April 15th Post Office Events (Fair Tax)

Fair Tax ping!

If you think that April 15th is a nightmare at the Post Office, what do you think will be the effect and administrative cost and burden of processing and mailing all those “Fair Tax” monthly “pre-bate” checks to just about every American family?

If you think that April 15th is a nightmare at the Post Office, what do you think will be the effect and administrative cost and burden of processing and mailing all those “Fair Tax” monthly “pre-bate” checks to just about every American family?

It will cost much less than printing, mailing and processing the multitude of tax forms and booklets with the income tax that will no longer have to be done with The Fair Tax.

what do you think will be the effect and administrative cost and burden of processing and mailing all those “Fair Tax” monthly “pre-bate” checks to just about every American family?

From what I have read, most FairTax tax refunds will be direct deposited, and will cost about as much to deliver as that spam that fills up our email.

These picky little objections seem pretty trivial to me after I have just prepared and submitted 27 pages of financial data to justify the income tax I paid. What if April 15 was just another day? The FairTax could be horrid and still be better than what we have. Why are you defending the status quo?

Almost all prebate payments will be credits to an electonic account. Just think, no more mountains of paperwork disclosing all the intimate details of your earnings and no more spending hours just to figure out how much to pay the king.

From what I have read, most FairTax tax refunds will be direct deposited, and will cost about as much to deliver as that spam that fills up our email.

What about the administration of keeping an accurate data base of families, dependents, addresses, bank accounts of every man, woman and child in the US? There are literally millions of changes each day that will have to be done to keep such data base up to date and also trying to eliminate errors and fraud.

Man50D: It will cost much less than printing, mailing and processing the multitude of tax forms and booklets with the income tax that will no longer have to be done with The Fair Tax.

Yes and no... I don’t know about you or anyone else but I’ve been completing my yearly tax returns and getting my refund (if any) electronically for years now and I haven’t been mailed any tax forms or booklets from either the Feds or my state for many years. I don’t even print out a hard copy of my yearly tax return, rather I “print” it as a PDF and save it off to my hard drive, a CD and a memory drive just in case I ever have to print a copy later on.

Even when I ran my own business and then later worked as a payroll manager employed by a fairly large company, I wasn’t mailed any tax forms or booklets as everything was done electronically and all the forms and booklets or documents or rulings on tax code I ever needed was available on-line. There is also a pretty substantial cost to businesses to convert to a totally new form of tax collection and remittance.

While a lot of people still get tax forms and booklets mailed to them and there is a huge cost for all that printing, there is also a huge cost to process all those “pre-bate” payments 12 times a year vs. once a year. And have you ever read through the entire proposed “Fair Tax” legislation? There are a lot of reporting requirements and burdens imbedded in there.

Cracker Jack: From what I have read, most FairTax tax refunds will be direct deposited, and will cost about as much to deliver as that spam that fills up our email.

These picky little objections seem pretty trivial to me after I have just prepared and submitted 27 pages of financial data to justify the income tax I paid. What if April 15 was just another day? The FairTax could be horrid and still be better than what we have. Why are you defending the status quo?

I’m not defending the status quo. I don’t like our current tax system one bit. But from what I’ve read about the Fair Tax it doesn’t seem to be a much better alternative. My main objection is that the “Fair Tax” is intended to be revenue neutral – meaning that the Feds have no obligation to reduce out of control spending or pork or social projects as they are guaranteed to collect the same amount of tax as they do today, rather the “Fair Tax” just shifts the burden of tax collection and remittance from employers and employees to sellers and consumers. Imagine the burden you and every seller of goods and services would have under the “Fair Tax” to keep every receipt for everything you’ve purchased in the last year in order to prove you paid the sales tax and justify and or prove whether or not your purchase was for a new product – taxable, vs. a used good – not taxable.

Groanup: Almost all prebate payments will be credits to an electronic account. Just think, no more mountains of paperwork disclosing all the intimate details of your earnings and no more spending hours just to figure out how much to pay the king.

Again, it’s a bit Yes and No. From what I’ve read and researched about the “Fair Tax” plan, your employer is still required reporting your earnings and number of qualified dependents to the Feds on a monthly basis in order to determine what “pre-bate” you are “qualified” to receive.

