Fair Tax to the Rescue?

[Dphins4me]

This is a great thing.  The more Americans willing to push their congressmans for this the more they will start to abolish the IRS & Income tax.

This would be the greatest thing to happen to the American people.

IS THIS WHY SALES OF THE FAIRTAX BOOK HAVE SPIKED?

Several listeners alerted me to this bit that appeared on Kiplinger.com written by Knight Kiplinger, the editor of the Kiplinger Personal Finance magazine. In the article Kiplinger is proposing fixes for some of our current financial problems. This section dealt with tax reform:

    Reform the tax code. The best thing Washington could do to supercharge private savings would be to tax consumption rather than income. The Byzantine U.S. tax code (all 60,000 pages of it) should be scrapped. All present federal taxes -- on personal and corporate income, capital gains, estates, even payroll taxes (FICA) -- should be gradually replaced by a new, national consumer sales tax, collected by the states at the point of purchase and forwarded to Washington.

    At every income level, big spenders would pay a lot of taxes, super savers much less. Poor people would get all their sales taxes rebated. (For more information on one version of a consumption tax, visit www.fairtax.org.)

There is absolutely no doubt that enactment of the FairTax would be the greatest boost to the American economy in our lifetimes. As I've said, the problem here is that (1) The FairTax act was introduced by a Republican; and, (2) it would constitute the most massive transfer of power from the government back to the people in the history of our Republic. The thinking in Washington is that our economic problems can only be solved through the enhancement of government power.

[Spider-Dan]

I long for the day where I can answer every political question with a statement I wrote years ago.

http://www.thedolphinsmakemecry.com/forums/index.php?topic=6395.msg62815#msg62815

Apologies for the novel.

There are three major problems I have with the "fair tax":

1) It puts everyone in the US on a form of "welfare;" everyone will be expecting the reimbursement check in the mail each month, and that's a pretty big stick for the gov't to wield.  Imagine the person who takes up an unpopular political position (e.g. an anti-war demonstrator) ... it would be a shame if his monthly check started having some paperwork problems, wouldn't it?

2) The "fair tax" would inevitably result in a huge explosion in the black market.  If you're paying 23%* sales tax, that's a pretty big incentive to start buying things under the table.  This, of course, means that the disappearance of the IRS would be accompanied by an explosion in the FBI (to try to eliminate all the tax-free black market goods).  Given the choice between IRS accountants and audits, or armed FBI agents busting down doors and hauling people off for suspected black marketeering, I'll take the former.

3) The gov't will have yet another reason to take away more of your privacy.  I don't like the idea of having every item I purchase logged and tracked in some database, to be used for whatever purposes the gov't deems fit at any later date.  You might say, "Well, there's sales tax already, right?"  The difference is, under current sales tax, businesses are responsible for reporting sales tax, whereas under the "fair tax," you (the individual) are.  That means that every item you buy will be logged and tracked to you.  If you get dragged in for suspicion of a kidnapping, do you want to have to explain why you bought a roll of duct tape 3 months ago?

Additionally, this would likely lead to cash purchases being frowned on (at the very least), as cash would be the tool of the black market.  You know the looks you would get if you tried to buy a house with cash?  Imagine that same look coming anytime you tried to pay with cash, period.

I don't mean to sound like an anti-government nut, but my privacy is already being trampled by laws like the USA PATRIOT Act.  I don't need to give the gov't yet another excuse to need-to-know every detail of my life.

Also, keep in mind that in order to eliminate income tax, the 16th amendment would need to be repealed.  Amendments cannot be repealed by an H.R. bill; you need to pass a new amendment to remove an old one, and passing amendments isn't exactly a walk in the park.  If this bill were to pass, the most likely scenario would be a momentary shutdown of the IRS, followed by a reinstatement of the IRS in an "emergency situation" (like, say, a never-ending worldwide war on terror), in which case we'll be getting double taxed.

And speaking of double taxation, keep in mind that any savings you currently have WILL be double taxed.  This is an especially harsh blow to retirees.

