The Fair Tax Plan : Fair or Not, Let's Talk About It
67I first became aware of the Fair Tax proposal about a year ago. Brian Miller was my preferred Arizona CD8 candidate for Congress, he strongly supported it, and therefore--obviously--I needed to scope out what the hey he was talking about. The more I read, the more I liked the proposal.
Back then, however, mentioning the Fair Tax to a voter seemed to be a sure way to get his (or her) eyes to glaze over immediately, followed by an absolutely brain dead, "Huh?" Even worse, the left wingers knew this and used their blamestream media lackeys brilliantly in smear campaigns against any conservative Republican bold (or foolish) enough to come out in favor of such comprehensive tax reform.
A prime example was in our CD8 general election runup which pitted Republican challenger Jesse Kelley against incumbent Democrat Gabrielle Giffords. Our TV was deluged with ads screaming that Kelley--who supported the Fair Tax--wanted to "raise your taxes by 23%!"
That was a flat lie. The Fair Tax would impose a 23% national sales tax, yes, but it would also eliminate every income based federal tax in existence. Which would make the Internal Revenue Service completely unnecessary, so yes, bye-bye, I.R.S. There's a pre-bate provision that makes sure no citizen has to pay out of his (or her) own pocket for essential goods and services. There's a whole lot more.
But the Fair Tax proposal does have one great drawback: It's not easy to sum it up in a thirty second sound bite (or even a one page Hub).
Which brings me to the crux of this Hub: For the first time ever, my "basic rule" for Comments is being waived. Regular readers are familiar with my standard position that my political Hubs are designed as opinion pieces, not public debate forums. Because of that, I don't generally approve comments attempting to convince conservatives they are out of their minds.
In this one case, things are different: I want plenty of discussion. Not name calling, thank you; that prohibition still stands. But if we're to improve our nation's tax system--and we all agree it needs improving--let's talk about what the Fair Tax might (or might not) do to accomplish that highly desirable end.
Goodness knows there's plenty to talk about. At FairTax.org, a Fair Tax Official answers not one but fifty specific questions. Just one of those fifty is included in the following video on this page.
Why open up discussion here? Because where last year it was relatively invisible, this year members of Congress are actually bringing the Fair Tax up for discussion. It's a comprehensive proposal that, if thoroughly understood, will have every thinking voter in favor and every special interest screaming bloody murder.
Which means we need to help every thinking voter get that clear picture. It may--probably will--take years to accomplish the task. But it's a task worth accomplishing, it can turbocharge our lackluster economy, and now is the time to start.
The floor is open.
Additional Writings Discussing the Fair Tax
- FAIR TAX NOW!
A clear explanation of several implementation aspects plus a call to action. - Is the Fair Tax Fair?
An excellent analysis and discussion of various Fair Tax aspects.
CommentsLoading...
Why can there not just be a flat tax on what people make. The more you make the more you pay. That just really sounds fair to me. Say they set 10%, they take 10% of your pay. No deductions.If you have 1 kid or 10 kids, hat's the choice you have to make. No matter what you buy, you still pay 10%. Just a thought. Actually very simple. Greg
Wendy: Thanks for the recommendations; I'll have to look into those.
Gregas: It does sound fair and simple. The problems (and they appear to be sizeable) are that (a) a true flat tax is regressive, hitting hardest the lower income people who can least afford it, (b) it's highly unlikely we'd ever get the no-deductions-no-exemptions version you're proposing to pass in Congress, (c) once there's ANY exemption, the lobbyists immediately go to work to enlarge the loopholes, and (d) those currently pushing a flat tax are wanting to ADD it to EXISTING taxes (some hidden) such as estate taxes, payroll taxes, etc.
The Fair Tax, on the other hand, is definitely progressive. A multimillionaire might well (and often does) hire experts to find him lots of income tax loopholes and frequently pays a fairly low tax rate. But if the Fair Tax were in place and he bought, let's say, a five million dollar home (not unlikely), he'd still (at the 23% rate) have to fork over $1,150,000 in taxes--with no way to duck the bite.
Whereas it seems HIGHLY unlikely such a wealthy dude would have paid that much in taxes on $5 mil worth of income, given what we know about the tax code and current accounting practices among the well to do.
I am a proponent of the Fair Tax. I make it a point not to discuss politics or religion as I become irritated when people disregard the feelings of others that do not conform to their ideas'. The Fair Tax for me seems to be a no brainer, everyone wins, except IRS employees but to be honest I would not lose any sleep over that.
David: I discovered this evening when I was going through those 50 videos that the "inventors" of this (Fair Tax) proposal have really done their homework. Questions were asked that I'd never thought about and answers given that made sense.
Even our Congress-Critters in D.C. win from the simple standpoint that umpty gazillion high pressure lobbyists would lose their jobs, leaving the Representatives and Senators better able to do theirs. There'd still be lobbyists, obviously, but the numbers would be significantly reduced.
A flat tax would still be on income, and would by definition require our beloved government to know exactly what every taxpayer earned, and would require an IRS breathing down our necks.
With the fair tax, if you earn $20 per hour and work 40 hours, you take home the entire $800, and you are not taxed until you spend it.
With a 23% national sales tax, there's no need for an IRS, or an April 15th, or for saving all those receipts unless you want to!
(Of course, we would have to repeal the 16th amendment lest the Washington thieves try to impose both taxes on us!)
