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

I do not know the peculiarities of the proposed bill, but it's doomed anyway so that's a moot point. Under the FairTax, though, the cost of all "Made in the USA" goods would be about the same cost as current, to include new cars, once all the factors are considered. This gives Made in USA goods a competitive advantage over foreign-made goods.

This PDF white paper explains it far better than I can. ==> [LINK] <== In it, you can see the following table.

 

LOL! That's for someone in the 28% TAX BRACKET. In other words, someone who make $150,000+ a year. Of course, they are going to save money.

Now. redo that same calculation for someone with an average wage who is, say, in the 18% or lower tax bracket. All of a sudden the car the new car cost calculation is going to be much less favorable to the "fair tax" system.

But, that's of course the two points of the fair tax. 1) Deprive the government of revenue (as we can see in your car sales example), by cutting revenue it gets from taxing the rich. 2) Shift the burden of taxation from the rich to the average folk. Win, win for the GOP donor class.

So, thanks for this demonstration, it was very instructive. Unfortunately, it doesn't do the "fair tax" system any favors.

The problem is that there will be many deceiving calculation like the one you posted, who will promise untold riches to everyone, if we only change over to the "fair tax". And, people will fall for it, without doing the math. Then, they vote against their own interest and will get screwed.

 

Always!

 

You are a little behind the times. We covered this quite bit in this thread:
http://www.politicalforum.com/index.php?threads/carter-introduces-fair-tax-act.607277/
I am reposting what I posted there, so some of it might not align with everything said here.

 

A 30% sales tax is the same amount as a 23% income tax, which is average right now. The only thing that happens is that you stop paying the tax out of your paycheck and start paying it at the register instead.

 

This isn't a something for nothing scheme. The idea here is to take all the taxes that get embedded and hidden from the population along the line of manufacturing and place them highly visibly at the retail point, where the people will see more readily when it gets changed.

 

8 states have no income tax: Wyoming, Washington, Texas, Tennessee, South Dakota, Nevada, Florida, and Alaska. Additionally New Hampshire only charges income tax on interest and dividends, but not wages/salaries. SO very obviously, the concept of using only sales tax for government revenue works. Further, when the Fair Tax was being researched prior to Linder introducing it in 2005, it was found that if Texas would have no exclusions then they could drop their sales tax from 6% to 2% and still have the same income.

 

No not really. Currently the IRS has to make sure that 258.3 million adults plus 32.6 million businesses, for a total of approximate 291 million entities, remain in compliance. Since not all businesses are retail level, that means under the Fair Tax, we would only have to track less than 32 million entities. That would take a smaller agency not a larger one.

 

That is incorrect. Per the bill only items at the retail level will be taxed. So the materials and equipment used to make the products would not be taxed.

 

The sticker shock won't be all that much because the taxes embedded along the way will be gone from the price so the product will go lower and then get taxed at the register.

 

Not true. Alaska, Delaware, Montana, Oregon and New Hampshire have no sales taxes. A majority does, true. Just not all.

 

Incorrect, not under Fair Tax bill as submitted.

 

That's what a Roth IRA is, unless what you linked to has no taxes going in nor coming out. Then yes, that would be awesome.

 

Don't exclude them because the proposed bill gets rid of them as well, in addition to the death tax and some others. So to make the comparison, you have to count all that will no longer be taken out of your paycheck.

Just make sure that you are looking at those figures equally. An income tax of 17% is not the same amount as a sales tax of 17%. See my earlier post on the math that shows that a 30% sales tax is the same as a 23% income tax. Now, yes that is still an increase from your claimed 17%, but you also didn't include portions of what gets taken out of your check to make an accurate comparison.

 

The prebate is to be the equivalent tax for the poverty level, a figure that we already calculate. So, numbers being for example sake, if poverty level is $1000 a month, that would mean $300 a month in sales tax. Thus every month each person would receive $300 at the beginning of the month to pay for the taxes, making poverty level spending tax free. See my previous post for more detail.

The intent is only to move how the taxes are gathered, not affect anyone's spending in any way.

Because the tax is only at the retail level, all the embedded taxes that were part of the price will go away, thus initially lowering the price. So the price tag won't change much, if at all, post sales tax.

 

Except everyone will not have to collect it and send it to the states. Hence the problem here where it is no longer the few, but literally everyone, including you Blues

 

If you think prices will remain the same, it won't. The prices will increase, plus you will have to pay the tax on that medicine now while in the past you did not. You will literally be using up the free money on price increases and prices will rise because you have "more money."

Again, not really. Since you have "more money" the markets will adjust to increase prices to maximize equilibrium. In addition you will have to pay taxes on the final goods and products, even your own services that you provide, among other things.

