Skip to comments.Fair Tax? No thanks
Posted on 01/23/2011 7:27:20 AM PST by jmaroneps37
When my financial advisor gave me a lot of caveats about the new Fair Tax surfacing in Congress, what I really heard him saying was, You cant trust government.
The unintended consequences of the proposed Fair Tax are pause for alarm because when they sell a Fair Tax, they dont tell you about other taxes that will conveniently remain on the books.
In theory if the government says theyll take away all other taxes, do they?
The Fair Tax is a misnomer in Europe. The income tax was not abolished when they added a VAT value added tax or Fair Tax. The problem is, they are suffocating the average European citizen.
A United Kingdom VAT of 17.5% on top of a 50% income tax totals a 67.5% fed to the amorphous blob; in France: VAT 19.6%, income tax 40%, total 59.6%; Greece: income tax 40%, VAT 25%, total tax 65%; Spain: VAT 16%, income tax 45%. In Sweden a 25% VAT plus a 55% income tax results in an eye popping 80% tax individuals feed to the government wow! Denmarks 83% is even worse!
The United States is heading right down the same path, my advisor tells me. Initially our current administration looks to propose a minuscule amount of only 1% or 2%, just like Europe started out imposing. Our 14 trillion dollar debt load is not sustainable, but he stresses VAT economies are deeply mired in gargantuan debt loads as well.
The American notion of hard work and perseverance enables anyone to get ahead here. Do you think that can ever happen with tax rates between 60% to 80%? he asks.
What would our lives be like with the European model of Obamas redistribution of wealth? Consider never being able to buy a home....
(Excerpt) Read more at coachisright.com ...
repeal the 16th amendment first, then we can talk about it.
The Fair tax proposal is very clear that the Fair tax goes into effect only after the 16th amendment is repealed.
The Fair Tax is NOT a vat tax.
A vat tax is a hidden tax on profits.
The Fair Tax is a national sales tax that replaces income, payroll, capital gains, and corporate taxes.
Oppose the Fair Tax if you like, but don’t lie about it.
A VAT is something to stay away from under ANY circumstances!
A VAT is the unseen killer.
Once implemented government will take as demanded until nothing is left to take.
I see it as the withheld income tax on steroids, if you don't see it taken out of your hand, if you don't write a check for it, you won't miss it.
Anything Europe does, we should be running from.
Didn't we learn our lesson in the 18th century?
That way everyone pays.
No special political favors can be given.
If we must be taxed, the (true) fair tax as you have stated it, is the ONLY fair tax available.
This is a totally misleading piece on the FairTax, and it perennially surfaces whenever Tax Reform talk is in the air.
The FairTax is NOT A VAT, not even close. Inside the legislation for the FairTax Code (H.R. 25), there is a provision that the FairTax sunsets (dies) unless the 16th Amendment is repealed.
Anyone that does their due diligence knows the above and if they have been following the discussions here on FR and elsewhere, they know there is a cabal of lobbyists that work each day to spread disinformation and propaganda about the FairTax.
Once someone gets serious to really study the legislation which is only 134 pages long, they will see that the FairTax is vastly superior IN EVERY RESPECT to what exists today, from collection, to transparency, to enforcement and on and on.
Take the case of a 50% income tax and a 50% sales tax. Say you earn $1,500 and want to spend every dollar you can in the same year. So, after Income Tax you have $750 to blow. Buy something that cost $500 and give the last $250 to the gov't.
Note that %50% + %50% doesn't equal 100%. I would appear to be 2/3 * 100%.
Not true. The transition from one to the other is not set up to be done in a "fair" way. Savings made before teh transition and spent after get double taxed, BIG TIME.
I still need to clarify one nagging point on the Fair Tax.
I’ve paid taxes on my income all my life and have managed to put away enough in savings for comfortable support when I retire.
Now, no one pays income tax, but pays higher tax on everything bought. Pffft! There goes any advantage of having a tax protected nest egg.
So I worked hard, got paid, paid taxes on that money I earned and somehow managed to save some of it. Now some people have the idea they want to tax me again when I use the money in retirement that I was already paid taxes on? BS
I’ve been leery of Fair tax but I’m warming up to it if it can be passed pretty much intact.
>>To promote freedom, fairness, and economic opportunity by repealing the
income tax and other taxes, abolishing the Internal Revenue Service,
and enacting a national sales tax to be administered primarily by the
Full text (pdf file)
There is no way to accomplish a transition that doesnt negatively affect in some way. We need to look long term. If we believe that a change is necessary, which it is, then we will need to accept the responsibility and acknowledge that there will be some pain.
