A Modest (FairTax) Proposal

July 14th, 2004 | Remember_Salamis

[Remember_Salamis]

I'm a huge FairTax supporter and want the ENTIRE tax system replaced by a 23% NRST.

But I've been thinking: What if we first just move payroll taxes into a new NRST, both employee and employer shares (all 15.3%).

The Payroll NRST would be anywhere from 6.5% to 8.5% without a rebate. It would be regressive, just like the current payroll tax. I haven't crunched the numbers yet on wher it would fall in that 6.5% - 8.5% range.

One of the benefits of doing this is proving that a NRST WORKS and is FEASIBLE. Once we've proven that it works, the entire argument against the FairTax/NRST falls like a house of cards.

It'll also allow us to easily reform Social Security by simply freezing the Payroll NRST and removing the cap on 401(k) contributions. Over time, people will invest more and more of their own income into their OWN investment vehicle.

I think the bill would easily pass because Liberals have been arguing against tax-cuts by stating that the poor have a "hidden" tax burden courtesy of the Payroll tax.

Over time, we can shift more and more taxes from the income tax system to the NRST, with corporate taxes probably coming next, followed by capital gains and estate taxes.

I think it's a pretty good idea to be armed with empirical evidence of the feasibility of the FairTax/NRST before implementing it across the board.

What does everybody think???

[Remember_Salamis]

bump.

[bcoffey]

I took my 2003 income w/o adjustments or deductions and my 2003 total tax bill and found I was already at 23%.

[steplock]

The only FAIR TAX is a SALES TAX.

You spend more - you pay more. Simple as that!

Regressive Income Taxes are only paid by the peones - us! the very rich make sure they have little "income" to be taxed on. And they want it to stay that way - repubs & dims alike!

[Remember_Salamis]

Go here:

http://www.fairtaxvolunteer.org

[Remember_Salamis]

The FairTAx IS a sales tax; my idea just calls for us to partially convert to a national retail sales tax (NRST) to prove that a NRST is do-able. Once, that's done, there's no real argumant against a FairTax Sales Tax.

BTW, a sales tax without a rebate is a regressive tax bacause the higher the income you have, the lower the porportion you spend on consumption.

[bcoffey]

OK, I went to the link.

The flaw in their proposal is that they don't think I should charge 23% for the "sale" of my services to an employer.

[steplock]

Actually, I wasn't sure what you meant with NRST.

To make it fair, all that needs to be done to protect the truly needy and poor is to not tax any food, medicine, education, and other like items that are considered to be necessary for sustinance. then costs for housing would be non-taxable under a certain $$ figure.

There would be a few bugs to be ironed out - but I don't care if a millionaire only pays 10% of a million if that is all he spends. It is much more fair than the even HIGHER percentages we, the peones, are paying now in comparison to the very rich.

When he - or his heirs - gets around to spending the money, then it WILL get taxed -

THAT is fair. No I am not rich, I am 100% disabled and living quite comfortably with under $24k/yr. Easy when you owe nothing.

[Remember_Salamis]

Not to your employer, unless your a gov't employee (excluding government enterprices such as Amtrak and the Post Office). If you work for any business, you don't sell your services. Only the Gov't will have to pay for the sevices of their employees. Why? Because the Gov't won'y apply the NRST to services provided to the government; if we didn't tax their services consumed, they would have a huge unfair advantage vs. the private sector

[rwfromkansas]

I think that we may need to have some sort of a "small-scale" Fairtax before folks would really go for it...to prove that it works.

I kind of like the idea. Once it has proven itself, then the entire income tax could be converted.

[Remember_Salamis]

"To make it fair, all that needs to be done to protect the truly needy and poor is to not tax any food, medicine, education, and other like items that are considered to be necessary for sustinance. then costs for housing would be non-taxable under a certain $$ figure."

--Education won't be taxed under the proposal (it's an investment), but why should the government decide what "sustinence" is? What is you grow your OWN food? What if you're healthy as an Ox and don't need medecine? What is you already own your home outright? It's up to the individual to decide what's "sustinence" by allocating his tax rebate (the Family Consumption Allowance) the way he or she sees fit.

