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

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

Tuesday, June 13, 2006 4:05 PM

Quote:
Originally posted by Nurumla:
The FairTax eliminates the IRS ...

I always get a chuckle out of this statement relating to Fair Tax, Flat Tax, VAT Tax, etc. We could eliminate the IRS tomorrow. Just rename it the Tax Collection Bureau, or somethnig.

No matter the tax system, you're going to have some organization that does the paperwork and enforces the laws.

Here's a few things I see along that line with the Fair Tax.

Someone still has to collect the money from the businesses who gather it as sales tax, and insure that businesses are reporting it correctly. That 23% just sitting there will be too tempting for some business owners, and failing businesses might decide they'd rather pay salary or rent with that than pay the government. They do this now with withholding and SS they collect from their employees. There's a need for collection enforcement right there.

As others have noted, that much sales tax will drive more of the economy underground, requiring more investigation and enforcement.

There will probably be a lot of issues around what is "new". If I build a house, rent it out for a year, and then sell it, is it new or used? How about a new car leased for a year then sold?Will such an actions be disallowed practice? More investigation and enforcement personnel needed. Also more law and regulation to clarify.

Wage earners will still have their income reported for Social Security computation purposes, but what about the self-employed? It would be to their benefit to report the highest income possible, to gain the largest SSA payout when they retire. Yep, more investigation and enforcement.

I could go on, but you get the idea. Still have an IRS analogue, still have audits, still have criminal investigations, still have collections functions. Fair tax just shifts the burden from the individual to the businesses he or she deals with.

"If Darwin ain't Happy,
Ain't Nobody Happy"

SIGNYM

Tuesday, June 13, 2006 4:14 PM

Quote:
To address your first point- what this tax will do is create a tax "hump". The rebate will affect the very poorest for a larger percent of income, the top 10% will get whacked less (on a percentage basis) because they spend far less on consumption, and the middle class- the ones who already have the largest tax burden (as a percentage of income) will once again get nailed. It's still not fair because it targets the middle class.-Signy

This does not target anyone as I said before its fair, everyone gets treated exactly the same. See above.-Nurumla

Everyone gets "treated" the same, but nonetheless the "effect" is to create a tax "hump". I calculated it out on a spreadsheet and I urge you to do the same.

Quote:
...but the LAST thing that corporations want is competition.-Signy

I am aware that if they could have a monopoly they would take it. But they don't have a monopoly. They have people they have to compete against to keep their prices in check.-Nurumla

Do you mean they have "people" to compete against or do you mean they have other corporations they have to compete against?

Assuming that you mean corporations are competing against corporations... many corporations have already achieved monopoly or cartel status- oil and related petroleum products, energy, software, agri-biotech (Monsanto, Dow), communications, insurances ... I'm sure I can come up with more if I think about it for another few minutes. And in the near future I think you'll see the auto industry, chip-making, and industrial chemicals following suit. (Virtually all industrial chemical manufacturing is now in China.)

You can tell there is a virtual monopoly because prices get jacked up artificially and stay there- that wouldn't be the case if effective competition was in place.

And, amazingly, I agree with Geezer! SOMEONE will have to check the cash register tapes against the reported business receipts and the actual volume of business. I knew a sales auditor and he commonly sat in as a "customer" at a restaurant, clocking the number of people who came and went, or sat across from a gas station, or matched sales receipts against costs. (And occasionally uncovered businesses with two sets of books- one for casual perusal and one for "The Don"). Yep, someone will wind up enforcing the the new tax code.
Oh and BTW- how do you account for internet sales?

---------------------------------
Don't piss in my face and tell me it's raining.

CITIZEN

Tuesday, June 13, 2006 5:02 PM

Quote:
Originally posted by Nurmla:
It think we've reached the source of our disagreement. So even though this system is better for the middle class and the lower class, you don't like it because it's not taxing the rich enough? I believe that taxing everyone the same is best.

Everyone pays less tax but we get the same amount of money? Back to my original point: The rich are paying less; this system is apparently better for the Middle and Lower class so they must be paying less, Businesses don't pay tax at all, which they do now, so what we get, is:

Less tax being collected, which means less government funds, which means government services will have to be cut, which will hit the lower classes harder than the middle classes, who will be hit harder than the rich. The rich whose tax contribution is reduced the most by the FairTax system; they also make a far lower percentage-wise contribution under this scheme than the lower or middle classes.

Flat rate taxes are not fair, because they shift the greatest burden down to those who have the least money.

Quote:
"In the most advanced countries the following will be pretty generally applicable:..a heavy progressive or graduated income tax." That was written by Karl Marx in The Communist Manifesto.

I'm not sure why you bring this up, because you seem to be using it to support wanting a flat tax system, where graduated and progressive taxing systems are where those with more disposable income pay more tax.

If you used that quote because everything Marx said must be wrong and Capitalism in it's most pure and violent form will save us all then I'm going to fall asleep. Pure capitalism had it's time and it was pretty shitty for the majority of people, which is why Marx started writing his manifesto.

Quote:
This does not target anyone as I said before its fair, everyone gets treated exactly the same. See above.

Right so multi millionaire pays $10,000 a year in tax. Guy who earns $15,000 a year has to pay the same. Is that fair? One guy dies of starvation out on the street, the other waits an extra week for his yacht. Is that fair? They're both being treated the same.

People earn different amounts, if one person has 20% of their wage as disposable income (after food shelter and so on) where another has 95% of their wage as disposable how is it fair that they should both pay the same percentage of their income?

20% tax of one will hit them a lot harder than the other.

Quote:
I am aware that if they could have a monopoly they would take it. But they don't have a monopoly. They have people they have to compete against to keep their prices in check.

Microsoft.

Fact is most sectors are moving closer to monopolies, not further away. The number of companies trading in any particular sector is dropping.

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.

FLETCH2

Wednesday, June 14, 2006 4:35 AM

Just some observations.

1) There are a lot of under the table dealings in the UK to avoid paying VAT. Go down the Totenham Court Rd with a pocket full of cash and you can easily buy most electronic goods sans VAT. It's no skin of the dealer's nose (as long as he isn't caught) because it doesn't effect his profit, the "discount" is money he never sees anyway.

2) As Citizen says if a government costs X billion dollars a year to run then it has to get X billion from somewhere, either through taxes or by borrowing. The only way it can operate on less that X billion is to cut services. You want to cut taxes? Then cut government spending and be honest about it, don't talk tripe about having your cake and eating it.

3) Taxes are by their nature "unfair" to someone. The only people that see a tax system as being "fairer" than another are trhe people that pay less under the "fair" tax. That's why tax policy is an interesting sociological experiment because if government spending remains constant and one group in society pays less then someone somewhere must pay more to make up the difference. It's interesting to watch those that will benefit try to persuade the ones that will suffer to back the idea. It's like watching turkeys vote for Christmas.

4) Finally modern capitalism is based on consumption. People buying things they don't really need helps to keep money flowing in the economy and give other people jobs. The last thing you want is to reduce people's spending power by taxing what they spend.

As for the 24% "invisible taxes" all that money ends up in government coffers. So if you are saying that the american tax burden is really 54% (30% real and 24% stealth "Invisable" taxes) and you are going to replace it with a 24% flat tax then where is the other 30% going to come from. Your argument is that prices wont go up because we already pay a stealth 24% flat tax, if we believe that where does your scheme make up the difference?

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