Debate the Fair Tax

[MilTan]

I feel like I’m going to regret wading in to this, but here goes:

Let me see if I can distill this correctly (let me know if I made some mistake). The general claim is this:

The price of a good right now is X. Of this, 77% represents something akin to the “base price” for the good, so the “base price” Y is 0.77X, while the “built-in” tax on the good, Z is 0.23X. This component Z arises because this is the amount of money paid out to employees (and directly through the government through FICA taxes) to ensure that their take-home pay is at some specific amount W (note that this means that the employees’ gross pay is higher than W).

So the argument goes that if we eliminate the income tax (and FICA taxes), then Z should logically go to zero, meaning that the price of the good is now the base price, Y. To make up for the lost tax revenue, we slap on top of Y a 30% tax, bringing the total price of the good back up to X. (I know that this means that the tax accounts for 23% of the price, but it’s still 30% of the “base price”).

---

Of course, for the price of the good to drop to the base price (before adding on the sales tax), the employers should only be paying the employees W, since anything extra that they were paying them was only to account for income taxes. By definition, if the employers pay the employees more than W, they can’t drop the price of the good to Y. So ivylass, I’m pretty sure you wouldn’t be seeing an extra $200 in each paycheck.

But wait, there’s more. For everything to work out correctly, employers can only drop employee wages to W. Any lower, and the employees wind up with less purchasing power under the fair tax scheme. The upshot is that the amount the employers can drop the wages is exactly the amount that the employees would have been paying in income and FICA taxes. This then is the only money that can go towards dropping prices. This means that the drop in prices (pre sales tax) would be commensurate with the elimination of the income tax and FICA taxes. Or, in other words, if prices are to remain constant the revenue from the national sales tax would be equivalent to the revenue from all taxes on wages.

Everything is fine and dandy if the national sales tax is meant to only account for the elimination of income and FICA taxes. In this situation, everything seems to work out as per my musings above, and everything stays constant in terms of purchasing power.

But if I’m not mistaken (and question #2 from the FAQ seems to indicate that I’m not), they also want to eliminate other taxes such as capital gains. This means that our national sales tax now has to account for more than wage taxes. And thus, by definition, has to be higher than the amount that employers can cut from wages. So either prices will go up (because prices pre-sales tax can only drop to account for the elimination of taxes on wages), or purchasing power will go down.

And before you start going on about the rebate, that’s simply another deficit that the sales tax has to cover, resulting in yet another increase in prices. Thus, the benefit from the rebate is essentially wiped out simply by offering it. And if the rebate is effectively useless, since it raises prices anyway, then as a poor person spending all of my money, I see my tax burden go from effectively zero to 23%.

Since the only way you do better is if you used to pay a lot of money in capital gains taxes, or your effective tax rate under the present system was more than 23%, I don’t see how this is anything other than a scheme to save the rich a lot of money in taxes at the expense of the poor (and hell, the working and middle classes too)

[MilTan]

I hate to reply to my own post, but there is a little bit of sloppy reasoning in the portion about the rebate. Of course if the rebate covers all of your expenses, then your tax rate would remain zero. But for a lot of people it will cover only a portion of their expenses, and their other, non-covered purchases will be more expensive than they need to be because of the rebate.

[TokyoBayer]

@Aeschines

Now, here’s the rub. The company can now ship this item to Japan for the lower price. So it could arguably sell in Japan for $0.78 1001.05 = ¥82. So now you can go to Japan and buy it cheaper there than in the US.

Actually, you won’t have to go all the way to Japan, just order from TokyoPlayer’s House of Exports.

Assuming FedEx costs about $50 or so for a small package then any purchase over $165 will save you money. Actually, since you can get together with your friends and order all together, then you can save on small items, too.

Since one would assume (I’ve read the FAQ but not the proposed legislation so I’m just guessing here, correct me if I’m wrong) that the sales tax would also be collected on personal imports, then I would sell the products as used. Japan doesn’t have laws dictating that I cannot call my products used, and the US has no jurisdiction, so I would not be breaking any laws.

