superchunk said: 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.

 Flat tax is too much of a burden on the lower income households, especially those that are at, below or slightly above the poverty line

DKII said: 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).

 Well private charities are going to take a BIG hit with the "Fair Tax" as you lose all tax deductions for charitable donations under the fair tax.  So the rich, big companies and the rest will cut out a lot of their donations to charity.

@Avinash
America's basis for the economy is Capitalist. If it isn't Capitalist, whose fault is that? THE RULING CLASS! THE POLITICIANS!

@Superchunk
The States could switch to a similar system. Right now the majority of the states model their tax system on the federal system. It wouldn't be hard for each state to switch to a smaller version of the FairTax. Most states already have some form of sales tax.

The States would collect the taxes from the companies and then send it to the Federal Government. The companies that collect the FairTax at the Retail level get a small handling bonus for the taxes they collect, something like $200 or 0.5% whichever is greater. The States also get a small handling bonus for collecting the FairTax from the companies.

I am not sure how the local level would handle the tax, but since they very rarely have an income tax to begin with, I do not think this is a problem. They could simply embed the sales tax in the price of the goods as well.

The FairTax is Federal Tax reform, not local or state tax reform. However I understand that reformation at the Federal level impacts the lower levels as well.

I've only skimmed, but from the basic gist, I like what I'm hearing, as the tax is on new products, which means that second hand goods would not be included in this. This means that lower income brackets would be able to cut down on their expenses simply by buying more through second hand, rather than buying new.

@ Kasz216

Wrong, as income increases American Citizens give MORE to charities since they have more to give. America is the most generous nation in the world. We give billions of dollars a year to foreign aid. We give billions to charities currently and would give MORE under the FairTax.

Lots of people have said this. I don't know exactly what logical fallacy using Karl Marx's name to attack this idea is, but it's certainly a dirty trick. Try using evidence to discredit that idea instead of ad hominem-style attacks.

The FairTax will have a net effect of taking money away from the middle classes and giving it to the rich. This contributes to more concentration of wealth among the rich, which does make the creation of a "ruling class" of superrich families more likely. I don't say that this would necessarily happen or even likely happen due to the FairTax, but the odds go up.

The abolition of the estate tax (and I freely say that this is a different subject from the FairTax) would make this possibility exponentially more likely.

Eomund said: @ Kasz216 Wrong, as income increases American Citizens give MORE to charities since they have more to give. America is the most generous nation in the world. We give billions of dollars a year to foreign aid. We give billions to charities currently and would give MORE under the FairTax.

American citizens give more when they have higher incomes because the richer you are by giving away money to charities you actually end up paying less taxes. Very few people actually give out of generosity and the people who do usually arn't the mega rich and definitly arn't the corporations.

I'm not sure what kind of fairy tale world you live in that you think the goverment gives foreign aid away out of the goodness of their hearts.

Final-Fan said: Final-Fan said: FactCheck.org is about as neutral and accurate as they come. Here's what they have to say about the FairTax: http://www.factcheck.org/taxes/unspinning_the_fairtax.html This is the Treasury Department's graph of who will pay what percentage of tax revenue under the FairTax as opposed to current tax law. Notice how everyone is actually paying MORE except for the extremely poor and very rich?

 Ok, the tax plan they used in this graph was the HR25 aka the FairTax. It was a modified version. They excluded items from the FairTax and therefore had to raise the rate of the FairTax making this chart invalid.

Kytiara said: Lingyis said: Andir said: Lingyis said: haven't spend much time reading it, but it sounds like the exact opposite of what economists would recommend--up income taxes, lower sales tax. as proposed under the fairtax the poor certainly are the biggest losers. I think you have it backwards. It's for the removal of an income tax. no i didn't. if tax revenue is to stay constant, economist would generally encourage increasing income tax and lowering sales tax. sales tax tends to hit the poorest the hardest. that's why the recent GST reductions in canada are not widely applauded by economists. fairtax would remove income tax and slap a flat 23% sales tax on everything, exactly opposite of what economists recommend. that is of course we assume the nation taxes the rich heavier than the poor, like we currently do (different tax brackets). i'm not really interested in politics, but my impression is that republicans tend to want to cut income taxes, which tends to benefit the richest.   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.

i'm canadian actually. economists don't like the lowering of GST, which is a sales tax. where did i contradict myself?

 

ps. should add that i'm a canadian who recently got permanent residency in the US :)

Andir said: I put it originally.  Think of it this way. (Not real numbers) Someone getting paid 15,000/year is getting hit for 20% taxes in an income tax system.  They take home about 12,000. Someone getting paid 150,000/year is getting hit for 40% taxes in an income tax system.  they take home about 90,000.

Aperson who made 15,000 dollars a year would pay $1,863 without thout the standard deduction in todays system with the standard deduction $1,038. Now under this tax proposal 23% of this guys income will now be taxed or $3,450 unless he is a thrifty spender and manages to save a significant chunk of that. Even if he only spent half is income on taxable stuff eh would still be paying more than he woudl today.

I have to wonder would this apply to rent or mortgages. even if it doesn't apply to rent but applies to mortgages than rent will still go up. On the plus side richer people with larger houses that cost more would pay a lot more. On the negative side many peopel who can barely get by today will pay a lot more