Time for a new tax system

[Tim5055]

Well I usually try to stay away from political discussions, but this one I am really supporting.  The FairTax Act, a bipartisan bill sponsored by John Linder (R-GA) and Collin Peterson (D-MN) would remove the burden of the income tax and other federal income-based taxes.

For the week of August 28 the book about this proposal      (The FairTax Book ) was #1 on the NY Times best seller list!

The current tax system is beyond reform.

The FairTax Act would replace the current tax system with national consumption tax that will:

    * Allow Americans to keep 100% of their paychecks, pensions, and Social Security payments.
    * Dramatically reduce the cost of goods and services by 20% to 30%.
    * Allow families to save more for homeownership, education, and retirement.
    * Raise the same amount of money for the federal government.
    * Make American products more competitive overseas.



Thumbnail sketch of the FairTax

[mowalker]

I got the book they day it came out!  I have not had the time to read it but from what I have scanned through it seems to be an excellent idea.
 
Tim, I guess with you now living in Atlanta you get to hear Neal Boortz on the Radio locally.  We do get him live here though.  He is really good and smart too!

[Tim5055]

I got the book they day it came out!  I have not had the time to read it but from what I have scanned through it seems to be an excellent idea.

I also bought it the first day.  Very interesting and a great plan.  If you support the idea take a minute to e-mail your senators and congressman.  So far there is little support from the Florida delegation.

So far Senator Martinez is eaning for it but Senator Nelson will not comment.  Only a few congressmen are for it

[chasd60]

The federal government has the right to impose an income tax. This right must be taken away from the FEDS before any other tax plan can work. The biggest fear by some is that the government goes to this method and the income tax creeps back into place. We would then have two forms of taxation by the FEDS.
 
 If they remove the FEDS ability to impose an income tax, I am all for it.

[Tim5055]

The federal government has the right to impose an income tax. This right must be taken away from the FEDS before any other tax plan can work. The biggest fear by some is that the government goes to this method and the income tax creeps back into place. We would then have two forms of taxation by the FEDS.
 
 If they remove the FEDS ability to impose an income tax, I am all for it.

That was already thought of.  From the FairTax  Frequently Asked Questions


Could we end up with both the FairTax and an income tax? No current supporter of the FairTax would support the FairTax unless the entire income tax is repealed. Moreover, concurrent with the repeal of the income tax, a constitutional amendment repealing the 16th Amendment and prohibiting an income tax will be pushed through Congress for ratification by the states.

Time to write your congressional deligation.  So far for ME Senator Olympia Snowe is leaning for it but Senator Susan Collins will not commit one way or the other.  On the house side Thomas Allen has come out against it and Michael Michaud is leaning against it.  These are the folks that we need to convince that  the voters want change.

[garym053]

I haven't read the book yet, but the idea "sounds" good. I will have to read about it before I could support it.
Getting close to that "between" seasons anyway- No Camping and no Cross Country skiing! Allows lots of time for reading!

[AustinBoston]

This is actually a very bad idea.

First, it is unconstitutional.  With the exception of the income tax, all federal taxes must be apportioned to the states according to population (which is currently not done with many federal taxes, which does not make them constitutional).

Second, it only taxes consumers.  Someone who makes hundreds of mullions of dollars a year doesn't consume all that much more than someone making ten thousand dollars a year.

Currently, soemone making hundreds of millions of dollars a year pays a heck of a lot more than someone making ten thousand dollars a year.

A better approach would be to raise the income tax to 35%, but make the first $50,000 per wage earner exempt.  This is more in line with what the imcome tax was meant to be - a tax on those with very large incomes.

Austin

[mowalker]

Austin,
 
READ THE BOOK!!
 
All you wrote above is addressed.

[Tim5055]

Second, it only taxes consumers.  Someone who makes hundreds of mullions of dollars a year doesn't consume all that much more than someone making ten thousand dollars a year.

Austin

I would be willing to bet that they do consume a whole lot more.  A really nice  Mercedes  clocks in at a whole lot more than a new Ford.  