While we are talking about exporting and importing, next question. Products manufactured overseas will not have their base prices drop since the tax systems in the foreign countries will not change. Thus the cost for your dell computer (manufactured all over the world) will still be $800 (or whatever) and you will have to pay the $240 on top of that for the sales tax.

@ivylas

Again, there will be NO CHANGE in prices. So, it won’t be “cheaper” to purchase abroad, since the prices here won’t change. You seem to think businesses will keep their prices at the rate they are now and enjoy a 23% (not 33%, was that a typo?) increased profit. Well, what’s to stop them right now from raising their prices 23%? Market forces.?

This would be where market forces would work against the proposal. Let’s look at airplanes which currently have Boeing and Airbus as the two main competitors. Boeing suddenly has a substantial savings, but since the competition doesn’t then there is no incentive to lower prices.

@AZCowboy

I think this is a reasonable criticism of the style used in presenting the concepts. How about the substance?

I think that asking for a breakdown of the winners and losers is not just a question of style. It’s important to an honest debate.

@AZCowboy

No, SS benefits and how they are determined would not change, simply the method the government uses to raise the funds.

My post wasn’t clear. Let’s try that one again. By tying SS benefits to one’s wages, but collecting the funds from the sales tax means that someone with a high income but lower greatly spending would benefit since their SS payments are tied to their income, but they haven’t had to contribute much. However someone who is lower income but spends all of their income would then have to subsidize the richer person.

[Sage_Rat]

@DMC

I think the Fair Tax is a horrible idea created to help make the rich richer.

Why does it matter if the rich are richer? The only reason the government taxes the rich more is because it’s more profitable for them to do so and buys themselves the most votes. On the other hand the reason to tax everyone evenly is simply because taxing the rich more than everyone else is unfair.

Personally I do support taxing the rich more than anyone else, but that does come down to the simple, machiavellian reason that the government gets more money with fewer complaints that way. And indeed, this proposal would negatively effect the lower middle class as the government would need to raise taxes across the board if the rich are taxed evenly with everyone else.

However, as it doesn’t tax investments and rich people aren’t going to use their extra income to buy even more jewelry for their wives–theoretically it could boost the number of businesses started, thus creating more jobs. But the whole balancing effect of moving everything from income to purchases would, I think, cause all the numbers to evolve so that the flow of money became, essentially, what we have now. Which means we would effectively be getting a flat income tax with a minimum cap that guaranteed a minimum wage. And with a flat tax, the lower middle class will be negatively affected.

[AZCowboy]

Silly of me to suggest that people debating the merits of the FairTax actually understand it first.

Allow me to paraphrase an argument here:

If you tax income in the US, you will lower the incentive to work in the US. The poor, middle class, and especially the rich would find all manner of creative and LEGAL ways to work abroad (or send their labor abroad). This is a double punch…

The FairTax is progressive. A greatly simplified progressive tax code.Cite.

@DMC

You yourself stated that it was at least partially due to marketing. Are you retracting that?

No, but I’m more concerned with the product than the marketing. I use a mobile phone even though I don’t care for the “sign a two year contract, get a free phone”. The phone ain’t free. That’s marketing. Can we focus on the substance?

@DMC

No one has demonstrated how all of these assumptions are going to come true, nor what we’ll do about the disaster if they don’t.

No one here has, only a bunch of Ivy-league economists, validated by the likes of Alan Greenspan.

@DMC

I don’t have to offer a solution to take issue with a proposed one.

True, but whenever you make a decision, you should always compare that decision to your next best alternative. And choosing a tax code is definitely choosing the lessor of two (or more) evils. It’s a proposed tax code after all.

An act of Congress cannot repeal the 16th amendment. But an act of Congress does require a majority of Congressmen’s support, which won’t be there without a repeal of the 16th amendment. As you know, the bill itself would repeal all (federal) income taxes and eliminate the IRS.

