FairTax

[tracydani3]

I was recently introduced to this taxing system and wondered what some of you all thought about it. This is obviously for the US, but some of you not from here may still know something and have an opinion.

Seems like a very good idea to me, but as some of you may remember I am not the most knowlegeable about these sorts of things:lol:

Anyway, to sum it up, you pay no taxes out of your paycheck, but instead pay taxes only on new goods/services that you use or purchase. Effectively paying only for the things you do and not for others.

I look forward to reading your replies:)

Oh yeah, here is the link-
http://www.fairtax.org/

Their FAQ has a lot of good info.

[MagicNakor]

Wouldn't that effectively kill any sort of facility or program that uses government funds? I can't say that I'm well-versed with the American taxation system, but I don't see how that could be a good thing.

:shuriken:

[tracydani3]

Apparently this form of taxing will collect as much taxes for the government as the current one (and potentialy more) does. Instead of having taxes taken out before you get paid, they would be taken out at the register so in effect you choose if the product/service is worth the tax.

Not to mention, you know exactly what you are being taxed when you are being taxed, rather then having all the hidden taxes we currently have.

Everyone would get a prebate each month based on family size which would in effect be a refund of taxes paid, in advance, on anything they spend up to the poverty level. Anything they choose to spend above poverty level would be taxes out of their pocket.

[MagicNakor]

But many things are supported by tax dollars that aren't bought or sold.

Or am I just too depressed and messed up right now to fully understand it?

:shuriken:

[tracydani3]

The idea is that everytime you purchase a new item or service, you will pay a certain percentage in taxes.

Those taxes you pay from your purchases/services used will go to fund all the federal needs.

[GepperRankins]

sounds like a good way to stretch that rich-poor gap.


wouldn't this push the price of produce up, which means wages would have to go up, which can't go up unless companies profits go up or they get subsidised by the government. which means another price hike on produce because somebody will have to pay the poor.

[tracydani3]

Good question.

I won't explain this very well as I am new to it myself, but here goes....

When you get rid of the current system, employers will no longer pay the taxes they do for having you on the payroll. That will drop the expense of having you down some. They will also not pay taxes on supplies bought to create whatever product/service they are selling so that will also lower the cost to the employer.

One thought is that then the business will in fact be able to lower prices and also pay you your gross salary while still making the same profit margin. You may pay the same price which would include the tax you *may* pay a higher price, it depends on the route businesses and employees take. But, you will only pay taxes on what you choose to spend.

An example of how to save money would be to buy used products such as cars and homes because the tax would not apply to them. It has already been paid in full when it was bought new.

The FAQ covers a lot of things better then I can and there is a forum as well where they discuss pro's and con's if you are interested.

http://www.fairtaxgroups.com/

They discuss several ways this can go.

The thing is, this makes the rich pay more taxes then they do now. One of the examples they use would be like this. We may buy ground beef at say $2.00 a pound plus taxof say 23%. The rich would pay say $9.00 a pound for beef tenderloin plus 23%. They are paying more because they choose to buy a higher end product.

Same with a house. We buy a house for $250k plus 23% tax and they buy a $3million house plus 23% tax.

This would in the end make the rich actualy fund more of the taxes because they will not have all the shelters they currently have to get out of paying. They only pay on what they buy and they have to buy all their things.

This would also make sure that illegal immogrants are paying their fair share too. They have to buy everything they consume just like we do and since everyone is getting taxed on their purchases rather then their income the tax base is far larger.

We would potentialy pay less in taxes, but more would be paying. And again, everyone is exempt on the taxes they pay up to the poverty level worth of purchases. So if you happen to be at poverty level in your spending habits, you would in effect not pay taxes.

EDITED TO ADD:

Since business will not get taxed either, they are more likely to stay in America rather then going elsewhere. Also, foreign businesses may choose to come here because they would not pay taxes either. Taxes are only paid on services/products bought in country so they could export tax free, but any business selling products/services to the US, those things will be taxed.

[Chewie]

Hehe it sounds great when you talk about illegal immigrants paying their way, eh?

Think of it this way.
Business A doesn't pay tax on purchases but their MD does.
Now that Business A is saving in taxes it offers its MD less salary but with a new company payment card.
The MD can pay back the balance on the card and avoid the tax or the company can write it off. Either way, both employer and employee win.
But not the taxman.

But that's OK because the tax is applied to illegal immigrants, tourists, pensioners and kids.

