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Old 04-12-2006, 03:28 PM  
Hydrae Hydrae is offline
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Fair Tax

I have been reading an interesting book co-authored by Neil Boortz and John Linder (US Rep from Georgia). It is about the "Fair Tax Act of 2005."

Basically what they are proposing is an elimination of all income, corporate, death and gift taxes and replacing them with a 23% national "consumption" (read sales) tax. While I have not finished the book (not a big book either, just over 100 pages), I find the concept very interesting. I have felt for a long time that income taxes are not constitutional (regardless of the 16th amendment which is possibly the worst piece of legislation ever pawned off on the American public).

Anyway, I wanted to throw this out for discussion. What are the reasons why this wouldn't work? I have a lot of respect for the opinions of people on this sub-forum as well as how informed some of you are in governmental related matters. So please tell me, why this isn't something we should all be lobbying our congresspeople about? How much longer should we continue to be slaves to our own government?

*EDIT: Here is a link for more information about this proposal:

http://www.fairtax.org/
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Old 04-12-2006, 03:44 PM   #2
jiveturkey jiveturkey is offline
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Is there any type of incentive for small businesses in this idea?
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Old 04-12-2006, 03:44 PM   #3
banyon banyon is offline
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Three initial thoughts:

1) I would like to note that the 16th amendment is part of the Constitution, therefore income tax is Constitutional. If we had a 28th amendment that repealed the 16th, then it would be Unconstitutional. Ask Scalia or patteeu, who are enamored with the amendment process.

2. Neal Boortz is quite possibly my least favorite person on the radio. I think I have mentioned this in other posts, but he is a smug, self-absorbed idiot. This being said, there are a few decent ideas in the plan.

3. No tax system will be fair without a system that eliminates offshore tax shelters and accounts for the wealthy to hide their assets.
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Old 04-12-2006, 03:47 PM   #4
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Its a regressive tax. If there was a rebate for the first $5k or so of tax and the a rebate of 1/2 for next 10k might be workable.

Dave
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Old 04-12-2006, 03:47 PM   #5
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Quote:
Originally Posted by jiveturkey
Is there any type of incentive for small businesses in this idea?

Yes collect the money and then steal it.

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High Tech is Sorcery and the people who are really powerful are literally telling people to commit crimes using the psychic interspace created by the WWW and Wireless. They are controlling peoples actions like drones . The two things are deeply intertwined. The more man's brain interfaces with machines the creepier it gets. They use brains separate from a human body in a supercomputer and you have The Image of the Beast. The military has been doing this since the 50s
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Old 04-12-2006, 03:54 PM   #6
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Quote:
Originally Posted by jiveturkey
Is there any type of incentive for small businesses in this idea?

How about simply no longer having to match employees Medicare and Social Security taxes? That alone will lower all business owners overhead.
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Old 04-12-2006, 03:59 PM   #7
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Quote:
Originally Posted by banyon
Three initial thoughts:

1) I would like to note that the 16th amendment is part of the Constitution, therefore income tax is Constitutional. If we had a 28th amendment that repealed the 16th, then it would be Unconstitutional. Ask Scalia or patteeu, who are enamored with the amendment process.

2. Neal Boortz is quite possibly my least favorite person on the radio. I think I have mentioned this in other posts, but he is a smug, self-absorbed idiot. This being said, there are a few decent ideas in the plan.

3. No tax system will be fair without a system that eliminates offshore tax shelters and accounts for the wealthy to hide their assets.

1) Yes, I know technically it is part of the Constitution thanks to the amendment process. However I firmly believe it completely violates other portions of the Constitution, specifically dealing with the collection of direct taxes being tied to an enumeration of the citizens.

2) I agree, I have turned the station specifically because he is on the station. But with an issue like this I am willing to listen to any idea that will get the government out of the business of being involved in my personal business.

3) If there are no death or capital gains taxes, why would this money continue to move offshore? The only time you would pay taxes is when you decided to spend money. There would be no reason to hide assets from a nonexistant tax. This area is actually one of the selling points they are using, the amount of US dollars that are out of this country with little to no hope of it coming back. If we can encourage some of this to come back into the US, the economy would go wild.
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Old 04-12-2006, 04:03 PM   #8
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Quote:
Originally Posted by Dave Lane
Its a regressive tax. If there was a rebate for the first $5k or so of tax and the a rebate of 1/2 for next 10k might be workable.

Dave
This is a portion of the proposal I have some issue with and that I understand the least in some ways. They are propsing that the government will send out monthly checks to EVERY household in the country to "prebate" the amount of taxes expected for a base level of living. You are really only paying taxes on anything above this level. This will have no bearing on how rich or poor you are, everyone gets this. This was put in mostly to protect the poor I believe.