@DMC

Do you happen to know what Congress came up with as the number?

As you know from reading the Bill, the rate proposed for 2007 is 23%.

@DMC

I think the Fair Tax is a horrible idea created to help make the rich richer.

Yes. And the poor richer. And the middle class richer. Bastards!

@Aeschines

Or are you claiming that incomes will remain the same AND prices will remain the same?

You got it!

@Aeschines

That’s even more ridiculous.

Obviously, how could both wages and prices remain the same, when the revenue collected by the government doesn’t change? That logic seems pretty simple to grasp, frankly.

MilTan, you are showing signs of understanding the basic concepts - kudos to you. You remain skeptical, that’s understandable. You have taken into account many of the puts and takes - but not all. Those others have been discussed earlier in this thread. Just as another example - eliminating the long term capital gains (and replacing it with the Fair Tax) has a revenue-positive impact. Long term capital gains (the rate the rich people pay) is only 20%. Someone spending alot of money off of capital gains avoids the 20% income tax, but instead pays the 23% consumption tax. Can you see that one aspect?

The rebate only covers the tax burden for the necessities of life. The rebate is what prevents the system from being regressive.

@TokyoPlayer

This would be where market forces would work against the proposal. Let’s look at airplanes which currently have Boeing and Airbus as the two main competitors. Boeing suddenly has a substantial savings, but since the competition doesn’t then there is no incentive to lower prices.

So Boeing is more competitive in the international markets. This is bad, for Americans, why?

@TokyoPlayer

I think that asking for a breakdown of the winners and losers is not just a question of style. It’s important to an honest debate.

Agreed. Which is why I have addressed that question - and continue to. In this post, I have pointed out that rich people that live off of long term capital gains have an increased share of the tax burden (though that doesn’t mean it is a net negative impact to them). Same with retirees - even though they are not negatively impacted, their contribution to the tax base increases. Get it?

@TokyoPlayer

By tying SS benefits to one’s wages, but collecting the funds from the sales tax means that someone with a high income but lower greatly spending would benefit since their SS payments are tied to their income, but they haven’t had to contribute much.

I agree here, but disagree with your conclusion. The point is that the FairTax rewards people to earn more money, and discourages consumption. The difference is savings, which (besides sticking cash in the mattress) provides for more investment, which is good for job creation. Spenders subsidize the program, not wage earners. This isn’t rich versus poor.

[MilTan]

@AZCowboy

MilTan, you are showing signs of understanding the basic concepts - kudos to you. You remain skeptical, that’s understandable. You have taken into account many of the puts and takes - but not all. Those others have been discussed earlier in this thread. Just as another example - eliminating the long term capital gains (and replacing it with the Fair Tax) has a revenue-positive impact. Long term capital gains (the rate the rich people pay) is only 20%. Someone spending alot of money off of capital gains avoids the 20% income tax, but instead pays the 23% consumption tax. Can you see that one aspect?

Actually, that’s one of the aspects that I definitely don’t see. Suppose I make all of my money from capital gains. I have 2 million dollars in savings, and I have a very conservative portfolio out of which I make $80,000 a year in interest and capital gains, which is what I live off of.

Under the current system, I would pay 15% a year (I think this number is correct, but I don’t think the actual amount matters, just that it’s non-zero) in taxes on this income. So my after-tax, disposable income is $68,000. Let’s make this hypothetical simple and claim that I spend all of that money (after all, I already have 2 million in the bank - no need to save more!). Thus, I buy some bundle of goods that costs $68,000. After this consumption, I am left with zero dollars (other than my investment portfolio, which remains constant).

