The Fair Tax

Discussion in 'Freedom and Liberty' started by melbo, Oct 26, 2005.

  1. melbo

    melbo Hunter Gatherer Administrator Founding Member

    Thumbnail sketch of the FairTax
    a comprehensive plan to replace income and payroll taxes

    The FairTax proposal is a comprehensive plan to replace federal income and payroll taxes, including personal, gift, estate, capital gains, alternative minimum, Social Security/Medicare, self-employment, and corporate taxes. The FairTax proposal integrates such features as a progressive national retail sales tax, dollar-for-dollar revenue replacement, and a rebate to ensure that no American pays such federal taxes up to the poverty level. Included in the FairTax plan is the repeal of the 16th Amendment to the Constitution. The FairTax allows Americans to keep 100 percent of their paychecks (minus any state income taxes), ends corporate taxes and compliance costs hidden in the retail cost of goods and services, and fully funds the federal government while fulfilling the promise of Social Security and Medicare.

    Americans take home their whole paychecks.
    Not only do more Americans have jobs, but they also take home 100 percent of their paychecks (except where state income taxes apply). No federal income taxes or payroll taxes are withheld from paychecks, pensions, or Social Security checks.

    No federal sales tax up to the poverty level means progressivity like today's tax system.
    To ensure no American pays tax on necessities, the FairTax plan provides a prepaid, monthly rebate (prebate) for every registered household to cover the consumption tax spent on necessities up to the federal poverty level. This, along with several other features, is how the FairTax completely untaxes the poor, lowers the tax burden on most, while making the overall rate progressive. However, the FairTax is progressive based on lifestyle/spending choices, rather than simply punishing those taxpayers who are successful. Do you see how much freer life is with the FairTax instead of the income tax?

    No tax on used goods. The amount you pay to fund the government is totally visible.
    With the FairTax you are only taxed once on any good or service; the sales tax is charged just as state sales taxes are today. If you choose to buy used goods - used car, used home, used appliances - you do not pay the FairTax. If, as a business owner or farmer, you buy something for strictly business purposes (not for personal consumption), you pay no consumption tax. When you decide what to buy and how much to spend, you see exactly how much you are contributing to the government with each purchase.

    Retail prices no longer hide corporate taxes or their compliance costs, which drive up costs for those who can least afford to pay.
    Did you know that income taxes and the cost of complying with them currently make up 20 percent or more percent of all retail prices? It's true. According to Dr. Dale Jorgenson of Harvard University, hidden income taxes are passed on to the consumer in the form of higher prices for everything you buy. If competition does not allow prices to rise, corporations lower labor costs, again hurting those who can least afford to lose their jobs. Finally, if prices are as high as competition allows and labor costs are as low as practical, profits/dividends to shareholders are driven down, thereby hurting retirement savings for moms-and-pops and pension funds invested in Corporate America. With the FairTax, the sham of corporate taxation ends, competition drives prices down, more people in America have jobs, and retirement/pension funds see improved performance.

    The income tax exports our jobs, rather than our products. The FairTax brings jobs home.
    Most importantly, the FairTax does not burden U.S. exports the way the current income tax does. The FairTax removes the cost of corporate taxes and compliance costs from the cost of U.S. exports, putting U.S. exports on a level playing field with foreign competitors. Lower prices sharply increase demand for U.S. exports, thereby increasing job creation in U.S.manufacturing sectors. At home, imports are subject to the same FairTax rate as domestically produced goods. Not only does the FairTax put U.S. products sold here on the same tax footing as foreign imports, but the dramatic lowering of compliance costs in comparison to other countries' value-added taxes also gives U.S. products a definitive pricing advantage which foreign tax systems cannot match.

    The FairTax strategy is revenue neutrality:
    Neither raise nor lower taxes so consumer costs remain stable.
    The FairTax pays for all current government operations, including Social Security and Medicare. Government revenues are more stable and predictable than with the federal income tax because consumption is a more constant revenue base than is income.

