I know it replaces taxes on productivity and investment, ie: income and savings, with a consumption tax on goods when purchased at the retail level. Any thoughts on this?
JP
Anything to simplify the income tax system now with it’s thousands of pages designed by the corrupt for the corrupt.
It is a well thought out consumption tax. Consumption taxes (sales tax) are regressive. Since poor people pay a larger percentage of their income on basics it taxes them more. But the fair tax gives a rebate, or gives the taxes back on most of if not all of the taxes that poor people pay.
The problem is that the way congress controls the country is through the control of money. It taxes what it does not want you to do and gives tax deductions for the things that it wants you to do. For example they generally want people to buy houses so there is a tax exemption on the mortgage interest that you pay, thus encouraging you to buy houses.
People that don’t like congress to control things think that its government is the problem don’t want the congress to be able to control anything so they think that would be a good thing.
I believe this tax is also called VAT, “Value Added Tax.” I think it’s a great idea–tax new consumption.
So if you buy a new refrigerator you may pay 20% say extra in VAT taxes. This is not necessarily regressive, because the poor will then tend to buy a used refrigerator instead then. Recycling of used tax-free items will increase, which would help our landfills.
I think this would be great if it is simple:
Tax all new sales of consumer goods, including vehicles
Exempt food and prescription drugs
Charge VAT on restaurant food
Charge VAT on hotel stays if short term
Charge VAT on new clothing, exempt used
No VAT on garage sales, or Thrift Stores.
This could be calculated quite easily as to how much revenue that would come in to replace income tax. If it could be kept simple this would be very workable.
Several European countries have used this tax in the past, so there is the benefit of their experience.
Furnishedowner
Furnished,
I don’t know if VAt is the same or not.But I’m all in for simplicity.Also this HAS to take the place of income tax,not as pelosi(aka crazy botox queen)suggested that it just be another tax,who in their right mind would go with that?They should’nt let her outta the straight jacket so much,she even looks like a fraud without saying a word.
I know about the Fair Tax.
The Fair Tax is a National sales tax that would be charged at 23% inclusive. That means for something that costs $100, $23 of that would be the Fair Tax. That is, of your $100, 77 goes to the seller, $23 goes to Washington.
The Fair Tax is not a VAT tax. VAT taxes tax goods at every point along its manufacture. It is much harder to administer than the Fair Tax would be.
The Fair Tax is applied only to new items. A new item is something that hasn’t had the Fair Tax paid on it. A used item is something on which the Fair Tax has been paid, or something that has been manufactued prior to when the Fair Tax takes effect.
The Fair Tax is not regressive. Poor people don’t pay it at all. That is because of a mechanism called the “prebate.” The prebate is an amount of money that every American citizen receives every month. It is based on their personal poverty level as determined by their living situation - single, married, married with X kids, etc. For a single person, the poverty level is around $11,000 right now. So, as a single person, I would get $11,000 X 0.23 / 12 = $210.83, every month.
The reason that poor people don’t pay the Fair Tax is, first, everything manufactured (or mined, or grown) here in the USA carries about a 22% of selling price income tax burden. That would go away. So, a $1.00 tomato would have its price fall to about $0.78. Then, with the Fair Tax applied, it would cost about $1.01. $1.01 - 0.23($1.01) = about $0.78.
So, when a poor person buys the $1.01 tomato, he reaches into a pocket and pays $0.78 of his own money for the actual amount of money that goes to the produced, and then reaches into his pocket again, cashes his prebate check, and pays the other $0.23 of the price for that tomato from the prebate.
Note that poor people immediately get a 22% discount, compared to current prices, on all their purchase of new goods and services.
The rest of us also have a graduated tax because of the prebate. Those at twice the poverty level pay 1/2 the fair tax rate. Those at 3 times the poverty level pay 2/3rds the fair tax rate. Etc. Its all because of the prebate. Nobody actually pays the full fair tax rate, but Bill Gates will probably pay about 22.9999999%.
Other aspects of the Fair Tax is that it does no good to purchase things overseas, because as the law is written, you still owe the tax. Now, you may be able to avoid the tax on the cute little snow globe you bought at a shop in Germany, but if you have Luigi the yacht builder build you a $50,000,000 yacht, you can bet that the Feds will have enforcement people coming after you if you fail to send in the $15,000,000 tax you owe on it.
The Fair Tax bill is written so that all income-based taxes go away - personal income tax, corporate income tax, social security tax, medicare tax, inheritance tax, gift tax, capital gains tax, etc. The bill is also written to sunset in 7 years if the congress does not repeal the 16th amendment and abolish the IRS. That is, it forces the repeal of the income tax, or dies trying.
Also of note is that the Fair Tax carries a built-in “tariff” that is not a tariff, so the WTO can’t complain about it. It works like this: As I mentioned, all goods and services here are burdened by the corporate income tax that causes about 22% of the price of things manufactured, grown, or mined here to be simply paying the corporate income tax. So, when the corporate income tax goes away, prices of everything produced here will fall by 22%. Then, they will be “Fair Taxed” back up to very close to what they were selling for. However, foreign goods and services will experience no such lowering of their selling price, since their factories in China, S. Korea, Japan, etc. have not been paying US Income Tax anyway. So, for instance, a $25,000 Jeep Liberty, built in Toledo, Ohio, would first fall to $19,500, then be taxed back up to about $25,350. However, foreign SUV’s that were selling for the same as the Jeep, $25,000, would be Fair Taxed to about $32,500. That gives American manufacturers, and foreign manufacturers that decide to open manufacturing plants here, a huge advantage, both for selling in the USA, and for selling overseas. That’s because, remember, that the Jeep Liberty’s price fell to $19,500, and was Fair Taxed back up, but for export, no Fair Tax would be applied. The Jeep would sell for $19,500 overseas, and have a huge price advantage over other similar vehicles.