You and ivylass seem to be arguing that under the Fair Tax, prices will not change. Thus, if that system were in place, I should still pay $68,000 for the bundle of goods that I consume. However, I am no longer taxed on my interest and capital gains. So my after-tax disposable income is $80,000! I am living in exactly the same manner as before, buying exactly the same goods, with exactly the same income, but all of a sudden, I have about 18% more money! And this doesn’t even account for the $2201 rebate (number taken from answer #3 of the FAQ)! With that, I now have almost 21% more money under the FairTax system than under the present system.[sup]1[/sup]

Note that with my current numbers, on top of my having come out significantly better under the FairTax system than the current system, the government definitely did not. Under the current system, the government gets $12,000 in tax revenue from me. Under the FairTax system, the government get $15,640 gross from me, but then gives me $2201 back, so its net revenue from me is about $13440. So it looks like a win for the government. But if I spent less than $68,000, the government revenues would go down under the FairTax system. The break even point isn’t significantly less, either. If I spent $62,000, the government’s net revenue would be approximately $12,000. Any less, and not only do I have a lot more after-tax income under the FairTax system as compared to the present system, the government makes less money – money which has to come from raising taxes on people poorer than myself.

The upshot is that I don’t think that the FairTax produces a revenue-positive impact, short of increasing the effective tax rate on the middle classes and below. But as a rich person, I make out like a bandit.

[sup]1: Does this smack of a “free lunch” to anyone else? This really feels like one of those “where did the dollar go” brain-teasers. I can’t figure out where this additional $14,200 is coming from! Am I basically making it on the backs of those that only pay taxes on wages? Anyway, this question is irrelevant to the rest of my post, although it would be nice to have it answered[/sup]

[MilTan]

@AZCowboy

The point is that the FairTax rewards people to earn more money, and discourages consumption.

I seem to be making a habit of double-posting, but I missed this on my first read-through as I was just responding to what you said to me. I doubt this statement is central to your thesis, but it is most certainly false under your assumptions. If prices do not increase, there is absolutely no incentive to consume less under the FairTax system than under the current system. It definitely does not discourage consumption.

[DMC]

@AZCowboy

The FairTax is progressive. A greatly simplified progressive tax code.Cite.

Since this is a very good example of the type of disingenous scamming we’re talking about, let’s just stick with it. We’ll address the other points next, but this one is so obviously false as to be laughable.
First off, actual definitions:

@Progressive defined

A tax that takes a larger percentage of income from high-income groups than from low-income groups.

@Regressive defined

A tax that takes a larger percentage of income from low-income groups than from high-income groups.

@Progressive defined by the lying liars at fairtax.org

the rich pay more and the poor pay less as a percentage of their spending

Do you really not see the difference? Take two families of four, one makes $50,000 a year and has to spend every penny to get by, while the other makes $100,000 a year and spends only $50,000 to get by. They both pay the exact same amount in taxes, to the penny. Please find me a cite that isn’t pushing a scam tax scheme that considers that definition to be progressive.

[Aeschines]

@AZCowboy

Silly of me to suggest that people debating the merits of the FairTax actually understand it first.

And how foolish of me to suggest that people understand Economics 101 before propagandizing for a tax scheme!
[/quote]
If you tax income in the US, you will lower the incentive to work in the US. The poor, middle class, and especially the rich would find all manner of creative and LEGAL ways to work abroad (or send their labor abroad). This is a double punch…
[/quote]
The US goverment already has this covered. Only the first 80k or so of foreign-earned income is exempt. You pay the US rate above any amount over that (minus the rate you make the foreign country, basically). Any disincentive is that you will most likely pay higher taxes than you would in the US in most countries that offer security and a comfortable standard of living. In Japan I paid lower taxes, however, and, yes, it was a big incentive for me to work there until I started butting against the 80k limit.

TokyoPlayer and I have demonstrated through ample examples and arguments that people will be incented to consume abroad. The only argument against this thus far is that “prices in the US will remain the same,” which argument I also rebutted.

Here is another throught experiment which, I think, complete refutes the claim that prices will remain the same in the US and people will not, therefore, be incented to consume abroad.

