Fair Tax

[TNRighty]

Have ya'll been following the Fair Tax issue? Its been in the makings for a while now, but has just recently gained momentum in mainstream politics. In case you haven't heard about it, it would replace the federal income tax with a national retail sales tax. If you want to read more, go to www.fairtax.org.

[Matter]

I'm familiar with it. Beats what we have now.

[bibster]

It's more fair then the current system. The more you earn, the more you spend, the more you're taxed but at the same rate as everyone else.

Dems fail to realize that this type of sytem is the fairest of them all. Do you see poor people buying yachts? Noo way.

[Matter]

bibster said:

It's more fair then the current system. The more you earn, the more you spend, the more you're taxed but at the same rate as everyone else.

It encourages savings... not penalize earning.

[TNRighty]

From what I've gathered, the price we pay for goods today would be about the same price even with a 22 or 23 cent per dollar retail sales tax. I'm no expert by any means, but I'll try to explain what I've heard. Here goes. The goods we purchase from retailers have already been taxed several times. Manufacturers that purchase the raw materials (steel, plastic, rubber, etc.)pay a tax on the material they purchase from the raw material producers. Retailers like Wal Mart pay a tax on the retail goods they purchase from manufacturers like Johnson and Johnson, Nike, and Sony. In other words, before these products ever hit the shelves, they've been taxed several times already, and those costs are passed on to the consumer in the form od higher retail prices. What the fair tax would do is eliminate these pre-retail taxes, thus lowering the retail price. We would be paying a retail tax on a much cheaper product. Anyways, that's how I understood it. If ya'll have a better or more detailed explanation, please elaborate.

[americanfirst]

The stuff you read about on the fairtax.org site is complete total BS. To start of with WalMart does not pay tax on stuff it buys from it's manufacturers that would be a value added tax like they have in some countries in Europe. We don't have that. The fair tax advocates seem to think that if companies paid no tax that they would cut the cost of goods by the amount of tax they used to pay. Since most of you know that many if not most big corporations pay little or no tax because of loop holes how or why would they cut the cost of items they sell.

The following is from:[http://www.ctj.org][/corpfed04an.pdf]
Who’s Paying Corporate Taxes—and Who’s Not

Ostensibly, the federal tax code requires corporations to pay 35 percent of their profits in
income taxes. But only a small proportion of the 275 corporations in our study paid federal
income taxes anywhere near that statutory 35 percent tax rate. Instead, the vast majority
paid considerably less. In fact, in 2002 and 2003, the average effective tax rate for all 275
companies was less than half the statutory 35 percent rate. Over the 2001-2003 period, effective
tax rates ranged from a low of –59.6 percent for Pepco Holdings to a high of 34.5 percent for CVS.
The average effective rate for all 275 companies dropped by a fifth, from 21.4 percent in 2001 to
17.2 percent in 2002-2003.
Here are some startling statistics:
# Eighty-two of the 275 companies, almost a
third of the total, paid zero or less in federal
income taxes in at least one year from 2001 to
2003. In the years they paid no income tax,
these companies reported $102 billion in pretax
U.S. profits. But instead of paying $35.6 billion
in income taxes as the statutory 35 percent
corporate tax rate seems to require, these
companies generated so many excess tax breaks that they received outright tax rebate checks
from the U.S. Treasury, totaling $12.6 billion.1 These companies’ “negative tax rates” meant
that they made more after taxes than before taxes in those no-tax years.
# Twenty-eight corporations enjoyed negative federal income tax rates over the entire 2001-03
period. These companies, whose pretax U.S. profits totaled $44.9 billion over the three years,
included, among others: Pepco Holdings (–59.6% tax rate), Prudential Financial (–46.2%), ITT
Industries (–22.3%), Boeing (–18.8%), Unisys (–16.0%), Fluor (–9.2%) and CSX (–7.5%), the
company previously headed by our current Secretary of the Treasury.
# In 2003 alone, 46 companies paid zero or less in federal income taxes. These 46 companies,
almost one out of six of the companies in the study, reported U.S. pretax profits in 2003 of
$42.6 billion, yet received tax rebates totaling $5.4 billion. In 2002, almost as many
companies, 42, paid no tax, reporting $43.5 billion in pretax profits yet receiving $4.9 billion
in tax rebates. From 2001 to 2003, the number of no-tax companies jumped from 33 to 46,
an increase of 40 percent.

