The 'fair tax' would have been nice if it started 60 years ago. I made my fortune, paid taxes on it and now the 'fair tax' people think I'll be happy to pay another 23% on it as I spend it. I'll oppose it four square.
Posted on 05/31/2010 8:08:42 PM PDT by TheFreedomPoster
When the federal income tax was established in 1913, the tax return consisted of only one page and the entire tax code itself consisted of only 14 pages, with a minimum tax of one-percent and a maximum tax on the extremely wealthy tax of only seven-percent. Today...
(Excerpt) Read more at redcounty.com ...
Even if you passed fairtax the IRS would stick around to collect penalties and taxes for Obamacare......
it’s a start....
The “fair tax” is a fantasy.
Since half the population currently doesn’t pay any federal income tax, why would they vote for a 23% sales tax to replace it?
The country needs to rid the government of Obama and his supporters, and we can’t afford this vote-losing diversion right now.
Won’t work unless you include all income - salary, dividends - the amount you get between Jan 1 and Dec 31, no matter what the source.
Otherwise the rich and the politicians will find ways to exclude acquired income by hiding it as they do now.
Correct. Government jobs never go away. They just get redistributed. The war on drugs (Reefer Madness) was launched almost simultaneously as prohibition was repealed.
FLAT tax, not “fairtax”. If it is good enough for The Almighty, it’s good enough for me.
Wow, this is a first. An article on the FairTax that is completely disingenuous. It doesn’t even MENTION the horrific unfairness of double taxing peoples’ life savings that they already paid income tax on. Nor does it mention the prebate that turns the FairTax into a progressive welfare scheme. Nor does it mention that people will effectively pay SS/M taxes on their entire spending — including everything above the $100K current taxable cap — but get ZERO additional SS/M benefits for their extra taxes.
Art Laffer says the true rate on a national sales tax would only need to be 11% to completely replace the income, gift, and estate taxes. So by leaving SS/M alone and eliminating the prebate, you could go from an evasion-prone, crippling 23% assault on savings and the wealthy, to a more reasonable 11% NRST that still eliminates the IRS, enhances American business competitiveness, etc.
Hello? It's not the FLAT TAX it's the FAIR TAX. Maybe you should read it before saying it won't work.
Peop[e will will barter to avoid the tax, so now what do you do?
Stop worrying about the tax and CUT SPENDING! We will always have some sort of progressive tax system, it's the spending that's killing us.
I've always dreamed of a tax system that taxed everybody so they won't be crying they want new programs all the time. Fat chance! Just think of the welfare queen with 6 kids that had to file a return every year and fork over even $50, just so we tax everyone. I guarantee she probably has an XBox, Iphone, and $100 shoes, even while drawing food stamps. She would just have to gather up $50 to pay taxes just like everyone else.
I’m sure they will, but they do already. The scale of bartering that would have to happen to disrupt that system is very large.
The 'fair tax' would have been nice if it started 60 years ago. I made my fortune, paid taxes on it and now the 'fair tax' people think I'll be happy to pay another 23% on it as I spend it. I'll oppose it four square.
If your money is in retirement accounts or appreciating assets, you probably avoided most income tax anyway. Eventual disbursements are probably not tax-free under the current system. You also don't seem to consider the downside of continuing evolution in the current income tax system. You may be facing a capital tax or confiscation one of these days.
But if you still insist it's unfair...why not propose an alternative in the spirit of the Fair Tax?
If we can settle upon a quantifiable definition of "unfairness" it would be worthwhile to extend the Fair Tax to include a redress. If your assets are in cash at a bank or investment account then there are records of the amounts deposited, including tax records. Upon enactment of the Fair Tax amended to cover the situation in question, you could apply for an assessment of "unfairness" (based on the tax you actually did pay for the amounts deposited) and then set up a "retiree rebate" account for you to withdraw from should you actually have to pay the sales tax. You probably shouldn't be eligible for the "poverty-line rebate" until you've depleted your "retiree rebate".
Any "retiree rebate" system should go away after the people who applied for it don't need it any more. It shouldn't be inheritable or continuing in any other way. At some point there will be no more disbursements and we do away with the "retiree rebate" system.
Considering you have raised the issue, can you quantify the actual impact of "double taxation" on retirement accounts? It seem like it would be a issue easily addressed ( see my earlier post on this topic ).
I don't even know if the FairTaxians have addressed this issue, since I didn't read the book, only the proposed statute. But it's obvious the vast majority of folks in the predicament of having retirement accounts were only taxed on the amounts deposited and the growth was untaxed. Combine that with the fact that disbursements under the current system would also end up being taxed and I suspect you may be overstating the impact.
If there really is an impact on folks that couldn't be covered in the "poverty-line rebate" available for everyone who bothers to apply, then we should extend the Fair Tax to include a "retiree rebate" to offset the quantifiable "double taxation".
A lot of savings is not in retirement (deferred income tax) accounts. It is in regular savings, brokerage, or bond accounts that the holder has been 1099’d every year and paid taxes on the earnings in addition to having paid income tax on the money before it was invested.
But suppose the best-case scenario — money that was saved tax-deferred in a 401k or IRA account. A person of modest means living off SS income and withdrawing additional living expenses of $10K - $20K per year would likely pay NOTHING in income taxes because their deductions would reduce their taxable income to nothing. So that IRA savings will never owe any income taxes at all.