Here is a thumbnail sketch of the FairTax I found:

The FairTax proposal is a comprehensive plan to replace federal income and payroll taxes, including personal, gift, estate, capital gains, alternative minimum, Social Security/Medicare, self-employment, and corporate taxes. The FairTax proposal integrates such features as a progressive national retail sales tax, dollar-for-dollar revenue replacement, and a rebate to ensure that no American pays such federal taxes up to the poverty level. Included in the FairTax plan is the repeal of the 16th Amendment to the Constitution. The FairTax allows Americans to keep 100 percent of their paychecks (minus any state income taxes), ends corporate taxes and compliance costs hidden in the retail cost of goods and services, and fully funds the federal government while fulfilling the promise of Social Security and Medicare.
Americans take home their whole paychecks.
Not only do more Americans have jobs, but they also take home 100 percent of their paychecks (except where state income taxes apply). No federal income taxes or payroll taxes are withheld from paychecks, pensions, or Social Security checks.

No federal sales tax up to the poverty level means progressivity like today's tax system.
To ensure no American pays tax on necessities, the FairTax plan provides a prepaid, monthly rebate (prebate) for every registered household to cover the consumption tax spent on necessities up to the federal poverty level. This, along with several other features, is how the FairTax completely untaxes the poor, lowers the tax burden on most, while making the overall rate progressive. However, the FairTax is progressive based on lifestyle/spending choices, rather than simply punishing those taxpayers who are successful. Do you see how much freer life is with the FairTax instead of the income tax?

No tax on used goods. The amount you pay to fund the government is totally visible.
With the FairTax you are only taxed once on any good or service, the sales tax is charged just as state sales taxes are today. If you choose to buy used goods - used car, used home, used appliances - you do not pay the FairTax. If, as a business owner or farmer, you buy something for strictly business purposes (not for personal consumption), you pay no consumption tax. When you decide what to buy and how much to spend, you see exactly how much you are contributing to the government with each purchase.

Retail prices no longer hide corporate taxes or their compliance costs, which drive up costs for those who can least, afford to pay.
Did you know that hidden income taxes and the cost of complying with them currently make up 20 percent or more percent of all retail prices? It's true. According to Dr. Dale Jorgenson of Harvard University, hidden income taxes are passed on to the consumer in the form of higher prices - from an average 22 percent on goods to an average 25 percent on services - for everything you buy. If competition does not allow prices to rise, corporations lower labor costs, again hurting those who can least afford to lose their jobs. Finally, if prices are as high as competition allows and labor costs are as low as practical, profits/dividends to shareholders are driven down, thereby hurting retirement savings for moms-and-pops and pension funds invested in Corporate America. With the FairTax, the sham of corporate taxation ends, competition drives prices down, more people in America have jobs, and retirement/pension funds see improved performance.

The income tax exports our jobs, rather than our products. The FairTax brings jobs home.
Most importantly, the FairTax does not burden U.S. exports as they are with the current income tax. So the FairTax allows U.S. exports to sell overseas for prices 22 percent lower, on average, than they do now, with similar profit margins. Lower prices sharply increase demand for U.S. exports, thereby increasing job creation in U.S.manufacturing sectors. At home, imports are subject to the same FairTax rate as domestically produced goods. Not only does the FairTax put U.S. products sold here on the same tax footing as foreign imports, but the dramatic lowering of compliance costs in comparison to other countries' value-added taxes also gives U.S. products a definitive pricing advantage which foreign tax systems cannot match.

The FairTax strategy is revenue neutrality:
Neither raise nor lower taxes so consumer costs remain stable.
The FairTax pays for all current government operations, including Social Security and Medicare. Government revenues are more stable and predictable than with the federal income tax because consumption is a more constant revenue base than is income.

