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Post by Justin Thyme on Mar 13, 2007 11:19:15 GMT -5
By Doug Furtaw If you are tired of taxes that lower our standard of living and take your hard-earned money, used for your family and children, and if you were one of the many who wish someone could rescue you from the hand of government, there is hope. Would you like to have your whole paycheck to spend to improve the lot of your family and your children without having federal tax, Social Security and Medicare taken out? Right now there is a bill going through Congress called the “FairTax” (HR2525 and S25). It is a bill to replace the income tax system with a consumption tax. The Fair Tax Act will repeal the income tax in its entirety, including all corporate and individual income taxes, payroll taxes, self-employment taxes, capital gains and estate and gift taxes. FairTax will impose a revenue-neutral national sales tax on all new goods and services at the point of final purchase for personal consumption. Business-to-business transactions and used products (which have already been taxed) are not subject to the sales tax. The FairTax is a highly progressive tax that provides a universal rebate in an amount equal to the sales tax on essential goods and services, so that no American pays taxes on the purchase of necessities. The FairTax would repeal the 16th Amendment to the Constitution, making the taxation of income from whatever source derived unconstitutional. Right now there is a grassroots movement throughout the country passing information about this bill, admonishing all to find out all they can about the FairTax, then contact their legislators and other officials to support this bill. www.adirondackdailyenterprise.com/Columns/articles.asp?articleID=6252
This won't go away just because Democrats now control Congress, and it shouldn't. There is no reason that Democrats can't embrace the FairTax. It fits in fully with their political philosophy.
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Felix
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Post by Felix on Mar 13, 2007 11:24:52 GMT -5
Justin, how did I know that your first post in the Debate Lounge would be on the Fair Tax?
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Post by tcrashfx on Mar 13, 2007 17:27:38 GMT -5
JiT convinced me a while ago.
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Post by Justin Thyme on Mar 13, 2007 20:33:52 GMT -5
The forum had to be properly primed.
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Jay
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Post by Jay on Mar 13, 2007 23:49:21 GMT -5
I don't think the government would ever get rid of income tax. They'd probably say....let's start off by increasing sales tax and lowering the income tax and then they'd never get rid of the income tax..
~J
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Copperhead
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Post by Copperhead on Mar 16, 2007 7:29:39 GMT -5
Jay, I hear ya. No matter how much more fair & uncomplicated it would be, there's no way the gov't would go for it. They like the bureaucracy & being in the middle of our business.
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Post by el Gusano on Mar 20, 2007 14:19:37 GMT -5
If we simply banned automatic withholding and required people to send in a payment once per month or once per year, there would be such an uproar that the Fair Tax would be passed retroactively.
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Copperhead
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Post by Copperhead on Mar 20, 2007 14:36:21 GMT -5
If we simply banned automatic withholding and required people to send in a payment once per month or once per year, there would be such an uproar that the Fair Tax would be passed retroactively. Nice idea, Gus.
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Post by traveler on Mar 21, 2007 15:44:00 GMT -5
The odds of the FairTax passing were low when the GOP controlled and far lower now that the dems control, especially since they (the dems) are already talking about raising taxes. The FairTax is definitely a good idea, though.
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Kordax
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Post by Kordax on Mar 21, 2007 20:22:30 GMT -5
How would the housing market be effected? Prices (and the underlying mortgages) have been bidded up to an extrordinary level -- very few people dell for a loss. If you add 23% to the purchase price of a $250,000 house, you're paying $307,500 up front with -0- interest deductions to offset your taxable income. People will still finance @ 80% of the purchase price as they do now -- some numbers: the same $250K house (that instantly becomes a $307,5000 house if the Fair Tax applies) would have a $200K mortgage the borrower would service. If the mortgage stayed the same, the borrower would have to plunk down $107K up front instead of $50K. If the borrower financed 80% of the Fair Tax purchase price, he's got a $61,500 down payment & he's servicing a $246K debt.
Any way you slice it, housing costs are going to present a huge blow back, right?
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Post by Justin Thyme on Mar 21, 2007 20:45:42 GMT -5
How would the housing market be effected? Kordax, the FairTax would only apply to new housing. Previously owned housing would be treated just like a previously owned car, the retail tax has been paid once and will never be required to be paid again. New housing will see a hit but not the full 23% due to the builder not paying the embeded taxes on the materials. These embeded taxes have been estimated at between 8% and 20%. The most reliable numbers I've seen on this place the embedded taxes at around 12%. Because incomes will increase by 12% to 15% due to the removal of all income taxes all this seems to be a wash to me. And, Traveler, as far as chances being reduced I can't let that discourage me and it shouldn't discourage you. Push hard on your representatives to co-sponsor the bill. If you are a Chattanooga resident you need to lean hard on Zach Wamp.