In contrast, the FairTax prebate will not even offset the tax on the SS income when spent, and the $10K-$20K pulled from the savings accounts will be taxed at 23% when spent. And ironically, they’d be forced to continue paying into SS/M at the same time that they are retired, non-working, recipients of SS/M.
Why are you suggesting some additional special rebates when the whole point is to simplify the tax method and eliminate the IRS ? Anything “special” means an IRS to prevent fraud and other cheating. The rebates only serve to make the FairTax “progressive” which is just a socialist scheme for buying off voters by making them think government is “free” because they personally don’t feel the pinch of taxes. My alternative is very simple — no rebates for anyone, no feeding of the SS/M Ponzi scheme, and a lower 11% rate.
So I'll address at least part of your comparison, even though you should have better quantified and attributed your effort.
For example, a single worker retiring at age 66 in 2010 may receive a maximum monthly SS benefit of $2,346. He withdraws $1667 additional per month from the IRA. His poverty allowance is about $200 per month. Assuming the worst case - he spends everything and everything he pays for is taxable - his fair tax is about $900-$200 = $700/month. If 25% of what he pays for is taxable his net fair tax is $25/month. At 22% his net fair tax is $0/month.
Under the income tax, what are his deductions? Oops, maybe none - he has no mortgage, any deductible contributions only reduce what he spent, not add to income ( however non-taxable spending under fairtax means no tax anyway), shelter is paid for or rented but likely not taxed, food is not deductible, but he may be eligible for EITC - which could lead to an effective rate of 0. Of course, under the current system SS could reduce benefits or go away, EITC might be changed - he's still at risk and we know the fundamentals are snafu. He might have to pay tax on his benefits.
This does not incorporate the claimed economic benefit of ditching the income tax.
As for continuing to pay into social security - that's a payroll tax has nothing to do with fairtax.
With respect to:
Anything “special” means an IRS to prevent fraud and other cheating.
Tax administration doesn't go away. And fraud and cheating already exist under the current system. What goes away is the tremendous cost of conforming with the income tax, all of the special rules and different treatment for different people. The rebate system is not part of the tax collection system. The only concern of the rebate system is preventing double dipping - and my extension of a one-time rebate to prevent double taxation at switchover for certain special cases which may be easily verified.
If you don't like my analysis let's see what you have, quantified, in context, and attributed.
OK, see I thought you said you read the HR25 law and therefore knew something about it. You clearly have a few gaps in your information.
First of all, the FairTax applies to EVERYTHING except charitable giving and education spending and second-hand goods. So rents, groceries, medicines, insurance, doctor visits, services, etc. are all taxed at 23%. So your $700/mo net FairTax figure is correct for a single person with $4K/mo spending and your “If 25% of what he pays for is taxable his net fair tax is $25/month. At 22% his net fair tax is $0/month” is nonsense.
Second, under the current system, SS income is not subject to income tax unless you have earned income — ie, not investment income — that hits a certain level.
Third, “Oops, maybe none...” is NEVER the case. Everybody gets a standard deduction under the income tax. Which would reduce his taxable $20K income — supposing it was all from an IRA account — to about $12K, yielding a tax of about $1,500. If that $20K was all from non-IRA savings, his income tax would be ZERO.
“Of course, under the current system SS could reduce benefits or go away, EITC might be changed - he’s still at risk and we know the fundamentals are snafu. He might have to pay tax on his benefits.” That’s pointless speculation, as anything could always happen, and EITC is not available to the retiree in any case.
Fifth, you need to re-read HR25 and understand that it is supposed to replace SS/M taxes as well as income taxes. “As for continuing to pay into social security - that’s a payroll tax has nothing to do with fairtax.” Your statement is completely wrong. Of the 23 cent tax on every dollar spent, over 7 cents goes straight into funding SS/M. Basically, one-third of every tax dollar collected under FairTax is to *replace* the payroll taxes. Which is ridiculous, when you think about all the withdrawn savings and SS income that was already taxed when it was earned being taxed again to feed SS/M via that one-third portion of the FairTax. Under the current system, you at least get credit for future benefits based on the FICA payroll taxes taken from you. Under the FairTax, there is no direct link between the eventual future benefits you’ll receive and the taxes you actually paid for them. In fact, retirees get ZERO additional SS benefits even though 7 cents of every dollar they spend will be continuously taken away by the SS/M system. Under the current system, the only way a retiree would continue to have money taken in taxes and put in SS/M is if they worked. Likewise if they worked, they would get increased benefit payments from SS/M. Under FairTax, they’d have money taken to fund SS/M and get nothing for it. If you really want to be shocked, look in HR25 for “Tip Income” and see how it screws anybody that actually relies on tip income for their living — they get SS credits for only a small amount of their income even though it is all FairTaxed when they spend that income.
“What goes away is the tremendous cost of conforming with the income tax, all of the special rules and different treatment for different people.”
All of which is still true with my rate of 11% by leaving out the rebate and SS/M.
“The rebate system is not part of the tax collection system. The only concern of the rebate system is preventing double dipping - and my extension of a one-time rebate to prevent double taxation at switchover for certain special cases which may be easily verified.”
“Easily verified” if you have an IRS. Not just “one-time”, though. Think of all the savings people have wrapped up in home equity as just one example. They’ll be selling those homes for decades, and the FairTax is going to take 23% of the proceeds as they spend that money on food, clothing, etc. So your “one-time” rebate is not going to work. Not that a one-time welfare check appeals to me any more than the ongoing welfare scheme of the “prebate”.
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