What does everybody think about FairTax?

[Comicstripper]

I've done only a small amount of research on FairTax- the proposal which would eliminate income, corporate, estate taxes, et.al, and replace them with a progressive national sales tax of around 23%. I recognize that the idea generally has conservative/Libertarian support, but I know a handful of liberals who are intrigued by the proposal. Where do you all stand? Keep in mind that FairTax would issue monthly rebates to families living under the poverty level, which would account for taxes paid on necessities.

Also keep in mind that I am not a proponent of the system, only a curious observer.

[no_hypocrisy]

1. It isn't fair. I heard an interview with its author and it sounds like a

repackaging of the flat tax.

[doggyboy]

2. Theother party loves it

around here, you'll find some sympathy, but most prefer a progressive tax system over a regressive one

[Nickster]

3. Terrible idea. It raises the cost of just about everything, especially the staple

items like food. These are costs that the average person can not and should not have to bear. Why not just make the existing system more progressive instead of protecting the rich with another system that slams the working man?

[eleny]

4. Not for it

[NoPasaran]

5. Scam

[CottonBear]

6. Terrible idea. It would bankrupt the middle and lower classes while making the rich richer.

The wealthy and very wealthy would not pay taxes on investments and very little on their earned income.

Neal Boortz (conservative, faux libertarian, blowhard radio host from Atlanta, GA) is a "fair tax" propagandist.

[Comicstripper]

8. As is Mike Gravel

One of the more liberal candidates in the race.
And wouldn't increased cost be more than balanced out by having more money to begin with?

[Iris]

43. Someone called Boortz's show about that not long ago.

He had worked out the scenario as it would apply to one of his employees who is a single-mother of 2 kids. She would have ended up with a deficit of $300-400 per month because she currently gets a low-income tax credit which would be eliminated under this system.

Also, you might be interested in knowing that when this book came out, Boortz bragged about never having done his own taxes and said he doesn't even know how to balance his checkbook. Essentially, it sounds like his name was added to the book to generate sales.

I am intrigued that Gravel supports the fair tax, but I just don't believe most people who support it really understand it or support it for any reason other than their own selfishness.

[CottonBear]

47. The "fair tax" concept is regressive.

I think we need to tax the wealthy more, not less.

I also think that SS taxes should be taxed on incomes over the current limit. I believe that income over $90,000 (I'm not sure of the exact figure) is not taxed for SS. We could solve the SS solvency problem by making the wealthy pay their fair share.

[SlipperySlope]

7. If I take them at face value...

Here are my observations. I started to write these as pro/cons, but I think that decision should be left to the reader.

- Simple (as proposed, but it remains to be seen what would get enacted)
- Reduces certain government overhead (The IRS primarily)
- Taxes consumption, not earnings or savings
- Progressive (through the rebate)
- 23% maximum rate
- Harder to implement social policy without modifying the tax system

That said, this doesn't seem like something that would realistically get passed.

[Supersedeas]

11. completely shifts the tax accounting burden to businesses and individuals who deal with the public

Big multinational corporations and most other corporations that operate on the wholesale level have absolutely no tax obligation to pay or report.

[BonnieJW]

17. What would happen to churches

and charities? The fundies would go balistic.

[SlipperySlope]

32. N/T - Deleted

[SlipperySlope]

50. Retracting above post...

The above was based on taking them at face value. After some investigation, I don't think that is the right thing to do, as they are purposely being misleading.

[HereSince1628]

9. I think depending on the people to file/apply for rebates is a bad idea

Filing income tax once a year is a nightmare, can you imagine the overhead involved in dealing with people filing 12 times a year so that could get monthly rebates on their sales tax overpayments?

Moreover the folks who need relief the most are often people working multiple jobs. In the little time they have away from those jobs and travelling to and from them, you'd be asking them to keep records, documentation and make monthly filings for rebates?

[Comicstripper]

10. From what I understand, the payments are monthly, not the registration

which I believe would be annual.

[HereSince1628]

16. Saving documentation for rebates for 12 months isn't any better, waiting a year is worse.

You'd have poor people pay the rates rich people do and the make them wait a year (undoubtedly with no interest on their overpayment) to get their rebates back?

Great idea tie up 23% of a poor people's money for a year. Force a person making just minumum wage to live on a bit more than 3/4ths of their minimum wage. And if they screw up their filings for their rebates the probably wouldn't get back any of it.

I see a screwing for the poor in the works, yes I do. But I bet H.R. Block loves the notion.

[Comicstripper]

18. Read more carefully

I said I wasn't a proponent. I wouldn't "have poor people" pay shit, because I'm not advocating this. I'm asking others for their opinion and trying to respond to different concerns and objections in a reasonable fashion.

[HereSince1628]

44. That was one of those midwestern "universal you's"

it could just as well have been a universal "us"

Sorry.

