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Thanks David in JAX for taking my post in the proper tone it was meant ... I'm not bashing the FairTax at all. I'm just learning about it and taking in all the factoids and facts and forming an opinion as I go. I think everyone agrees that our current income tax system is whacky, so, even if the FairTax enters a brouhaha, at least there are intelligent people out there trying hard to revamp the system.
You are to be commended for your skepticism. I believe that you (and everyone else) should NOT take one person's word for it without doing some research and/or getting an array of other viewpoints. That way, you can come to your own informed decision.
Here is what the Fair Tax does in simple terms:
1. Gets rid of the federal income tax and the IRS.
2. Replaces the income tax with a national sales tax at the final point of sale.
3. Prices do not go up with the addition of the tax because imbedded taxes are already included in the price of items you buy now. Example: a car costing $20,000 now would cost $13,400 with $6,600 in tax for a total cost of $20,000.
4. Gives a monthly graduated "prebate" check to people of certain incomes so they aren't paying taxes on essentials.
Concerning #3 above, using a new car purchase as example, if a car is $20,000 with or without the federal sales tax, with the FairTax that means the dealership makes a ton less money since they'd have to fork over the imbedded amount of federal sales tax. If the FairTax folks think retailers and manufacturers are going to roll back prices, well, I don't think that would happen.
Concerning #4: obviously the IRS will stay put since the only way to determine the prebate is if people report their income - not a simple process since there are so many different kinds of income.
I'm curious what would happen to the economy with FairTax. Faced with building a house/buying a brand new car (federal sales tax) vs buying an existing house/buying a used car (no sales tax) - which would I buy? No brainers for me, and my decision would certainly affect the construction industry as well as Detroit.
Concerning #3 above, using a new car purchase as example, if a car is $20,000 with or without the federal sales tax, with the FairTax that means the dealership makes a ton less money since they'd have to fork over the imbedded amount of federal sales tax. If the FairTax folks think retailers and manufacturers are going to roll back prices, well, I don't think that would happen.
Concerning #4: obviously the IRS will stay put since the only way to determine the prebate is if people report their income - not a simple process since there are so many different kinds of income.
I'm curious what would happen to the economy with FairTax. Faced with building a house/buying a brand new car (federal sales tax) vs buying an existing house/buying a used car (no sales tax) - which would I buy? No brainers for me, and my decision would certainly affect the construction industry as well as Detroit.
See my explanation above.
No, the car dealership won't lose ANY money. If you currently buy a car for $20,000, about 23% of that ($4,600) will wind up never seeing the dealer's or manufacturer's pocketbook. Why not? Because that $4,600 is the cost of compliance and of "corporate income taxes"! Notice that YOU, and not the car folks, just paid nearly five grand for "corporate income taxes"! Now you see what I mean when I say "corporations don't pay taxes, they collect them"? They just collected five grand from YOU.
Anywho, under the Fairtax, the $4,600 will not be in the original car cost, thus making the original car cost $15,400 (that's the $20,000 minus the $4,600 compliance costs that are no longer there). Add in the Fairtax of 23%, and the cost of the car now comes to $18,942 (that's the original price of $15,400 plus the 23% Fairtax amount of $3,542). You just saved about $1,100 because of the Fairtax! As for the dealer, it doesn't matter if the sticker had $20,000 under the current system or $18,942 under the Fairtax system...their cost (and thus, their profit) remains unchanged.
Now as for this: "obviously the IRS will stay put since the only way to determine the prebate is if people report their income"
NO, NO, NO! The prebate amount is NOT, I repeat NOT, determined by income! After all, there is no more income tax, so how could there be a determination of income?? It's based on family size. A family of four would receive a bigger prebate than a family of two, because they would need to buy more necessities of life (food, clothing, etc.). Do NOT let anyone mislead you with that "based on income" nonsense, my friend!
If your point is that some bureacracy would still be needed to issue prebates, you are correct and I concede that point. However, it wouldn't be nearly as convoluted and bloated as the IRS is today.
Finally: "Faced with building a house/buying a brand new car (federal sales tax) vs buying an existing house/buying a used car (no sales tax) - which would I buy"
You would buy whichever was least expensive and/or whichever was right for you. You HAVE to get this part into your head: the price of what you see ALREADY has the Fairtax built into it.
If you were debating today, under our current tax system, whether to buy a new house versus an existing house, what would you consider? You would consider price, location, amenities, emotional appeal, and a host of other things...right? You would STILL consider those EXACT same things under the Fairtax. I go back to my original point (at the risk of sounding like a broken record), too: if you bought a $200k NEW house under the Fairtax, the tax is already embedded, and if you bought a $200k USED house under the Fairtax, there is no embedded tax...but your bottom line is still the same: $200k. You would NOT get more "bang for your buck" with a $200k used home than you would for a $200k new home.
The same applies to car buying. Does a new car today cost more than a similar used car today? Of course! Would a new car under the Fairtax cost more than a used car under the Fairtax? Of course! If you bought a car as I described above (see the "$20k car vs. $18.9k car" example), it would naturally cost more than if you were to buy the same car used (completely irrespective of the Fairtax, since new cars just cost more, period).
