Lets talk about the Fair Tax proposal

[Wiglaf]

i'd be worried about massive evasions from banks, wall street, insurance and other services.. basically the same loophole concerns that were mentioned. but other than that it should be done.

money/tax fairness aside, the primary reason I support these proposals is because I am lazy, and the majority of people out there also find taxes to be a pain in the ass.
The current system? not doing paperwork is basically tax evasion.
taking care of it on the spending end is automatic, nobody escapes. Even illegal immigrants have to pay that shit.

[chrisesteschiro]

Nothing to add...
I am behind the fair tax 100%

[Hallen]

I like the idea of a VAT tax, and I would support one. But there's just one problem with it; it's very regressive. Someone who makes makes $20K a year has 100% of their income taxed because they don't have any spare income to save. It costs $20K/yr just to pay the rent, car, buy food, etc. But someone who makes $1M a year may only have 25% of their income taxed because they can spend $250K and save the rest. Just some food for thought.

You can look at it as regressive if you want. But the big problem with VAT taxes is that they are generally applied at every level. That's what value added means. You mine some iron out of the ground and sell it to a manufacturer with the VAT applied because you added value by pulling the iron out of the ground. The manufacturer turns the iron into steel and sells it, again with VAT applied. Another manufacturer turns that steel into a screw and sells it with added VAT. That screw goes into your car. Every part of a product gets taxed multiple times in the process which adds huge burden to every product made. It drive up prices. It would slow the economy. So not only does that poor person have to pay tax on 100% of the money they make, they also have to pay much higher prices. Yes, you can exclude things like food from VAT taxes, but then we are back to the loopholes and the government manipulating the economy and business via tax code.

The "fair tax" isn't a VAT (at least from the definition of a VAT that I have seen). The fair tax just hits you at the time of sale to the person who is actually going to use that product (unless that "person" is a business, then it gets complicated).

Also, another very bad thing about sales taxes is the international nature of business now. If I don't want to pay sales tax on books for example, all I have to do is buy it online from a store in EastWhatsitstan who ignores US laws on sales tax. It works great because the Fair tax doesn't charge sales tax to people outside the US buying US products (to improve our "trade deficit"). All that has to happen then, is to turn around and sell it back to somebody in the States. Simple. End around.

[Scotaku]

Having had a chance to look over the site, I'm going with my initial thoughts.

Frankly, I was insulted at the stroking, evasive answers in the so-called FAQ. What little was said about how such a radical change from citizen income to consumer spending taxes affects government coffers made me laugh. Taxes are what fund government programs. Budgeting those dollars would be monumentally more difficult without the known quantity of anticipated income of the citizenry... in this regard, the flat tax makes far more sense.

The flat tax genuinely creates equals among the population. We all earn green money and for every dollar, a silver dime goes toward our portion of the collective burden. If you want to work your way to the top, pay your ten cents for every one of those million bucks and enjoy the good life; it's the American Way. If you want to jockey a register inquiring about the desire of your customers to partake of french fries with their order, pay your dimes too. No more rich guy can afford the loopholes and the poor guy doesn't make enough to be taxed. Eff that. All Men Are Created Equal, so let each of them pay an equal portion of what he chooses to earn... and from that, the government can have a hope of establishing a budget.

[Scotaku]

I will have to read the proposal more closely than 0 dark thirty in the morning. I've been a long time fan of the flat tax idea, if you earn a buck you pay your ten cents, but the idea of taxing only what is purchased intrigues me. I will definitely look into the idea once I'm awake later this morning. My first thoughts are that budgeting government spending will become much more difficult because knowing what every citizens earns and what every citizen spends are two wildly different numbers.

[mrsleeve]

^^^^^^^^^^^^^^^^^^^^^^^

This is why you dont VAT food and shelter, then you dont buy new stuff, if you dont buy new = no taxes paid. Again if you only make 20k a year then you get to keep that 20K a year not only 13ish

[mrsleeve]

^^^^^^^^^^^^^^^^^^^^^^^

This is why you dont VAT food and shelter, then you dont buy new stuff, if you dont buy new = no taxes paid. Again if you only make 20k a year then you get to keep that 20K a year not only 13ish

[CorvallisBMW]

I like the idea of a VAT tax, and I would support one. But there's just one problem with it; it's very regressive. Someone who makes makes $20K a year has 100% of their income taxed because they don't have any spare income to save. It costs $20K/yr just to pay the rent, car, buy food, etc. But someone who makes $1M a year may only have 25% of their income taxed because they can spend $250K and save the rest. Just some food for thought.

[Hallen]

You and I agree on almost everything else, and I like you. As respectfully as I can say it, this post of yours shows that you haven't read about what the tax proposal actually is and isn't. Businesses taxes are abolished all together, and all federal taxes are abolished (including Social Security and Medicare, though they're fully funded).

