The FairTax... do you know what it is?

POSTED BY: Nurumla
UPDATED: Wednesday, June 14, 2006 04:35
VIEWED: 8195
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NURUMLA

Saturday, June 10, 2006 4:01 PM

I was talking up Firefly at the FairTax board so this seemed like the next logical step.
(I would like to point out that this is a non-partisan issue, so please don't refuse to read it because you don't agree with my politics)

It is always a shocker to me how many people have no idea what the FairTax is. A lot of them haven't even heard of it. First here is something most of us can agree on: the current tax system in America is not working. There are so many hundreds of thousands of pages of code that not a single person in the United States understands it. In fact, a few years ago Money magazine sent out identical tax scenarios to 45 different professional tax preparers and got 45 different answers back.

But what to do about the current system? It's beyond repair (do we really just want to add MORE pages of code to it?). So something new will come in. The best solution I have found is a system called the FairTax. The FairTax eliminates the IRS and the income tax (along with the Social Security tax, the Medicare tax, corporate income taxes, the death tax, the self-employment tax, the alternative minimum tax, the gift tax, capital gains taxes, tax audits, and some major headaches every April 15). It replaces these with a 23% consumption tax (a sales tax) on the retail level.

And don't worry, prices for goods would not go up. There are 20-25% of embedded taxes built into every product we buy currently. To understand this first one must know that all cost of business is passed on. If a company has to pay a tax they just build it into the price of their product. Companies do not pay taxes, people do. Once the FairTax is in place the free market will work its magic and prices will be the same as they are now.

This tax is transparent and voluntary. You know exactly how much you're paying because with-holding has been eliminated. It is also voluntary because if you don't want to, you don't have to pay it. Used goods are not taxed.

Because no one should have to pay taxes on the nesseties of life there is a prebate built into the FairTax. Each head of household writes out the names and social security numbers of each member of the house. A check is sent once a month to cover the tax on the basics (based on the poverty level).

Business would come flying back into the United States. Under the current tax codes it is nearly impossible for business to operate (hence why they leave to go to another country) because they are taxed so much. And since all cost is sent right into the price of the good, American products are suffering. Right now it is estimated that 85% of business choices are made around the tax code instead of what is best for the company.

If you'd like to see this movement become a reality, please sign the petition here: http://fairtaxpetition.com/

This doesn't even begin to sum up the FairTax (since I'll pulling the information off the top of my head). So please, ask me questions! I'll be glad to answer them. Or you can go to www.fairtax.org and learn whatever it is you please.

_____________________________________
the woods are lovely, dark, and deep
but I have promises to keep
and miles to go before I sleep

LOSTMARAUDER

Saturday, June 10, 2006 5:10 PM

Been following and talking about this plan for almost 15 years..the best part are that it helps the poor, encourages saving, and nails the "underground" communities like drug dealers and such. Afterall, they love their big toys, right? Imagine nailing them for 23% every time they purchase a yacht, limo, etc.

I encourage everyone to check out this plan and make some noise about it!

NURUMLA

Saturday, June 10, 2006 6:25 PM

Quote:
Originally posted by LostMarauder:
Been following and talking about this plan for almost 15 years..the best part are that it helps the poor, encourages saving, and nails the "underground" communities like drug dealers and such. Afterall, they love their big toys, right? Imagine nailing them for 23% every time they purchase a yacht, limo, etc.

Completely!

Unfortunately people don't really like talking about taxes. And people my age (19) aren't earning enough money to really understand the bite of the income tax (especially since we don't have a state income tax in Fl)

_____________________________________
the woods are lovely, dark, and deep
but I have promises to keep
and miles to go before I sleep

CITIZEN

Saturday, June 10, 2006 7:30 PM

So basically you cut taxes by a huge amount and remove some of the highest income completely?

I can't see how this would raise the same amount of money, so how can it support all that current taxes do? The US is running a huge deficit and you seem to be advocating a system that would reduce income.

I couldn't find any information on the website on how government services will get the same amount of money from a smaller pot.

Quote:
Once the FairTax is in place the free market will work its magic and prices will be the same as they are now.