[Remember_Salamis]

Damn straight! But what other FairTAx supporters fear is ending up with both systems. We could pass accompanying legislation stating that only current taxes may be transfered to the NRST.

[rwfromkansas]

Actually, there is another way...exempt a certain amount of purchases per month in a prebate determined by the poverty level for a number of family members. This is what the FairTax does.

It gives you the choice to determine what you consider a necessity instead of having the govt. tell you that food is exempt etc. You can choose to use the prebate on all your medicine if you think medicine is more important that month, for instance. You could use the prebate on any number of items.

But, the tax is not regressive in this manner....yet you have freedom.

Isn't that great???

[rwfromkansas]

good point....or put in a legislative stipulation that it must be converted over after a certain number of years etc.

[ancient_geezer]

To make it fair, all that needs to be done to protect the truly needy and poor is to not tax any food, medicine, education, and other like items that are considered to be necessary for sustinance. then costs for housing would be non-taxable under a certain $$ figure.

Why let the government pick what should be excepted? That is what happened to the income tax:

 

 

Source: CCH Inc. Number of pages in the CCH Standard Federal Tax Reporter, as found on Cato website.

---

What HR25 proposes to avoid the problems of Congress Critters deciding necessities for you, and thier buddies:

All legal residents will receive a FCA equivalent to the FairTax paid on essential goods and services. The FCA demogrant will be paid in advance, in equal installments each month. The size of the monthly FCA will be determined by the government's Poverty Level for a particular family size, multiplied by the tax rate.

Every year, the Department of Health and Human Services [HHS] determine the "poverty level" for each family size.

The 2001 "FairTax" Family Consumption Allowance Figures
Family Size	HHS Poverty Level	Annual FCA	Monthly FCA
One	$8,590	$1,976	$165
Two	$17,180	$3,951	$329
Three	$20,200	$4,646	$387
Four	$23,220	$5,341	$445
Five	$26,240	$6,035	$503
Six	$29,260	$6,730	$561
Seven	$32,280	$7,424	$619
Eight	$35,300	$8,119	$677

1) Federal Register: February 16, 2001, Pages 10695-10697).

[ The monthly FCA for each adult is .23 * (HSS poverty level for a single person)/12 to assure no marriage penalty due to the manner in which the poverty level is dependant on family size. The monthly FCA for each child is .23 * (the incremental increase of HSS poverty level for a family with one child over no child) ] A. Geezer

A family of four, for example, could spend $23,220 per year free of tax because they will have received over the course of the year rebates totaling $5,341. $5,341 is the amount of sales tax paid on $23,220 in expenditures. A family spending double the "poverty level" or $46,440 per year will effectively pay tax on only half of their spending and, therefore, have an effective tax rate of 11 ½ percent or half the FairTax rate.

The beauty of the FairTax is that you can control how much you pay in taxes. If you happen to save, invest or spend a portion on used [previously taxed] items, you can get your effective tax rate below 9%.

To illustrate examine the tax burden that a family of four will have at various annual expenditure levels.

H.R.25 "The FairTax Act

[Remember_Salamis]

Yes, I under stand how that works with the FULL FairTax pan. But it is not needed if we only transfer Payroll Taxes. Putting in a prebate for the payroll tax would make marginal taxes even more progressive than they currently are; the payroll tax is slightly regressive in it's current form, with income over $82,000 not being taxed. Nut putting in a prebate will prevent further progressivity in marginal tax rates.

[Remember_Salamis]

By doing it "one by one" we'll give our GOP buddies something to run on, taking heed of Dick Morris' political advice of NEVER solving all of your own problems.

[steplock]

"Why let the government pick what should be excepted?"

It still feels almost "sinful" to tax food and medicines and any other necessity.

[rwfromkansas]

True.

[Remember_Salamis]

Is it "sinful" to tax food for the farmer who grows his own food? Nope.

Is it "sinful" to tax medicine that the large majority of Americans don't need. Nope.

That's why it's best to let each individual decide what's a "necessity" and "what's not". Plus, if we start exempting items, the lobbyists will stream back in to screw up our new tax code, just like they have done with the current one. No loopholes, no problem.