Thank you, I shall definitely make it a point to become more knowledgeable by looking at the above. I have always strongly agreed with abolishing the IRS.
Will: What you said.
David: Just got a call from Willie Nelson; he agrees.
Tell Willie I said "Hi" and no, he cannot sing 'Wanton Woman' without paying royalties.
(And tell him I'll pay him back that $20 just as soon as this hand is played...I have two aces.)
Willie WOULD go right well with Wanton Woman, wouldn't he?
He hung up before I could tell him about the aces, though. Said he had to get going, something about writing a new tune. Could have sworn I heard him muttering,
"USA and the new Fair Tax
I.R.S. gets my razor sharp axe."
I'm sure he'll do better'n that before recording it.
Ghost - This nation without the IRS? What would we all do but save a ton of money?
I've been in tune with the Fair Tax for quite some time myself. It's consumption based so is basically fair regarding all the citizens of this nation.
The wealthy consume more obviously so they end up paying for that consumption. Here's the rub with the lesser minds of this nation - those who pay NO federal income tax and that's in the 50% range presently. They will have to then contribute to the continued solvency of the nation. Is that too much to ask?
A flat tax would presently have to be 60% on every tax payer in the nation just to balance the present budget. Talk about giving a liberal the screaming memees!
The Frog
Hey Ghost, you did a great job explaining the progressivity/regressivity rule. One additional issue with the Fair Tax is that paying it is always voluntary. Nobody is taxed for the necessities of life, so the only things that we would be taxed on are purchases that we can choose not to make. Therefore, the wealthy who are still paying the bulk of the taxes are doing it voluntarily. If they want to reduce their tax burden, they just don't buy as much stuff. Same way with the poor. If you buy stuff other than food, shelter and a few other indexed basics, you pay the tax. If you don't, you don't pay, so if you have a tax burden at all, you only have yourself to blame. Also, the proposal outlined by Boortz and Linder does not tax the sales of used merchandise so buying second-hand is another way to save.
Almost any tax system would be more fair than what we have now.
I favor the 23% sales tax with no deductions, loopholes, or other hidey-holes for income. The advantage of the sales tax would be EVERYBODY PAYS. Now there is a great deal of hidden, under the table income, that is never taxed. Companies pay huge bucks to Tax Professionals to find new loopholes in our present tax laws saving them millions in taxes.
The mantra about taxing the rich more would work under this system because the RICH buy more than the POOR. This is not that hard to understand.
Even pimps, prostitutes, and drug dealers spend money and would pay taxes on unreported income. Gee, this might bring in more tax dollars.
Someone argued the 23% sales tax would force every retailer and service provider to become tax collectors? Just in case you don't know, they already are. They currently collect sales tax on every sale, which must be reported and mailed in every month.
Implementing this system would impact the unemployment numbers badly. All those poor IRS employees standing in an unemployment line would be a beautiful site.
Ghost, thanks for explaining this. Up and Awesome. I had heard about this but didn't have this much info. But are you sure that enough of our elected officials (especially The Secretary of the Treasury) would be willing to vote themselves out of the power that the IRS affords them. Because I would love to see the elimination of the IRS in my life time. Hey Frog. No, it's not too much to ask. I'm poor and I'm willing. Hey, I think I just heard a liberal scream.
Thanks
Chuck
"But are you sure that enough of our elected officials (especially The Secretary of the Treasury) would be willing to vote themselves out of the power that the IRS affords them."
Bingo!
That's why the Fairtax will probably never be passed. The present tax system is ideal for manipulating the citizens...do what Congress wants, and you get a tax break...Congress loves all you little people out there, and they hate the evil rich!
Talk about creating class warfare and manipulation!
Again, it's all about power, while the liberties and freedoms they are supposed to be protecting go wanting.
Same as Term Limits. This bunch of crooks will never vote themselves out of their positions of power.
I'm curious as to impact on jobs. On the government side: How many folks work for the IRS? What is their yearly payroll? On the public side: How many folks work for tax accountant firms? What about the folks who train these same people? From a fiscal point of view: how much does it save in payrolls that come from our taxes? Does the burden associated with collecting taxes shift to those who make sales?
When you talk about eliminating the IRS and taxes, you're really talking about eliminating one of our countries largest, and most dynamic industries. By dynamic, I mean that IRS employees and tax accountants and folks who prepare taxes on their own all have to scramble to keep up with the ever changing tax law.
Personally, I'd favor a process for change that implement such a drastically new approach on a trial basis in one state or community with the aim of developing supporting data for repealing the 16th amendment.
While that experiment is occuring, have Congress focus on prioritizing their concerns in accordance with the Constitution they all swore to uphold. The sooner they stop debating and wasting time on non-Constitutional concerns, the sooner we'll get back to a sound fiscal approach for governance. Fair-Tax could be a part of the solution.
"When you talk about eliminating the IRS and taxes, you're really talking about eliminating one of our countries largest, and most dynamic industries."
Which is 100% government overhead and produces exactly zero! Government jobs are all a drag on the economy, so we need to eliminate all but those that are absolutely necessary.
BTW, guess who was listed as the number one spender on anti-flat tax advertising when that was popular?
H&R Block!
Yes, a complicated tax system is very popular with accountants, IRS employeees, and CPA's, but so what? Let them get a real job!
A flit tax based upon consumption ultimately brings in more money because compliance goes up. The way things are now half of the population doesn't pay a dime. These same people are probably buying boats! Voted up useful and awesome.
