WHY THE FAIRTAX WON'T WORK

NCPA ^ | 2/15/2008 | NCAP staff

[CindyDawg]

Yep. Put it out there in the light. Let people see how greedy their government has become.

[Always Right]

So lets say your income is $50,000 the percentage taken out before you see it is: Medicare 1.45% S.S. 6.25% Income 25.00% Total Rate 32.70%

You don't take into account personal exemptions and deductions and brackets. Someone who earns $50K and has a house and family, will not pay 1 cent of tax at the 25% rate, let alone his whole salary as your analysis implies.

[dawn53]

What about when I spend the money I’ve already saved (i.e. already paid income tax on)...won’t this kind of tax benefit those who are younger or who have no savings more than those who do? Older folks would be double taxed, so to speak.

Seems to me the concept would slow down the economy because perception is everything, and when people “perceive” of an item as expensive they don’t spend as much. Add 30% to every item, service, etc...and people’s perception will be that it costs more, thus they won’t spend, and the economy will take a hit.

I’m definitely not an economist, just an ordinary person trying to think how other ordinary people would think about the FT.

And as far as eliminating the IRS, yeah maybe, but they’d have to establish some other huge bureaucracy to collect the tax from the retail/service sector. So you’d just be exchanging one bureaucracy (IRS) for another (FT collectors.)

[GeorgiaDawg32]

No more IRS...what a campaign issue.

agreed..

[xcamel]

FIY.. SS, medicare/medicaid are not now, nor have they ever been “income taxes”

[Man50D]

It won’t happen for one simple reason. People will not accept a 30% sales tax (which is what it really is) instead of the mostly single digit sales tax we have today.

Sales Taxes are far from single digits. Most people fall into the 15% income bracket. Wage earners also pay 7.65 percent in payroll taxes. Then there's the 7.65% employer matching. Fair Tax FAQ#5. Add in the hidden corporate income taxes and associated compliance costs embedded in the cost of all goods and services and the total tax is in excess of 30%.


“Fair Tax” proponents use 23% arguing that’s how income tax is calculated today, but when people realize that 30 cents will be tacked on to every dollar they spend (i.e. it’s really 30%), the research shows that they will balk at the idea.

Twenty two million dollars worth of research determined 23% is the tax rate necessary to cover what is costs to fund the government at the same level we have today. The 30% exclusive tax rate with The Fair Tax you refer to is merely the 23% inclusive tax rate under the income tax extracted from today's prices. The result will be the same dollar amount collected from the embedded corporate income taxes and compliance costs and is far less than the total embedded taxes we pay today.

[alloysteel]

Well, here’s the thing. Over the years, too many people have way too much invested in doing things the old way, and they cannot, or will not, take the nessary steps to convert fully from the old system to a new system, of ANY kind. Once assessed, some form of the income tax shall be with us forever, because that is just about the only lever that can be manipulated to generate funds (and a quick revenue flow) on a short-term basis.

Like for example, if you don’t file income tax forms (whether you had income or not) you can’t participate in the Great Tax Refund boondoggle. Earned Income Credits are supposed to offset the grief of having to have a “less than living wage”, but it is income redistribution by any other name, and amounts to a welfare payment, as there is nothing in which the recipient participates, other than paperwork.

And now this recent big stimulus package, will only be paid out to the low-income (less than $75,000) tax-filers, but they now have to file, where they may have been out of the system for years, because of low annual wages.

The IRS exists in large part for catching the unwary, and this has been sometimes an even more important function than to merely raise revenue. If revenue were the objective, then a simple tax rate of, say, 20% to cover all the payments into Soshsecurry and Muddycare, and all the other government-mandated programs, applied to EVERYBODY at all levels, large and small, would yield a revenue stream more than adequate for most current and future needs, if the Federal Government would only keep the contract they now have with the electorate.

But somebody will want to change it, and launch into some grandiose scheme to “help the deserving” (i.e., whoever has the largest bloc of votes and/or campaign cash to deliver).

There shall never be sufficient oversight to stop that chiseling.

[Normal4me]

Excellent post. Let capitalism dictate how much money we send the government. If your product is too expensive you have to lower the cost to sell it. Less revenue going to the government then.

