I prefer the fair tax.
With the fair tax, you snag people like drug dealers, prostitutes, and people who otherwise wouldn’t pay taxes.
You also reward savers, as money that’s saved and/or invested isn’t taxed unless you spend it.
Let’s say that i earn and want to invest $20,000 with the flat tax. If the tax is 10%, then I can only invest $18,000.
With the Fair tax, I can invest all $20,000.
I get to make money (interest/dividends) off that $2,000 for my retirement. When I spend it, I may spend part of it on things like my car insurance, phone bill, electric bill... things that aren’t taxed at all with the fair tax.
You say that you would have the full $20,000 to spend and that is true but it is not the full picture.
Even if the tax rate is the same between fair and flat tax(10% in your example), you end up with the same amount of goods. Under the fair tax, everything AND I MEAN EVERYTHING, would cost 10% above the cost of the goods - that is the tax burden. So the net effect is that the first $2,000 would go to taxes and $18,000 would go towards “goods”.
Thus, you end up with the same amount of goods. This is true if you buy products, commodities, even stocks and bonds. So your investment ends up being the same -UNLESS- you start allowing tax exempt status for some products. And once you do that, the fair tax is no longer fair.
Same tax, different side of the equation. The only way to make this difference to weigh heavily in the favor of fair tax would be not not tax interest earned on bank accounts, investment dividends, bond interest, etc. Then you would have a significant tilt towards fair tax.
Really? You actually believe that?
Marie wrote:
With the fair tax, you snag people like drug dealers, prostitutes, and people who otherwise wouldn’t pay taxes.
Riddle me this:
A drug dealer and a prostitute, right? That's who you're going to collect taxes on. They avoid the income tax because they don't report their illicit income (from illicit sales of goods and services).
Do you honestly believe that the drug dealer and the prostitute will report their sales of taxable goods and services, and will collect and remit the fair tax on their sales? Do you think the drug dealer is saying, "The reason I don't report my illegal income on my yearly tax return is because I disagree with the income tax. I'll be happy to collect sales tax on my sales and send in a monthly report of my taxable sales, along with the sales tax that I collect." Do you expect me to believe that.
Black market transactions are untaxed. That's part of the definition of "black market." Drug dealers don't pay income taxes, and they don't collect and remit sales taxes. Prostitutes don't pay income taxes, and they won't collect and remit sales taxes for their services. The same transactions where taxes are evaded under the income tax will have taxes evaded under the so called "Fair Tax."
As for when they spend their money, right now, Drug dealers and prostitutes pay "embedded taxes" in the price of everything they buy. The price of everything includes the income taxes of everyone who is in the chain that brings that prodcut to market. The store pays income taxes on its profits, the wholesaler pays taxes on its profits. The manufacturer pays taxes on its profits, the raw materials suppliers pay taxes on their profits.
When you misrepresent your plan with ficticious advantages, one looks closer at the rest of the plan. The FairTax has some very nice points. I like some of the ideas. But the actual bill that implements it is scary when you read it. There's some really bad stuff in their plan as well.