How about this.
Mary works at Walmart and needs a new boiler for that nasty New York winter and it's gonna cost her $3000. Because she earns above the bread line (as defined by government, possibly) she doesn't get any help with this.

Martha also works at Walmart and needs a boiler but since she lives in Nebraska her living expenses are considerably lower than Mary's in New York. It's also gonna cost her $3000 but that's not so hard to find.

Money Inc. needs a boiler for its Manhattan office. That's no problem 'cos the company's doing OK and anyway, it won't have to pay the $600 tax that ordinary people do.


We have this system in the UK; it's known as VAT - Value Added Tax.
VAT was originally intended to be levied only on luxury items.
It's levied on almost all goods and services including electricity and tampons. Consider that, if you will. Tampons are officially a luxury item in the UK.

Another large and real problem with going wholesale over to this type of taxation is how much more complicated it is compared to earnings tax.
The more complicated you make taxation, the more loopholes evaders will find, the more bread line people will 'slip through the safety net' and the more it costs to operate it.

[MagicNakor]

It sounds almost like a variation of what we have here: the GST (or Goods and Services Tax). Like the VAT, it also applies to feminine hygiene products, as well as a great deal of other neccessities. It's been very controversial since its introduction, and several times political parties have promised to abolish it (hah!), though the current government cut a single percentage off it.

:shuriken:

[j2k4]

The idea (as it generally arises) is expressed in the form of of a VAT, and has the appeal of transparency, choice, and proportion, as well as simplicity.

It has it's apparent difficulties, as have been enumerated in previous posts, but whether those could be overcome will not likely be examined for precisely the qualities it seems to offer.

Politics, as practiced in the U.S., are largely built upon the patronage transparence and choice abhor.

Whole bureaucracies would also become redundant/obsolete, throwing many people out of work.

Civil servants are not normally extraordinarily popular here, but hey, we're talking about millions of jobs, and while no politician wants to confront such a problem, neither does he want to run against an opponent who calls him out for implementing such a program.

The practical problems are enormous to the point of rendering the theory useless, as the required troubleshooting process cannot occur unless the program is more-or-less in place.

None of this takes into consideration the reaction of an impatient and self-indulgent electorate, which might support the project in a referendum, then rebel during the sea-change of implementation.

Human nature would, as ever, present the insurmountable obstacle.

[tracydani3]

It can only be compared to the VAT tax in that it is a tax paid at the time of purchasing something.

If I am not mistaken, the UK, much like Germany still has many other taxes along with the VAT.

The idea of the FairTax is to completely replace the current system (getting rid of everything else) and only having the FairTax. This would in effect make it very simple (except as j2 has said, the implimentation, working out the kinks, where do the people currently in those tax related jobs go etc.) compared to our current system.

For example, no tax season or returns to file for. Some of the ideas for what to do with people in those jobs are to put them into other areas of law enforcement. They would be able to concentrate on the smaller amount of people who do need to keep records such as businesses to help prevent trying to get around the system.

I believe they say that about 250-300 billion dollars is used every year in tax accounting and enforcement. Money better spent elsewhere for sure.

I will need to look into it more in the next few days because I am not sure what, if anything happens to the social programs in place currently. I imagine they are still there as the taxes are still being collected, just in a more efficient and (hopefully) fair way.

It is a system that I do not see getting put in place for some of the same reasons that j2 has mentioned, but if it is something that has great potential it is something I may be willing to get off my lazy butt to help promote:P

[MagicNakor]

That would put a lot of people out of work....won't someone think of the accountants?

:shuriken:

[j2k4]

That would put a lot of people out of work....won't someone think of the accountants?

:shuriken:

Accountants are just lawyers without the attitude.




































:naughty:

[Skweeky]

Poor Biggles

[JPaul]

I really don't think a system based entirely on indirect taxation would work, neither do I think it would be fair.

For example Males A and B have the same income. Neither pay any direct taxes and only pay tax on the purchase of goods or services.

However Male A is married with children. Male B on the other hand is single. Simply because he has a bigger family Male A spends all of his income and as such pays tax on all (or most) of it. Male B on the other hand spends half of his income and saves or invests the rest. As such he pays half the tax of Male A.

In our system there is direct and indirect taxation. For the direct taxation the Govt controls how much is paid by individuals, based on their circumstances. You may not agree with the specific methods used, however the concept is surely right.

However individuals have some control over how much they pay in indirect taxes, e.g. VAT.

