Is the "Fair Tax" really fair, and a good idea for America?

[YourTokah]

Simply put, the FairTax replaces the way we're currently taxed - based on our annual income - with a tax on goods and services. The FairTax is a voluntary “consumption" tax: the more you buy, the more you pay in taxes, the less you buy, the less you pay in taxes.
Everyone pays their fair share of taxes, and with the FairTax rebate, spending up to the poverty level is tax free. The Federal government is fully funded, including Social Security and Medicare, and you don't need an expert to determine your Federal taxes.

So what are some of the problems that you see coming about through the implementation of the FairTax?

Is it a bad idea or good?

I say good.

[monty of ll]

How about trading goods and services among individuals? Are you going to try to tax that?

[tman_ndsu08]

The only possible problem with the fair tax is deciding which goods and services are exempt.

But on the conceptual level, this is a revolution! There is no way that this shouldn't be implemented now!


The super rich just go around our current tax system because they don't have any "income". They live off their tax free stock dividends and savings.

[belverron]

I think it's a simpler, more elegant solution to a problem which has been around for a long time.

[RickSp]

Unless we address the level of government spending, playing around with reapportioning the tax burden is largely pointless. High taxes, even "fair high taxes", are still high taxes. I wonder whether there is anything that can be called a "fair tax."

[belverron]

And... that's another debate entirely.

[monty of ll]

Right RickSp, and most of these ideas are pie in the sky that aren't thought through to their logical conclusion. They're attempts of some individuals to make it fairer for themselves at the expense of others. And if not that, then to eliminate taxes altogether. Doooohhhhh!

But the idea isn't new. Maybe Tokah should move to Canada where we have the Goods and Services Tax (GST) if he thinks it's a move in the right direction. Unfortunately though, all the people who support such innovations hate it here, simply because they don't like taxes of any kind. One thing it has accomplished is makeing it easy for tradesmen to cheat on their taxes. It's easy to find someone who will give you some carpenter work, for example, in return for some other labour or commodity. And of coure nearly all contractors are happy to accept cash in payment for their services. Now if you're a contractor, you would see the beauty in the GST, but if you are someone who can't avoid it then you probably don't like it a lot. In fact if you're a cheating contractor you would be really dumb if you didn't just plain love it!

[YourTokah]

Well, I see it this way. A lot of wealthier people are able to afford financial wizards that help them protect their riches from tax penalties. There are hundreds and hundreds of books about how to avoid paying taxes. The poorer folks don't have much choice, their money gets siphoned right out of their paychecks and that's it for them. Sometimes they get it back, or some of it back, at tax time, sometimes they don't, sometimes they owe even more. My parents are somewhere in the middle. They're pretty well off, try to maximize their right offs, and still owe the government most every year.
We can close so many loopholes in tax law and make all people pay based on the same principle with this type of tax.
You want a 300 tv? Fine - the fair tax is added in to the price and you're paying it. You want a 10,000 tv because you're wealthier and you can afford it? Fine, same thing applies.
I'm not sure how this law would or should apply to necessary services such as utility bills, groceries, etc. Utilities should be exempt, and groceries could apply the same rule we have here in NW Florida - if it's milk, it's tax free, if it's chocolate candies, you're getting taxed because chocolate candy is a nonessential. Potato chips are taxed, potatoes aren't. That sorta thing. For the most part, however, groceries are tax free. Anything else, though - clothing, books, computers, software, DVD's, music, furniture, knickknacks, etc. - All taxed by the FairTax, our new Federal Sales Tax. You don't buy it, you don't pay those taxes. You want to consume goods, you produce as well, by paying the FairTax. I think it makes sense, especially with the rebate up to poverty level. I suppose saving receipts would be quite necessary then.

In response to Monty of II: I am not going to try to tax anything. I am inviting debate on a subject that interests me. As far as taxing goods and services traded among individuals, precisely what do you mean? Does the doctor down the street trade his services for your shoe-repair services? I doubt it. Please give examples of what you mean.

[YourTokah]

Everywhere in this country people provide services and goods "under the table" for cash or trade. That exists now and will not change with the implementation of the FairTax. Sure, some people could potentially benefit from it, because that's human nature, to try to find out how you can advance your particular station in life a little further, sometimes at the expense of your fellow man - harkens back to survival of the fittest. But regardless of a contractor doing someone's cabinets for cash under the table, he'll spend that cash on something, whether it's tools, lumber, his kid's car, or whate er, and he'll pay the FairTax that way.

btw, I'm a she not a he, and my husband and I actually HAVE talked about moving to Canada - we admire the Canadian style of government for several reasons and find it preferable to America lately.