Jim: Yes, there'll be plenty of liberal screaming; that's for sure. The problem for them is (duh) the very fairness of the thing. Which means (again duh) We the People will need the Presidency and both houses to Congress--plus flame-retardant clothing to keep us safe against the media smear attacks--to get it passed.
But I'm very VERY encouraged by the dramatic increase in Fair Tax awareness during the past 12 months.
Wendy: Exactly. I like the way it encourages savings and/or investment in that two-pronged approach. Don't buy "stuff" just to have "stuff", and Bingo! Tax savings! OR, buy used if you don't really need new, and Double Bingo! More tax savings!
Mike: Precisely. That's one thing pointed out clearly in the videos at the FairTax website--the tax percantage can be lower with a sales tax than with an income tax because the pool of "what's getting taxed" is much, much larger.
And yes, retailers are definitely already tax collectors. I've run businesses myself and can tell you, one more sales tax form which would go to the feds (routed through the states first) and one more check to cut? Piece of cake--when you consider that in return you (the retailer) get to STOP all that nasty paperwork required to withhold payroll taxes.
"Joe, you worked 70 freaking hours this week? Cool! Let's see, I pay you $17.50 an hour, that's $1,225.00, here's your paycheck, see you Monday!"
(Never mind the 70 hour analogy; I did work those in the oilpatch.)
Chuck: Nobody in power in any affected bureaucracy would ever vote themselves out of a job. Not in the nature of the beast. Which is why we need to (a) make sure we up our House numbers, take the Senate, and elect the right President in 2012, plus (b) get this education on the Fair Tax out there where the nation as a whole can understand it by Inauguration Day 2013.
I'd personally love seeing every one of us with a keyboard putting something out there on it. Joni Douglas beat me to the punch and has a lengthy, well researched page, but each of us as a writer has a unique style and produces work with a little different slant.
Will: A few months back, I'd have agreed with you that we'd not likely see the Fair Tax passed in this lifetime. But I'm suddenly and deeply encouraged in that it's being openly discussed in Congress as we speak. That's a new development, no doubt powered by some of our Tea Party type conservative freshmen who went to D.C. already supporting the concept.
The thing is, we don't need the power brokers to like it to make it happen. What we do need is conservative control of both houses of Congress and the Presidency plus a whole lot of public education.
Did I mention I'm basically an optimist?
Either that, or I just don't like being told something can't be done....:)
Mike: No, this bunch won't. Which is why we need a new bunch, eh? The thing is, what the Tea Party accomplished in 2010 was nothing but a campfire moving up from pure tinder to setting the medium sized twigs ablaze. A few more small branches, and we can start getting those logs on there to stay warm through the night.
The liberals are counting on, or at least hoping for, the "flash in the pan" burnout of Wake Up America. I believe they're wrong this time--and that if there's ever been a time for getting this done, it's now, within the next few years.
Jim: You make sense. On the other hand, we already have clear examples of how the Fair Tax works. Texas and Florida, for example, have NO state income taxes and run the bulk of their economies (and those are not small economies) from their state sales taxes even now. So that experiment has been done for us.
Regarding jobs per se: We'd have an explosion of new jobs like you can't even imagine. For instance:
1. There would be so much more EFFECTIVE money available for hiring and expansion in the private sector. Why? Because to pay one government employee $1,000, you don't just have to collect $1,000 in taxes. The waste as it runs through the system is huge--and that waste would be suddenly and entirely eliminated.
2. Besides expansion, startup companies would sprout up like dandelions in your lawn. A few years ago, I wanted to buy my own water truck, become an owner operator rather than a company driver. Would have tripled my gross and doubled my net. But the paperwork was a booger. Because of that paperwork, much of which had to do with taxes, I'd already figured IN ADVANCE that I would NOT likely add a SECOND truck and hire a driver after I could afford it. Too much hassle.
Now (were I to start up trucking again), if the Fair Tax were in play, I would DEFINITELY look to expand as fast as I could and hire as fast as I could.
3. Other companies deciding to locate here instead of China. Right now our corporate income tax is killing us in the international marketplace. ELIMINATE that tax, and we'll draw new firms like horse poo draws flies. So much so that other countries may copy us, but we'll have the jump on them, a leap ahead that would put us out in front for a long time to come.
4. And with all those former government employees out of work--I don't know the numbers, but let's just say a million of them--I can see the Help Wanted ads now:
"JOIN MEGASTUFF CORP. FOR A NEW AND EXCITING CAREER!! SEEKING SMART DUDES AND DUDETTES, FORMER I.R.S. INCLUDED!! FREE RE-TRAINING, GREAT PAY, AND ALL THE FREE WIDGETS YOU CAN TAKE HOME UNDER YOUR HAT!!"
Man! With a labor pool like that? Already educated, motivated, etc. etc.? America's first couple of centuries would be NOTHING compared to what we could accomplish in the first fifty years of Fair Tax implementation!
Sorry. I get carried away. It's this vision thing, see....
Will: Again, what you said: "100% overhead and produces exactly 0", our precious I.R.S. And yes, we'd end up no longer needing the services of our longtime accountant, too.
But as one of the Fair Tax videos notes, people with true bean counting expertise are never going to lack for work. So they don't do tax returns any more? So? All of a sudden more people have actual surplus cash on hand to invest; they're going to need accounting help. So are all those new businesses; tax reporting is not the only bottom line that has to be intensely watched if a business is to succeed.
