The FairTax - gaining steam!

[gindie]

Consider this a "revival" of the National Sales Tax topic on this board from last November.   

There is a new book out, called the "FairTax Book".  Just released Tuesday, it is currently #3 on Amazon.com and #7 on Barnes and Noble.  These are impressive rankings for a book on taxes, of all things.

To quicky summarize, the plan:

1) Would eliminate all current federal taxes (income, corporate, AMT, FICA, Medicare, investment-related, death, etc.) and replace them with a single 23% sales tax on all retail purchases of NEW goods and services.

2) Probably (and this is my one slight hesitation about the plan) would result in the price reduction of goods and services due to the elimination of the current taxes paid during the intermediate levels of production.  This might offset the new  retail tax to some degree.

3) Would result in a "prebate" check sent each month to each head of household to compensate for the taxes paid for the necessities of life.  The amount of the check would be based on the government poverty level computations for the size of the household.  This significantly reduces the argument that the new tax would hurt the poor.

4) Would eliminate the horrendous cost of compliance with the current tax structure.

...and many more.

I would like to see comments from those who have read the book.  I have, and it is an easy read of only about 2-3 hours, about 180 pages.

 

[fire5soon]

I think this is the most important piece of legislation our government has seen in decades (HR 25 I believe.)  This would create a boom in our economy and make the US the tax haven of the world.

There is a related site www.fairtax.org which also explains the plan.

In short, I think this is nothing short of vital for this country to survive as the dominate economy in the world.

-Jay

 

[unclemick]

Probably the dumbest idea I've seen since the country tried Prohibition.

Although I always enjoyed Gangster movies as a kid.

Heh, heh, heh.

 

[TromboneAl]

Shouldn't have put that $1,000 into my wife's Roth yesterday!

 

[retire@40]

We already went through this baloney ad nauseum a few months ago.

http://early-retirement.org/forums/index.php?topic=1533.0

 

[JohnP]

I agree totally with unclemick (again) on this. 

JohnP

 

[laurence]

Yeesh, try to tell the construction industry and the millions of overextended home owners to kiss their mortgage deduction goodbye. Just have your running shoes on when you do.

 

[sgeeeee]

Not worth talking about. It's such a dumb idea it's a complete non-starter.

 

[ShokWaveRider]

I would Prefer a flat tax of 10 - 15% for EVERYONE, including lobbyinst, Government, Rich, Poor, EVERYONE.

It would work also. No State Taxes, No Income Taxes No Sales Taxes. Each State would get Say 3% of the 10 and the Feds would get 7%. Now THAT would boost the economy. I for one would buy a new car sales tax free!

SWR

 

[riskadverse]

If it touches the mortgage deduction, it is DOA. Our economy is currently driven by the housing and mortgage industry. No need to kill the goose who laid the golden egg . . . especially if you think it might be able to squeeze another one out.

I wouldn't expect significant income tax reform in your lifetime. The people in control have a pretty sweet deal and the people who will replace them will have the same deal.

 

[Mr._johngalt]

I would Prefer a flat tax of 10 - 15% for EVERYONE, including lobbyinst, Government, Rich, Poor, EVERYONE.

It would work also. No State Taxes, No Income Taxes No Sales Taxes. Each State would get Say 3% of the 10 and the Feds would get 7%. Now THAT would boost the economy. I for one would buy a new car sales tax free!

SWR

Never happen.

 

[Cut-Throat]

Not worth talking about.  It's such a dumb idea it's a complete non-starter. 

Yup, This is almost as stupid as a Chain Letter.

What amazes me, is that some retired folks here are in favor of this idea. They spent their whole working lives paying income taxes on their money, and now want to hand it over to the government again when they spend it!

 

[charlie]

Hi gindie,

I bet you did not expect such a harsh response, eh?

For what it's worth, there would also be a huge one time windfall
capital gain profit for all those dividend paying stocks and bonds.

If it stands any chance, they will have to figure out a way to
compensate for already taxed money ..... like ROTH's for example.

As for the loss of mortgage deduction, it would be interesting to
see the numbers ...... I bet a large percentage of filers with
mortgages use the standard deduction anyway.

IMHO, most of the critics have not spent the time to study the
proposal in detail .... typical knee jerk left wing reaction.

Cheers,

Charlie

 

[unclemick]

Yep

And it will stay knee jerk - until after Hilary and Ted say it's ok.

Then I might change my mind.

Heh, heh, heh, heh, heh.

 

[Cut-Throat]

IMHO, most of the critics have not spent the time to study the
proposal in detail .... typical knee jerk left wing reaction.

Actually this has been studied in great detail by the left including the same proposal by former California Governor Jerry Brown( a leftie Democrat)when he was running for President.
http://www.collegian.psu.edu/archive/1992/03/03-27-92tdc/03-27-92dnews-07.asp

I thought I might be in favor of this measure about 15 years ago. After hearing quite a lengthly debate, I came to realize what a Ponzi Scheme this was.

At first glance, most everyone is for this because most everyone's taxes seem lower. What does this tell you? - Well; if you think budget deficits are high today and were high under Reagan, where do you think the Government is going to get its money? If you think the government is going to cut costs, you better start voting Democratic!

 

[gindie]

Cut-Throat -

Your link describes:  a 13% "income" tax on individuals and corporations

Fair Tax:  23% "sales" tax.  No tax on investments or savings (e.g. 401K's).  Foreigners, illegals, and crooks pay the tax when they buy anything retail.

I'm hoping one of the nay-sayers would just read the book, like I did, and THEN voice their specific objections.

 

[sgeeeee]

. . .

I'm hoping one of the nay-sayers would just read the book, like I did, and THEN voice their specific objections.