Yeah, that would be like paying tax on your social security tax when you get payments.
That would be double taxation so they would NEVER tax your social security. /s
The current tax system is based on debt and penalizes savings.
The Fair Tax encourages savings (saving is tax free) and therefore encourages the resulting investment.
If you are a saver, changing to a tax system that encourages savings is an advantage that more than offsets the tax liabilities of consumption.
Add in your ability to engage in tax avoidance - buy used, buy less and don’t get tax (and these are things that savers do anyway), and the Fair Tax offers a huge advantage to savers.
It is a tax system DESIGNED for savers.
It's the "pure form" that creates the hurdle however.
Politicians thrive on "picking away" at things until they are no longer recognizable for what they are meant to be.
They can't help themselves.
“Note that %50% + %50% doesn’t equal 100%. I would appear to be 2/3 * 100%.”
I caught that too. You don’t simply add up the taxes when combining, since they interact with each other. If that were the case, then a 50% income tax and 60% VAT would mean that people could not buy anything, but that would not be the case - as they would still have 50% of their income left over to buy overpriced consumer items.
The way to do the math for the case of a 20% income tax and 70% VAT is something like:
Start with $1.00
Take away 20% - you get 80 cents
Take that number and divide by 1.70 (one dollar plus 70% VAT)
You get 47 cents left, so your effective tax rate is 53%
Don’t ask me why it works, but it seems to work.
A tax on profits would be a corporate income tax.
ow some people have the idea they want to tax me again when I use the money in retirement that I was already paid taxes on?
Actually, you wouldn't let that happen, you would expatriate and take all of your wealth with you and spend it in another economy. The Fair Tax is the most efficient way to motivate wealth to flee the country.
It eases my mind quite a bit that my congressman supports it. His record is second to none when it comes to taxes.
He was the founder of Michigan’s “NO” caucus and never once voted for a new tax or tax increase in his 14 years in the state senate.
Since a VAT doesn’t have anything in common with the FAIR Tax, I have to agree.
The Fair Tax is more like a national sales tax that replaces all other federal taxes (personal and corporate income taxes, capital gains, social security, etc.). And, unlike a VAT, the Fair Tax is visible and above board, right there on the receipt.
I don’t trust congress to implement the Fair Tax as written and the 7 yr sunset is too long.
Nothing stops them from a repeal and replace bill that substitutes a VAT for the Fair Tax once everyone has gotten used to it that pulls the rug out from under the repeal of the 16th ammendment.
As a small business person, I don’t care to be the government tax collector. People should be doing their own tax forms and paying their own taxes. The Fair Tax is another burden on small business, especially start ups.
I’d rather have a flattish tiered income tax of 5, 10 and 15 percent with a personal exemption of 50K and absolutely NO other deductions.
In fairness, I've seen engineers, managers, educators, etc., do the same thing. I think it let's them believe that they are not just technicians. How it impacts the result is often immaterial.
I have the best, most conservative with conviction congressman that anyone could ask for.
Mine is Tim Walberg 2 time freshman congressman.
In 08 the local paper wouldn’t endorse him because he wasn’t bringing enough money into the district. In 2010 the same paper endorsed him because he wasn’t promising to bring money to the district.
It took less than 2 years for people in Michigan’s 7th district to get fed up with the marxism of Mark Schauer.
“It is a tax system DESIGNED for savers.”
But it screws those who have been savers for decades and now want to live off that savings. The tax man took money from me as I saved and now a new crop of tax men want to take it from me a second time. It was NOT “DESIGNED for savers”.
In 2010 the same paper endorsed him because he wasnt promising to bring money to the district.
I had to do a double take on THAT one. : )
Your decades of saving will be worth far more in a system that rewards investment - and therefore increases the measure of your savings. The increases in return on investment created by the resulting economic boom will more than offset taxation that targets consumption.
Besides, the resulting change to rewarding investment could very well save this economy, and your savings with it. If we remain under the present system, how long will it take before the current gov’t confiscates your savings ‘in the national interest’?
How “fair” will that be to you?
That would be true for those still working. But if you are already retired, were a saver and now have little-to-no increasing earning potential, it's not such a great deal.
Now I'm not saying that the Fair Tax is a bad thing.... only that it is not a boon to those who are no longer able to save but did so when they were young enough.
