A progressive argument in favor of the FairTax

I just got done reading this opinion piece making a progressive argument for the FairTax.

I'm not saying I support the FairTax yet, I do have quite a few reservations about it, but this was a good read.

What do you guys think?

It is the most regressive tax you could have, otherwise

VATS and sales taxes are inherently regressive forms of taxation. The current federal income tax is progressive except to the extent that this is offset by payroll taxes. The use of the name "Fair Tax" is just plain fraudulent in that this tax is not fair unless you want to give huge tax cuts to the rich. Replacing a progressive tax system for a regressive tax system is not fair.

it is the most regressive of taxes. Fair Tax is a Grover Norquist wet dream.

A family of four would receive a check of a bit less than $500 every month too pay the taxes on necessities. This pretty much makes it easy for low income people to buy the things they need without being adversly affected.

When you add up all the taxes in this country - fed, state, local, SS, medicare, property, etc. - guess what? Our tax rate is already surprisingly flat. About 17%, across the board.

So for lower income families who spend just about every penny they earn, you're raising their taxes. They'll now pay an effective rate of roughly 23%.

Meanwhile, look at the other end of the scale - the upper crust. What portion of their income do you guess they spend every year versus invest? If someone is making a million dollars a year, I highly doubt they'd spend even half of it, but let's say they do. They end up with an effective tax rate of just 11.5%. HALF the tax burden of the lowest income families. And it's one-third less total tax dollars than they were paying under the old system!!

And this is called the "fair" tax?!?!

The day the new tax goes into effect, prices instantaneously shoot up. Sticker shock on everything from cars down to peanut butter. Spending goes down, if for no other reason that psychological. Economy takes a big hit.

It hit the economy so hard that merchants started "eating" the tax themselves to keep their customers coming in.

I don't consider that progressive, nor an argument.

That piece is full of nebulous terms with few specifics such as necessities and luxuries, but it doesn't really tell you what is included in each.

And this gem: "The Fair Tax Act would put an end to it . The Act would mandate that anything sold in the United States would incur U.S. taxes." THe taxes are paid by the buyer. How does that makes sure that the corps pay their share. Overseas corps are making money from doing business in this lucrative market, but they don't have to have any financial stake in our society?

I have to continually talk my father off of a flat tax, or a VAT, or whatever....He says it would be fair, and that the current tax code is horrendous and too complex, etc, etc.

Yes the current tax code is a nightmare. It really really is. Even when it was more progressive than it is now, it was still a nightmare. Call it what you will, but a flat tax, or fair tax, might be fair on the day it's written, but never after.

A one page bill would turn into a million. And riders on other bills. Oh here's the new parks bill which assigns 20 million to upgrade park benches in Yellowstone...lets attach a rider on that to lower the sales tax on all industrial grade lemmywedges that come out of one of my supporter's factories to only 10% to give him a compettive edge...

Oh certain non profit organizations don't have to pay taxes, so if they keep their receipts they'll get money back from the government....and then rich people shelter everything in them and end up not paying any tax on their cars, boats, homes, mansions, ski trips, cocaine...

And so on...until once again it's a nightmare, only this time it'll actually work even easier for the ones who want to exploit it...meanwhile the rest of us will get stuck paying all the bills.

It is no more a fair tax than the Clear Skies intiaitive cleaned the air - it is a Flat Tax


http://en.wikipedia.org/wiki/Flat_tax#Arguments_against

<snip>
Opponents note that by limiting the flat tax to paid wages, wealthier people who earn proportionally more money from investments and savings are not taxed for their additional revenue at all; similarly, the loss of deductions means that some tax reliefs for the middle class will disappear. The wealthy would actually be paying less, as a percentage of their monetary gains, than the less wealthy. Therefore, opponents point out that the flat tax is deceptively advertised as fair, when in fact it shifts the tax burden off the upper class onto the middle class -- the real issues are deductions and what money counts as "income", not where the tax brackets are set.

<snip>
It has been said that whilst in most countries the introduction of a flat tax has coincided with strong increases in growth and tax revenue, there is no proven correlation between the two. A study by the IMF showed for instance that sharp increases in Russian GDP growth and tax revenue around the time of the introduction of a 13% flat tax were not the result of the tax reform, but of a sharp increase in oil prices, strong real wage growth and an intensification in the prosecution of tax evasion <11>.
In Estonia, which has had a 26% flat tax rate since 1994, studies have shown that the significant increase in tax revenue experienced was caused partly by a disproportionately rising VAT revenue <12>. Moreover, Estonia and Slovakia have high social contributions, pegged to wage levels <13>. Both matters raise questions regarding the justice of the flat tax system, and thus its long-term viability. The Estonian economist and former chairman of his country's parliamentary budget committee stated in September 2005 that "income disparities are rising and calls for a progressive system of taxation are getting louder - this could put an end to the flat tax after the next election" <14>.

