Fair Tax Plan

If you actually know what the FairTax plan is, you would not hesitate to support it.

Yes, you took a class which says a sales tax is regressive, which is true, but you didn't read the FairTax legislation (HR 25) or the description at FairTax.org so you are speaking about something when you only know half the story.

In fact the FairTax is the only tax proposal which TOTALLY untaxes the poorest among us. I suggest you read the part about the "prebate" and perhaps you will refine your position.

Your position on "Only 50% of your income was taxed" reminds me of the story about a Russian peasant who, when approached and offered anything he wanted with the caveat that his neighbor would receive twice as much, said remove one of my eyes. It sound to me as though you are more interested in knocking others down than improving your own position.

I assume that you are a student but from your statements on savings and investment as well as un-taxing business, where do you think the money for that great job you expect after graduation will come from?

Please learn all the facts and then rethink your position.

Please look at this legislation more closely before you start making blanket accusations. The FairTax plan is much more than just a sales tax, it's comprehensive tax reform that ensures it is MORE PROGRESSIVE THAN INCOME TAX. This is because citizens are given a prebate each month to ensure that no one pays tax on the basic necessities of life. As a result, THE TRULY POOR PAY NO TAX AT ALL, WHICH IS NOT THE CASE NOW.

This is why the FairTax has truly bi-partisan appeal, it cleans up the mess of our tax system, puts American goods on equal footing with those of other countries both here and abroad, will encourage companies to bring manufacturing jobs BACK to America, save our economy BILLIONS of wasted dollars in tax compliance costs, all the while ensuring those under the poverty line PAY NOTHING AT ALL.

I encourage you to do a more thorough study of the FairTax, and I think you'll want to post again to correct the misinformation you have posted about the FairTax in this entry.

It levels the global playing field for US Businesses, which are the geese that lay golden eggs.

Before you jump to conclusions, I want you to read the following from Alan Greenspan: "Corporations don't pay taxes, people do."

Who pays those taxes? The consumers in the form of a higher price, the shareholders in the form of reduced returns on investment, and finally the employees in the form of reduced wages and benefits, delayed raises, or the loss of a job when the burden becomes too great.

The Fair Tax Plan will allow our companies, and OUR WORKERS, to compete on a level playing field for the first time in over 30 years. It will provide much greater economic opportunity for all, but especially for those who struggle to maintain a job and provide an adequate standard of living. The Fair Tax is truly is a pay-as-you-go system for all and it is assessed only when an individual has an ability to pay, not when the IRS says you have an ability to pay.

US workers will be in full control of their paychecks for the first time in DECADES. No more withholding for Federal Income Tax or FICA or MEDICARE -- two of the most REGRESSIVE taxes we inflict. Those living at or below the poverty line WILL PAY NO TAX and we will all be better off.

APRIL 15TH????? Let's make it just another Spring day.

HR 25, the Fair Tax Act, is in the House Ways and Means Committee of
congress, waiting to be passed into law. If passed, the Income Tax &
IRS would be abolished and replaced with a national (retail only) sales
tax.

Everyone shoud go to: www.congress.org and tell their congressmen that
they want HR 25 passed into law ASAP!!!! If we all "push together", we
can make it happen. There's nothing to it, BUT TO DO IT!!!!!!

Read and Enjoy.

The FINAL SOLUTION!! for the IRS & Income Tax Problem

50 Reasons I Support the FairTax
(How many reasons can you give for supporting the present obsolete IRS
& income tax system?)

Those Who Know the Facts Love the Fair Tax
"Family Friendly Tax Reform"
Tax Reform with far less pain and much more gain!
Out with the Old Code and in with the New (national RETAIL ONLY sales
tax).