According to those that study such things, the Fair Tax should see about a $10 - $15 trillion influx of foreign money into the USA to build factories. This should give us full employment within just a few years, and in fact could see a problem with labor shortages. The USA would be the world’s bestest and newest corporate tax haven on the planet. Soon, everything associated with foreign manufacturers would be built in the USA - Nikon Cameras, Mitsubishi automobiles, Sony electronics, etc. etc. And American manufacturers would close their Mexican and Canadian manufacturing plants and bring them back here, because it would be corporate suicide not to.
That’s about as much as I can say in 1 post. Hope that helps.
The “prebate” make it a no-go, as far as I am concerned. If it’s based on your income, right there, you are back to filing something akin to an income tax where you have to figure out what your income is.
If everyone gets the same, every citizen of every other country will be trying to drop a kid in the USA because that kid then gets $210 every month for the rest of his life, just for nothing. That’s a nice income to get mailed to you in a third world country.
If they don’t want to be regressive on the poor, don’t tax food and shelter. Forget about the prebate.
And then, of course, once the government has the tax in place, it is quite easy to raise the rate. They are claiming it’s only 23% now. What’s it going to be in 5 years?
Some of you have more trust in the federal government than I do. I’ve watched them manipulate the voters too often to believe every word they say.
tatertot: Its (the prebate) not based on your income. Its based on your living sitaution. If you’re single, you get the single rate (the poverty level times the fair tax rate divided by 12). If you’re in a family of 4, and Bill Gates is in a family of 4, you’ll get the same prebate. You just have to register as single, married, married with kids, etc…
I prefer the flat tax. Everybody pays 10%. The tax form has 2 lines. Line #1 put the amount you earned. Line number 2 multiply amount on line #1 by.1 and write it there. Send in amount on line #2.
I agree with Bluemoon. It is stupid to have all these different tax levels, or having the Government send out rebate checks to the poor. We want a tax system fair to everything, which means the poor pay the same % as the middle class and rich.
Lets just have a flat 5-10% on everybodys income. OR…
Have a 20% sales tax on everything, with no income tax. No rebates.
rally2xs,
Thanks for the very knowledgeable lesson on the Fair Tax. You’ve given us all something to ponder.
Furnishedowner
Thanks, furnishedowner.
Way I see it, we absolutely have to get rid of the income tax or we are toast. It’s never been this bad before, at least in relatively modern times, and its just going to get worse. Jobs continue ot go overseas, and the income tax is at the bottom of that. Most everything you can name about American business doing poorly in relation to foreign business, the income tax is at the bottom of it.
Get rid of the income tax, and go back to consumption taxes as the founding fathers intended, and as existed before 1913 when this country rose from a revolutionarly-war torn country to the greatness that it was by that time, and we will experience a revolution in prosperty unlike any seen in the modern world. It will really be impressive.
But we just have to nuke income taxes…
I prefer no federal income taxes. If the federal government was the same size as 1997, we could survive with no income tax. The reality is it only takes about 67 billion to run the constitutionally authorized portions of government.
If America ( the place most folks around the world want to move to, legally and
illegally) went to the “Fair Tax” system, designed by Neil Bortz, our economy would
explode. Most recent example of lower taxes and it’s impact to our economic growth
was executed by President Ronald Reagan.
If the current administration, gets it’s way and shoves the Obamacare down our
throat, we will all witness, what more taxation will do for America. I the commercial
real estate falls, as is forcast, our markets could go to new lows. The expectation of
these factors, is driving gold, silver, copper, and other commodities up, up and away.
Are we facing continued decline in real estate value, or have we bottomed?
NONE of this is going to happen. NADA! The reason is that the administration is desperately trying to move us to socialism. Their goal is total control of every aspect of our lives, including every penny of your income and wealth. Having lower taxes and more fair taxes are the OPPOSITE of what Obama is trying to do.
If you want to look at the character of a person, look at their friends. Obama has CHOSEN to surround himself with self-proclaimed socialists, marxists, and communist revolutionaries. His intention is to DESTROY THE COUNTRY as we know it and he is close to accomplishing that goal. Look at his unprecedented attack on the 1st Amendment the past couple of weeks when he tried to tell the traditional media not to follow stories that Fox News uncovered. Our country is under attack and we certainly are not going to see anything “fair” about taxation in the near future. What you are going to see is a HUGE increase in taxation as the socialists try to implement socialized medicine along with cap and trade.
We have to keep the administration from enacting public health care, and that took a great step in the right direction yesterday when the GOP won a couple of Governerships.
As for BHO attempting to destroy the country, Rush Limbaugh has said that a couple times, and the ACTIONS of the administration indicate either a very, very stupid approach to the economy, or a deliberate attempt to sink it to the bottom of the ocean.
The Fair Tax would cause an economic boom that the world has never experienced before. As for it never happening, we have the vote, and we can make it happen, if we’re firm with our legislators. The Tea Parties are a start. But whe have to educate the citizens first to how great things could really be if we passed the Fair Tax.