Several things need to be worked out and considered here or it will be a disaster. For example, the fact that wealthy household only spend about 50% of their income. This disproportionately shifts the tax burden onto the middle class. According to the SSA chart on compensation statistics, only 2% of the population makes above $200,000 a year http://www.ssa.gov/cgi-bin/netcomp.cgi?year=2015 however, under a "fairtax", they're only paying tax on 123,000 of that. This brings us right back to our current situation, with most top income earners paying ~15-18%, except, now the majority of the population, will now be paying ~20%, and based on spending habits, the top earners will only be paying around 8-12%, taking away property taxes, corporate taxes, capital gains taxes etc etc, it only a win for the top earners and a loss for the bottom. It is severly regressive, the less you make the more you pay up. an average family will spend around 40k a year when their income falls in a typical lower middle to middle to middle upper class range (between 40k and 75k), those near the bottom of this will be paying a full 23%, those in the middle 20%, those at the top, 18%. Those outside of the middle class will progressively pay less and less as they can afford to save more, invest more, spend more in business etc. Problem #2 is the prebate for the poverty level. This would obviously require some sort of agency tracking, as the poverty level isn't static. A single persons poverty level is 11k. Now I can tell you for a fact nobody can actually live on 11k, the federal poverty guidlines are derived from the current cost of food, which makes no sense considering food is actually one of the lowest expenses today than it was when it was drafted and doesn't accurately reflect the cost of living by itself, it also fails to take into account food is not the only necessity, housing, water, transportation, and lights come into factor. The true 1 person poverty level should really lie around 15k when all of this is considered, which is why public assistance programs utilize 125% of the poverty level as an eligibility for benefits. Seondly, when two people get involved, it jumps to 21k, 3, 25k, and so on and so forth. Why are we also giving a poverty prebate to those obviously not in poverty? Third problem is it only goes towards sales tax on new items at retail transactions, this is self explanatory, it leaves a massive hole in revenue considering people consume much more then retail goods, specifically wealthy individuals. We currently spend 30% of our GDP, how are we going to finance that if our actual GDP is not being taxed at that rate? If you ran the numbers based on just how much tax someone would be paying in vs what is paid in now, (considering all income groups) and then added the prebates into the mix, our revenue would significantly drop, I'm currently busy with school, so I don't have the time necessary to crunch the numbers, but a quick glance and some estimations makes me wager it'd drop by 50% or more.
Problem with your little graph is that it treats investing which they seem to have shuffled into other as nothing important. Investing drives this economy and everyone has seen what happens when investors don't invest. Rich people didn't get rich by sitting on their money they invest everything that they aren't currently using. Second problem I see is that many of the Fair Tax proposals I have seen exclude many food items similar to how most state taxes exclude food so the entire point is moot. What I do agree with is that the prebate idea is just (*)(*)(*)(*)ing retarded and idiotic. Its much simpler to just exclude food. My personal preference would be a 10-15% income/capital gains tax across the board which everyone pays.
Depends on what problem you're trying to solve. If you're trying to maximize federal revenue without regard to being fair, then yes it's a problem that you missed some money you could have taken. If you're trying to to be fair (unbiased) about how equal citizens pay for the equal privilege of American citizenship... you'll never get there by looking at percentage of income. There is no logical reason guy A, who pays $35,000 in taxes can be said to make less of a contribution than guy B who pays $2,000 regardless of what percentage that is of their annual income, lifetime income, body weight, IQ or favorite number.
I think these comments touch on the major problem of these "simpler" tax schemes. People are trying to pretend the government is suddenly taking in a whole lot less revenue. Right now we manage our high level of taxation by putting taxes nearly everywhere. There are a lot of them, many are invisible to the consumer, and really it's hard to avoid them much by altering behavior. 10-15% taxation on income and capital gains is way low. Fairtax will also be very low. Even if their numbers are trustworthy in that, under current spending patterns, a 30% sales tax will do the trick, they then have to throw in food exclusions or prebates which add complexity and mean the sales tax rate would need to be higher. But if there's a 40% sales tax on new items, that's going to start seriously altering behavior as people avoid buying new things, focusing on getting things second hand or repairing, or making it themselves in a 3d printer, people would start going on vacations abroad to stretch their money, people would start smuggling in stuff or selling it under the table, and people would prefer paying for untaxed services over new items. This means the tax would need to be higher still (which would drive increasingly bizarre behavior, requiring even higher taxes). That's to say nothing of the economic impacts of that behavior.
