is only 1%. Well, if the taxes are all nearly embedded anyway, then are we not ALREADY collecting the taxes from the underground economy???

It SURE seems like Fairtax.org and the proponents of the fair tax are trying to have it both ways.

This approach seems dishonest and conflicting.

Answer 1

All flat tax proposals do nothing to improve tax equity. They are false disguises to make you think it is fairer while quietly shifting the tax burden away from corporations and the wealthy. Why else would you totally restructure the tax system while collecting the same amount if it were not to shift the burden?

Consider the most popular flat tax proposal from Rep. Dick Armey. Under his system, you would file your taxes on a post card and send in 17% of your income. The problem under his proposal is that only salary, tips, and pensions qualify as income. All other forms of wealth creation escape taxation. That in effect shifts the entire tax burden onto the working class while allowing the truly affluent members of our society (those who don't work for someone else) to escape taxation.

While supply sider folks argue that the wealthy create jobs, keep in mind that without employees to staff your offices and factories, nothing would ever get created or done in this society. The true reward for investors is that they get to keep the profits while employees earn a fixed salary. If we want to reward people for creating jobs, let's give a tax credit to those who create jobs. Those investing in real estate and the stock market don't create jobs. The general contractors who build houses and the companies you invest in create jobs. Not you, the investor.

Under Fair Tax or other consumption based tax systems, the burden is also shifted to the working class. The wealthy again escape taxation because they can direct their purchases to other lands that don't tax them.

Fair Tax won't tax the huge mansions that the wealthy purchase.

Fair Tax won't tax their yachts. They'll simply buy a slightly used one from a foreigner who "brings" it into this country. Look at the folks who complain about California treatment of Yachts.

Fair Tax won't tax the things they buy in foreign lands.

Fair Tax will create a huge underground economy or black market of activity that goes undetected.

They also get to pass on their vast accumulations of wealth to their offspring and never pay taxes on those earnings. This is why we have an inheritance tax. Because the huge capital gains of the wealthy would never be taxed otherwise.

The cost of compliance is very minimal to individuals. Typical filers pay $50 to $200 to get their taxes prepared by a professional. This is nothing more than making the equity even worse.

As I pointed out at the top of my answer, the folks arguing for a new tax system will use smoke and mirrors to say this is a more equitable system while they quietly change what is subject to taxation. Kinda like a magician who averts your attention from what he/she is really doing. Setting the zero-tax rate at the poverty level is a VERY low standard. Ask any family of four how well they leave at DOUBLE the poverty level. Not well at all.

Fair Tax is just another method to shift the tax burden away from businesses and the wealthy and onto the middle class. Watch out for the distracters in their arguments. They never define equity. Be glad we have a tax system which approximates egalitarian values (look that word up).

The current system may be imperfect. But any wholesale change to the system has a huge benefit to the wealthy and to coprorations. Don't take their measly crumbs that they offer.

Answer 2

The current income tax system generates it's revenue from three basic sources. First there are the payroll taxes. This is in two parts, the employee and the employer. (matching amounts of 7/65% SS and 1% Medicare). The second source is the personal income taxes paid by individuals. The individuals are approx 140 million filers and only about 1/2 of them actually pay income taxes.

The third source is from businesses through corporate tax returns. These businesses consider the taxes they must pay as a "cost of doing business" (both SS/Medicare and Corporate taxes) and obtain the funds to pay these taxes from their customers (individuals; anyone who buys the products or services).

The embedded cost of taxation to businesses includes not only the actual tax payments, but also tax compliance costs and tax avoidance costs. When a business must conduct inventories, pay accountants to prepare their tax returns, hire lawyers and others to find or create tax loopholes to avoid paying higher taxes, these costs must also be included as embedded costs. The 22 % is not just the business taxes being paid, it also includes the other costs. All these costs are paid by individuals including the cash/underground economy. but they do not pay the employee matching SS & Medicare or personal income taxes.