If you were in a 23-percent income tax bracket, the federal government would take $23 out of your paycheck for every $100 you made. With the FairTax, if the federal government gets $23 out of every $100 spent in America, the same total revenue is delivered to the federal government. This is revenue neutrality. So, instead of paycheck-earning Americans paying 7.65 percent of their paychecks in Social Security/Medicare payroll taxes, plus an average of 18 percent of their paychecks in federal income tax, for a total of about 25.65 percent, consumers in America pay only $23 out of every $100. Or about 30 percent at the cash register when they elect to spend on new goods or services for their own personal consumption. And this tax is collected only on spending above the federal poverty level, providing important progressivity.

Tax criminals - don't make criminals out of honest taxpayers.
Today, the IRS will admit to 25 percent non-compliance with the code. FairTax.org will be generous and simply take the position that this is likely a conservative estimate of the underground economy. However, this does not take into account the criminal/drug/porn economy, which equally conservative estimates put at one trillion dollars of untaxed activity. The FairTax will tax this - criminals love to flash that cash at retail - while continuing to provide the federal penalties so effective in bringing such miscreants to justice. The substantial decrease in points of compliance - from every wage earner, investor, and retiree, down to only retailers - also allows enforcement to concentrate on following the money to criminal activity, rather than making potential criminals out of every taxpayer struggling to decipher the current code.

[AustinBoston]

I would be willing to bet that they do consume a whole lot more.  A really nice  Mercedes  clocks in at a whole lot more than a new Ford.  

Here is a thumbnail sketch of the FairTax I found:

The FairTax proposal is a comprehensive plan to replace federal income and payroll taxes, including personal, gift, estate, capital gains, alternative minimum, Social Security/Medicare, self-employment, and corporate taxes. The FairTax proposal integrates such features as a progressive national retail sales tax, dollar-for-dollar revenue replacement, and a rebate to ensure that no American pays such federal taxes up to the poverty level. Included in the FairTax plan is the repeal of the 16th Amendment to the Constitution. The FairTax allows Americans to keep 100 percent of their paychecks (minus any state income taxes), ends corporate taxes and compliance costs hidden in the retail cost of goods and services, and fully funds the federal government while fulfilling the promise of Social Security and Medicare.

Start with this.  The rates would have to be different in different states, and would have to be changed every year.  Why?  Because federal taxes have to be apportioned to the states according to the population.  That means if the tax is intended to collect $1200 per person (a random number), then it has to collect that by state.  So if people in Mississippi make different lifestyle choices than those in Connecticut, different rates would be required.  The only exception to that (for the Federal Government) is the income tax, and that is because the 16th amendment allowed it.

Americans take home their whole paychecks.
Not only do more Americans have jobs, but they also take home 100 percent of their paychecks (except where state income taxes apply). No federal income taxes or payroll taxes are withheld from paychecks, pensions, or Social Security checks.

No federal sales tax up to the poverty level means progressivity like today's tax system.
To ensure no American pays tax on necessities, the FairTax plan provides a prepaid, monthly rebate (prebate) for every registered household to cover the consumption tax spent on necessities up to the federal poverty level.

Administered by the IRS, I'm sure.  After all, they won't have anything else to do.

This, along with several other features, is how the FairTax completely untaxes the poor, lowers the tax burden on most, while making the overall rate progressive. However, the FairTax is progressive based on lifestyle/spending choices, rather than simply punishing those taxpayers who are successful. Do you see how much freer life is with the FairTax instead of the income tax?

Yes.  Free for those who are extrtemely rich.  When the income tax was introduced, it put a stop to the rise of the super-rich.  Adjusted for inflation, there were trillionares in the U.S., becoming richer and richer on the backs of everyone else.  Eliminating the income tax would allow that to return.

No tax on used goods. The amount you pay to fund the government is totally visible.
With the FairTax you are only taxed once on any good or service, the sales tax is charged just as state sales taxes are today. If you choose to buy used goods - used car, used home, used appliances - you do not pay the FairTax. If, as a business owner or farmer, you buy something for strictly business purposes (not for personal consumption), you pay no consumption tax. When you decide what to buy and how much to spend, you see exactly how much you are contributing to the government with each purchase.

This is probably a good thing.

