Yes, I have. It looks much simpler than the current tax system that employs an army of IRS agents and accountants to explain. The reason I mentioned Geitner is that he was supposed to be the only person on planet Earth capable of being Treasury Secretary yet he couldn’t figure out his own taxes.
Okay, then I have three questions for you:
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How does the current “army of IRS” agents compare to the government apparatus that would be required to administer the Fair Tax (most notably, to correctly process the prebate checks every month), and does the Fair Tax website downplay the bureaucracy that would be involved?
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How would the tax burden with respect to income shift if we were to adopt the Fair Tax?
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What reason is there to completely change the federal tax structure rather than just simplify the income tax?
I gotta admit I don’t know much about the fair tax (mostly because the transitions rules would be impossible and we would never be able to pull it off), does it impose a tax on the sale of homes?
What sort of tax rate would it have to be to balance the budget?
It taxes different activity by taxing consumption rather than production. And as a happy side effect, rich people pay less in taxes, but that JUST A COINCIDENCE.
- how many people are required to deal with the current sales tax system versus the IRS and the accounting needed to feed it?
2 & 3, people who slip through the cracks would still have to pay sales tax. Illicit income would be eliminated because it’s no longer taxed.
Taxes are no different than any other function of government. Efficiencies should always be pursued.
That’s not true unless the rich choose to live under a bridge.
0 out of 3 questions answered. Try again, please.
I’ll show you how it’s done.
I don’t know what the costs are that are associated with collecting current sales taxes, but they do exist. If nothing else, there must be methods to detect cheaters, those residents of high-tax states who would purchase expensive items in states with lower sales tax and bring them home.
I also believe that the costs associated with the Fair Tax would be signifigantly higher than for the current sales taxes. Sales taxes do not have to process millions of “prebate” payments every month, and the rates proposed for the Fair Tax are several times higher than sales taxes, with consequently greater incentives for fraud.
Furthermore, I don’t recall making any claims about whether the Fair Tax or income tax would involve greater government overhead. My complaint is that the website for the Fair Tax is dismissing any overhead that it would require, unfairly boosting its claims for adoption.
Well that’s life I guess. You can’t always get the answers you want. It’s already a hijack to the thread and you’re not really interested in it conceptually so what’s the point of further discussions?
So why did you number your reply, as if it was in any way related to the numerbed questions?
Yeah, you’re right about that; I am more interested in facts than in concepts.
Call it a weakness.
Anecdotaly, the American tax system is reputed to be the most absurdly over-complicated in the developed world. Somewhere in the excluded middle between it and the tea party proposal there is probably a sensible system which would work much better. Tax reform in a polarised society might be tricky to pull off.
I should have been more clear. The part of the tax code that actually imposes a tax is very very thin, the other 10,000 pages of the code and regulations is all deductions or special tax regimes that reduce your tax burden.
If you passed a fairtax today, in ten years it would have generated thousands of new rules that would encourage home ownership, deal with international mail order, encourage alternative energy, provide exclusions for things in different categories, the ability to complicate any tax system is only limited by the ability of government to respons to tax evaders.
Earlier in the thread, to me:
Now he sounds like this:
The guy who can’t answer a single question about his supposedly perfect new tax scheme, previously accusing others of not wanting to discuss stuff.
Which is it? Do you want to discuss stuff, or just post your opinions drive by style with zero interest in actually talking about it? You seem to be good at the making assertions part of debating, but not the actual debating part of it.
A consumption tax absolutely shifts tax burdens and if the “prebate” is based on poverty levels then the ultra rich are getting taxed at lower rates then the well off and will almost invariably have their tax rates reduced. The flattening of the tax rates along with generous tax relief at the lower end has meant that the folks in the middle and upper middle calss take it on the chin so that the really rich can pay the same rate as the merely well off.
The poverty rate for a family of 4 is about $22K
The fairtax is 30% (or 23% inclusive). So the family of 4 gets about $5K.
A family of 4 with an AGI of $68K (lets assume that all savings done by a $68K family is done on a pretax basis (401Ks and stuff like that)) would pay about $9,362 under the current system and about $10,640 with Fairtax. Not a huge difference and I guess you cuold tweak the prebate to even this sort of thing understanding taht this will make things even more progressive at lower income levels.
A family of 4 with an AGI of $137K (still consumes almost all of their AGI, i.e. their savings is still in things like their 401K) pays $26,687 under the current system and about $26,510 with Fairtax IF they consume everything they earn.
A family of 4 with andAGI of $202K pays $46,833 under the current system and $41,460 under the new system… IF they consume every dollar they earn.
A family of 4 with an AGI or $373K pays $101,108 under the current system and $80,790 under the fairtax IF they consume everythign they earn.
A family of 4 that earns $1,000,000 pays $320,307 under the current system and $230,000 under Fairtax IF (and this is a HUGE if) they consume everything.
So as you can see, overal taxes seem to be dropping or close to even for almost everyone (which makes you wonder how it is revenue neutral) but to the extent there is an increased burden that burden is borne by the middle class and to the extent there is tax relief the effect is most pronounced at the very top end of the spectrum.
The chifting is even more pronounced if we adopt Obama’s proposed tax structure.
YMMV if your income is laregely capital gains and dividends.
With regards to a “fair tax” proposal and this thread, the question is: will it balance the budget? If it does, it means at least one person is going to pay higher taxes.