Suppose there is Country A, which has the exact same tax scheme, price levels, other economic factors as the US. Think of it as a US clone, if you will. Consider these two scenarios.

Neither the US nor Country A implement the “Fair” Tax
Joe in Country A earns his salary in 2004 and comes to live (without working) in the US for all of 2005 and spends precisely his takehome pay earned in 2004. He pays exactly the same sales taxes he would have paid in Country A, etc. Since he’s not earning income in the US, he’s not paying income tax. The upshot is that it’s just like being home as far as taxes are concerned.

The US implements the “Fair” Tax, but Country A does not
Joe in Country A earns his Joe in Country A earns his salary in 2004 and comes to live (without working) in the US for all of 2005 and spends precisely his takehome pay earned in 2004. He paid income tax in 2004, but now in 2005 he is also paying the “Fair” Tax in the US. Yet, according to people in this thread, prices in the US have not gone up at all, so he doesn’t even notice, even though he has effectively been taxed twice on the same income.

What is wrong with this picture?

[Aeschines]

Here’s another simple fact that leads me to believe that some of the proponents here are economics-challenged.

The claim “prices will stay the same” assumes that all value-added is of US origin. But that’s 180 from the truth.

Every car made in the US has foreign-made parts, and this principle applies to many if not most of “Made in USA” goods, whether the value-added is material or labor.

So, if Godiva buys blocks of Venezulean chocolate that cost a dollar apiece, turn these into bonbon sets that sell for $10 dollars apiece (assuming no profit and breaking even on COGS), it can only save in terms of embedded taxes on the $9 value-added maximum. The $1 in raw materials will still have the 30% tax slapped on it, and the price will have to go up to $10.30 (assuming no profit and breaking even on COGS).

Needless to say, this applies to ALL IMPORTED PRODUCTS. So where do you get “prices will not go up”?! That’s beyond ludicrous; it’s willfully ignorant.

[TokyoBayer]

@AZCowboy

Someone spending alot of money off of capital gains avoids the 20% income tax, but instead pays the 23% consumption tax.

That’s a 30% sales tax. Of course, under the proposed system, someone who comes to Japan and spends a lot of money off of capital gains pays only 5%. Non-residents will also do well under this system.

In response to my question concerning SS.

@AZCowboy

Spenders subsidize the program, not wage earners. This isn’t rich versus poor.

Then develop a program which the payouts are based on spending, not wages. This is a fair tax, right?

@AZCowboy

If you tax income in the US, you will lower the incentive to work in the US. The poor, middle class, and especially the rich would find all manner of creative and LEGAL ways to work abroad (or send their labor abroad). This is a double punch…

Any one else find the irony in this argument? That purchasing overseas won’t be an issue, but working abroad is?
Gosh, the US does tax income, yet it hasn’t created a flood of workers leaving the good ol’ USA. Unlike our hypothetic arguments, this would be an issue in the present, if this were the case. So, cite?

To point out the obvious, working abroad is not trivial. For most people, you have to live there and only a small percentage of Americans do so. Top European tennis starts are known to change countries of residence for tax purchases, but very few other workers can. Americans I know in Japan lives here because we want to, not because of tax issues.

@Aeschines

Only the first 80k or so of foreign-earned income is exempt. You pay the US rate above any amount over that (minus the rate you make the foreign country, basically). Any disincentive is that you will most likely pay higher taxes than you would in the US in most countries that offer security and a comfortable standard of living. In Japan I paid lower taxes, however, and, yes, it was a big incentive for me to work there until I started butting against the 80k limit.

First, it should be pointed out that this foreign-earning deduction is only for residents of foreign countries, obviously meaning that you have to actually live in the foreign country in order to qualify for this exemption.

And that is the kicker. Shopping in a foreign country is easy. A couple of clicks on the internet. Saving 30% on sales tax is a pretty strong motivation. Under the current sales tax laws, people are supposed to self-report and pay the tax themselves for products they purchase outside of the state. (At least in Utah.) How many do?

