Replace All Federal Taxes on Income with the Fair Tax Act , HR 25 and S 122
On Implementation of Fair Tax - Taxed Twice on Savings?
OK, so I have money that has already been taxed in savings or wherever. Say $1,000. On implementation of the Fair Tax, I now need to spend 23% more for a product using money that I've already paid taxes on. I've read both books and can't figure out how this is addressed. Effectively, I would be paying taxes on my saved money again.
The day before the Fair Tax is implemented, a product costs $1.00. The day the Fair Tax is implemented, I now have to pay $1.23. Which is fine, if there is no longer an Income Tax on my paycheck.
Wouldn't a Pre-bate on all my current cash / assets need to be made in order NOT to lose 23% purchasing power on money I've already paid taxes on?
Am I missing something?
Thanks!
Replies to This Discussion
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Permalink Reply by Dennis Wall on -
I don't "BELIEVE" the 22% embedded taxes are wasted money. I "KNOW" FOR A COLD HARD FACT "IT IS WASTED MONEY", JUST AS MUCH AS "WATER IS WET", IS A COLD HARD FACT. We pay our taxes on income, the business pays their taxes on income, and the government receives these taxes. Then the business passes these taxes on to us in the price of the product. The government receives zero money. We paid TWICE (actually more than twice, we paid personal income and the business taxes as well the 2nd time around) and the government collected ONCE. THE GOVERNMENT COLLECTS 2.5 TRILLION PER YEAR FROM OUR TAXES AND IT COST THE CITIZENS 5 TRILLION IN TAXES. "THAT" IS THE "WASTED MONEY". AN ARTIFICIAL INFLATION AND THE MOST INEFFEICENT WAY TO FUND A GOVERNMENT.
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Permalink Reply by Dan Hunt on
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Dennis
We pay the embedded tax every time it's imposed at each stage of production, however many times that will be but often more than twice. Then include taxes on savings and investments. In the end we are taxed far more than twice under the income tax code.
I find it amazing and shortsighted for retirees to prefer maintaining the status quo at the expense of future generations thereby ensuring they to will be enslaved to the federal government as previous generations.
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Permalink Reply by Dennis Wall on
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Exactly Dan, it makes you think they may be a little low on the 22% embedded taxes. I fear if we do not get the FairTax installed, so we can show these idiot politicians how much they can spend without bankrupting this country, the next bubble to burst will be the US government, and a Social Security check or an unemployment or welfare check won't be worth the paper its printed on, if the banks won't cash them.
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Permalink Reply by Dennis Wall on
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Purchasing power is part of the equation Hank, our purchasing power is 78% (100-22). When you figure the percentage of our gross earnings that we get to take home as take home pay and then multiply that by 78% we are all at around 50%, then we have to pay our local property taxes and in my state (NC), having already paid state income taxes, we pay 7% sales tax on top of that. The $5 trillion is probably short of what it cost us. Thats why I say Income Taxes is the DUMBEST THING mankind ever devised.
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Permalink Reply by John wiese on
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Here is how dumb the government is, if the FairTax was in place now the government would have collected at least 50% more revenue than they have so far this year. The FairTax is calculated as (GDP- exports+ imports) times .23, now there is no way to know how much of the GDP is exported, however we do know that we import more than we export, so taking the GDP number and multiplying it by .23 will give us a low end number; then compare that number to revenue collected year to date and you will realize that during a recession when income is low people still spend money which would give the feds more money to waste(I mean pay their bills) as well as giving us more money to spend. Sounds crazy, but because every sale is taxed that means imports and people on vacation from overseas, people that work for cash, drug dealers, prostitutes, and illegal aliens will all be taxed which will allow us all to pay less. If you want to run the numbers yourself go to www.USDebtClock.org
The FairTax will not fix all our problems but it's a huge step in the right direction.
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Permalink Reply by Dennis Wall on
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There will be winners and losers. The losers are the career politicians who love the power and glory and their only goal is getting re-elected, they will not be able to hide the cost of government from the people. And the criminals they will lose. The Winners will be the citizens, all of them. The younger people will gain the most, the older will gain the least. And you will gain even if you live on Social Security alone. If we go with yours and Mr Jorgensons assumptions and the price went to $118 on a product that now cost $100 and you are living on SS alone then you are spending at the poverty level and the prebate will cover $27.14 of the cost leaving you with $90.86 for the purchase. I, to am getting close to retirement age and I will not benefit as much as younger people, but maybe that is just, because we shouldn' t have been sitting on our butts all these years and letting things get out of hand as they have, we should have fixed things along time ago and we could have benefitted more.
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Permalink Reply by Steve Keller on
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I would like all the FairTax bashers to respond to the following assumption. Let’s assume for a moment that the FairTax is our current tax system. Let’s further assume there is a new FairerTax bill in congress that would replace the FairTax.
(1) Would you support this FairerTax bill if you were now required to fill an income tax return by April 15th of each year?
(2) Would you support this bill if you were now subject to an IRS audit?
(3) Would you support this bill if it replaced the consumption tax with an income tax, a payroll tax, a corporate tax, a capital gains tax, a gift tax and it cost twice as much to monitor this new means of taxation?
(4) Would you support this bill if you were now required to keep track of all financial transactions, and failure to do so could be subject to fines, interest or even imprisonment?
(5) Would you support this bill if only certain people will be able to take advantage of certain loopholes; mainly wealthy Americans?