You're right, I hadn't read it. I was going by people using the term VAT and the 16% rate. Obviously VAT is not really what it is, it's a single point sales tax and the rate is set at 23%.

The problem that I still see with it though is that because of all the exclusions, the business rebates, the "prefunds" the market value sales or gifts, the exemptions, is that it is going to be just as complicated and just as fraught with loopholes and unfairness as the current system is. Although I will say that it has the potential to be better than the current system and it is aiming in the right direction.

The eliminate the IRS, but they have to create a whole new administration to handle the accounting, collections, and auditing. Well, that's just the same old IRS with a different name. It's more of a political move than a substantial one.

I once had to wait in a long line at the airport in South Africa to file a claim form to get back the money paid in VAT because I was excluded. That's all fine and dandy, but what a pain. I gave up trying to get my $20 back because it just wasn't worth the effort. There will be a lot of that kind of thing with this Fair Tax even thought the specific circumstance doesn't apply.

So, I'm open to these ideas. I like the fact that it doesn't punish people for making more money. That's good for the economy and good for business.

However, it does punish people for spending. That will be bad for the economy. Yes, we might start saving more, and that is generally good, but if you get huge sticker shock from the 23% tax on a $30k car, well, it's going to be very hard to pull the trigger. You'll go looking for a used car where somebody else paid the burden (until the used cars are as expensive as new cars). And there is double tax there too, unless they have some kind of rebate for the interest that you pay on a portion of a loan that was used to pay taxes.

I just don't think it is as clear cut as they are trying to make it out to be. Businesses will spend a fair amount of money keeping track of all of this so I doubt that there will be much if any savings in that context.

[nando]

That does open a lot of loopholes. If I was to buy a used car from a private entity for 10k, tax of 16% would be 1,600. I'd make a deal of tossing $600 in the guys pocket, if he agreed to pocket the rest of the cash as well and say he sold it for $2k. This would become a regular practice. Downward inflation. (after rereading this, it's a great idea)

people already do that. WA state makes you pay taxes on used car sales. you have to be realistic (nobody will believe you bought an M3 for $2k), but it can save a few hundred bucks when you go to register it.

Cash would be king, since it's harder to track. But people manage to not pay income taxes (legally or otherwise) so it wouldn't really be any more of a loss than it already is.

I'm pretty sure we'd have to get rid of ALL our encumbent politicians to get something like this through. They are deeply entrenched and won't give up their power easily. Remember, government is all about them, not about us..

[Aptyp]

I think KishG is a 5 year old. Has all the "why" questions and absolutely incompetent to look anything up on his own.

Even 5%, those deals could be made. Even at 1%, although most would just say "Fuck it" and pay it to avoid headaches.

[z31maniac]

(btw state income tax is a joke - wtf do they do with it?).

Support the defense industry. :D

[kishg]

16% is way too high.. 5% max. i want to be able to spend all the money i will be saving from not paying to the fed and states (btw state income tax is a joke - wtf do they do with it?).

[Aptyp]

I think fair tax is theoretically awesome (just like Utopia and Communism). That system would discourage people from spending frivolously, and encourage saving. Banks would be able to have more money and could invest into new businesses.


Having said that...
ebay? flea markets? under the table purchases? Now there will have to be an IRS system to count how much you've made and how much you have left? What about people, who keep cash under mattresses?

Businesses would run tax free, but what about all the consumable goods associated with those businesses? Pens, paper, computers, etc? That would add to a HUGE revenue loss.


That does open a lot of loopholes. If I was to buy a used car from a private entity for 10k, tax of 16% would be 1,600. I'd make a deal of tossing $600 in the guys pocket, if he agreed to pocket the rest of the cash as well and say he sold it for $2k. This would become a regular practice. Downward inflation. (after rereading this, it's a great idea)

Current tax code is 100,000 pages to make sure people wouldn't be able to find loopholes, instead with those securities, they wrote in a whole lot of ways to circumvent paying taxes. AND people still find new ways. This fair tax may become just as convoluted as our current system. Over time they'll start looking for ways to tax internet, to monitor bank accounts for personal cash flow.

Theoretically, I'm on board. Rationally, I'd like to see congress over this, get some ideas, put together a decent draft and figure out a straight forward approach that works. It would have to be very simple, so even a 6th grader could understand the concept of consumption and tax.


PS: with our current global economy, banks may not reinvest money back into your community. Instead, they may find a way to lose their money overseas, like they just did (AIG, WaMu, Wachovia, and on and on and on). So now banks would definitely have to be monitored for their ridiculously risque behaviors, thereby adding to the government. All those new gov employees will have to be paid, more revenue will need to be made, higher fair tax would be implemented (even if it's .000001%), more people will try to screw government over, and the circle of life begins again with more government.

[Julien]

I think the fairtax is a terrible idea but I don't feel like arguing with a bunch of head strong conservatives.

So that being said, carry on.