So Long, IRS? Debate Swirls Around “Fair Tax”

RTTNews ^ | September 16, 2007

[Filo]

Question here....for those that know. What is the difference between the “Fair Tax” and the “Flat Tax”?

A flat tax is a tax paid by everyone at the same rate relative to their income. The Fair Tax is paid by everyone who purchases something at a rate relative to their spending.

Seems to me that a Flat Tax of 10% would give the government more than they need.

Seems to me that 5% would be more than enough for what we need from the government and 1% would just about cover their Constitutional mandate.

30% is just ridiculous.

[mysterio]

Because existing sales taxes are under 10 percent. Under 10 percent is a lot different than 30 percent.

[Man50D]

You need to consider some important points. The Fair Tax Act Of 2007 will abolish the IRS,repeals all statutory language having to do with taxing income and payroll (i.e., the Internal Revenue Code), it eliminates the filing of annual income tax returns to the federal government. Fair Tax FAQ #50. Also House Joint Resolution 16 will abolish the IRS.

The only fair tax is a flat tax.

The Fair tax is a flat tax but on consumption instead of income. A Flat Tax on income tax was enacted in 1913 and has evolved into the 67,000+ page monstrosity that exists today. The first tax ranged from merely 1% on the first $20,000 of taxable income and was only 7% on incomes above $500,000. So few people earned more than $500,000 that is was essentially a one tiered tax with only about 2% of the population paying tax. Today, more than 80% of the population is under the income tax. Another flat tax income would eventually evolve back into the income tax disaster we have currently.

Let the states collect it and prohibit the Feds from any collection of taxes.

Then you are talking about repealing article 1 Section 8 of the Constitution. That is a separate issue and not within the scope of HR.25/S.1025.

Your comments show you have not read The Fair Tax Act or visited Americans For Fair Taxation website. I suggest you do so before making anymore erroneous comments about The Fair Tax.

[TChris]

Because existing sales taxes are under 10 percent. Under 10 percent is a lot different than 30 percent.

Just because you say so?

Do you have any sort of proof that this would happen, or just a gut feeling?

[Man50D]

We'll have to double the size of the IRS to fight the blackmarket that the sales tax is going to generate.

On the contrary black market will be greatly reduced. People will have more money in their paychecks, prices will be reduced as the elimination of corporate income taxes and much less compliance costs will make it easier for people to comply. No tax filers will make it much easier for the Treasury Department to find anyone who committing tax evasion. Fair Tax will abolish the IRS!

And why hasn't anyone figured out that punishing people with a 30% tax for buying new goods when they can buy used goods tax free is going to cripple the economy?

A better question is why haven't you bothered to read The Fair Tax Act Of 2007? If you did so you would realize that rate will be offset by a corresponding decrease in prices due to elimination of corporate taxes and much lower compliance costs. Businesses will pass on those cost savings due competition. The end result is the cost of goods and services will remain about the same with the NRST rate included. Additionally people will have more money to spend with the elimination federal income taxes. Try visiting Americans For Fair Taxation website before making anymore uninformed comments.

[raygunfan]

anything to watch the left cough and wheeze as their airline to my wallet get stepped on...

im all for it.

[Man50D]

can you add me to your ping list please?

You're on the list!

[MattinNJ]

IMHO, the present tax system will fall like the Berlin Wall once the Fair Tax debate is brought to light in a Presidential debate by the twop remaining candidates (hopefully Thompson and Clinton). It is so obviously flawed that it will collapse on itself like communism.

Ironically, it will be vehemently attacked by the left even though it will fill the government coffers to allow for more spending on their beloved social programs. They will attack it simply because it will prove to be a tremendous tax relief to everyone except those who refuse to work.

[Crucis Country]

No, I have not read your website. I did my own research and discovered so many faults that I cannot support ANY consumption tax.

Taxing consumption kills sales and that is a negative feedback spiral on productivity and profits. With the dems in power, you'll get both an income tax AND a national sales tax. Look at Europe about haow this scheme has impacted their economies.

If you want improvement, repeal the amendment that authorized the income tax.

[mysterio]

Do you have any sort of proof that this would happen, or just a gut feeling?

It's intuitively obvious that 30% tax on everything new is going to spur a black market for new goods.

[untrained skeptic]

Where I think the "Fair Tax" has it's problem is with savings.