The second thing to consider is that if it’s a “consumption” tax, it’s going to hurt consumption. Essentially, during year one every one is stupid stupid to realize that it’s just an account shift, and they suddenly feel richer having their income restored. In year two, they suddenly realize that all that income doesn’t make up for the next tax on the things they so desperately want to consume. So they start to look for ways around it. They buy from other countries (ie Canada and Mexico), they smuggle it in from China, and they use cash transactions to avoid documentation. All things I’ve witnessed in Canada and India. Indians being particularly apt at avoiding consumption taxes.
In year three, a new election cycle begins, and a new political party is going to bitch about how high their consumption taxes are. To get people to vote for them, they’ll offer an incentive: seniors over 65 don’t pay consumption on the first $200 worth of adult diapers. Now we have an additional 10 pages of tax code, plus a need for more enforcement to catch the people lying. But that doesn’t matter because it’s popular, so it passes, and now we have a deficit because seniors over 65 spent a damn lot of money on diapers.
In year four, terrorists do something, requiring military adventurism. It’s politically impossible to reverse the senior tax exception on diapers, so it’s paid for by more deficits. The war is unpopular, and the economy isn’t going well, so another segment is bribed, I mean, encouraged to vote by getting a consumption tax rebate on purchases over $1million.
Except, it turns out that 10% sales tax on $1million is a lot of money to make up for, and it also turns out that stupid people mistakenly believe they buy things worth $1million, or might in the future, so you’ve got enough support for re-election.
Then the economy goes to shit, the government is expected to provide stimulus, but is already running a deficit. So after stimulus spending, they attempt to repeal the adult diaper rebate. Which confuses stupid people, who organize a new political party, attempting to simply the tax code.
What if instead we just skipped to the end. Income tax is an incredibly simple and straight forward system of taxation. Or at least is used to be, and could be again. Eliminate all the extra bullshit, and you have an efficient means of generating revenue, that doesn’t hurt consumption.
The best part about all this, is that in 10 years, it’ll be the same group of *morans *that will suggest taxing income instead of consumption.
It should also be pointed out that now we’ll get to have back and forth arguments about what is poverty, and how much their prebate should be.
It’ll be set at some arbitrarily stupid number that a rich white dude pulls out his fat ass. He’ll pretend to justify it, and then announce it’s $16,945. But wait, does that change depending on where you live? If we have elections based on geographic regions, you bet your fat white ass it will depend on where you live. (oddly enough just like the Canadian student loan situation).
So now we’ve created an incentive for people to make damn sure they earn less than $16,945. Because at $16,946 you end up losing your prebate and end up with a real income closer to $12,000 (a number I just made up).
Enter the bleeding heart liberal that wants to raise it to $22,842, at number he pulled out of his equally fat white ass. And as a compromise, the conservative counterpart wants it to be based on children, because children are a blessing from God.
So now we have both an incentive to earn less than $22,842 and to have more children. And I assume that’ll be based on sole income, so we’ll discourage marriage.
And on and on and on. Seriously, we’ve been through this before. Shifting the deck chairs does nothing, but make some people suddenly feel good until the boat lists the other way.
Double check the website, you may have that wrong.
I think every household gets a prebate; the amount based on the number of people in the household and the typical spending of a household of that size at the poverty line. It’s rather like the income tax, under which everybody earns their first ~$8,000 tax free and the taxes only kick in for what you make in excess of that. If I read the Fair Tax proposal right, a household exactly at the poverty line (and which spends exactly as would be typical) will receive a prebate equal to the amount of Fair Tax that they pay each month. They’ll break even, which means they aren’t really paying any Fair Tax at all. And everybody gets those checks; essentially your spending that would just enable you to live in poverty is free, and the taxes only kick in for what you spend in excess of that.
Which means tracking the size of every household in the country, month-by-month, and sending each of them a check.
Most likely.
In any case, the incentives shift. If each “household” is getting a big fat check, the question becomes how to set up a household? How to set up as many households as you can.
So how do we verify all the households getting these massive prebates?
The next obvious issue is how do we properly assess at x factor, of what gets sent? My guess is that like everything else, it will start at an artificially low projection, and in a few years balloon to an unreasonably high number, bankrupting the government.
Point is, it needs to balance the budget, otherwise it’s just a shell game. And if it balances the budget, it means a lot of people are paying a lot more taxes.
Keeping track of how many kids you have is not really the administrative issue. The huge administrative issue is how do you transition between an income tax and a consumption tax.
The bigger issue with any tax simplification proposal is that you can have a very simple income tax as well (the provisions imposing a tax are very short), its all the exceptions and exclusions and special regimes that makes the tax code and regulations almost a million pages long.
Regan reformed and simplified the tax code in 1986 after 7 attempts to tweak it. They overhauled the tax system in 1986 and it stayed nice and shiny until the next congress when people started tweaking it a little bit here and a little bit there in order to make sure that we weren’t hurting widows and orphans (if you were a democrat) or business (if you were a Republican).
Noone honestly thinks that a pristine new tax system of ANY sort is going to stay that way and between the transition issues and the equity issues of taxing consumption rather than income, its not liekly to go anywhere.
It is a virtual certainty that the FAIRTAX will not be revenue neutral in practice because consumption (or at least documented consumption) will decrease as a result foa consumption tax and its not clear that current consumption would support the consumption tax (unless we are willing to levy a consumption tax on our exports).
It is an ABSOLUTE certainty that the FAIRTAX will shift some of the tax burden from the ultra rich to the middle/upper-middle class.
The theory behind the tax is that costs will be reduced so the end cost to consumers remain the same. What it will probably do is alter cross-state taxation on the internet so that products don’t get a free ride which currently represents a loss of state tax revenue.