koffieboon said: Entroper said: With an income tax, evasion comes from individuals. With a consumption tax, evasion would have to come from businesses. There are far fewer businesses to track than individuals, so I think compliance would be better with a consumption tax. A few people running flea markets and garage sales and not charging tax doesn't bother me so much. It is not about a few people running minor businesses, it is about people travelling outside the US to do their shopping abroad, where sales tax are a lot lower. We're talking about people smuggling those products into the US to sell for a big profit because sales tax are so high in the US. If the price of products in the US is a lot higher than outside of the US there is a opportunity to make money for people. And history taught us people will take advantage of it. And actually, if it is really big money were not talking about individuals making a little extra money but organised crime making billions of dollars.

Organised crime would make money? O wait they do that now... just kidding then. Criminals will do anything to make money or power, which ever is more important to them. There are already underground markets and economies that are estimated at over $1 trillion. As far as I know, smuggling is a crime, not a tax evasion problem. They would be prosecuted as such. When people legally import goods or claim them at customs they would pay the FairTax if I understand it correctly.

The shopping abroad argument is fairly weak too. It is expensive to shop abroad for expensive goods. If people want to buy something cheap what is stopping them from crossing the border now and buying it in Mexico or Canada.

koffieboon said: Eomund said: Further, this is a tax hike on the middle class. If you make less than $15,000 you win. If you make more than $200,000 you win, because you actually save more and spend less of your income. This is a nice populist proposal which sounds good but is economically challenged. It only works on someone who has not read about the problems. I make more than $15,000 and less than $100,000, yet I know about all the "problems" and still support it very strongly. I doubt there will be a serious if any tax hike on the "middle class." If there is I think their income increases would offset it. Who is to say that the Middle class can't save more as well? They could invest a small amount and get dividends every month to supplement their income as well. This argument fails to convince me that the "FairTax is nonsense." The FairTax removes power from the government and puts it squarely back in the hands of the people. The congress can't jack with the rate like they can with an income tax. It is one of the best ideas in a very long time. Assuming the government collects the same amount of tax and the groups of under 15k and above 200k will be better off, the only outcome is that the middleclass will pay more taxes. It is the only way the numbers add up, someone has to pay for the decrease of tax payed by other groups. Now about the last part, what will prevent congress to increase the sales tax rate? I really don't see a difference with the income tax here. But on a different note, doesn't the US have some real issues to resolve instead of arguing about a tax reform?

This is a common argument I have heard in this thread. One I have debunked by pointing to Wal-Mart. How is Wal-Mart able to sell its wares so inexpensively? Volume. The number of goods and the number of transactions outweigh the barely over cost prices. Wal-Mart is hugely profitable. The same can be said about taxes. When rates are lowered, more people take less precautions to avoid the tax. This increases the tax-base, increasing the volume of tax payers. We saw this under Reagan vividly. We have seen a similar event under Bush. Tax cuts = more money to the people. More money to the people = more economic growth. More economic growth = more tax revenue. It all offsets. Taxes are not a zero sum game. When you cut taxes at the top, the economy can grow because there are more investments. Businesses need investments to grow. When businesses grow, more people can be employed increasing tax revenue.

A similar effect will happen with the FairTax. It doesn't necessarily cut the rate, but it definately increases the tax-base. Therefore no one group will be hit any harder with taxes than they currently are. Infact I wager that most groups will see a positive impact under the FairTax all the while tax revenue stays the same. 

Do not misunderstand me. I do not want to cut taxes or implement the FairTax to increase the Tax revenue collected. Tax money, to a point, is better left in the hands of the one who earned it. There are necessary roles for the government to play in society, like prisons, roads, secure borders, etc., but when they start meddling with the private sector it always has unintended consequences.

Congress can and likely will increase the rate eventually. They could decrease it as well. The rate is comprised of three portions. A general revenue portion, a social security portion, and a medicare portion. These three are joined at the hip when it comes to what portion of the FairTax revenue they get, however. They split the revenue based on the percentage spent in the budget. The rate can only increase through the increase of one of the three "pillars" of the rate.

The income tax is a convoluted mess. Congress can include credits or add penalties to an income tax system. That is how they control people. Did you know that over 80% of all business decisions are based on tax liability? They already control us. The FairTax removes this control. 

