I hope President-elect Obama has taken the time to really study H.R. 25 the FairTax bill. I know for some strange reason this has become a partisan bill. This bill will help all Americans not just Republicans. I’m a Democrat and I’m sure it will help our family. With the state our economy is in, President-elect Obama should give this bill some real consideration. Talk about a stimulus package; everyone receives their gross paycheck and a prebate “stimulus” check at the beginning of each month. A family of four would receive over $500 at the beginning of each month. This alone will pay a huge portion of their mortgage payment, thus preventing many, would be foreclosures. Honest taxpaying Americans are getting tired of making up the revenue that is lost because of the huge group of people living in our country who don’t contribute one dime to support our Federal Government.

I would consider #2 a “pro”. While H&R block would have to change it’s focus (and they could diversify into money management) I wouldn’t mind seeing the IRS being slashed back to a tiny fraction of it’s current size. Yeah, people would lose cushy government jobs, but people lose jobs every day and the world keeps on turning. Reducing the size of government is far more important in my opinion.

I am sorry to say but many of your Con’s are inaccurate.
#2 not that big of a deal, there are not that many people working in that industry compared to the benefits that would be brought by the fairtax being inacted, including much more money coming back to the states to be invested because there are no taxes on investements nor doing business.
#4/6 the tax would not be 30% unless you look at it as a exclusive tax, being proposed currently is an inclusive tax, you see is has been studied that their is roughly 22% of embeded taxes in all goods and services already because of business taxes, compliance costs and taxes in the supply chain. When you inact the fairtax those taxes of 22% will reduce the cost of the goods and services due to competition. So a $100 dollar coat now costs $78, add $22 of taxes and being inclusive that coat is still $100 and $22 of $100 is 22% inclusively. Exclusivly is appears to be 30%. Also at the same time though everyone is taking home their full paycheck as opposed to only 75%. This ends up meaning you take home 25% more or all of your paycheck and your goods and services costs the same. This would result in the ability to buy more goods. People would spend more, businesses would come home to the states because they aren’t being taxed and therefore more jobs being available.
#8 Entitlements would not be increased already no one is taxed on income up to the poverty line. In fact this would encourage people to work more because if they work harder and make more money they keep it. They can buy 2nd hand and not paying taxes and save easier. The 489 billion is already lost due to the fact that we don’t collect taxes on the wages up to the poverty level. Also plz don’t use wikipedia for quotes.
#10 taxes will be collected from roughly 22 million businesses rather then 158 million people and business which means tax evasion should be less because companies have much more at stake as opposed to an individual, there are less points to keep track of and a business has little to gain but alot to risk with high penalties for not paying taxes.

Plz take these points into consideration and spread the word. It is very easy to misunderstand the fairtax theory and misrepresent it as its opposition does often. But it remains the best idea for our country. Plz visit http://www.fairtax.org for more info and possibly pick up the fairtax book.

PS - #9 is huge. Broadening the tax base will healp keep SS and Medicare from going out of business. Also it’s fair, it gets everyone to pay up while providing the poor with enough to compensate for the taxes they would have to pay for necessary goods and services. All this while the payments out only go to legal US citizen. More people paying in less people taking out. Its the only sustainable solution to our unsustainable mess.

Just read your about the blog and just want to say I hope you dont take my previous message as rude. Nice to see other young people interested in our economy, now if only we could get these idiots out of congress.

Quoting the FairTax on an exclusive manner may be easier for people to understand but it is incorrect unless you show the current income tax rates on an exclusive basis. Otherwise this gives a false impression of the FairTax. It replaces the income tax so therefore should be quoted the same way.

The FairTax is not added ontop of the price of goods.
Lastly, many current IRS workers would be transfered to the S.S. Dept. to handle the prebate checks. This would be a much more constructive job for them.

I not only support FairTax but I am trying to get others to support Fair Tax as well.
You claim that on some of your Con’s and you are not correct. As in Con #4, It is not 30% to 34% on Consumption Tax is not true at all . Economist have studied this and the tax on New Consumption will be at 23%. So an American car like Ford would be competitive with foreign car like Toyota which would cost much more, Therefore a Ford would be competitive overseas Market as well creating jobs here in American not in a Toyota factory.

You also will get a “prebate” every month so to help the poor at or below poverty level based on SS # if you don’t have a SS# you will not be getting a “prebate”. Even if you are not working you still pay taxes not collection from those who are working like today.There for every one who is not a citizen will not get a “prebate” and still will have to pay taxes. So your claim to Con# 8 is not true either.

Do not be worry about IRS workers, Instead of wasting about $300,000 billion in trying to collect your taxes and find a way to to “catch” people cheating on the taxation which consisted of 67,000 pages of a Income Tax Code that the IRS can not understand and even Congress has published it does not understand.

It has been studied by Economist that if FairTax was implemented that $ 13 Trillion in foreign banks that is ‘hidden” from the IRS to avoided the taxation of this country government would in MONTHS would start to flow back into our country’s economy. Yes $ 13 Trillion would pay off the national debt as it stands today and another saving of $ 300,000 from downsizing the government by abolishing the IRS. Therefore this will cause our Corporations and small companies to return creating more jobs and trust me plenty of work with more jobs than American worker including IRS who loss their job. IRS job that WAS trying to “catch’ you cheating.. I am happy to tell you all this is your stimulus package your government is looking for it’s under their noise. FairTax is the most studies Taxation in the world by many economist and all agreed it is the only taxation to be progressive to create not destroy an economy.

Fair Tax IS NOT Flat Tax! Flat Tax is another way to be call Income Taxation the same thing we have today. Please do not let anyone tell you different! If Flat Tax is implemented it would revert back to Income Taxation is a few years thus keeping what we have today.
Fair Tax is the only answer to stimulate the country economy and make every American live their American Dream life again.
Please ask yourself to check our FairTax on http://www.fairtax.org it is worth you time.
Thank you
Charlie Prochaska
Leesburg Ga

I’ve read a number of articles on the so called “fair tax” and it seems to me that there is an aggresive and vocal minority putting the most optimistic spin on a plan that would actually amount to a tax INCREASE for anyone making $25,000 to $1,000,000. That’s me and almost everyone I know. Also, it doesn’t address current deficit spending and where Clinton did balance budgets - Pres. Bush reversed course which makes this all the harder to implement. Deficit spending is not going away under Pres. Obama either. Then you have the expansion of taxable goods and services which would include rent, legal fees, utilities, Doctor bills, etc. under the fair tax’s proposed 100% base. Tough sale.

It’s an interesting theory that I was initially in favor of but upon further inspection it’s a free lunch for the poor and a handout to the super rich - all of whom will be able to live tax free as a percentage of their income. Also, never underestimate the ability of citizens to avoid paying taxes! Eventually people will end up paying a higher sales tax rate to make up for the shortfalls in avoided taxes and optimistic spending projections that may not occur. Given the roller coaster ride the nation has been on a the fuel pump in the last 12 months the pain at the pump would’ve been made worse by the massive tax increase the fair tax would impose on consumers. There is too much instabity in the market for the fair tax to work. I think for any fair tax plan to really work it would still need to include some income tax for the highest incomes and some market controls that most would rightly oppose out of principle. Like the saying goes, if it sounds too good to be true it probably is.

I support the “Fair Tax Act of 2009″ because I believe that it is not only fair but the best course for everyone. The current system of taxation unduly taxes the middle and lower income wage earners. This burdens the “free capitalism” economic system that we have, forcing the U.S. Government to intervene at inopportune times with terrible repercussions. The WAGE tax not only taxes the individual, but also creates a barrier to business expansion by reducing revenue that could be used to hire more employees, about 10 to 15% more employees, in my estimation. This alone would stimulate the economy more than the stimulus packages already passed. And look at the savings. 23 – 27 percent increase in state sales tax, for most people, will balance with a 20 – 30 percent reduction in IRS taxes. However, don’t overlook that the estate and gift taxes will be repealed. For those who are savers, this will allow you to save and invest that much more.

I do not support the so called fair tax, I am now retired and do not pay too much taxes these days, but the lord knows I paid more then my share over the years,and I do not think it would be fair now for me to pay extreme taxes on things I want and need, no it is not fair, to me and my wife at all, please dont come back with the little you get returned, ti wouldnt help much, and the only thing I would have is I would not be able to buy any extras or very few, no thanks, it is not fair especially to the old folks like myself

No disrespect intended to Jimmy, but his view is part of the problem. Holding on to an out of date unfair practice because the “Old People” have done it this way and it would not be fair to them now is just silly. The Fair Tax benefits all individuals and business alike. We need to get past this like minded “old people” in congresses that are unwilling to branch out to something new because it’s not how our dads did it. Is the Status quo the best we can do? Jimmy, what about your Kids, Grandkids, Great Grand Kids? Don’t they deserve better? Fight for the Fair Tax act.

Another con I have heard: businesses will have the burden of collecting the national sales tax and reporting/submitting it, which is an expense they will shoulder for the rest of us
Solution: Allow them to keep a small portion to cover their expenses.

However, I suspect that this burden compared to filing under the current system will be less expensive anyway.

I believe that National Security is the #1 reason to support the fair tax. Our current system puts domestic business and production at such a disadvantage vs. China, India, etc that we have largely lost our industrial base and we are now losing our service base AND white collar jobs. Some estimate that we will lose 40,000,000 more jobs (yes, that’s million). In 2008, IBM cut 6000 US jobs and added 18000 in India. A March 09 WSJ article says, “IBM plans to lay off about 5,000 U.S. employees, with many of the jobs being transferred to India, according to people familiar with the situation.” http://online.wsj.com/article/SB123799610031239341.html

We can debate how adopting the fair tax will affect you or me or the rich or the poor or the working or the retired, but unless we level the playing field for US production vs. China and India, we will all be living out a slow economic suicide. Patriotism and pragmatism demands that we find a better way — soon.

The best description I have seen of where we are headed without change is in the book, “The War for Wealth” by Gabor Steingart. The front cover quote of Dr. Henry Kissenger reads, “A lucid and compelling reality check.” Read this book, get a grip on where we are headed, THEN critique the fair tax.

Jimmy, I would like you to reconsider your position on the fair tax. I have copied an excerpt from the fairtax.org website for you to read. I hope this helps change your mind. Please reconsider the facts.

http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#13

What about senior citizens, retired people, and anyone on a fixed income?

As a group, seniors do very well under the FairTax. Low-income seniors are much better off under the FairTax than under the current income tax system.

Some erroneously believe that people who live exclusively on Social Security pay no taxes. They may not know it, but they are paying hidden corporate income taxes and employer payroll taxes whenever they buy anything. Under the FairTax, seniors pay $0.23 out of every dollar they choose to spend on new goods and services.

Plus, seniors, like everyone else, receive a monthly prebate, in advance of purchases, for taxes paid on the cost of necessities which more than pays for all of the taxes they would pay if they received the average Social Security benefit amount and spent it all. If seniors choose to work, they are freed from regressive payroll taxes, the federal income tax on wages, and the compliance burdens associated with each. They pay no more hidden taxes on goods or services, and used goods are tax free. There is no income tax on their Social Security benefits.

The income tax imposed on investment income and pension benefits or IRA withdrawals is repealed. Pension funds, IRAs, and 401(k) plans had assets of $12 trillion in 2004. An income tax deduction was taken for contributions to most of these plans. All beneficiaries and owners of these plans expected to pay income tax on them upon withdrawal, but are not required to do so under the FairTax.

All owners of existing homes experience large capital gains due to the repeal of the income tax and implementation of the FairTax Plan. Seniors have dramatically higher home ownership rates than other age groups (81 percent for seniors compared to 65 percent on average). Homes are often a family’s largest asset. Gains are likely to be in the range of 20 percent.

The FairTax makes the economy much more dynamic and prosperous. Consequently, federal tax revenues grow. This makes it less likely that federal budget pressures require Medicare or Social Security benefit cuts.

@It’s a tax increase for me
True, but considering we are already taxed at between 22 to 23% on our income (in my case weekly). This would go away to be replaced by a national sales tax. Lets not forget it also would abolish import taxes. Which would lower production costs, which in turn would mean lower over counter costs for goods.
And one other good point alot of people miss is that now the 100 billion drug trade would be paying there fair share which is not possible under current taxation.

@Jimmy
Jimmy did you vote for Obama? If you did he is the reason why your grandchildren and possible your great grandchildren will be paying for his new budget. Is that fair to them? Besides there are provisions in the fair tax for people on fixed incomes its called a prebate check.

I agree, the pros far outweigh the cons. However, one issue that is not even addressed in this analysis is the 13 trillion dollars worth of outsourced revenue that would be attracted back to the US. And that’s just the beginning. As stated in the article, the fair tax is levied on consumption, rather than production. Therefore, Con #4 is completely bogus. Upon enaction of the fair tax, we would not only recoup the money that is now being spent to feed the economies of countries overseas, not all of them friendly to us, but we would have other countries bringing their businesses here, simply because it would make so much more sense for them to do so on their bottom line. When that happens, there will be more work to be done than people available to do it, which would actually mean a job for everyone who wants to work. Really, has anyone even considered what it would be like to have an unemployment rating on the negative side of zero? That would certainly raise the wages of American workers my leaps and bounds. Of course, there are those who are unable to work, or just don’t want to. That’s a consideration, but the potential influx of revenue to our economy, when you think of all the sources this would present, is staggering! Our economy would once again be the giant it once was, and, once again, the envy of the world. (with exception of the third world dictatorships whose nations have always been, and will always be in economic ruin.) But even they would be making secret investments in our economy, and denying it at every turn. Fair tax now, abolish the IRS. It’s time to turn this nation around, for the better, for a change.

What about tourists visiting the U.S.? Subjecting them to this tax is unfair, essentially a massive tariff, and once the word gets out about how expensive it is to visit, nobody will come. This will drive us to create tax exempt cards for tourists, but then these would be counterfeited.

Or maybe tourists save receipts and get reimbursed on the way out.

