WTF? A 30% sales tax? End the IRS? Who's the wacko in Congress with this idea?

That's the whole point of this new (old) fair tax proposal. It's to tax the wealthy less. Of course, it will be sold under the guise of making everybody rich. Unfortunately, many people will easily vote for their own destruction, based on the promises of riches. That's how snake-oil salesmen make a living. The grass is always greener on the other side....

 

The prebate covers the TAX on the necessities. No citizen will pay tax on the basic necessities required to live. The poverty line is the income level that has been determined to cover the most basic necessities. The prebate refunds tax to that level.

The FairTax bill isn't going to fail to gain support again because it's not a good idea. It will fail because it abolishes the IRS and the tax code as it exists today, along with all the loopholes and deductions, and thereby takes great power away from congress. Congress NEVER supports legislation that lessens their power, and that is a non-partisan fact.

The rich aren't going to make moves to avoid this tax. They are going to buy all the stuff they want, regardless of price, just like they always have. They're not bargain shoppers. But, the middle class and poor are. Under the fairtax, EVERYONE present in our country becomes a taxpayer; drug dealers, prostitutes, black market dealers, tourists, everyone.

The fairtax projects that a 23% tax rate will be revenue neutral, pay for the prebate checks, and pay for the tax collection costs.

From their website:
"The proper tax rate has been carefully worked out; 23 percent does the job of: (1) raising the same amount of federal funds as are raised by the current system, (2) paying the universal rebate, and (3) paying the collection fees to retailers and state governments. Unlike some other proposals, this rate has been independently confirmed by several different, nonpartisan institutions across the country." - FairTax.org <== click there to answer questions.

 

I am on the side of we are taxed too much and spend way too much but this proposal has no chance of covering even the basic expenditures of America. I considered it a bit more and really think even 100% would not come close to covering it. Assuming there are going to be exemptions for things like food, rent and mortgages and we apply it like the sales tax that are currently in place.

Lets work through an example. Lets take a young couple working in the San Mateo CA for an IT company. Assume they are recently married, rent or own a home with a mortgage and have a salary around 150K each. Household income is $300k. Just running their numbers through the income tax calculator their taxes would be $87,858 about 30%. Lets assume they spend about 50K a year on goods outside of rent/mortgage and food. Things like eating out, shows, entertainment, travel, toys etc... San Mateo already has a sales tax of almost 10% but now we will collect 30% instead. They would pay $15K in taxes instead of the $93K (88K + 5K) in the past. That is a shortfall of $78K for this couple alone. You can argue maybe they would spend more if they did not have to pay income tax but they might just as easily invest it. Even if you were to adjust their spending habits and they spent $200K of the $300 they had they would only pay 60K in taxes whereas in the past they would pay $94K. Most likely they would not have $200K disposable income left over after rent and food. Realistically if they were spending $50K the tax rate would have to be close to 190% to collect the same amount in taxes as before.

https://smartasset.com/taxes/income-taxes#jdobLyIH3P

 

Gotcha, that makes sense. I wasn't thinking just the tax.

Congress probably doesn't care how it gets it's money. Just as long as it has what it needs. The bigger problem would be this could end the need for turbo tax and H&R block and many accountants. They will care more than Congress.

Oh, that's not entirely accurate. Many of the rich in this country are so because they are bargain shoppers. What if they shift their purchases to where sales tax doesn't apply?

Some are, some aren't.

How would black market dealers pay this tax? And if tourists have to pay an extra 30% to come here, why would they? America isn't that alluring to everyone. Sometimes, it's a cheaper option for international travel is all.

That's nice, but does it presume no change in spending? Does it take into account economic cycles such as recessions?

Also, this:

Unspinning the FairTax - FactCheck.org

So those advocating for this admit that it helps those over 200k and makes things worse for those making between 40k and 100k. Is that really the way we should go? Why are we raising taxes on that income bracket? Again, that's from Americans for Fair Taxation, proponents of this plan. So it's not really up to for debate.

This makes me think this is nothing more than rich person slight of hand. You're worried about Congress not giving something up? Try prying money from the hands of the wealthy.

Oh, and it's not a 23% tax. It's 30% because in American is calculated exclusively when it's expressed in a rate. As in, none of the sales tax is included in the price currently.

Also:

So calling this revenue neutral at 30% may not be accurate if allegedly it's going to eliminate hidden taxes.