Eomund said: koffieboon said: Entroper said: With an income tax, evasion comes from individuals. With a consumption tax, evasion would have to come from businesses. There are far fewer businesses to track than individuals, so I think compliance would be better with a consumption tax. A few people running flea markets and garage sales and not charging tax doesn't bother me so much. It is not about a few people running minor businesses, it is about people travelling outside the US to do their shopping abroad, where sales tax are a lot lower. We're talking about people smuggling those products into the US to sell for a big profit because sales tax are so high in the US. If the price of products in the US is a lot higher than outside of the US there is a opportunity to make money for people. And history taught us people will take advantage of it. And actually, if it is really big money were not talking about individuals making a little extra money but organised crime making billions of dollars. Organised crime would make money? O wait they do that now... just kidding then. Criminals will do anything to make money or power, which ever is more important to them. There are already underground markets and economies that are estimated at over $1 trillion. As far as I know, smuggling is a crime, not a tax evasion problem. They would be prosecuted as such. When people legally import goods or claim them at customs they would pay the FairTax if I understand it correctly. The shopping abroad argument is fairly weak too. It is expensive to shop abroad for expensive goods. If people want to buy something cheap what is stopping them from crossing the border now and buying it in Mexico or Canada.

 The US dollar.  I know a lot of people that used to drive to Canada to buy goods.  They stopped since the dollar plummeted though... and now Canadians cross the border and buy stuff over here.

 I'd probably take some trips to Canada myself to pick up exensive goods. 

Honestly it seems to ring hollow to charge anyone a consumption tax for money they spend overseas or in another country.  Thereis no basis for it.

Unlike income taxes, which they deserve a cut because presumably your job exists because of the market conditions the country and city have created.

A consumption tax levied on foreign goods makes about as much sense as  an income tax that is regressive because it's trying to tax wealth.  Even current foreign taxes are hazy but they make sense because they are applied to the exporter not the importer.  The exporter pays for the right to do buisness with people from another country. 

I shouldn't have to pay the government anything if i wish to do buisness with another country. 

One of our earlier exchanges discusses many issues that are being raised once again, so I thought I'd just resurrect the last post in the series:

Eomund said: Final-Fan said: Eomund said: Final-Fan said: I'll do a thorough response later, but for now: Your list neglects my objection that the FairTax gives a huge tax cut to the rich that's paid for by the middle (and lower-middle and upper-middle) class. I'll be checking the posts for other possible oversights. Let me respond to this objection now. Sorry about not including it before, I just forgot about this objection. First, what is wrong with a tax cut for the rich? They would still be paying the majority even under this chart: I still maintain that this chart is inaccurate, but even so it proves my point. The "rich" still pay 45.9% of the taxes. The rich pay more taxes because they have more wealth. What is the matter with this? In fact, according to wikipedia (I know, I know, but they stole it straight from an IRS report), "the top 1% pay 36.9% of federal tax (wealth 32.7%), the top 5% pay 57.1% (earning 57.2%)[you mean wealth right?], top 10% pay 68% (wealth 69.8%), and the bottom 50% pay 3.3% (wealth 2.8%)". So the wealthy already pay much less in taxes relative to their wealth than the bottom HALF of American taxpayers. . Just for fun, here's a graph of wealth vs. income: First, WRONG. The rich pay more taxes because they have more INCOME. I disagree. The METHOD we choose to tax the rich more is primarily the income they make. There is a difference. That is what the current system taxes, INCOME not wealth. Second your numbers for the percent go to prove my point. The top 3,000,000 (the top 1%) wage earners pay 36.9% of total federal taxes right? They would then each pay about $270,600 of their income, not their wealth (if the federal tax you mentioned was the total revenue to the government). Your assertion that "the wealthy already pay much less in taxes relative to their wealth than the bottom HALF of American taxpayers," is also slightly skewed. You say they pay less in relation to their wealth, but the top 1% pays 4.2% more! Boo hoo. Do you really feel sorry for the richest 1 out of every 100 Americans? The bottom 50% only pay .5% more than the wealth they have. Is that fair? Try looking at it this way: the bottom 50% (as a group) pay 17.9% more than their share based on the wealth they have, while ONLY other designated group to pay more than its share is the wealthiest 1% which pays 11.4% more than its share. We ask more from the poorer half of taxpayers, relative to their wealth, than from any others, even the richest 1%! Is that fair? Boo hoo indeed. Now before you argue that the "evil rich" (as you seem to be saying, but correct me if I put words in your mouth) have more money and wouldn't miss it compared to the lower classes, lets review. What type of tax system do we have in America? That's right, we have an INCOME tax system. The more a person makes, the higher rate you get taxed. That is a so called progressive income tax system, the rich pay more than the poor. This system is not supposed to tax wealth, but instead it is supposed to tax the wages a person earns. I call that a penalty for aspiring to get out of poverty. What percent taxes does a super rich person pay when he does not work any more? Everything he has is in an IRA or a tax free investment. He can spend his money at his leisure and doesn't worry about income because he doesn't need to work. What tax would be fair to levy on him? That's what the estate tax is for, which you also want to get rid of. A thing you seem to be saying is that the wealthy need to pay their fair share of taxes, and I will agree that the rich need to pay more than the other groups in order for the system to work. The FairTax will tax everyone based on their wealth, just like you want. If a person doesn't have the money to spend, he can't be taxed on it. Except that not taxing investments only helps those who invest -- which is only those with money left over after spending on necessities -- which is NOT THE POORER BUT THE RICHER. Also it seems that the second 5% (the second half of the top 10%) only have 12.6% of the wealth yet they are included in the 68% of the tax dollars. The second-from-top 5% have 12.6% of wealth and pay 10.9% of taxes. Less than their fair share. What was your point? [deleted the wealth/income graph because it was causing cropping issues] http://www.faculty.fairfield.edu/faculty/hodgson/Courses/so11/stratification/WealthIncome07.gif I assume you can't see the right side, so I'll tell you that the bottom 40% only gets 12% of the income and has a shocking ZERO POINT TWO percent of the wealth. (Yes, this graph probably shows the bottom 50% having only 2.0 percent of wealth instead of 2.8. Either way...) Now lets get to your next assertion, the "tax cut" would be paid for by the middle (upper and lower middle). Lets look at what happened under current law when the "Bush Tax Cuts" (PLEASE DO NOT GET INTO BUSH POLICY IN THIS THREAD). With the rates for the "top" were cut, revenue to the government increased dramatically. No group(s) paid for those tax cuts. The reason that government tax revenue increased was the tax base increased. The tax cut allowed for more investment and job creation. This employed more people, all of whom pay taxes thereby increasing revenue. Actually, this is incorrect, according to FactCheck.org and all of their highly placed and very official sources, many coming right from the Bush Administration itself. "The impact of the tax cuts on economic growth is a matter of debate among economists. We're not voicing a view on whether the tax cuts should have been enacted; that, too, is a separate discussion. But it is clear they did not "increase revenues." I take it that you concede that I am right in this case? To look at a private enterprise with a similar philosophy we will look at Wal-Mart. Wal-Mart makes money, lots of it. Why do they make money? They sell lots of things for cheaper than elsewhere. This is only to show that when you decrease the price, more people come to buy your inventory. The same is true with tax policy. When you cut taxes, people have more to do with whatever they decide. EXCUSE ME, BUT NO NO NO NO NO. You very recently conceded that prices will go up if people's paychecks do and to the same extent; and you JUST NOW admitted that everyone but the very rich and very poor will get a tax hike. Where are you pulling this out of? I never admitted "that everyone but the very rich and very poor will get a tax hike," you put those words in my mouth from your own conclusions. Sorry. I was presuming that you agreed with the graph by Americans for Fair Taxation. You don't? In what way do you think that the FairTax group's numbers are wrong aside from assuming a 0% evasion rate? (added boldface to attract attention) I used Wal-Mart as an example because they have lowered their prices to barely cover costs, yet they make money. How is this possible? Let me answer in one word, VOLUME. When you increase volume of sales (or the number of people in the tax base) you can lower rates. This is a chicken or the egg argument however, which comes first? The tax cuts to bring more people in, or bringing more people in then lower rates. In America I submit that the more people feel the tax is "fair" the less they avoid it. When there are tax cuts, people take less steps to protect their income from taxation, thereby increasing taxable income and revenue. This is fantasyland math. "if you build it, they will come." Evidence please. And evidence that the difference will be as big as you say. Many people will decide to simply spend it. Others will invest