@mike

Um, my children and grandchildren will be paying for Bush’s war. Obama’s additions account for 7% of the current deficit, whereas Bush took an $800 billion surplus and inverted it. Obama’s “bailouts” are to be repaid; Bush’s spending was waste.

Finally, Bush raised spending and lowered tax revenue. What happens when you increase spending and lower income? Take some time to figure that out if you must. When Obama increases taxes, as he certainly HAS to do before our creditors come calling, it will be to pay off Bush’s debt. Point your arrows toward the correct target and stop hamstringing the people who are trying to fix your broken country.

I agree with you Derek. What I think people are forgeting is how devistating 9/11 was on the economy. I also argree that spending Trillions of dollars of the American publics money is wrong and irresponsible. Something is really going wrong in the minds of some Americans. Common since will tell me at 26 years old that the government of the USA has no place running car companies and giving money to financial institutions. One of the big reasons these companies are having such a hard time is the fact of too much government regulation unfair trade policies.

I am sure that I am not the first to point this out, but whoever wrote this obviously does NOT understand how the fair tax works. It will not INCREASE the cost of ANYTHING we buy. The fair tax REPLACES the imbedded taxes ALREADY in everything we currently buy. So what costs you $100 before the fair tax will still cost $100 after the fair tax. So items #4 and #6 are incorrect.

I encourage ALL to read the Fair Tax book and its follow up Answering the Critics, so that when you read articles like this one, you know whats true and what isn’t. GO FAIR TAX!

i think this is a great idea and i never considered that everyone gets taxed citizen or not and the drug dealers to

To the advocates of fair tax. Have any of you investigated why it took so long for us to get out of the Great Depression? The answer:
the people who had money and could afford to spend it, did not!
Since spending for all discretionary items would be totally optional,
What makes you think they would necessarily spend large amounts so they would pay there fair share of taxes?
What is wrong with a flat tax, no other tax but a complusory amount, less only a break for the lowest incomes.
It would be removed by the giver and sent to the fed.
Some said a nagative would be that it could revert to our current income tax method, wouldn’t that also apply to a fair tax?
Also some claim drug money would be included with a fair tax, how do you know that drug cartel money is spent in the US?
Also Russia and several other countries in eastern Europe are using the flat tax and love it. Big money people are suddenly paying their share.
So it is a proven. Fair tax has not been proven.

Bob,

The basic cocept of a sales tax is well proven. Several of the united states have no state income tax and use a sales tax instead. I believe Texas, Florida, and Tennesee are among them.

Fair Tax is a sales tax, not hard to do or prove.

@Derek Clark
Actually, during Reagan’s tour tax revenues decreased by 1.2% of GDP according to the GAO. Bush did even worse 1.5% decrease. Tax revenues do sometimes increase but not always when taxes are lowered. It depends on the situation and what other events are taking place. The Fair Tax replaces many taxes already being collected.

You’ve got it wrong. It is NOT a “sales tax” ADD ON as you imply. Since the tax which WAS paid formerly along the line to bring the product or service to availability has been removed and no longer has to be covered the COST of bringing the product or service to availability is less, so that when the Fair Tax is included the final price to the consumer will be the same as it was. Now if there is a separate STATE SALES TAX that is something else, but all federal tax, payroll tax, inheritance tax, etc will no longer exist for anyone. The Fair Tax is an included or embedded tax. See “The Fair Tax Book” and “FairTax:THETRUTH” (Both Neal Boortz/Linder) and read carefully and completely

The message “It looks like you’ve already said that’, is incorrect. Nothing I have said appeared! Third try:
Your number 4 and number 6 are misleading and incorrect. The Fair Tax is not an ADD ON “sales tax”. The Fair Tax is a tax included in the price to the consumer such that the price to the consumer is the SAME as it was before the Fair Tax. In bringing a product or service to availability all taxes along the line of bringing that product or service to the consumer must be included in that price. If ALL such federal taxes are removed and he Fair Tax then added as an included (embedded) tax then the overall price to the consumer will be the SAME (but now including the Fair Tax) as it was. The difference is that NO ONE pays ANY federal tax. (Now STATE SALES TAX etc may still exist)

Ed Selander,

You seem to believe in the Fairtax myth that all embedded costs of the income tax system would be removed and, after adding the sales tax, retail prices would be about the same. This is just not true! Here’s why:

First, you need to understand just what percentage cost savings can be made by eliminating the income tax and payroll contribution. The 1998 study by Dr Dale Jorgenson concluded that 22% in costs could be removed from the 35 business sectors he studied for AFFT. But he has readily admitted that he assumed that employee income tax withholding and the employee share of FICA would be available to businesses to reduce costs. In other words, he assumed that your gross pay would be reduced to your current net after withholding. A large gross pay cut for most of us, whether working or retired. Most experts agree that this isn’t going to happen for fairness and contractual reasons. So, what purely business tax costs can be removed?

Using the 2007 data found in the Kotlikoff/BHI Fairtax rate study, with retail sales of $9.5 trillion, businesses paid $291 billion or 3% of sales in income taxes, $435 billion or 4.5% in FICA contributions, and $265 billion or 2.5% of sales in tax compliance costs. Add them up and businesses can reduce costs 10% on average, and after adding the 30% sales tax, prices have to rise by 17%. (1.00 x /9 x 1/30 = 1.17) Simple math. Prices are not going to remain the same. However, with take home pay increasing, and in view of the Fairtax prebate, “real” prices may be unchanged. Retirees who currently pay no income tax or payroll contributions would have only the prebate as added income, and could be adversely impacted by the Fairtax.

By the way, you also seem to believe that cost savings cascade or accumulate up through the various levels of production. Dollar savings do accumulate, but percentage cost savings do not! It doesn’t matter if there is one level of production or ten, the percentage cost savings remains the same. And that percentage is 10% on average as discussed above. Percentage cost savings do not accumulate because the cost savings apply only to the value added at a particular level of production You can’t add them up!

After reading all of the comments made it is obvious that we as Americans are mostly confused and poorly informed regarding the tax system. This is understandable since the tax code is 60,000 pages long. We also get fed misleading information about our government’s spending. This makes our ability to have intelligent informed conversations difficult. Personally, I would like to keep it simple. Fair tax offers me the opportunity to receive all of my earned income. That is a big bonus for me as I loose about 30% to the current system. The fair tax will not increase the amount paid at the register by 25-30% because the “hidden tax” will be removed. However even if I see an increase at the register, I will pay it with the satisfaction that everyone else is paying the same fair amount (those making money legally and illegally, immigrants and citizens). I am frustrated with seeing less and less of my earned income knowing that my money is being used to fund things that I do not support. Changing to the fair tax can give me another voice to the government. If I do not agree with what they are spending I can spend less thereby giving me the power to control there spending. The thought of it makes me smile.

An awful lot of good points have been made in the above comments, and I would like to make a couple more. I am retired, but I still pick up a couple of odd carpenter jobs from time to time. Even though my SS earnings and my small auxillary income does not require that I pay income tax, I still have to ante up 15.3% of what I earn as self-employment tax. Pretty steep, in my opinion, and not necessarily fair. Also, I want to remind you that the 22% figure for the imbedded tax and the 23% figure for the Fairtax amount are the product of the study by the bevy of accountants, businessmen, statiticians, and others who originally conceived the Fairtax idea in the mid 90’s. The data still looked good in 2007, but it would certainly be easy to adjust if the need were there. I would like to go back to the $100 coat we were talking about. Under Fairtax, you would still pay $100; the retailer would remit the $23, minus about 58 cents handling fee (1/4 of 1%), to the government. Remember, you have done away with the embedded costs of $22, so there is about a dollar difference to quibble about. Don’t forget - if you are rich and spend a lot, you pay more taxes; if you are poor, you don’t spend as much and you pay less taxes. To a degree, you can choose the amount of taxes you want to pay.

@It’s a tax increase for me your stupid

As far as I’m concerned, the Con’s are minute compared to the many Pro’s. First of all. If the Fair Tax gets enacted, one of the Federal Taxes that disappears will be the Corporate tax. Doing away with this tax will make setting up manufacturing industry a no brainer, even for foreign corporations. It’ll bring back American built products. More Built in America, means more American jobs.

Second. Who doesn’t want to take home almost every dime you work for, every dime of interest you earn, and every dollar of retirement saving you’ve saved up for all your life. Giving us more to spend, means more to buy, hyper-stimulating the consumer based economy.

It means even the illegals pay some taxes. They have to eat and buy cars too. Right now, they don’t pay a dime, because they all get paid under the table with cash (which most of gets sent to Mexico). Why we don’t tax the crap out of money sent out of country to Mexico, is beyond me.

The Fair Tax is a win, win for hard working Americans. As for the IRS and Tax preparers. Trust me, they’ll find new work elsewhere. Accountants will still be needed.

Bring on HR25. Let’s Git R Done!

The only way to fairly charge tax is by sales taxes. Income tax can’t do it because not everyone will work. EVERYONE spends money on food, clothing, cars, gas, etc.. This way EVERYONE pays taxes, you don’t want to pay taxes, don’t eat. But since we live in the same city, receive the same services from the gov. on road repair protection from our armies in the same manner, The price for these services should be equal. I should pay not more or no less than you who live down the street. I should not be paying 3 times more than you because my income is higher. I now have an incentative to become better at work and increase my income. The percentage of the income will not pay my government funding benefits and yours. That should be our choice, and we can choose that when we decide to purchase items that will include a higher sales tax. Sign me up, I’ll vote on it tomorrow and tell everyone I know to do so also. How do I get the word out to others to help get the fair tax passed and working?

Sighn me up now
Jimmy Head
770-715-3271
jhead@smc3.com

Tell me how I can help get this done.

The fair tax isn’t progressive enough. Investments have to be taxed some how. you can’t expect the less investment incline of us (called them simple if you want, but they deserve fair policies too) to accept that the income a CEO makes on his dividends will no longer be taxed. The prebate is a limp cold fix-it-all in the currently proposed fairtax and while I don’t support it’s elimination, I don’t find it adequate in making the proposed system fair enough.

Okay, now tell me how I don’t know the bill and haven’t read it, that’s fine. But if I’m ever going to support a national sales tax, there HAS to be 1: some sort of tax gradient (more tax as cost of purchase increases, effectively taxing those more “extravagant” consumers”) 2: taxation of capital gains and 3: taxation and tariff protecting and supporting American business and industry.

The fairtax is called “bipartisan”, but when the vast majority of it’s supporters are R’s and some blue dog dem’s, I think the bill itself can stand to be a little more bipartisan. it’s not a poison pill, but fairtax proponent’s are, IMO, secret flat tax proponents with a wise idea. But a wise idea none the less.

Taxes on the rich will never be high enough for some people. I am by no means rich, nor has a poor person ever offered me a job. As far as an old person being against the FairTax I see two things. One like many others, he has not actually read up on the FairTax, and two he has no children or grand children or he just dosen’t give a damn about them or were this country is headed.

@Bob
his stupid? compelling argument!

Look! It all comes down to this simple fact. Is it really fair to tax what you work so hard for to bring home every two weeks. That’s how simple this is. The income/payroll tax will only get larger and larger as costs of running a government keep going up. Until they’re taking more than 50% of “your” hard earned money. No one is saying that the FairTax is the final solution. It’s not. But it’s better than taxing income. Even at it’s inception, the tax rate of 24% is lower than the 28% you pay now through payroll deductions. There is no guarantee, of coarse, that millions of Americans will take their extra income and spend it, but I could certainly see it happening more with the FairTax, than when the Payroll tax goes up again.

We are NEVER going to be free of higher taxes until hard working Americans tell their Congressmen/Senators to stop wasting our money on earmarks, pet projects and Pork. While we’re at it let’s outlaw lobbyists and political PAC’s. How about letting us, the tax payer, vote on Federal spending legislation. In this age of computerization, why do we even need a representative government anymore.

@ZIEMBA
I agree with you. Terrible idea! Would kill retail? Retail would take the
brunt and then give a no sales tax discount - but increase their prices
to cover. A real free ride for Welfare! Drug dealers and fraudsters would just find some other way to launder money.
Illegal immigrants would not be subject to taxes as they would only buy
food or none taxable items - they could get their other necessary consumer goods from their respective countries with no sales tax.
The tax system is cumbersome and much to difficult but as I see it -
Bush admin never went after the lawbreakers - Obama admin has actively
pursued the fraudsters and brought back a healthy sum of money.
opens the door to a supreme kleptocracy!
sales tax

I like the fair tax for one major reason, it is tough to get earnings of all US and illegals taxed. However, all of these people must eat/buy goods to live in the USA. At least they would be included by fair tax. I am all for the concept of keep it simple with a straight tax method. All the reasons were discussed in the articles. The real question is can taxes be spent for the reasons collected and eliminate deficit spending. Everything from collecting wheel tax for roads but spending elsewhere to not having a funded budjet goal.

Yes, taxes can be spent with collected reasons, “if” we citizens of the capitalistic utopia, demand congress change our constitution to include a balanced budget amendment, and a Presidential line item veto. Until we, as the ultimate society of free people, demand our elected officials listen to us and not the lobby contingent, there will always be ways of screw this opportunity up.

I say, let’s make April 15th just another spring day. Close down the IRS forever. Make lots of noise! I constantly write my political hacks to demand a fair vote on the FairTax.

I’m reading Fair Tax right now, so am very interested in this topic - what to do to fix our broken system and save our country from being foreclosed by foreign governments. I’m still working through the debate of whether to support this specific movement or not, but know something does have to change. As a 30something, I see our future retirement plans being delayed inevitably (if at all possible) because of the number of retirees we’ll each have to support with all the Baby Boomers reaching that age soon.

The way I see it now, with my limited economic education, is we can either reduce government costs or have the govt make more money. Making more money would either be done by taxing everyone more or by getting new streams of income. For example, if drugs or prostitution were legalized federally, taxes could be collected and the problem could be fixed for now. To save money, the govt can either limit spending on programs (like not paying for any social security but still taxing people for it) or revamp a broken system thats in place now. Which route would be easier, more balanced, and provide faster results?