I don't really care where the money comes from, but I don't know if it's right to say that as this plan is described is how it will work in the final analysis. I suspect the tax rate will be higher than advertised to be revenue neutral and it will shift the burden to those who don't need anymore burden.

 

Good job, when you rely on the numbers given to us by the anti tax crowd, you can almost guarantee that they are largely exaggerated in favor of their proposals.

The other issue: The jet-setting rich will probably just make all of their luxury goods purchases overseas. Of course, the average guy doesn't have this ability.

 

Yep, I wasn't thinking right on that.

Yes, but Jay Leno didn't buy many of those cars new. Most were used. And as such, many would avoid the sales tax unless it counts on private transactions too. Which reading it, I don't see that.

And those prices aren't coming down just yet. In fact, why would they? If people are willing to pay the price, it will stay there. So far, people seem to want to buy cars no matter what. Until that changes, we will have people paying higher prices with no tax gain on that item if we switched.

OK, so this tax doesn't help solve problem one. The tax burden goes DOWN on the rich. The American for Fair Tax says so themselves.

Unspinning the FairTax - FactCheck.org

So scratch that solution.

The tax code could be simplified and loop holes closed, but we can do that without this. There's nothing stopping us except....rich people lobbying Congress.

Thugs? The IRS is made up of nerdy accountants. Sorry, but calling them thugs is like calling Elon Musk, well, smart. And you can prove your case if you don't pay your taxes. Have you ever dealt with them? They send you a letter asking if what you filed was correct, and if so, please provide supporting documentation because the documentation you and the other entities provided to them do not support what you filed. In other words, show us why you're right please and this problem will go away. But you see, if you messed up or cheated, no, you get to pay plus face the consequences. Why do you think you should avoid those consequences? It doesn't make them thugs to uphold the law. It makes them a law and order department which should be supported by those on the right.

 

I am on the side of lower taxes and greater fiscal responsibility and this proposal would be great for my family but I think it would be a disaster for America.

People do not need others telling them this will work or not. I supplied a link to the federal income tax calculator. They can work through as many examples as they like. What you will find is people with low income would end up paying about the same or a bit more and people with decent paying jobs, like the IT couple in my example, would benefit hugely. I would not consider that couple rich, they make less than someone in congress and work much harder. They work in a good profession and live in a very expensive area but over time they will probably do quite well. I can't even imagine how this would benefit the super rich.

 

I don't disagree with much of what's said here, but much of what's said here does show that this is not a silver bullet solution. It will shift tax burden to people who shouldn't have more tax burden. It won't be revenue neutral at 30%, that's impossible based on how it's being sold by proponents. Eliminating the IRS doesn't matter to me, I don't hate them or love them and I don't understand all the emotion attached to them. And finally, none of this is objectively better than what we have today. It's better in some ways, worse in others. So yeah, I'm still not sold.

 

Fiscal responsibility doesn't mean paying as little as possible, it means being effective with one's money. In other words, you consider the cost of not spending that extra dollar and the opportunity lost as a result. I think many people are motivated by cheapness, but you can't run a country that way. Not a great one at least. So I think taxes should be as high only they need to be for us to be as fiscally responsible and meet our objectives. I don't think this fairtax does it at all. At least, not in the form being discussed.

 

I wasn't referring to individual fiscal responsibility. I was referring to the government spending of the tax dollars we give them.

 

Yeah, so was I. The government should make use of every dollar it spends. If spending a million more nets a benefit worth more than the million it spent, they should probably spend it. That's being fiscally responsible, making the most of your money, getting the best return on every dollar spent. It's not spending the absolute least amount of money. That's true of personal finance and government finance.

 

I am not talking about spending the least amount of money possible. I am saying we pay a lot in taxes already. The government needs to do a better job spending that money responsibly. When you are spending billions and trillions the word like cheap do not come to mind. I think the tax system can use reform but I do not think a 30% sale tax will do it.

I mean if you want to twist my arm I will gladly accept it but IMO it would be very bad for the country.

 

Perhaps in some areas they could and perhaps in others they are spending very wisely. The amount of money matters less than what we get for it. If you spend 100 billion developing a fighter jet that sells to major militaries the world over, you might have invested your money wisely. It's a matter of cost benefit. If we spend 1 trillion and make our infrastructure world class and see 2 trillion in returns, well, we did good.

