The tax man has cometh!

[Sabre]

Given that it is tax day once again, I thought I’d put in another plug for The FairTax Act (HR 25, S 1025) (see http://www.fairtax.org for details).  I’d certainly be plenty happy to never have to file another federal tax return.

For those who don’t know much about this legislation, The FairTax Plan is a nonpartisan national grassroots campaign to replace the federal income tax system with a progressive national retail sales tax. It provides a "prebate" to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue replacement and, through companion legislation, repeal of the 16th Amendment.  This legislation has around 57 co-sponsors (plus the sponsor) in the House, and 3 + sponsor in the Senate.

Here is the summary of the bill, meant to generate dialog and reasoned, respectful debate…

The Act is called the “Fair Tax Act of 2007.” As of Dec. 31, 2008, it repeals all income taxes and payroll taxes, specifically:

   • The individual income tax (including capital gains taxes and the alternative minimum tax)
   • All individual and employer payroll taxes including Social Security, Medicare, and federal unemployment taxes
   • The corporate income tax
   • The self-employment tax (a self-employed person pays both the individual and the employer portions of Social Security and Medicare taxes)
   • The estate and gift tax

Effective January 1, 2009 it replaces the above taxes with a national retail sales tax on all goods and services sold at retail. The tax rate is set to be revenue neutral – at the level necessary to replace the revenues generated by the repealed taxes.
 
A 23-percent (of the tax-inclusive sales price) sales tax is imposed on all retail sales for personal consumption of new goods and services. Exports and the purchase of inputs by businesses (i.e., intermediate sales) are not taxed, nor are used goods or any savings, investment, or education tuition expenses. The sales tax must be separately stated and charged on the sales receipt. This makes it clear to the consumer exactly how much they are paying in federal taxes.

There are no exemptions under the FairTax, meaning that no lobbyist, corporation, or individual can obtain tax advantages that are not available to the general public. Also, everyone pays the same rate, but those who spend more pay more total taxes than those who spend less.

The FairTaxSM provides every American family with a rebate of the sales tax on spending up to the federal poverty level (plus an extra amount to prevent any marriage penalty). The rebate is paid monthly in advance. It allows a family of four to spend $27,380 tax free each year. The rebate for a married couple with two children is $525 per month ($6,297 annually). Therefore, no family pays federal sales tax on essential goods and services and middle-class families are effectively exempted on a large part of their annual spending.

Funding for Social Security and Medicare benefits remains the same. The Social Security and Medicare trust funds receive the same amount of money as they do under current law. The source of the trust fund revenue is a dedicated portion of sales tax revenue instead of payroll tax revenue.
States can elect to collect the federal sales tax on behalf of the federal government in exchange for a fee of one-quarter of one percent of gross collections. Retail businesses collecting the tax also get the same administrative fee.

Strong taxpayer rights provisions are incorporated into the Act. The burden of persuasion in disputes is on the government. A strong, independent problem resolution office is created. Taxpayers are entitled to professional fees in disputes unless the government establishes that its position was substantially justified.

While the bill is simple to understand (as opposed to the 70,000 pages of the IRS tax code), it's implications for individuals and the economy are far reaching.  Note some of the articles on the FairTax website, which discuss those implications, and why passing this bill would likely result in the largest economic expansion in the nation's history.

[Blooz]

Flat Tax


Gross income --> XXXXX
% rate -->                .XX
Multipy ----->
Send to Treasury->XXXX

No exemptions, no deductions, everybody pays the same rate.

Now that's a simplified tax code.

[storch]

See Rule #5

[Nilsen]

Originally posted by Blooz
Flat Tax


Gross income --> XXXXX
% rate -->                .XX
Multipy ----->
Send to Treasury->XXXX

No exemptions, no deductions, everybody pays the same rate.

Now that's a simplified tax code.

Yup im all for that. Id even be willing to accept pay even more tax than i do now just for the fairness and simplicity of that system.

[lasersailor184]

I'm all for the flat rate tax as well.  Especially if that rate is 0.00 for all tax brackets.

[Sabre]

Originally posted by Blooz
Flat Tax


Gross income --> XXXXX
% rate -->                .XX
Multipy ----->
Send to Treasury->XXXX

No exemptions, no deductions, everybody pays the same rate.

Now that's a simplified tax code.