We can’t keep the status quo in place. To keep doing the same thing and expect different results, as they say, is madness.

A fair tax is simple and fair. A sales tax will decrease spending for the poor and middle classes and once again allow the Federal Government to meddle in our finances and our way of living. I thought this approach was exactly what conservatives didn’t want.

correction: A FLAT TAX is simple and fair…not a Fair Tax.

It sounds like a great idea and I have heard arguments that it can generate upwards of fifteen trillion dollars annually at twenty three percent. One thing to consider is the service industry which generates billions of dollars in unclaimed cash tips. I think there would be a major economic adjustment that would be considered by many to be negative but I think the long term benefits in the abolition of corruption and the taxing of under-the-table and black market dollars far outweighs any negative aspects of this concept. I think its the way to go. I just worry about the government figuring ways to abuse this system too. In addition, I think this kind of revenue could be a means to a great compromise between fair taxation and also a healthy social healthcare plan that eliminates abuses in the health care and insurance industries. I like it.

It sounds like a great idea and I have heard arguments that it can generate upwards of fifteen trillion dollars annually at twenty three percent. One thing to consider is the service industry which generates billions of dollars in unclaimed cash tips. I think there would be a major economic adjustment that would be considered by many to be negative but I think the long term benefits in the abolition of corruption and the taxing of under-the-table and black market dollars far outweighs any negative aspects of this concept. I think its the way to go. I just worry about the government figuring ways to abuse this system too. In addition, I think this kind of revenue could be a means to a great compromise between fair taxation and also a healthy social healthcare plan that eliminates abuses in the health care and insurance industries. I like it. Also, one thing our people who think this would kill retail seem to forget is that everyone would be keeping their entire paycheck. A $1200 paycheck would suddenly become $1800 bucks. You don’t have to buy anything! You can pay bills. Save it! Whatever! I think this is a great thing.

Overall a good idea except: medical services, nursing home care, school room & board will be taxed at 23/30%. There will be a lot of pressure to untax those things, since there would already be the exception of school tuition. I understand that education is considered an investment and therefore should not be taxed, but then it gets a little fuzzy. Is the tax exemption only for accredited schools, or does any kind of education qualify?

“Fair Tax” = BAD!! It would result in an increase in taxes for most Americans. Less for the rich. Period. Anyone who tries to tell you different has either drank the Kool-Aid or has an agenda. If you and the good Congressman sponsoring the bill do not understand the current tax code, then perhaps that is the biggest problem. I do not like certain provisions in the current tax code either. But I certainly do not want to throw away a bad tax system for something which will be worse for me and most Americans I know. Simplifying the tax system is a good idea. Oversimplifying it is not. Gone would be tax on income from investments. Do rich people invest because they think it is currently tax free, only to be shocked when they find out their investment income is taxed? No. Who gains the most income from investments? The rich or the poor? What percentage of a poor person’s income is spent on items taxable by the sales tax compared to the rich person?

Many comments have been made about how drug dealers would now be forced to pay tax. Unless I am missing something here, how is this ever going to happen? Drug dealers don’t carry cash registers with printed receipts. Fair Tax surely can never work until such time as we have a cashless economy. Any smart small trader will ring some of their transactions through the cash register and then “no sale” a portion to avoid paying tax, just as they do now in avoiding business taxes. Unless huge amounts of money are spent to police these activities, people will flock to cash trading at much higher levels. I’m a huge supporter of the Fair Tax concept but it must be aligned with the removal of physical currency from circulation,….we have the technology!

@Parso
What part of this don’t you get! The drug dealers would pay the tax when they buy the food they eat, the cars (some expensive) they drive, the guns they kill with and the fancy jewelry they wear to flaunt their importance. The FairTax is a “consumption tax” you buy, you pay. Everyone buys! Some buy more than others, which separates the middle class, poor and rich societies.

Taxing investments is backwards philosophy, hence the corporate tax. We don’t want to tax forward thinking investors, we want them to invest more. More investments means more employment.

The FairTax also makes undocumented workers and illegal immigrants pay a fair share as well. While the current system penalizes us for their sake. Now what makes more sense to you.

OK! Here are the quick bullet points most misunderstood about the FairTax.

The first and most important, you get to keep virtually all the money you work hard for 40 hours of every week of every year. (including all that lottery money)

You don’t need to report income to any governmental agency, namely the IRS. Because the IRS will no longer be needed, and April 15th becomes just another spring day.

Corporate taxes disappear completely. This is good for a couple of reasons. First, corporate taxes are hidden in the retail price of everything you buy now, inflating that price so that you and I actually pay those corporate taxes, not the corporations. Take away the corp tax and prices come down. Yes corporate big wigs “could” keep the price higher to make more profits, but you and I are looking for the cheapest prices, right? So that pitts same corporations in a price war to get your business. ( plus, the less you pay, the less tax. WIN, WIN!)
With no corporate tax to pay, companies would be free to build new manufacturing plants here, in the USA. Thereby hiring more Americans, lowering unemployment. More foreign companies would be eager to build their factories here because of no taxes, less hassle.

No more Estate Taxes. No brain needed there. Why should we pay taxes on stuff our relatives have already paid taxes on before.

No more Capital Gains Taxes. Want your money to earn money? Sure you do! Why should the government get their hands on any of it? No matter how much money you make or save, you should be rewarded, not penalized. If I could save more of my 401k money without paying Capital gains Tax, that’s less I’ll need in Social Security (more for the lower income groups)

Speaking of Social Security. It’s fully funded through FairTax. No more shell games.

And as I said before, NO MORE IRS! NO MORE FILINGS! NO MORE KEEPING BOOKS AND RECEIPTS!

This is the best idea since sliced bread.

Yes, I agree that the “Fair Tax” is in my opinion the best and most “fair” tax of any I have heard of. It would seem to me that the “Fair Tax” would assume a relatively stable currency as a store of value. All currencies I know of are “fiat currencies” , that is, these pieces of paper are backed by nothing and have value only because the government deems it so by “fiat”.(There is not enough gold for backing currency of today’s economies) So It is the duty of government to maintain the integrity of currency. It is also known that the end cycle of all fiat currency has ended in hyper-inflation. Governments tend to tax by means of inflating the currency surreptitiously (often for vote buying projects) eventually leading to hyperinflation. Whether a “Fair Tax” has any real meaning with unstable currency seems doubtful to me

this conservative idea that giving more money to the rich will spur job growth is a uniquely conservative idea and frankly shows how this proposed fairtax breaks directly down party lines. Reagan cut taxes for the top earners, did it prevent the collapes of 87? bush cut taxes for the top wage earners twice, did it prevent the meltdown? Bush’s weren’t paid for, they just expected the government not to need the money, leaving a gigantic budget deficit, will eliminating estate and dividend taxes move us closer to having a balanced budget? Did low corporate taxes save Ireland from financial collapse? ask any Irishman if it brought down prices of good. They’ll tell you it raised the price 30% because of inflation.

a lot of the comments you hear on this blog have been drinking the koolaid. there isn’t a way to further cut taxes for the rich and maintain the current budget. You wanna talk fiscal responsibility? hows about proposing a tax system that isn’t regressive? one that can raise the sort of money needed to pay our bills. The middle class is suffering more now than ever, and you want to increase their tax burden because you’ve bought the line that giving rich people more money will “trickle down”? it’s shown time and again not to work in anything but the shortest of terms.

We’ve lived with reaganomics for 30 years now, and what do you have? 7% of our workforce is unionized as opposed to 38% in 1950. the middle class has shrunk. Retirement ages have risen, people work more hours for less money. People move from job to job to job. pensions have all but been replaced by 401ks/IRAs subject to markets hurling themselves over cliffs, outsourcing has destroyed american manufacturing. Under reaganomics, we’ve lost financial security.

It’s these sort of ideas that lead to the repeal of glass-stegall. that led to santa clara county decision. That give the america we live in the bubble-and-bust economy that threatens not just it’s own citizens well being, but shakes the global marketplace. and they are conservative ideas. The conservative idea that manipulation of taxes can have positive outcomes for the economy have been debunked over and over. The best way to spur an economy is to spend. But since we’re broke, we need to earn, not cut. All other facets of removing our nation from the boom-and-bust market cycle cannot be solved with income tax reform, and it’s become entirely apparent that proponents of the fairtax have no interest in removing the nation from the boom/bust cycle.

but again, a good idea is a good idea. And these are days needing pragmatism. I agree with 75% of what the goals of a FairTax are, I really do! I admire the simple yet effective way of taxing illegal immigrants and black market criminals. I agree with eliminating April 15th from our lexicon. I agree with replacing income taxes with sales taxes. I even agree with ending the IRS as we know it. Most of all, I agree with middle class people being able to save more of their money. But life, like all things, is a compromise.. and if the Fairtax is not subject to compromise, if it’s supporters really think it’s perfect just the way it is, they’re going to find themselves very alone in the political world, and their measure will gather dust on the shelf.

@Roger Biggs
You have some valid points. As a moderate voter (I refuse to align myself with either party) I have no allegiance to anything “as written”. There probably are a few items in the fair tax that could use a tweak or two. My main concern is the elimination of the payroll/income tax, and the possibility of those who aren’t citizens, while taking advantage of our social/medical programs, paying “something”.

I work very hard for my paycheck. What infuriates me is that the government has the right to take any of my hard earned money to pay for programs and entitlements that I don’t benefit from.

I’m not saying the FairTax is the end all and be all of our tax problems. I’m saying, it’s a great start on the road to prosperity. It can always be tweaked, in the tax “payers” favor.

There seems to be much displeasure expressed here ,and that’s it.

Robert while that is true….illegals dont pay taxes most of the time and use the services so under the Fairtax you get all your money and everyone is taxed for the services when they purchase goods and services.

@Peter
Yes, I agree. I must have written my comment the wrong way. I want the illegals to pay their fair share of taxes for services rendered. I am 100% for the FairTax

I think it is very important to be aware of what is happening in Washington at this particular time. Congress has grossly overspent and is desperately trying to come up with additional ways to collect more taxes. High on the list of possibilities is the enactment of a Value Added Tax. If you add this nightmare to our current 70,000 page current tax code, the result would be a bureaucratic catastrophe. If our government was operating under the FairTax system and needed to raise more tax money, they would only need to adjust the percentage amount. This action would be very transparent, and the lawmakers would be taken to task if the voters thought the increase was out of line. Obviously, a flat-tax proposal is also on the table, and it would only be slightly better than the system we have now, in that the Internal Revenue Service would still be calling the shots. The problem is that in either case, you would be taxing production, and penalizing those that work hardest to succeed. If you think that this aspect does not affect our manufacturing industries, just go to your local Walmart and check item by item where it is manufactured. I did just that last Christmas, and was appalled at the few items that we manufacture here at home. FairTax, if enacted, would make the United States the tax-friendliest place in the world to set up a business. An estimated 13 trillion dollars that are now nesting offshore would come back home because it would not be necessary to hide “Income” anymore. For me, personally, I really like the idea that politicians would no longer be able to use the tax code to punish their enemies or reward their cronies. It is nice to be able to read these posts and tackle a couple of issues at a time, but I would strongly recommend that you go to http://www.fairtax.org and find a description of the FairTax Bill in Plain English. I printed out the 30-odd pages and took it to a FairTax meeting that I co-hosted. Using this information, I was able to answer every question that came up. Here is a word of caution. Don’t be so hasty to demonize the rich - for two reasons. First, they are the ones who have taken the risks, put their fortunes on the line and have provided the bulk of the jobs that are there. Second, they are already paying more than the lion’s share of the taxes. This is America, and any one of us could be rich, as well, if we had the brains and the fortitude to make it happen.

I think the “fair tax” would work well on income. But what about savings? For anyone who has earned and saved money, they have already paid tax on that money. Under the fair tax system, they would pay tax a second time on everything they spent. How would we transition from the current system to the fair tax system? Would we just say “too bad” but you have to pay taxes again to people that currently have savings? The fair tax system would be great for anyone who has not accumulated anything in their lifetime.

As a resident of Texas where we already have a state sales tax I can tell you that it doesnt hurt anyone to pay one. Here something that is $1.00 costs $1.08 after tax. This tax isnt applied to each individual item, but the gross total. I read on one comment that a national sales tax would discourage tourism, if that were true Texas would not have one of the highest tourist industries in the country. Also the arguement that a sales tax would hurt the economy, well if that were true then why was Texas ( Austin especially) one of the least affected states of the economic downturn? I know for a fact that a sales tax would affect drug dealers (if you consider giving god loving Americans their herb dealing drugs) Every time a dealer in Texasbuys bags to keep drugs in he supports Texas schools, and roads and pays Govt salaries, when he buys scales to weigh them, or gas to deliver them, or any number of things he needs to support his business he’s paying taxes! Do people really think their will be an underground movement to start smuggling things like baggies? Thats just fear of change. The same thing goes for illegals (which texas has its fair share of), here they pay taxes just the same as citizens for goods and services and none of the ones I know go to Mexico to get things. Why would they risk having to go back over the border not just once but multiple times? Thats just not logical thinking.

ok no more about how good of an example Texas is/ has been to this country..

Bryan: It hurts here in Chicago, because we pay over 10% in sales taxes and we have a state income tax which I do not believe Texas has. We currently pay 3.5% income tax and the state income tax is probably going to 5% after the 2010 elections. The sales taxes would still need to be levied somehow, so the state would have an income tax of 5% the sales tax of over 10% (at least here in Cook county), and that would need to be added to the 23-35% fair tax that would be needed for the federal government. Even at the lowest estimated federal rate of 23%, the state would need to add 15% for a total fair tax of 38%. Therefore a $1 item would cost $1.38 (at the lowest estimated rate and $1.50 at a 35% federal fair tax rate. And, with the new health care mandates on the states, the state portion would probably need to go up another 1-2 percentage points. I understand that there is a huge amount of unreported income, but people will undoubtedly find a way around the new system as well.

