Fair Tax Nation

Replace All Federal Taxes on Income with the Fair Tax Act , HR 25 and S 122

Another (hopefully) simple question

I joined FairTax based on an invitation that stated it is a "Nonpartisan organization with the goal of replacing all income taxes with a progressive consumption tax known as The FairTax." I followed some of the early "Fair Tax" efforts and found that they were neither progressive nor fair. Where can I find a description of the fair and progressive consumption based tax proposal? Thanks.

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Permalink Reply by Richard Ivy on March 5, 2009 at 10:29am
RE: "I don't use all the government that is offered to me. There's a lot of waste I have to pay for as well as services I don't want or need."

No one uses all the government services that are available and no one believes that everything the government spends money for is a legitimate expense. Poor folks have little need for FAA and none for the SEC and many others. Rich folks don't ride public transit, use public schools, and many others. Some don't like "the arts". Others don't care for the space programs or the military. Some don't even have a use for the fire departments and others would abolish the military. I don't agree with all of the things government spends on either but I am certain that if 10/100/1000/100.... people list write down their list of valid items and the priorities they place on them, you would have 10/100/1000/100.... very different lists. a legitemate government government MUST be for all of the people regardless of their social status, tastes, philosophies, etc. That means I won't necessarily agree with every dollar spent. I'm sure there are thing the government shouldn't spend money on and I'm sure there is waste but the same will hold true with the Fair Tax bill because the bill does not stipulate on what or how money is spent. And I could have a long discussion with anyone who believes that the FairTax will prevent Congress from raising the "sales tax rate" whenever it suits them. Heck! It would even be easier because a 0.001 % increase would raise the tax revenue quite a bit.


RE: "But, taxing industry only means that you'll be taxing a tax somewhere down the line. Ultimately, the consumer gets to pay that tax, since taxes are a cost of doing business and they are passed forward."

There is certainly some legitimacy to what you say here except that businesses easily "consume" a very large portion of the consumption that goes on in the US. Maybe the FairTax bill should ONLY be applied to purchases made by (or for) businesses. As you say, consumers would ultimately pay the price for. At least on the surface I'd have to say that it would be easier to police cheating businesses than cheating individuals.
Permalink Reply by John K Eck SR on March 5, 2009 at 2:52pm
Regarding what foreign tourists would pay I believe they would not pay anything more than is already "built-in" to prices now as the "built-in" taxes would go away when the FairTax is put into to place. Businesses, companies etc would no longer build their costs of taxes i.e. social security or medicare,into the cost of doing business. Their overhead and burden rates would go down, if they do not lower their costs and try to make additional profits market competetion would either force them to lower their overhead and burden or risk losing sales to other that have lowered their costs. The FairTax is not in addition to "built-in" taxes it is meant to replace those taxes. Studies have estimated the existing built-in taxes to be around 22% where as the proposed FairTax rate is 23%, granted a slight increase but considering the prebate and the fact that you no longer pay federal income, SSI or Medicare taxes everyone would have more spendable income. It should also be noted that the 22% cost that is embedded in the price system does not include the cost of complying with the tax code. In the book FairTax: The Truth, pages 146-151 address the issue of cheating on the tax.
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Permalink Reply by Jesse on April 17, 2009 at 4:41pm
I came to this forum specifically to discuss the issue of tourists paying this sales tax. I think the fairtax sales tax is a excellent idea in general. However, as Richard Ivy stated, applying this tax to tourists could devastate our tourism.

When I was in Peru, I avoided buying any big ticket items in shops that charged sales tax, because it's 19% (seemed high when I'm accustomed to only 8% here in Washington state). Further, I think their sales tax is very poorly enforced due to a very corrupt government, and impoverished population.

I believe many tourists would do the same thing in the USA. I think it would be necessary to cut this sales tax in half for tourists, so they aren't discouraged from buying expensive things in the USA, and taking them home.

Maybe I should start another thread about this, but I figured I'd start here, as there was already some discussion about it.
Permalink Reply by Sean Fagan on April 17, 2009 at 5:31pm
However, since the Fair Tax replaces the imbedded taxes, the prices on new goods and services would remain virtually the same as the tourists are paying now. In the end, there would be little or no impact on the tourism industry.

And I think you can pretty much count on all shops charging for the sales tax and enforcement would be rather high.
Permalink Reply by John K Eck SR on April 17, 2009 at 6:02pm
Please see the attached information.
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Permalink Reply by Pat Conroy on March 6, 2009 at 2:27pm
I agree that the FairTax will not necessarily change anything on the spending side; however, it may tie spending more directly to the tax each individual pays. Currently, for those in the 50% of the population who pay little or no income tax, there is not much about spending that they really have a reason to oppose.

There will always be the push/pull among advocates of spending more/less, raisint/lowering the amount of the prebate, and taxing more/less. The difference with the FairTax is that it is very transparent.