I have a few questions for you. This tax will be on doctor and hospital bills. If 40 some million people in this country do not have medical insurance now how many more would loose it if the rates had to go up 30 or more per cent because of sales taxes on hospital and doctor bills. Next this tax is only imposed on new goods and services. That means if you bought a car today and sold it or had it repossed tomorrow nobody could recoup the sales tax. Since a vast majority of new cars are bought will little or nothing down how whould this tax effect our economy. What bank is going to finance 30% of the cost of a 25,000 car if tomorrow you defaulted and they could not recoup the sales tax on top of what it already depreciated. How about a house. Who's going to finance a house with a 30% sales tax you can't recoup. How many years would you lock yourself into that house and living in that town before you could break even and sell the house. More than 15 years I would suspect. Why do I keep on saying 30% instead of the 23% that they advertize on the site. It because they fiqure the tax in a way no one else would. The tax is 23% of the total price after the 30% tax is added in. In other words if you bought something for $100 and added a 30% tax you would come up with $130 and the tax is 23% of $130 instead of 23% of $100. Why do they fiqure this this way when no one in the world would fiqure it this way, Because it is just one more lie that they tell. Don't believe me go to an article that I have posted on my website originally posted on MSNBC in the business section. It's at americansfirst.com/taxes.htm.

[TNRighty]

Thanks,

I'll check out those websites. I haven't made up my mind if I'm for it or not. I introduced this topic hoping to get some more info on it.

However, judging by your rants about the evil corporations and health-care, I'd guess your data is driven more by class warfare politics than economics. Nevertheless, I'll check it out.

Again, I haven't made my final judgement on the fair tax, but I suspect liberals are against the fairtax because it would do away with the one of the fundamental economic principles of liberalism (and for that matter communism) ... progressive taxation and the concept that we are somehow entitled to a portion of the wealth of others.

Anyways, I'll urge you all when researching the fair tax, think economically, not politically.

[americanfirst]

Maybe you have heard of Adam Smith. Conservatives love to portray 18th century radical humanist Adam Smith as the original capitalist defender. Smith introduces the famous concept of the "invisible hand" which is the basis for supply side economics. Certainly when anyone argues against the priciple of trickle down economics they are lambasted as being totally ignorant of classical economics but the problem is that most of both his supporters and detractors have never read his work. I will admit it is a tough read. The quote most often attributed to Smith is the following but let's see what else he has to say.

"Every individual… intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his original intention. By pursuing his own interest he frequently promotes that of society more effectively than when he really intends to promote it."
-- Adam Smith, Wealth Of Nations

Now let's see what old Adam had to say progressive taxation:

"The subjects of every state ought to contribute toward the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state ....[As Henry Home (Lord Kames) has written, a goal of taxation should be to] 'remedy inequality of riches as much as possible, by relieving the poor and burdening the rich.'"
-- Adam Smith, Wealth Of Nations

Gee Wiz! If Smith can be so right about supply side economics how can he be so wrong about taxes?

Now come on you are going to have to do better than call me a liberal or a communist. Keep this going and you will find out that I am neither. I am a realist. I believe in reality. I am no different than those that are in the top 5% of the income stream I want to protect my interests just like they want to protect theirs. Problem is that they have been doing a much better job of it lately than those in the bottom 95%. I was just trying to show that the theory that if we did away with business taxes they would cut prices enough to offset a 30% tax is pure BS. Prices are set and rightly so by what the traffic will bear and not buy what is the cost of bringing the product to market. I will give you a perfect example of this. My wife is from the Philippines. I took her to a department store and saw an outfit that I thought would look stunning on her. She would not even try it on. It cost $250 and she knew that the seamstress in her country that made the article earned less than a dollar to make it.

Rush Limbaugh says that conservatism is rooted truth. I can prove that conservatives are just as adept at lying and talking about things they absolutly know nothing about as liberals are when either is trying to get their point across. Want to try me. I can prove that one of conservatisms icons is a lier. By the way I could also do the same for a liberal I am sure. But for now it is the conservative's that I fear will do me greater economic harm than the liberals. I assure you if the liberals were in a position to harm me ( they do not control either the congress or the White House) I would be attacking those theats also.