H&R Block specifically: I'd love to see those folks out of business. Long story, but just a short snippet--back in the late sixties, I checked into going to work for them on a seasonal (pre-April 15) basis. The training they provided for such a position didn't really take all that long...but the average customer would have no way to know the H&R "expert" across the desk knows less than they do about getting a tax return done the best way possible.
Pam and I both (separately, before we knew each other) caught H&R making mistakes on our stuff; WE had to correct THEM.
BPop: Love your "flit tax" terminology. I'm thinking, with a "flit tax" in place, more of us could afford to "flit around" here and there, possibly even fill the gas tank to make it to the grandkids place for fireworks on the Fourth of July or some such....
Ghost - You seem to be becoming quite an English major old buddy.
Frog: Heh! Let's see...I do have a minor in English (major in psych). My mother, two aunts, and one grandmother were all teachers, with Mom having had a Masters degree in English--that's how she met my old man, when he was her high school student. And HER Dad was a college English prof., at one time head of the English Dept. at the U. of Oregon in Eugene.
So yeah....
Most if not all large companies are split into two groups. The support groups (Expense) spend money to keep the business up and running, maintain buildings and equipment, procure supplies, etc. The other side is the income group, who's job it is to bring money (Income) into the company. The hope is the income group can bring in more money than the support group needs to keep the operation running.
Our government has shifted to a serious unbalance where the (Expense) group is far larger than the (Income) side. I understand the government is not supposed to make money, but they should be smart enough to at least break even. If everyone paid their fair share of tax, this should not be impossible.
Even if we were able to eliminate the IRS, we would still need finance people to distribute the tax collected and keep the bills paid.
Nice job Ghost. You know I am a supporter of the Fair Tax and I tried to spell out many of the details of the Fair Tax in my hub. Thanks for the mention above.
I hope we hear more about it in the coming talks on tax reform. While I understand why the career politicians may not be so excited about the Fair Tax, I do believe most people would be for it if they took the time to understand it.
Joni, the biggest problem will be getting out the truth about the new Tax process. The last time they were able to convince many voters that a National Sales Tax would be on top of their existing taxes, not a replacement for the existing taxes.
The Fair Tax takes a huge load off all Americans because it would repeal the 16th amendment (income tax) and get rid of all income taxes at all levels, including inheritance tax.
That means that American corporations no longer would have to compete at a disadvantage, which would bring huge job growth back to America.
Read all about it:
BTW, a tax 'expert' on a forum lectured me a few years ago, saying the Fairtax would cause a great recession while our present system protected us from such things.
He disappeared in late 2008.
WillStarr, Thanks for the link. I have read this before, but plan on going back and reading it again.
I just can't imagine anyone who would object to replacing our current system with the Fair Tax system. Of course those who have not paid taxes for years, and currently pay no taxes might find it offensive. And some of our currently elected politicians may have a little problem with this change because a couple of them fall into the previous group.
The hardest part of getting this change in place will be to educate the citizens, and get rid of the lies that were quickly passed around concerning this change. I for one would welcome this with open arms.
So much for protection from recession. Guess our current system is not working.
"I just can't imagine anyone who would object to replacing our current system with the Fair Tax system"
Just imagine anyone on the left.
The Fairtax would take tremendous power over the people away from government because income tax is loaded with regulation that we must obey or go to jail. With the Fairtax, all of that is gone!
The left loves a big nanny government with tremendous power.
Mike: Well stated. People who understand how to crunch numbers just aren't going to be out of work for very long a time, ever.
Joni: Thanks for checking in...and you've hit the nail smack on the head. Educating the entire nation--how's that for a job we can tackle, eh?
This is SO important, as I saw during the Kelley vs. Giffords campaign. One 30 second smear bite against the Fair Tax did more damage to Kelley's chances than pretty much all the rest put together. That quick hit threw Pam so far out of whack, it took me HOURS to explain how the ad was a complete piece of B.S. She's got it now, but not every confused voter has an informed conservative living under the same roof.
Hi-ho! Hi-ho! It's off to work we go! (But...am I Grumpy or Sneezy? Is there a Dwarf named Baldy?)
Old Poolman: Like you said.
Will: Thanks for putting in the link. It's already in the Hub, though, just above the video, so heads up for the rest of us--I'll have to delete any more comments that include it. HubPages frowns severely on linking more than twice to any outside source (as I found out back in 2008).
Will: Love the "disappearing expert" comment. Sounds much like the "experts" who predicted the imminent demise of the Tea Party due to the Supreme Court "win" in Wisconsin by the liberal candidate, Kloppenburg--before all the votes were counted and Prosser, the incumbent conservative, came out ahead at the end.
Mike and Will: You've summed it up once again. Nobody could logically object to the Fair Tax except (a) people who've never paid any taxes anyway, (b) those who don't understand it due to simple lack of education and/or smear tactics by the left, and (c) the libs who love the nanny state.
Which makes it pretty clear: We take (b) out of the equation by massively educating the populace, hammer-hammer-hammer, then outvote the oppressors at the polls in 2012 and THEN strongly support the new administration to Git 'R' Done.
Simple.
No, I didn't say "easy". Just straightforward.
Ghost, I think we have very different political views but I really want to say 'great job.' This gets a big 'rate up' from me because you are looking at the problem rather than just complaining about it. Kudos to you.
So here is where Republicans and Democrats agree: The tax code is a mess. We need tax reform. I think many liberals would also agree that the IRS is bloated and probably has a lot of waste.