Retail prices no longer hide corporate taxes or their compliance costs, which drive up costs for those who can least, afford to pay.
Did you know that hidden income taxes and the cost of complying with them currently make up 20 percent or more percent of all retail prices? It's true. According to Dr. Dale Jorgenson of Harvard University, hidden income taxes are passed on to the consumer in the form of higher prices - from an average 22 percent on goods to an average 25 percent on services - for everything you buy. If competition does not allow prices to rise, corporations lower labor costs, again hurting those who can least afford to lose their jobs. Finally, if prices are as high as competition allows and labor costs are as low as practical, profits/dividends to shareholders are driven down, thereby hurting retirement savings for moms-and-pops and pension funds invested in Corporate America. With the FairTax, the sham of corporate taxation ends, competition drives prices down, more people in America have jobs, and retirement/pension funds see improved performance.

Did you know the IRS is the prime enforcer of laws that keep things like the ERON disaster from happening?  What we are talking about here is 1) No longer taxing those who use government servicews and 2) making sure that they can steal the money they should be either passing on to stockholders or consumers (because without an income tax, there are no income tax audits.)  Really bad idea.

The income tax exports our jobs, rather than our products. The FairTax brings jobs home.
Most importantly, the FairTax does not burden U.S. exports as they are with the current income tax. So the FairTax allows U.S. exports to sell overseas for prices 22 percent lower, on average, than they do now, with similar profit margins. Lower prices sharply increase demand for U.S. exports, thereby increasing job creation in U.S.manufacturing sectors. At home, imports are subject to the same FairTax rate as domestically produced goods. Not only does the FairTax put U.S. products sold here on the same tax footing as foreign imports, but the dramatic lowering of compliance costs in comparison to other countries' value-added taxes also gives U.S. products a definitive pricing advantage which foreign tax systems cannot match.

This could also be accomplished by rebating or subsidizing exports.  Lots of other countries do this.

The FairTax strategy is revenue neutrality:
Neither raise nor lower taxes so consumer costs remain stable.

Nonsense.  Under the new system, I could live in a shack, turn off the heat, ride a bicycle, and have the government subsidize my lifestyle, while earning millions of dollars a year.

If I do that now, I still pay, because I can afford to do so, regardless of how I choose to live.

Someone who has chosen to live very simply in order to afford a particular luxury suddenly finds his lifestyle ended. (Read this as someone who really wants that new pop-up has to pay quite a bit more for it.)

The FairTax pays for all current government operations, including Social Security and Medicare. Government revenues are more stable and predictable than with the federal income tax because consumption is a more constant revenue base than is income.

And goverment services are no longer paid for by those who use them.  Why should I have to pay for highway maintenance if I never drive?  Why should I pay for social security if I have no income (and therefore will never collect)?

Tax criminals - don't make criminals out of honest taxpayers.
Today, the IRS will admit to 25 percent non-compliance with the code. FairTax.org will be generous and simply take the position that this is likely a conservative estimate of the underground economy. However, this does not take into account the criminal/drug/porn economy, which equally conservative estimates put at one trillion dollars of untaxed activity. The FairTax will tax this - criminals love to flash that cash at retail - while continuing to provide the federal penalties so effective in bringing such miscreants to justice.

WHAT?  You have to be kidding - putting a consumer tax on illegal drugs.  What a joke.  Think, people.

The substantial decrease in points of compliance - from every wage earner, investor, and retiree, down to only retailers - also allows enforcement to concentrate on following the money to criminal activity, rather than making potential criminals out of every taxpayer struggling to decipher the current code.

Fat chance.

Here is the biggest reason this will fail.  It is not because of the tax issue, but because of the information issue.

Right now, if you itemize your deductions, you tell the government where you live, who you work for, how much you earn, where you worship, who you bank with, who your mortgage company is, what your medical expenses are, who takes care of your preschoolers, where your older children go to private school or college, and more.  The primary block for the FairTax (and for my $50,000 exemption as well) is that the Federal government would loose that information about the majority of Americans.  They will never give that up.

Austin