From what I can tell, Bob would be ineligible for a refund because (despite the section headings) the bill does not provide an exception for exports qua exports, hence the constitutional concern.
~Max
Of all the reasons that this bill is a non-starter, the failure to address this technical point is surely insignificant.
Admitted! Moving on…
~Max
My mistake, I had mixed up the family “rebate” (which requires annual registration, not monthly filings) with the monthly filings for tax credits/refunds. If you file every month, you get up to a $200 tax credit. Title II, Chapter 2. Don’t file and you miss out.
~Max
Under this “Fair Tax Act” in what way is Social Security eliminated? Is it just shut down, or does it just continue until the money runs out? If the latter, then what happens to people down the line who get it cut off, but are too advanced in age at that time to realistically seek employment?
The payroll tax is repealed and replaced by a portion of the new sales tax, but the benefits remain unchanged. Employers are required to report wages to the SSA, which I now realize solves the problem @thorny_locust and I discussed upthread.
~Max
Will this make it easier, or harder, for Republicans to downsize or eliminate Social Security?
The only way to measure how hard it is to eliminate social security is to count votes, which is independent of support for this act. But suffice to say, if Republicans had the votes to pass the Fair Tax Act (which they don’t), they would be much closer to having the votes to repeal social security than ever before. Also, the radical nature of the Fair Tax Act (if actually passed) indicates a willingness of Republicans to vote for other radical legislation.
~Max
However, they would become by law calculated as if it were 2023, with apparently no provision for inflation. Or is the inflation provision supposed to be included in the other methods of calculation being used in 2023?
And if the law requires everything to continue to be done as if it were 2023 – I think the fund would indeed eventually run out of money. I don’t think they’re currently taking in quite enough to keep it funded.
The benefits don’t change at all. The revenue set aside for the trust fund is collected differently. Right now we use a fixed percentage payroll tax. Under the proposed act the same amount is supposed to be collected from sales tax proceeds.
Ambiguity: does the “amount” of revenue allocated from the sales tax have to meet the “same amount” of revenue collected by 2023 soc. sec. payroll taxes, or the “same amount” of revenue that would be collected if the 2023 payroll tax was levied in the current (i.e. 2025) tax year?
I say the former. You say the latter. The latter case, since it is a percentage of current year wages, adjusts for inflation.
~Max
It is not my assertion; I was merely repeating what the Supreme Court said.
You paraphrased the Supreme Court, inaccurately.
It is clear on the face of this text that it does not purport to confer power to levy income taxes in a generic sense, - an authority already possessed and never questioned, - or to limit and distinguish between one kind of income taxes and another, but that the whole purpose of the Amendment was to relieve all income taxes when imposed from apportionment from a consideration of the source whence the income was derived.
The 16th still purports to confer power to levy income taxes in a specific sense, that is, from sources such as investment and real property without regard to apportionment or census.
~Max
I don’t think I do. I thought they might mean to start in 2025, but wasn’t sure; but whatever year they started with, I thought they meant it to stay at that amount, not to be adjusted again for later years.
That’s why I figured the program would run out of money.
In 2022, H&R Block reported revenue of $3.5 billion dollars, nearly the same as they did in 2021. If this measure were to become law, their revenue would fall by approximately $3.5 billion dollars a year. There are many other firms that make lots of money filling out people’s income taxes.
How much lobbying against this do you think is going to happen? A whole lot.
What are the chances of this ever becoming law? A whole lot less.
It’s political theater, folks, and not even very good theater at that.
Yup it’s the 3.5B in tax preparation revenue that will stop this, not the fact that it will screw 90% of the population. That sounds ridiculous.
Oh wait.
Businesses still have to record, report and remit tax revenue – they might choose to engage a contractor for that, because government paperwork is never simple.
The key is “from whatever source derived” trumping Pollock’s holding that that taxing income from property was a direct tax. The Federal government always had the power to tax income from labor as that is an indirect tax.
Is there any provisions in place to account for how hard this screws retirees?
Oh, you paid income tax for 50 years while you worked, saved a nice nest egg, and now are paying basically zero taxes while you enjoy your hard-earned and hard-saved money in your golden years? Well, too bad, here’s a 30% tax on every thing you buy, sucker!
If rent is subject to this “fair” tax, you’ll have a whole shitload of people who pay a large portion of their income towards rent suddenly facing a 30% increase in their most expensive outlay of cash. There is no way they could afford an increase like this.
A sudden influx of millions of homeless people would lead to a complete collapse of the economy.
That’s a feature, not a bug. Of course you are right, so the only fair thing to do is to give everyone an exemption to the fair tax equal to their net worth at the time the conversion is made from income tax to the sales tax. So if you have $50,000 in the bank at that time, you would be allowed to spend $50,000 without paying the sales tax. After all, you already paid tax when you earned that $50,000, and not giving this exemption would be double taxation as you noted.
So the middle class would get an exemption in the range of perhaps hundreds of thousands of dollars, the lower class would get an exemption of maybe a few thousand, and the rich would get an exemption of several million dollars. The rich may never pay the sales tax in their lifetime, the middle class perhaps several years, and the poor maybe a month.
Sounds really regressive, but we can’t have double taxation. That would not be fair, and this is the fair tax after all.