49 states plus the district of Columbia have a state sales tax. Alaska does not but certain municipalities do. Second rates vary from state to state with a combination of both state and local sales taxes. Tax Foundation has an excellent chart in this link. If you look at it, a lot of southern states, states that are heavily red, and some other Western states have high sales taxes, especially states with no state income tax like Texas, Florida, Washington, and a few others. So, what will happen is take you state overall sales tax and add 30%, then take away the state income tax rate in your state, since you have one, and those sales taxes will rise in order to fund the state and local governments. Whatever money you think you are saving will be gone faster before the year is out if this bill passes both houses and is signed. And that is not going to happen.

 

No, a Roth is pre taxed, not a tax free savings you know this difference as well which leads me to the conclusion you are not open enough to have a real conversation about this.

 

Other than the fact you can invest tax free. 401k’s included. I love this idea really.

 

The prebate will be calculated initially on the 2022 poverty level based on your family size and in which state you live. Currently, we have three calculations for this: Continental US, Alaska, and Hawaii. Aftert the initial year, it will be hard to calculate it because income will no longer be a determining factor. It practically eliminates the income tax and thus the only measure to determine income to get those calculations for the poverty line. Total taxable sales are not a good indication of what the poverty line is based on the proposed method.

It is much more than that. How taxes are gathered currently is mostly at source, ie wages and voluntarily at other types of income, plus the estimated tax payments. Under the new system, everyone will not have to collect and pay the tax to the state, and then the state sends it to the government. This was done under the Article of Confederation and the states routinely did not do this, hence why it was one of the reasons the Articles of Confederation failed. Under the article, the states collected the tariffs and they sent the tariffs to the national government. The problem, the states used that money for their own needs and states now will do the same. If they don't like what the federal government is doing, they will withhold it. And that violated the US Constitution under the separation of powers.

Yes, it is. However, it also expands the retail base to include services, aka wages. The exceptions are investment income, capital gains, investment purchases, and anything you purchase outside the United States. That would mean any and all government subsidies will now have to be taxed at 30% by the government, not to mention any and all payments for government services. It will hurt the middle class the most, especially the two-earner income middle class. And it will be on top of whatever state sales tax you currently pay, minus a 0.25% reduction. and despite the prebates, it will hurt the poor too because now everything will be more expensive. More money you have, the more chance the retailers will increase the price to maximize profitability, plus the 30% sales tax you have to pay. The rich have the money and moxie to use the rules to their advantage by creating corporations and other businesses to buy this, and then they can use it for personal gain.

 

If you get rid of Title A, those investments are gone, kaput, eliminted. That is where they are created and how the rules work for tax free in Title A. You may want to look at where IRC 401, 402, 403, 404, 405, 406, 407, 408, and 409 are located. And nothing in the current proposal makes that up in their nitty and gritty.

 

Europe runs on the Value Added Tax (VAT) which is a close cousin of the consumption tax. They seem to get along just fine.

 

This is a rant unless you provide proof

 

Notwithstanding the proposed bill, it is a valid question. Through the W4, and based on facts and circumstances, you can determine how much withholding to take out, If you meet the rules, you can have nothing taken out. But with a sales tax, you don't have that luxury. So, a family of 4 married, with one job making $110k a year and both dependents under the age of 17, you can have as many as 6 allowances in which you will get within plus or minus $300. this is assuming you have no other income. With a sales tax, no matter what you purchase, it will be 30%. I can guarantee you that the effective rate for a family of four, with one job, and two dependents under the age of 17, the effective tax rate would be far lower in an income tax situation than the 30% sales tax on all goods and services. His salary will now be taxed at 30%, which means a hell of a lot less take home pay, or disposable income, than under the income tax. And he won't get the prebate because he is well above the poverty line for a family of four no matter where he lives. Thus, you are essentially screwing the middle class here.

No it's not, because income, it is based on taxable income. you have gross income, minus certain adjustments to income, minus the standard or itemized deductions, minus certain nonrefundable credits, namely exemptions and dependents, among others. This is assuming no other additional taxes are in play. So, if we say it is taxable income and it is 17% after all the deductions and nonrefundable credits with no additional taxes, then you are looking at a net tax increase of 13%, aren't you? And with the middle class, there will be some investments, but nothing significant. Most of the income will be ordinary and earned income. And that can mean wages, self-employment, or nonpassive pass-through income on Schedule E.

 

30% is a little much. I'd like to see 10% and a balanced budget amendment, but I would settle for 20%. I would do the tax like Texas does. Basic groceries and medicine and medical care are not subject to the sales tax. Throw in a $1000/month for rent being sales tax free and I think we would be close. The poor get a greater percentage of their spending tax free and we don't have the IRS invading our privacy.