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Any of you AM radio listeners out there should check out Neal Boortz...he's a big proponent of it (co-wrote the book). He's on AM690/106.5FM from 9a-12p M-F.
I am for the Fair Tax.....my question is how can we be so sure that prices will stay the same (or even decrease the full 23%)?
Going back to the car example. Say as new car today cost 20k, of which $4,600 is taxes...who is to say that after the fair tax is passed, the auto dealers (or whoever) would roll back their prices the full 23%? My thought is that they may be able to roll it back $2600 and we'd still see the sticker price of $17,400 and think we are getting a deal. Then the dealer gets to keep and extra two grand out of the deal.
After all, look at gas prices...no matter how low pricel go for a barrell of oil, I think the gas stations would dtill be able to charge a little higher than normal.
Say if prices dropped so much where they would normally charge $2.50/gallon, I think they could get away with charging $2.60 or $2.70 because that would seem like such a deal to what we are paying today.
Does that thought make sense?
I wish I was going to be in town for the rally I would love to go.
Any of you AM radio listeners out there should check out Neal Boortz...he's a big proponent of it (co-wrote the book). He's on AM690/106.5FM from 9a-12p M-F.
Question: "my question is how can we be so sure that prices will stay the same (or even decrease the full 23%)?"
Answer: Competitive pressures from the marketplace. Have you ever paid attention to "car wars"? Between rebates, employee discounts, etc., car dealerships are in a cut-throat war for our business. If one of them doesn't drop their prices, rest assured that the rest of them will. It happens every single time, without fail.
Also: "Going back to the car example. Say as new car today cost 20k, of which $4,600 is taxes...who is to say that after the fair tax is passed, the auto dealers (or whoever) would roll back their prices the full 23%? My thought is that they may be able to roll it back $2600 and we'd still see the sticker price of $17,400 and think we are getting a deal. Then the dealer gets to keep and extra two grand out of the deal."
Two replies:
1. See the retort above. Competitive pressures will force the dealership to "sink or swim", i.e. drop their prices or lose their butts. Like I said, every time it works. When one car company lowers their prices (and in order to attract business, they do exactly that), the rest follow suit.
2. Let's pretend that we live in Fantasyland where the law of supply-and-demand cease to exist. If the dealer drops the price $2600 instead of $4600 AND you like the $2600 savings, and the dealer pockets the extra two grand out of the deal, why do you care? You got the car for the price you wanted and saved an amount that was satisfactory to you. If you don't like the savings, you can opt not to buy the car, in which case the dealer loses a whole heckuva lot more than the $2k he was hoping to pocket. It's a voluntary transaction.
Your gas price analogy is faulty, because it's wrong. And I have proof:
Remember here a few years ago, during the month of August, the state legislature passed a law that waived the state's gas tax? The state said that from August 1 - August 31, they would no longer charge sales tax on gasoline. They said that the gas stations could charge the sales tax on the gas that they already had in the ground at their stations (since it had been purchased at the higher price), but any new gas that was obtained by the stations after that supply had to be sold to the public without the gas tax. In other words, the state warned us, don't expect to see the savings the morning of Aug. 1, but instead, somewhere around the 3rd or 4th.
Well, wouldn't you know it, the market responded? Gate gasoline released a public announcement that despite the green light to wait until the gas supplies in the ground were gone, they were going to immediately pass on the savings to their customers. This move forced the rest of the gas stations to immediately drop their prices, too, since no one was going to buy gas from them if they could go to Gate and get the savings instantly. All of the gas stations around FL dropped their prices, so as not to get left behind in the marketplace of supply-and-demand.
That was with gasoline, supposedly a commodity that the companies are just "dying to stick it" to us! It didn't work that way. The market worked, and as that example showed, it works every single time! Trust it.
My only fear would be that the notebook manufacturer would leave the retail price at $1.00 and use the extra nickel to pay for a bigger CEO retreat.
Don't get me wrong, I'm all for abolishing the IRS since they were supposed to be a temporary entity anyway. I just want to be sure that everyone feels the benefits and not just those at the top.
WitchDoctor, see my explanation as to why the price difference would be passed on to the consumer.
I don't agree. Lower and middle income folks pay a higher percentage of their income on essential living expenses.
And the Fairtax would let all families keep ALL of their salary, rather than the government taking its cut before they even see any part of their money. Now, that family will have control of spending their prebate money on any buying essentials, and determining how much they can afford to pay in taxes by purchasing what they need or want.