First off Consumption tax would greatly hurt people on a fixed income who do not pay income tax such as social security. They still receive the same amount of money per month that would figure this way: For every $100
they receive they could only spend $65-$75. A person with only $1000/month would be only able to spend $650-$750. Rent would go up, car leases would go up, car rentals would go up, airline tickets would go up, food taxes would go up… Also the State portion of the sales tax would go up. You think gas prices are high now wait until there is an consumption tax. Alcohol and Tobacco prices would also be affected too.

@Lawrence
Yes! But your paychecks go up too, when they stop taking income taxes out of it! Right now, the government takes a minimum 28% out of every paycheck. And yes, the lower income folks get most of that back. The Fair Tax starts out at 21%. That’s 7% less than your paying now. So you’re getting a tax cut! If you make more than 200,000 a year, that’s a huge tax cut.

The Fair Tax legislation I read has protection for lower income folks, so they don’t end up paying much, if any at all.

@ChicagoGman
Maybe you need to take a hard hard look at how expensive Illinois government is cost you. Time for some hard bad medicine. I live in Texas also, and yes we don’t have an Income Tax here, but we also don’t have a very big government infrastructure either.

You could easily do away with the state income tax, raise the sales tax to make up for it, and I’d bet a paycheck Illinois treasury would overflow.

Robert Heiney: Illinois is run by Democrats, so the Illinois coffers will never overflow. But, back to the fair tax, I think you are talking about a “flat tax” not the fair tax. The “fair tax” as I understand it, would be like the VAT in Europe, where everyone pays a surcharge for everything they buy. How could that start out at 21% for low income earners, and progress upward for higher income earners? To do that, you would have to know each purchaser’s income level before a salesperson decided how much tax surcharge to apply to a purchase. If you are talking a flat tax, I can see how that could be incrementally increased as the person’s income rose. I would agree with a flat tax that eliminated all of the tax loopholes and deductions allowing the rich to pay little of no federal income tax in some cases. Even if they pay lots of taxes, they can legally take advantage of tax loopholes to minimize the tax they pay.

No the VAT tax is a tax that is charged to biz along the process of making something and then passed onto the consumer at the end of the chain. It is not transparent at all. The fair tax does not discriminate based on income it is like a flat tax in the sense it taxes everything at 21% but included in the fair tax proposal is the elimination of all other taxes…all. So I guess you can say a flat tax is part of the fair tax proposal but the fairtax proposal only works if all of its components are puit into law.

To Robert Heiney: I have taken a hard look on how much it costs to run Illinois. I even offered to balance the budget for Governor Quinn. He did not contact me to take me up on the offer. He is hell bent on raising the Illinois income tax rate to 5% this fall. The only thing Illinois politicians know how to cut is fire protection, police protection, and education. Then, they say they need the tax increase to replace the funds lost in those programs. What about all of the other non-essential programs, grants, and expenditures in the state? But that’s an Illinois problem, not yours.

Peter: Its pretty much the same thing as the VAT then. The fair tax is not applied to vendors supplying parts to the manufacturer. The tax is applied at the end when the consumer pays. I guess the difference is that with the VAT they charge you $130 and tell you the price includes the VAT of $30. Here, using the flat tax, the item costs $100, and they add the $30 fair tax. Either way it would cost $130. I realize that the VAT and the fair tax rates would be different, but I used 30% in my example.

True…it may end in the same charge to the consumer but the VAT also requires a much larger federal processing because of its complexity and requires industries to spend money on implementing and controling their VAT obligations where as the Fairtax trys to minimize those “complience costs”. Also the VAT is very easy to manipulate as govt can apply exemptions to products like our own tax code. Under the fairtax nothing is exempt and rebates are given to everyone based on size of family. So it would be a big deal to have an exemption put in place or the govt would want to increase the rebate which you would have to do to everyone and would be a big outlay of money or expense for the govt they would have to justify. Much more transparent then the VAT which Britian has large problems with.

Example of the randomness of the VAT rules in Britian.
http://online.wsj.com/article/SB10001424052702304252704575156052357241946.html?mod=WSJ_Opinion_LEFTTopOpinion

Lawrence…one thing to think about is that everyone who doesnt pay taxes now because they are too poor or are on fix income like the retired will still be better off. 1st the 100 dollar jacket that includes roughly 21% of taxes from the manufacturing and businesses that are taxed through the process of manufacturing should go down in price by 21% thru competition. So that jacket would be still 100 dollars with the fairtax 21% tax rate. 2nd the Fairtax gives everyone a rebate for the taxes they will pay buying goods that are essential for living pending on size of family. So now the goods all cost the same and they are getting the tax rebate up front for esstential items. Essentially they will benefit, poor, retire…everyone.

I know that the Prebate feature of FairTax has been discussed somewhat, but I would like to touch on the subject quickly again. The Prebate is computed based on what the government considers is the poverty level for a family unit of a given size. The amount of the Prebate is determined as the amount of tax that a family unit would spend on purchased goods if that unit had income equal to the poverty level, and this amount would be sent to the head of that family unit once each month. The last time I looked it up, a family of two parents and two children would receive a monthly check of $529.00. Since it is a “Fair”tax, every family unit in the country would receive a Prebate check, even Warren Buffet’s. Based on the above, you can see that anyone who earns under the poverty level would be reimbursed for the taxes he pays. One feature that I like is that only American citizens can receive the Prebate check, which kind of hits illegals where it hurts. For purposes of our discussion here, it doesn’t help to go into individual state financing. FairTax deals only with obtaining revenue at the Faderal level.

@ChicagoGman
Gman - You would come out OK on svaings. Right now, you probably like to contribute to a 401K or and IRA account because you can invest pre-tax dollars. Under FairTax, all money you put into a savings account would be pre-tax. Under our current system, any money you take out of your savings is subject to taxation. If your money was saved on a pre-tax basis, your withdrawal will be taxed as ordinary income. If your savings earned interest or increased in value because of capital gains distributions, these are subect to tax as well. FairTax does away with all these taxes on savings. I can see that if you have saved money that you have already paid taxes on, you will be hit again when you buy something with that money. Most people, though, if they have sizable amounts to save, would have tried to save it on a pre-tax basis and wouldn’t be hurt.

@Ron Meier

“One feature that I like is that only American citizens can receive the Prebate check, which kind of hits illegals where it hurts.”

good to know spite is a fairtax supporter’s talking-point.

that sort of thing doesn’t help you move the idea forward.

@Roger Biggs
Just because he mentioned it doesnt mean its a talking point….just a side benefit. It creates a benefit to people who are here legally and would give an incentive to get citizenship as opposed to now where they get the benefits but do not pay anything for them.

to Ron Meier: I have about half of my savings that are tax-deferred. I was concerned about the half that are not tax deferred as far as my being taxed on that money twice (when I made it and when I spend it). I now also have the delemma of wanting to cash in some of my tax deferred
investments before the federal tax increases start kicking in next year, of keeping them in the hopes that I would never have to pay any income tax on that money if the fair tax were ever to be adopted. I suppose the tax-deferred aspect of the investments will still outweigh a 5 or 10% in federal income taxes.

to Ron Meier: I have about half of my savings that are tax-deferred. I was concerned about the half that are not tax deferred as far as my being taxed on that money twice (when I made it and when I spend it). I now also have the delemma of wanting to cash in some of my tax deferred
investments before the federal tax increases start kicking in next year, of keeping them in the hopes that I would never have to pay any income tax on that money if the fair tax were ever to be adopted. I suppose the tax-deferred aspect of the investments will still outweigh a 5 or 10% increase in federal income taxes.

to Ron Meier: I realize it is a discussion of the Federal fair tax system, but as a conservative, I always want to look at possible repercussions of legislation. The Illinois tax system is based on the federal tax system. In fact, they use the “adjusted gross income” line from the federal tax return. I would think the states might want to also change to the fair tax system if the IRS does.

@ChicagoGman
I would think that all the states that currently have an income tax would probably raise more money, if they adopted the fair tax in its place. BUT, those states probably don’t want to risk the presumption of raising sales taxes to incorporate their income tax savings, simply because it still looks as though they are raising taxes, even though they’d be eliminating a whole tax structure.

@ChicagoGman
Well we’re going to have to start somewhere, right? I have lots of money tied up in both pre and post tax accounts, and I’m willing to bite the bullet and take what loss I have to, in order to get the IRS demolished. I want the extra money I work for, that the government takes from me every pay day.

Ron Meier,

One thing about the prebate you might not have considered ia that it would create a group of 30 million working families each year that wouldn’t pay any net federal tax. Compare that to current tax law where less than 1 million workers can use refundable tax credits to totally offset their payroll contributions. Do you really believe that it would be a good idea to have 30 million workers disconnected from the cost of the federal government each year?

@Hank Van Gieson
Come on. How’d you come up with this figure. OK. So it creates 30 millions people not paying any tax at all. And I’ll bet, based on their yearly income and family size and support structure, they’d deserve it!

I can’t believe anyone out there thinks, what we have now is the perfect way to fund our federal government. Penalizing workers, by taking their hard earned paychecks.

@Hank Van Gieson

Yeah where does this 30 mill number come from? And how about all the people who are not working and living off of welfare from the govt and pay no taxes? I would severly doubt that this would create 30 mill familes that would not pay taxes.

I would love to see the “Fair Tax Act” The IRS is so out of reach with reality this would make things understandable for everyone. I love that our present tax laws are 60,000 pages and the Fair tax Act is 132 pages. to many “Loop Holds” in our current taxation. Please pass this bill! I live in NJ and our taxes here are just plain criminal!!

@Cort
We used to live in NJ also, and you’re right, they are almost criminal. However, the FairTax bill will only cure our Federal Tax criminals. You’re going to have to elect more local politicians that aren’t cronies to corruption. That’s one of the reasons we left.

However, you will get more money in your paycheck to pay more of those criminal NJ taxes. Good Luck!

@Hank Van Gieson
http://finance.yahoo.com/news/Nearly-half-of-US-households-apf-1105567323.html?x=0&.v=1

Just out tdy…2009 47% of all households will pay no money to the Federal Govt. So I do disagree with your 1 mill person assertion of people who do not pay under the current system.

Robert/Peter,

The 30 million “freeloaders” is based on actual IRS data. You should first recall that the prebate is not based on HHS official poverty level data,but it is based on the AFFT revision that removes the “marriage penalty”. I guess AFFT doesn’t believe that two can live as cheaply as one and a half? In other words, the AFFT defined poverty level increases the cost of the prebate by 25%. For example, the poverty level for a family of four is $21,000 according to HHS, but $28,000 according to AFFT.

Using the higher poverty level, you can determine just how many families would pay no net tax. The total was 50 million in 2008, but I removed the 20 million retirees because they don’t pay any payroll taxes. Bottom line is that those 30 million working families at or below the AFFT adjusted poverty level pay no net federal tax annually, yet they all qualify for full pension and health care benefits when eligible.

Under current law, it is clear that over 40% pay no income tax, but all workers pay at least the 7.65% payroll contributions. And, again using IRS data, it looks like less than 1 million workers can qualify for the refundable tax credits such as the EITC and child care credits which would totally offset that payroll contribution. 1 million versus 30 million workers disconnected from the cost of the federal government annually. Is that a good thing for America?

The next time you hear someone claiming that the Fairtax prebate totally untaxes those up to poverty level spending, why not ask just how many people we are talking about.

@Hank Van Gieson

Hank I do see what you are saying…using two different sets of data to determine cutoff for poverty level will drastically make that difference. In that case the Fairtax should use HHS poverty level. Still the 7.65% payroll your mention workers never see. I assume you are talking about the part that the company pays on behalf of every worker it hires, the other equal half is taken from workers salary which would be accounted for the in the article I quoted. This first 7.65% payroll paid by the company is never taken out of their “salary” it is just an assumed expense taken by the company. So the 47% number I showed you in the article still stands, and I would assume that would equal more then 1 mill people and most likely more then 30 mill.

Peter,

Your referenced article was talking only about income taxes, and it appears that 47% didn’t pay any in 2009. But less than 1 million qualified for the refundable credits in an amount that totally offset their payroll contributions. I’m talking about the 7.65% the employee paid, not the matching contribution from the employer. Only around 1 million therefore paid no net federal tax under current law. 30 million workers would pay no net federal tax annually under the Fairtax due to the prebate and the AFFT defined poverty level.

As others have pointed our, this years group of 30 million may eventually move up in salary so that they start to make a contribution, but because the prebate is inflation protected, those workers that are accustomed to getting only a cost of living increase each year may never pay any federal taxes. Yet they would still receive full SS/Medicare benefits. That is not what our country is all about, imho!

I believe that everyone should contribute for the federal benefits, and I don’t approve of freeloaders. My bottom line is that the Fairtax authors never should have included FICA payments on the list of taxes to be replaced. Not only does that force all current retirees to resume paying for their benefits with their sales tax dollars, but as I’ve shown, it creates a huge group of non contribiters to the cost of the federal government. The Fairtax isn’t fair!

This is a pretty good pro/con. However, I feel …

#2 is a Pro … we don’t need an entire industry just to help folks figure out their taxes (Tax Preparation & Tax Prep Software) and collect Taxes (IRS)

#10 … we already have an underground economy. How many folks who sell their crap on Craigslist report the income from the sale? As you pointed out, how many drug dealers report their earnings? How many prostitutes? My sister lived for 2 years as an erotic massage “therapist” without paying taxes, earning ~$30,000/yr. She didn’t have a bank account, and during that time just claimed herself as “unemployed” so she never filed a tax return.

Since there’s a ton of people skipping out on paying taxes due to BS tax breaks, saying 20-30% taxes are necessary I think is over-estimating. I think once you start taxing everyone on consumption, regardless of social status or earning power, then you broaden that base so much that you could probably reduce this to 10% or less. Plus, it would give the government a flexibility to alter the taxes quickly as needed. EG: one month they could make it 12% to cover a shortfall due to something, then lower it to 8% during a period of prosperity.

