# Fair tax act **URL:** \ **Category:** Politics & Elections\ **Created:** [January 24, 2023, 8:14am UTC](https://boards.straightdope.com/t/fair-tax-act/978711 "2023-01-24T08:14:58Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![AlsoNamedBort](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alsonamedbort/32/3213_2.png) [@AlsoNamedBort](https://boards.straightdope.com/u/AlsoNamedBort)\ **Post date:** [January 24, 2023, 8:16pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/41 "2023-01-24T20:16:41Z")
Considering this will never pass, and they know that, I don’t get the Republicans’ thought process here. The ads write themselves: “You know how your groceries have gotten more expensive? Rep so-and-so just voted to add another 23% on top of that!” ---
**Author:** ![tofor](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tofor/32/13727_2.png) [@tofor](https://boards.straightdope.com/u/tofor)\ **Post date:** [January 24, 2023, 8:18pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/42 "2023-01-24T20:18:52Z")
“I voted to eliminate all income taxes, eliminate the IRS and close all the loopholes so the rich elites pay their fair share.” ---
**Author:** ![Max\_S](https://avatars.discourse-cdn.com/v4/letter/m/46a35a/32.png) [@Max\_S](https://boards.straightdope.com/u/Max_S)\ **Post date:** [January 24, 2023, 8:38pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/43 "2023-01-24T20:38:17Z")
> [@Lord\_Feldon](#): > > The Constitution allows Congress to tax income, but does not require it. Social Security wasn’t enacted until two decades after the 16th Amendment. > > But yes, it seems that a federal sales tax would simply be a use of the _original_ taxing powers (indeed, there already _are_ federal taxes on things like airline tickets), so the FairTax is stupid but constitutional. I agree, there doesn’t seem to be anything unconstitutional about this year’s Fair Tax Act (H.R.25, 118th Cong.). Worth noting that the exact same bill was put forward last year, and it only garnered 30 cosponsors out of the 211 Republican members in the House. And this year’s has even fewer. It’s been proposed one way or another since 2005. It’s not going anywhere, it will die in Ways & Means. > [@Exapno\_Mapcase](#): > > Of course, the IRS collects most of them. Who will do so in the future? A new bureaucracy will be required. And we’ll laugh and laugh. One interesting thing about this bill is that the Treasury offers individual states a contract to collect federal taxes for a flat 0.25% fee. But I suspect the biggest reason Republicans aren’t jumping on this plan is that it requires average Joe _and_ average small business to track all spending and file taxes _every month_. ~Max ---
**Author:** ![Dag\_Otto](https://avatars.discourse-cdn.com/v4/letter/d/439d5e/32.png) [@Dag\_Otto](https://boards.straightdope.com/u/Dag_Otto)\ **Post date:** [January 24, 2023, 8:42pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/44 "2023-01-24T20:42:59Z")
I see that you’ve been busy putting money away in a Roth IRA. Even been converting some traditional IRA to Roth. That’s nice. Oh, by the way, I have a bit of bad news… ---
**Author:** ![tofor](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tofor/32/13727_2.png) [@tofor](https://boards.straightdope.com/u/tofor)\ **Post date:** [January 24, 2023, 8:56pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/45 "2023-01-24T20:56:45Z")
> [@Max\_S](#): > > But I suspect the biggest reason Republicans aren’t jumping on this plan is that it requires average Joe _and_ average small business to track all spending and file taxes _every month_. It does not. Only businesses would have to report and file taxes, and any business operating in a state with sales tax is already doing it. Individuals would no longer have to file taxes at all. ---
**Author:** ![thorny\_locust](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thorny_locust/32/431_2.png) [@thorny\_locust](https://boards.straightdope.com/u/thorny_locust)\ **Post date:** [January 24, 2023, 9:01pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/46 "2023-01-24T21:01:12Z")
> [@tofor](#): > > They would continue to be funded with the new tax. Maybe. 23%, on purchases only, with a lot of purchases exempted, is to fund all of those plus everything else the federal government spends money on? Well, maybe. Notice you’d lose the specific social security and medicare funds – they’d all have to be authorized, and re-authorized, out of the general fund. > [@tofor](#): > > > [@thorny\_locust](#): > > > > So if you can’t afford to buy a house you’ll have to pay tax on your housing, but if you can afford to buy one you won’t? > > Hmm, good point. That seems like a highly unlikely policy proposal, but I don’t know exactly how housing would be managed. Looks pretty likely to me, if this is intended to accomplish what I suspect it would be intended to accomplish, if it had any chance of passing. As it doesn’t, I strongly suspect it’s just noise, intended to be able to tell people ‘I voted to get rid of income tax!’ > [@tofor](#): > > Individuals would no longer have to file taxes at all. Except for everybody self-employed or with a side gig who sells anything, presumably. ---