*note:  The "23%" sales tax is misleading.  Right now, if you buy an item for $1.00 with 7% sales tax, you pay $1.07.  Under a "23% fair tax," you would pay $1.30 (23% of $1.30 is 30 cents).  Based on the way that we are accustomed to calculating sales tax, it would be less misleading to just call it a 30% sales tax.

[run_to_win]

1) It puts everyone in the US on a form of "welfare;" everyone will be expecting the reimbursement check in the mail each month, and that's a pretty big stick for the gov't to wield.

So instead of many people waiting for a monthly check suddenly everyone is?  I don't like the idea but I don't see a real problem.  Not much different than everyone waiting for their tax refund. 

Imagine the person who takes up an unpopular political position (e.g. an anti-war demonstrator) ... it would be a shame if his monthly check started having some paperwork problems, wouldn't it?

If this never happened during the tyrannical Bush regime where the majority of the people waiting for checks did not agree with the administration, then what makes you think it'll suddently begin under Obama or McCain?

2) The "fair tax" would inevitably result in a huge explosion in the black market.  If you're paying 23%* sales tax, that's a pretty big incentive to start buying things under the table.

Sounds a bit like the internet which was mostly tax free until recently.  E-bay, Craigslist, etc, etc, etc. 

This, of course, means that the disappearance of the IRS would be accompanied by an explosion in the FBI (to try to eliminate all the tax-free black market goods).

Did the internet create a similar explosion?  I save 9% everytime I buy out of state or off of Craigslist. 

3) The gov't will have yet another reason to take away more of your privacy.  I don't like the idea of having every item I purchase logged and tracked in some database, to be used for whatever purposes the gov't deems fit at any later date.

Why haven't local states done anything like this?  Relative to my state, the feds are relatively hands-off.  It's a felony if I gamble on the internet - because every dollar I spend on the internet is one less that I'll spend at an First-American casino, and they own our state government.  My state sends SWAT teams to break up friendly low-stakes poker games.  I don't see it happening.  The only hint of your scenario coming true is one of the candidates using law-enforcement to stifle unfavorable political ads. 

You might say, "Well, there's sales tax already, right?"  The difference is, under current sales tax, businesses are responsible for reporting sales tax, whereas under the "fair tax," you (the individual) are.

So?  Instead of reporting income now we're reporting sales?  In my state we already have to log our sales tax to deduct it from our income tax.  Of course, for those of us without records or too lazy to keep track, there's a standard deduction we can take.  The Fair Tax probably won't be any diferent.   

Additionally, this would likely lead to cash purchases being frowned on (at the very least), as cash would be the tool of the black market.

Does the current black market take credit?

You know the looks you would get if you tried to buy a house with cash?  Imagine that same look coming anytime you tried to pay with cash, period.

Hysteria.  As long as you can show how you came about all that cash you have nothing to worry about. 

I don't mean to sound like an anti-government nut,

but my privacy is already being trampled by laws like the USA PATRIOT Act.  I don't need to give the gov't yet another excuse to need-to-know every detail of my life.

Give us one example of the government actually intruding into your privacy.

Also, keep in mind that in order to eliminate income tax, the 16th amendment would need to be repealed.  Amendments cannot be repealed by an H.R. bill; you need to pass a new amendment to remove an old one, and passing amendments isn't exactly a walk in the park.

Yeah, it would be hard so let's not try.   

If this bill were to pass, the most likely scenario would be a momentary shutdown of the IRS, followed by a reinstatement of the IRS in an "emergency situation" (like, say, a never-ending worldwide war on terror), in which case we'll be getting double taxed.

Said the person who sounds like an "anti-government nut". 

And speaking of double taxation, keep in mind that any savings you currently have WILL be double taxed.

Please explain.

[Dphins4me]

It puts everyone in the US on a form of "welfare;" everyone will be expecting the reimbursement check in the mail each month, and that's a pretty big stick for the gov't to wield.  Imagine the person who takes up an unpopular political position (e.g. an anti-war demonstrator) ... it would be a shame if his monthly check started having some paperwork problems, wouldn't it?