I currently live in Texas, and we’ve had an 8.5% sales tax for the longest time. We’ve been doing a lot better than most other states during the recession, and our economy is still strong. Just expand that model to cover the whole nation, get rid of taxing pay-checks, get rid of tax-breaks, etc. If poor folks need help, then the government can expand some social programs like food stamps to help them.

Any program which reduces governmental burden on people and industry is a good thing. If you think about it, during tax season most folks pay an additional $50+ “tax” to get someone to prepare their taxes since it’s so convoluted. That’s $50 that’s going to a bogus industry, because the government has made things too difficult. If we’re to stay competitive in the global market, we need to optimize government.

@blah blah blacksheep
Excellent points! You’re absolutely right on all counts. Part of the problem is getting people to stop fearing change and embrace the future. The second problem is congress itself. They currently use the Income Tax as fodder when grilling appointees confirmations and election mud slinging. Without the Income Tax, they’d have to rely on doing the right thing. And we can’t have that!

http://online.wsj.com/article/SB10001424052702304168004575177910000899010.html

@Bob Jones
I am very interested in both the fair tax and flat tax. I have heard great things about both! Ultimately, something needs to change in our current tax system. We are killing our jobs and almost half the country isn’t paying them!

Fair Tax is the Answer.
That $20,000 car will be $26,000. Well probably not. That $20,000 car will now be $16,000 due to the amount of with holding taxes are paid by employers, now will NOT be paid.

Taxes will be higher on the poor and lower middle class…Not true! if the Fair Tax kicks in at products over $4,000.00, For example groceries, medicines, daily essentials WOULD NOT be taxed. Now if buy a $70,000 yacht gues what it would be taxed. So the poor and the lower middle class would keep more of their money. Oh they may even put a little in the bank, which they do not have now.

To stimulate the housing market, only charge a 10% rate for 5 years on all new home purchases. Guess what it is 10% more then they are making now on a stale housing market. 20% on purchases of second and third , etc homes.

For me the money the is being taken out each week could make my monthly nut with some left over. Savings would go up allowing banks to be more flexible with credit now they have some capital to invest.

People would have MORE MONEY for down payments on items thus less credit is being extended. (see sub prime mortgage crisis)

Companies would now have money to hire more employees since their tax responsibilities on employees is now eliminated. Obviously with the prices of their products dropping they would sell more therefore would be making more.

The billions and billions of corporate taxes not being paid when companies divert income to other countries, will now collect taxes on their products they are selling here.

No one likes change, The IRS and accountants will be the hardest hit here. But the IRS will still need to collect from businesses on a daily basis so that busineeses dont walk off with tax revenue they collected. One tax form would need to be sent. Any purchase made by anyone over $4,000.00 the IRS would need to know where and how much paid so they can verify the tax was indeed sent to the government. Accountants would still be required not to do tax forms but to help monitor retirement plans and the like. What is the best way to invest my new found money.

The imigration problem is half solved. Those who are here illegally will be paying their share at the time of purchase. Now reporting may be an issue if they do not report the purchase, but guess what we have collected the money.

Government all phases, would not pay the normal rate of 23% they would pay 10% on ALL purchases over $4,000.00.

Service companies, Banks, etc. that do not sell products but sell service would pay a 10% tax on all services. Currently there is no tax on labor now there will be. Labor over $4,000.00.

States that have income tax, would have a 2% allowable sales tax to provide their tax replacement. 2% is considerable considering there will be more revenue being spent in their state.

Here is my favorite. This is why Politicians do NOT like this system. They spend what they collect. You can not go into the RED if you are not spending what you do not have. Eliminating pork barrel programs and agencies, would ultimately begin to pay down the debt and produce a better future for our country. The term BUDGET is the biggest farce in the world. They sell programs (like heath care) on the projected cost. There has NEVER , and I challenge anyone to find one, NEVER been a government ran program that has come in under budget. Now they spend what they collect. Example numbers only. The collect in 2012 3 trillion dollars. The next years spending is 3 trillion or less. If your spending needs are over that number better start cutting. Any excess would be used to pay down the debt.

What a concept. Americans have more money in their pockets and the government must spend only what they collect.

Chuck: There are several flaws in your approach. For example:

You say “…Here is my favorite. This is why Politicians do NOT like this system. They spend what they collect. You can not go into the RED if you are not spending what you do not have.” We have the same situation today where the Government spends more than they take in. It is the federal deficit. Why would the “fair tax” plan be any different. The Government would still spend more than they take in, it would just affect how the taxes were collected. There would still be no requirement to spend no more than is taken in, unless we passed a law that required a balanced budget, and actually enforced that law. Since the Federal Government has the ability to print as much money as they want, uncontrolled spending would still continue.

Also, if labor that cost over $4,000 was taxable, contractors, for example, would just write a contract for building the east wall of the new living room for $3,999, another contract for building the north wall of the living room for another $3,999, etc, and not be required to collect the fair tax. People will always find a way around caviats, such as the $4,000 limit. I think a better way is just to tax everything at a smaller rate.

@ChicagoGman
100% agree.. a fair tax is not a flat tax, it’s gotta show some sort of gradient.

Also mentioned in other places on the thread was welfare reform. I don’t think a proposed fair tax should come to the table looking to reform welfare, it’s not the bill to do that. Now if it were ever taken seriously, welfare adjustments are probably warranted if needed to win votes, but it probably shouldn’t start that way.

@Chuck

Chuck: The way you state how the fairtax works is not how I understand it and I have read the book. Everything is taxed and the reason the 20k car still costs 20k is because their is an embedded cost now of about 20% to pay for taxs on companies and compliance costs etc….add on the fairtax which is 27% on the 16k or 20% of the original price of 20k and the cost of the good is 20k still. Meanwhile you just recieved your paycheck…all of it w/o taxes taken out. Also every family is recieving a check monthly to cover the cost of the taxes you would pay up to the poverty level for necessary goods based on the size of your family. That way there are no caviats like Chicagogma easily pointed out.

-Cost of goods stay the same: cause once the burden of compliance and taxes etc are taken off the businesses competition will drive those now inflated prices down then fairtax on top brings the true tax on those goods to the consumers eye instead of being hidden
-You recieve your entire paycheck: fairtax gets rid of income and all other taxes
-You recieve a monthly check from the govt based on family size that covers the estimated taxes that would be paid on goods necessary to live up to the poverty level.

Also that % was studied so it would result in a net 0 change in govt income. The fair part is it hits all equally and people have to choice what to buy, it also increases the poeple who are taxed across the board including tourists, illegals, and anyone spending money in the states. While only citizens recieve SS or medicare benefits.

@Chuck

Where has this notion come from, that if taxes on corporations are cut that would reduce the cost of goods by some arbitrary amount you or I or anyone could say is 4000 dollars off a 20,000 dollar purchase? WHAT? econ 101. supply and demand. Not Taxes! taxes are not 20% of the price we see on the tag. they can hardly be called a function of price at all. And even if it were 20% of the cost, how on earth do you figure that the savings can simultaneously be passed on to the consumer AND used to hire new workers? what stops a CEO from just pocketing it, your trust in that CEO? if there isn’t an increase in demand, there will not be an increase in workers. This has so little to do with taxes, it hurts. I’m not saying prices won’t drop, but they won’t drop any more than what it would take to keep the out-the-door price the item has today constant to tomorrow where a fairtax might be law. Furthermore, did you know that some things are sold at cost on the market and even below their cost of manufacture? How has tax played into the equation of price on these products? it’s all in the market strategy. some things are sold at cost and money is made on servicing and accessories. I got a Palm Pre. cost me 80 dollars. This Sprint made money on this phone? don’t count on it.

Oh, and about government projects.. well.. I know you won’t take obama’s word for it, but
http://uk.reuters.com/article/idUKTRE53C3LT20090413

And a quick google search of the subject finds that within the first 10 results (just 10 measly google hits), what obama said is being backed up by two local newspapers you’re free to catagorize as socialist dossiers.
http://stlouis.bizjournals.com/stlouis/stories/2009/07/20/daily67.html
http://qctimes.com/news/local/article_7e5e8dd0-19d4-11df-b5fe-001cc4c002e0.html

How does the taxing of things like drug dealers work??? Are we expecting drug dealers to actually ask for a tax collection???

There is a false notion that the 23% tax would somehow make items costing x today more expensive when the opposite is true.

Income tax, or even excise tax, compliance has been computed to make up approximately 22% of the cost of any item sold today. Without that compliance, look for prices to drop. So, the $20,000 car would not ultimately cost $26,000 but only $21,648 ($20,000-22@*23%).

Prices of items would fall to more sensible levels and would reflect a truer picture of its true cost.

The Fair Tax is THE way to go!!

@RobInDaBurgh
Drug Dealers currently are “unemployed” and are only taxed when they purchase things and are hit with the sales tax. Essentially if the full tax on people is levied at consumption or sales level then it doesnt matter where your money came from you are paying taxes.

Peter :@RobInDaBurgh Drug Dealers currently are “unemployed” and are only taxed when they purchase things and are hit with the sales tax. Essentially if the full tax on people is levied at consumption or sales level then it doesnt matter where your money came from you are paying taxes.

Oh and everyone would be paying their fair amount as opposed to now where only legally employed people pay taxes on their income and then also pay state sales taxes.

Further, why does the rate HAVE to be 23%?? Who says that revenue neutrality has to be the litmus test?

Our government is way too large and the cost of feeding this pig is rising all the time.

If government shrinks because things like the IRS is no longer needed, and other agencies are needed less, then why does 23% have to be the benchmark. I can honestly see where a rate of 15% (sound familiar Flat Taxers?) would work just as well…

@Don Short
Don I completely agree but I believe the Fairtaxers wanted to show that would could make this switch cleanly and not make huge headaches the first year. As the embedded costs would be very close to equal the necessary tax.

It is true after the first year you have a huge surplus you can cut the rate. And manage one tax rate year to year. And if people notice it is slowly going up they will ask why and if the govt is spending more and more then they will take action because that tax is right in front of your face where as every individually now has no clue how much they actually are paying in taxes because they are hidden in payroll taxes, embedded in the cost of goods they buy etc.

@Don Short
23, 21, 20% Does it really matter, when the government taxes you 28% right now. And that 28% comes out of the paycheck you’ve worked hard to earn. 23% would be a bargain. Not to mention that you’d pay it only when you buy something. Don’t forget! You’re getting 28% more in TAKE HOME pay.

@RobInDaBurgh
Every time they buy something to eat, drink, smoke, make more drugs, drive, etc. We won’t need to “ask” them to pay. They will pay.

@Peter
But all those other taxes go away if the Fair Tax gets enacted! We’re answering our own questions here. If Company A and Company B both stop paying corporate taxes, and Company B refuses to lower the price of it’s product to reflect the absence of the embedded corporate tax, why on earth would anyone buy his product? I’d go right to companyA, because he dropped the price. Wouldn’t you?

@Roger Biggs
Govt project is a seperate issue but it would be interesting to see how they make that budget. Very easy to over budget to say they came in under budget, on the other side if they are using 2 years ago budgets for the same type of work there are different economic factors going on including lower gas prices etc which can lead to work being done for less. Just putting that sie out there too.

On the fairtax part there definitly is a cost of 20% on avg of products sold due to taxes. When corporations have to pay all different taxes for the company, plus taxes on employees, plus have whole departments just to comply with the tax code every year it adds up.
http://online.wsj.com/article/SB10001424052702303348504575184380326567888.html?mod=WSJ_Opinion_AboveLEFTTop
This alone explains how on avg it can cost a company 50 cents for every $1 paid in taxes just to prepare that companies taxes. Thats alot of money.
And yes supply and demand will bring the cost of those goods down. CEO’s wont pocket the money because they can’t. If the cost of doing biz is lowered they will drop their price under the competition in order to increase sales and market share this is what competition leads to until the cost of the product is unable to go lower because then the company would be losing money. It is simple and the fact that you don’t believe taxes comprise 20% of the cost of goods on avg, and it was studied and proven, just shows how avg consumers even myself dont really understand how much money we are paying to the govt in taxes. Businesses never pay taxes they always pass those costs down to the consumer.

I would really like to know why a “Family Consumption Allowance” (FCA) ‘prebate’ check would be sent out to everyone. A better idea would be to make certain items tax exempt, e.g. food at the grocery store (not prepared foods), clothing under a minimum price. If we make the essentials tax exempt then we wouldn’t foster entitlement and problems with dependency and the “free lunch” mentality as experienced by recipients of current government welfare programs.

@Jim
Problem is once you start with tax exemptions it leads to very minute changes to make things expempt. In Britian they do this.
http://online.wsj.com/article/SB10001424052702304252704575156052357241946.html?KEYWORDS=VAT
Gives the govt the ability to favor certain industries or things. They start defining what a food is and what clothes are. Are bathing suits clothes or how about a wet suit? Food wise would soda be exempt or taxed, how about juice from concentrate vs pure juice? It can be made complicated and invites favoritism. The point of the fairtax is to keep things simple. It is much easier for the govt to cut a check for the expected cost of taxes on items needed to surive depending on the size of a family.

Too much misinformation here about the likely impact of the Fairtax on retail prices. Pay attention, particularly those of you who seem to think that retail prices would remain about the same and you would take home your entire paycheck/pension.

The 1997 Jorgenson study done for AFFT concluded that there was an average tax cost of 22% of sales across the 35 industry segments studied. But, Jorgenson readily admitted that he included the employee income tax and payroll contributions in his 22%. So, if you claim to be going to get all your pay, then only business tax costs can be eliminated.

How much are the business tax costs? Using 2007 revenue data, retail sales were $9.5 trillion and business income taxes were $291 billion or 3% of sales. Business payroll contributions were $435 billion or 4.5% of sales. And, tax compliance costs were $147 billion or 1.5% of sales. Add up all the tax related costs for businesses and it comes to 9% of sales in 2007.

Reduce business costs by 9% and add the 30% Fairtax and retail prices have to rise by 18% on average. (1.00 x .91 x 1.30 = 1.18) Please note that you have to add 30% in order to get a 23% tax inclusive amount.