**Author:** ![tofor](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/tofor/32/13727_2.png) [@tofor](https://boards.straightdope.com/u/tofor)\ **Post date:** [January 24, 2023, 9:03pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/47 "2023-01-24T21:03:57Z")
> [@thorny\_locust](#): > > Except for everybody self-employed or with a side gig who sells anything, presumably. Yes, of course. Which they already do in most states. ---
**Author:** ![thorny\_locust](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thorny_locust/32/431_2.png) [@thorny\_locust](https://boards.straightdope.com/u/thorny_locust)\ **Post date:** [January 24, 2023, 9:07pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/48 "2023-01-24T21:07:29Z")
Not monthly, if they’re small scale enough. Is this law set up to allow quarterly or annual reporting below certain sales levels? And farmers, currently not at all, at least in New York State, if selling only food products (other than ready-to-eat, which is taxed here.) ---
**Author:** ![Max\_S](https://avatars.discourse-cdn.com/v4/letter/m/46a35a/32.png) [@Max\_S](https://boards.straightdope.com/u/Max_S)\ **Post date:** [January 24, 2023, 9:12pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/49 "2023-01-24T21:12:26Z")
> [@tofor](#): > > Individuals would no longer have to file taxes at all. Unless you want your rebate, in which case yes, you need to file _every month_. And _everybody_ needs to keep all receipts of all spending for 6-7 years in case of an audit. ~Max ---
**Author:** ![Max\_S](https://avatars.discourse-cdn.com/v4/letter/m/46a35a/32.png) [@Max\_S](https://boards.straightdope.com/u/Max_S)\ **Post date:** [January 24, 2023, 9:19pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/50 "2023-01-24T21:19:28Z")
> [@thorny\_locust](#): > > Notice you’d lose the specific social security and medicare funds – they’d all have to be authorized, and re-authorized, out of the general fund. This is inaccurate. The 23% is only fixed until 2025, after which the law sets the sales tax percentage at the sum of 14.91%, a social security rate, and a hospital insurance rate. The social security and hospital insurance rates are to be set by SSA to raise revenue equivalent to a 12.4% social security payroll tax and a 2.9% Medicare payroll tax, respectively. This revenue is then deposited in equivalent trust funds. See section 904 of the bill. ~Max ---
**Author:** ![thorny\_locust](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thorny_locust/32/431_2.png) [@thorny\_locust](https://boards.straightdope.com/u/thorny_locust)\ **Post date:** [January 24, 2023, 9:23pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/51 "2023-01-24T21:23:24Z")
> [@Max\_S](#): > > This is inaccurate. The 23% is only fixed until 2025, after which the law sets the sales tax percentage at the sum of 14.91%, a social security rate, and a hospital insurance rate. > > The social security and hospital insurance rates are to be set by SSA to raise revenue equivalent to a 12.4% social security payroll tax and a 2.9% Medicare payroll tax, respectively. This revenue is then deposited in equivalent trust funds. Ah. Somewhat better. I note that they keep telling us this current rate is insufficient, though. Does the bill do the equivalent of raising the amount at which it’s no longer taken, however? And how are they going to keep track of total wages, in order to figure the amount of payroll? ---
**Author:** ![Max\_S](https://avatars.discourse-cdn.com/v4/letter/m/46a35a/32.png) [@Max\_S](https://boards.straightdope.com/u/Max_S)\ **Post date:** [January 24, 2023, 9:37pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/52 "2023-01-24T21:37:33Z")
> [@thorny\_locust](#): > > I note that they keep telling us this current rate is insufficient, though. Until 2025 the allocation of revenue is given as 64.83% to general revenue 27.43% to social security 7.74% to hospital insurance After 2025, SSA is charged with determining the rates which will raise “the same amount of revenue that would have been raised by imposing a [12.4/2.9] percent tax on the [Social Security/Medicare] wage base (including self-employment income) as determined in accordance with chapter 21 of the Internal Revenue Code most recently in effect prior to the enactment of this Act”. _My_ interpretation is that SSA will find out how much money was raised in the last year before the law took effect (i.e. 2023), and predict the rates necessary to raise the same amount for each year going forward. As total taxable sales go up, the revenue goal is fixed by statute to the same number of 2023 dollars not adjusted for inflation. Meaning so long as the economy grows, tax rates go down over time, regardless of strain on the trust funds. ~Max ---