Making sense?
Last edited by joninclay; 01-25-2008 at 08:02 AM..
This will kill the immigrants in this country.....and the businesses who pay under the table. Like it or not those immigrants and the under the table, tax free, income they make decrease the price of everything in this country. Their willingness to be cheap labor makes most foods, houses, and roads cost less than they would without them.......or do the owners of those companies just see more profit? Hmmm? So, if you kick the immigrants out with this, all prices will go up in the end. I would rather have hard working immigrants in this country than lazy, welfare collectors who "are far above it" to work for even minimum wage. Meanwhile the immigrant down the road is supporting his huge family, working his ass off, for below minimum wage.
Really this is a tax system that benefits the rich only. Immigrants will suffer, the poor and middle class will see little change, and the rich....who don't need to spend too much of their income on goods, but save most of it...will benefit significantly. So, this tax is for the 1%. The income tax is the only way to get the excess wealth out of the 1%. Without that, you will see the rich get richer. You can't tell me that the rich will spend more if they have more....they just will save more.
Again, the lower and middle class will not be affected by this. The immigrants will lose. The rich will gain.
This will kill the immigrants in this country.....and the businesses who pay under the table. Like it or not those immigrants and the under the table, tax free, income they make decrease the price of everything in this country. Their willingness to be cheap labor makes most foods, houses, and roads cost less than they would without them.......or do the owners of those companies just see more profit? Hmmm? So, if you kick the immigrants out with this, all prices will go up in the end. I would rather have hard working immigrants in this country than lazy, welfare collectors who "are far above it" to work for even minimum wage. Meanwhile the immigrant down the road is supporting his huge family, working his ass off, for below minimum wage.
Really this is a tax system that benefits the rich only. Immigrants will suffer, the poor and middle class will see little change, and the rich....who don't need to spend too much of their income on goods, but save most of it...will benefit significantly. So, this tax is for the 1%. The income tax is the only way to get the excess wealth out of the 1%. Without that, you will see the rich get richer. You can't tell me that the rich will spend more if they have more....they just will save more.
Again, the lower and middle class will not be affected by this. The immigrants will lose. The rich will gain.
I was skeptical at first too. Sounded too good to be true. Finally bought the book a few months ago and read it several times. Also read several counterpoints on the web. Seems more plusses than minuses. Definitely better than the current tax system we have now.
I'm a supporter of the Fairtax now. I've given the book as gifts to my friends.
To answer your questions above, I would say the opposite of what you say will happen.
This will kill the immigrants in this country.....and the businesses who pay under the table. Like it or not those immigrants and the under the table, tax free, income they make decrease the price of everything in this country. Their willingness to be cheap labor makes most foods, houses, and roads cost less than they would without them.......or do the owners of those companies just see more profit? Hmmm? So, if you kick the immigrants out with this, all prices will go up in the end. I would rather have hard working immigrants in this country than lazy, welfare collectors who "are far above it" to work for even minimum wage. Meanwhile the immigrant down the road is supporting his huge family, working his ass off, for below minimum wage.
This is a very interesting arguement against the Fair Tax. It's interesting because it's a reason why many people are for the Fair Tax. You are exactly right. The proposed system would tax illegal immigrants working under the table for the first time. Being for or against illegal immigration is probably a discussion for a whole new thread, but I agree with you and believe what you are saying is true.
I disagree about the groups that it would help though. Yes, poor people will remain poor because it isn't taxes that are making them poor. But the wealthy and the middle class (particularly the middle class) would do much better under the Fair Tax. The current tax system directly targets the middle class. We can debate who it targets, but we all know it. Read the Fair Tax books and you will see how it really would help out most Americans. Check out <i>The Fair Tax Book</i> and <i>FarTax: The Truth: Answering The Critics</i> for answers to these questions. I had the same exact same thoughts and questions as you and mawipafl until I got <i>The Fair Tax Book</i> and started looking into it myself.
I was skeptical at first too. Sounded too good to be true. Finally bought the book a few months ago and read it several times. Also read several counterpoints on the web. Seems more plusses than minuses. Definitely better than the current tax system we have now.
I'm a supporter of the Fairtax now. I've given the book as gifts to my friends.
To answer your questions above, I would say the opposite of what you say will happen.
I don't agree. Lower and middle income folks pay a higher percentage of their income on essential living expenses. Higher income folks have more discretionary spending and if they are faced with paying 25% sales tax for a non-essential item or investing/sheltering it from taxes, that is what many will do.
I am not arguing that the system is not broken, but Fair Tax, IMO, isn't the answer.
This will kill the immigrants in this country.....and the businesses who pay under the table. Like it or not those immigrants and the under the table, tax free, income they make decrease the price of everything in this country. Their willingness to be cheap labor makes most foods, houses, and roads cost less than they would without them.......or do the owners of those companies just see more profit? Hmmm? So, if you kick the immigrants out with this, all prices will go up in the end. I would rather have hard working immigrants in this country than lazy, welfare collectors who "are far above it" to work for even minimum wage. Meanwhile the immigrant down the road is supporting his huge family, working his ass off, for below minimum wage.