The “Fair Tax” also doesn’t eliminate the need for SSA, and you and your employer to complete I-9 forms, federal and state unemployment insurance and such. Your employer will still have to report your earnings to the Feds and in addition to that, every seller and service provider will have to report your purchases.

One of the other unintended consequences of the “Fair Tax” is that not only are your health insurance premiums no longer “pre-taxed”, but every time you go to the doctor, your out of pocket costs and co-pays for this service is now subject to the new sales tax adding yet another reporting and administrative burden to your health care provider and adding to the cost of your healthcare.

The prebate is based on the number in the household. Not on earnings.

Your earnings are reported once a year just to acccount for SS.

Most health insurance is paid with after tax dollars unless it's a medical savings account - I believe.

What does the flier say ? “If we had Fair tax you would pay a lot more taxes but you wouldn't have to visit the Post Office once a year”?

Except for those people who don't have a bank account. And of course they are first going to have to identify who is eligible a HUGE undertaking as we have seen with the stimulus payment. It is a idea that will give rise to a bureaucracy that will make the IRS seem small, will be result in massive fraud, a huge underground economy and will result in most people paying more tax. Other than that it is a good idea.

Except for those people who don't have a bank account

That's what I meant when I said "almost" all. There could easily be a restriction that only those who have a bank account could receive the prebate. I'll bet you'd get 100% participation.

And of course they are first going to have to identify who is eligible a HUGE undertaking as we have seen with the stimulus payment.

Use the SS records. What is so huge about the stimulus payment. It uses pre existing tax records. Only those who file this year receive it.

It is a idea that will give rise to a bureaucracy that will make the IRS seem small, will be result in massive fraud, a huge underground economy and will result in most people paying more tax

The bureaucracy is already in place. In fact, you can shave 99% of it and leave 50 clerks to count each state's remittances. Massive fraud? Why? You can buy used and not pay the tax. Or you can defer payments to a time of your choosing. Underground economy? That exists now - especially with illegal aliens. They would be paying the FT on their purchases without the benefit of the prebate. And the cash economy would no longer be able to skirt all taxes.

How would people be paying more tax?

Thank you for your thoughtful reply.

My main objection is that the “Fair Tax” is intended to be revenue neutral...

This is my understanding of the FairTax revenue-neutral rationale: Those that proposed the FairTax want to change the tax system, not do that plus fight every special interest group there is to get spending cuts approved. It is a matter of staying focused. FairTax and spending cuts are not mutually exclusive. Those two things can be done in parallel or one after the other. One advantage of the FairTax is the visibility of a tax that is paid by everyone. It would be harder for politicians to convince people that give-aways would be paid for by "the other guy"--the "rich", the corporations, and those evil oil companies. I believe it would be easier to get spending cuts passed after the FairTax was in place. I am totally comfortable with tax reform and spending cuts being broken into two projects. And I am in favor of both.

...the “Fair Tax” just shifts the burden of tax collection and remittance from employers and employees to sellers and consumers.

One of the provisions of HR 25 is to actually pay the retailers for collecting the tax. That idea is pretty revolutionary. No one pays me (or for that matter, no one pays anyone that sent me an income or deduction statement) for the effort of calculating my income tax obligation.

Imagine the burden you and every seller of goods and services would have under the “Fair Tax” to keep every receipt for everything you’ve purchased in the last year

So how does this burden compare with my situation where I sold some stock and was digging out 20-year old records to get the basis right? I haven't detected that the FairTax requires much of anything for record keeping for the buyer. For the retailer, record keeping for the state sales tax is parallel to that required for the FairTax.

I’ve been completing my yearly tax returns and getting my refund (if any) electronically

Your tax situation must be less complex than mine. I must file some forms they won't take electronically (or so my accountant tells me). No matter. Collecting the data, summarizing it and sending it to a tax preparer is the complicated part. Mailing vs efiling is a trivial question compared to the rest of it.

No amount of trying to compare the imagined complexity of the FairTax with the known horrendous complexity of the income tax makes any sense to me. You are comparing mud puddles to oceans. FairTax won't totally eliminate bureaucracy. It would reduce it in a MAJOR way.