or save it. Some will do some of both. All three will help stimulate the economy. The stimulated economy will pay more taxes than a higher rate would be able to do. Taxes are not a zero sum game. When you add more people to the tax base, by cutting taxes, you increase government revenue. It was shown under Reagan as well. He cut the highest tax rate from 70% to 28%! Then the government went from collecting about $500B to $1T! He doubled the revenue by cutting taxes. I'm going to have to ask you to account for a decade of normal economic growth (as opposed to what Reagan's tax cuts are supposedly responsible for) into that analysis. Then we can discuss this further. What is "normal economic growth"? If you are talking about the technology boom in the 90's I do not think that can or will happen again. Normal for a non-recession. Unless you believe that, contrary to all historical evidence, the situation would have continued unabated or worsened if not for Reagan? Now tell me again how tax cuts are a bad thing? I understand you will probably disagree with my point of view, but this is shown in the facts of the past. Only not. Only not not... wait... :) Now the FairTax. You claim that it will be a tax cut for the "rich" and it seems according to your chart that they would pay 7.6% less as a percentage of total taxes collected. This does not mean that the other groups will see a tax increase to remain at revenue neutral. These charts (I posted them earlier too) show the effective tax rate of current law and the FairTax: and These charts seem to me to be showing that the effective rates are going to decrease under the FairTax. Effective tax rates are rates people end up paying after the tax refund (Current law) and prebate (FairTax) are applied. The FairTax will increase the tax base, similar to how tax cuts increase the tax base. Thereby increasing revenue to the government without raising tax rates on anyone. So I disagree that your claim that the "huge tax cut to the rich that will be paid for my the middle (and lower-middle and upper-middle) class," has validity based on past tax cuts and the effects they have had on government revenue and the economy. I refer you to my earlier post (in fact, now that I look, it was right after the LAST time you whipped out thos two graphs): Even if I were to grant that the graph that FactCheck.org uses wasn't properly fact-checked (which I emphatically do not), the trends still hold true. The extremely poor and very rich benefit at the cost of the middle class. And, hey, you trust your precious Americans for Fair Taxation, right? Notice the similarity in relative numbers, with two exceptions: the AFT graph shows less benefit to the poor in both "before" and "after", and THE EFFECT THE FAIR TAX WILL HAVE ON VERY HIGH INCOME LEVELS IS HIDDEN. They don't want you to see that the major benefits of the "FairTax" are to the very top earners. You can argue about how much more efficient the FairTax will supposedly be, but trying to deny that the rich are the primary beneficiaries is just pathetic. The "rich" may be the "primary beneficiaries" under the FairTax but they are not the only ones, and I am not talking about the "poor" here. When the middle class is no longer taxed on income or Capital Gains, they will invest more and increase their monthly income; they will also boost the economy. Upper-middle class, maybe. The lower middle class will still be more worried about paying off their credit cards. I notice that you don't deny that this is a huge, huge boost to the rich, and will only accelerate the growing dichotomy between rich and poor; and remove the final guardian keeping it even remotely in check, the estate tax. Also, I want sources on your allegations about the graph, and don't forget that the source has to specify that it is the data that THAT graph draws on that is incorrect. I would like to add that the AFT's objection to the graph FactCheck uses is "but it doesn't count payroll taxes!" which fall only on the first $95,000 and are regressive anyway. So if those were factored in, it should show a MUCH, MUCH BIGGER tax cut on the upper end of the spectrum than the Treasury-data-based graph does. No wonder the AFT doesn't want you to see it. Payroll taxes do not fall only on the first $95,000. The first $95,000 of payroll tax is the Social Security portion of payroll taxes @6.2%. The Medicare portion of the payroll tax is 2.6% and has no cap. Also I do not dismiss the word regressive. Regressive is the opposite of progressive and falls hardest on the lower classes. You cannot dismiss what you just said, because it is true. Payroll taxes are regressive and hurt the lower classes the most. (I initially forgot about this section.) Good catch; I admit my error. Another small correction: it's actually $97,500. But still, the MC tax is less than 30% of (SS+MC). My point remains: the AFT is hiding the top of the scale to hide a massive tax cut for the rich. In your case, they don't have to, because you're A-OK with that; but I think (and they fear) most FairTax supporters would not like it if they knew the truth. I also forgot to mention that under Reagan "stagflation," as it is known, dissappeared. He reduced inflation and invigorated a stagnant economy, all the while doubling federal tax revenue using a tax cut. When the top 1% cannot invest and manage companies the way they need to invigorate both the company and economy, because of taxes, the economy falters and slips. Sqrl has pointed this out before. Yes, the '80s were good. Mostly for businesses, but let's forget that for a moment. It was a recovery. It normally happens after a recession, whatever people try to do to fix it. This could turn into a huge debate that might very well overtake the thread and would certainly distract from the FairTax debate, so let's please drop it. Another great result of the FairTax is that 13 Trillion in legal off-shore accounts will be able to come back to America and be invested. It is in off-shore accounts now to protect it from the current tax structure. Under the FairTax it can come back to America because it will be untaxed. Research shows that it takes $100,000 to create ONE new job. How many new jobs can be created under the FairTax with that much new investment? I don't know where you got those numbers, but (even assuming they are right) I don't think that those $13 trillion are all going to come back and I don't think that all the money that comes back is going to help the economy and it's CERTAINLY not all going to help create jobs. This is more fantasy math and blatant assumption and guessing games. The income tax we have punishes achievement. As does ANY tax. (Including the FairTax) The higher wage you earn, the higher rate you get hit with. When the top 1% pays 36.9% of the total tax bill, and the lesser groups do not pay their own fair share, Ah, so you want to raise taxes on the 50th through 99th percentiles? 'Cuz (as shown above) it's not the working class that ain't carrying its own weight. but instead get handouts from the government (like the Earned Income Credit), we are redistributing their money to the people who are not as high achieving. Who are we to take from people who have and give it to those who have less? I am all for helping the poor and lower class, but it should be done out of CHARITY not out of redistribution by government. Wealth redistribution is not charity, it is robbery. Relying on charity (A) rewards the greedy and (B) is really, really inefficient. I could elaborate but that should do for now.

