Of course, but they have no chance of doing anything of the sort for the next couple years at the minimum. It’s all performance theater.
This is not a new proposal.
Obviously it can’t be exact for everybody, but as originally proposed it was meant to be roughly equivalent.
That is the very definition of an Ad Homonym fallacy. 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?).
That is one reason this bill has no chance of going anywhere. The FairTax would be really expensive for the wealthy.
True enough. I’d be shocked if this bill made it to a vote, but even if it passed it would be purely performative.
A progressive tax system means the rate of tax paid goes up as income goes up - that doesn’t happen with sales tax. With sales tax, typically the rate goes down as the income goes up because only purchases are subject to sales tax - if I earn $200K a year and invest $100K, I will be paying sales tax on a maximum of $100K per year so a 23% sales tax rate will result on me paying at most, 11.5% of my total income in taxes while someone who earns $20K might not be able to save/invest anything and ends up paying a maximum of 22% of their income in taxes.
*As far as I can , tell putting money into a savings account would not be considered a “purchase” of goods or services and not taxed , just as “copyrights, trademarks, patents, goodwill, financial instruments, securities, commercial paper, debts, notes and bonds, and other property deemed intangible at common law.” would not be taxed. Not sure about mortgages or rent payments , but food, clothing prescription medication would be taxable (even though they are often exempt from state sales taxes)
It does when coupled with a UBI/“Prebate”.
Sorry, I should clarify. You are defining a progressive income tax. Obviously FairTax is not that. It’s a progressive sales tax. The rate of tax paid goes up as spending goes up.
Only to a point - someone with $50K income might pay a lower rate than someone who earns $100K but someone who earns $200K will pay more than someone who earns a million , spends as much on goods and services as the person who earns $200K and invests the rest.
ETA - the post immediately above snuck in.
I’ve never seen “regressive” or “progressive” used in relation to spending. What I have often seen are statements like “sales taxes are regressive” contrasting sales taxes with income taxes.
Reminder that the 23% is after the fact.
A $1 item with this rate would cost $1.30, i.e. it’s 23% of the $1.30, not 23% of the $1
No fair, Doreen, I was just about to post the same thing. You’re absolutely right. And it’s terrifying that it took more than 20 posts before anyone got to this critical point.
Here’s The Hill saying the same thing, only more so.
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. That’s because those with lower incomes tend to spend more of what they make while richer people tend to save more of their incomes, investing in retirement accounts, securities and other types of assets.
“Let’s say you’re a family of four. You need at least $50,000 a year to live before you can save a dime. Under this proposal, every dollar of that income is going to be taxed. On the other hand, if you’re making $1 million a year and you’re saving a portion of that, not all of that income is going to end up being taxed as a sales tax,” Frank Clemente, director of tax advocacy organization Americans for Tax Fairness, said in an interview.
The advantage to higher earners is so pronounced that the legislation includes a “prebate,” a cash transfer program in which taxpayers get regular checks equal to the amount that people at the poverty level would owe in taxes.
The prebate is $250-500 a month depending on family size. Good for the very lowest, but not sufficiently for the middle class.
Here’s a graph showing the decline in percentages of state and local taxes for various income groups. Lowest 20% pay 10.9%; top 1% pay 5.4%. It’s from 2015 but it’s not going to be off for today. The middle class - the middle 40% on that graph - pays about 9%, still about double that of the top 1%.
No spin can possibly make it believable that this isn’t a gift to the wealthy and to corporations, who would pay no taxes. The total tax burden percentage goes steadily down with income and wealth. That’s the definition of regressive taxation.The Wall Street Journal’s editorial board headlined it thus:
The GOP’s Fair Tax Masochism
A national sales-tax proposal is a gift to Democratic campaigns to retake the House.
(Behind a pay wall, so I can’t read the whole thing. Even so: it’s the WSJ editorial board!)
The bill introduced is H. R. 25, and this link gives the complete bill.