Regarding the fair tax, I followed your link and read through the Q&A. For me, I love it because I am mid thirties, I have my house, my 2 cars, etc. I don't anticipate many big purchases so it benefits me.
The challenge I have with the Fair Tax is that it looks to be unfair to the huge generation of retiring baby boomers. I read through the Q&A and they do not really address this. So for all those retirees that saved up and now plan on buying a vacation home or car, or travelling, etc, they are going to get hit with a much larger tax. Maybe I'm missing something? If they can work this out, I could support the fair tax.
Sorry, lengthy comment but one other quick thought: Our economy depends on massive consumer spending. We thrive based on people spending more than they can afford. The Fair tax may discourage spending and put a lot of companies out of business. Just a thought, it is one thing to consider.
LRC - Again you amaze me with the questions you ask. I think we must realize that no single method of taxation is ever fair to everyone. But I like questions like yours asking "Have you considered this?" Sometimes ideas appear to be the best solution, but change when presented with various "what if" scenarios. In my present financial position the Fair Tax would work for me, but others have different situations. I doubt our elected representatives are going to be very anxious to make these changes and will drag their feet as long as possible.
LRC and Mike: You two just snatched the topic right out of my head. I was puzzling over what to write about for a next Hub, thought maybe a couple of Fair Tax questions might work--and here you have them on tap. Awesome.
The concern about higher taxes for (as an example) a retirement home is a logical one. I strongly suspect the Fair Tax would not--at least on average--end up hurting the seniors (of which I are one), though.
Why not?
Well, firstly, yes, the consumption tax at point of sale would apply. But I'm willing to bet the price of the home would start out smaller to make up for it--at least after an initial shake-out period.
Why?
Because the home builders will be able to produce the home more cheaply. A contractor who doesn't have to pay extra bookkeepers, etc., to handle payroll tax calculations and filings or all those nasty I.R.S. compliance issues (which, as a former employer myself, I can testify are far from negligible)...is flat-out going to have less overhead.
Especially when you consider that Home Depot is going to have similar cost savings in what it does...and so will the loggers who dropped the timber in the first place...and so will the sawmills...and the bolt factories...and....
Now, about "discouraging spending": Maybe. Anything is possible, no question about that. But in our case, Pam and I would be MUCH more comfortable "spending freely" once we knew the I.R.S. was history. Neither my wife nor I hold off on buying something for the house or an extra bottle of soda because of the state sales tax--I tend to cuss it from habit, having grown up in a state (Montana) that didn't HAVE such a thing, but that's about it.
Now, it would unquestionably "temper" spending just a tad in that it clearly encourages savings and/or investment--but so what? Let's say we start saving, build up $50,000 in reserves (which would be very very cool). Okay, so, does that money just sit there doing nothing for the economy?
No. In fact, not only no, but Hell, no! No, our friendly banker looks at the numbers, says, "Hey, we've got $50,000 of Ghost's dough to play with--let's lend it to that Randy the Restaurateur so he can clinch that deal, get us a Red Lobster franchise in this town, FINALLY."
And, booom! Our money, saved or not, goes to work. We get a Red Lobster. My wife pushes me to buy her a huge batch of stir fry shrimp (saw her eat 30 at one sitting, little 100 pound woman or no), and I wind up having to wash dishes for Randy to pay for Pam's appetite!
Which would suck to be me at that point, but you see what I'm saying.
Mike, our elected representatives are, like you say, not going to be anxious to pass this--with two exceptions:
1. Those Tea Party types who already favor it strongly (such as Herman Cain for President and at least some of the House freshmen), and
2. Those We the People have beaten thoroughly about the head and shoulders until they sing the right tune.
The Fair Tax exempts most retirees as low income. However, it seems to me that we should also have a tax cut-off age, where we say to retirees past, say, 65, "You've paid your dues all your working life. You don't have to pay any more!"
The fair tax would solve so many problems so quickly it would almost seem like magic.
First - everyone would pay taxes.
Second - Employers would save huge amounts of extra overhead.
Third - People would start saving money without fear of Capital Gains Tax eating up their earnings. As Fred pointed out, this money would go back into the economy and create jobs.
Last - a person could die in peace knowing the government would not get most of his lifetime savings under the present Death Tax.
In my opinion, more would benefit from this change than be hurt by it. Except of course those who never pay taxes would start paying their fair share based on their spending habits.
Will: That sounds good on the face of it, but it's a sure bet that once there was a cutoff age--well, that's a camel nose in the tent right there. We'd immediately see fierce politicking and lobbying to get the age increased...or decreased...or for various folks to be included in that exemption for the sake of liberalism, or.... No, I'd be scared of ANY exemption like that--or any OTHER exemption--even though I'm already 67 and even if I hit 100. Heck, if I'm still around at 110, this is one tax I wouldn't gripe about.
'Cause what you're describing is an entitlement. And man, I'm getting to cringe just at HEARING that word.
Mike: What you said.
With a Tax Law change we need to strike "Entitlement" from our dictionaries and vocabularies. I agree, start with one exception, and in a few years we would be back to a 40,000 page tax regulation book. Nope, everybody pays.
Old Poolman - you know I'm a huge fan of yours. You are one of the logical thinkers that looks at all sides of the issue.
Ghost, what are you trying to do, make me a follower? :)
I really like your thought process on this. As I said, the Fair tax could discourage spending but on the same token, it could have the opposite affect. If people take home almost all of their paychecks, they could certainly become bigger spenders.
