Scott Burns on the "Fair Tax"

[Nords]

Then we can talk about how fair it is.

It's not about "fair", it's about who has the votes and how much money this will bring in to government coffers...

 

[samclem]

Golly, if I'm a single guy making $1,000,000 a year, my effective tax rate goes down from 33% to a "fair" rate of 21%!!! And that's not even including social security and medicare taxes I won't have to pay anymore!!! What a savings!!!

But wait, if I'm making $100,000 a year, my rate is about 19%. Hmmmm, my effective tax rate goes from 20% to a somewhat "fair" tax of 19%. Ok, if you count social security tax and medicare tax savings, it really goes down a few more points, so I guess I'm a little more ahead.

Oh, if I only make $30,000 a year, my effective tax rate goes from 10% to "fair" tax of 15%. Ok, put in the ss and med tax savings and I'm just barely ahead with the...do I have to say it?...fair tax.

But what the heck, it looks like under a "fair" tax everyone, yes sir, everyone in the country rich or poor, tall or short, pays less, so why not?

Now, back to this magic lotion....it removes every kind of spot or stain.......

What mortgage payments/local taxes did you assume? And what amount to savings (not taxed under the NRST)? You can prove any point you'd like depending on your assumptions.

Here's what I think might be typical:
(Annual amounts)
1) 40,000 income, 3 people in household, 7000 mortgage payments, 1000 in local taxes, 1000 to savings. Net effective tax under NRST= 4.6%

2) 100,000 income, 3 people in household, 15K mortgage payments, 3000 in local taxes, 15K to savings, Net effective tax under NRST= 10.12%


I have no idea what these folks would pay under the present system--but the overall effective rates above sound like they are about comparable after considering the standard deduction, etc. People earning less than poverty level end up with net payments from the government under this system (similar to the earned income tax credit today). And, they would pay no SS or medicare taxes.

Of course, the amount of tax you pay would be up to you. Buy new cars, furs, boats, etc and pay more tax. Repair your old car, buy a used car/boat, put more into savings= pay far less tax. Oh, and foreign goods sold in this country would also be taxed at the same rate, producing income for the treasury (workers producing these goods now pay no income tax to the US, so there's comparatively little benefit to the Treasury when a Volvo is sold in Oklahoma).

The NRST isn't perfect--but it is worth close consideration. Scott Burns thinks so, too.

Here's another link to his article--the first one I posted now contains a different article at the top.

http://www.dallasnews.com/sharedcontent/dws/bus/scottburns/columns/2006/stories/101906dnbusburnstoo.50f89926.html

 

[samclem]

Retire@40,
For completeness, I should have made a calc based on the case of your cited 30K earner:

Earned $30K, 3 people in household, pays $6000 for mortgage, pays $800 in local taxes, manages to put $500 into savings: Total net taxes under the NRST: 0% And--no payroll taxes.

 

[sgeeeee]

The un-"Fair" tax calculator is useless. It fails to answer any questions about who pays more and who pays less. It hides the actual tax and costs of goods behind nonsense categories. If this whole un'"Fair" tax isn't a scam coming from the billionaire elite, then it sure is sold poorly. I've seen infomercials for miracle diet plans that are more honest and revealing than the un'"Fair" tax propaganda.

If someone has done calculations to prove that the un-"Fair" tax is revenue neutral to the government, then they must know exactly who pays more and who pays less. Tell me who they are and how much more or how much less they pay. It's that simple. Without this analysis, how can anyone claim it is more fair?

This tax is sold as more fair. That implies a "better" distribution of the costs of government. So tell me exactly what the better distribution is or I believe the proponents are lying. I refuse to believe some Lilliputian story about everyone being better off. If someone can't break down who pays what as compared to today, then I believe the sales pitch for the un'"Fair" tax is a scam. Why should anyone believe otherwise.

People who support this tax as fair but can't answer the simple question about who pays more and who pays less look like charlatans. On what basis do you conclude the tax to be more fair?

 

[bpp]

I'll tell you one group who would pay less tax under the Fair Tax plan: US citizens abroad. Conversely, residents of the US would pay more.

Sounds fair to me.

 

[lets-retire]

1 and 2 are facts, but you come to a wrong conclusion.

Under a "fair" tax they would be just as bad if not worse. We've talked about this in previous threads on this topic during the last election.

Since the tax is not based on income that becomes irrelevant. I can see that an underground economy could develop, however that is why we would still need the enforcement arm of the IRS. It would be a lot easier to discover tax fraud in a sales tax than in a income tax system. If your mom and pop store decides to stop collecting sales tax and sell things off the books how difficult would it be to look at their receipts and expenditures and discover many things purchased, but not displayed in the store for sale or held n a warehouse. Mom and Pop still need to buy things to live. So even if they didn't pay the tax collected to the government when they spent their money it would still find it's way back to government coffers.