With the Fairtax, you have a CHOICE of paying more taxes or less. Do you need a brand new house or car? For some people, they want brand new. Good for them. Other people will settle for "less" - a 1 or 3 year old car will do just fine. Etc... etc.... You have a choice on the amount of taxes you pay.
Years ago, I would let my employer withhold the tax from my salary because I was too lazy to figure things out come tax time. I would be elated at getting a "refund". I was part of the sheeple. The government wants it this way. It favors them greatly.
Then I matured and became more financially conscious. I became an independent contractor and suddenly had to face financial reality on a daily basis. Tax time was hell-time. But I was aware of how much the government was ripping me off. And spending money like crazy. My "refund" was really nothing more than the government taking too much of my income and kindly giving it back to me, after they'd made a whole year's interest on it. Or close to it.
I prefer the second: being more financially aware.
Quote:
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.
A bit of a misunderstanding here: there would be no 25% sales tax ON TOP of the item price. It would be included in the item price. The price is expected to stay the same.
Whatever product you buy now, whether its a T-shirt or a car, has approximately 23% "embedded tax" already in it. This is the estimated cost to the company of complying with the convoluted tax code - withholding tax, SS, FICA, etc... . Just imagine whole divisions of employees and outside consultants retained by a company, doing tax compliance related work rather than work related to the company's core business.
With the Fairtax, this 23% "embedded tax" or "cost for tax compliance" would essentially go away. The product would be 23% cheaper. So even if a 23% Fairtax replaces that, the final item price would still be the same.
The higher-income folks would still be buying the same priced product. In fact, they'll most likely be spending more stuff and even bring back their fortune stashed away is some Swiss or Cayman bank account. There would be no reason to "shelter" their money from taxes.
I'm sure someone will question that if a company, say GM, under the Fairtax, is able to cut cost by 23%, why would they voluntarily pass that on to the consumer through lower product prices?
Simply that MARKET COMPETITION will force them to. The other car companies (who also cut costs by 23%) will most likely compete on price.
I've been "conditioned" to believe that the government has a right to tax me before I even see any of my salary. The Fairtax book has a great backbrounder on the evolution of the income tax and how the American public was fooled into wanting to be taxed. Then conditioned to just accept it. The book is a pretty good read. I've already ordered the sequel to the Fairtax Book - "FairTax: The Truth: Answering the Critics"
If I had a concern about the Fairtax, it would be the anticipated short-term effect of people losing their tax-related jobs. But this would be short term, because they would then be able to work in the core business of their companies.
Here are some interesting articles on income taxes. They're a bit old, but the idea is still good.
OpinionEditorials.com – The Income Tax and How it Undermines the U.S. Economy - Liakos (http://www.opinioneditorials.com/guestcontributors/cliakos_20051128.html - broken link)
Is it really fair to call the Fair tax a fair tax?
Isn't it true that it mostly benefits the upper class - upper tier of income?
And the middle and lower classes dont get as much benefit?
-jeff
Winchester, MA
How about this? Let's say you make $100K a year gross salary. You'd be solid middle class. With the Fairtax, you'd take home your $100K Net salary. No more gross or net. You take home $100K.
Your neighbor makes a million bucks a year. He takes home a million bucks a year. Do you really care if he makes a million bucks a year? His making 1 million bucks a year does not affect you adversely. In fact, it might even help you to have a really wealthy neighbor. You might even want to make as much as he does someday.
You buy a new car within your budget (say $30K). He buys a more expensive new car because his budget is higher (say $70K). Ergo, he pays more taxes than you do. Then he also buys a new boat. A vacation home. etc.... Bottom line is: he pays more taxes than you.
What's not to like in that scenario? If you're concerned about the percentage of tax he's paying in relation to his income, well, now, you're talking class or wealth envy. That's a totally different matter. No amount of tax code tinkering can fix that. The only fix for that is for you to start making a million bucks a year too. Heck, you'd better start making 2 million. Show him who's the big guy around there.
In fact, in the current tax system, the wealthy are paying a fortune to tax lawyers and accountants to basically shelter their money overseas from the oppressive tax code here. I would rather the Fairtax be passed and the rich can bring back their money into the country and invest in this country again, rather than overseas.
So, where does the 23% tax rate come from? In an economic system so complex, who was the noble prize winner who decided that 23% would create a nice balance for consumers, the government, and corporations? Why not 18% or why not 31%...why 23%? Why does that number work?