Really this is a tax system that benefits the rich only. Immigrants will suffer, the poor and middle class will see little change, and the rich....who don't need to spend too much of their income on goods, but save most of it...will benefit significantly. So, this tax is for the 1%. The income tax is the only way to get the excess wealth out of the 1%. Without that, you will see the rich get richer. You can't tell me that the rich will spend more if they have more....they just will save more.
Again, the lower and middle class will not be affected by this. The immigrants will lose. The rich will gain.
No, this will not "kill the immigrants in this country", OK? Immigrants (legal or illegal) will still be buying stuff the exact same way they buy stuff right now. Since the cost of goods and services will NOT increase under the FairTax, just how are immigrants going to be harmed?
Illegal immigrants who are getting paid under the table aren't paying income tax right now, but they're buying things. If the cost of the things they're buying doesn't increase (and I've shown where the cost doesn't increase), they will still have the same amount of money they have right now. The difference is that under the FairTax, 23% of the price they pay for the things they buy will go to the federal government. Moderator cut: edit
As for the "what to do about illegal immigrants", that is an entirely different subject for a different day. Let's stick to the FairTax, shall we?
As for this: "Really this is a tax system that benefits the rich only. Immigrants will suffer, the poor and middle class will see little change, and the rich....who don't need to spend too much of their income on goods, but save most of it...will benefit significantly."
What in the blue Hades are you talking about? The working poor and middle class will benefit greatly because they will no longer have SS & Medicare taxes withheld from their paychecks! The cost of goods and services they buy will (once again) NOT INCREASE! If their paychecks are bigger and the stuff they buy remains the same, then basic math says they will have more money!
Also, while the rich may save more than the poor do, the indisputable fact is that the rich also BUY more things than the poor do. I mean, hello??? If someone is poor, then by definition they don't have more money to spend! Whether a rich person buys a Corvette or a Corolla, a yacht or a jonboat, a McMansion or a modest condo, the rich person will be paying an embedded sales tax! The bigger the price tag, the more sales tax they pay. Seems fair to me.
Moderator cut: edit"The income tax is the only way to get the excess wealth out of the 1%. Without that, you will see the rich get richer. You can't tell me that the rich will spend more if they have more....they just will save more."
1. Did you know that the CEO of Netscape paid himself $1 as an annual salary a few years ago? He had lots of wealth, but if you look at his income, he was living in destitution! He's not the only one who does this so as to escape paying income taxes (or at least to escape paying oppressively high income taxes). Income is a lousy way to tax.
2. I just DID tell you the rich will spend more. The evil, loathsome "rich" are the heartless souls who start companies that hire people. They're the monsters who buy things that keep the makers and sellers of those things gainfully employed. Until I get hired by a poor person, I think I'll opt not to crap on the people who are in many ways responsible for keeping a roof over my head and food on my table...if it's all the same to you.
3. With the massive influx of revenue, wealth, and prosperity that the Fairtax would bring, you'd have to be hiding in a cave to avoid feeling the positive ramifications that the FairTax would bring. Or you'd have to have no drive, ambition, initiative, talent, etc., in which case there's no tax system that will help you out.
The biggest detractors of the FairTax aren't from people who don't understand it. They're from people who are deathly afraid that we can't "stick it to" the boogeyman of the "rich" anymore. Obviously, I see that class envy will not disappear whether we have a FairTax or not.
Last edited by riveree; 01-27-2008 at 07:40 AM..
Reason: editing for tone, we don't want to derail into personal attacks
I don't agree. Lower and middle income folks pay a higher percentage of their income on essential living expenses. Higher income folks have more discretionary spending and if they are faced with paying 25% sales tax for a non-essential item or investing/sheltering it from taxes, that is what many will do.
I am not arguing that the system is not broken, but Fair Tax, IMO, isn't the answer.
Contention: "Lower and middle income folks pay a higher percentage of their income on essential living expenses."
Retort: The FairTax gives a prebate to cover the cost of taxes paid on the essentials of life: food, clothing, meds, etc. Therefore, they will not be paying taxes on the necessities of life. Hint: a cell phone and plasma TV's aren't considered essentials. Face it: the poor and middle class will have an INCREASE in their quality of life, because their paychecks will be bigger with the absence of income, SS, and Medicare taxes.
Contention: "Higher income folks have more discretionary spending and if they are faced with paying 25% sales tax for a non-essential item or investing/sheltering it from taxes, that is what many will do."
1. The tax is 23%, not 25%.
2. The cost of goods and services (anyone?)...will NOT increase! See my initial explanation if you don't get that part.
3. With no more income taxes, no more SS/Medicare taxes, no more capital gains taxes, no more "corporate taxes", etc., there's no longer a need for "the rich" to shelter their money from taxes. If they don't want to pay federal sales taxes, they won't buy stuff. However, considering that the aforementioned other taxes will be abolished, trust me when I say they'll have more than enough extra money to spend on things (luxury or otherwise). They may not spend it all, but they sure will spend more than they currently do. Period.
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