Before we go any further, is a flat tax or fair tax part of the Tea Party platform? Is there any reason to think they’d push for this?
And most importantly, would a new tax system set out to balance the budget, or leave it in a deficit?
That’s what we’re talking about here–ending deficit spending. I don’t personally care where the tax comes from, as long as it matches spending.
As mentioned a dozen times before, eliminating the IRS won’t save that much money. That’s just another populist message. The IRS is considered evil, a nice easy enemy to rally against. Vote for me and I’ll get rid of the IRS! And I’ll give you a free pony, everyone loves ponies, and hates the IRS. And trust me, the new tax will be so simple even a caveman can do it. Remember, you can trust me.
Not to mention that the Fair Tax is based on a self-contradictory lie: that businesses will lower the cost of goods because they won’t have to pay the business expense of “hidden taxes” on income, but that businesses will not cut worker pay to become more competitive as their overhead is lowered.
But all in all, the Fair Tax is just another proposal to shift the tax burden away from the wealthy and onto the middle class. The top 10% of income earners (those who earn an average of $350,000) pay an effective Federal tax rate of about 27%. The effective tax rate they pay would go down by a lot – not just to 23%, but much lower, because the wealthy use their income for a lot of other things besides consumption.
The Fair Tax claims it would be revenue neutral: if the rich are going to have their taxes cut by a very large percentage (let’s say at LEAST a 1/3 reduction in the taxes they pay), then it is obvious that the poor and middle class are going to get soaked.
It is a terrible idea if you think that there ought to be even a shred of progressivity in the tax system.
So my original question was asking if the Tea Party was actually serious about anything, and not just selling populist message of free money. I’m now quite convinced the only thing they are serious about is power–and getting it by any means necessary.
Sharron Angle just tried to rewrite history by telling a group of Hispanic youth that the 9/11 hijackers entered the US from Canada. Kudos to her for being brave enough to demonize the northern border to a group of Hispanics, while in Nevada.
But that’s not the point, the point is she flat out lied, or she’s an idiot. Maybe both.
So how many of the 9/11 terrorists entered the U.S. from Canada? None, not one. They also entered the US directly and legally, most with student visas. They also didn’t “sneak in” through a “porous border.” People still go through US Customs when entering at the Canadian border.
So that’s the Tea Party in a nutshell. Tell people their taxes are too high. Tell Hispanics that the Canadian border is the real security problem. Tell seniors Obamacare has death panels.
Tell what ever lie you think will get you elected.
Did you read the website? It includes an interesting, and may I say, novel, proposal to make it at least slightly progressive (don’t know if they use that term or not). Every household would get a check, every month, equal to the amount of tax that would be spent by a family living at the poverty level. The call it a prebate. (Essentially, you pay no tax to live at the poverty level, everyone pays a fixed amount on any spending over and above that.)
Still less progressive than what we have now. And sending a check to every household every month, based on the size of the family? Oh no, there’s no overhead cost or potential for fraud there.
Yeah, I’ve read it several times in the past. While I suppose the prebate could be argued to be a fig leaf over the lack of progressivity, it’s more analogous to the personal exemption in the current tax code rather than the increase in marginal rates as income rises.
ETA: It is also laughable to try to estimate living costs for a poverty-level family. Are we going to offer larger subsidies to families living in Greenwich, CT (where the cost of living is highest and there are no poor people, so all the prebate is going to the wealthy) and minimal subsidies to families in Mingo County, West Virginia (where the cost of living is very low and there are no rich people, so the poor get less in their checks than the Greenwich wealthy people)? Or are we just going to average costs across the US so that poor people who live in big cities are going to be inadequately compensated for this ridiculous prebate?
But the fact still remains: it claims to be revenue-neutral, it cuts taxes on the rich in a BIG, BIG way, and therefore even with the prebate, the poor and the middle class are going to see their taxes go up under this system.
Sure, we could set up a new system of taxing various investments. Just takes a new bureaucracy to do so.
But one of the selling points of the Fair Tax is that investments would be bolstered and provide a huge boost to the economy (or so they say).
I’m not sure what a supporter of the Fair Tax would say if one of the huge selling points of the tax (to “liberate” funds for investment) were to be eliminated by establishing a new tax on investment. Extending federal taxation to consumption and investment kind of makes it a system that everyone would hate, IMHO.
Is that based on the assumption that income gets taxed at source? For example, that your typical wage earner just gets x% taken out of their pay and sent to the feds?
So, what about other income? For example, dividends and interest? Does x% get taken out of all dividend payments, including payments from one company to another? What about foreign income? How will you get tax taken out of that at source, and won’t you hen have an obvious way for some US residents to get significant tax-free income?
Oh sure, it would be nice not to have to bother with all the forms and paperwork every year. No need to scrap the whole thing, though; we could just make it a hell of a lot simpler.
And I’m just not convinced that this Fair Tax would really reduce the bureaucratic overhead on the government side. Have you seen the proposal for “prebates”? Are they going to keep track of how many people live in every household in the country, every month? Do I have to file papers with the government every time someone moves into or out of my home?
Right, and their income would be lower, because government revenue is coming from some where else.
There is no free lunch. You can shuffle the cards around all you want, but society still needs government to avoid anarchy, and the government still needs revenue to function.
I’m saying that taxes aren’t much of an issue until you have profits.
Of course you can’t say that taxing can’t POSSIBLY hurt. I’m saying that it isn’t hurting right now and that at the sort of tax increases we are talking about right now will EVER hurt.
We simply cannot balance the budget over the long term without tax increases, our taxes are simply unsustainably low unless you can convince the tea partiers taht cutting medicare or the military is an important part of reforming government.
OK, so lets pretend we eliminate all pork (less than 1% of the budget). Where do you get the other 800 billion dollars of your budget deficit?
If you don’t count the defense department (which is a big “if”), the federal government spends money pretty efficeintly. Most of that waste fraud and abuse you are thinking about happens at teh state and local levels.
Now who’s making unsubstatiated claims (along with an huge qualifier, that assumes taht our wage rates will be competitive with China perhaps?)