www.fairtax.org

1. It allows you to keep 100% of your paycheck, with nothing withheld
for Social Security and Medicare payments.
2. It eliminates the regressive payroll tax that hurts the poor.
Currently, every one of us is taxed a minimum of 7.65% on our first-dollar of
wages up to $90,000, if we earn that much.
3. It assures that the wealthiest Americans will be voluntarily helping
to fund social security with every last dollar they spend above the
poverty level. Today, earnings are subject to payroll taxes only up to
$90,000. The wealthiest Americans therefore do not pay into the system
above that amount. If their earnings are from investments, no earnings
fund the Social Security system. Under the FairTax, a single purchase
(regardless of the source of the earnings) can result in greater
contributions to the Social Security system than would be paid by an individual
under the payroll tax of today.
4. It provides funding for Social Security and Medicare at a level
equal to or greater than at present, with a stronger and broader tax base.
5. It secures the future of Social Security and Medicare because all
spenders fund it and not just the workers.
6. It eliminates all personal income taxes, payroll taxes, corporate
income taxes, gift taxes, death taxes, and capital gains taxes.
7. It eliminates the income tax and the IRS. Members of Congress and
the public overwhelmingly agree that the current internal revenue code is
cumbersome, intrusive, coercive, and inefficient.
8. It is revenue neutral with the present income tax system, funding
the federal budget at current levels.
9. It will remove an average of 22% of the cost of American made goods
by removing the built-in payroll tax (the other 7.65% of earnings that
employers pay) and other business taxes that are now passed to
consumers as an "embedded" tax of approximately 22% due to the cascading of
income and payroll taxes paid by U.S. employers, at every step of
production, to the U.S. Treasury.
10. It doesn't tax used items ? clothes, cars, homes. Only new items
are taxed when sold by a business to an individual.
11. It is progressive, a "prebate" of the tax amount up to the poverty
level is given to everyone. This means that those spending below the
poverty level have a net gain because the "prebate" exceeds the amount
paid in taxes. (Under the present system they pay the payroll tax even if
they get a full refund of income tax withheld.)