**Author:** ![eschereal](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/eschereal/32/18939_2.png) [@eschereal](https://boards.straightdope.com/u/eschereal)\ **Post date:** [January 24, 2023, 10:10pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/53 "2023-01-24T22:10:46Z")
> [@doreen](#): > > I suspect that was intended - after all, without the concept of “deductions” it will be hard to put loopholes in. So just impose taxes on purchases only the first time they are purchased by individuals and no taxes on used goods. Because rich people don’t buy used goods So I build a 3-deck 40 meter yacht. I rent it out for a week or two. Now it is “used”, so you can buy it from me for a couple hundred million and pay no tax on it. Also, that bit about intangibles is an obvious appeasement to the wealthy. AIUI, the government balanced the budget in the 1930s with a 0.5% tax on financial instrument trading, which also helped calm the markets. Any “fair tax” on sales that ignores that is BS on the face of it. ---
**Author:** ![Little\_Nemo](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/little_nemo/32/3120_2.png) [@Little\_Nemo](https://boards.straightdope.com/u/Little_Nemo)\ **Post date:** [January 24, 2023, 10:13pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/54 "2023-01-24T22:13:31Z")
> [@Saint\_Cad](#): > > Little Nemo you’d make a great Republican. It’s all those years of experience working in prisons. ---
**Author:** ![SlipperyPete](https://avatars.discourse-cdn.com/v4/letter/s/ba9def/32.png) [@SlipperyPete](https://boards.straightdope.com/u/SlipperyPete)\ **Post date:** [January 24, 2023, 10:17pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/55 "2023-01-24T22:17:52Z")
Rich people do not spend 100% of their income. The middle class does spend close to 100% of their income. Let’s compare a realistic scenario. Jim makes $120k to support his family. Currently, his federal tax rate works out to about 15% after deductions and averaging out the tax brackets. Richard makes $1.5 million per year, mostly in investment income. He manages to avoid taxation on some of his money by shuffling it into tax shelters and such, and all of his dividend income is untaxed, and his capital gains are only taxed at 15%. Still there is quite a bit of income taxed at the highest tax bracket, 39%, so his total taxes are currently 23%. Under the fair tax, Jim spends 95% of his income supporting his whole family, and saves 5%. His new tax rate works out to 22%, an increase of 7%. (his taxes have increased by about 50%) Richard only spends 20% of his income, and still lives quite comfortably on the $300k per year. The rest of his money goes into investments, property, and corporate shells. He pays the 23% on his $300k and his total tax rate becomes 4.6%. He has decreased his tax rate by a whopping 18.4%. (or an 80% decrease from the old system) This tax is bigly regressive. ---
**Author:** ![anny\_m](https://avatars.discourse-cdn.com/v4/letter/a/96bed5/32.png) [@anny\_m](https://boards.straightdope.com/u/anny_m)\ **Post date:** [January 24, 2023, 10:37pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/56 "2023-01-24T22:37:33Z")
> [@tofor](#): > > Part of the motivation is to restrict congress from using the tax system to encourage certain behaviors with tax rebates or deductions. I find this highly unlikely. The tax code has always been more than a way of raising revenue – it’s also been a vehicle for social engineering. Congress will not want to give that up. Realistically, how long would it be before some Senator or Rep says that some industry (which of course his state is a large part of) is suffering from unfair competition, and the way to resolve it is to reduce the tax on the products of that industry? Of course, many (most? all?) other lawmakers realize how nice it would be to cut taxes on the fruits of their own predominate industry… ---
**Author:** ![thorny\_locust](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/thorny_locust/32/431_2.png) [@thorny\_locust](https://boards.straightdope.com/u/thorny_locust)\ **Post date:** [January 24, 2023, 11:06pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/57 "2023-01-24T23:06:01Z")
> [@Max\_S](#): > > _My_ interpretation is that SSA will find out how much money was raised in the last year before the law took effect (i.e. 2023), and predict the rates necessary to raise the same amount for each year going forward. As total taxable sales go up, the revenue goal is fixed by statute to the same number of 2023 dollars not adjusted for inflation. Meaning so long as the economy grows, tax rates go down over time, regardless of strain on the trust funds. It reads to me as if they’d find out how much money would have been