[Evergreen1]

I always thought that a national sales tax would be a good idea for the very reasons that were mentioned, it seems to be the fairest. The only thing I don't agree with is that anyone will lower their prices, the prices will remain exactly as they are, with a certain percent national sales tax added. However, if they do away with the taxes taken out of paychecks it'll be the ONE tax, only federal. You'll still be paying Social Security, medicare, state, SUI/SDI - if you just earn a middle class wage, that Federal tax only amounts to maybe $70/week. And with a national sales tax I do believe that you'll be spending more than $70 in national sales taxes depending what the national sales tax would BE.
Maybe I should read up on it, I'm speaking about something that I don't know much about here.
Forgot to add - what about large families? They have to buy a LOT more things, and with earning the same wage as a 2 person household, it gets unfair THAT way
compared to the current system of deductions and tax credits and all. Well, like I said, maybe I should READ the facts before I post!

[americanfirst]

What the problem is that people think that they pay more in Federal income tax than they do. They get you to just look at what you take home after you pay Federal, Social Security, State tax, and in many cases people like me have life insurance, medical, dental, disability insurance and 401 K coming out. The average dumbell thinks he pays 28% in Federal Income Tax. Bush and most people are fond of talking about a family of four so lets look at what a family of four whom just takes the standard deduction pays in Federal income tax. Because that is where they cuts are and that is were conservative say that it is unfair for the rich to pay more than they do.

I went to tubo tax and they have a free tax estimator. I enter 50,000 in income and married with two dependents under 17, again this is not my situation but it is what everyone including the president uses when he talks about taxes. I entered no deductions for anything and took the standard deduction. the tax was $1470 or less than 3%. $62732 which is the median income for a family of four. Same deal standard deduction. Tax $3390 or 5.5%. $100,000 same deal except I entered a meager $5000 for an 401K deduction. Didn't even enter pretax for health insurance etc. Tax $11,900 or 11.9%. See what I mean most people believe that they pay 28% in income tax and they don't. Most people earning over $75,000 also itemize and pay even less. If you have investment income or dividend income you pay even less. You have to make over $165,000 per year to pay 15% and over $350,000 to pay 28%. All of these alternate tax proposals are an attempt to transfer more of the cost of government from those at the top to those at the bottom. This sales tax would kick in at $19,000 people whom only earn $19,000 pay no tax now. I really don't want to pay more in taxes so I really don't want to change the deal I have now. Yeah! I'm looking out for number 1 me. This certainly is a conservative value. Those at the top are looking out for themselves so why shouldn't I do the same. If this gets passed get ready to bend over.

[TNRighty]

Under the fair tax, every family gets a monthly check from the government equal to the amount they would be expected to pay for necessary items such as groceries, toothpaste, etc. So in essence those items would be tax free.

Also, under the fair tax there is no social security tax or medicare tax. There are no payroll taxes at all. If you make $1000 every paycheck, you take home $1000 every paycheck.

I don't care what your turbo tax numbers say, I'm sitting here looking at my most recent paystub, and 19.8% of my taxable income went to the government.

Maybe the fair tax is the answer, maybe it isn't. But when the top 50% of income earners are paying 96.5% of the federal revenue, you're teetering very close to being a welfare state. We need tax reform in some way or another.

[MO]

Under the fair tax, every family gets a monthly check from the government equal to the amount they would be expected to pay for necessary items such as groceries, toothpaste, etc. So in essence those items would be tax free.

I don't like the sound of that at all!

[americanfirst]

That doesn't prove anything. Are you a family of four? That again is what we are talking about. Do you overpay your income tax during the year and get a refund. How much did you make last year and what did you acutally pay. Do you think that a family of four that only earns $19,000 per year should pay any tax? Again I'm not a conservative or a liberal but a realist and in reality no-one including myself wants to pay more tax and in my personal situation I see myself paying more tax under this system than what I pay now.

Also answer my questions about how this would effect the economy. Would a 30% tax on a new auto maybe make you to wait a little longer. Would a bank finance a 30% tax on a auto or a home when in fact they could not recoup that tax if you defaulted on the loan. Average home price $260,000 that would be a tax of around $80,000.