  Why is that a big stick for the Gov?  Actually the talk is a debit type card that can be reloaded monthly.  Credit Card companies have actually contacted the Fair Tax group telling them they are interested in working something out if they can get the Tax passed.

I also think you are reaching with the paper work stuff.

The "fair tax" would inevitably result in a huge explosion in the black market.  If you're paying 23%* sales tax, that's a pretty big incentive to start buying things under the table.  This, of course, means that the disappearance of the IRS would be accompanied by an explosion in the FBI (to try to eliminate all the tax-free black market goods).  Given the choice between IRS accountants and audits, or armed FBI agents busting down doors and hauling people off for suspected black marketeering, I'll take the former.

There will always be cheats.  Heck they cannot collect billions in today system.  My question is what is the incentive for the person selling the item under the table?   What do they gain out of it?  The only person gaining is the buyer.  Seller gains nothing.  Why would the seller risk being caught for the buyer?

In today's system it benefits them to hide the transaction since its income.  Fair Tax that transaction is no longer a concern for the seller, so again I ask.  What is their incentive to risk arrest to save "the buyer" money?

The gov't will have yet another reason to take away more of your privacy.  I don't like the idea of having every item I purchase logged and tracked in some database, to be used for whatever purposes the gov't deems fit at any later date.  You might say, "Well, there's sales tax already, right?"  The difference is, under current sales tax, businesses are responsible for reporting sales tax, whereas under the "fair tax," you (the individual) are.  That means that every item you buy will be logged and tracked to you.  If you get dragged in for suspicion of a kidnapping, do you want to have to explain why you bought a roll of duct tape 3 months ago?

Boy this one is out there.  Not sure of where you are getting this.  Businesses still would collect the tax at the time of the transaction & send it to the Gov just as they do now.  For you.  You are done with it once you pay & leave.

However, you know exactly what the tax you paid & nothing is hidden from you.

Hate to tell you.  Everything you purchase is tracked.  If you use a store discount card, then its tracked.

Additionally, this would likely lead to cash purchases being frowned on (at the very least), as cash would be the tool of the black market.  You know the looks you would get if you tried to buy a house with cash?  Imagine that same look coming anytime you tried to pay with cash, period.

Why would cash purchasing be any different than before?

Also, keep in mind that in order to eliminate income tax, the 16th amendment would need to be repealed.  Amendments cannot be repealed by an H.R. bill; you need to pass a new amendment to remove an old one, and passing amendments isn't exactly a walk in the park.  If this bill were to pass, the most likely scenario would be a momentary shutdown of the IRS, followed by a reinstatement of the IRS in an "emergency situation" (like, say, a never-ending worldwide war on terror), in which case we'll be getting double taxed.

    Yes, they would have to amend the constitution.  The other is sky is falling stuff.

And speaking of double taxation, keep in mind that any savings you currently have WILL be double taxed.  This is an especially harsh blow to retirees.

The transition details would still need to be worked out, but if this is the biggest concern then I'd say it workable.  Heck, they may already have the details worked out, but 401K & IRA ( Not Roth ) would still be tax because they have not been tax yet, but earned under the old system, so those would be no different then the money already in your pocket.

*note:  The "23%" sales tax is misleading.  Right now, if you buy an item for $1.00 with 7% sales tax, you pay $1.07.  Under a "23% fair tax," you would pay $1.30 (23% of $1.30 is 30 cents).  Based on the way that we are accustomed to calculating sales tax, it would be less misleading to just call it a 30% sales tax..

  No, the items you pay a dollar today for would no longer cost a dollar.  Everything you purchase today has a embedded taxes on them I think its about ~22% ( Will have to look that up again )  So with the Fair tax all those embedded taxes are removed. 

This is where we find out what you believe.  If you believe in the free market system then competition between companies will drive the price down to where that item that cost you $1 will now cost you about $~.80.