I see some of your points regarding seniors. I'm still not 100% on this part but I think the fair tax is moving towards a much better system than we have now.
I write and call my congress rep all the time. I'm going to call his office and find out his position on the fair tax and if there is an actual bill out there.
I'm curious how much support this idea has in congress.
LRC - Would you let us know what your congress rep has to say? I will do the same and we can compare notes.
I like what you're both saying here, though my Congress-critter is still recuperating--that being Gabrielle Giffords.
LRC, please don't let me fool you with a single piece; I'm sure most of my stuff would properly drive you up the wall! LOL!
My gut says none of us can truly comprehend the explosive liberating effect this change would make until we experience it for real. It's a bit like my wife's current smoking cessation plan. Even though she's still smoking 4 to 5 ultralight cigs per day, the drop (from around a one-pack average) is producing what are to her startling changes already.
That is, she's smelling much more clearly, taste is sharper, her posture and energy seem to be noticeably improved, and she's even finding that her prescribed medications (for varous ailments) are working more effectively.
I suspect getting rid of the I.R.S. will be--for the economy--like getting rid of a LIFETIME cancer stick habit.
Can't believe I missed this, but it turns out the Fair Tax has actually been introduced as a bill in Congress twice before: As the Fair Tax Act of 2005 and again as the Fair Tax Act of 2007.
Perhaps the third time will be the charm?
I meant we should pass the Fair Tax first, and then we'll talk about an age moratorium on taxes.
After all, if we can specify a 'retirement age', we could also help fund that retirement not by entitlements, but by simple freedom from taxation.
For instance, if a 401K type of retirement savings plan was totally tax free after retirement age, and retirees also paid no sales tax, we could virtually eliminate Social Security!
Yes-but. The key to the entire Fair Tax plan is that EVERYBODY pays, except for basic needs where NOBODY pays. Break that, even by one dude or dudette, and you've guaranteed the long term demise of the system. I don't believe there should EVER be an age moratorium. Why should a 100 year old feller get, say, a bigger "basic needs" pre-bate than a struggling 20 year old?
But you've certainly got the main thing right: Let's pass it first; we can politick the rest of it later--and you can bet the libs will try.
Just my two cents. To make it work it would need to be bullet proof. If we open the door just a crack to allow one exclusion, it would soon be overflowing with exclusions. A little favor here, another favor there, and we would be right back where we are today.
Mike: I agree completely. It's good that Will's brought up the topic, though--because you can bet your bottom dollar that once we do get it passed, it will be under constant attack, not JUST sincerely questioned, and will need to be vigorously defended for some time to come.
Over time, it could/would develop its own cast iron armor...but NOTHING is safe from the enemy and/or even from well meaning friends if not rigorously monitored and guarded. As we have seen.
Ghost, good luck to your wife. Not only are there health benefits but certainly economic benefits to quitting smoking. Down the street in NYC, I think cigs are like $11 per pack or something crazy like that.
So I called my House congress rep (He is a Dem) but have not talked to my senator's offices yet. I spoke to a staffer and he told me the rep does not support the fair tax in it's current form. They are going to send me an email with the reasons why and also his position on tax reform including other bills in committe. I can pass it along or if it is too long, maybe I'll do a hub on possible tax reform bills?
My rep is a pretty moderate guy as our district is literally 1/3 independent voters, 1/3 Dem voters and 1/3 republicans. He has co-sponsored an earmark ban and is usually a reasonable guy. I'm curious to see why he does not support.
"The key to the entire Fair Tax plan is that EVERYBODY pays, except for basic needs where NOBODY pays. Break that, even by one dude or dudette, and you've guaranteed the long term demise of the system."
The poor are already exempted, and in so many cases, that would include lots of elderly people.
Weird. I just did a comment, edited, hit to re-post, and got a blank with the statement, "Your comment has been removed". What the--?
LRC: Thanks on the good wishes for Pam; she appreciates them--and has already seen benefits including financial, though a pack here runs between $6 and $7, not $11.
Good update on your rep. Feel free to summarize his objections to the Fair Tax when you get them. Or, if they're too lengthy for that, maybe you could mention just a few at a time?
And a Hub on "possible tax reforms" would be great.
Will: Exactly; that's part of what Old Poolman and I were trying to get across.
The pre-bate makes it so that no one, rich or poor, young or old, has to pay taxes on basic "survival level" goods and services. And from there, where it's more "elective" than "compulsory", we all pay as we go.
For everyone who currently pays their fair share of taxes, I can't think of a single reason why they would object to a Fair Tax implementation.
For those who currently pay nothing, or pay a small portion of what they should be paying, it will be a different story.
Wait until the crying and screaming starts and we will all know who has not been paying taxes. It is as simple as that.
Fred,
This Hub did the same thing to me earlier. Must be another HubPages glitch.
"For everyone who currently pays their fair share of taxes, I can't think of a single reason why they would object to a Fair Tax implementation."
The objections come from the 50% who currently pay no taxes at all, and from the politicians who don't want to give up the huge power of tax regulations.
Mike and Will: We're definitely on the same page here when it comes to the "who will scream and who will not" in the face of true tax reform.
Will: Thanks for letting me know saw that, too. Better an HP glitch than me thinking the Digital Police targeted me specifically! LOL!