I'm hoping anyone who backs this option stops to think.

Although I haven't read this book that has affected you so much, I have read quite a bit about this proposal in newspaper and magazine articles. Let me just give a short explanation of why I have no intention of reading the book. Here are just a few of my initial objections:

To quicky summarize, the plan:

1) Would eliminate all current federal taxes (income, corporate, AMT, FICA, Medicare, investment-related, death, etc.) and replace them with a single 23% sales tax on all retail purchases of NEW goods and services.

Who cares what it would eliminate? It won't eliminate cost of governing. At the end of the day, everyone knows that the country has to pay for what it spends (unless you are a knee-jerk Republican who supports GWB and his massive deficits -- apparently thinking this can go on forever). So . . . the sum of every dime we are paying today (plus the dimes that make up the rising deficit) in income tax, corporate tax, AMT, FICA, Medicare, investment-related, inheritance, etc. still has to be paid from this sales tax. The only thing that changes is who pays -- not how much has to be paid. And as Cut-throat has already pointed out, more of the burden will be directed at retirees than is currently the case. Retirees have already spent the accumulation portion of their life paying for government on their income. They have aniticipated the day when they enter the distribution phase of their lives and their taxes are reduced. This legislation would allow them the opportunity to pay twice. No thanks.

2) Probably (and this is my one slight hesitation about the plan) would result in the price reduction of goods and services due to the elimination of the current taxes paid during the intermediate levels of production. This might offset the new retail tax to some degree.

This is really misguided thinking. Commodity items are not priced based on cost. They are priced based on "what the market will bear." In general, what the market will bear is determined by the sum of the price + taxes (and other fees). If taxes are reduced, the price will be raised by the manufacturer to get all the market will bear. In this case, taxes go up, so commodity items must be priced lower. If costs cannot be lowered enough, the items are no longer viable. I have significant experience with this. Don't expect the consumer to win this battle. It won't happen.

3) Would result in a "prebate" check sent each month to each head of household to compensate for the taxes paid for the necessities of life. The amount of the check would be based on the government poverty level computations for the size of the household. This significantly reduces the argument that the new tax would hurt the poor.

Who cares. See item 1.

4) Would eliminate the horrendous cost of compliance with the current tax structure.

At what cost? So we have this large tax collection machine today that does not collect any sales tax. And we are going to transition it to a large tax collection machine that collects sales tax. That should be a really efficient process . . . NOT.

Now . . . answer these concerns and I will read the book (as long as I can get it from the library). I'm sure not going to give any money to the neo-con author who is pushing this idea.

 

[unclemick]

Is it now Russia - that is trying the 13% flat tax.

There may be a future example to study - the pros and cons - academic wise.

I believe in ancient days - the flat tax % number floated was much lower.

 

[Eagle43]

http://boortz.com/nuze/index.html


Go about 1/2 way down to locate Flat Tax stuff. Boortz is one of the authors. Also links to reviews, etc.

I like Boortz because he's a Libertarian. This plan will NEVER make it through Congress. Too many people, left and right, have a vested interest in our current tax system. Hopefully it will contribute to a thorough discussion of our tax system. But I doubt it. If you can't get support from either Democrats or Republicans, you don't have a chance. And the (I don't know exact percentage) of people who don't pay income taxes at all are certainly not going to support it. Then there are the lobbyists, of which the housing industry is just one example. Fugettaboutit.

 

[TromboneAl]

I reluctantly agree that a single sales tax to replace others would not be a good idea, and would never pass.

But, close your eyes for a minute and imagine a world with no income taxes to prepare, no withholding, no property tax due, no tax hassles of any kind...

Imagine no tax deadline,
I wonder if you can,
No need for schedule C,
A brotherhood of man,
Imagine all the people
Sharing all the world...

You may say I'm a dreamer,
But I'm not the only one,
I hope some day you'll join us,
And the world will live as one.

 

[retire@40]

Foreigners, illegals, and crooks pay the tax when they buy anything retail.

What if the guy doing the selling is a foreigner, illegal, or a crook?

Think things ALL the way through.

 

[Nords]

But, close your eyes for a minute and imagine a world with no income taxes to prepare, no withholding, no property tax due, no tax hassles of any kind...

Why, the whole financial-management industry could implode.

Would we really want to be responsible for putting all those 401(k) providers out of business?!?

 

[lets-retire]

The merits of good or bad are fun to discuss, but as one stated earlier the people in power wish to maintain that power and taxes are a large basis of that power.

 

[Ed_The_Gypsy]

A problem: It is very unusual to replace one tax with another, much less many taxes with one. Human nature. It is also very unusual for one tax to be eliminated altogether. I do seem to recall that some surtaxes from LBJ's time had expiration dates on them, though. They were introduced to pay for the Viet Nam War (interesting, no?).

Of course, sales taxes do tend to produce smuggling and black markets (cigarettes, booze, etc.).

I am thinking about a flat personal income tax and reducing or eliminating corporate income tax for industries here in-country only. Business creates jobs, not government. Government sure as heck can destroy jobs, though.

Of course, this is all wool-gathering. The tax system has created special interests in everybody and the resistance to change is insurmountable.

Ed

 

[Michael]

...no property tax due...

That is levied by the local school board, not the fed. State and local sales taxes would have to increase quite a bit, on top of the federal tax, to eliminate local taxes also. Federal, state, and local sales taxes would likely top 50%, if no reductions in spending were made.

...eliminating corporate income tax...

Which would require an increase in taxes on their employees, necessitating an increase in wages to compensate. Corporations pay the taxes either way. The only way to reduce corporate tax burdens is to reduce government spending.