[SlipperySlope]

33. N/T - Deleted

[Czolgosz]

12. There is no such thing as a progressive sales tax.

Gravel calls his plan a "progressive" sales tax because he would exclude certain necessities (like food), but for all the items which are not excluded, a family of six living on one $50,000-per-year income would pay the same tax as a multi-billionaire bachelor.

That ain't how a progressive tax works.

[Comicstripper]

14. Well, except that

presumably the bachelor would be buying things like yachts and ...caviar factories, and paying out the nose for them, while the family of six would not. And, they'd have more money to begin with, since they're not paying income tax.

Again, I'm just playing Devil's Advocate here.

[LiberalFighter]

22. Why should a single person pay more in taxes?

Besides paying more in taxes I also pay more when food does not last long enough for normal meals. I don't get the benefits of 2 for 1 meals or other specials at restaurants when eating solo.

[Comicstripper]

27. I'm not saying that.

I thought the hypothetical bachelor mentioned was said to be a multimillionaire. I referred to him as 'the bachelor' for clarity. I'm just saying, his cost of living would be higher (as a multimillionaire, not as a bachelor), and he'd be taxed for those expensive items he is presumably purchasing at nearly a quarter of their original price. Yes, this is the same % a family of six would pay, but while their $2 food item would now cost them just under $2.50 (the extra cost of which would be rebated if they were poor), the rich bachelor's $2 million yacht now becomes a $2.5 million dollar yacht. Again, this is just in theory, I understand the danger of loopholes and am NOT advocating this system.

[Czolgosz]

28. Yes, the bachelor would buy his yacht in Holland, his caviar in Russia, and won't pay a cent in US

sales tax.

[Comicstripper]

31. Precisemente. My concern exactly. n/t

[depakid]

19. And therein Gravel shows his ignorance of basic economics

Namely, the law diminishing marginal utility.

[sabbat hunter]

40. well sorta

they are paying the same tax rate, but not the same amount of tax.

a regressive tax is a sales/VAT tax because it takes a greater percentage of a lower persons income on a single item than it does on a weathy persons income on the same item.

[LiberalFighter]

13. What was your federal income tax for 2006?

Mine was 8.9% of adjusted gross income.

Or 6.2% on total income including 401k.

Why would I want to pay 16 to 23% national tax?

I'm in the under $50,000 bracket.

[Comicstripper]

15. I don't pay federal income taxes

because I'm a kid. I'm just curious, looking into different proposals and ideas for the country. Just feeling this one out.

[LiberalFighter]

25. Ask your parents to compute the tax rate after filing their taxes

Then ask if they would want to pay 16-23% national tax or what they paid for 2006.

[CTLawGuy]

41. you wouldn't, I wouldn't, but who would

the rich, becuase they pay the least, as a % of their income, in consumption of goods. They're the ones who would get a break vs. having to pay on the massive amounts of income they make.

As you get richer, there comes a point when there is no point in consuming any more. If you get more and more money, for example you would go and see more and more movies, up to a point--and that point comes when there are no more movies you want to see. When you reach that point, you won't spend any extra money, but will rather invest it or save it, or put it in your mattress.

Same thing with any other goods. At some point you don't need any other cars, houses or yachts.

Who pays the greatest % in consumption (probably a % over 100% with all the debt)? Poor people who plain don't have extra money to save and invest and who don't pay that much in income taxes, but who would get hosed by consumption taxes.

[sinkingfeeling]

20. Terrible idea. Just do the math. Comparing what % the rich , who shelter their money, would pay

versus the other 90% of the workers.

[terisan]

21. Scam to get non-rich to pay major costs of government that benefit of rich.

The super rich will simply buy high ticket items, such as yachts and private jets, jewels, furs, etc., overseas and manage to get an import tax exemption passed.

[Comicstripper]

23. Right. This is probably my biggest concern.

(I hope that didn't sound sarcastic, because it wasn't meant to be)

[unpossibles]

24. my gut feeling is to not trust it

anything that is named "free" or "fair" usually isn't. If it were truly fair, the rich would hate it.

[LSK]

26. it sucks

1 It does not generate enough revenue
2 It punishes the poor who must spend all their income to get buy while the rich can only spend so much

[high density]

29. I don't think it's going to work

Corporate America certainly wouldn't like it. This economy is running purely on consumerism and a 25% jump in the price of everything would make this bad economy even worse.

I think the flat tax lets the richest people off the easiest, as they likely spend a much smaller percentage of their income than the rest of us. Any flat tax would have to be combined with a significant capital gains tax IMHO.

[Sapere aude]

30. it is a means to push the tax burden on the middle and lower classes.

Why not spur the economy by giving a tax break to the middle and lower classes. They will spend it and create demand?

[StudentsMustUniteNow]

34. Though I would like to see a profound change in the direction of our consumerist economy

I don't think the FairTax is fair. Maybe if you're taxing only iPods, jewelry and other things that are not necessary to life, then it could work. Taxing food? No.