You have this "tax = robbery" mentality that surfaces now and then and I suspect that it permeates your thought process. Especially regarding the estate tax. Get past it and look at the fact that the bottom half of Americans are (as a group) taxed more than their share is judging by wealth, and do so to a greater extent than the only other group for which this is true, the top 1%, and that the FairTax will make this WORSE. (Since the FairTax is a sales tax, the benefits will be reaped almost entirely by those who invest instead of spend, which is not the less-wealthy half of Americans, to put it lightly.) You admit that the FairTax is going to be a huge tax cut for the rich but deny that the middle class is going to see a tax hike while claiming it will be revenue neutral. Is it going to punish the poor according to you?

[REPOSTED, with minor clarifications and with edits integrated into the text.]

P.S. The Earned Income Tax Credit is hardly what I'd classify as a "handout", as it is a tax credit for low-income families. (The EITC exists for singles but maxes out at $412.) Therefore it encourages the poor to work where traditional welfare does not. Also, "economists suggest that every increased dollar received by low and moderate-income families has a multiplier effect of between 1.5 to 2 times the original amount, in terms of its impact on the local economy"

@Eomund:  Your whole post is based on your belief that what you read from FairTax proponents are trustworthy.


 Firstly this$5000 is false. The Prebate which he just mentioned only refunds $196/monthly per person. That equals $2352 a year. Everything else is right.

 Okay.   I'm not gonna look up the figure, but that doesn't affect his argument.  If anything it makes it stronger, but it's not central to the argument.

 
His rates are correct. The FairTax is a 23% inclusive rate, but if thought about as a traditional sales tax it is 30%. However the FairTax will already be included in the shelf price of every item, therefore the exclusive rate will never be seen. We already pay an inclusive tax on every good and service we buy of about 22%.

That's the most ridiculous thing I've ever heard.  If you don't see it, it's not there?  You can't let this simple sleight of hand get you!

  I believe that the states could lower the sales tax rate a point or so after the FairTax because they would be getting additional revenue from it as well.