[Cracker Jack]

They tack on 30% in FT on to each dollar spent on the item itself. Then they claim that 30 cents is only 23% of $1.30.

For every $1.30 I gross on my paycheck, the IRS takes 23% and I have $1.00 left to spend on the item.

In each case, the tax is 30 cents for every $1.30 earned under the IRS and 30 cents for each dollar spent under the FairTax. It doesn't matter what percentage you claim. The tax is 30 cents. The tax is 23% if applied to the $1.30 gross income. The tax is 30% if applied to the net after taxes. This is not a hard concept. To compare IRS and FairTax rates, the same base should be used. IRS and FairTax are both 23% of the $1.30 dollar gross. IRS and FairTax are both 30% of the $1.00 net. Most people are smart enough to understand the percentage depends on the base used.

I suspect that people who continue to insist the rates are different or somehow dishonest are not as stupid as they seem. They just don't want to discuss the pros and cons of IRS tax and Fair Tax. The Fair Tax is a winner for many reasons. I agree it is easy to demagogue and will be a hard sell.

[CindyDawg]

A tax is money the government takes. People have no choice. Pay or go to jail. SS is a tax . So are..property taxes, fees on your utilities, gas, car tags, marriage licences, inspection stickers, tolls, tire disposal, cigarettes, alcohol, park fees ........to name a few.

[listenhillary]

Corporate taxes go away under the fair tax, don’t they?

[NavVet]

“Already been proved over and over again that ‘embedded taxes’ account for less than 8% of the average “retail price”.

Why must you turn Free Republic into a house of lies. The truth is posted below.

“Every employee of any company involved in American commerce is also a provider of a service, and, as such, the employee incurs a tax liability as a result of his or her work. This tax liability is incorporated into what the employee charges the employer for their services, and is eventually incorporated into the final retail cost of the employer’s product or service. Each employee is essentially a separate business entity providing a product, be it physical or mental labor, to the employer.

The extensive research behind HR 25, The FairTax Bill, shows that the average embedded taxes in every consumer product or service is about 22%. In some industries, such as leather goods, the embedded tax is smaller. In other industries, such as homebuilding and construction, the embedded tax is higher, but it averages out to somewhere between 22 and 23%. With the passage of The FairTax Bill, those embedded taxes disappear. These embedded taxes include the combined tax burdens of all entities involved in bringing those goods or services to market, and that includes you, the employee, and the taxes you incur as a result of your employment.”

[Antonello]

“Fair Tax” proponents use 23% arguing that’s how income tax is calculated today, but when people realize that 30 cents will be tacked on to every dollar they spend (i.e. it’s really 30%), the research shows that they will balk at the idea.

You might want to check your math:
$1.00 + .30 = $1.30
23% of $1.30 = .30
30% of $1.30 = .39

In other words, for ever dollar spent, an additional 30 cents would be charged. That's 23%, not 30%.

There are many solid arguments against fairtax. Thinking the tax rate is higher than advertised when it is you that messed up the math isn't one of them.

[Man50D]

The Fair Tax will never work because the establishment will never allow it to be considered seriously.

You're falling into the same trap many others fall. Congress is not the establishment. The people are the establishment and increasing number of them are supporting The Fair Tax. They are a direct cause for 73 members of Congress signing onto the Fair Tax and why you see an increasing number of Fair Tax articles, pro and con, posted on FR.

[K-oneTexas]

By the By ... They are taken out up front by your employer before you see your check. Based on your income and taken out with the income tax. All part and parcel of the same government scheme. Thank you.

[Always Right]

The extensive research behind HR 25, The FairTax Bill, shows that the average embedded taxes in every consumer product or service is about 22%.

Which according to the lead researcher included employee paid taxes, not just corporate and business taxes as fairtax.org implies in their grossly misleading statements.

[xcamel]

Both Kotillof and Jorgensen have since retracted the “22%” claim - they were the ones that that came up with the number. Please redo your homework, as you are embarrassing yourself.

[Antonello]

They tack on 30% in FT on to each dollar spent on the item itself. Then they claim that 30 cents is only 23% of $1.30.

Total scam.

Math isn't your strong point, is it?
(See post 73)

[Mojave]

And you are fine with this?

Nope. I oppose the FT.

[steve8714]

AA) Companies will immediately deduct all the embedded taxes from what they sell.