Those of us who have been responsible and have saved up money that was after tax dollars suddenly find that all that money that we had saved buys us far less than it did before the tax was implemented. Other than tax deferred investments, all that money was saved after taxes had been taken out. While we won't be paying the taxes up front anymore, and from that point on the tax is relatively neutral, it screws you on your savings because it causes a huge, instant jump in inflation.

Sure we will no longer be paying taxes on the interest that investments earn, so future investments will work out fine.

However, unless the investments you have made jump up to compensate for the drop in purchasing power of the dollar, investors get screwed.

[TChris]

It's intuitively obvious that 30% tax on everything new is going to spur a black market for new goods.

No, it's not obvious at all. Other forms of "pay when you buy" taxes in effect worldwide certainly haven't resulted in widespread tax avoidance.

Absent an explanation why a ~30% rate would trigger this phenomenon when ~10% has not, all we have to go on is your assumption.

[mysterio]

10% is not high enough to make a black market enormously profitable. 30% is. Nobody would have ordered cigarettes online if the tax was 6% of the price, but when you raise the price of a pack significantly, you get a lot more people trying to avoid the tax. Given our complete failure to control the trade of illegal drugs, I am unwilling to risk another police state and have government double checking everything I buy.

[Tenacious 1]

Rather, Luscombe believes that “A better approach would be to test the waters with a limited national sales tax.”

If there is even a chance that this happens to "test the waters", I am out. FORGET IT! Testing the waters mean adding a national sales tax that never goes away while leaving all the other BS in place! No Friggin Way! We would catch up with the European socialist model in short order.

The only way I would even give that a second look is if they were going to first eliminate all federal income tax forever!

[Gorzaloon]

It's intuitively obvious that 30% tax on everything new is going to spur a black market for new goods.

No, it's not obvious at all. Other forms of "pay when you buy" taxes in effect worldwide certainly haven't resulted in widespread tax avoidance.

What are the total taxes on a pack of cigarettes? Trucks are hijacked and stores robbed for them, and people were buying them online till they got caught and presented with tax bills. People in military bases and reservations find themselves with hoardes of new friends.

[TChris]

10% is not high enough to make a black market enormously profitable. 30% is. Nobody would have ordered cigarettes online if the tax was 6% of the price, but when you raise the price of a pack significantly, you get a lot more people trying to avoid the tax. Given our complete failure to control the trade of illegal drugs, I am unwilling to risk another police state and have government double checking everything I buy.

I understand the reasoning behind your claim, but that isn't proof. The fact is, it just doesn't happen.

For example, there's a great profit to be had by stealing cars and selling them, but few people steal cars. Profitability isn't enough of an incentive to cause most people to violate the law.

In the USA, most people obey the law. Moving to a Fair Tax system wouldn't change that fact, as far as I can tell.

[Teacher317]

Yes, but they are criminals, and are pursued and prosecuted. They hardly account for any significant percentage of the total volume of sales of those products.

I'm all for any tax system where I do not have to report my life's story to others, and face punitive actions for, well, anything they can think of. Let businesses collect and report as they routinely do for every other accounting measure... and let the intentional criminals face sanctions for failures/fraud/stealing. That's a HUGE increase for freedom for all citizens in one easy step.

[TChris]

What are the total taxes on a pack of cigarettes? Trucks are hijacked and stores robbed for them, and people were buying them online till they got caught and presented with tax bills. People in military bases and reservations find themselves with hoardes of new friends.

Yes, and just how often does this happen? Not very.

Mysterio is trying to argue that widespread black markets would result from the Fair Tax. That's just not gonna happen. Some isolated examples of the theft of cigarette shipments doesn't prove anything at all in that regard.

[groanup]

Let me ask folks on this forum what will happen if you start paying out 31.25% on top of the base cost of goods, every time you make a purchase? Will you reduce your purchases? If your new car that you wheeled and dealed down to $30,000.00 would suddenly cost you $41,000.00 would you buy it today, or would you wait a couple of years? I know I’d put the purchase off.

A simple example:

Under the income tax: you make $100 dollars, you pay $25 in taxes. You have $75 left over for consumption and savings.

? Under the FairTax: You make $100 dollars you keep it all. But you can only buy $77 worth of consumption because you have to pay 23% sales tax.

So the dollars are generally the same for the average Joe either way. Except under the FairTax savings isn't taxed before you put it away and while it is earning interest and dividends. One also has a CHOICE about when and where to spend money (be taxed).

[sono]

So long IRS? Never happen ... too many have a vested interest in the present system. Just my opinion. I could be wrong.