A flat income tax would again be most painful for the poor, given our current tax structure. It will increase the disparity between rich and poor, and that will create an even more permanent underclass than we have now. It’ll continue to make home prices astronmical, and ultimately will stratify society tremendously. I think those conditions lead inevitably to an increasing cycle of violence – down the road, surely, but there.
–Cliffy
You’ll have to explain that one to me. My suggestion is that people liveing on or below the poverty line do get tax credits for kids as well as the benifit of any other social programs in place. Why would home prices go up? Because middle class and above would have more money to spend on homes? As I said before we need to find a way to keep the prices of the essentials under control so that those with lower incomes can afford the basics.
Actually, I wouldn’t be surprised if salaries went down as a long-term consequence of the Fair Tax.
Imagine. Someone pays you $30K per year. You lose 1/3 (for ease of math) so you take home $20K. Well and good.
FAIR TAX goes into place. Suddenly instead of taking home $20K you’re taking home $30K. Woot!
I, as your employer, begin to think “Hrm. I could pay someone $25K and they’ll still be taking home more. I can save some big bucks!” Then I start hiring at a lower rate thereby placing deflationary pressure on salaries.
Sure, you still have to pay that purchase tax. But, as an employer, that’s not my worry.
That’s what I’d do, anyway.
And, yes, IRL I have been (and will be again if all goes well) an employer and responsible for hiring, salaries, and so forth. I’m not just making this up…this is my first instinct on it.
Except now nobody is willing to work for $25K because $25K post-fair-tax buys far less stuff than $25K pre-fair-tax. The economist made a reasonably convincing argument a few weeks back that by altering just two parameters, the tax rate and the rebate, it was possible for a flat tax to look remarkably like the modern tax system. The benifits of a flat tax over a simplified progressive tax is that taxation could be done at the corporation level instead of the individual level. With progressive tax, you need to know the income of every single person in the firm. With a flat tax, all you need is to know the total payroll figure.
What most people don’t take into account when debating a flat tax is just how much money gets swallowed up into collecting tax. Just saving that money alone makes it a pretty compelling argument.
From Shalmanese
Maybe its just a typo but you mention the flat tax while the OP is about the fair tax. The flat tax is on income. The fair tax is on consumption.
Various Consumption Taxes Discussed in the US:
With income taxes, the ability to make it progressive is at least as much a function of income recognition rules as it is a matter of tax rates. The complexity isn’t in applying the rate to income, it is in determining what is income. A flat tax could be just as progressive as the current system but I doubt it would be much less budensome.
No, it would not replace all taxes. It is meant to replace MOST Federal Taxes. Not State or Local, nor Excise.
Yes, you have to file returns, and you have to keep (for the average 1040X taxppayer) 100s of times more records than you would under Income Tax. It would be ridiculously easy to cheat, too (on your refund, that is).
All by itself, it is so large it would lead to huge compliance problems, and with State sales tax added in, it would be uncollectable.
As with most such "fair’ taxes it would end up with the Middle Class (and especially the Upper Middle class) (most of us here) paying more taxes, and the very rich paying less. The “Fair tax” is a contradiction in terms.
True in theory. I just don’t believe it’s politically possible to do that without ripping out the tax structure wholesale. And frankly, I want to get the US of A as far away from the mess of regulations we have no as possible.
Oh, shoot-* that’s *easy
Make it “revenue neutral”. There ya go. Most middle class dudes won’t pay much if any FIT, but will pay a small VAT. The rich might pay a little more, but they will benefit by the abolishment of the AMT.
Most dudes won’t have to worry about the ‘regulations’- only the rich will, and they have their CPA to handle it for them.
Those in the Upper Middle class or the Lower-Upper class will only have to worry about Mort Int & Prop taxes. Not a lot of records to keep or regs to be concerned with.
Keep in mind the tax is on the final product, not the material. So car manufacturers do not pay tax on the metal to build the car, contractors don’t pay tax on the drywall and nails to build the houses, etc. This will lead to a decrease in prices, so the 23% sales tax will keep prices about the same as they are now.
They do it now, with Social Security and military pay. What makes you think this would be harder? Ivylad gets direct deposit for his retirement pay each month.
Florida and Texas do it with much success. Yes, there are some tax dodgers, but how many people cheat on their income taxes, or over or underpay because they can’t understand that beastly tax code?
There won’t be a 23% (the proposed tax) increase in prices. This has been documented by economists. Read the FAQs at the fairtax.org site. The Fair Tax also calls for a simultaneous repeal of the income tax, so it won’t be "unconstitutional.:
There’s a book about this coming out in July, co-authored by Neal Boortz.
Given the excessively complicated rat-screwing disaster that is the U.S. income tax code, I can understand the desire to move towards a flat income tax rate, or eliminating it entirely in favour of nothing-but-sales tax.
But using the principle that anything a rich guy supports is bad for a middle-income earner like myself, I dislike flat taxes (and I’m going to include an income tax rate of 0 as flat).
Let’s face it: no matter how much more money rich people have, there are certain necessary items that everyone simply must buy, and to be honest rich people don’t spend anywhere near enough to compensate for how much they currently pay in income tax. Seriously, how many sets of plates, fancy dinners, cars and homes do they have to buy to make up for what they pay in income tax? And when it comes to basic groceries and clothing (which arguably make up the major portion of everyone’s expenditures) the rich don’t necessarily spend all that much more than the middle class.
Somehow I doubt it has addressed any of the issues brought up in this thread and I suspect that if it had, it would no longer be what you guys consider a “fair tax”.
Why would we want to review it when the vast majority of us probably know far more about it than most of its proponents?
Tell you what Erik426, answer this simple question and we’ll see if it is worth the zombification.
Since the richest Americans will obviously pay far less under a consumption tax and since someone has to pay the bills, which roughly-defined income group do you expect to have to make up the difference by paying far more in taxes than they do today?
Erik426, if you want to start a discussion of fair tax ideas, please start a new thread instead of posting to one that is six years old. And explain your ideas - don’t just post a link.