[monty of ll]

Tokah- The GST in Canada encouraged under the table trade for goods and services and made it more common. No, a doctor probably can't take part in the cheating because there is obviously more paperwork involved which makes his transactions more traceable. I don't think you can just ignore that this happens by saying that the people who earn the money will have to pay taxes when they spend the money anyway. In fact the people who earn money will buy goods from others under the table to avoid the sales tax. And besides, what's the difference of paying taxes on what you spend compared to paying taxes on what you earn?

You asked what the problems are with this aspect of a fair tax and I'm telling you what I, as a Canadian have found wrong with our GST, as I understand from your post that that is a good part of your proposal.

If you're contemplating moving to Canada then you should be prepared to become much more socialist leaning than most Americans are. Social assistance for those in need and universal healthcare may be admirable ideas to you though.

Actually it would be interesting to do a detailed comparison of how much taxes we pay in Canada to how much taxes you pay in the U.S. Some of the things that would need to be considered would be how much alcohol or tobacco you buy. If you don't buy any then you are going to benefit hugely from the Canadian system. If you buy a lot of both then you are going to end up spending a lot more in taxes. This is very significant for smokers and boozers who can easily spend $500 a month on those two items. Do you think that's a good thing? Personally, I love it! Then how about lottery tickets? (lotteries are government controlled) If you don't buy them then you gotta love those who do for paying a huge amount of tax for you. Providing you can overlook the negative social aspect

You see, X amount of taxes are going to be collected and it's just a matter of dodging as much tax as you can. I have an acreage and I can claim farm status on my property by producing about $2500 a year from the land. By doing that I can save about $5000/year in property taxes. If I choose I can grow my own food and raise my own meat and pretty well dodge all taxes. In short, I know what taxes to support and what taxes to not support. That, I suspect, is where most people should be coming from, rather than proposing new systems that aren't thought through to their logical conclusions.

[Prometheus]

I support the consumption tax for two main reasons:

(1) It dosen't involve an invasion of privacy. The IRS would nat have to audit you and look at all of your personal information.

(2) It would tax those with more money to spend. It also wouldn't tax studens like me who are saving for college. If you don't spend it, it accumulates interest tax free. Very good for saving and retirement and the like. Also, things like tuition and school books wouldn't be taxed.

[YourTokah]

monty of II said:
And besides, what's the difference of paying taxes on what you spend compared to paying taxes on what you earn?

The difference is that people will automatically pay their taxes when they purchase something, as opposed to people being able to protect their earnings from taxation through various legal loopholes. Not everyone's earnings are paychecks. People make money off of stocks, bonds, cds, dividends, mutual funds, investment activites, etc. Some of these monies are never taxed. The poor are always taxed 100% but the rich are not.

And as for my personal views on socialzed government, including assistance to those in need and universal healthcare, yes I am very much a proponent of socialism.

[YourTokah]

Prom, I know you are all about less government involvement/intrusion. I think the Fair Tax accomplishes that, exactly as you said. I do not think that the fair tax would result in a drastic increase in illegal goods and services bargaining agreements, as monty says has happened in Canada. Those occur as it is, and I'm sure they already occurred in Canada. Just because the tax situation will change doesn't mean that the records of business transactions and activities maintained by companies will suddenly disappear. It's be pretty obvious that someone's got something going on the side if they're spending all of this money and they don't have any business on the books.

[Prometheus]

We get people to pay a sales tax. It's the same concept except a bigger tax. I can;t even imagine what it would be like to get a check with my full wages. That would be amazing. Well, I guess social security would stil be done the same way (but that's another discussion). I think that a consumption tax would make people wake up and realize how much taxes they are paying. Right now it is kind of hidden how much we are taxed because it never makes it to our bank account. If we paid the tax every day, we might be more careful about what we used tax money on.

[monty of ll]

Ahhh, I see Tokah, it's all about unfair exemptions. It always boils down to this but then when it does, nobody is willing to attempt to spell out which exemptions are unfair. Probably mostly what irks people is the ability of corps. to write off income with expansion of capital assets. Otherwise, as I have already stated, it's not even considered what exemptions are unfair.

Exemptions at a very elementary level for whom it may concern:

If a businessman sells carrots, should he have to pay taxes on the money he receives for his carrots, or should he be able to deduct the price of the carrot seeds before he pays taxes?

My point is, if people want to eliminate exemptions and loopholes then they have to address the issue headon, not ignore the necessity of those. This is usually the point at which the whole notion is abandoned.