(6) Would you support this bill knowing you may need to hire a tax accountant because of the complexity of the new 60,000 page tax code that includes over 1200 different tax forms?
(7) Would you support this bill if it created a withholding and payroll tax that would reduce you take home pay by as much as 30 or 40 percent?
(8) Would you support this bill if taking on a second job to fill your family needs would result in a greater up-front percentage being deducted from their paycheck?
(9) Would you support this bill if you would no longer receive your monthly prebate check?
(10) Would you support this bill if it resulted in prices of goods and services to increase by 10 to 15 percent as a result of corporations passing on the new taxes and the cost to comply with these taxes?
(11) Would you support this bill if the earnings from you investments were now taxed?
(12) Would you support this bill if now your child’s college education were no longer tax exempt and you now needed to save towards their education with after tax dollars?
(13) Would you support this bill knowing that trillions of dollars of investments will move offshore resulting in a huge number of lost jobs?
(14) Would you support this bill because it would give more power back to government where it belongs?
(15) Would you support this bill knowing that lobbyists will now be able to offer favors to congressmen if they vote a certain way to alter this new code?
(16) Would you support this bill knowing it will be easier for the Federal Government to raise taxes by manipulate the code?
(17) Here is the best one. Would you support this bill if illegal aliens, and those profiting from the underground economy would no longer be paying taxes.
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Permalink Reply by Ron Mullins on
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Steve, I totally agree with your comments / approach.
One point, I have not heard, is about mandatory distributions from IRA accounts. With the FairTax you would no longer be penalized, for withdrawing to small amount from your IRA accounts.
If we can get the FairTax passed before I turn 70 1/2, I won't have to worry about all the regulations put on IRAs.
As far as spending money, I have already paid taxes on, I could care less. I will gladly take all the benefits, which come, from having The FairTax and go from there.
Steve pointed out many of those differences / benefits in the 17 points of, if we already had The FairTax.
Just a thought
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Permalink Reply by Deborah in Ohio on -
Mr. Wolf, as a legal secretary, I can assure you that after the Fair Tax is implemented, and corporations begin to save money that they will no longer need to spend on tax lawyers and accountants and the lack of corporation taxes, they will HAVE to keep their prices the same or lower them. No consumer in their right mind will purchase the same amount of goods if they all go up 23% the next day after the Fair Tax is implemented. As soon as one store (WalMart or Meijers) lowers their prices, their will be price wars, and all the prices will come crashing down.
Besides, we'll have 100% of our paychecks and employers will not be able to cut our checks down to size because there would be mass rioting in the streets! People all across the country would begin filing lawsuits against their employers, especially in unions!
You keep harping on savings being taxed twice when they are spent. They ALREADY ARE! When you spend $100 now you are already paying 23 to 25% in embedded corporate taxes that corporations have passed down to you. When they no longer have corporate taxes to pay, they can just send the 23 to 25% tax directly to Washington.
So prices stay the same, I no longer pay interest on my savings or my kids college education (education is the only exemption because it is an investment), and I have 100% of my paycheck back. The only losers are tax accountants and lawyers who may have to diversify into investment or real estate law. Oh, and of course, Washington DC lobbyists won't be able to get tax breaks for their corporations any more unless Uncle Sam starts writing checks to corporations and they won't be able to be hidden in tax breaks any more.
That way, Uncle Sam can no longer pick the winners and losers. Then if we can stop the Gangster Government's economic bailouts, we'd lose our Communist Manifesto Plank #1. Did you realize that the Federal National Income Tax was in the Communist Manifesto? That means the Fair Tax would take us one step toward becoming the Free Nation that our Founding Fathers Ben Franklin and Thomas Jefferson and George Washington gave us!
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Permalink Reply by E Wolf on
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Deborah,
I completely agree with all the points you are making... I know of all the benefits, and trust me, I hope that it passes...
I understand that the price of products and services SHOULD go down. And if I have a dollar in hand now that I've already paid taxes on, the same product to be purchased that is $1.00 now will hopefully be the same $1.00 after embedded taxes are removed and pricess go down.
To that point, I would have had to have made, say $1.30, in order to have made that $1.00, but the day after the fair tax was enacted, I would have to only make $1.00 to cover the same product cost.
I understand how competition works and how reducing embedded taxes/costs will reduce prices. Where is the guarantee? Will it take a month? Year? 5 years? Who knows?
Like I said... I'm all for the Fair Tax. But this issue does exists and I haven't seen it addressed in either book that I've read.
The Fair Tax would ultimately, and in VERY SHORT order, change America for the better! But the politicians that are currently in office (all parties) will NEVER give up control of the current tax code... Ever. Any fiscally conservative politician that supports the Fair Tax will get my vote.
Thanks Deborah!
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Permalink Reply by chiefcook on -
"The Fair Tax would ultimately, and in VERY SHORT order, change America for the better! But the politicians that are currently in office (all parties) will NEVER give up control of the current tax code... Ever. Any fiscally conservative politician that supports the Fair Tax will get my vote."
That is why we need to vote them out in November.
"I understand how competition works and how reducing embedded taxes/costs will reduce prices. Where is the guarantee? Will it take a month? Year? 5 years? Who knows?"
The transaction tax credit for businesses will go into effect on "day 0ne". This reimburses the business for their previously paid embedded costs. Are they going ot profit and keep it? They can if they want to, but I would shop elsewhere if they try!
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