Of course investment is important. I've always been in favor of low capital gains tax. Instead of a prebate, give low income people a card that excludes them from paying tax up to a certain dollar amount, adjust it based on the 125% guidelines for households, people who get food stamps also do not pay taxes on food using food stamps in states with a food tax, and most low income people pay for about 50-75% of their food using food stamps. But i think the tax must apply well beyond retail outlets. Buy a house or car? Pay tax. Any consumption of resources needs to be taxed in order for it to actually eliminate loopholes. It just seems more burdensome then the current system. We could have arguments all day about what tax is consumption and what isn't. Technically when you hire someone you're consuming labor resources. You really don't want to discourage consumption by way of tax, people only invest because they have a good feeling someone will consume that investments product, giving them a return. Maximizing revenue aside, I'm looking strictly at a fairness issue. This ends up being regressive, which is just as unfair as a progressive system, if not more so. Buying things new at retail outlets is not an accurate representation of use of government services. Honestly the best way to make things more fair, and realistic, is to turn federal services over to states, and let states decide how to best raise and spend money. It's much easier to write letters and complain, petition, and get things changed on a state level. Even county level makes sense. For example, in Atlanta, there are lots of low income people who need medical care, so Atlanta and its benefiting counties spend tax dollars on a public hospital system that provides low income people with cheap medical care. It works pretty well. I can also see how it solves conservative complaints like "low income people use the most social services, but pay nothing into their funding" If low income individuals paid a low rate for health care, they're contributing what they can afford into the system, rather than getting it entirely free. The federal gov't could provide military and whatever else it needs to do on a national level, and they could raise taxes specifically for those endeavors. Every country that successfully provides social services without going broke does it on a state level. I think that's where we have been going wrong. Too much federal level. Places like finland and sweden have low federal taxes, but high state taxes. Generally most people don't complain about it and like how it works, and they're certainly not going broke and many of those nordic countries are economically more free then the US, mainly because of low corporate, capital gains etc. taxes, and a non interventionist government when it comes to the economy. Which is not really good for business. It could potentially cause prices of new item to deflate so low that companies so no advantage of selling them or manufacturing them, which is bad.
You can't do it fairly. We are all equal partners in this country, we all have the same rights and benefits. That costs about $14,000 per person a year. Unless you want to start metering out federal services, the only way to fairly pay for that is charge every family $14,000 per person. A family of four would be looking at a federal tax bill of $56,000 per year. Very few families can pay their fair share of what this country costs (about 1 in 20). At our current level of spending, there is no fair way to keep the lights on.
That's why I'm in favor of handing most programs over to states (and their counties/cities) entirely. That's fair enough even at a progressive level. Obviously a flat federal sales tax is illogical. That's the entire point of this thread. You can argue over fair, but fair doesn't always make sense, arguing for what makes the most sense and what provides the greatest benefit to society as a whole with the least cost is the most realistic way. You can argue, for example, it's not fair when you have no children of your own and went to private schools to have to pay for public schools in property taxes, but in all reality that's forgetting that it's not fair that a disadvantaged family can't obtain education, and trust me, it still costs you, when businesses close down and leave the area because they're broken into constantly, when you get carjacked or burgalarized because someone needs money and can't get a job, when that person is unable to make a meaningful contribution to the economy because they can't read or write etc. It does cost, and at a higher price.
You are assuming that the government needs all the money it currently gets in the first place. I do not believe that for one second. The vast majority of money for Federal spending should be the military and interstate projects like highways or canals, dams etc. Something that multiple states would benefit from but can't do alone. Everything else should be ONLY at the state level because that is where citizens have the most ability to affect change if they feel money is being mispent. I say only the state level because my state has health insurance for kids which just duplicates Title 19 which also helps kids and my state has benefits for low income housing which essentially duplicate HUD grants as well. There is no reason whatsoever to have the Feds duplicating systems that states can do themselves. You and I have literally no say in how the Feds spend the money. 10-15% is of course a suggestion and it if ends up being a bit higher then fine but there is no way you can argue that they actually need the current amount of revenue. Food exclusions are not complex nor difficult to implement and unlike the prebate idea would require no additional personnel to manage. Most if not all states with sales taxes already exclude many food items. In my state you only pay sales taxes on prepared foods while stuff like raw meat, eggs and milk etc are tax exempt.
Don't get me started on food stamps. If it were up to me I would gut the system entirely and get rid of that asinine program. I worked in retail and the amount of abuse in that system is just maddening. People coming in and buying (*)(*)(*)(*) they have no business buying if they are supposedly on hard times and my favorite when they bought groceries with their EBT card and then whipped out a wad of money to buy a bunch of booze. (*)(*)(*)(*)ing leeches should be denied all welfare assistance for them and their families permanently. The tax exempt card thing has been suggested but I just see another avenue for abuse such as people loaning out their cards to other people for a small fee. Simply exempting food taxes is much simpler and achieves the same thing since poor people spend a higher percentage of their income on food. I don't want another government program that will be misappropriated and morph into some ponzy scheme like the EBT system here is in my state. At least they finally passed legislation that requires that they spend a specific percentage on healthy food and not on junk food and it prevents leeches from using their EBT cards to buy shrimp and New York strip steaks. Get the cod and get the hamburger or chuck roast and if you want more get a (*)(*)(*)(*)ing second job. Sorry if I sound pissed but this is one of my hot button issues.
