Replace All Federal Taxes on Income with the Fair Tax Act , HR 25
I Could Use Some Open Discussion From Valuable Supporters Of FairTax
I have read the FairTax books and studied them. I have read the Fair Tax Act of 2009. I feel comfortable answering questions in my personal life and on Twitter.
If the idea of "progressive" starts and ends with the prebate then that answers my concern. It doesn't satisfy the potential misconception for others that have never read the books or had FairTax explained to them. A sales tax on consumer goods and services or the exemption of tax (prebate) may be described as having progressive effects as it increases a tax burden on high end consumption or decreases a tax burden on low end consumption respectively. This should be explained to a greater extent, or enlighten me by telling me where I missed the explanation.
If you are politically motivated as I am and are conservative to boot, just the word "progressive" has a negative connotation. What we have now is progressive taxation, and I don't need to explain how bad that is. Progressive can have a negative impact if it refers to a specific political ideology, or if it refers to taxation. One word can make or break a deal, and we need every positive possible.
The opening line in explanation of the FairTax on the website states :
“including a progressive national retail sales tax”
This can be very misleading when it actually is a fixed 23% sales tax on goods and services, so the mention of progressive seems out of place.
With Obama-nomics and his unprecedented spending, how solid is the 23% when we are on the hook for a $24 trillion deficit? I have a Congressman who shows an interest, but I will not push if I cannot be convinced there is no ambiguity in the legislation or promotional media.
If the idea of "progressive" starts and ends with the prebate then that answers my concern. It doesn't satisfy the potential misconception for others that have never read the books or had FairTax explained to them. A sales tax on consumer goods and services or the exemption of tax (prebate) may be described as having progressive effects as it increases a tax burden on high end consumption or decreases a tax burden on low end consumption respectively. This should be explained to a greater extent, or enlighten me by telling me where I missed the explanation.
If you are politically motivated as I am and are conservative to boot, just the word "progressive" has a negative connotation. What we have now is progressive taxation, and I don't need to explain how bad that is. Progressive can have a negative impact if it refers to a specific political ideology, or if it refers to taxation. One word can make or break a deal, and we need every positive possible.
The opening line in explanation of the FairTax on the website states :
“including a progressive national retail sales tax”
This can be very misleading when it actually is a fixed 23% sales tax on goods and services, so the mention of progressive seems out of place.
With Obama-nomics and his unprecedented spending, how solid is the 23% when we are on the hook for a $24 trillion deficit? I have a Congressman who shows an interest, but I will not push if I cannot be convinced there is no ambiguity in the legislation or promotional media.
Replies to This Discussion
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Permalink Reply by Randy Stone on -
Think about how many jobs will come back to America after the Fair Tax. Think about all the income that is NO LONGER TAXED.
When we work hard to bring home the bacon and it seems the more hours/jobs we work, the less we bring home. With our current tax code punishes someone for working more then that is regressive tax. So after the Fair Tax, I can earn as much as I want without taxation. I will only pay tax on consumption and that level should be the same in both tax codes.
In short,
It will create jobs that our current tax code hinders
I can earn as much as I want to and not be penalized for it with tax brackets
And as you already stated, the lower income will FINALLY be basically UN-TAXED!
I have a problem getting people to truly understand that the 23% sales tax is a wash with all the hidden taxes that are passed on to them. If I have enough time and their full attention, I can get that point accross but many will not get passed the thought of a higher sales tax. That is my only problem other than the usual "oh it will never pass" comment.
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Permalink Reply by Brian Durham on
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I think it's important to lay out the positives with a FT. Many people ask "what's in it for me", "what will I loose" or "does it fall within my economic and/or social economical beliefs" whether they are liberal or conservative?
Most American Citizens support, stand behind, live, eat, breath and if need be would defend our capital / free market system. Those that stand behind the free market / capital system must trust it or they would not be standing behind it. Any notion that says a Fair Tax system would not bring in enough income would seem to be a direct contradiction in the very system in which they trust and defend. Is it our capital / free market system people are trusting or is it really the fact that our government can legally cease working income and / or make money from thin air they are trusting?