In other words, the rate returned was meant to be high enough to cover the total amount somebody might currently be getting from Social Security, SSI, SNAP, Medicare. Medicaid, and HUD – which would, in the case of someone now eligible for and needing all of those, amount to a great deal more than 23% of what they’ll have to spend that would be eligible for sales tax under the proposal?
And again – is this part supposed to also be in the constitutional amendment, or only the part that says the only way the government can raise any funds is via a sales tax?
That’s not at all what an ad hominim fallacy is. Nor does it have anything to do with homonyms.
So as someone’s annual total spending goes up, they start paying increasingly more than 23% of it as sales tax? 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. (And, as the cheap version of some items costs massively more than the expensive version of others, I don’t see how the second type would even work – base rate on caviar but highest rate on even a falling down hut?; and the second, in order to work, would involve accurate extraordinarly detailed reporting on the part of each purchaser, or else an extraordinary amount of surveillance of exactly what everybody was buying.)
Not anywhere near remotely sufficient, in the USA, to replace medicare, medicaid, social security, SSI, HUD, SNAP, unemployment benefits. Hell, for a lot of people it won’t replace any one of those.
It’s probably sufficient for those of the middle class who don’t have significant medical expenses. It’s not sufficient for those who do, and it’s in no way sufficient for the very lowest.
As you acknowledge, there are numerous loopholes in our existing tax system that allow wealthy people to avoid paying any substantial taxes.
Do you think the Republicans are proposing a major tax change that won’t include even greater loopholes in it? They’ll classify yachts as medical devices and declare them exempt from sales taxes.
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.
The bill is only anti-income taxes, and therefore says that the 16th amendment should be repealed. I don’t see anything in it requiring a new amendment.
Section 401 is probably what’s confusing the issue. It certainly confuses me.
SEC. 401. Elimination of sales tax if Sixteenth Amendment not repealed.
If the Sixteenth Amendment to the Constitution of the United States is not repealed before the end of the 7-year period beginning on the date of the enactment of this Act, then all provisions of, and amendments made by, this Act shall not apply to any use or consumption in any year beginning after December 31 of the calendar year in which or with which such period ends, except that the Sales Tax Bureau of the Department of the Treasury shall not be terminated until 6 months after such December 31.
Excise taxes have always been part of the Constitution and were the predominant means of taxation before the 16th Amendment. The bulk of those were liquor taxes. The 16th Amendment allowed Prohibition to happen because that gave the government its only hope of replacement income. Without the 16th, you can bet anything you like that excise taxes will rise again.
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.
Yes, that’s one likely avenue of avoiding a sales tax. Simply declare corporations are exempt from the tax and then set up a personal corporation that buys all of the things for you that you would otherwise be buying as a person. You don’t even have to rent your house. Just say that the corporation owns the house and you’re allowed to live in it rent-free as an officer of the corporation. The corporation also provides you with all your food and household goods, which it purchases tax free.
Sorry, you confused me with your reference to “benefits they intend to cancel”. None of those things you list are cancelled by the FairTax.
No, they get asymptotically closer to 23%.
Fortunately then the FairTax does not replace any of those. It only changes the way they are funded.
Yes. But I think it only has the support it does because it hasn’t a prayer of passing.
You won’t pay sales tax on buying a house. You will only pay sales tax on building a house. And if ConglomoCorp rents you the house you need to pay tax on the rent since services are taxed.
Didn’t even think about that because it is considered income and taxed … unless there is no income tax.
Little Nemo you’d make a great Republican.
Only the funding for them, by the constitutional amendment. The taxes which pay for those things are largely, by one definition or another, income taxes.
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?
They would continue to be funded with the new tax.
Hmm, good point. That seems like a highly unlikely policy proposal, but I don’t know exactly how housing would be managed.
Supposedly, that’s the reason to set the rate where it is, so that the flat tax can fund all those things. Doesn’t mean they won’t try to get of them separately.
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 - except places to live, art, collector’s items and so on. Jay Leno has a car worth $20 million . He bought it used from someone since it’s older than he is.
Now this is finally an argument that actually addresses the bill in question.
Let’s look at this piece of the bill
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.
That’s a HUGE exemption right there. Basically any exception is an opportunity for a loophole.