Under the Fair Tax, there will be over 300 million people in America and the 50 million tourists paying the National Retail Sales Tax on new goods and services. These taxes will fund the SS & Medicare programs that are currently funded on payroll taxes as well as the general fund programs. Everyone will be paying into all tax funds.

The major differences is the emimination of the tax compliance costs for both individuals and businesses, the major reduction is government spending for collecting taxes (IRS) and the time and material savings in preparing the individual and business tax returns. These have been estimated between 300 & 500 billion dollars.

The prebate amount for each family will eliminate the NRST up to the poverty level there by totally untaxing families below this level.

The individual will have full control over how much tax will be paid based upon how and when something is purchased. There is no tax on used goods. The value of the new goods or services will determine how much tax is paid. New store brand jeans costs the least, name brand jeans have a higher price but desinger jeans are the most expensive. When the jeans are purchased, the individual will determine which level of goods are purchased; used, store brand, named brand or designer jean there by controlling how much tax is paid.

The purpose of the Fair Tax is to be revenue nuteral to the government (they get the same tax dollars as under the current system) when the Fair Tax goes into place. The fact that the average percentage amounts of the embedded business tax costs (retail businesses) currently and the necessary percentage of total sales of new goods and services (22% and 23% inclusively) is purely an accident. If you are talking about the service industries, the embedded tax and compliance costs is closer to 25-26% while a manufacturing business is closer to 19-20%.

Answer 3

The Fairtaxers seem to adjust their argument and add something to it whenever a criticism arises. The "embedded tax" theory (which is ridiculous by the way) was only added when people criticised the sales tax for adding 30% to the cost of everything.

One argument that they make that I love is that: 1) We will all be taking home more; and 2) Prices won't increase after the fairtax due to "embedded taxes"; yet 3) The government will receive the exact same amount of money. Talk about having it both ways........

Answer 4

Neither, absolutely. except you're hideously rich it extremely is, then it really is extremely a lot as wash. The so-said as "honest Tax" is a vast 30% or better nationwide sales tax on all new products. How does one extra $6,000 in tax on a sparkling $20,000 motor vehicle sound? no longer so good, eh? that's a difficulty-free false impression that the rich might want to pay better taxes lower than the "honest Tax." they tend to receive wealth, no longer spend it. they'd pay a a lot decrease share of their gross income lower than the "honest Tax." in case you decrease the burden from the rich, you both ought to diminish amenities or move the burden to some different person. that would want to be the undesirable and center class. The undesirable might want to be tossed into the streets, and the middle class might want to bear the brunt of the burden and may want to develop into the hot "operating undesirable." On properly of that, as at present proposed there are vast opportunities for fraud and black promoting and marketing which have not been addressed. those themes might want to very virtually actual bring about draconian new rules and terrifying powers for the IRS to strive against that fraud and black promoting and marketing. The Flat Tax might want to must be levied at round 27% to make stronger a similar gross sales because the present graduated tax. the rich pay a marginal price of as a lot as 35% so that they'd be searching at a positive tax damage. maximum taxpayers pay a internet price a lot lower than 27%. Crunch the numbers out of your go back very last twelve months and that i will wager your complete income tax bill is lower than 20%. (in basic terms divide the whole Tax line by ability of the whole income line.) And if you're a suffering college student, it would want to were as low as 0%. With the flat tax, your tax bill might want to rocket to 27%. in case you earned $5,000 very last twelve months, you paid no Federal income tax. lower than the Flat Tax, you would pay about $a million,350. Does THAT sound like a good suggestion? So Paris Hilton can shop a million or so in taxes? did not imagine so! The fairest of all taxes is a graduated income tax, in basic terms as we've now. positive, the Tax Code needs some simplification and modernization, yet neither the "honest Tax" nor the "Flat Tax" might want to be any type of a great deal for the mandatory citizen.

Answer 5

I have read the N. Boortz fairtax book - they leave some gaping holes, for anyone paying attention and thinking about what they are reading, in their explanation of just how it would work.