    If you were in a 23-percent income tax bracket, the federal government would take $23 out of your paycheck for every $100 you made. With the FairTax, if the federal government gets $23 out of every $100 spent in America, the same total revenue is delivered to the federal government. This is revenue neutrality. So, instead of paycheck-earning Americans paying 7.65 percent of their paychecks in Social Security/Medicare payroll taxes, plus an average of 18 percent of their paychecks in federal income tax, for a total of about 25.65 percent, consumers in America pay only $23 out of every $100. Or about 30 percent at the cash register when they elect to spend on new goods or services for their own personal consumption. And this tax is collected only on spending above the federal poverty level, providing important progressivity.

    Tax criminals - don't make criminals out of honest taxpayers.
    Today, the IRS will admit to 25 percent noncompliance with the code. will be generous and simply take the position that this is likely a conservative estimate of the underground economy. However, this does not take into account the criminal/drug/porn economy, which equally conservative estimates put at one trillion dollars of untaxed activity. The FairTax does tax this - criminals love to flash that cash at retail - while continuing to provide the federal penalties so effective in bringing such miscreants to justice. The substantial decrease in points of compliance - from every wage earner, investor, and retiree, down to only retailers - also allows enforcement to concentrate on following the money to criminal activity, rather than making potential criminals out of every taxpayer struggling to decipher the current code.

    What is the FairTax plan?
    The FairTax plan is a comprehensive proposal that replaces all federal income and payroll taxes with an integrated approach including a progressive national retail sales tax, a rebate to ensure no American pays federal taxes up to the poverty level, dollar-for-dollar revenue neutrality, and the repeal of the 16th Amendment. This non-partisan legislation (HR 25/S 25) abolishes all federal personal, gift, estate, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes and replaces them all with one simple, visible, federal retail sales tax - collected by existing state sales tax authorities. The FairTax taxes us only on what we choose to spend, not on what we earn. It does not raise any more or less revenue; it is designed to be revenue neutral. So it is also cost neutral - the final cost for goods and services changes little under the FairTax. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.

    What is Americans For Fair Taxation ( is a non-profit, non-partisan, grassroots organization dedicated to replacing the current tax system. The organization has hundreds of thousands of members and volunteers nationwide. Its plan supports sound economic research, education of citizens and community leaders, and grassroots mobilization efforts. For more information visit the web page: or call 1-800-FAIRTAX.

  2. monkeyman

    monkeyman Monkey+++ Moderator Emeritus Founding Member

    I definatly like the idea, dose have some things where it dosnt hold up.
    1- companies that are currently able to get retailers to pay them 'x' for thier product are in reality not likely to lower thier price since costs went down. It will generaly be figured, and work out most likely, that if they could sell it for that befor they can continue to sell it for that and absorb the difference as added profit, thus simply raising the cost of the product to the consumer by at least the amount of the tax.

    2-This would greatly encourage grey markets and such since anyone could then buy things for that much less by getting it from sources that dont pay the tax, beyond that they can simply buy most if not all of the goods used.

    3-If the companies DO lower prices and it is charged like a current sales tax then this just dropped the amount of taxes being paid.

    4-If I understand this correctly things like food, rent, and so on would not be taxed. Middle class working folks are the biggest part of the tax base, most of thier money goes to pay the bills, buy food, pay rent or the mortgage, and so on, so only what was left after this would be getting taxed. This being the case if they were paying 23% before and we'll say 75% of thier income goes on the mortgage, food, utilities, payments on a late modle used car and so on (all things that as I understand it this would NOT tax since state sales tax generaly dosnt) then they are now only paying in less than 7% of thier income to the Feds, so it would be FAR from a dollar for dollar replacement. Currently you dont pay income tax on the INTREST portion of a mortgage and you get a totaly unrealisticly low allowment that you can deduct the taxes paid on that for utilities and some of the other necessities but you still pay taxes on the money you are useing to pay that bill with, if you dont tax the 'used' homes, then most folks already buy homes that are previously owned and the payments on that home represent a very significant part of thier income, but its a used item that would not be getting taxed any more.

    5-Income tax is exponential while this is static. When you make your money the feds take thier bite then every time you spend a dollar that money is becomeing someone elses income and being taxed on them and so on so that same dollar is being taxed EVERY time it changes hands other than the rare exception of when it goes to a tax exempt group or a case of someone who dose not report it and risks the wrath of the only ABC group able to jail Al Capone, even with all those he killed and all the hundreds of laws he broke, the IRS! Also currently if you put money in to saveings or any other investment that allows you to build your financial security and in most cases any funds that grow even for your retirement that would be spent on things that would not be taxed, then they are able to tax that income as well, with fair tax this money would be lost to the Feds and the things it would be spent on would often not be able to be taxed.