Also, Neal Boortz wrote a book endorsing this tax. I get the impression that everything coming out of Neal Boortz's mouth is shit, so you tell me.

[Comicstripper]

35. There's a very high chance that FairTax is pure shit. Fine, uncut, raw, Colombian shit.

Only asking, in the name of free inquiry.

[CTLawGuy]

42. even that stuff

luxury items are a part of a middle class lifestyle as well (the less extravagant kinds) and to put these things way out of reach would reduce the quality of life in America.

[DeeDeeNY]

36. What about Hallilburton in Dubai?

They would be doing all their business in Dubai, which means zero tax.
(Although for all I know, just relocating in Dubai under the current system means they are already paying zero US tax.)

[happyslug]

37. The Rate is NOT 23% but 30 % and maybe even 60%, plus the state sales tax rate.

Previous threads on this topic:

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=114&topic_id=19356#19462

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=114&topic_id=15670

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=114&topic_id=15245

The 23% tax rate is NOT a sales tax of 23% but 30%. The advocates of this system call it 23% or that is the percentage of the tax when you add the tax to cost of the item tax. i.e. if something cost $1.00, the tax rate is 30 Cents, but that 30 cents is only 23% of $1.30.

Further problem is that this assumes REAL ESTATE is fully subject to the Tax, if you exclude Real Estate that rates go up to 60-70% to obtain the same revenue we get from the Income tax. Furthermore studies indicate that if the Sales tax go over 10% you have increase non-compliance. At 10% or less the sales tax is a nuisance that people will pay rather than avoid, over 10% the sales tax is no longer a nuisance but a burden that people will go out of they way to avoid paying.

Economist William Gale's Paper on Replacing the Income tax with a National Sales Tax:
http://www.fairtaxblog.com/pdf/gale-william-retail-tax-rate.pdf

For Wikipedia on this subject:
http://en.wikipedia.org/wiki/FairTax

Other sites:

Even the right wing Mises institute opposes the "Fair Tax", more than it does NOTHING to cut spending the Mises institute big issue with Government:
http://www.mises.org/story/1814

[CTLawGuy]

38. it would send the economy into the toilet

consumption taxes are very harmful to an economy, especially at the perecentages necessary to maintain revenue neutrality.

How would you react to having to pay 25% more for all the things you enjoy? The middle class is about more than the basic necessities, it is about being able to have some luxuries, like a TV, or the ability to go to the movies, or going out to a nice restaurant on occasion.

What this will do is force people to cut back drastically on the non-essential things they buy which will cause business to contract and force them to lay off workers, thus giving people even less money. It pushes people down from the middle class.

[Leo 9]

39. It's sold with three lies. 1. The tax percentage would be low...

...and remain low.

2. The rebate would be generous and remain generous.

3. There's a hidden tax in the price of products that would be removed if all taxes other than sales tax were removed.


Has anyone ever seen the price of anything go down after any of their top heavy tax cuts, or has the price of almost everything (except cheap junk from China) more than doubled after they got the sort of tax cuts they wanted?

So much for their "hidden tax".


It's all a scam to further their agenda of moving the tax burden off of those who are richer, onto those who are poorer.

[Colobo]

45. I think it's not that bad of an idea.

[Staph]

46. I am well and truly freaked.

I had heard of this idea, the national sales tax, though never under the name of FairTax. And what appears at the top of the page? An ad for FairTax. That kind of targeting is just too frightening for words!

[LBJDemocrat]

48. It would be OK if basic goods were exempt

The Bush administration, I believe, released a report on it that showed that the FairTax would shift the burden to those with lower incomes. I don't know how credible this is, but it seems reasonable.

But if basic goods were exempt, then the FairTax would encourage people to stop being such degenerate consumers; and that would be a good thing for the moral health of Americans. Aside from that, I don't see any good in it.

[MasterDarkNinja]

49. Bad idea, it would double tax people who have saved up money with income taxes

I also don't like the idea of people earning tons of money potentially saving most of it in the bank and never spending it, therefore not paying any taxes on it for a long time, forcing the government to raise taxes to make up for that lost income.

[unlawflcombatnt]

51. "Progressive" is just a sound-bite when it comes to sales taxes

The proposals I've read claim that it is "progressive," yet offer no provisions that are even vaguely "progressive." The marginal and average propensities to consume increase as income decreases. In other words, the poorest spend the highest fraction of their income on consumer goods. Thus they would ALWAYS pay a higher percentage of their income as sales tax. Such a tax would reduce the purchasing power of all consumers, but would hurt the least affluent the most

A truly "progressive" sales tax would somehow have to result in the less affluent paying a smaller sales tax on goods purchased. That doesn't just sound difficult, it sounds impossible.

A "progressive" sales tax is just another gimmick, concocted by the rich, to get out of paying income tax, while deceiving the public with the word "progressive."