Too many of you still believe in the free lunch myth. That is, reduce costs by 22% and add the 23% sales tax and prices are actually lower. That just isn’t true. There is no free lunch. Take home all of your pay, but you are going to need it to pay the higher retail prices!

@ChicagoGman

They do not spend what they collect, if they did we would not be 13 trillion in debt. They spend constantly what they do not have. if they go over budget all well, we will just appropiate more and move on. That my friend is the entire problem. You are right on the instance that labor is AT $4,000.00 I do expect that to happen. 1 in a million would be at that price. In the Fair Tax system there is far less bullshit than in our current system. And everybody pays the drug dealers, the immigrants, everyone who does not pay now will then.

@Hank Van Gieson
Hank my man you may be right, I simply do not agree. The car example I used has say 100 different parts from contrators. each one of those parts would now be cheaper as their expenses would drop. Correct me if I am wrong but isn’t FICA alone 7.5% corporate match for every employee. In our system of heavy over head I still conquer with about 20% of the over head is tax related, if a company under the fair tax system does not drop their prices conducively to their costs dropping someone else will. We get back into the system where we are making great products for a FAIR price. Competion is the key.

In the car scenario, I MIGHT pay an extra $6k in taxes for a new car … however, I no longer pay $5k a year in Federal taxes, not to mention FICA, SS and all the rest, and If I buy a used car (which I usually do) I pay ZERO tax on used goods.

The “entitlements” are even and fair, and considered a basic tax break for all living ESSENTIALS per person for every LEGAL citizen. If I spend more than that, I can afford it and should pay taxes.

Chuck,

You may disagree all you want to, but the facts are clear. I would hope you would agree that businesses can’t save any more than they pay in tax related costs. As I went into some detail to explain, using 2007 actual revenue from the Kotlikoff/BHI study done for AFFT, total business tax costs were an average of 9% of sales. Retail prices have to rise by 18%, period. It might be that using a different year’s data, the cost savings might be slightly more or less, but I believe that an 18% retail price is an absolute minimum, and is highly dependent on the final revenue neutral rate. There is not one study supporting the 23% inclusive rate, and most of the unbiased economists come up with 28% to 34%. Stay tuned!

One other thing you might consider is that you seem to believe that cost savings cascade or accumulate up through the various levels of production. While it is true that dollar cost savings do accumulate, percentage cost savings do not! It doesn’t matter if there is one level of production or ten, the percentage cost savings remains the same, and that percentage is 9% per my explanation. The reason percentage cost savings don’t cascade is that the cost savings only apply to the value added at any level. To clarify, if business cost savings average 9%, then if there were six levels of production, the percentage cost savings would still be 9%, not 54%. May not be intuitively obvious, but it is a fact that all economists agree with. Quoting from the AFFT Director of Research, she wrote that the most likely scenario is that everyone gets all their pay/pension and retail prices rise. The “free lunch” myth has been thoroughly debunked!

@Hank Van Gieson
Hank what about the savings companies would have from not needing a whole compliance and tax department nor tax preperation services from outside companies which the WSJ says can cost 50 cents for every dollar paid in taxes. Would these be included in that 9%?

Deb Fordel,

Each person has to do their own calculations as to which tax system is best for them. But not everyone comes out ahead under the Fairtax. For instance, a single minimum wage earner would have paid around $200 more in sales taxes in 2009 than what was paid under the current income tax and payroll contributions. A retired couple living on Social Security pensions of $30,000 plus $18,000 in investment income paid zero income tax in 2009, and of course paid zero SS contributions. Under the Fairtax they would have paid almost $11,000 in sales taxes. The Fairtax is not fair for everyone!

Watch out for the impact of buying used goods. True, no revenue would go to the federal Treasurer, but after a short adjustment period, supply and demand forces will return prices to the current used/new relationship. I would expect used goods to be in demand based on new stuff sticker shock if nothing else. But when prices reestablish to the current relationship, you won’t be getting any windfall cost savings. In other words, if you don’t buy your underwear at Goodwill now, there would be no reason to buy used under the Fairtax.

@Hank Van Gieson
What you’re saying makes a lot of sense.. and if I may put on my Fairtax supporting hat, would you not agree though, that national sales tax legislation has within it’s ability to dial in the fairness to make the tax more progressive? reducing but retaining corporate, capital gains, and inheritance taxes, as well as setting in place a gradient scale of taxes (higher dollar items demand higher tax rates), while maintaining a prebate to ensure poorer wage earners can manage it are all possibilities. Couldn’t a FairTax structured correctly meet our needs at a micro and macro level while still offering the benefits? and if it could, why would/should we let it pass us by? =) certainly nothing would be the easier thing to do, but as a progressive democrat, I’m not interested in passing easy legislation!

Also, to other progressive democrats who might be reading this, don’t dismiss the national sales tax proposal. familiarize yourself with it and you’ll find that it’s not an entirely bad model. it just needs a few dashes of progressiveism and a pinch of protectionism and I see it as being extremely agreeable.

Peter,

I believe that the $147 billion represents the cost estimated by the IRS to prepare and submit a business income tax return. I think you also have to recognize that the accounting folks at a typical firm have to deal with much more than the federal income tax and payroll contributions. State and Local taxes play a big part, and any firm that is publically traded has to deal with the voluminous SEC reports required. Take away income taxes and I don’t believe that a lot of business number crunchers would be displaced. CPA’s I have talked to say that there is a lot of other responsibilities that would still need to be met.

Roger Biggs,

I don’t agree that the Fairtax is progressive unless you want to redefine “progressive”. That term has a fairly rigid business dictionary definition that is related to income, not consumption. The prebate is advertised as somehow making the Fairtax progressive, but in my opinion, the prebate simply moves the point of regressivity from zero to the poverty level as redefined by AFFT.

Turns out I do believe that a national consumption tax would be better for our economy than the income tax, but I don’t think the Fairtax scheme as defined by HR25 is the way to go. In my opinion, the creators of the Fairtax badly overreached.

(1) They taxed government consumption at all levels in order to prevent unfair government competition with the private sector, but incurred the strong possibility that that portion of HR25 will be found to be unconstitutional. Under our federal form of government it is unconstitutional for one sovereign power (federal) to tax the other sovereign power (states). Taxing state/local governments also has the effect of hiding almost 15% of the federal revenue needed in higher state/local taxes or reduced State/Local services.

(2) They added payroll taxes to the mix of taxes to be replaced, and thereby treated all retirees unfairly. After paying into the Social Security trust funds for typically 45 years, under the Fairtax, retirees would be forced to resume paying into the trust funds with their sales tax dollars, depending on their income level.

(3) Seniors would see their after tax savings essentially double taxed under the Fairtax. Lower income families who depend on non taxed income from accumulated savings would pay much higher taxes and would have significantly less purchasing power under the Fairtax.

(4) Completely untaxing businesses was a major political mistake. It is true that businesses really don’t pay taxes, but simply pass any tax costs on to consumers in the form of higher prices. But this obvious truth has not been accepted or acted upon by the Congress, especially by the Congress currently in the leadership role. Completely untaxing businesses is probably a non starter in the existing political environment.

(5) They adopted a prebate, the largest cash grant entitlement in the history of the country at a time when entitlements are squeezing out discretionary spending, including critical Defense spending. Described as a monthly refund in advance of sales taxes paid for essential spending up to the poverty level, the prebate is in fact an entitlement with an annual cost approaching $600 billion. Adding the prebate entitlement to the entitlements already in the federal budget will move the percent of entitlements from around 60% to 70%. The Fairtax prebate entitlement will only serve to accelerate the coming federal “budgetary train wreck”.

(6) They adopted an inventory tax credit which will contribute to a very large federal budget deficit in the first year of implementation. The inventory tax credit is estimated to cost $600 billion in lost federal revenue and no offsets have been proposed.

(7) They excluded education tuition, thus allowing the “camel’s nose under the tent flap”. That precedent would certainly encourage future politicians to try to exclude such things as medical expenses, home ownership or anything else they might consider as important as education.

(8) HR25 proposes to eliminate the gift and estate taxes, giving support to critics claims that the Fairtax benefits the wealthy unfairly.

(9) And finally, they chose a “cold turkey” implementation schedule. HR25 proposes to make the change over from the income tax to the Fairtax overnight, although certainly with adequate notice. Congressman Jim Saxton, the former minority leader of the Joint Economic Committee, wrote in February 2006 that, “The US Government is institutionally conservative, resistant to change, and generally supports the status quo. They need incremental change, not wholesale reforms.”

A simplified version of the Fairtax might correct these issues and might have a better chance of Congressional consideration. I call it Fairtax-Lite. Fairtax-Lite is a broad based, 12% national consumption tax with (1) no exclusions, (2) a targeted prebate costing an estimated $59 billion or, alternatively, retention of the EITC at approximately the same cost, (3) no government taxation, (4) leaves payroll contributions and estate/gift taxes in place, (5) no inventory tax credits, and (6) implements the plan over five years.

Compared to the Fairtax, the Fairtax-Lite proposal would: (1) Remove the likely constitutional challenge from the States; (2) Make good on the Federal government commitments to retirees who have paid into the Social Security Trust Funds during their work years. (3) Retain some economic fairness to our nations lower income retired community who are depending on their accumulated savings to maintain their lifestyle; (4) Continue to have businesses contribute their share to the Social Security Trust Funds; (5) Reduce the coming federal government entitlement crunch; (6) Eliminate the excessive budget deficit in year one of implementation; (7) Reduce the possibility of future exemptions; (8) Assure the wealthy pay their fair share; and, (9) Allow the government to “try before buy” with ample opportunity to correct unforeseen problems without wrecking the national economy.

Fairtax-Lite is a far less complex plan to rid the country of the income tax and replace it with a national consumption tax, and would have a significantly better chance of Congressional approval than HR25 as written.

@Hank Van Gieson
I like it a lot, hank! I can see you’ve really spent some time thinking about this.. do you have a website I can reference?

one thing I really like about how you’ve approached this is the targeted prebate. I can see how something like that can help out retirees who have already paid their share of SS and the poor who couldn’t afford to have their savings diminished to pay more for their goods.

one thing I’d like to change though is payroll taxes. as it stands, payroll taxes are the main reason I think people turn to the fairtax as a solution. SS tax in particular is severely faulted because there is a cap. you’ll never pay SS on more than 106k of ones income. I just don’t think that’s right when it’s clear SS is going to be out of money years before I ever retire. also, half of SS is paid by the employee, the other half by the employer, which, as stated, reflects in cost (however little) so we end up paying for all of it anyways. Wouldn’t it be better to elimate the SS and Medicare payroll taxes and offset it with a 80’s era capital gains tax?

Ideally, I’d like to see a consumption tax be limited to replacing payroll taxes and reducing corporate tax marginally (to attract american investors back to america, and maybe some foreign ones too).

I also agree with you about comprehensive legislation’s chances of passing, so the integration approach will make Fairtax-Lite more palatable. For this reason also I’d like to see any tax reform legislation not bundled with immigration or welfare reform, labour, trade, or energy reform either.

But please! if you have a website or blog of yours I can reference, that’d be awesome!

@Hank Van Gieson
I commend you as as well Hank for your obviously detailed look at this. I unfortunatly am not blessed with enough time to look into this as you are able to commit but also believe with Roger that this can always be improved. I still think the ultimate end game should be a total single tax at the consumption end but also agree that constitutionally this should be looked at. I believe we should also make your concerns and ideas known to he fairtax group so that may look into them.

The point I like about this though is I think the consumer should really see how much of their money is actually needed to support our govt as opposed to now where much of that is hidden.

I am for it! We are paying approximately the 34% now, but it is on earnings and the only ways to control that is to either hire someone to look for loopholes or to earn less. That is not the American way, or shouldn’t be. At least, with a tax on consumption instead of earnings, I can control the outgo directly and honestly, by controlling my consumption. If I could keep more of my money, I might not miss the extra dollars I spend on a new car. I would have more of my money to spend on it. Or, I could just not buy one until I could save more for that purchase. Either way, it puts ME in control. Businesses would save money, too, by not having the expenses involved in withholding their employees’ earnings to pay those income taxes.

Certainly, not everyone is in agreement on the fair tax issue, but this is the first web site I have seen where a civil discussion is taking place. There is no swearing, nobody calling anyone stupid or ignorant. Its very refreshing and informative. Thanks to all of the participants.

HANK, and the rest.

I must admit that Hank’s theory is brilliant. Your plan still has the my mandatory aspects which are stimulating the economy with the moeny that regular Americans earn. Not with massive stimulus packages that do not get to the regular Joe. The economy with stimulate from the bottom up. Not from the top down. It is the same corporate greed that put us in this position to begin with.
Giving Citi 80 Billion to do what. Clean up their books buy a Spanish bank, and make their stock worth more. What credit was freed up?

The real numbers of a successful economy are Retail numbers, consumer confidence, money in investments.

The problem here is that HR25 does have it’s flaws. But it does interject many outstanding starting points. Our tax code is rediculous. If any measure can be passed without bribing Senators with pork barrel promises for their states it would be a miracle. IE the Health Care Bill.

Any tax reform measure must come with additional measures by big government to tighten up. To the dismay of my liberal friends, if you do not see that our government is mis managed, over valued, then we certainly need to revisit the issue. Any corporation that ran itself under the rules that the government does would be hauled in to Congress or possibly jail.

I encourage everyone to visit and educate themselves on the issue. Sites like Fairtax.org. Cat.org and the like to educate yourselves on the issue. Brilliant minds like Hank have propsed solid theories that will work.

Once the education process is complete, get the word out to your friends and family. Tell your representatives that you want change or you want them out. The funny thing on this is I asked Congressman Ron Klien and Senator Bill Nelson my so called representation about their opinions regarding this issue. I received the prototypical political response. Regarding spending and simplifying the current tax code. That my friends is the real problem. The political machine just does the minimum to keep their jobs. Let us please as many as we can without taking a stand on anything. if they take a stand they can simply be bought with a 400 million dollar hospital tucked into a Health Care bill.
But I am digressing.