You're making a statement with 2 huge assumptions.  The first doesn't affect your argument (possibility of lowering taxes), the second "... because they would be getting additional revenue" is a biggie.  Let's see if this is justified in the following paragraph:

Under the FairTax, each business that sells new goods or services would be required to collect the FairTax. The business would then send the FairTax to the state they are operating in. Each business gets to keep the greater amount of 0.25% of the FairTax collected or $200 for their trouble of collecting the tax. Each state would receive the FairTax from all the businesses within its borders. The states also get to keep 0. 25% of the taxes that pass through their hands to offset the cost of collecting the FairTax. That 0.25% would be a sizeable amount in most states and could drop the sales tax rate a point in my opinion.

 I don't see how 0.25% of 30% can cover say 7% state income tax when personal income tax is, say, 30% (some kind of average). 

 The 23% FairTax will produce the revenues under the current system. I have looked at how the economists figured that number and it works. It was amazing trying to follow them, not hard, just tedious.

You're looking at numbers from economists who support the fair tax.  There are an ENORMOUS number of assumptions that go into these estimates.  Economists disagree about these assumptions.  So, to truly understand, you'll need to understand other economist's estimates, now just one or one group of economists.

Anyways the already pays income taxes for its employees, so what is the difference when they pay the FairTax? The decrease in the payroll and income taxes collected by the government from its employees would be offset by the FairTax it collected from itself when buying goods. I will explain this better. The price of goods reflects the total amount of the income taxes paid by employee, the payroll taxes, and corporate taxes. On average these embedded (embedded because they are part of the cost of doing business) taxes amount to 22% of the price (Note: this is also inclusive to the price of the good, just like the FairTax will be). The budget does not go up because of the FairTax. Let me point you to the study where those economists figured the rate of the FairTax. Taxing Sales Under the FairTax - What Rate Works?

 No, no, no.  You're still under the bind of the magical 22% (or 23%, whatever) "inclusive" number.  Again, economists routinely disagree about the assumptions that go into these analysis.  Why should I not think that the bias from the group that supports the FairTax to begin with is conditioned to make it work?  Indeed--if that's the only group of economist that come up with those figures, all reasonable statistical estimator will say that with overwhelming likelihood, the true workable rate lies above this 22/23% rate (or 30% depending on the perspective).

 The evasion issue is something that noone has completely worked out, either against the FairTax or in favor of it. I agree it could be difficult to stop tax evasion under the FairTax, but it is not as impossible as people think it is. There are many arguments to make here, but I will continue for now.

To me, this is of 1st order importance.  Technically there's little point in arguing if this point isn't resolved, but like you said, we'll continue.

Bruce Bartlett is not known for being Fair to the FairTax. Nor are these government studies. Many of the government studies were done by Senators who jacked with the FairTax before they calculated it. They added exemptions to essentials and other things which they deemed, "politically feasible." They then calculated the rate based on the convoluted mess they put together, making the rate seem much higher than it would have to be. They added exemptions which are not necessary since the Prebate refunds all the taxes you pay on the essentials of life (upto the poverty line). Their study therefore is broken.

Aha!  Their study is broken but the FairTax camp isn't.  Like I said, the "true" workable rate likely lies somewhere in between.

This is a bad thing how? Most states, 44 in fact, base their state taxes on the federal model. It would be a God-send to be able to stop worrying about April 15 for the rest of my life. As I have said before, all the states would get an Administrative Credit of 0.25% to cover the costs of collecting the FairTax. They could then dismantle the income tax structure and those costs would be gone, not increasing the budget for the state.

Um, he's not saying it's a bad thing.  He's saying the states would need to raise revenues in other ways.  He's not saying increasing budget for compliance or anything.  And I don't see how this Adminstrative Credit of 0.25% will cover the lost revenue of it only covers the costs of collection.

Entroper already covered this one for me. Thanks.

I'll look into that.  

Yes exports would be much better off in the world market, as they would have no taxes embedded in them at all. The FairTax is not applied to exports. Again I doubt the validity of these "independent studies." Some may have merit, but overall I do not trust their numbers.

Again, if you don't trust their numbers, why do you trust FairTax proponent's numbers?

I make more than $15,000 and less than $100,000, yet I know about all the "problems" and still support it very strongly. I doubt there will be a serious if any tax hike on the "middle class." If there is I think their income increases would offset it. Who is to say that the Middle class can't save more as well? They could invest a small amount and get dividends every month to supplement their income as well. This argument fails to convince me that the "FairTax is nonsense."

