Fairtax: Yeah or Nay

[fantom]

What are your opinions of the Fairtax?

I personally haven't been able to find any faults with the proposal since I have learned about it (about 6 months ago). I am interested in everybody's opinions, especially those against it. If you are against it, I would like to hear why.

For those of you who don't know what it is, here's a little information:

The Fairtax is a national sales tax that will replace the current IRS system.

Basically, all personal, social security, medicare, corporate, estate, gift, capital gains, alternative minimum, and self emplyoment taxes are done away with.

In place of these taxes, there is a national sales tax on all retail goods and services.

There is a "prebate" check sent to all households every month to reimburse people for necessity goods up to the poverty level.

This new system is designed to replace the ever-increasingly-complex income tax system while providing the government with the same income level.

For more information, you can visit "fairtax.org"

 

[Craig Sheppard]

This sounds a lot like Europe's VAT... is it going to be 18% too? I'll check out the site.

EDIT: Ok, briefly reviewed the FAQ. Definitely different from a VAT, so I take that back. Initially it sounds appealing, especially for this reason:

It encourages savings and discourages consumption. You don't give any money off the bat to the govt, so all the money you earn is yours to keep. Only if you buy goods do you have to pay the piper.

(As a side note--does this mean I'd have to pay 23% on a new car?? YIKES.)

But I always hear the largest part of the economy (or one of the largest) is consumer spending. If this system is in place, I'm definitely discouraged from needless consumer spending, since I know I'll be paying 23% on top of the price. Wouldn't this be bad for the economy? Part of the reason the US cranks along like it does is because of our insatiable need to spend, spend, spend... if we became a nation of misers, would we chug along so easily?

Personally, I think it absolutely would be better to encourage people to save instead of spend...but I don't run the economy, that's just my point of view.

This warrants further investigation...

 

[fantom]

(As a side note--does this mean I'd have to pay 23% on a new car?? YIKES.)

Any retail good today (like a car) already has taxes embedded into it. These embedded costs will be removed under the fairtax. Then, with the 23% added on, retail goods will cost approximately the same amount they do today.

But I always hear the largest part of the economy (or one of the largest) is consumer spending. If this system is in place, I'm definitely discouraged from needless consumer spending, since I know I'll be paying 23% on top of the price. Wouldn't this be bad for the economy?

From the FAQ:

"How will the plan affect economic growth? With the penalty for working harder and producing more removed, Americans are free to keep every dollar they earn, and a new era of economic growth and job creation is unleashed. Hidden taxes are history, Americans are able to save more, and businesses invest more. Capital formation, the real source of job creation and innovation, is facilitated. Gross domestic product (GDP) increases by an estimated 10.5 percent in the first year alone. The FairTax as proposed raises the economy’s capital stock by 42 percent, its labor supply by four percent, its output by 12 percent, and its real wage rate by eight percent.

As U.S. companies and individuals repatriate, on a tax-free basis, income generated overseas, huge amounts of new capital flood into the United States. With such a huge capital supply, real interest rates remain low. Additionally, other international investors will seek to invest here to avoid taxes on income in their own countries, thereby further spurring the growth of our own economy.

 

[Craig Sheppard]

You know one thing that web site fails to mention is that companies will have to pay lower salaraies under this system. If you make 50,000 gross and net 40,000, that $10000 is kept by the company to pay taxes. They don't actually pay that money to you, they just move it along to the govt. If they were to eliminate that and pay you $50,000, that's like giving you a $10,000 raise, which can't happen because they're not bringing in any more money (since they say they're not raising prices under the system). So you'd have to be aware your take-home pay will be similar to what it is now--it's not like you'd get all that tax money back in your paycheck.

 

[fantom]

You know one thing that web site fails to mention is that companies will have to pay lower salaraies under this system. If you make 50,000 gross and net 40,000, that $10000 is kept by the company to pay taxes. They don't actually pay that money to you, they just move it along to the govt. If they were to eliminate that and pay you $50,000, that's like giving you a $10,000 raise, which can't happen because they're not bringing in any more money (since they say they're not raising prices under the system). So you'd have to be aware your take-home pay will be similar to what it is now--it's not like you'd get all that tax money back in your paycheck.

I think you are missing something here.

You are saying that companies will not be making more money. This is not true. They will be making way more. Here are some reasons:

* Companies will be making the same amount of money on their goods and services that they do now.
* Companies in the US spend BILLIONS every year preparing taxes for the government. This money will now go into their pockets.
* Companies make many business decisions based upon consequences of the current tax system. Under Fairtax, they will be able to make the decisions to benefit their business.
* Companies will have the ability to spend money on growth since consumers will be investing more money into those companies.

Companies absolutely will be making more money than under the current income tax system.

You may have read something that I haven't read, what did you see that makes you think that companies won't be bringing in more money?

 

[Craig Sheppard]

Check this out... it wasn't clearly defined in Boortz' book, but he clarifies:

http://www.fairtaxblog.com/20050915/boortz-clarifies-keep-100-of-your-paycheck/

"When the FairTax is implemented, and when business and personal income and payroll taxes disappear, your employer is going to have to make a decision. He will either take some or the entire amount he had been withholding for federal income and payroll taxes and add it to your weekly check, or he will readjust your pay figures so that your entire paycheck will be equal to what you used to call “take home pay” before the FairTax. The employer may also decide to do a little of both. Either way, you can see that the amount of money you actually receive as pay – the amount you can put into your bank account – will not decrease, and may actually increase."

 

[don knot]

I absolutely love Boortz! What a smart-***! He's really smart and makes a lot of sense, but is more abrasive than sandpaper, but that is his objective/

 

[Craig Sheppard]

I absolutely love Boortz! What a smart-***! He's really smart and makes a lot of sense, but is more abrasive than sandpaper, but that is his objective/

I just learned he's on local here in Raleigh on 680, I'll have to catch his show sometime. I can't imagine him being any more obnoxious than Hannity. If he is, well I'll only listen one time.

 

[fantom]

Check this out... it wasn't clearly defined in Boortz' book, but he clarifies:

http://www.fairtaxblog.com/20050915/boortz-clarifies-keep-100-of-your-paycheck/

"When the FairTax is implemented, and when business and personal income and payroll taxes disappear, your employer is going to have to make a decision. He will either take some or the entire amount he had been withholding for federal income and payroll taxes and add it to your weekly check, or he will readjust your pay figures so that your entire paycheck will be equal to what you used to call “take home pay” before the FairTax. The employer may also decide to do a little of both. Either way, you can see that the amount of money you actually receive as pay – the amount you can put into your bank account – will not decrease, and may actually increase."

OK. Gotcha. Thanks!

With this being the case, I would still rather have this system than the current tax system.

 

[Craig Sheppard]

OK. Gotcha. Thanks!

With this being the case, I would still rather have this system than the current tax system.

Yeah, I think that's the prevailing opinion/reaction too. I'm in that camp too, only knowing what I've read about it. Having a system that's easy to understand, easy to plan your finances around, well distributed among classes, with few loopholes is miles and miles ahead of what we have now.

I'll have to read his book--I assume he must go into some implementation plans. Theories/plans are great, but this has to be a whopper to put in place. But they got the Euro rolling over in Europe, so I'm sure we can do this.