Both of which are wrong. Ceasing income from Business or Individuals while allowing other to soak up the benefits of such has been a recipe for disaster in which our current economic situation can attest. Making money from thin air, well just listen to the world today and hear what they are saying about the Dollar Bill, that should speak for itself.
My point, How could anyone not trust or want a FT system that would become part of that free market society. How could anyone not trust the FT if they completely trust our capital / free market system? How could any mainstream party not want this if they are truly a party for this nation and what it stands for?
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Permalink Reply by cary henderson on
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> The progressive feature is the prebate. Think of it as the reverse of the personal exemption/standard deduction on your income tax forms. This applies to all family members at a fixed rate.
> As to the effects of the trillions of deficit; there is no real talk of raising taxes now, except the hidden kind, Cap and Trade etc.
> In truth the FairTax is the best way to deal with deficits. Once people see directly how much tax they are paying they will put pressure on Congress to reduce spending as a way to reduce the deficits.
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Permalink Reply by Ron Teidel on
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I appreciate any and all discussion on my original request. After reading the direction of the comments, I feel it is necessary to elaborate on my concerns.
I am already sold on the concept of FairTax and believe that it is a resolution for many of the ailments we are currently a slave to in our current form of taxation. So I don't need to be sold on what I have supported for well over a year now.
Please re-read the part of my discussion about "progressive", it is or could be a pivotal issue to potential supporters as I expressed unless it is crystal clear in it's intent. My intent is to point out a question that has come up and needs an answer that is addressed in the promotional documentation. If we are using the word progressive it needs to be explained exactly how it fits into the scheme of FairTax.
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> The idea of progressive taxation is different things to different people. If you take the Marxist view progressive means complete destruction of wealth in the middle class. In that scenario the rate of taxation increases with the level of income to the point that there is no reward for work. When this situation is reached there is no possibility of changing ones position on the socio-economic ladder. You then end up with a welfare class that is paid to remain in that position, and an elite class of rulers who have enough wealth that taxes on income doesn't effect it. Everyone in between has to work for a living, with the rising tax burden preventing them from any gain.
> The concept of progressive under the Fairtax is a different one. The Fairtax is progressive only down to a predetermined point, the Federal poverty level. Each individual and family is allowed to spend without taxation up to that level. The unique idea of a prebate on the consumption tax allows this. Those who have more wealth will tend to consume more thus a progressive tax rate is ensured since the tax paid becomes greater with increasing consumption. A person can alter his or her status economically by changing spending habits. Furthermore since saving is encouraged under the FairTax thrift is rewarded and investment without greater accumulation of debt will increase.
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Permalink Reply by chiefcook on
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Many people will tell you that a "sales tax" is regressive in that the lower income people will pay a higher ratio of tax as they will spend all their income where a wealthy person will not be spending their entire income. Therefore this type of taxation is bad for low income people. The converse of "regressive" is "progressive" meaning a progressive tax system is better for low income people. The Fair Tax without the prebate and the fact that it only applies to new goods and services would be labeled "regressive" by those who oppose it. This is one of the easiest ways to explain the labels.
This is another thing to help explain the "progressive" nature of the Fair Tax.
Everyone pays the same percentage (flat rate percentage) but only on new goods and services. The prebate provides every qualified family with the amount of federal taxes that will be paid up to the poverty level determined by HHS agency. If you look at the effect of the flat rate on the family at different income levels you can see how the wealthy person will have an effective tax rate higher than lower income person. Using one person family, the poverty level is $10,900 The person that spends at or below this amount on new goods or services will have an effective rate of ZERO; the person that spends $21,800 will have a tax rate of 11.5%: the person at $43,600 (4 times) has effective tax rate of 17.5%; person at $87,200 (8 times) has effective tax rate of 20.125%; person at $174,400 (16 times) has effective tax rate of 21.56% and finally $348,800 (32 times) has effective tax rate of 22.28%. No family will have a tax rate greater than 23% on their purchases. The family can lower their effective tax rate by buying used goods whenever possible. You can use the size family you want but the percentages will remain the same at the various amounts above the poverty level for the similar size family.