One of the contentions of this book is that although they are proposing adding a 23% tax to everything (including services such as medical and dental), prices will drop by close to that same amount due to the loss of all the embedded taxes we are paying without realizing they are in the price of goods and services. At the same time you are now getting 100% of your pay so your buying power should increase while business expenses are going down.
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Old 04-12-2006, 04:04 PM   #9
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Quote:
Originally Posted by Hydrae
1) If there are no death or capital gains taxes, why would this money continue to move offshore? The only time you would pay taxes is when you decided to spend money. There would be no reason to hide assets from a nonexistant tax. This area is actually one of the selling points they are using, the amount of US dollars that are out of this country with little to no hope of it coming back. If we can encourage some of this to come back into the US, the economy would go wild.

There are ways around a VAT tax that I am confronted with all the time since I ship overseas regularly.

Actually a 5% VAT type tax to fund universal health care I would find quite acceptable.

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High Tech is Sorcery and the people who are really powerful are literally telling people to commit crimes using the psychic interspace created by the WWW and Wireless. They are controlling peoples actions like drones . The two things are deeply intertwined. The more man's brain interfaces with machines the creepier it gets. They use brains separate from a human body in a supercomputer and you have The Image of the Beast. The military has been doing this since the 50s
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Old 04-12-2006, 04:15 PM   #10
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Quote:
Originally Posted by Dave Lane
There are ways around a VAT tax that I am confronted with all the time since I ship overseas regularly.

Actually a 5% VAT type tax to fund universal health care I would find quite acceptable.

Dave

But it is not a VAT. It is a straight consumer tax on goods and services at the retail level. This keeps it all right in front of everybody instead of it getting hidden in the price of things like happens now. A VAT also hides the tax source as it is added at each level of manufacture (from my VERY limited knowledge). By having the amount of taxes paid more clear, people will become more aware of just how much is wasted of OUR money all the time. Right now, most of us don't realize just how much we are paying in taxes over and above our income taxes.

One of the questions put forth in the book is to ask people these questions:

1) How much did you pay in taxes last year?

2) How much money did you earn last pay period?

Typical answers:

1) I got a refund!

2) Well, my take home pay is...

Of course I realize the majority of people out there are not as smart as those posting here so I would expect most people here can answer these questions off the top of their head! (I have been an anti-income tax person for many years and I honestly could not answer #2).
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Old 04-12-2006, 04:27 PM   #11
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Hydrae. If there is one thing you can count on...

Any type of tax will ensure that wealthy people's accountants and lawyers will be trying to find a way around it.

2 things I am unclear on:

A) Why wouldn't people just buy the equivalent good overseas? We'd have to raise all of our import taxes to ensure that this doesn't happen and it might result in retaliation by other countries.

B)businesses will find ways to hide the true amounts of their sales receipts to undercut this tax. Plus they might incorporate overseas to be able to transfer sales accounts/records.

your point about decreasing the desire to shelter income, however, is a good one.
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Old 04-12-2006, 04:36 PM   #12
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Quote:
Originally Posted by banyon
Hydrae. If there is one thing you can count on...

Any type of tax will ensure that wealthy people's accountants and lawyers will be trying to find a way around it.

2 things I am unclear on:

A) Why wouldn't people just buy the equivalent good overseas? We'd have to raise all of our import taxes to ensure that this doesn't happen and it might result in retaliation by other countries.

B)businesses will find ways to hide the true amounts of their sales receipts to undercut this tax. Plus they might incorporate overseas to be able to transfer sales accounts/records.

your point about decreasing the desire to shelter income, however, is a good one.

I will do my best to answer questions on this thread. Just remember, I haven't even finished the book and am a long way from an expert on these issues, jsut a concerned citizen.

A) They do address some of this in the book regarding impoirt tarrifs but off the top of my head, not sure how to answer this one.

B) How many businesses do this now in relation to state sales taxes? The proposal as it stands now would have the taxes collected by the states since they already have a mechanism in place. The states (and I believe the businesses involved in the collections such as the retail stores) will receive a small percentage of the amount collected to cover collection costs.
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Old 04-12-2006, 04:40 PM   #13
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I'm a fan of the fair tax as I've heard it described (I haven't actually read the book), but here are a few difficulties that might arise. It's possible that some or all of them have been addressed in the book, and if so, I'd be interested in hearing about it. Most of these "criticisms" are related to the transition from our current tax scheme to the fair tax.

