Ok, so I am poor and have no extra money for non-essential items. Therefore I am not taxed. Yet I receive full benefit that the government provides.



Hooray, Now I am rich. I go on a spending spree and pay for all of the services you deadbeats can not afford.



2024 HERE WE COME THE UNITED LAZY STATES OF AMERICA!

I generally support the concept of the Fair Tax, though I don't really hold out any hope that our current government is capable of actually implementing it correctly. People forget that there's a huge amount of money to be saved by eliminating the income tax and the IRS fighting tax fraud and so forth. And another positive I've heard is that the government shouldn't have any right to know what any individual makes (privacy issue), and thus replacing the income tax with this system would address that.

The main argument against the Fair Tax that I've heard, is that the economy recovery has been driven by consumer spending, and by its nature the Fair Tax encourages savings at the expense of spending. However a large amount of savings is also good for the economy in other ways.

I don't necessarily buy into the idea that it'd somehow hurt the poor in some extreme fashion. They're mostly outside the tax system now and they'd remain so under this system. It's the middle-class that might get squeezed under this system, and that's why you really won't see much support for it, everyone's afraid of the ire of the middle class for some reason. Also I generally prefer that the poor (and others) be taken care of by private charities rather than government-funded (and usually horribly run) programs. And the lower-middle-class people mostly have themselves to blame for their problems (having too many children usually) and usually still live a lot better than the truly poor people in third-world nations, so I don't have much sympathy for them in general (obviously specific cases can be different).

I'm opposed, Ideas like this always turn out badly

hibikir your idea that there will be a ruling class formed by the FairTax is bogus.

Let me explain. Currently there is already a ruling class, the politicians. They are exempt from many rules that the rest of us have to follow. They also have an income paid for by you and me. Should they be paid by tax payer dollars? Yes. Should they be able to specially earmark my tax dollars for their projects? No. And yet they do! They are already a ruling class.
The current tax system can be, and is changed, yearly. It is changed by the same politicians we pay. They make incentives for lifestyle changes and hope to control our behavior through taxation. I can provide examples but they are lengthy.

My point is the FairTax will disassemble the current federal power structure of the tax code. Lobbyists will not be able to easily change the tax code in preference toward any one interest group. Now the FairTax Rate could be changed, but it will not be easy. Since the FairTax is highly visible to everyone, people will likely be much more attentive to tax changes and therefore the current ruling class would lose a bulk of its power.

Now the idea that wealth would create a ruling class might have some merit, if it didn't come from Karl Marx. We have seen the opposite of what Marx predicted would happen in Capitalist Countries like America. He predicted that the disparity between the wealthy and the poor would become greater and greater until it would become uncrossable and you would have two classes of people, the rich and the poor.
In America there is great mobility of the wealth. People change between the Quintiles (the 5 different groupings of people based on income) quite often. There is research that shows this. I don't have a link right now so take my word for it until I can find it.

 US isn't a capitalist economy, it is a mixed economy

My questions would be what about the states.

Right now nearly all states already have some form of a sales tax. This usually divided up by the city, county, and state.

If the ALL taxes were gone, *poof*, how would the states make revenue? After all this discussion is for federally taxed items, correct?

So, I pay 8.1% sales tax right now plus my taxes on my house and car related stuff and another smaller portion of pay gets taxed all to the state.

Does this all remain? Would I be paying the 23% federal sales tax plus the 8.1% that I currently pay? How would state income tax work? Right now it is based on the amount I pay to the federal government.

If all that goes away too, then where does the state and city get revenue from? Does it all get shifted to the government and trickle down from there? That would surely suck for the richer states like California.

I don't know. I will have to read the proposal to see if it answers these questions.


Personally I like a flat tax system.

Eliminate taxes on various items you already own like phones, houses, and car registration, etc.

Then keep a sales tax system for the cities and counties for new goods only.
Make a flat 15% or so income tax on everyone's income, no breaks of any kind.
Then the state income tax could also be level to a flat % of that.

This way it is still fair for all, and much simpler.

PS: The Fair Tax retains a lot of its benefits (though it does get a little more clunky) if you decide to tax luxury items at a higher rate and discount things like food and clothing, and you retain a bit of the tax the rich help the poor flavor of the current tax code. The MA state sales tax already excludes food and clothing.

Not to be a nitpicker Lingyis, but you just contradicted yourself.  You said economists would suggest increasing personal income taxes and lowering consumption taxes (if tax revenue is kept even), but then used the example of us Canadians lowering our GST from 6% to 5% and claiming economists didn't like it.  I don't want to sound like I'm just trying tomake trouble, I'm curious what you think.