And also:
This will not kill the immigrants only if the prices do come down like joninclay mentioned in his car example. Only if. So, the immigrants can only be saved if corporations decide to take their 23% percent tax break and give it all back to the consumer.....not wanting any of that 23% as additional profit. They will lower prices exactly with the tax breaks. Hmm....yeah you are right joninclay....prices will go down exactly with the tax break...companies will not seek any additional profit...and the consumer will see all the benefits of it. Yep.
And yes, no sales tax is fair to everyone....only staggered rates are fair......you have to tax the rich at a higher percentage! If this system included a staggered sales tax on luxury items I might think it was fair...but any rate that is across the board the same for everyone whether you make 10,000 or 10,000,000 is unfair and would be a huge disaster for this country's government. The revenue that the government would lose would be significant.
To rely on people to buy luxury items to run the nation is in my opinion a disaster waiting to happen. Because that is where the largest portion of tax money would come from....the rich...and to get enough tax revenue out of their hands they need to buy luxury items. I for one, would buy everything online from overseas. I would pay 7% sales tax from "AnyOtherCountry" and would buy only the basics from the US at their 23% rate. I would win big, the government would lose. My nations infrastructure would crumble before me, but I would have more money in the bank!
So, where does the 23% tax rate come from? In an economic system so complex, who was the noble prize winner who decided that 23% would create a nice balance for consumers, the government, and corporations? Why not 18% or why not 31%...why 23%? Why does that number work?
And also:
This will not kill the immigrants only if the prices do come down like joninclay mentioned in his car example. Only if. So, the immigrants can only be saved if corporations decide to take their 23% percent tax break and give it all back to the consumer.....not wanting any of that 23% as additional profit. They will lower prices exactly with the tax breaks. Hmm....yeah you are right joninclay....prices will go down exactly with the tax break...companies will not seek any additional profit...and the consumer will see all the benefits of it. Yep.
And yes, no sales tax is fair to everyone....only staggered rates are fair......you have to tax the rich at a higher percentage! If this system included a staggered sales tax on luxury items I might think it was fair...but any rate that is across the board the same for everyone whether you make 10,000 or 10,000,000 is unfair and would be a huge disaster for this country's government. The revenue that the government would lose would be significant.
To rely on people to buy luxury items to run the nation is in my opinion a disaster waiting to happen. Because that is where the largest portion of tax money would come from....the rich...and to get enough tax revenue out of their hands they need to buy luxury items. I for one, would buy everything online from overseas. I would pay 7% sales tax from "AnyOtherCountry" and would buy only the basics from the US at their 23% rate. I would win big, the government would lose. My nations infrastructure would crumble before me, but I would have more money in the bank!
Just read the book. It addresses every question you have and much more. Read it several times if need be. I've read it several times myself. Its really a very simple concept, yet really revolutionary in light of our current tax code mess. If you don't want to pay for it, borrow it from the library.
Somebody told me that our country revolted from the Brits because of a 3 or 4 % tax ?! Is this true? 3 or 4 percent?
I am SO glad I did not cause a fight! I would love everyone to attend the event, whether you support it or not it is always good to be informed and educated! (Even if you just want to know what you are fighting against!) Education never hurt anyone.
AND just an FYI....
Quote:
Originally Posted by mawipafl
I did think of an easy loophole: dealership salesmen can take a new vehicle and drive it around enough to classify it as "used" which would mean no federal sales tax for me the buyer. Here's a possible ad we just might see -- don't pay the federal sales tax; buy a used [whatever] today that's as close to brand new as you can get!
Told ya I was cynical :-)
Car dealers sell demos ALL the time, (cars for test drives with some miles on them), as new. The law is that a car is still new regardless of the mileage on it until it is registered/titled. Husband used to be Tag/Title Clerk at a dealership
I am SO glad I did not cause a fight! I would love everyone to attend the event, whether you support it or not it is always good to be informed and educated! (Even if you just want to know what you are fighting against!) Education never hurt anyone.
AND just an FYI....
Car dealers sell demos ALL the time, (cars for test drives with some miles on them), as new. The law is that a car is still new regardless of the mileage on it until it is registered/titled. Husband used to be Tag/Title Clerk at a dealership
That's one of the reasons I like the Jax Forum. Most people here seem very reasonable and are willing to listen to different points of view.
I wonder if this Fairtax bill will get any kind of traction AFTER the election? It seems like a very long shot because only ordinary citizens want it. The politicians sure don't. And the self-interest lobbies will surely fight it.
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Fair Tax, is it really FAIR?