    6-Many of the things that you are currently able to deduct have limits that would be harder to keep in place with this plan. One prime example would be medical expences. While I dont recall at the moment what the limit is I do recall that if you have a major medical incident (serious car wreck or what ever where you land in the hospital for a few weeks and so on or similar) or an ongoing medical problem (cancer, in a wheel chair, anything where you have to spend lots on med equiptment, treatment, medications and so on but especialy focused on the treatment that would definatly not be taxed here) then that takes TONS of money and none of that is taxed on this plan, so say you have built up a big saveings since you arent haveing it stolen by the Feds any more and yopu have a car wreck, for the sake of argument we'll even say this allowed you to afford some basic med insurance but you REALY got busted up. The insurance only pays a part of it up to a certian amount. So when its all said and done you go through say 20K out of your saveings that year to pay the med bills that the insurance didnt pay (not far fetched AT ALL, my dad had awsome ins. through the Teamsters union" and still had that kind of pay outs beyond what they paid for med bills on 2 different ocassions), well it never got spent on taxable things so the Feds never saw any of it where as now they taxed it before it went in the saveings, on all the intrest it made while in the saveings, and then if you had that accident you could only write of like 5k or what ever it is of that as the amount of your income THAT year that you dont have to pay taxes on even if you spent 5 times your anual income on the med bills.

    Dont get me wrong, as far as Im concerned these would all be GREAT things since they would leave more money in my pockets AND might even help to starve the beast a bit, but these are just some of the reasons off the top of my head why I would be willing to bet this plan would NEVER be allowed by the Feds to ever be implemented as it is presented.
    Just my long winded $0.02 worth.
  3. melbo

    melbo Hunter Gatherer Administrator Founding Member

    It actually works out to be about even, with a small savings(More money in the pocket) of the under $22,000 folks.

    It' not a tax cut, just a new system of collecting the same. and, the rich would pay more as they buy more things.

    It's revenue neutral, meaning it will give the gov the same amount of cash. but it will also save us a crapload of money in the administration of it.

    If anyone would like a copy of this book, The Fair Tax.

    and really want to read it, PM me and I'll send you a copy on me... [beer]

    Maybe I can work out a bulk rate with The FairTax Book (9780060875411): Neal Boortz, John Linder: Books@@AMEPARAM@@
  4. monkeyman

    monkeyman Monkey+++ Moderator Emeritus Founding Member

    Like I say it sounds like a cool deal for those of us at the lower end, it just seems like some of it may not be as neutral and also would transfer more of the tax to those with more disposable income...2 things I figure would make it less likely to be accepted by the government and if they dont put it on a balot then us poor folks dont get a lot to say about it.
  5. melbo

    melbo Hunter Gatherer Administrator Founding Member

    On the transfer to the rich... They are already in a Higher Bracket and so pay more anyway. I'm sending you a copy of the book mm...
  6. monkeyman

    monkeyman Monkey+++ Moderator Emeritus Founding Member

    Ok, I mena some of the points may be taken care of in the details of the plan, just that those were some that came to mind with what I have heard about it.
  7. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    Some day when a third party takes over ;)
  8. InFreedomsCause

    InFreedomsCause Monkey+++ Founding Member

    Its better than what we have, maybe, but I'm still paying for services I don't want to use, and I'm still paying some other b**** to sit at home and watch soaps.

    The road tax attached to fuel is more fair, since you only pay essentially for a service you use.

    But when I have to pay other kids tuition fees while I homeschool my own, or when I have to pay that proverbial b**** to exercise her azz, or when I have to pay into a retirement plan that I have no reason to believe will be around for me to collect, etc, etc, I feel like doing these things: [beat] [elim] [smsh]

    Sorry for the rant, but the only fair tax is a "pay as you use" tax. IOW, I'd opt out of everything but road use and emergency service use...Maybe some well regulated national defense use. Everything else is of no value to me.
  9. InFreedomsCause

    InFreedomsCause Monkey+++ Founding Member

    One more thing...Does this "Fair Tax" mean we can eliminate the IRS? After all, the cost of operating the IRS is as much as the entire federal budget in 1972.
  10. melbo

    melbo Hunter Gatherer Administrator Founding Member

    Yes, in this plan, The entire IRS goes into the garbage can.
    THe savings there is what allows the rest to work
  11. InFreedomsCause

    InFreedomsCause Monkey+++ Founding Member

    One thing I do like about this is that since people will actually see how much they are paying into government at the end of their Wally World receipt, instead of having the dough taken out before they ever even see the paycheck, they might start demanding that the government cut waste and cut back on retarded welfare-type programs.