If you think companies will not lower cost to gain a larger market place.  Just check out the airlines.  Some companies are changing for bags, while others have choose to not charge to gain more customers.

That is a highlighted version, but I do suggest reading the book & the book that addresses things like the 30% sales tax you just listed.

[Dphins4me]

So?  Instead of reporting income now we're reporting sales?  In my state we already have to log our sales tax to deduct it from our income tax.  Of course, for those of us without records or too lazy to keep track, there's a standard deduction we can take.  The Fair Tax probably won't be any diferent.   

  April 15 would be just another day in the year.  No forms, no anything to file.

Your taxes are paid at the time of the transaction.

If I recall correctly the tax is only on new items, not used.

[Frimp]

^^

You are right

[Spider-Dan]

My favorite thing about my post is the part when I linked to a 3-year old thread where this subject was already discussed in detail.

The "fair tax" is not new, is not novel, and has no chance whatsoever of being passed... particularly in the current political environment.

Given that taxpayers are currently paying $700bn to bail out corrupt corporations, the idea of passing a new law that is rife with potential for corporate tax evasion (and CEO tax evasion in particular) is not likely to be well-received, to put it charitably.

[Frimp]

^^^

There have been more than one threads here. But, there has been a surge in intrest in the subject.

[run_to_win]

My favorite thing about my post is the part when I linked to a 3-year old thread where this subject was already discussed in detail.

That's okay.  We won't mind debunking your fears once again in another 3 years.

Given that taxpayers are currently paying $700bn to bail out corrupt corporations,

If only the side calling for MORE oversite and regulation had been listened to.  *sigh*

[Fau Teixeira]

you don't need to repeal the 16th amendment to do away with the income tax

the 16th only allows the income tax .. it doesn't mandate the income tax .. you could do away with the entire IRS with a bill from congress

[Frimp]

you don't need to repeal the 16th amendment to do away with the income tax

the 16th only allows the income tax .. it doesn't mandate the income tax .. you could do away with the entire IRS with a bill from congress

But if you didn't repeal it, if the fairtax was put into place, a greedy government could come in, and put the income tax back into place on top of the fairtax.

[Dphins4me]

The "fair tax" is not new, is not novel, and has no chance whatsoever of being passed... particularly in the current political environment.

Given that taxpayers are currently paying $700bn to bail out corrupt corporations, the idea of passing a new law that is rife with potential for corporate tax evasion (and CEO tax evasion in particular) is not likely to be well-received, to put it charitably.

 Its not going to be passed today, nor tomorrow, a decade from now is what I'm looking at.  An informed public leads to politicians supporting what they want.  The public truly has the power, when we use it.

Politicians wants two things.  Your vote & to not be paying attention to what they are doing.  

If enough people let them know they want this, then in time we will get enough people in office that will " Get er done "

Kinda hard to be corrupt when you take away the reason to be corrupt when declaring your income.  No off shore accounts to chase down & tax.  Just whenever they buy that new sports car, then they pay their taxes.  

There is no incentive for the seller to get the buyer out of the tax.

[Dphins4me]

you don't need to repeal the 16th amendment to do away with the income tax

the 16th only allows the income tax .. it doesn't mandate the income tax .. you could do away with the entire IRS with a bill from congress

Thanks for the correction & debunking a fear of Spider Dans.

[Dphins4me]

But if you didn't repeal it, if the fairtax was put into place, a greedy government could come in, and put the income tax back into place on top of the fairtax.

Yes, but it would be the death of those politicians political lives..  No politicians wants to be voted out of office.

[Spider-Dan]

If only the side calling for MORE oversite and regulation had been listened to.  *sigh*

Which side was that?

Kind of hard to play the "I wanted more regulation in 2003" card when you are on the record saying "we need less regulation" in 2008.

But fine, let's talk about the "fair tax".

There will be no elimination of the IRS, nor reduction in tax lawyers, because business-to-business transactions are untaxed.  And who do you suppose will be the government entity in charge of determining who is and is not legitimately conducting untaxable transactions?

It's a shell game, pure and simple.