The Dems will not pass the issue without solid confirmation that any government programs and yes even agencies are not to be touched.

The Reps will not pass the issue without big business being protected.

It is now time to get the work done from outside Washington. It is no longer about the right or the left, It is about America getting back to the country it once was. It is time that all of our leaders become accountable to us. If they do not do what we want them to do, remove them from office. Not that they care hell when they spend one term in office they are now eligible for Government retirement and benefits. That is another problem for another day.

Everyone here has shown not only interest in the issue, but superior intelect as well. Go get it done. Get out and take this country back.

Hank , thank you for your insight my friend. Maybe we can meet one day. I would be honored. Let us keep this chat going.

Roger/Peter/Chuck,

Thanks for your cordial comments. Too often my posts are met with name calling and agenda accusations of one kind or another. My goal is simply to keep the facts in play.

Unfortunately, I’m kind of a Neanderthal when it comes to blogs and I have never tried to create my own. Might be a good thing to work on. Stay tuned!

Let me talk about Social Security futures for a minute. I assume you all understand that FICA stands for Federal Insurance Contribution Act, passed in 1931. The Social Security plan is just like an insurance policy. Pay your premiums and collect your rewards when eligible. As an aside, I do believe that FICA was unconstitutional when it was passed, but Roosevelt put a lot of pressure on the courts, even threatening to pack the Supreme Court with supporters. As a result, the SC dodged the issue and has refused to call it an insurance plan, although that is really what it is. Too late now to change things and I think the best solution is to correct the actuarial problems that occur ever 30-50 years or so. Former Senator Bill Bradley wrote in his new book that Social Security could be returned to solvency for another 100 years by (1) raising the eligibility age, (2)lifting the cap on earnings, (3)bringing into the plan all State and Local employees that currently are enrolled in other plans, and (4) Switching to a chained method of calculating cost of living increases, in effect recognizing that buying habits change as prices increase.

For those of you younger folks, you don’t need to worry about getting your promised benefits. After all, you support the Fairtax plan which proposes to pay benefits from the general fund, so why can’t that happen if the trust funds run out of cash and IOU’s? I think our country is good for it and you will get yours. If I’m wrong, the demonstrations to follow would make the tax day affair look like kids at kindergarten.

Including the SS and Medicare contributions on the list of things to be replaced with the Fairtax created two important issues. First, the transition issue, which has no good solution. All of us old folks that paid in for 45 years or so would pay a sales tax that is higher by 6% in order to cover SS obligations. Also, as I’ve written, the Fairtax creates a group of 30 million workers that may never pay any net federal tax due to the prebate, yet they all will qualify for full SS benefits. 30 million freeloaders is not what our nation is all about, imho. I’ve paid my premiums over my working lifetime, why should I pay someone elses premiums with my sales tax dollars. Leave SS out of the Fairtax plan, make everyone pay their premiums, and fix the current shortfall as Bradley suggested.

The following are some Fairtax statements I have heard or read over the last six years. You are probably familiar with most of them already. Please read each of them and consider whether they are true or false. Anyone who is interested can take a shot, and I will provide answers a bit later.

(1) HR25 abolishes the IRS and the IRC.

(2) There are 67,000 pages in the Internal Revenue Code and supporting Regulations.

(3) A sales tax inclusive rate of 23% would be revenue neutral.

(4) The after tax price of retail purchases will be about the same.

(5) The “prebate” is a tax refund paid in advance.

(6) Your dollars will purchase more under the Fairtax.

(7) You choose when and how much tax to pay.

(8) Everyone will be economically better off under the Fairtax.

(9) Interest bearing investment and debt instruments are not taxed.

(10) There is $10-$15 trillion of US owned assets in offshore accounts.

(11) Buying “used” goods, (tax previously paid), eliminates the tax costs from the sales price.

(12) A national sales tax would have no impact on State and Local governments.

(13) The GDP will rise by around 10% in the first year of implementation.

(14) The Fairtax will save Social Security.

(15) The Fairtax is progressive.

(16) The Fairtax plan will insure that everyone pays their fair share of taxes.

To simplify your responses, just list the number of those statements you believe to be false.

Good luck!

Hank,
1, is false and 13 is iffy. I know that’s what some economists project.

@Hank Van Gieson
I’m waiting for you to tell us they’re all false haha =)

Addressing your comments about SS and transition, wouldn’t a targeted prebate as you’ve proposed offset the “double tax” as it were on seniors who paid their share of SS over the course of their working years? I don’t see why the same program can’t target lower income people to reduce their tax, but maintain some contribution for their eventual SS and healthcare benefits. I can see however, how a few adjustments to the current payroll taxes can resolve the issue without extra reform, which could very well be preferable to seniors who might feel anxious over the change.

Now onto the 4 point made by Senator Bradley. #2 and #3 could be resolved by including SS into the consumption tax since there is no cap on your spending and everyone (state, local, and federal employees) will be purchasing too. Point #4 needs doing anyways and I’m stupefied it’s not something done already.

#1 is difficult to assess.. If you raise the eligibility age, you run the risk that people waiting till they receive SS benefits to retire will continue to work and stagnate the job market further. Some propose that *lowering* the eligibility age will convince senior workers to retire early, freeing up millions of jobs for newcomers, laid off, and the like. I’m not sure what will happen one way or another, but if all 4 changes can achieve solvency for 100 years, I think doing 3 out of 4 can at least extend solvency until a more permanent solution can be reached.

I asked my Congressman to give me his position on Fair Tax H.R.25. I am no expert on the subject, but am disappointed he is not more for it. I am not convinced he is as informed as many in this thread are. In any case, thought some would be interested on his ‘position’.

Besides his ‘position’ he also states that he is not on the committee where the bill has been referred to. Here is his reply IN SUMMARY:

First, although the sponsors of the bill argue that the tax rate would be just 23%, the experts estimate that the tax would have to be quite a bit higher than that in order to remain revenues neutral (meaning that the tax would bring in the same amount of revenues as our current system). The Joint Committee on Taxation estimated that, in order to remain revenue neutral the tax would actually have to be over 50%. I do not think that citizens would support this drastic price increase on top of other state and local taxes.

Next, this sales tax proposal is unlike any sales tax imposed by any sate or local government. This tax would be applied to all goods and services, including food, health care, legal fees, prescription drugs, home rents, and new home purchases. This could have drastic unintended consequences on nearly every sector of our society. For example, the proposal would tax the purchases of goods and services (other than education-related) by Federal, State, and local governments, including all government services and purchases, such as salaries for police officers and other public employees, as well as for new police cars.

This would be a huge additional burden placed on State and local governments and could result in an increase in local bond rates. It has been estimated by the Committee on Ways and Means that State and local governments would have to increase their taxes by $300 billion pr year or reduce their level of services by $300 billion per year under the proposal. Additionally, the Federal government would have to pay the sales tax when purchasing military equipment and when it makes payments of wages to servicemen and women — assuming revenue levels based on the Federal government paying itself taxes defies common sense.

Additionally, the national sales tax would place a great burden on retired individuals, particularly those on Social Security, who would face very large tax increases, since the burden of tax would be shifted from wages and capital gains to consumption. Most Social Security benefits are not taxed under current law, so with the national sales tax, seniors would be forced to pay high tax rates on goods and services they purchase with their Social Security checks.

Finally, the Congressional Budget Office has estimated that the current income tax system has a noncompliance rate of about 15%. Most of this occurs at the business level and consists of non reporting of business sales. Since the retail sales tax will be collected at the business level, any realistic revenue estimate of the tax would have to assume significant levels of noncompliance. The Congressional Research Service anticipates that the retail sales taxes would increase the incentive for firms to avoid tax. For example, for a retailer with a 2% profit margin, the benefit of avoiding a profits tax is less than 1% of profits. However, if the retailer stands to save 20% of each dollar, the incentive to avoid is much greater. This is the reason that many tax scholars doubt that a high retail sales tax is feasible, and why no such high rate of the retail sales tax exists anywhere in the world. In fact, because of compliance problems, most countries imposing significant levels of consumption taxes use value-added taxes, which levy taxes on all stages of production of a product.

@Waco John
I’m guessing your a Texan, like me. I, too, asked my congressmen how they felt about Fair Tax. The amount of doublespeak that came spewing from his, and her mouths was astronomical. There must be a school for politicians, that teaches them how to sound like they’re answering our questions, while talking about something completely different.

I’m guessing, not a single member of the House or Senate (except for those who wrote and co-sponsored it)know what HB25 is. And why would they “want” to change a system that right now benefits them financially, while screwing us in the end (no pun intended). Anyone who thinks we live in the land of the free, need only look at our tax code to see how much we are under their thumbs, just waiting to be squashed like bugs.

We need to clean house in both houses.

I agree .. I don’t think this Congressman (Tex) knows as much as what is discussed at this website. I look forward to when all of Wash. that is presently ‘in’, is voted out. All of ‘em.

Waco John,

Who is your Congressman? Rarely have I seen such an excellent summary or what is wrong with the Fairtax scheme, particularly coming from one of our elected officials. He nailed it and there should be no doubt as to why he doesn’t support HR25.

Tom, Roger, et al,

Before providing the answers to my little Fairtax quiz, let me assure you that my intent was not to embarass anyone, or throw someone like Tom, who had the guts to respond, under the bus. The whole purpose of the quiz was to demonstrate the difference between what is in the actual legislation, and the Fairtax advocate’s claims found in various books and blogs. So, here are my answers for your consideration. Due to the length of my response, I have split my response into thirds and will post one section a day. Feel free to disagree!

(1) HR25 abolishes the IRS and the Internal Revenue Code.

False! HR25 does eliminate the IRS as constituted today, but the Internal Revenue Code will remain. HR25 replaces four of the eleven Titles in the current Code with sales tax Titles. Whatever it might be called, Treasury will have to reconstitute the IRS to assist the States in regulating and enforcing the Fairtax.

(2) There are 67,000 pages in the Internal Revenue Code and supporting Regulations.

False! According to a Tax Foundation report, in 2009 the entire code and supporting regulations could be printed on 20,000 double sided pages using normal legal paragraphing and assuming 250 words per page. The income tax portion of the code plus supporting regulations could be printed on 13,000 pages.

(3) A sales tax inclusive rate of 23% would be revenue neutral.

False! There is not one study that would support this claim. The AFFT base/rate study done in 2006 showed that the rate would have to be 23.8%, and most estimates by unbiased economists show that the inclusive rate would have to be in excess of 30% when factoring in tax evasion, tax avoidance, and the unconstitutional federal taxation of State and Local government consumption.

(4) The after tax price of retail purchases will be about the same.

False! Unless one believes that all gross pay and pensions would be reduced by the amount of current tax withholding, retail prices will rise by 18%. Based on actual revenue data from 2007, business embedded costs of the income tax system as a percent of retail sales consisted of 4.5% for payroll contributions, 3% for income taxes, and 1.5% for compliance costs. Removing the 9% in business tax costs and adding the 30% sales tax will result in an 18% retail sales price increase. (1.00 x .91 x 1.30 = 1.18)

(5) The “prebate” is a tax refund paid in advance.

False! While AFFT might want everyone to believe that the prebate is similar to a tax refund, in fact, the prebate is a cash grant entitlement costing an estimated $600 billion annually. Unlike an income tax refund, the prebate increases everyone’s gross income. The prebate can be spent and taxed or saved as circumstances dictate. The prebate is an entitlement that comes at a time when entitlements are rapidly squeezing out discretionary spending, including Defense discretionary in the federal budget.

This makes so much sense!

I am PRO Fair Tax. The current system is broken.

Here is the second installment of quiz answers.

(6) Your dollars will purchase more under the Fairtax.

False! While many people will have more take home pay, the 18% rise in nominal retail prices means that dollars will purchase less, not more.

(7) You choose when and how much tax to pay.

Disingenuous! Unless you choose to not live, choices about paying taxes would be quite limited. Half of a typical family budget goes towards services, and all services would be taxed. There are no untaxed groceries, no untaxed restaurant meals, no untaxed home heating oil or gas for automobiles, nothing untaxed in Wal-mart, etc. etc. Untaxed or “used” goods would be limited to the infrequent purchase of homes, automobiles, clothing, appliances, and so forth.

(8) Everyone will be economically better off under the Fairtax.

False! Many groups of family units will pay more in taxes and/or have less purchasing power under the Fairtax. For instance, a retired couple living on $30,000 from Social Security plus $18,000 of investment income would pay no income tax or payroll contributions on the $48,000 under current law. Under the Fairtax, their income would increase by the $4784 prebate, and if they spent all of it on taxable consumption, they would pay a gross sales tax of over $12,000. After deducting the prebate, their net taxes would still be $7350 more than under current law.

(9) Interest bearing investment and debt instruments are not taxed.

False! Section 801-806 of HR25 mandates an implicit tax on both investment and debt instruments based on the differential between the interest rate paid or received on debt/investment instruments, and the applicable Treasury rate. For instance, a short term $100,000 CD paying 2% would be charged a monthly implicit tax of $28.75 if the short term Treasury rate was 3.5%. ($100,000 x .015% x .23 / 12 = $28.75). A maxed out credit card with a balance of $10,000 charging 18% interest would be charged a monthly implicit tax of $27.79 if the mid term Treasury rate was 3.5%. ($10,000 x .145 x .23/ 12 = $27.79). These implicit taxes would be in addition to any normal service charges.

(10) There is $10-$15 trillion of US owned assets in offshore accounts.

False! There is not one shred of data supporting this Fairtax claim. There are many trillions in offshore assets, but those assets are owned by wealthy individuals from all over the world. According to the Tax Justice Network, an organization that tracks offshore holdings, there was $11.5 trillion in offshore assets in 2005, of which $1.6 trillion was owned by North American wealthy individuals. There are 23 sovereign nations in NA, so the best estimate for American owned offshore liquid assets would be significantly less than $1 trillion. And, failing an IRS amnesty provision in HR25, that offshore wealth is not likely to come rushing home.