I know a lot of people on food stamps not like that, more then I do that are like that. I was raised on food stamps. My family bought mostly chicken because it was cheap, made everything (including bread) home made because it was cheaper. There was no (or very little) chips soda and pizza in a box. I grew up in an alcohol free and drug free home too. Father worked 40-60 hrs a week and went to school full time on top of it. Their friends and acquaintances were the same way. Don't throw the baby out with the bath water. I don't see how it can be abused really. You either buy food with it or pay cash for other things. Obviously someone who can't afford food probably shouldn't be buying alcohol, but just because someone buys one 12 pack doesn't mean that $10 will buy him an entire months (or weeks) food.
Therein lies the problem. Fair is so subjective it really shouldn't be part of the discussion. Nothing will ever be fair for everyone no matter what you do. That's why we have government in the first place.
Fair means impartial, equal, unbiased. Whether something has a bias or not, can often be objectively determined. Many of our laws are objectively fair to our citizens. It's a reasonable goal for most of our laws. Life isn't fair. It never will be. Government can't make it fair.
But many of our laws are objectively fair? Didn't the government put those laws onto the books? Government can't make things fair?
Our government can make many of the things it produces fair. It didn't make your life, it did make our laws. Government can make fair laws. It can't make your life fair.
The problem is that the requirements to get the EBT card are so lax that even I qualify for it and I work 30+ hours a week and go to school full time and work full time plus extra remodeling jobs during the summer. I am by no means rich but I make more than enough to feed and clothe myself. I am sorry but I grew up around a poor people and by and large these people were just losers which is why when I could get away I never looked back. Your family and friend are the exception not the rule. I have never known a group of such lazy self absorbed people who couldn't be bothered to change their kids diapers much less actually hold down a job without constantly calling in sick so they could sit around and drink all day instead of work. Then they would complain about no one wanting to hire them. I spit on those people and I plan on driving through that neighborhood at some point in my new BMW with a trophy wife at my side and rolling down my window and calling out all those loser mother(*)(*)(*)(*)ers.
But it can make unfair laws that makes life unfair for certain people. And based on the idea "fair" is unbiased, fair tax is no longer fair due to its regressive nature favoring a lower actual tax rate for wealthy individuals. You seem to think it's fair though, proving the point I just made.
Wrong. You only get ebt if you makes less then 125% of the poverty level. Trust me, if you fall in that range, you can't afford the lowest cost of living arrangements without help, and didn't your mother teach you manners?
Law makers can, and do, make some unfair laws. You can make fair laws, not all laws are fair. A law is unfair if it's biased, if it treats one citizen differently than another. Regressive, progressive... that has nothing to do with a law being fair. That's someone trying to make laws that treat people differently (and so are unfair, by definition) with a goal of making their lives come out equal (fair). And that never works the way folks expect. All those loopholes everyone is complaining about? That's how they get created. You can't make Joe's life fair, with an unfair law. But you can treat him fairly, if you make fair laws.
But i just explained to you that it is biased. A person making 25k doesn't have the option to save 50% of their income, a person making 200k does, therefore those on the bottom are forced to pay the entire rate whether they want to or not, and please, do so,e research and math before you go telling me how a person with 25k can suddenly save their money and just stop paying living expenses. If you really want a fair tax tax everyone based on how much money they accumulate (no matter the means) a flat rate. Of course you will most likely object to this. You don't want fair, you want a loophole.
No, it's not. You're trying to make it biased. You are asking the law to treat a guy who has less income in his personal life differently than other citizens. You're biasing the law in favor of that guy. Your goal isn't to hurt someone who because he's black, tall, left handed or because he's Jewish. But you are biasing the law so it doesn't treat equal citizens equally. You have good intentions. You're trying to find a way to be charitable to a guy who is less capable. You're trying to give that guy a loophole. But you're not being honest about it.
I never said such a thing. I simply explained how a flat sales tax is a loophole for wealthy individuals who save a large amount of their income. Go on, pass a flat tax that taxes every form of income, that is unbiased. everyone pays 30%, doesn't matter if it's capital gains, self employment, corporate, salary, wage, you pay the same tax. I don't see you complaining we should raise capital gains or self employment taxes to income tax levels, despite that being biased. Why not? You sir, are doing the exact thing you accused me of. http://psychology.about.com/od/theoriesofpersonality/ss/defensemech_7.htm