Well that's the thing 'free market magic'. It's like trickle down, it's magic, doesn't actually happen. The prices will go up if the tax is put up, that's how it always works. In all likely-hood companies would take it as an opportunity to add a slightly higher percentage to their profits, since the price rises are happening anyway and they can blame it all on the Government, why wouldn't they try to make out on the deal?

Quote:
And don't worry, prices for goods would not go up. There are 20-25% of embedded taxes built into every product we buy currently. To understand this first one must know that all cost of business is passed on. If a company has to pay a tax they just build it into the price of their product. Companies do not pay taxes, people do.

This actually supports the concept that prices go up. The company also buys things so it also pays tax so it still builds in the Fairtax into product prices.

But more over why shouldn't a business pay taxes? Why should they have the protections and rights of an individual but none of the responsibilities?

More insane ramblings by the people who brought you beeeer milkshakes!
"I had a rose named after me and I was very flattered. But I was not pleased to read the description in the catalog: 'No good in a bed, but fine against a wall'." -- Eleanor Roosevelt.

NURUMLA

Sunday, June 11, 2006 3:27 AM

Quote:
I can't see how this would raise the same amount of money, so how can it support all that current taxes do? The US is running a huge deficit and you seem to be advocating a system that would reduce income.

They would make the same amount of money as they currently do off taxes for a simply reason: it gathers taxes from a much larger base than we currently do. It taxes the large underground economy on all of their (rather large) purchases. It taxes people who visit our country on the goods and services they buy (but they'll still be paying the same amount of money they are now). The point of the 23% as being selected was it would be enough to raise the same amount as we currently do off of the income tax.

Quote:
Well that's the thing 'free market magic'. It's like trickle down, it's magic, doesn't actually happen. The prices will go up if the tax is put up, that's how it always works. In all likely-hood companies would take it as an opportunity to add a slightly higher percentage to their profits, since the price rises are happening anyway and they can blame it all on the Government, why wouldn't they try to make out on the deal?

They would not be able to stay in business if they did not lower their prices. Competition would drive them down. One business lowers their price and then everyone else has to do the same thing to be able to compete with them. That's how it works.

Quote:
This actually supports the concept that prices go up. The company also buys things so it also pays tax so it still builds in the Fairtax into product prices.

Goods are only taxed at the retail level. At levels of production they are not taxed.

Quote:

But more over why shouldn't a business pay taxes? Why should they have the protections and rights of an individual but none of the responsibilities?

As I said before all costs of business are passed on to the consumer- that includes tax compliance costs. Business do not pay taxes. They make sure that we pay it for them (by building it into the cost). Making the United States a tax haven of the world (which is what the FairTax would do) would open up so much new business here and bring in so much money.

_____________________________________
the woods are lovely, dark, and deep
but I have promises to keep
and miles to go before I sleep

SERGEANTX

Sunday, June 11, 2006 3:57 AM

I like this plan. It would encourage a large underground economy as people sought ways to avoid the tax. I think this would be very healthy and throw a wrench in plans to shift us all to a cashless economy. You got my signature. Seems like an uphill battle though.

SergeantX

"Dream a little dream or you can live a little dream. I'd rather live it, cause dreamers always chase but never get it." Aesop Rock

CITIZEN

Sunday, June 11, 2006 11:29 AM

Quote:
Originally posted by Nurumla:
They would make the same amount of money as they currently do off taxes for a simply reason: it gathers taxes from a much larger base than we currently do. It taxes the large underground economy on all of their (rather large) purchases. It taxes people who visit our country on the goods and services they buy (but they'll still be paying the same amount of money they are now). The point of the 23% as being selected was it would be enough to raise the same amount as we currently do off of the income tax.

Yeah I read the stuff on the website and it all just sounds like propaganda (no offence meant it’s just how it reads to me). Huge revenues are made from a business, that’s not going to be covered by tourists. Furthermore the website is replete with examples of how people will be paying LESS tax. All I can see is that everyone (except tourists who’ll be paying more, which hardly seems fair) will be paying less tax. It's a scheme that cuts what people pay by only taxing them on what they consume.