That made the most sense out of everything you've said so far, since you believe that FairTax would massively improve efficiencies.  That's actually a reasonable economic belief.

The FairTax removes power from the government and puts it squarely back in the hands of the people. The congress can't jack with the rate like they can with an income tax. It is one of the
best ideas in a very long time.

Okay, they can still jack rates, or introduce new taxes, etc etc.  Whatever society people live in, there's always ways to add taxes.

The FairTax is exactly what Dick Armey wants, Flat rate of 23%, Low enough to keep the economy moving, Simple enough that businesses don't have to screw with mountains of paperwork. The people don't have to worry about a thing for personal income or spending, only a business does (which it has to already).

Dick Armey wants a flat INCOME tax, not sales tax.  I don't support a flat income tax rate anyway, so I won't push this point.

Entroper said: Do you really want to add 30% to the cost of a new home? And pay an extra 30% in interest on the borrowing price? 30-40% more for your legal services? Do you want your rents to go up 30%? Do you really think that massive evasion would not follow? We would move back to a black market cash economy so fast it would take all of Ben Bernanke's printing presses working overtime to create enough cash for the black market economy. If my income went up 30% (because of elimination of income tax), why not? The anti-FairTax people need to stick to logical arguments and avoid emotional appeals.

 wait wait wait, what?  why would i?  i'm gonna cling on to this extra 30%, or 23%, or whatever else number.

 if you're the sort that hands it back and thinks "i'm not losing out here!  the overall conomy will benefit!  efficiencies go up!"   i tip my hat off to you.  it'll be nice if every individual in a society behaves that way, since FairTax would actually work.

@Eomund
Yes, organized crime already exists and makes a lot of money. With a high sales tax they will however gain another way to make money. Instead of drugs now they can make money on any good imaginable. And shopping abroad really isn't that hard nowadays. Ever heard of the internet?

About you expecting not having to pay more taxes because the new system will encourage economic growth, I disagree. First of all this isn't certainly happening, because you will get more money in your pockets, but goods are also more expensive, which offset each other. Of course economic growth can be stimulated by lowering the tax rate, but the same applies to the current tax system. On another note, being completely dependent on sales tax for its income seems to make the government more susceptible to economic trends, with could cause a quickly increasing budget deficit in case of a recession.

Just did my taxes. So, rather than pay what was an effective tax rate of probably around 15%, I would be paying 30% on everything I buy. So IF I spend my money (which I have to do with my current living situation, and any way, whats the point of having money if I don't spend it) I am paying twice as much as I was under the IRS. Sounds terrible. I don't care if it comes out before I get my money or comes out after I get my money, it still comes out.

I'm not sure if the people arguing for the Fair Tax fully understand the current taxation system.

Say I make 65,000/year and have 10,000 in deductions (but would probably be a lot more, but I will be conservative), my net income is 55,000 dollars.

Now, I would pay 10% of my income up to 7,825 dollars, I would pay 15% from 7,825 to 31850, and pay 25% from 31851-55000

so it breaks down like this:

782.50 + 3603.75 + 5787.25 = 10,173.50 in tax paid total
which equates to 15.65% effective tax rate.

This doesn't include social security, but I think the VERY LOW estimate of 10,000 in deductions cancels that out (not to mention, you will COLLECT on social security later)

This would be a disaster for the middle class and completely destroy our economy.

 

You made a couple mistakes here.

First, income tax is an inclusive tax, so you need to compare to 23%, not 30%. If that doesn't make sense, think about making $100, and having it taxed at 15.65%, versus spending $100 and having 23% of it go to taxes.

Second, yes, you'll collect on social security later, but you'll collect on it later with the FairTax anyway. Social security plus Medicare taxes sum to 7.65%. Add that to 15.65%, and... well look at that, you're at 23.3%. Roughly the same as the FairTax! And that's assuming that you spend 100% of your net income every year -- if you don't, you'll pay less taxes, if you spend over (by borrowing), you'll pay more taxes.

Third, you get a prebate with the FairTax, so you have to figure that in to make a fair comparison.

The FairTax is change.

Lots of people fear change.

Thats what I see going on here.