1) In the income tax, the home mortgage interest deduction and the charitable giving deduction are big incentives toward home ownership and charitable giving respectively. An immediate transition away from these incentives could be pretty disruptive to the home building and charity businesses.

2) Elderly people who have been responsible in terms of saving for their own retirement have not only paid taxes on that income one time, but in many cases have paid a second round of taxes on the growth of those savings (except for IRA-like savings). An immediate and complete transition to a sales tax would now lead to those people paying a third round of taxes on those funds as they were spent on retail goods.

3) A 23% tax on retail goods (in addition to any state and local sales taxes) would be a significant incentive for the creation of a black market to avoid the tax altogether either by selling off the books or by exchanging through barter. Of course, the flip side is that it would eliminate the black market pressure for such things as paid-in-cash labor and undeclared tips.

There are probably other significant criticisms, but on balance I think the pros outweigh any cons I can think of. One of the best things about a switch to the FAIR tax, IMO, would be the ability to apply that tax to imported goods and to strip that tax from exports which would make domestic products/services more competitive with foreign-made products/services both here and abroad. The income tax is embedded in our products and services (driving up their prices) and they can't be added to imports or stripped from exports under the current treaties governing global trade (GATT).
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Old 04-12-2006, 04:42 PM   #14
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Quote:
Originally Posted by banyon
Hydrae. If there is one thing you can count on...

Any type of tax will ensure that wealthy people's accountants and lawyers will be trying to find a way around it.

2 things I am unclear on:

A) Why wouldn't people just buy the equivalent good overseas? We'd have to raise all of our import taxes to ensure that this doesn't happen and it might result in retaliation by other countries.

B)businesses will find ways to hide the true amounts of their sales receipts to undercut this tax. Plus they might incorporate overseas to be able to transfer sales accounts/records.

your point about decreasing the desire to shelter income, however, is a good one.
Goods imported for sale in the US would definitely have the FAIR tax applied to them at the retail point. I'm not sure what would happen for individuals who buy retail in foreign markets and then try to bring the products home, but I'd bet that US taxes would be applied at the border and I don't think that would cause any trade conflict concerns. I believe other countries are already doing these things to American products.
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Old 04-12-2006, 05:10 PM   #15
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Quote:
Originally Posted by patteeu
I'm a fan of the fair tax as I've heard it described (I haven't actually read the book), but here are a few difficulties that might arise. It's possible that some or all of them have been addressed in the book, and if so, I'd be interested in hearing about it. Most of these "criticisms" are related to the transition from our current tax scheme to the fair tax.

1) In the income tax, the home mortgage interest deduction and the charitable giving deduction are big incentives toward home ownership and charitable giving respectively. An immediate transition away from these incentives could be pretty disruptive to the home building and charity businesses.

2) Elderly people who have been responsible in terms of saving for their own retirement have not only paid taxes on that income one time, but in many cases have paid a second round of taxes on the growth of those savings (except for IRA-like savings). An immediate and complete transition to a sales tax would now lead to those people paying a third round of taxes on those funds as they were spent on retail goods.

3) A 23% tax on retail goods (in addition to any state and local sales taxes) would be a significant incentive for the creation of a black market to avoid the tax altogether either by selling off the books or by exchanging through barter. Of course, the flip side is that it would eliminate the black market pressure for such things as paid-in-cash labor and undeclared tips.

There are probably other significant criticisms, but on balance I think the pros outweigh any cons I can think of. One of the best things about a switch to the FAIR tax, IMO, would be the ability to apply that tax to imported goods and to strip that tax from exports which would make domestic products/services more competitive with foreign-made products/services both here and abroad. The income tax is embedded in our products and services (driving up their prices) and they can't be added to imports or stripped from exports under the current treaties governing global trade (GATT).
1) Interesting point. I agree charities would certainly be hurt by the loss of tax cut incentive to donate to them. It would be nice if our moral code would actually get us to do this on our own, wouldn't it?

As to home building, I would hope that by effectively giving everyone a 20+% increase on take home pay, people would be in a much better position to afford to purchase a home regardless of tax/interest implications.

2) Again, this is not a point that they have addressed in the book (at least so far, I will probably finish it tonight or tomorrow night). I would expect though that as the market relevels itself at a reduced price point (they estimate 20-25% drop in the cost of producing products due to the elimination of the embedded taxes. These numbers are cited from the Professor Emeritus of Harvards' Economic school), the out of pocket cost for goods and services should come back to around the level they are now. So although they would technically be taxed yet again on the money, it should have little to no affect on their buying power.

3) Certainly a potential issue with the creation of a new black market. However it would end the whole tax evasion market we have currently. Whether those would balance out or anything, I have no idea.
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