Yes and no... I don’t know about you or anyone else but I’ve been completing my yearly tax returns and getting my refund (if any) electronically for years now and I haven’t been mailed any tax forms or booklets from either the Feds or my state for many years.

You're missing one very obvious point and it costs you more than you realize. The refund means the government took more of your money than they needed and used it to finance their coffers in any number of ways while you could have used it to save, invest or spend. That won't happen with The Fair Tax. You will decide who much to be taxed and the rest you can use as you see fit.

There is also a pretty substantial cost to businesses to convert to a totally new form of tax collection and remittance.

There is a far greater cost for businesses to comply with the 67,000+ page tax code. The conversion at most could be considered a short term problem. Offset that with the long term savings for money spent complying with the income tax and The Fair Tax comes out way ahead.

While a lot of people still get tax forms and booklets mailed to them and there is a huge cost for all that printing, there is also a huge cost to process all those “pre-bate” payments 12 times a year vs. once a year.

This point fails to hold water for two reasons. First you failed to consider many businesses and individual must file tax returns quarterly versus none for The Fair Tax. Second the cost to send the prebate electronically to taxpayers will be less than the cost for taxpayers to submit tax forms electronically and by mail combined.

And have you ever read through the entire proposed “Fair Tax” legislation? There are a lot of reporting requirements and burdens imbedded in there.

Hmmmmmm, let's see now 133 pages of Fair Tax requirements to read versus 67,000+ pages of income tax requirements. Call me crazy but I would say the income tax is slightly more onerous than the Fair Tax.

My main objection is that the “Fair Tax” is intended to be revenue neutral – meaning that the Feds have no obligation to reduce out of control spending or pork or social projects as they are guaranteed to collect the same amount of tax as they do today, rather the “Fair Tax” just shifts the burden of tax collection and remittance from employers and employees to sellers and consumers.

This point falls flat on its face. The Fair Tax will address out of control spending. Tying tax collection directly to consumer spending is a check and balance against excessive spending by Congress since doing so would require Congress critters to raise the sales tax rate. Raising The Fair Tax would discourage consumers to spend less and thereby result in less tax collected at the register. Congress could only maximize tax collection by keeping the rate within reasonable bounds. Founding father and first Secretary Of The Treasury understood this concept in his Federalist paper #21 by stating the following:

It is a signal advantage of taxes on articles of consumption, that they contain in their own nature a security against excess. They prescribe their own limit; which cannot be exceeded without defeating the end proposed, that is, an extension of the revenue. When applied to this object, the saying is as just as it is witty, that, "in political arithmetic, two and two do not always make four." If duties are too high, they lessen the consumption; the collection is eluded; and the product to the treasury is not so great as when they are confined within proper and moderate bounds. This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.

Sellers already collect sales taxes on the state level in 45 states. Remitting the Fair Tax to the Treasury will simply be one more line line on the current sales tax reporting form. Fair Tax FAQ #10 They will remit the tax to the state taxing authority. Businesses will hardly consider remitting the tax a burden when after receiving a fee for collection. Consumers will be paying the tax when they make a purchase and they decide how much and when they will pay.

The “Fair Tax” also doesn’t eliminate the need for SSA, and you and your employer to complete I-9 forms, federal and state unemployment insurance and such.

The Fair Tax is designed solely within the scope of the manner in which taxes are collected. It is not meant to address these issues.

One of the other unintended consequences of the “Fair Tax” is that not only are your health insurance premiums no longer “pre-taxed”, but every time you go to the doctor, your out of pocket costs and co-pays for this service is now subject to the new sales tax adding yet another reporting and administrative burden to your health care provider and adding to the cost of your healthcare.

You obviously don't realize every payment you make for any item includes a 22% hidden corporate tax businesses consider a cost and pass onto the consumer in the form of higher prices. The Fair Tax will eliminate those costs since corporate taxes and their associated compliance costs will be abolished. Businesses will eventually be forced to pass on at least some of their savings onto the consumer by lowering prices due to competition or risk losing business.