The genius of the FairTax is that class warfare goes by the wayside. If the rate is changed, it is changed for everyone. If the amount of the prebate is changed, it is changed for everyone.

This is one of the things that will make it so difficult to get passed. Class warfare is one of the mainstays of the political class.
Permalink Reply by Ron Wenrich on March 7, 2009 at 6:52am
I saw this on an economic blog, and think it may tie in to this discussion.

There are 2 ethical camps on the function of government. One is of the view that the individual has the responsibility of their own decisions and the government should play the role of enforcing property rights. That involves such things as funding the military, having a set of laws and some social services.

The other camp believes that the government should be benevolent and compassionate to those that are less fortunate. It plays more of a protector role. Taxes are not to be viewed as a burden, but more of a tithe.

Under many tithing systems, people usually give a certain portion of their income. That's called a flat tax. My state and local government has this system. No deductions, so I'm paying tax on my taxes.

The progressive system of taxation on income is a way of making those deemed to have more ability to pay charged higher rates. It can also be used as a punitive measure where Group A decides that Group B is making too much money and they charge more.

Tax is often used to vary a certain activity. If a business makes too much money due to market conditions, they want to use a windfall profit tax. If they loose too much money, they want to give a subsidy. If they want to limit smoking, they raise the tobacco tax.

So, how does raising taxes on higher income people and businesses give them any incentive to earn more money? No matter what your activity, the government is always your partner.

The Fair Tax does not address any type of government direction. It only says that government should tax people based on their wealth through purchases and not through their paychecks. Its a system that is used to fund government.

And the Fair Tax is also better at policing businesses than individuals. Businesses will be the tax collector for the IRS. The individual will be paying those taxes to a business and will not have to report anything to the IRS. The IRS will be able to check up on those businesses since they will have a greatly reduced workload.

The Fair Tax is not a perfect system. But, its a lot simpler than the current system, and it costs a whole lot less. Will there be tax cheats? Sure, but the current system has them.
Permalink Reply by Deborah in Ohio on April 18, 2009 at 11:42pm
Richard, I can understand you desire for fairness, but my eyes are glazing over trying to understand the complexity of what you're saying. The whole point is to keep it simple!

The current tax system taxes people who don't have a full time job, who never get pay raises, and who have to have Food Stamps from Uncle Sam to survive! How is that fair or helpful?

Why tax anyone who doesn't have a full-time job and can't support themself? Doesn't that seem like cruel and unusual punishment to you? It sounds like nonsense to me. The FairTax gives me 100% of my paycheck back, so I have a lot more money to work with!

FairTax untaxes people up to the poverty level. And it doesn't take a lawyer to figure it out. By the way, paying according to your ability sounds like something out of the Communist Manifesto. How did that work out for Communist Russia and China?

And legalizing sins to avoid tax cheats? You've got to be kidding! What's the point? I could tell my 5 year old it's OK to smack his 2 year old sister upside the head to keep him from breaking my rules, but nah. Not gonna happen on my watch!
Permalink Reply by Nancy L. Gatchel on April 18, 2009 at 1:25pm
Services already have an imbedded tax and tax compliance cost, in the neighborhood of 25 to 30%. Obviously, this is decreased under the Fair Tax. Your topic also brings to mind the size of the federal government. Elected officials' income isn't taxed for Social Security or Medicare. At the point of consumption, the fastest growing industry in the nation, the federal government, would be contributing. I believe this is fair.

"....each according to his wealth" - I like that. The person making 50 thousand annually buys the new car he can afford and the person making 250 thousand will buy a more expensive new car, henceforth, the wealthier pay more taxes.

I live on Soc. Sec. benefits. The monthly prebate to untax the necessities would benefit me greatly. As it stands, I DO pay federal taxes and compliance costs imbedded in every new product or service that I buy. Supposedly, Soc. Sec. is not taxed. Not so. Our present tax code, in my opinion, is a form of extortion.

The IRS will get you one way or another. What a leviathan drag on our economy! Fair Tax perfect? No. But it beats any plan I've seen by a long shot.
Permalink Reply by Deborah in Ohio on April 18, 2009 at 11:47pm
By the way, Richard, I hope we're not being too hard on you. We all had millions of questions when we first heard of the FairTax too. It was just too simple! It takes a while for all the awesome benefits to sink in. We had a learning curve, and we have a lot of grace toward your learning curve. Feel free to keep asking questions! You're helping us sharpen our communication skills!
Permalink Reply by Nancy L. Gatchel on April 19, 2009 at 7:05pm
When I used the phrase "each according to his wealth", I realize that it's not usually a phrase that a free market capitalist nation likes to use. However, the Fair Tax actually makes this possible, only in the sense that the wealthy spend more. I can see that I may have used this phrase in an erroneous fashion. Hopefully, I've explained the point I was trying to make.

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