raised in 2025 (or maybe 2026), using the same techniques that would have been used in 2023, including the same wage base – Social Security is currently taken out of wages only up to $160,200; so it’s a regressive tax, as all money earned by those who make less than that is taxed, but only some of the money earned by those who make more. One of the ways that’s often suggested for making up deficits is to raise or remove that ceiling; that language reads to me as forbidding any such change. And, of course, you’re entirely right: if it’s not inflation-indexed it’s going to almost certainly be short even in 2025, and increasingly more so over time. Current payments are inflation-indexed, though there are often grumbles about how that’s calculated. ---
**Author:** ![Max\_S](https://avatars.discourse-cdn.com/v4/letter/m/46a35a/32.png) [@Max\_S](https://boards.straightdope.com/u/Max_S)\ **Post date:** [January 24, 2023, 11:20pm UTC](https://boards.straightdope.com/t/fair-tax-act/978711/58 "2023-01-24T23:20:16Z")
> [@thorny\_locust](#): > > It reads to me as if they’d find out how much money would have been raised in 2025 (or maybe 2026), using the same techniques that would have been used in 2023 Yes well, that _would_ be difficult to do in 2026 without everybody reporting annual income in 2025. ~Max ---
**Author:** ![FinsToTheLeft](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/finstotheleft/32/2930_2.png) [@FinsToTheLeft](https://boards.straightdope.com/u/FinsToTheLeft)\ **Post date:** [January 25, 2023, 12:48am UTC](https://boards.straightdope.com/t/fair-tax-act/978711/59 "2023-01-25T00:48:36Z")
Speaking as a Canadian who frequently visits the US and probably spends 15-25 nights in the US each year, this would DESTROY tourism. 3% of GDP, 9 million jobs, $250B. > **[Travel & Tourism Industry](https://www.trade.gov/travel-tourism-industry)** > > Export related information for the travel and tourism industry including market intelligence, trade events, and other resources. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [January 25, 2023, 1:19am UTC](https://boards.straightdope.com/t/fair-tax-act/978711/60 "2023-01-25T01:19:41Z")
> [@tofor](#): > > Wealthy people often pay little to no tax. Under FairTax they would pay close to 23% on their purchases (how many wealthy people do you know who buy used anything?). On their purchases, not their income. Thes_e un-_“fair taxes” are taxes on the middle class. The poor would pay more than they do now, the middle class a lot more and the rich less. Remember, I was a Treasury Agent for 20 years. Sure, a rich person can pay zero tax due to dodges, losses, etc, but it’s not as common as you think. And really rich people would just buy stuff from places with no such tax, or used, or as investments, or … > [@Exapno\_Mapcase](#): > > The plan would increase the tax burden on the middle class > > Having a sales tax as the only source of public revenue would put a higher tax burden on people making less money. Exactly. And remember who wants this tax- the people who cut the taxes on the rich and just passed a bill to cut the IRS budget by a huge amount. The GOP knows this tax will benefit the rich. > [@thorny\_locust](#): > > Or maybe individual items priced over a given amount incur a higher sales tax, that percentage increasing as the cost of the items increases? > > Because that’s what a progressive sales tax would have to do. Yeah, you really can’t have a Progressive sales tax. I mean it is _possible._ And 25% wont cover both SSI and Incomes taxes, that is a “pie in the sky figure”. Last time I checked, it would have to be around 30%. And several states have a 10% sales tax. Which mean the middle class would be paying 40% tax. > [@Saint\_Cad](#): > > They don’t have to be that clever, just use similar techniques like they use now. Never buy, always lease. Have ConglomoCorp (which you own 100% of) buy the house and rent from them. Right, Easy peasy. > [@AlsoNamedBort](#): > > There are exemptions from the tax for used and intangible property; for property or services **purchased for business, export, or investment purposes** ; and for state government functions. Yeah, the rich would claim everything but groceries is either for business or for an investment. We buy furniture from Ikea, rich buy it from an antique gallery or bespoke- which are “investments”. > [@thorny\_locust](#): > > I note that they keep telling us this current rate is insufficient, though. The rate is not so bad, SocSec can be solved by just getting rid of the ceiling. > [@FinsToTheLeft](#): > > Speaking as a Canadian who frequently visits the US and probably spends 15-25 nights in the US each year, this would DESTROY tourism. 3% of GDP, 9 million jobs, $250B. Good point. [Previous page](https://boards.straightdope.com/t/fair-tax-act/978711.md?page=2) [Next page](https://boards.straightdope.com/t/fair-tax-act/978711.md?page=4)