I don't know what the right amount we should pay is or isn't, but we should get the most for the money we the people spend. That's all I'm saying.

Yeah I mean I would just buy a lot less stuff if we switched to this new plan. Honestly, with the prebate, my monthly spending is covered 100%. So I agree, good for me, but overall not sound.

 

Fake News. You think that folks spending a $1,000,000,000,000 a year are currently paying $300,000,000/yr in federal taxes?

I support the concept, but a lower tax rate than 30% of gross domestic product going to the Federal government.

22.5% looks like a much better number.

 

It's not the media's job.
It's up to those who want to implement it and show how it actually is a better system.
They can use the media to get the word out, but it falls on those advocating the change to get the public informed.

 

It is on RETAIL sales, new products not used cars or used washing machines or used guitars. Through RETAIL outlets. And you don't have the 28% combine federal withholdings anymore and get the prebate each month to cover the sales tax on neccessities.

 

And you bettter be able to show what you sold your inventory for and where you cash came from.

 

Of course it is the 4th branch's job to help educate the public on the affairs of the government.....................geeezzzzz

 

Maybe that will work, though administrating sales tax is harder than income tax. Don't know if the IRS needs more or less people with sales tax, but they will need a ton.

 

Flat taxes go too far. It should be a lump sum payment payable by all citizens equally.

 

There are only a FRACTION of companies that will be collecting it and remitting to the US Treasury compared to the number of individual income tax payers.

 

Yes, I understand the attractiveness to the consumption tax, anecdotally, but making policy based on anecdotal experience is unwise. The lawmakers should make tax policy as it affects the whole.

As I understand a sales tax, there is no 'withholding', which is the whole point of the tax, to make it a lot easier than filing taxes at the end of the year.

In point of fact, the 30% sales (consumption) tax will result in higher taxes for poor people, and lower taxes for rich people, given that the higher up on the income ladder one goes, the smaller one's personal purchases are, insofar as needs and wants, as a percentage of income. Yes, purchases increase, spending is at a higher level, but that's not what I'm talking about, I'm talking about as a percentage of total. If you earned $500,000,000 in income, and only spent $1,000,000 on needs and wants, your expenditure for needs and wants is 1/5th of 1% of your income. So you'd pay a tax of $300,000, which is .06% or about 3/50ths per cent of your income would be paid in taxes. For a rich guy to only pay $300,000 on an income fo $500,000,000 that's a paltry sum for that much income.

If you earned $20k per year, and had no disposable income, and 1/4th of that is on rent, and the rest on needs and wants which are taxed at 30% you are paying 30% consumption tax on $15k purchases of needs and wants which is a tax of $4,500 which is 22.5% of your income, a tax which you are not paying now, as a poor person, so that is a hefty tax increase for you as a poor person. The rich guy paying is paying only .06% where he would normally pay a helluva lot more than that is recieving a huge tax cut.

Take Warren Buffet He lives like a middle class person, in a rather humble house, the kind the average working class person would purchase, and lives on inexpensive food and clothing. He said he is fine living on $100k per year. But this guy makes a billion bucks a year, or in the hundreds of millions. If all he had to do was pay a consumption tax, it would be only $30k on all that income (30$ of $100k purchases).

A consumption tax is similar to a flat tax, it raises taxes on the poor, and lowers it on the rich, compared to current tax schedules.

Okay, under the prebate scheme, that would alleviate 23% of the poverty level deducted from what you paid, which should mean you are paying no taxes if you are at the poverty level, however, that still doesn't negate the fact that the rich will be getting a huge tax cut.

https://money.com/fair-tax-act-national-sales-tax/
1% of earners in the country would receive an average tax cut of $75,000, according to Brookings, while the bottom 90% of earners would see a tax hike.

It's not fair.

 

Okay, that quote indicates some relief via the prebate to the people at the bottom, but it doesn't negate the fact that the rich will get a huge tax break.

The rich, though they spend at a higher level than us on stuff, they spend, as a percentage of their total income, a lot less. If you spend $10 million per year on stuff, needs and wants, because you are rich, but your income is $500,000,000, you are spending a lot less, in terms of percentage of income on yourself that a poor person would, who spends ALL of his income, since he or she has very little disposible income (to save or invest).

 

Let everyone know then, when faux tv and RW radio start promoting it.

 

I have heard it discussed many times in various formats. Perhaps you should broaden you realm or sources.