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If everyone paid a higher sales tax on their purchases say 10%, that would make everyone a taxpayer. Then eliminate the income tax altogether. I know it does not have a snowballs chance, because the tax attorneys and CPAs would have a strong lobby. But it would be the most particular and certain way to make everyone pay their share.
The Europeans and Canadians call it the Value Added Tax (VAT). It could work if different rates are used for basic purchases like food. The political issue then becomes what is considered 'basic'.
A non-comprehensive list of things that suck about the Fair Tax:
The net effect of the Fair Tax would be to shift the taxation burden even more from the wealthy to the middle class.
Business organizations won't have to pay the Fair Tax, but the Federal, State and Local governments will have to pay the Fair Tax.
The Fair Tax is actually a 30% consumption tax on all new goods and all services. In order to be revenue neutral, the Fair Tax would actually need to be somewhere about 35%.
The Fair Tax is applied to consumer services - something that's never happened before. And things like rent, utilities, cable television, insurance, interest payments, etc are all considered consumer services.
Employee compensation isn't covered by the Fair Tax. That includes non-monetary compensation - as long as the business entity can claim it as necessary for conducting business. Company cars, club memberships, use of the corporate jet, use of the company condo in the Carribean, corporate "business trips", business lunches and dinners - all tax free.
The economists who support the Fair Tax concede that implementing the Fair Tax would immediately throw the nation into a recession.
The Fair Tax eliminates the IRS - but it replaces it with several new bureaucratic organizations. One will be responsible for tracking American households, issuing monthly Tax Pre-bate checks to each household and combatting fraud concerning those pre-bate checks. A second bureaucracy will track each business organization that sells either goods or services to the consumers and that will ensure that the Fair Tax is being collected and forwarded to the Federal government. Yet a THIRD bureaucracy will be required to track all organizations that sell to other organizations, to ensure that they don't sell directly to the public.
The Fair Tax eliminates Medicare and Medicaid, substituting a voucher program for senior medical insurance - just like Eric Cantor had in his budget proposal.
While the Fair Tax would not apply to used goods, it would cause the price of used goods to rise. People complain about how expensive used cars are now, just wait until used car purchases rise and new car purchases drop because no one wants to pay an extra 30-35% on a Honda Civic.
The Fair Tax falls less on the 'haves' and more on the 'have-nots'. A retiree couple who have already purchased everything for their house, from furniture to appliances to bedding won't be affected, but new families starting out with an empty house or aparment will either pay the Fair Tax on new goods or higher prices for used goods.
Frankly, if you want a plan that taxes Grandma another 35% on her $200 a month medicine that she needs to survive, while a billionaire pays no taxes on his purchase of a ten million dollar home, then you'll jump for joy for the Fair Tax.
Now watch, some Fair Tax supporter will call me ignorant, tell me to educate myself, and link the home page for the Fair Tax.
See, the thing is that I have been to the Fair Tax website, I spent a good number of days going through just part of it, and I already found all of these problems with the Fair Tax Plan.
If everyone paid a higher sales tax on their purchases say 10%, that would make everyone a taxpayer. Then eliminate the income tax altogether. I know it does not have a snowballs chance, because the tax attorneys and CPAs would have a strong lobby. But it would be the most particular and certain way to make everyone pay their share.
How about an adjustment, say 10% tax on every purchase over $500, including Market Securities, Corp Stock exchanges, etc?
You would think it is a smart idea to pay higher sales tax and eliminate the income tax... but... what you don't realize is that government has a SPENDING problem which means if they instituted that, guess what, 10 years down the road they don't have enough money so they start a "new" 1% income tax on incomes over 100k... then a few more years down the road and we have the income tax rates like we have now PLUS the additional sales tax that you suggest... So, there you go.... the problem with government isn't its revenue, it has and will always be its spending...
Sales tax on neccessities such as food, clothing, toilet paper and the like would have a bigger impact on those that earn less.
I don't think much of that idea.
I think it is a great idea.
The government should implement a sales tax on necessities only so that it has a non-volatile and predictable source of revenue every year. The alternative is what we have right now - deficits everytime we have a recession because the sale tax from non-necessities is very volatile.
Last edited by Bostonian123; 07-31-2011 at 11:22 AM..
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