Gotta grab a nap and then run my wife over to see the grandkid this evening. Back in time for Johnny Carson...uh, Jay Leno...or is it Conan O'Brien--no, it's Jay!
When our politicians start protesting making changes to our tax plan, we are going to have to ask them why?
But wait, this would also mean that those who pay no taxes now would not get a tax refund? I can see why they might not support this change. I still don't understand how someone who paid nothing gets a refund. To me a refund means getting back a portion of what you paid, not a gift.
Not sure how that works, Mike--although I guess I might have been one of those. Seems like I got a $250 check from Uncle Sammy as a "boost" so my Social Security in a year when no other income (other than SSA) appeared to be forthcoming at the moment.
But heck, I wouldn't even have TAKEN my SSA in 2009 if I'd had the slightest luck job hunting. And with the Fair Tax in place, there would be jobs out there once again, even for an old coot with attitude...:)
You can bet 99.999% of the politicians who protest will cite a reason that won't hold water. You know, standard procedure and all....
I am not as concerned with the tax laws as I am with how our money is spent.
@Leighsue - Are you saying that when only 50% of our citizens are paying taxes, and the government is going to be demanding more tax money from them, we don't need to change the tax laws? We are all concerned about how our money is spent, but some of us are getting tired of providing all of this money while others provide nothing.
"Are you saying that when only 50% of our citizens are paying taxes, and the government is going to be demanding more tax money from them, we don't need to change the tax laws?"
There's an old saying that when you rob Peter to pay Paul, you can always count on Paul's support!
Those who get a free ride vote almost exclusively for Democrats. It's a disgrace that so many Americans support raising taxes on the wealthy while they, themselves, pay no taxes at all. That is the untimate in class envy and hatred.
Leighsue, Old Poolman, Will: I'd say all three of you are 100% correct. We do need to concern ourselves with the tax situation AND with how our money is spent--AND with how MUCH is spent, for that matter.
But, Leighsue, I'd almost bet you (or someone close to you, at least) has life complicated at least slightly by the I.R.S. I always keep my nose clean when it comes to tax filings, but that doesn't mean I don't ever stress myself severely over April 15. A few examples:
1. Age 18, my first time filing a return, did it on my own, rite of passage, but not exactly stress free--or why remember it so clearly today, almost 50 years later?
2. This past year, had reserves in savings to cover estimated tax filings for tax on a bit of a windfall that showed up early in 2010. But crises intervened, and I had to abandon the final two (of 4) filings for the year. Got it handled, but will be facing a bit of a penalty, and plenty of B.S. in the figuring-out stage.
3. During my business-owning years, there were many deductions I could legally have claimed under the tax code...but didn't. Once I was incorporated, deducting business mileage for a car--unless is was corporate owned and used for nothing else--was a virtually guaranteed audit flag.
MAJOR stress.
So I, for one, have highly personal reasons to detest the I.R.S...and so do millions of other (taxpaying) citizens.
Those who don't currently pay? Will's covered that rather well.
Ghost, I got a fairly lengthy response from my congressman on why he doesn't support the fair tax. I was unaware that George Bush put together a Bi-partisan commission of Republicans and Democrats to examine the possibility of a 'Fair Tax.' This was back in 2005 and the new Fair Tax bill (HR 25) is a replica of the original proposal in 2005. I'll try to summarize the panel's findings on the Fair Tax:
- if exemptions are given for those who are below a certain income level, the fair tax would be 34%. Without any exemptions, it would be 23% consumption tax. The current fair tax bill does give the exemption. The argument is that people of extremely low incomes use their money for necessities (Food, electricity, etc). All of these things could become unaffordable. If you do give 'grants' to those below a certain income level, it would be an entitlement program larger than any we have. The Govt would be giving away 700 billion per year and would have to create a large agency to oversee this dispersement. (More bureaucracy)
- It would most likely do nothing to decrease the IRS, and may actually expand it due to the various ways that people can evade taxes and the new complications of distributing funds to state & Local governments. If you think about it, retailers would charge everyone 23% whenever they buy anything. At the end of the year, you would submit your expenses along with your income to find out if you would qualify for a cash grant (if you are below a certain income level).
Even if they put forth the plan without the exemption, tax evasion could run rampant. (causing expansion of IRS) People would form 'dummy' corporations so that they can purchase items as corporations and avoid the consumption tax. Or legitimate businesses could abuse the system, for example, I own a small business, I could buy my next car as a business vehicle and avoid the consumption tax.
People could also file individually instead of household in order to lower their income. So for example, if a husband and wife both make 25k, they could file individually and both qualify for a full deduction (no taxes paid) rather than filling as a married couple.
Right now, most states do not tax food. There are also services that are difficult to tax. For example, financial services. These implications would be difficult to handle according to the panel.
In 1967, 19 countries had a 'fair tax' consumption plan in place. By 1995, all of them moved away from them due to problems of tax evasion.
Again, not my opinion, this is just the info from the panel. I could try to post it somehow so you can see the full commentary.
Will Starr: I loved your comment but had to delete it due to the inclusion of the link. This page already has two of those to the fairtax.org site, and a third COULD violate HP Terms of Use (depending on interpretation--I'm going on the scaredy-cat side).
But I don't want to lose what you had to say, so am reproducing it as follows:
Hi LRC
The FairTax website disputes the findings of politicians who don't (oddly enough) want to give up the massive powers provided by income tax regulations.
LRC: Okay, now to respond to what your Congressman had to say. It looks to me like standard duck-and-dodge disinformation. Let's see now....