I had cancer and three operations and chemo for around $100,000 Gee Wiz did I want to pay another $30,000. Let me get this right now. We will do away with social security and medicare which including employer contributions is 20% of income. And we will do away with all business taxes. Then we will exclude 19% of income and we will finance that and the rest of the government on 23% of purchases. That's what the fair tax people tell you. The only real problem is that they lie. First of all the tax is 30% in reality which they won't tell you but that won't do it either. Most experts think it will be closer to 60% if you include the elimination of the estate tax. Just think how much easier it will be to rachet up the sales tax than to amend the tax code. We've not even explored what this will do to revenue to the states when most state taxes are linked to federal taxes. Most think the average increase in sales taxes would have to be around 15%. Let's say the average is around 5% now. So between state and federal your talking about 50% on every good and service you purchase. If those that say it will take 60% are right for the federal it would be 80%. The phone bill, the electric bill, gasoline, groceries, the doctor, the dentist, a resturant meal. What do you think this will do to the small business owner that depends on discreationary income. Woudn't you think twice about going to a resturant if you were going to be taxed 50%. Wouldn't you think twice about buying a multi-million dollar boat or private aircraft if you might have to add 50% in taxes. Look what happened to the luxuary boat business when they added the luxary tax on it. It killed it. They ended up having to repeal it to save the industry. Your right you won't be taxed unless you spend it. But if you don't spend it what will it do to the economy? Use your noodle!

You're right about the top 50% paying 95% of the taxes but they don't make close to 95% of the types of purchases that will be taxed. (Investment purchases such as stocks and bonds won't be taxed and neither will the capitol gains on them either.) So whose going to make up the difference?

What they want to do is transfer the taxes from those in the top to those at the bottom, and when I say the top I'm really only talking about the top 3% and I venture to say that there is not one person on this board that is in the top 3% in income. Again reality sinks in. Do you personally want to pay more taxes. That's what we are talking about. Do you really care what the Walton's pay in taxes. I don't!

Gee Wiz! We have eliminated the tax on dividends so their business income won't be taxed twice. Then we eliminate the business taxes so their income won't be taxed once. Then they only pay taxes on what they buy. Gee Wiz! They already have a house, funiture, and a fleet of company owned vehicles and airplanes. Their travel expense are more than likely paid by their company. What per cent of their billions of income could they possibly consume and be taxed on. I don't care if it's 50 million dollars it's a drop in the bucket as a percentage of their income. Get a life! If they don't pay it someone will have to and that's Y-O-U! Guess what sucker I don't want to be included in the Forbes 400 welfare plan like you do. I don't want to pay more taxes and I don't believe most of the people on this board do either. I personally don't believe they need the help, if things were that tough how could they amass these types of fortunes, how could just 400 people amass wealth of $1,000,000,000,000 which is more than 70% of the whole country put together. Believe it or not most of the Forbes 400 think that they don't need the help either. Again I'm a realist not a liberal or a conservative and I like most people are looking after myself first which I understand is the first principal in conservatism.

[MO]

In some ways it make sense. I certainly don't agree with the tax system currently in place that puts such a top heavy burden on those who are the most productive.

Sending every family a check every month sounds nuttier than the current system. Sounds like folks who may want to get people used to being a little dependent on daddy government. No way I'd go for that. This would grow the government. I don't want the Department of Health & Human Services to be such a big part of my life. Why not just have some things that aren't taxed to begin with, disproportionate benefit or not. They are building redistribution of wealth into the plan from the start, which is what is not fair about the current system.

[americanfirst]

Do you want to pay more taxes. If those that are paying them now now longer have to, guess what you will have to. Leave me out I don't want to. Please tell me what in the world would it do to our economy if their was a 50 to 80% tax on every good or service you purchased. Their numbers don't add up. Read it and prove me wrong. Again if social security and medicare are 20% of income when you include the employers share, and you are going to eliminate all business taxes, the estate tax and all other federal taxes plus refund an amount equal to the tax on the first 19% of income how in the world would a tax of 23% of retail sales of only new items and services fund the social security, medicare, and the rest of the budget.