wouldnt the fair tax kill the lower/middle classes?

Question

they would have to pay like 30% taxes on food when they already make nothing...it woudl benefit the wealthy, but the poor it would destroy.. right?

Answer 1

"Destroy" might be a little harsh but you are correct. The Fairtax shifts the tax burden from the rich down to the middle and lower classes.

One assumption that the Fairtax makes is that the poor never buy anything but "essentials". Obviously, this is not true. While a poor single parent now effective has a negative income tax rate due to the earned income credit, he or she would pay taxes under the Fairtax if they bought anything besides what the government deemed essential.

As a rule, the middle class spends more of its income than the rich.

Put the above two facts together and there you have it.....the rich pay less and the poor and middle class pay more.

Answer 2

I know a couple of single moms who are scraping by on around $15k per year supporting 2 kids. The EIC keeps them both solvent, though only barely. Their cash flows would both be decimated by a 30% sales tax and the loss if the EIC, even with the so-called "prebate" feature. In their cases, destroy might be an appropriate way to describe the impact on them. Both became homeowners during the Clinton years when times were better but both of the good jobs dried up in the past 5 years. Both would probably lose their homes and have to move into cheap apartments on the bad side of town and their kids would have to share a bedroom.

I make in the mid 70s most years and am able to salt away a fair bit towards my retirement. A 30% levy on all goods and services would clobber most of my retirement savings and a lot of those savings went in after-tax so I'd lose my shirt coming out on the other end, suffering double taxation on all of those dollars. It might not be bad enough to put me on Alpo in my "golden years" but it would damn sure put a lot of cheap bologna on the menu and kill off my travel plans.

My brother is a millionaire several times over. He'd do OK with it and would probably be able to save even more as his tax bill would drop significantly.

Fair Tax? Only if you're like my brother!

Answer 3

The Fair Tax will provide a much LOWER effective tax rate on the lower and middle classes than under the current income tax code.

The first thing the Fair Tax will do is to eliminate all the "classes". Everyone will be treated equally. There will be a single tax rate of 23% on all NEW GOODS and SERVICES at the comsumer level. It will also provide a prebate to provide in advance the amount of the 23% tax rate up to the poverty level for the size of the household.

The currently "poor or lower income" household with incomes less than the poverty level will have an effective tax rate of ZERO or LESS ( additional funds to spend in addition to their income!) This replaces the EIC under the present income tax system provides once a year, the prebate is paid at the beginning of every month!) The household that spends revenue at the poverty level amount on new goods and services but also spends revenue on used goods would also have an effective tax rate of 0.0% (family of four is $27,300)

A household that spends revenues on new goods and services at a rate of twice the poverty level plus any purchases of used goods in addition to this will have an effective tax rate of 11.5% or less of their total spending. (family of four is $54,600)

This will progress to a point where any household that qualifies for the prebate will have an effective tax rate of less than 23%.

The poor and lower income households will have a tendency to spend on used goods when possible thereby allowing them to use the prebate funds to buy goods (new or used) in addition to their normal purchases. all at a 0.0% tax rate.

The wealthy or upper income households will not be spending their money on used goods, therefore they will be paying an effective higher tax rate (close to 23%) on all their purchases!.

It is not a question of the household wanting to invest, save or give their money away, but when and how you spend your money. The wealthy will spend a considerable higher dollar amount of their funds during the year and will also be paying an effecgtive higher tax rate.

Another problem with the current tax system is all the embedded taxes that each of us pay but do not realize it. Businesses do not pay taxes. They are a collection point for taxes. These taxes are merely another cost of doing business placed on the business by politicians. The customers pay the taxes. The embedded costs at the retail level average 22-23% of the price of a new product. Add this to the SS taxes and Medicare taxes as well as personal income tax costs and the average low-middle income individual is currently paying about 40-45% taxes now!

Eliminate the income tax and its associated costs (40%), The Fair Tax amount (11.5%) looks a whole lot better.

This is only the dollar costs of the difference in the plans. The Fair Tax also eliminates the time needed to maintain records all year long to prepare a tax return, the time spent putting it all together or paying someone else to prepare the tax return. You also maintain your private information. You no longer have to tell anyone how much you have in savings, investments or buried under in the back yard! You can give whatever you want to whoever you want and not report it to anyone.

Answer 4

Yup, you've got that right. Proponents say that the prebate would protect them - but they conveniently ignore items like EIC which would no longer exist. If you read their website and N. Boortz's book closely, you'll realize there are tons of holes in their logic, and many issues are missing detail - and "the devil is in the details" as was once said.

Answer 5

Nonsense.

Think about it, the only truly "fair" tax would be if you divided the annual budget by the number of wage-earners, and they each paid the same amount! (isn't that how you'd deal with the rent or the electricity bill if you shared a house with a bunch of other people?)

To demand that people who have more should contribute more by LAW is patently unfair.

Giving the poorest 10% or so of a population some sort of "break" seems a reasonable human response, but to repeatedly expect richer people to pay more is absurd!

Answer 6

correct. most flat taxes would hurt the poor and middle classes that why we have the tax system we now use,a progressive tax( the more you make the more you pay.)