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We need to talk about the "fair tax" again
First of all, what's the site?
Second, I spent some more time thinking about it, and I think if I understand it properly it's morally repugnant. I'm willing to admit I perhaps don't have all the facts, so please correct any assumptions I've made that are incorrect.
It's a tax based on sales, right? Who levies the taxes? Federal and state? Ok, so we have a flat rate based on sales taxes. Poor and middle classes get a prebate. How much is this prebate? Is it based on how much I spent last year? The government decides how much I should be spending on food, clothing, gas, whatever else, right? Is my rent taxed? My utlities?
Here's the thing. Assuming I understand this correctly, this is a regressive tax and a major break for the wealthy. Bill Gates gets an $8 billion paycheck each year. How much of that can he possibly spend? Obviously his necessities are covered enough times over to cover a small country. Even if he buys luxury items, he's maybe looking at having 25% of his income taxed. Yes, I know it's not an income tax, but it's income that would go to pay the taxes on everything he purchases.
Using my husband and me as an example would be incredibly different. We spend probably 90% of our paychecks every month. We might be able to cut it down to like 75% if we bought nothing extra. But nevertheless, that would mean we're being taxed an a much higher rate than Bill Gates.
And I'm much more well off that many, many people in this country.
So our prebate would need to be something like $20,000 a year, right? Oh, that would be just for me--$40,000 for the both of us?
I'm confused as to why this is a good idea. Please correct any wrong ideas I have.
Re: We need to talk about the "fair tax" again
my read shelf:
The prebate has nothing to do with what you spend, it's based on income and a gov't estimate of what essential goods cost. There a link in the previous discussion thread Zoe posted.
What happens when sales decline (like during a recession)? Wouldn't there be a precipitous drop in tax revenue for the government? That seems problematic.
Here's why I hate it.
Can you imagine the lobbying industry that will develop to decide what is a necessity and tax free and what isn't and should be taxed?
States have sales tax now, but it's like 6%. Probably not enough to influence you to buy one thing or another. Slap a 20% tax on top of that though and you've got some decision making to do.
Some states have pads as tax free and tampons get a sales tax because they are a luxury (clearly men wrote these laws). 6% isnt' enough to make me want to stop buying tampons, but 20%...? That's going to start influencing people's purchases. So, now Tampax is lobbying Congress.
Multiply that by every single consumer good there is and you've got a nightmare. Who really wants the government making those kinds of decisions?
Income tax revenues correlate with economic growth too. The gov't loses in revenue under both systems.
I agree. I see now why my estimate for my prebate is wrong, but I think the one they propose would still be too low.
And I would be making some decisions. I'm pretty sure I'd drop most of the extras pretty fast.
Remember how much more money you'd be making with no income or payroll taxes though. Also when corporate income tax rates are cut the primary beneficiaries are their employees who recoup that cut in the form of higher wages (there's a long proven record of that response).
It's essentially behavioral then, which is essentially and undeniably regressive.
I'll have to think about buying pads AND tampons (to borrow ESF's), but Paris Hilton can buy all the feminine hygiene she wants.
Again, there's only so much of $8 bil you can spend. They still pay a lower percentage of their income that the rest of us.
Inherently unfair. Actually calling this the Fair Tax is like majorly Orwellian.
Actually sales taxes have very low feedback. Many states have sales taxes and that has not hurt consumption. When you figure in the large increase in net income people will be receiving the negative feedback won't be anywhere near as bad as it is now under a progressive income tax system - which at the higher ends of the income spectrum has a measurable negative feedback.
Now that I'd love to see (my company choose to pay me more). I'd make about $400 more a month without state and federal taxes, so yes I see why my estimate was way off.
How would a 20-something% tax be good for things like health care and higher education? Those are already cost-prohibitive. It doesn't seem like the prebate would cover all of that; some people's healthcare needs are much higher than others'.
Also, I was wondering this in the original thread - the fairtax.org calculations don't seem to take into consideration a drop in consumption for new goods in favor of used. Or people consuming fewer services and opting to DIY. Like ESF said, a 20% hike in cost is going to make people think twice about spending.
I thought there'd be no taxes on "necessities" like food?
Eh...whatever, I do not see it ever happening.
I will NEVER understand why punishing the rich is considered fair to the left. It just boggles my mind why anyone would think twice about how much of Paris Hilton's income is spent on taxation.
You might note that Paris Hilton spends a lot more money than the cost of a tampon. She buys planes and boats and cars and multiple homes, and designer clothes, etc. Think of how much sales tax she'll pay on a yacht and that might make you feel better.
The Fair Tax is one rate for everyone. That's why it's fair. Because of varying income levels poor & middle income people will never buy as much, or therefore pay as much tax, as someone at the high end. So they're still paying more in absolute dollars, they're just not being excessively punished with a higher rate on top of higher dollars. The goal of this plan is to grow the economy, which if you've ever seen a graph of the poverty rate and economic growth, you'd see that a healthy, strong economy is the only way to get significant numbers of people out of poverty. Certainly the current method of attempting to equalize incomes through a progressive tax code has failed miserably.
Again, you're not figuring in the huge rise in incomes.