(You also get credit for income taxes paid for to foreign countries, which means that you can earn much more than 80k and still not pay US taxes. Ironically, the three forms and two worksheets which I have to file for the US showing why I owe no taxes takes much longer to compute and file than my Japanese taxes, which are done for me by my company. This is one reason I would support tax reform in the US, but not this one.)

[Sage_Rat]

@Aeschines

The US implements the “Fair” Tax, but Country A does not
Joe in Country A earns his salary in 2004 and comes to live (without working) in the US for all of 2005 and spends precisely his takehome pay earned in 2004. He paid income tax in 2004, but now in 2005 he is also paying the “Fair” Tax in the US. Yet, according to people in this thread, prices in the US have not gone up at all, so he doesn’t even notice, even though he has effectively been taxed twice on the same income.

What is wrong with this picture?

What is wrong with the picture is:

1. People don’t save all their money to spend next year.
2. Most people don’t relocate to different countries.
3. You’re arguing that something is bad because there is…a transitionary period! :eek:
4. The government can reimburse, or simply not collect taxes for a month (or however long we can estimate people save ahead for) when making the switch. So even the transitionary period isn’t all that bad.

As stated before, I am against the fair tax as proposed. But the above is just setting up a scarecrow.

[Sage_Rat]

@Sage Rat

setting up a scarecrow.

Straw man <- :smack:

[Ravenman]

@AZCowboy

No one here has, only a bunch of Ivy-league economists, validated by the likes of Alan Greenspan.

I looked up the presentation in which Greenspan “endorsed” the fair tax.

@Alan Greenspan

As you know, many economists believe that a consumption tax would be best from the perspective of promoting economic growth–particularly if one were designing a tax system from scratch–because a consumption tax is likely to encourage saving and capital formation. However, getting from the current tax system to a consumption tax raises a challenging set of transition issues.

Link.

That’s all he said. He didn’t say “I endorse the Fair Tax,” he said “many economists” believe that such a tax would be good. He also didn’t say that the tax would benefit workers, nor would it cause wholesale prices to fall. He simply said it would probably encourage saving and capital formation, but I can hardly dispute.

Further, he said that switching to the Fair Tax (or something similar) would raise a “challenging set of transition issues.” Granted, he’s known for his crypto-speak, but I read that as a warning not to believe the pie-in-the-sky promises that the Fair Tax will instantly raise wages, lower prices, raise revenues, clean the air, and promote healthy kids. Furthermore, I have been asking time and again for proponents to address the difficult transition issues (like my point that wages would fall dramatically upon introduction of a consumption tax), but all I’ve received is references to the FAQ, which I’ve read 20 times already.

[Steve_MB]

@DMC

They calculate tax on the gross amount, not the net amount.

That part of it is perfectly legitimate – existing income taxes are calculated on the gross amount, not the net amount; therefore, any proposed substitute must be quoted the same way to enable and apples-to-apples comparison.

Ravenman’s “where does the money come from?” question is a more fundamental, and valid, objection.

[DMC]

@Steve MB

That part of it is perfectly legitimate – existing income taxes are calculated on the gross amount, not the net amount; therefore, any proposed substitute must be quoted the same way to enable and apples-to-apples comparison.

If they want to be compared to a sales tax (they do) then they need to be calculated like one (they aren’t), or at the very least, make it very clear what the difference is. If you call it a sales tax, and state that it’s 23%, you’re being disingenuous to do otherwise. While they are pretty careful about using the term “inclusive” when speaking about it in interviews, as they know that their interviewers might be prepped for this, they still refer to it as a sales tax of 23%. Want to guess what percentage of Americans know that a 23% inclusive tax is equal to a 30% traditional sales tax, or even what “inclusive” means in this instance? I’m betting it’s a lot lower than the percentage of my spending they want to take. Hell, it’s probably lower than the percentage of income they want to take from Linder under the new plan, and that’s a low number.