1. The argument that providing the pre-bate invalidates the 23% figure. When it comes to crunching numbers, percentages can always be off one way or the other. However, I'm betting the Fair Tax folks have done better work with their math than the opponents have done. And you note how every time they don't get to hold onto your tax dollars, they call it "giving away government money"?
2. This item--that it wouldn't eliminate the I.R.S.--is pure dee B.S. piled high and deep. The paragraph states you'd have to prove need via vast paperwork at year's end to get your pre-bate. Not so. EVERYONE gets the pre-bate which covers the amount needed for taxes on basic goods and services. This entry is as big a lie as anything Obama himself could dream up.
3. The corporate purchase idea: Straw man here. Even if that were done in the beginning (you buy a "company car" that isn't REALLLY a company car use-wise, for example), and even if that potential chink in the armor hasn't already been addressed, it would be a quick and easy fix. Such as by a "retail is retail" rule whether purchased by a corporation or individual. New car, finished product, tax it. Raw steel to make the car, don't tax it quite yet.
This one in particular smells of politicians looking for anything that might work as an exuse, not a real reason.
4. File what? There would BE no income tax filings. Again, EVERYONE gets the pre-bate, there ARE NO TAX FILINGS except the consumption tax forms submitted by the retailers through the year. NO income tax filings.
5. Food is NOT taxed under the Fair Tax plan in the sense that the pre-bate is designed to provide every citizen with an amount which will COVER that tax when you head to the grocery store.
6. The "19 countries in 1967" having anything similar to THIS Fair Tax plan is not likely to be a true statement. Betcha a dollar to a dog nut that a bit of research--which I will undertake, and report back, but give me a bit of time--will prove that to be more B.S. of the brownest order.
7. And finally, back to the opening statement: Bi-partisan panels are suspect by default. They're made up of generally liberal (regardless of party) political animals who are hardwired not to soil their own nest. That alone would raise at least one of my eyebrows.
Since the panel members either didn't read the Fair Tax plan at all or are intellectually challenged, we don't need the whole commentary; the summary you've posted is enough for now, I'm thinking.
Off to do research on 1967...wasn't that the year of the Six Days' War?
Great comments Ghost, I tend to agree that these commissions can be 'loaded' with politicians who will follow a certain 'path.' My congressman didn't support the Fair tax but he didn't offer an alternative. I'm always leary of those who present problems but not actual solutions. One part that still sticks out to me is the prebate. Assuming 100% participation, that is 100 million+ households receiving a monthly check. This part sounds like it could carry a lot of administrative costs and is a potential for fraud.
I selfishly do like the consumption tax idea as I would benefit (I'm a big saver, not a big spender). I think if they can really hammer out the details on fraud prevention and tax evasion, it could make a lot of sense.
almost forgot, do you know what I really like? The tax is at the point of consumption so illegal immigrants would be paying taxes. The only bad part is that a consumption tax could discourage tourism to America but I'm sure they could figure out something (maybe tourists pay at the 11.5 rate?)
The only way the pre-bate could be obtained fraudulently would be for someone to convince the govt. he or she was more than one person and thus entitled to more than one check--which of course has always taken place to some degree, getting checks sent to dead people and the like. But the potential for that sort of think wouldn't be INCREASED with the Fair Tax (even as it stands now). Plus, the existing swamp of fraudulent income tax evasion would be entirely eliminated.
It's not likely to discourage tourism...simply because the prices before tax would be LOWER due to the elimination of so many tax-related costs during the production of those products (and services).
The FairTax proponents have been going over this for years, and they have refined it to the point that it has few flaws and those are minor.
It's a good plan and far better than the present system. If we adopt it, the economy will rebound in no time.
Agreed.
Also, I neglected to respond to one of LRC's concerns, that being the potential for problems in sending out over 100 million checks monthly.
One thing the feds ARE good at is sending out checks. I'm on Social Security myself these past two years, and Pam was on SSI for something like 12 years (until we got married and it was all up to me). Neither of us has, at least to date, ever seen a monthly check fail to show up where it was supposed to and in the amount it was supposed to be.
With that in mind, I just called up the stats. RIGHT NOW, the govt. is sending out--between SSA and SSI--nearly 60 million checks per month.
Doubling that should present no problem at all.
We do not pay taxes at present because Dennis' disability pension is non-taxable. I would be willing to pay some taxes for a pre-bate. We do not get anything back now. You have to pay in to get something back.
Let me clarify that a bit for you, Becky: Under the Fair Tax Plan, you guys WOULD get a prebate check. The prebate is NOT based on INCOME but on EXPECTATION OF CONSUMPTION.
In other words, that check would be sent to EVERY adult citizen (except the incarcerated) to cover the taxes he or she WILL be paying WHEN BUYING STUFF FOR BASIC NEEDS.
That is the take I got from it but thank you for clarifying. Did you get the story my Katy girl wrote? I thought you would like it.
A story by Katy? I don't think so. Just checked my email in case--or...???
I sent it to your e-mail. Will send again. It is really good for a 14-year old.
Sounds good. It'll be another few hours before I can clean up my email inbox, but will fine-tooth-comb it before the night is over.
Wendy S. Wilmoth 13 months ago
Interesting look at the Fair tax. There are two great books that explain it clearly and in detail, both by Neal Boortz: "The Fair Tax Book" and "Fair Tax: The Truth." Voted Up!