I guess I find the government estimating how much essential goods should cost in order to calculate the prebate to be highly problematic. If government is so inefficient that it can't be trusted to properly provide health care, what makes anyone think that government will be efficient enough to adjust the estimates for essential goods in order to properly keep up with inflation?
Also, what's essential to some people isn't essential to others. Here's an interesting thought: parents currently get exemptions for dependent children. Under the fair tax, their tax burden would likely go UP because they have to purchase more essential things such as clothes or school supplies for those children. I'm not necessarily convinced that people should get a tax break for having children, but I really don't think that assessing a tax penalty would be a good idea.
Now that I think about it, wouldn't it kind of amount to a tax on large families?
I don't think everyone sees it as punishing the rich. It's more a case of people not being able to afford both necessary goods and taxes, so you lighten some of their tax burden which can only be done by someone else taking up that slack. It's not that the rich somehow should pay more as punishment but rather b/c they are able. Everyone benefits when people can feed and clothe themselves and have shelter.
I'm really not a fan of taxing the rich more. I'm definitely in the camp of they earned it so why shouldn't they keep it. BUT I don't see any other way to address the issue of people not having enough money to pay taxes and buy necessary items.
Yes, but this plan favors the rich. And it punishes pretty much everyone we've all ever met. Again, Paris may buy planes and yachts, but how much of her income can she actually spend? I can spend all of mine, easily. And that's not even buying insane luxuries. I'll no longer be able to have any luxuries. The tax code has made all of my personal choices for me.
I thought Randroids liked personal choices?
DI-TTO!!!!!
If these people are so horrible at everything, why are we letting them choose how much prebate we get? Why?
Because they spend more just by virtue of having kids. I don't have kids, and I don't deserve any extra money. I can afford to pay more than a couple my age and income with kids. Should we punish the children with poverty for being born?
No, because it's not a given. The tax will be a set amount. The prebate will be a set amount. The cost of goods and services might change. And I would have no clue what my income would be. Somehow, I can't imagine how I could raise my hourly rate in a huge way, overnight, plus charge a 20+% tax on top of that.
I have such mixed feelings about child tax credits. On the one hand, I'm totally with you - why should I pay more taxes than people with kids, even though they use more services (roads, parks, schools) than I do? On the other hand, I see that we benefit from kids not living in poverty (granted, it's not like the only people claiming child tax credits are improverished) and that someone's real wealth is decreased when they have kids. It's all so complicated. This is why I never want to make tax policy.
I feel like I'm entrenched in class warfare. Who cares what % of her income she spends? She will pay more in taxes than you. That's what matters. Even if she spends 1% of her income it will be more than what you spend. I'm going to point out again - you'd have more money! No one is taking away personal choices. C'mon. I think you're exaggerating your tax liability b/c it won't be an increase from what you're paying now, and you're ignoring how much rich people buy.
This plan doesn't favor the rich unless they do nothing but sit on their money - which they don't. Rich people invest their money, they buy expensive things just b/c they can. But so what? This plan is good for everyone. I'm middle class and I save my entire paycheck every month. So this plan would benefit me a great deal. It would also benefit me b/c a growing, healthy economy will give me great opportunities for jobs and investment. How awesome would our 401k's be if we had a vibrant economy? You think that's only for rich people?
Also, you may have heard about the rich's tax avoidance schemes. They're very adroit at finding ways to get out of paying income taxes. They already probably pay a lower rate than you now b/c their money isn't derived from taxable wages. The Fair Tax gets rid of all those loopholes.
Yes it is a given. The fair tax replaces the income tax and payroll taxes. Think of what % of your check goes to income taxes, SS & Medicare including the employer portion.
The prices of goods and services are determined by supply & demand. If bunny is right and this fair tax results in lower consumption then lowered demand results in lower prices. That would be a win-win. It's a documented fact that when corporate income tax rates are lowered the primary and secondary beneficiaries are employees (in the form of higher wages) and shareholders. But even if you want to ignore that you'll still have a much greater net income to play with.
I have a tax-related question that I can't even seem to word right. So bear with me, I have to explain the question:
You hear that the top 1% of income earners make x% of the income in this country, and somewhere along the line, I've heard that y% of income tax is paid by some small number of people. What I would like to know is what percentage of income earners pay what percentage of tax. I don't know if that makes any sense. I don't remember the real numbers, but suppose that the top 1% of earners make 50% of the income in this country. I'd like to know what percent of the tax that 1% is paying. Is there anywhere that tracks this?
I'm with you BMcB. I'm confused about how I feel about it. Do they really use roads and parks more? I don't know. Schools of course they do. But I thought the ideology behind the credits wasn't b/c they use more services. If they use them more, shouldn't they pay more, too? Like, as an OINK, shouldn't I get a credit for the schools I'm not using?
Child credits are so parents can afford things like food and clothes for their kids. Budgeting should be part of their decision making process. I don't want to share my income with kids; I want to eat sushi and drink fabulous whines. But, of course, we can't determine policy by shoulds, so we've got to make sure kids have food and clothes regardless whether their parents planned intelligently.
I think I remember seeing a chart like this not too long ago... this might have been it:
http://chartjunk.karmanaut.com/wp-content/images/taxplans.gif ?
ETA: that's illustrating the proposed tax plans and not current. I don't think it answers your question, actually. oops.