Hope this helps better understand the differences.
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I want to thank cari henderson and chiefcook for their thoughtful response to my last post, and hope that if something comprehensive does not already exist that something by the keepers of the FairTax.org address this questionable issue of "progressive".
Maybe a great place to start would be in FAQ.
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> There was a response written to an article claiming that the Fairtax was regressive a year or so ago. I believe it is still available on the FairTax.org site, but I can't find it. In the response the writer uses economist's formulas to prove that the FairTax is progressive. One of these is called a gini coefficient I believe. You could look for that if you want a more academic explanation.
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Permalink Reply by Jesse on
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Ron,
I don't know that a single country in the world has a tax system that isn't in some way progressive or attempting to be. I think what we're striving for here, is progressive tax that is fair to all Americans. If you want a tax that is not progressive, I think you'll have a hard time selling it to any group that won't specifically benefit from it.
I think this is a good article:
http://en.wikipedia.org/wiki/Progressive_tax
I think for any comprehensive, national taxing system to work, it has to be progressive. I welcome you to show me otherwise.
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Thanks once again for any discussions I have been afforded, I truly appreciate them.
Clarification. I am not opposed to the word progressive as long as the intent is well defined, and it doesn't become a slipery word that drags us into the abyss of the unknown. As you know our current system is a progressive taxation, but it isn't fair because it has a tendency to financially enslave those, who are above the poverty level, into a capital grabbing device with no return on investment, and a tax code that serves no avereage American, but is an escape device for special interests. The FairTax is the greatest solution to federal taxation I have seen in my lifetime. It appears to be a good solution to many things, however, my concern still exists.
What is progressive about the FairTax? I am looking for a definition to support the claim in the explanation at the web site "including a progressive national retail sales tax". There is nothing progressive about the 23% consumer sales tax on all goods and services, that is pretty clear cut, and progressive is mentioned nowhere else except to describe Karl Marx and his philosophy in The FairTax Book.
If we don't need the word, and it's negative connotation, let's lose it which is all I'm trying to point out.
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The label "progressive" is by the vast majority of pundits is a positive label when compared with "regressive" which is attached to any straight sales or consumption based tax system.
The concept of a "progressive tax" is for the people that spend a higher amount will pay a higher tax rate than those that spend a lower amount. Since the Fair Tax (flat tax on consumption), would be a larger burden on low income people without the prebate and therefore be considered regressive as low income people must spend more of their total available funds to live. The prebate makes the effective tax rate a variable percentage based upon the spending. See my post above where I demonstrate the effective tax rate can go from ZERO up to 23% as the amount of spending rises.
People are going to put a label on everything. Do you have a better label to express the positive connotation that we should use?
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I am so impressed with the responses I got from everyone. If I wasn't already sold on FairTax, I would be now.
Let me try to sum up the answer I come away with. The only two areas that one could walk away with an understanding that Fairtax has any similarity to progressive taxation would be the prebate and spending on goods and services beyond the poverty level. The government publishes the poverty level and the prebate is determined on family size, while all Americans are taxed a flat rate of 23% on consumer spending above the prebate level. The good news is no one escapes their fair share of taxation, and gone is the progressive form of taxation based on income. Every American controls their own taxation based on how much they choose to consume in goods or services. The desire and ability to live above life's basic necessities at the poverty level will motivate most to increased spending and ultimately their contribution to the free market system and the taxes needed to run our country.
I was asked by cheifcook to apply a label that bears no negative connotation to taxation in the statement "including a progressive national retail sales tax". We don't need to replace the word progressive, why not just drop it? It's misleading. There is nothing progressive about it, it's 23% whether you buy a pack of gum or a brand new Porsche 911 GT2. If it is absolutely imperative the national retail sales tax be be given an introductory title why not "fixed", or "flat", it would be far more conducive.
It may seem like I am splitting hairs, and if so I apologize. I have written work instructions, and manuals all my working life with the constant direction that they had to be written in such a way that they were idiot-proof.
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