Under the current system, when you take money out of your pension or 401K it is taxed as income. Therefore you will not get dollar out for dollar in.
There will be a tax credit for the basic cost living in the Fair Tax.
You will now be taxed on what you spend, not what you invest or gift.
Asking for more money than revenue we produce is called taking from someone else.
Better to tax less, produce more, and decide for ourselves how money is spent in our homes and the district.
This is the upside of the Fair Tax to me. It is tax free to save. However, my concern is the rebates to households. If the IRS is abolished, then how do they administrate sending checks to all households on a monthly basis when there a a large number of errors in the distribution of SS? I don’t like the dependence on government to send all households checks. Why collect money and then pay to give it back?
A couple buys a house, raises a family, retires, and decides to downsize. Today, a $500k capital gain from that sale is exempt from tax. With the new unfair tax tax man at the door, that couple has to pay taxes on all that gain throughout retirement.
Keep it close to home when possible and everyone comes out ahead.
Me thinks that was the original idea with the founders.
The only people who are against the Fair Tax are the ones who are living off the present system.
If things dont change, and they stop spending and the printing of money, in one year ALL YOUR ASSETS will be confiscated by the federal government to continue operating and giving perks to the gimme class. That means all your savings, all your retirements and every single bit of savings you managed to save.
It will be for the greater good dont you know!
With extra high unemployment many will not be paying any income tax, the so revenue for the gov’t. So whatever money they do get, from savings I.E. they will pay the fair tax on it and get a refund of so much a yr.
Face it, the issue is uncontrolled spending. This fairtax/unfair tax is just shifting the burden around. Those who want it will benefit from it. Those who will get screwed by it will oppose it.
He no longer needs a tax accountant. None of the the businesses he frequents needs a tax accountant. The cost of government is reduced by ALL COSTS associated with the IRS (both sides of the table).
Fair Tax will be 23% the first year. Then . . .
25% the next year
27% the year after
30% the next
an up and up, and up and up . . . .
'cause no matter what tax system is in place, government cannot be trusted.
Never used a tax accountant in my life. Please tell me where today we can get a “10% (for ease)” ROI with any kind of retirement risk level?
Pure FT cultist drivel. In the long run we are all dead.
"we will need to accept the responsibility and acknowledge that there will be some pain"
OK, how about you give me 2 year's worth of your gross income? I'm sure that will be just "some" pain.
The neat thing about the Fair Tax re: your concerns is that it offers an easy reference point for politicians:
“If elected, I think we can get by on only 22%, not 23% taxation.”
“My opponent says he will spend 22%. We can run the gov’t on 20%!”
I think it will bid the cost of government down. Add to that the fact that ending the lobbyist hold on Washington (the tax code is their tool) will break up the current system.
Also add the fact that a single percentage representing taxation will allow services not Constitutionally authorized to be sent back to the States: “HHS and education costs 5% of the 23% we tax. Beginning next year, we will reduce the tax to gov’t by 1% and the expense of HHS/Ed by 20% (1% of their total 5%) with the expectation that the States will begin to pick up both the tax and expense burden of this service. We will reduce 20% a year (1% of the 23% pool of total fed taxes) for five years. At the end of five years, gov’t taxation will be 17% at the federal level and the fedgov will provide none of these services. We expect some of that to be offset by they States as the pick up the total cost and service of HHS/Ed. Of course, the States are free to determine for themselves the costs and services they wish to provide.”
This is a mechanism to begin to shift domestic affairs back to the States. Whether used or not, it’s clearly a better deal for States than a lobbyist backed and protected tax code that shifts power to Washington.
The bottom line is that the Fair Tax shifts power away from Washington. For me, that is its biggest draw.
The FT is theft, just like the IT.
If you cant think beyond your immediate needs nothing will change and you can just live with the increased taxes coming your way. Have fun!
Btw: you would be terribly disappointed with all of my gross income in the next two years. I am retired and living off the money I grossly earned in the past.
IMO anyone who thinks that the FT wouldn’t be compromised into existence without dropping the amendment requirement is delusional. And, once its apparatus is implemented, the way is paved for a greater aggregate tax load—which is what the Dems always want.
Prima Fasce - False .
So, how about 5% or 25,000 per year after tax - still not bad.
By the way, in the absence of tax on interest / dividends / cap gains the effective yield on all investments goes up a bunch - hence the munis (historically).
One of the dirty secrets of tax deferred retirement accounts has been that bracket creep has been increasing your eventual marginal tax rate every year.
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