This is the percentage related portion of the sales pitch that is given to all booksellers to use:

Then the FairTax is for you. In the face of the outlandish American tax burden, talk-radio firebrand Neal Boortz and Congressman John Linder are leading the charge to phase out our current, unfair system and enact the FairTax Plan, replacing the federal income tax and withholding system with a simple 23 percent retail sales tax on new goods and services.

This is just one of many areas in which they play word games to attempt to confuse, much like their defense of this tax as “progressive”. Based on some of the responses in this thread, their attempts at confusion seems to be working.

[Monocracy]

@AZCowboy

And you are correct that the drug sale still isn’t taxed. But under the current system, someone earning all their income from drug dealing is never taxed. Under the FairTax, they are at least paying their share when making legal purchases with their drug profits. The question was of the “winners and losers” in the revenue neutral plan. Drug dealers are in the loser category.

Drug dealers are not in the loser category, they are in the neutral category. Let me give you a very simple example to illustrate this.

In an income tax model, WorkerMan makes $300 in wages, pays $50 in taxes, takes home $250. WorkerMan buys and ounce of Hawaiin Gold from DrugDealer for $250. DrugDealer purchases $250 worth of consumables.

In a Fair Tax model, WorkerMan makes $300 in wages. WorkerMan buys an ounce of Hawaiin Gold from DrugDealer for $300. DrugDealer purchases $250 worth of consumables and pays $50 sales tax.

In both cases, the government gets $50, WorkerMan gets his weed, and DrugDealer gets his $250 worth of product. Everyone breaks even.

This is your misconception. No one is suggesting money rains from the heaven - simply that this plan is a more fair way to raise the revenues of the government. And it simply isn’t true that the poor will pay more and the rich less, as demonstrated by many examples in this thread. Some poor people will pay less, some rich people will pay more. It isn’t that simple of a comparison to our current dreadfully complicated system.

I think the Fair Tax is a horrible idea created to help make the rich richer.

Yes. And the poor richer. And the middle class richer. Bastards!

We’re back to the money raining from heaven thing again. How can it possibly make everyone richer? The government needs to collect X amount of money to run itself, and it collects X amount of money from the people. If it collects less from the rich, it must collect more from the poor or middle class. In the Fair Tax model, the rich will pay less, and the poor will pay more. It is similar to a flat tax.

I also don’t think that a 30% sales tax will cover the expenses of government if you’re taling about eliminating SS taxes and corporate taxes also. Anyone know how much in retail products Americans sell in a year?

And imagine a 30% tax on a $250,000 home. Yikes!

[Ravenman]

All very good questions. So far we know drug dealers and elderly retirees paying more taxes. Would a proponent of the fair tax please say who else is going to pay more in taxes?

[TokyoBayer]

Like many other questions here, already asked and not answered. The reply to a request for specifics:

@TokyoPlayer

I guess this is where I feel the FairTax argument is disingenuous, at least as given in the site. This is to be revenue neutral. How is everyone’s net income going to go up? Can’t happen. Obviously if someone’s tax is going down, someone else’s tax would go up. If you want a real debate, create a table showing the winners and the losers.

@AZCowboy

I think this is a reasonable criticism of the style used in presenting the concepts. How about the substance?

[GSV_Consolation_of_Dreams]

@Monocracy

Drug dealers are not in the loser category, they are in the neutral category. Let me give you a very simple example to illustrate this.

In an income tax model, WorkerMan makes $300 in wages, pays $50 in taxes, takes home $250. WorkerMan buys and ounce of Hawaiin Gold from DrugDealer for $250. DrugDealer purchases $250 worth of consumables.

In a Fair Tax model, WorkerMan makes $300 in wages. WorkerMan buys an ounce of Hawaiin Gold from DrugDealer for $300. DrugDealer purchases $250 worth of consumables and pays $50 sales tax.

Is’t it DMC’s contention that under a FairTax system, WorkerMan would only get paid $250? but pay no taxes on that?