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Kordax
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Post by Kordax on Mar 21, 2007 21:38:03 GMT -5
So everything used escapes taxation, only the new stuff?
So the new housing market, the new car market, the new durable good market, the new anything market collapses for as long as possible since any sensible merchant would automatically gravitate to selling & acquiring inventories of used stuff to escape taxable events?
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Felix
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Post by Felix on Mar 21, 2007 21:52:56 GMT -5
I will admit that in regard to the Fair Tax, I have done little homework. What I can't get past is the fact that X $ are needed to run the country on its present budget.
Changing the method of obtaining X $ will not remove the need to match the figure needed for federal expenditures UNLESS cuts are made to programs, especially transfer payments like Social Security and the various health and welfare programs. I understand that Social Security is supposed to go away under the Fair Tax, along with most other taxes. But even with the exclusion for very low incomes, I can't believe that a LOT of folks are not going to be hurting.
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Post by el Gusano on Mar 21, 2007 22:24:30 GMT -5
If you run the numbers, the costs should remain exactly the same in terms of real dollars. The difference being that it's not a regressive tax. Every citizen gets a "refund" of the tax amount on the current poverty level income. IOW, if the poverty level is $10,000, then every citizen would get a check for the Fair Tax amount on $10,000, which in effect lets you live tax free on the necessities.
After that, the taxes you pay are up to you. But, with things being the same in terms of real dollars, it should not be a big blow. The only problem that I can really foresee is that there are a lot of people who play the lottery and don't realize that they have almost no chance of winning it. So, are they going to see the higher price and not realize that they have more money and not "get it"?
I don't know.
The incentive for working for cash under the table is gone.
Class warfare is greatly diminished.
Buying votes by promising to really sock it to those who have worked hard and been successful will be a thing of the past.
Also, I don't think that housing and autos will be affected the way you think, Kordax, but I've not studied that aspect in great detail.
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Post by Justin Thyme on Mar 21, 2007 23:08:19 GMT -5
So the new housing market, the new car market, the new durable good market, the new anything market collapses for as long as possible since any sensible merchant would automatically gravitate to selling & acquiring inventories of used stuff to escape taxable events? Stuff only lasts so long before it has to be replaced, Kordax. But the tax will encourage people to be more frugal in their savings and in their use of resources. Weren't you worried about the used car market a while back with tightened emissions testing? This ought to turn your worries here around. Besides, look at the incentive for foreign investment into this country this would be. If you make something in this country and ship it overseas there is no tax component to the pricing. Items imported into this country will have the tax component of the country of origin PLUS the FairTax. Suddenly domestic manufacturing is competitive with foreign imports again and there is a huge incentive for overseas manufacturers to build stuff here instead of shipping it here. There is also the incentive for those companies to build stuff here to ship elsewhere. Incomes will be higher due to no taxes levied on income and you will have foreign manufacturing opening up more factories here providing more jobs which will also force wages up. The tax is designed to be revenue neutral so it should end up being a wash for most people. With this being the case I really don't see people buying less. Oh, and since education is seen as a business expense education expenses will not be taxed. That ought to be of a little interest to you.
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Post by legaltender on Mar 21, 2007 23:50:42 GMT -5
How do you calculate the "necessities" that FairTax "prebates" are predicated on? I can't get anyone to show me how they intend to distribute prebates without keeping exhaustive, intrusive databases on all taxpayers, taxpayer purchases, and taxpayer residences. Explain what happens to people who can't receive prebates (non-citizens, homeless, victims of database error, etc.). And if the amount of the prebate "is updated every year to keep up with inflation," the FairTax rate will have to be raised in like manner. The FairTax essentially makes welfare universal.
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Post by el Gusano on Mar 22, 2007 0:05:10 GMT -5
The prebate, from my understanding, would be based entirely upon the poverty level, as I stated above. That amount is tax free.
Why would non-citizens need a prebate?
Why would homeless people need a prebate? Are they working?
As income rises, tax revenue rises by the same percentage. So would the presumed poverty level.
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Post by legaltender on Mar 22, 2007 1:14:50 GMT -5
The system would require families to publicly declare and prove their poverty. That involves a staggering regime of bookkeeping and privacy invasion. It would be simpler exempting food and other subsistence consumption from the federal sales tax than to collect the tax and then return part of it to 113 million households in the form of a monthly check.