I also read that it would raise the same as the income tax (I doubt it would but I'll get to that) but Income tax isn't the only tax its scraping is it, so if 23% returns the same revenue as the income tax the overall revenue will drop.

When you lower taxes no matter how you cut it you have less money which means you have to cut government services.

As to why I think tax income would be lower: as you say people can opt out, especially the rich who have more options to opt out. Also overall I’m not sure this scheme is that fair, because the wealthy spend a far lower percentage of their wealth on goods than the poor. So the poor are going to be spending a higher percentage of their earnings on tax than the rich. It really sounds like it could just end up being a tax the poor to spare the rich scheme.

Quote:
They would not be able to stay in business if they did not lower their prices. Competition would drive them down. One business lowers their price and then everyone else has to do the same thing to be able to compete with them. That's how it works.

Actually it tends not to be. Companies often take a tax rise as an excuse to raise their prices, yeah if one broke the mould and refused to raise their prices the others would have to go back to the old pre tax price to remain competitive, but oddly that doesn't happen, despite what economics text books say.

Quote:
Goods are only taxed at the retail level. At levels of production they are not taxed.

For sure, but companies BUY THINGS. They buy at the retail level. Many goods (especially electrical) buy their components AT RETAIL, they don't manufacture them. Shops buy goods wholesale but still from a retail outlet (many wholesalers will still allow you to buy even if you don't represent a business).

They buy office supplies, they buy photocopiers, computers, buildings, carpets, chairs, potted plants they buy coffee

.

Are they going to be exempt from the FairTax? Because that doesn’t sound very fair...

Which brings me to:

Quote:
As I said before all costs of business are passed on to the consumer- that includes tax compliance costs. Business do not pay taxes. They make sure that we pay it for them (by building it into the cost). Making the United States a tax haven of the world (which is what the FairTax would do) would open up so much new business here and bring in so much money.

This isn't answering my question. I asked why a business should enjoy the rights privileges and protections of an individual, but none of the inherent responsibilities (like paying taxes).

More insane ramblings by the people who brought you beeeer milkshakes!
"I had a rose named after me and I was very flattered. But I was not pleased to read the description in the catalog: 'No good in a bed, but fine against a wall'." -- Eleanor Roosevelt.

LOSTMARAUDER

Sunday, June 11, 2006 5:57 PM

Quote:
This isn't answering my question. I asked why a business should enjoy the rights privileges and protections of an individual, but none of the inherent responsibilities (like paying taxes).

Ultimately, the consumer pays every cent of tax collected by the government. If Widgets, Inc pays tax on the raw materials used to manufacture its products, the company will pass those costs along to the retailer, who then will pass them to the consumer. So the consumer pays the hidden taxes now (20-25% of the retail price) or will pay them in addition to the much lower retail price in the fair tax system.

All I can say is, I'm a cynic who looks for the "catch" in EVERYTHING. After 15 years of research, I have yet to find a single reason not to support the Fair Tax. Trust me, that's saying something.

Quote:
When you lower taxes no matter how you cut it you have less money which means you have to cut government services.

And the problem with that is...?

CITIZEN

Sunday, June 11, 2006 10:37 PM

Erm nothing is wrong with reducing government services to reduce taxes if that's your thing. What's wrong is when you say we reduce taxes but not reduce services because that's bullshit which is what the fairtax system says.

More insane ramblings by the people who brought you beeeer milkshakes!
"I had a rose named after me and I was very flattered. But I was not pleased to read the description in the catalog: 'No good in a bed, but fine against a wall'." -- Eleanor Roosevelt.

NURUMLA

Monday, June 12, 2006 2:44 PM

I can't make you believe that this would be a revenue neutral switch, but that is why 23% was chosen. They hired top economists to do the job of coming up with the tax idea to begin with. But I can't make you believe that if you think it's all just propaganda.

My advice to you is to read the book. It's easy to read, available at most libraries and only takes a few hours to get through. It answers all of the questions you have much better than I can with examples that I don't know by heart yet (including one when corporate taxes were not renewed by congress and prices dropped).

_____________________________________
the woods are lovely, dark, and deep
but I have promises to keep
and miles to go before I sleep

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