12. It eliminates 90% of the cost of compliance. American families and
American businesses waste an estimated $250 ? $600 billion per year
doing the paperwork necessary to comply with the tax code. That is roughly
$1,000 ? $2,000 annually for every man, woman and child in the U.S.
13. It creates an opportunity for our products to leave this country
costing an average of 25% less, thus increasing our exports, lower our
deficit balance of trade, and increasing employment at home.
14. It encourages investment in companies located in the U.S., thus
providing a home for money already in the US and attracting more. The U.S.
will be the most attractive tax-free haven in the world for doing
business. American companies will return from offshore and overseas.
15. It encourages repatriation to the U.S. of money held by U.S.
individuals and companies now in foreign countries, with no tax consequence.
16. All 290 million Americans and 51 million visiting tourists fund
Social Security and Medicare with their purchases. Today only 110 million
workers fund these programs via deductions from their paychecks.
17. The broader tax base includes the ten percent of our economy, an
estimated $1 trillion, that today is underground or under the table.
Under the FairTax, the illegal drug dealer will pay his tax just like the
rest of us when he buys his sunglasses, BMW, and other items, as will
those who do business for cash.
18. It allows families to save more for home ownership, education, and
retirement. An average family making $50,000 will have $7,500 more
spendable income.
19. It makes educational tuition a tax-free expenditure of tax-free
income.
20. It makes American products more competitive overseas by removing
the embedded tax from them, thus lowering their prices, which compensates
for low foreign wages.
21. It makes American products more competitive at home by removing the
embedded tax from them, compensating for the low cost of imported
products not burdened by taxes imposed by exporting countries.
22. It removes the need for formal 401-K's, IRAs, HSA, etc. Anyone will
be able to set up any kind of savings or investment account without
regard to taxes or the government.
23. It frees churches and other non-profit organizations from the
expense of filing tax returns and paying their half of Social Security and
Medicare payments for employees. There will no longer be any 501.c.3 or
501.c.4 non-profit tax status, because there will be no more tax to be
exempt from.
24. It restores to churches and non-profit organizations the 1st
Amendment right to engage in free speech, without fear of losing their
tax-free status.
25. It gives individuals and businesses the right to donate as much as
they want to in a given year to charitable causes.
26. It restores the 4th Amendment, protecting against unreasonable
searches and seizures, from which the IRS presently is exempt.
27. It restores the 5th Amendment, which guarantees the right to due
process. Under current systems the IRS has their own courts with their
own set of rules not included in the 5th.
28. It cleans up a major flaw in campaign financing, eliminating
campaign donations for "tax favors".
29. It eliminates wrangling in Congress over tax cuts, the tax code,
and who is or is not paying a fair share of the tax bill.
30. It encourages work by letting workers keep 100% of their earnings
and giving a rebate, to boot, making the notion that the more you work,
the more money you have, a reality, unlike the current system where
welfare is lost when you go to work, so your first dollars earned after
taxes just offset what you were currently getting in welfare, making you
no better off.
31. It allows more of the lower income families to become home owners
by allowing a second job income above their current income (all tax
free) to be applied to a mortgage. Money for down payments for homes is
also saved totally tax free so that it will accumulate faster.
32. It allows families to retain farms and businesses in the hands of
those who built them through the elimination of the death tax.
33. It allows families to help each other out tax-free, by eliminating
the gift tax.
34. It encourages individuals to self-insure, making the health system
more direct pay (no 3rd party pay), thus bringing costs down.
35. Without FICA to pay, most states, counties, municipalities, and
school districts will see a large increase in their state budget revenues,
additionally lowering the overall tax burden (State & Federal) for most
Americans.
36. It assures that no American will find, at the end of the year, a
need to get a loan to pay taxes as an alternative to penalties, interest,
or cheating.
37. It restores individual privacy. The government no longer needs to
know where you work, what you are earning, and what you are doing with
it.
38. It eliminates the need to have a "marriage" clarification declaring
who you live with, as that has no bearing at all on a state or federal
sales tax.
39. It eliminates the need for courts to decide which divorced parent
gets to take the tax deduction for children.
40. It reduces production costs for farmers and other subsidized
businesses, leading to a reduction in subsidies, thus reducing the federal
budget.
41. It eliminates the administrative costs incurred by states in
collection of state sales taxes because states will piggyback the state tax
collection onto the national tax collection, for which they are
compensated by the FairTax ?% administrative cost give-back. [Doesn't this go
to the retailers?]
42. It results in a windfall profit for many of those holding taxable
corporate high interest bonds at the time of passage of FairTax, since
they will not be taxed under FairTax. (A higher interest rate is usually
paid to entice investors to buy the corporate bonds rather than go with
the lower interest, but tax free, municipal bonds, now.)
43. It shifts the tax to consumption, which consumption tables over
time show is more stable than income, therefore the tax revenue stream is
likely to be a more stable and predictable amount.
44. It results in Federal Reserve rates being based on current
consumption, which is rather stable, instead of future earnings, which are less
predictable, resulting in surer inflation prevention.
45. It allows for better planning by businesses, because they no longer
have to consider tax implications for everything they do.
46. It makes higher employment or better compensation possible in the
small business sector where today it costs approximately three dollars
in compliance costs to pay one dollar in payroll and income taxes.
47. It moves many now providing tax preparation, advice, accounting,
planning, and records maintenance into an expansive economy where they
will be producing goods and services. There they can add to the standard
of living of all Americans and likely earn more than they do currently,
instead of shuffling paper for the government (and not contributing
anything economically to society).
48. It relieves citizens of the risk of facing the shift in burden of
proof that is so common with the current system, i.e., the taxpayer is
guilty unless innocence can be proved, when even IRS staff sometimes
give conflicting interpretations.
49. It's simple, unambiguous, and certain, the opposite of the current
tax code.
50. It's good for the environment. It reportedly would save about
300,000 trees a year that are needed to produce the paper for the IRS
compliance and tax forms, enough to reach around the equator placed end to
end 28 times. Also, since it taxes only new items, it would encourage
buying tax-free pre-owned cars, clothes, furniture, houses, etc. Reuse is
good for the environment, too.

Best Regards,
John Paul McDaniel

Go to: www.fairtax.org

The Fair Tax is the one truly Fair approach to taxation. Not only does it provide a mechanism by which those of meager means pay not taxes whatsoever on the essentials of life, it provides a option by which the poor may avoid any taxes whatever.

The Fair Tax, because it applies to only new goods and services, gives individuals the option of using used goods in place of purchasing new ones. Buy a new car, pay taxes. Buy a used one, pay no taxes.

This works out particularly well for those who are on the lower end of the socioeconomic scale since they are often the biggest consumers of used goods. In essence, they get by with zero taxes by doing what they have always done.

And don't forget, the new/used dichotomy will be a big inducement to reuse/recycle as opposed to buying new all the time.

The rich will never change their spending patterns. (Do you imaging Paris Hilton shopping at Good Will), but the Fair Tax will be the greatest income multiplier those on the lower half of the income scale have ever seen.

Don't be mislead by those who want to keep the power inherent in the income tax. We don't need to continue supporting lobbyists, tax manipulators, or Congressional royalists. Take away their power. Support the Fair Tax and return control to the people.