Let's refer to it as what it is: a national sales tax. The FairTax moniker is spin... a marketing ploy,

that can change over the years due to political whim and budgetary reality; the "family consumption allowance", since it's mailed back to to everyone, is where this issue resides. Government gets its 23% on every purchase, then the amount paid back for necessities, over the years, can change by coded definition.

This primarily allows government to everyone's tax money paid for 'only' necessities, and then the challenge for the poor is to hope that the 'good will' of the government will insure that they later receive these taxes back.

Therefore, one point of regression that isn't discussed is the forced borrowing that occurs until citizens receive their rebate, and this appears a much higher burden on the poor than upon the wealthy. For the wealthiest people, paying 23% on every purchase isn't much of a burden, because ability to pay for food, clothing, and shelter is never in doubt due to their high disposable income for discretionary spending. But can the poor afford the loss of access to their money for the limited time until the government issues the family consumption allowance checks?

It will screw the middle class and poor and help the "already-got-ours"..

It's about PERCENTAGES.. percentage of what you make vs what you need to spend to stay alive..

When you make beaucoup bucks, you can still only eat so much or drive so many cars or wear so many clothes.. What you have left over is always going to be a lot!

but when you make "not so much", a LARGER proportion of what you HAVE needs to be spent on the bare minimums of existence..

This is the kind of "taxation" that insures generational wealth and the oligarcy.. If 99% of what you earn goes to support your daily life, there won;t be much to pass on... But if only 10% of what you earn is required to support you, you have so many more options and your progeny hits the groound running..

THIS is what the whole reparations issue is about..

and then I'll talk about flat taxes. Otherwise, forget it.

A fair tax would exempt all income earners under $20K from paying any tax, with deductions for each child, and rates increasing with income - in other words, A PROGRESSIVE, GRADUATED TAX!

A flat tax is by definition UNFAIR, because it treats people who have nothing but disposable income the same as people who use all income for subsistence. They throw in little exemptions, but the fact is these flat tax gimmicks are supported by republicans and rich people because that's who it would benefit.

Anyone who makes over $ 1 mil per year should be paying at a rate of 50%, IMO.

More crap from the economic libertarians.

It would be a tax cut for the rich and a burden for the poor. If you've ever had to scrape along month to month, you know that a tax credit next year does nothing to make up for the fact that you can't buy enough groceries to last this month.

The underlying assumption of the writer is that government simply enacts various taxes for fun. It ignores the fact that not all taxes are created for the sole purpose of raising revenue. It would do the author some good to learn about the tax on undistributed earnings for corporations. Seriously, whoever wrote this did so in a historical vacuum. It's as silly as when the GOP repealed Glass-Steagall (look at all the synergy THAT created).

Silver bullet fixes are almost always a mistake. This is no different.

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except I'd exempt food and prescription meds from the consumption tax. Maybe clothing items of less than $30 value too. That could take some slack off the poor.

Not to put too fine a point on it, but the whole idea is essentially (if implicitly) predicated on the presumption that "saving" is always good, "consumption" is bad (but sometimes a necessary evil), and thus it's a win-win scenario to discourage people from spending lots of money.

Of course, when lots of people sit on their money instead of spending it, what's the result? Recession (or worse, depression).

An expense-based tax puts that burden on people who circulate money. A top-weighted income-based tax puts more of that burden on people who sit on money. Which do you think is better for the economy?

There's also the question of whether paying wages is considered a "sale" of a service. If the "fairtax" applies to services, you haven't eliminated the income tax at all (since I'll have to pass along X% of every dollar I earn by selling my labor). If they are, then you haven't eliminated tax evasion: I'll just start "giving" my products away ... and charge for packaging and delivery (tax-exempt service charges).

While we're in the realm of overly simplistic tax plans, here's an idea: the Broad Tax. Instead of simplifying the tax code by trying to eliminate the margin system, simplify it by eliminating exceptions. Capital gains? Income. (Monetary) inheritances? Income. (Monetary) gifts? Income. If it's a wad of dollars, it's income and is subject to the unified income tax.

Discuss. :-)