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Post by el Gusano on Mar 22, 2007 1:26:13 GMT -5
The system would require families to publicly declare and prove their poverty. And why do you make this claim? Do you have anything to substantiate it? All that I've read is that everyone gets the rebate on the tax on the amount of the poverty level. It doesn't matter how much or how little you make.
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Post by legaltender on Mar 22, 2007 7:56:48 GMT -5
Do you have anything to substantiate the government would send a prebate to Warren Buffet under this scheme?
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Post by daworm on Mar 22, 2007 8:49:47 GMT -5
Why wouldn't they send him one? He has a SSN and is over 18, isn't he?
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Post by legaltender on Mar 22, 2007 9:11:06 GMT -5
Why wouldn't they send him one? Because Buffet and Bill Gates need help offsetting the sales tax on their purchases. And Libertarians call liberals "sheep."
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Post by Justin Thyme on Mar 22, 2007 9:19:41 GMT -5
Do you have anything to substantiate the government would send a prebate to Warren Buffet under this scheme? HR25
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Post by legaltender on Mar 22, 2007 10:29:54 GMT -5
"The proposed cash grant programs would require all eligible Americans to file paperwork with the IRA or other government agency in order to claim their benefits under this new entitlement program. A federal agency would need to manage the program, verify individuals' marital status and number of eligible children, and write checks to every family in the United States. Eligibility rules would be necessary, for example, to ensure that a child claimed as a dependant, could not file for his or her own separate grant. A program based on annual income would require the IRS or another federal government agency to make many of the same determinations now made under the current income tax. To pay for the federal cash grant program and remain revenue neutral, the required tax rates, assuming evasion rates somewhat lower than under the income tax, would be 34%." www.taxreformpanel.gov/final-report/TaxReform_Ch9.pdf
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Post by daworm on Mar 22, 2007 12:36:32 GMT -5
Do they "need" it? No, not really. But remember, this is called a "Fair Tax". If anyone gets a prebate, everyone gets a prebate. Does an individual making 100K need it? Probably not, but they get it too. So does the guy making 20K, and so does the guy making 10K or less. That's the whole point. We don't pay taxes on anything below poverty level, and only pay taxes on new goods purchased.
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Post by daworm on Mar 22, 2007 12:40:53 GMT -5
If nothing else, and taking these numbers as fact (which I do not), this should piss you off more about the cost of the current system than deter support for the fair tax. Where is all this money going, and are we seeing any real benefit from it?
If you ever wanted to see the voice of the people expressed in government, allow us to direct to which programs our tax money goes. A lot of things that are priorities today would dry up in a heartbeat tomorrow.
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Post by legaltender on Mar 22, 2007 12:53:43 GMT -5
Euphemistically, yes.
From The President's Advisory Panel on Tax Reform (2006):
"Middle-income Americans, however, would bear more of the federal tax burden under the retail sales tax with a Prebate. The Treasury Department’s analysis of hypothetical taxpayers shows that married couples at the bottom 25th percentile, 50th percentile, and 75th percentile of the income distribution for married taxpayers would see substantial tax increases under a full replacement retail sales tax. A typical married couple at the bottom 25th percentile of the income distribution earns $39,300 per year and would pay $5,625 dollars in federal taxes in 2006. Under the retail sales tax with a Prebate, the same family would pay $7,997 in net federal taxes after subtracting the Prebate of $6,694, resulting in a tax increase of $2,372, or 42 percent. A typical married couple at the 50th percentile of the income distribution making $66,200 would pay an additional $4,791, a tax increase of 36 percent, and a typical married couple in the 75th percentile, making $99,600 would pay an additional $6,789, a 29 percent tax increase. A typical single mother at the bottom 25th percentile of the income distribution for head of household taxpayers has $23,100 of income per year and, compared to current law, would pay $5,866 more under the retail sales tax with a Prebate."
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Post by el Gusano on Mar 22, 2007 12:55:02 GMT -5
Ditto to what Worm said.
And, as a reminder, even with the tax, costs would remain about the same because of the structure.
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Post by daworm on Mar 22, 2007 13:03:20 GMT -5
Why euphemistically? We all pay the same rate, period. How much fairer can you get?
You are assuming a base line that is fair to begin with, and projecting the change as unfair. Whereas what is really happening is that some groups that get an unfair rate under the present system will no longer enjoy the advantage or suffer the disadvantage.
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Post by legaltender on Mar 22, 2007 13:06:34 GMT -5
And, as a reminder, even with the tax, costs would remain about the same because of the structure. Depending on who scores the proposal.
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