Assuming there is no prebate (which there is) and I pay taxes on $1 million versus someone elses $25 K - I'm already paying 40 times the tax they are. And this doesn't seem fair to you? Oh, and that other $1 million that isn't getting taxed - I can guarantee you it's not just sitting in a bank somewhere. It's probably going to be inveseted, donated, or in some other manner create jobs & weath for others.

I'm encouraged by all the positive and informed reply's to esuffern's initial comments. I have been following anti Fair Tax concerns for awhile simply to be able to make a better decision myself. I've heard the Fair Tax people talk, and it sounds good, but I know one has to hear the other side before anything can be determined. However, esuffern's post was absolutly typical of every anti Fair Tax: it didn't address the Fair Tax as its proposed. I would love to hear someone argue against a specific point in it, then, if had merit, the proposal could be further tweaked and move forward. Instead its the same old uninformed attack.

I am hoping esuffern replies after some more research. I'm interested in a response.

Finally, consider yourself the Czar of a brand new country where you need a system of taxing your citizens. Two proposals are on your desk: the USA's current tax laws (all the thousands of pages, loopholes, collection cost/efforts) and the Fair Tax. I don't see how a sane person would think that the current tax system is a benifit to anyone other than accountants, tax attorneys, and politicians. Any system will be flawed, so we're looking for the least flawed and simplist to enact/enforce.

I'm leaning towards the Fair Tax plan, and no one to date has been able to argue against the proposal that has actually read the proposal.

KEY POINT: IF YOU AREN'T PAYING TAXES NOW, YOU WON'T BE PAYING TAXES UNDER THE FAIR TAX. Amazing how that is lost.

I just don't see as much money gotten by the govt with this tax.
I think SS tax and medicare tax are good because they are going just for those purposes (assuming SS continues to exist). With the sales tax, the money might get misappropriated.

The prebates totally UNTAX the poor. Granted there's a small salary range that will see little or no benefit from the switch to the FairTax, but who's going to remain in that narrow income bracket from long? The advantages far far outweight the problems.
What's more, what is so terribly wrong with people being rich? Can't we get over this petty jealously that Bill Gates can buy Texas? Why should you or I care if a few people become super rich? You're fed, clothed and housed, aren't you? Stop whining that you didn't found Microsoft, and be happy you live in such a great country!
History shows that whenever we "make a bigger pie", a few people get bigger percentages. EVERYONE gets a bigger piece, so stop complaining. God bless the rich, for they employ the lazy bums. -Paul

"If you take Econ class you'll know that income tax is a progressive tax and sales tax is a regressive tax."

Actually, this statement is not true. Any tax can be made to be progressive or regressive, without regard to what the taxable event (being paid, buying something, etc) is. The way this is done under the current system is with a standard deduction, meaning that there's a basic part of your income that isn't taxable, and by stair-stepping the rates for each incremental block of money you make thereafter. The way the FairTax accomplishes it is by a prebate, which ensures that any spending you do up to the poverty level is tax-free.

The base tax-free consumption allowance for a family of four is about $27k. This means their prebate will be (.23 * 27000)= $6210 for the year.
Let's imagine the Smiths, who earn $30k/yr, and the Joneses, who earn $60k/yr.

Both families' spending, up to the $27k mark of spending, is totally, 100% tax-free. That means that the most the Smiths could pay taxes is .23* 3000 (=$690 total tax paid), or .2% of their income actually paid in tax.
The most the Joneses could pay in taxes is .23*33000 = $7590, or 12.6% of their income.

You point out that it's *possible* for the Joneses to pay less as a percentage of their income than the Smiths do, and conclude that the poor will therefore bear the tax burden, but there's two problems with that logic:

1) It is mathematically impossible for the Smiths to pay more than 2% of their income in tax, even if they spend every dime they make- which they don't have to do.
2) Just because it's possible for the Joneses to consume at the same level as the Smiths doesn't mean that they will. In fact, the statistical evidence says that they won't- consumption correlates more strongly to wealth than it does, in fact, to income. There might be exceptions in a large statistical sample, but that's okay.

If the Joneses in this example decide to consume at the same level as the Smiths, that just means that next year the Joneses will have more money to spend. Eventually, they will- and the more they wait, the more tax revenue that'll mean. Until then, they'll invest it- meaning it's being used to start companies, buy equipment, pay people, create opportunities, and grow the economy.