Here are the last six answers to the Fairtax quiz. Kudo’s to Roger for guessing that all 16 were false. Perhaps Fairtax advocates will now understand the need to follow Neal Boortz’s advice and “believe nothing you hear, do your own homework, and make up your own mind!”

(11) Buying “used” goods, (tax previously paid), eliminates the tax costs from the sales price.

False! The retail price of untaxed goods would quickly adjust to the current new/used relationship due to competitive pressures. No federal tax revenue would be generated by the sale of “used” goods, but there would still be a significant tax cost element in the resale price. Think about it as the “embedded cost of the Fairtax”!! For instance, purchasing a new car with a dealer cost of $30,000 would result in an after tax price of $39,000. Subsequent resale of the car would include some portion of the $9,000 sales tax.

(12) A national sales tax would have no impact on State and Local governments.

False! The Fairtax proposes to tax State and Local consumption which would be unconstitutional under our federal form of government. 12-15% of the needed federal revenue would be hidden in higher State/Local taxes if this provision was retained.

(13) The GDP will rise by 10% in the first year of implementation

False! Taxes are not included in the GDP calculations according to many economists. Assuming that producer prices fall by 9%, then GDP should also fall by a like amount.

(14) The Fairtax will save Social Security.

False! The Fairtax only changes the method of collecting revenue from an income tax to a consumption tax. The Fairtax Social Security set aside amounts do nothing to address the looming crisis brought on by the imbalance between revenue collected and benefits paid.
(15) The Fairtax is progressive.
False! “Regressive” is an economic term with a precise definition - when a tax is regressive, the higher one’s income, the lower the proportion of that income that actually goes to paying the tax - and vice versa. Either a tax is “regressive” or it isn’t. The FairTax is regressive. Low income workers will pay a larger percentage of their income in taxes than middle class workers, and middle class workers will pay a larger percentage of their income than high income earners. The Fairtax “prebate” simply moves the point of “regressivity” from zero to the AFFT adjusted poverty level amount.

(16) The Fairtax plan ensures that everyone pays their fair share of taxes.

False! Due to the Family Consumption Allowance, 30 million lower income workers would pay no net federal tax annually, yet would still qualify for full Social Security pension and health care benefits.

Derek,

True, 47% pay no INCOME taxes, but all workers pay their 7.65%
FICA premiums. Under the Fairtax, FICA contributions are included on the list of taxes to be replaced, so, due to the prebate, there are 30 million workers that would pay no net federal tax annually, but still qualify for full SS benefits. At the AFFT adjusted poverty level, there are actually 50 million families that would pay no net tax due to the prebate, but 20 million of them are retirees who pay no FICA taxes. I stand by my claim that we would have 30 million “free loaders” compared to the less than 1 million workers under current law that can qualify for refundable tax credits in an amount that would totally offset their FICA payments. 1 million versus 30 million! Disconnecting 30 million workers from the cost of the federal government does not seem to me to be good for the country.

Hank,
Sorry for my tardiness midterms this week. As I stated last week you are brilliant my friend. But let’s look at the issue logically, for a period. I want to start with the obvious Government Reporting and the like. According to our government we have a national unemployment rate of 9.7% The Labor Dept. equates this number by new jobless claims for benefits as the main tabulator for that number. However, there are unknown millions who have exhausted their benefits and are no where to be found on the unemployment numbers. Maryland for example has shown the highest rate of job creation in the last year. Due in large part to the Census Bureau being located there. Artifical Creation. This term has no meaning in politics. The politicians will run on this all election season. Since Obama has been in office there has been xxx number of jobs created. Let’s figure out a way to count ALL of the unemployed. My hypothesis the rate is nearly 16%

Then we have the Dept of Education. They have a budget of nearly 70 Billion. I can not find anywhere in the Constitution where it states that the Federal Government needs to have this entity. I am quite sure that the states are fully capable of monitoring their educational needs.

The Defense Dept. Here is one that is near and dear to my heart. As a Navy fellow I understand the role of our military in defending our freedom. I for one trust the military leaders when they come to the hill each year and state their needs for the upcoming budget year, and state why they need these things. Over the last 20 years or so they have been telling Congress that certain military bases, certain weapon projects are no longer needed. The politicians do not listen as they cannot have bases closed in their districts. They cannot have defense contractors laying off people in their districts. That politician would be axed if this happened. So we have useless bases kept open, useless planes and other instruments being kept afloat by them. Again Artificial job creation. Instead of slowly working these people into the next great project they continue to build obsolete projects.

As I said in one of prior posts, we continue to make theories based on outdated information. See the Health Care Bill. This theory has been constantly done in highway projects. They build a highway based on 5 year growth projections, but if it takes 5 years to finish the highway then the numbers were incorrect and the highway before it even opens is useless. We must come back and widen it again.

I say all of that to say this, Every year that our unemploment is at (the true number) around 15% these people are not paying into the SS system. But will expect benefits when their time comes. They pay no income tax obviously! So in essence our current revenue generating system is so flawed it is appalling. The GDP is another scewed number. Maybe with your brilliance you can help me understand. This number incorporates ALL things built in America. So I proffer this, If I am building a house, My concrete comes from Mexico, My drywall from Canada, My lumber from Canada, and my furniture from Europe, what part of the house is counted towards the GDP? For the record I am being series here, I do not know the answer to this question.

I believe I read somewhere that in 2008 the government collected 3 trillion in revenue. I believe I read somewhere that the entire retail sector from Autos to Zambonis including food at bars etc. was around 29.7 trillion. Now if this number is true and again I am not sure as my previously mentioned recording issues, this would be a revenue collection measure of 7.4 Trillion at an average of 25% tax rate. Not changing any spending, not changing any GDP number, not changing any unemployment rates true or not. If this number is true then it reflects the the TRUE purchases of the country. Not only it legal residents but anyone who visited here and/or lives here illegally.
Of course I am sure you will help nme with the accuracy of that retail number.

Now, while I am for a Fair Tax System, the key word here is FAIR. What I mean is this, Groceries, utility bills, home heating oil, etc. would be taxed at a much lower rate. For example 10% why you ask, these products are purchased daily by nearly everyone. Having a 20 to 30% rate on these is counter productive. Even the poor illegal residents by groceries. We are now collecting a 10% tax on their existance. The true poor struggling Americans will be also paying their FAIR share, a share that is truly affordable.

Now, non luxury vehicles, would have a 15% tax on these. moderate number and FAIR to the people buying them.

Luxury vehicles, yachts, homes over 1 million dollars, other higher income luxuries would pay the 30% number. This, in my estimation, would do two things. First the drug dealers, the businesses that send money out of the country, etc. would now be paying their share. Did I mention that it now no longer legal to purchase a car oversees and bring it here. A dealer in America must process the deal and collect the tax. Same with yachts, etc.
In summary we are having a FAIR tax just the rates are adjusted accordingly.

The biggy here is internet purchases. I believe I read that Americans are somewhere near 300 Billion annually and 85% of these purchases are not taxed. They are only taxed in some states that have state level taxes for companies in their states selling and buying the merchandise.

We as a nation need to stop using bogus reporting tools the drive consumer habits. That drive government spending, that drive budgetary movement. Give the American people that are truly legal back their money let them decide what they need, what they want, what they can afford. Then the government gets theirs on the back end not the front end.

Finally, if these number are correct, I would assume that the Feds could take a certain percentage out of the revenue to pay for medicare and social security. There
is certainly enough revenue to do so. Quite possibly do so without a loss.

I am certainly not as intelligent as you, I still have two more years of college to go, but logic dictates that the system is broke. It has been broken for years. I personally can not think of a better way not only to drive the economy, but actually get one number to understand the economy. The jobs will come back under this system, employer costs must go down it is obvious. That number is not so obvious as you have explained, but a drop none the less.

Now in a non related issue. I received this email yesterday. The movie is nearly 2 hours long, after viewing it last evening, I am no longer sure what to believe. Since I have read soem brilliance here on this site, I am asking all of you to take some time and view this video and let me know what your opinion is on the issue. The video is regarding our government and it direction.

http://www.youtube.com/watch?v=eAaQNACwaLw&feature=related

God Bless

Chuck

Chuck,

Excellent post, and I would suggest that I am no more intellegent than you, just more experienced. It greatly encourages me (at age 77) to find someone your age genuinely interested in the future of our republic, and with a good grasp of the major issues.

As for the GDP issue, here is a short definition: “It is the market value of all final goods and services made within the borders of a country in a year”. The key word here is “final”. It is the retail value of all goods and services. The National Income Product Accounts (NIPA) is the source for determinimg the GDP. By the way, those tables were used by the Fairtax economists to determine the Fairtax taxable base, which in 2007 was around $11 trillion after removing education tuition, etc. In 2008, the GDP was around $14 trillion, so I’m not sure what your $29 trillion is?

A bit of trivia for you to think about. When President Washington sat down at his first cabinet meeting, there were five department heads at the table, plus the VP. Present were Knox, War Department, Jefferson, State Department, and Hamilton, Treasury plus the Attorney General and the Postmaster General. When Obama held his first cabinet meeting, there were 15 Department heads present plus countless heads of independent agencies lining the walls. One of the more important tasks for your generation would be to reduce the size and cost of the federal government. I’m a strict Constitutionalist, and there are numerous Cabinet Departments that we can do without, including Education, Homeland Security, Commerce, HHS, HUD, etc. etc. I would hope you will support a “10th Amendment Commission” charged with reducing the size and cost of the federal government by 10% annually, with their recommendations subject to an up or down vote by Congress with no amendments. Worked for the Base Realignment and Closing Commission, it could work here, but the Obama Commission has no Congressional authority and will probably fail.

I’ll take a look at the video and let you know my reaction.

Cheers!

I hate to see anyone lose a job, but if the IRS was gone, hmm. Not sure if that bothers me much. that is one agency that should have never been created in my view. EPA is another. There is just too much waste in government, esp at the federal level. Many agencies are not needed.

Anything would be better than the tax system we have now. The IRS is becoming nothing short of a sword used by every politician to instil fear and buy favors. If all the hidden taxes we now pay for were erased (as with the Fair Tax) the cost of the final products should not rise in any significant way.

Hello there, I couldn’t see a means to contact you, and so I really hope that you read this comment. I own a website about ladies wetsuits, and thought you would like to exchange links with me. I have submitted my email address if you would like to get in contact. Thanks.

President Obama would never agree to the Fair Tax, because it minimizes governmental power and control over the people. It would also force all the crooked politicians to pay taxes and not be able to hide or divert their incomes. We would no longer need the IRS and we would no longer have payroll taxes, giving us the full amount of our earnings to spend and likely, stimulate the economy hugely without help (or hindrance) from the government! All illegal activity, drugs, prostitution etc. would now pay taxes, creating a huge base, since crime creates more money than average wage earners.

It would create transparency and Americans could see where their money is actually going. Remember, Obama has given the IRS huge control in implementing the healthcare bill and assessing fines and penalties to those who refuse to buy health insurance. The government would lose control over spending OUR money and they will stop this bill at all cost to remove this freedom from the people, to spend their own money as they see fit!

Hank

You responses are a bit skewed and not totally accurate. Your answers can only indicate to me that either you are a lobbyist, work for the IRS or some governmental group that would be eliminated, thus eliminating your job!

Let’s face it. Who in their right mind would want to replace the existing tax code of 54,000 pages, containing more than 2.8 million words which has been revised 16,000 times, for a simple, clear 133 page H.R. 25 tax reform bill? Research has recently been completed on the IRS where the researcher stated, if you took the returns of 20 families from various income levels, and gave them to 20 different IRS agents to complete, it would be virtually impossible for 2 of them to come up with the same tax number. Doesn’t this tell you the current tax system is an abomination? Anyone who supports it MUST have a vested interest!

We must buy new items to pay taxes? How about everyone paying the same percentage of tax on all income, without exemptions or deductions? Medicare and my city collects taxes this way and it works. For example, if a couple that both works, with one making substantially more money than the other, should they both share the expenses equally? With that method, they may as well live individually. I pay taxes for schooling, but never had children. I still understand the need for a public school system and don’t complain about paying for one. The wealthy shouldn’t complain either as they are blessed with wealth!

@Bill
OK. Bill. Let’s say this. If you get paid cash, and never deposit that money in a savings or checking account, how would the IRS know you made that money, and how much to tax you for it. The person who gave it to you would have to report it to the IRS. This doesn’t happen when cash is used as payment, because the company paying you would then have to pay their half of your Social Security, Medicare/Medicade and offer you Health Insurance.

Another scenario would be if you sold some of your household goods to buy new stuff. If you hold a garage sale and clear out all your old things, technically, you’re required to report all of that money you made, as income. DO YOU? I’ll say no, you don’t.

The FairTax puts an end to all the guess work involved in your income, lets you keep all of it, then taxes you when you buy new stuff (there is no tax on items that are used because they’ve already had the taxes paid when they were new). So you control how much tax you pay, not the government.

Of course, the government has to agree with this method taxation, and I’m guessing you and I will be long dead before any smart politicians endorse the FairTax.

I agree with you that the Fair Tax will not eliminate criminal enterprise, except possibly that particular one known as our overreaching Government. No tax system will eliminate crime.

I also agree that we’ll be long dead before any incumbent politician sponsors a Fair Tax bill with a chance of passing.

Fair Tax! Because the rich don’t have enough money!

the fair tax wont work great idea but wont work, say you sell a car for 5k, you tell the buyer there is a sale today car is 500.00 but he must leave you a 4500 tip, buyer saves big on tax, government gets next to no money, it wont work

@ben

Ben if you read clearly any used item is not taxed because it was taxed when it was sold new.

@ben
ONLY NEW ITEMS GET TAXED! Used are tax free. We’ve been over this a lot. And the rich don’t get anymore money than they get now. They just pay more taxes for their vanity purchases. They won’t get caught dead driving a Hyundai.