    However, I think this could be used to tax internet purchases which up until now have been relatively tax free.
  12. ghrit

    ghrit Bad company Administrator Founding Member

    I think that for either this scheme or a flat tax to work, there cannot be a bunch of exceptions. One of the problems with the IRS regs today is all the ifs, ands, and wherefores. IMHO, either we simplify the code or we live with what we have; it makes no sense to me to substitute one mess with another. Going that route just about guarantees that the IRS will never be done away with, it will be "needed" to interpret, however wrongly, the new code.
  13. melbo

    melbo Hunter Gatherer Administrator Founding Member

    Yep, you would see eavry dolar. The concept of 'withholding' was a very powerful once for the Tax grabbers. It effectively hid the tax from sight. People refer to something called take-home pay and never really feel the bite of taxation.

    Yes also ghrit. There wouyld be no exemtions at all. No deductions, not tax sheltes, etc. You buy something, you pay the tax. Just once though as used goods are not re-taxed.

    This tax would ultimately effect the very wealthy more as they tend to consume the highest amount of high dollar items.

    But again, even if I have to pay the tax on my Amazon purchase, it would'nt seem that bad as the price of the book would be less from the lack of Coroporate taxes during the entire creation of the book.

    mm, I just remembered that I am to send you a copy of theis. Just put it in the front seat of my truck for tomorrow. Sorry. forgot.
  14. Quigley_Sharps

    Quigley_Sharps The Badministrator Administrator Founding Member

    Way it should be, make all the dead beats pay taxes :D
    And the IRS agents can go pump gas at the local Exxon station.
  15. melbo

    melbo Hunter Gatherer Administrator Founding Member

    The only problem I see is the same when we dumped prohibition... They came up with the NFA to give all of the Whiskey agents a job... So maybe all of those 10's of thousands of IRS agents would be transffered to the BATFE... :eek:
  16. ghrit

    ghrit Bad company Administrator Founding Member

    One might hope they would be added to the Border Patrol. Most are accountants or lawyers, I imagine, so maybe their indoor ineptitude would reduce thier numbers, eh?
  17. melbo

    melbo Hunter Gatherer Administrator Founding Member

    Good point ghrit, you will see strong oppostition to this from Tax accountants and tax lawyers as there services will no longer be needed either. SO subtract that amount from the corporate 'cost' of goods as well

    I'm going to try to get a case price on these to pass out/around here. It's a really good read and is very simple and to the point.
  18. RightHand

    RightHand Been There, Done That RIP 4/15/21 Moderator Moderator Emeritus Founding Member

    Unfortunately, the business owner, predominately the small business owner, is forced to be the unpaid tax collector for the government. This is an expensive proposition for business and the opportunity for failure to remit is great. The government will respond by establishing an agency to police the businesses who collect the taxes. The process adds another layer of expense to the already struggling small business that is frequently hanging on by its fingernails. I'm not at all opposed to the fair tax plan just the onus of collection being placed on business.
  19. melbo

    melbo Hunter Gatherer Administrator Founding Member

    But RH, most small business' that sell at the retail level already collect Sales Tax. This is as simple as that. ANd they are giving 1% back to those retailers for the collection.

    For a company like Wal-mart, it is as simple as adding 1 more line of code to the POS registers. The burden is only on the end retailer, and most of them already are taxmen at this point.
  20. ghrit

    ghrit Bad company Administrator Founding Member

    RH, to a point I agree with you. However, the business already has to deal with taxes, so it wouldn't add any work or effort to keeping the books. In fact, it would reduce the effort, as it would be a flat percentage number against gross receipts, no magical formulae involved; a straight pass through. The only effort expended from the dot gov standpoint is an occasional audit which happens anyway. Since income tax is removed from consideration, the entire business income goes to the owner(s) without dilution.
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