The people working for cash would also still spend their money and pay their taxes, as will little Johnny, and Janine when they spend their allowance or present money on candy or other toys. Essentially the tax base will increase.

The sales tax will also encourage people to LBYM and increase savings, which as you know has the effect of increasing their wealth and ability to buy things, or maybe even retire early (I've heard this can happen ). Or do you prefer to be the minority and have only a few able to retire early.

 

[Zathras]

Now, if you and I are going to be paying more, tell me who is paying less. If we are paying less, tell me who is paying more. Then we can talk about how fair it is.

If you can tell me how many people are not paying taxes and how many people are using loopholes in the tax system to avoid taxes I will tell you where the 'fair-tax' people are saying the extra taxes are coming from.

While this isn't a flat tax as used in a number of eastern european countries I believe the proponents of the fair tax are counting on the same bump in compliance/payment of taxes received by countries that have gone to the flat tax.

http://www.csmonitor.com/2005/0308/p01s03-woeu.html

edit- here is another link http://www.businessweek.com/magazine/content/05_39/b3952079.htm

 

[Zathras]

Here we go, I can give a better answer now.
According to http://www.economist.com/displaystory.cfm?story_id=3860731, the IRS estimated that for every dollar it collected, 19-20 cents was owed but not paid.

IF (and I am not saying that it will, but it is part of the 'plan') half of this is paid due to a flat/fair tax that is an additional 156-176 billion dollars (in 2001 dollars, so about 170-190 billion dollars??). If the gain is closer to 90% then we are looking at over 300 billion.

 

[samclem]

The un-"Fair" tax calculator is useless. It fails to answer any questions about who pays more and who pays less. It hides the actual tax and costs of goods behind nonsense categories.

The "Tax Calculator" just does what the name implies-it allows you to calculate what your tax would be under the NRST. No, it does not write a report of winners and losers. I don't find the categories to be confusing at all, they seem simple enogh to me. Certainly if a person can't figure out what to put in each box he woudn't have a prayer of being able to comprehend/comply with the present "nonsense categories" on their 1040 and attachments. Many of us have just become numb to the whackiness that is in our present tax code--if someone were proposing our present system today, they'd be laughed out of town.

Here's a missive "against" the NRST from a lover of the present system.
http://www.fosterfriess.com/content/view/160/38/

Congressman Lindner's comments to the House Ways and Means Committee in July 2005 get right to the point of fairness, the appropraite size of the tax, etc (apologies for the extended quote):

"An interesting part of my experience promoting this bill has been responding to myriad calculations of what the rate of the FairTax would need to be. All sorts of outlandish numbers have been calculated including one of nearly 60% by the Joint Tax Committee some number of years ago. I confess that these erroneous guesstimates used to be very frustrating to me, but now I simply use them to make my point. You see, I don’t care what the rate has to be for revenue neutrality. The math is what it is. I value the transparency and the efficiency of removing all of the hidden taxes and having the complete tax figure available for all Americans to see. With a near zero percent savings rate in this country, consumption and income by definition are the same thing…so if a detractor calculates that a revenue neutral FairTax rate would actually be 60%, by definition the current tax rate on all of America—when you pull all the hidden taxes together into one place—must also be 60%. If I spend everything that I earn, and the tax man needs 60 cents out of every dollar that I spend, in the alternative he would also need 60 cents out of every dollar that I earn. I ask that you take this point to heart as this Committee continues this process."

http://waysandmeans.house.gov/hearings.asp?formmode=view&id=2955

 

[retire@40]

...If someone has done calculations to prove that the un-"Fair" tax is revenue neutral to the government, then they must know exactly who pays more and who pays less. Tell me who they are and how much more or how much less they pay. It's that simple. Without this analysis, how can anyone claim it is more fair?...

Don't you get it? EVERYONE pays less!!! That's what makes it "Fair!"

Now hold my hand and let's skip all the way to see the wizard!

 

[sgeeeee]

Talking to un-"Fair" tax proponents is like talking to ***** about SWR. Make broad unsupported claims of fairness. Never define fairness. Evade questions by quoting sources that don't provide answers. Rinse, repeat.

Here is my summary of the un-"Fair" tax argument:

- It is more fair.

- I won't define fair.

- It is easier to collect and enforce.

- I won't answer any specific questions about collection and enforcement issues.

- Everyone will benefit.

- Trust me.

And here is my conclusion:

- No thanks.

 

[samclem]

I'll tell you one group who would pay less tax under the Fair Tax plan: US citizens abroad. Conversely, residents of the US would pay more.

Sounds fair to me.

I remember US expats complaining here about the present taxation system. Okay guys--write your congressmen!