[SteveA]

I'm really mixed on the Fair Tax proposal. I'd agree it seems better but the issue is that they'd have to amend the constitution to allow yet another form of taxation when it's not impossible, in fact easier, to modify the current system to be similar.

Assuming we had to have some mandatory system of taxes, I don't mind the idea of a fixed rate across the board but the arguments that we can already effectively do something similar without the need for a new federal incentive and ability to tax individual transactions seem like good arguments.

An amendment requires much more support than modifying the existing system, so it would seem that if there were truly good intentions behind it they would have already gone that direction with IRS because it's easier too. Likely it will be yet another excuse to grant a federal ability to tax individual purchases (which leads to a lot of concerns over enforcement as well).

I'd say put the money where their mouth is and show they can at least reform the current system before adding a federal sales tax.

[Prometheus]

Quote by: SteveA I'm really mixed on the Fair Tax proposal. I'd agree it seems better but the issue is that they'd have to amend the constitution to allow yet another form of taxation when it's not impossible, in fact easier, to modify the current system to be similar. Assuming we had to have some mandatory system of taxes, I don't mind the idea of a fixed rate across the board but the arguments that we can already effectively do something similar without the need for a new federal incentive and ability to tax individual transactions seem like good arguments. An amendment requires much more support than modifying the existing system, so it would seem that if there were truly good intentions behind it they would have already gone that direction with IRS because it's easier too. Likely it will be yet another excuse to grant a federal ability to tax individual purchases (which leads to a lot of concerns over enforcement as well). I'd say put the money where their mouth is and show they can at least reform the current system before adding a federal sales tax.

Or we could just repeal that blight of the 15'th ammendment...

[Milton Bradley]

My concern arises in the percentage of income spent by rich, vs. poor.


Poor people spend virtually every dollar they make with little chance of seeing any benefit. The rich, on the other hand, spend only a fraction of their money on basic needs. Leaving plenty to spend on vacation while vacationing abroad.


If my guess is right, the rich will be bringing lots of goods back from outside the tax zone.

[Prometheus]

Quote by: Milton Bradley My concern arises in the percentage of income spent by rich, vs. poor. Poor people spend virtually every dollar they make with little chance of seeing any benefit. The rich, on the other hand, spend only a fraction of their money on basic needs. Leaving plenty to spend on vacation while vacationing abroad. If my guess is right, the rich will be bringing lots of goods back from outside the tax zone.

We already have terrifs for foriegn imports. Plus they would be taxed when sold retail in the US.

And you can say what you like about foriegn vacations, but rich people still spend *way* more inside the country then they do outside.

[SteveA]

My concern arises in the percentage of income spent by rich, vs. poor. Poor people spend virtually every dollar they make with little chance of seeing any benefit. The rich, on the other hand, spend only a fraction of their money on basic needs. Leaving plenty to spend on vacation while vacationing abroad.

I think there are some unnatural or unjust disparities in income and wealth. Part of this comes from our current tax system though. The claims that progressive taxes that hit only the "rich" will make things better are flawed for a couple reasons.

1) Being rich is a reward that encourages people to create value. Taking this wealth from people makes it so that noone has the opportunity to be rich. What should instead be done is only take those resources for which a legitimate service is being performed by government or returning wealth that has been unjustly acquired. We want to deter crime, not prosperity.

2) We already place higher taxes on the wealthy. The more we attempt to do this, the more these taxes are seen as unjust and those people move elsewhere, taking what they can with them. If we attempt to stop such people from leaving the system we'll even place a greater discouragement for people to be in that position in the first place or bring their wealth to America.

3) Realistically, many influencial and wealthy people already have a lot of say. If taxes were increased, ostensibly on the rich, you'd find more loopholes added that would place these resources in untaxable forms, with the main burden of taxes being on the people who can't afford to take adavantage of these (a.k.a. the middle-upper middle class where most the GDP comes from anyway).

If we have mandatory taxes, they should be applied equally so everyone sees the benefit of keeping them low, not select groups only (we currently have groups of people that truly benefit when taxes are increased. That's just wrong by any standard - government was never a tool for a free ride - maybe temporary assistance but having a system that rewards people for increasing taxes on others is prone to abuse and unstable).

Some examples of things that I believe cause artificial monopolies to be created and deny free competition and trade are licensing requirements, abuse of the patent and intellectual property system, emminent domain, federal regulations placing undue burdens on start up endeavors, technological restriction, tax exemptions and writeoffs, governmental discrimination in subcontractors, asset seizures etc. etc. etc.

Free up the markets, see how this affects the disparities in wages and then go from there if there are still problems.