"Say you make $25,000 a year and you have to spend all your money to pay for all the things you need, like your food, car, house, insurance, etc. and you have no extra money left over. 100% of your income was taxed because you spent it all. Say you make $2 million a year and you spent $1 million dollars and had $1 million left that you saved/invested. Only 50% of your income was taxed."

This is a great example to demonstrate why 'income progressivity' is not the final measure of fairness: Say the Smiths from my prior example made $25k/yr and spent every cent- under the FairTax, their effective tax rate would be negative. They would receive more in prebate than they paid in tax. Sure, 100% of their income would be taxed because they spent every dime they earned, but their tax rate will be negative- meaning that it put more money in their pockets than it took out.

By contrast, say the Johnsons made $2m and spent $1m- they will pay (.23 * $1,000,000 - 6210)=$228,571 in tax- their effective rate is 22.8% (tax paid/consumption), and if you measure it as a percentage of their total income, that's 11.4%. This *is* lower than the maximum possible percentage of income the Joneses could afford to pay in the above example, but nobody's putting a gun to the Jones's head and forcing them to consume, either- in essence, each household is empowered to set their tax rate by regulating their retail consumption.

On the face of it, there's nothing about the FairTax that enforces progressivity by income, because there's nothing to force anybody to consume proportionately to their income. Yet in spite of this, the tax enforces a negative rate for the Smiths, a positive range for the Joneses, and a higher range for the Johnsons.

This is actually pretty fair if you think about it- it limits mathematically how much the poor can possibly pay, and for those with money to spend above the line, it makes the realization of the value of that money a taxable event. It targets only those with above-the-line wealth, empowers anybody to save and invest tax-free, removes tax loopholes available today only to the very wealthy, and exploits the fact that people want what they want and are willing to pay for it, and that they'll have more of their money in hand to do it with.

Having a national sales tax and abolishing income tax puts the tax burden on the poor.

It absolutely does not. It is mathematically impossible for the poor to pay as much as the wealthy- to do so, they'd have to spend 'above the line', and the less 'above the line' wealth you have, the less you're able to pay tax.

You've noted that under a consumption tax system, the taxable event is voluntary- meaning that it's possible for anybody to limit their tax bill by limiting their consumption. Your argument rests upon the notion that such freedom is somehow bad, that if we give people the choice of a) consuming and paying taxes or b) not consuming, they'll ALL choose the latter. This is highly improbable. Some percentage will go the frugal route, and others will go over the top, while the rest will be in the middle, just as they do today. Bottom line, the FairTax won't make goods more expensive- true, there'll be a 23% tax on that item, but the price of the item will go down because the producer didn't pay income tax. Fundamentally, people will shop the way they already do, and those with wealth will consume, because that's what they do- and remember, they'll be doing so with their whole paychecks- no income tax withholding :-).

This freedom to choose how you're taxed is actually a good thing- it empowers you to build wealth and incentivizes the things that are good for your financial health. This is the sort of signal we want our tax code sending.

But it has great implications for big business because corporations will only be taxed for office supplies and transportation. Don't get tricked by the name because the Fair Tax is anything but fair.

Yes, the FairTax will be good for business- it repeals corporate income taxes- and this will be good for everybody. When a business must pay a tax, it passes the expense along to one of 3 places: to consumers, in the form of higher prices, to employees, in the form of lower pay or fewer jobs, and to stockholders/owners, in the form of reduced profit.

It's easy to think that more profit for big business is bad, or that if it's good, it's only good for them- but this isn't true- it's good for their customers as well- because prices will come down as the cost of income tax compliance (which is very expensive) goes away.

Keep in mind that the income tax's compliance burden falls most heavily upon small businesses- in 2003, according to the tax foundation, American small business paid on average $724 in compliance-related expenses for every $100 it paid in tax (yes, a 724% compliance fee, on top of their taxes). Clearly, repealing the current system would not just benefit big business, as you say- it will benefit small businesses even more.

Interestingly enough, I just posted a blog this morning supporting the abolition of the Federal Income Tax and supporting the start of a National Sales Tax. I've researched this topic extensively for my high school debate class and much of the information I've learned is included in the blog. http://www.progressiveu.org/115158-abolish-the-federal-income-tax-reesta...