Using televisions as an example;

Don't buy one, pay no VAT

Buy one for £117.50, pay £17.50 VAT

Buy one for £235, pay £35 VAT

So individuals have a degree of control over what they choose to spend money on, therefore how much indirect tax they pay. There is the further argument that the person who can afford the better telly can better afford to pay a greater ammount of tax.

We need mixed tax systems, for both social and economic reasons.

[tracydani3]

@ JPaul

Here is the prebate chart as an example of what you are talking about.
http://www.fairtaxvolunteer.org/smart/gfx/table1.jpg

The single guy and the married guy would get a different prebate off-setting the difference in family size. In effect, they will not pay taxes until they spent proportionately more money. The prebate is paid monthly and is meant to cover any taxes paid by buying essential products/services up to the poverty level.

Then just as you say, they are able to exercise a certain amount of control over their taxes by making decisions that suit their income for items not deemed essential.

EDITED TO ADD: Here is the link (http://www.fairtaxvolunteer.org/smart/faq-main.html#3) to the FAQ which answers a lot of this stuff if you are interested.

[Mr JP Fugley]

Thanks for that.

The most obvious problem any Govt would have with that system would be that they were relying on traders to honestly collect the taxes and declare them. You only have to look at tax fraud in the UK to see what a problem it causes. In this system the Govt would be giving much more control to traders and as such the opportinity for frauds of all sorts.

PAYE, whilst far from being fraud free is much easier to regulate and ensure that the correct amounts are paid. Indeed if people do not make the proper tax returns the Govt simply takes away all allowances and taxes everything until the tax return is made.

I can see the attractions of the system however I am a fan of a mixed system of taxation.

Thanks for bringing the subject up.

[j2k4]

Personally, I've don't think anything beyond a flat federal tax on income is necessary, based only on income, with no exceptions, and no returns.

States could drop their income tax and shift to sales-based taxes, laying aside exemptions for industry and other business-even churches should pay, provided doing so gains them free expression.

States should feel compelled to chase businesses to host, and treat them fairly.

Go ahead and do away with that god-awful bureaucracy, and let the pols learn to budget.

Fat chances all around, though, and that is a fact.

Absent some cataclysmic financial upheaval, nothing of the sort will ever happen; another thing we can thank the activist courts for.

I have real difficulty getting interested in half-measures...

[Rat Faced]

There is a finite amount that Rich People spend, and the rest gets saved/invested... all this money will not be taxed, as it is now.

The total percentage of income paid as taxation therefore goes up in the Lower Paid, and down for the Higher Paid.

The burdon of Taxation falls more upon the lower paid, the ones that need to spend all their income just to survive.


I'd rather they took it all as Income Tax... i then know the rest of its mine. Can't stand stealth taxes.

[j2k4]

There is a finite amount that Rich People spend, and the rest gets saved/invested... all this money will not be taxed, as it is now.


Just as a point of interest, Brother Rat, it seems your sentiment is structured so as to reflect poorly upon the rich.

By what measure do you deem such investment (per highlighted) as a negative, or an affront, to the less-than-rich? :huh:

[Mr JP Fugley]

There is a finite amount that Rich People spend, and the rest gets saved/invested... all this money will not be taxed, as it is now.

The total percentage of income paid as taxation therefore goes up in the Lower Paid, and down for the Higher Paid.

The burdon of Taxation falls more upon the lower paid, the ones that need to spend all their income just to survive.


I'd rather they took it all as Income Tax... i then know the rest of its mine. Can't stand stealth taxes.

The phrase "stealth tax" is pretty much a meaningless soundbite. Everyone knows what VAT is, or Excise Duty for that matter.

However I agree with the rest of what you said.

[tracydani3]

Some of the benefits as far as the tax is concerned would be that, overall the average persons taxes would be lower( so they say anyway).

This would be possible because everyone would pay taxes. Including those who work under the table and do not report income, legal or not. Tourists, drug dealers, whoever because it would be a tax on any new product or service regardless.

As I said, I am new to it myself so haven't really learned enough to decide this is the way or not, but it makes more sense to me then our current system that takes a semi serious education, constant updating etc. just to have any idea of what is really happening within it.

[Mr JP Fugley]

This would be possible because everyone would pay taxes. Including those who work under the table and do not report income, legal or not. Tourists, drug dealers, whoever because it would be a tax on any new product or service regardless.


Good point, never thought of that.

I still don't agree with the concept, but I hadn't thought of that particular angle.