While certainly preferable to the current system, a flat tax still does not have many of the personal and business economic advantages of the Fair Tax.  It does not, for example, address the issue of the underground economy, which can completely avoid federal taxes under the current system, but could not avoid it in under the Fair Tax plan.  I encourage you to read more about the Fair Tax plan from it's proponents, as well as it's detractors.  The websight has very compelling counters to the missinformation being spread by its detractors.

If you like the idea of the flat tax for its simplicity, you'll like the Fair Tax for the same reason.  Plus, it let's you, the consumer, decide when and how much federal taxes to pay.

[Auger]

There are no exemptions under the FairTax, meaning that no lobbyist, corporation, or individual can obtain tax advantages that are not available to the general public. Also, everyone pays the same rate, but those who spend more pay more total taxes than those who spend less.

And that right there is what will kill it.  We are a society of special interests, and we hate not being special.  Someone will find a way to put a rule in there just for their little group, and the whole mess will start all over again.  Plus, there is no exemption for political contributions.  Like that will fly.

[Sabre]

Auger: No doubt, this is an uphill battle against the lobbiests in Washington; they are deeply entrenched.  That's why this is a grass-roots campaign.  With the 16th ammendment repealed (part of the plan), it will be much more difficult to insert exemptions of any kind, as it would represent un-equal treatment, an consititutional no-no.  Still, it will be up to the people to insure Congress doesn't try to slip back into it's old ways.  On the other hand, with the simplicity inherent in the Fair Tax bill, it becomes much harder to hide manipulations...unlike the current system.

Asside from the difficulty of passing this legislation (difficult but not impossible), do you have other quesitons/concerns about the bill itself?

[mietla]

Originally posted by Blooz
Flat Tax


Gross income --> XXXXX
% rate -->                .XX
Multipy ----->
Send to Treasury->XXXX

No exemptions, no deductions, everybody pays the same rate.

Now that's a simplified tax code.

not really.

Number of people living here (legal or not, citizen or not)= N
What we want to spend next year = B
Send to treasury = B/N

This is a flat tax. You would be surprised how spending would be cut

[mars01]

See Rule #7

[Sabre]

Mars01, correct me if I'm wrong, but Canada uses a value added tax, or VAT, which is quite different then a set sales tax such as the Fair Tax bill proposes.  That and run-away entitlement programs is what is sucking the economic life out of Canada (and Europe, too).

Because much of the cost passed on to consumers under the current US system is due to costs that would be eliminated by the Fair Tax, these goods would generally go down in price due to market forces.  In fact, anywhere from 18 to 25 percent of the retail cost of goods and services before state sales taxes are added is due to Federally imposed withholdings and taxes, accumulated at every stage before those goods or services reach the consumer.  As soon as the cost of producing an item or service goes down, the competative market place will result in the price to the consumer going down ad competing companies fight for market share.

[mars01]

I don't know Sabre, call me a cynic, your last post sounds good on paper but we all know the real savings will go strait to the CEOs and business owners pockets.  Much like all the savings from out sourcing our manufacturing and software industries.

VAT or FTA it still puts the governments hand on my wallet every time I open it and sounds like it passes the tax directly onto the consumer.  Where in your case above it is indirectly passed on by decision of the producer or retailer in offering price.  Market forces can create an environment where profit margins are decreased to continue profitability and competitive pricing and in effect the producer/retailer takes the hit.  Albeit this rarely is that case.

I just don't want the government taxing goods.  It could get out of hand too easily and directly couples two things that shouldn't be combined, goods for sale and government revenue.

I am more behind the Flat tax than a Sales Tax.  I live in a state that has a sales tax on selected items and it sucks!!

[storch]

Originally posted by mars01
See Rule #7

mars it was repealed after the civil war.  uncle sam got himself in trouble and needed to pay for the spanish american war.  the income tax was then voted in, I believe in 1913 with the ratification of the 16th amendment.  yes,  we the people of the early 20th century voted to be taxed and amended the constitution to allow the congress to tax us.

now we have the best most productive society on earth.  this is in large part because our system of government works well.  tax freedom day is april 30, 2007.  that is the theortical day when we are through with our financial obligation to the government(s) and from there on out what we earn is ours to live with and spend as we deem fit.

compare our system and lifestyle to any other on earth and tell me we are not far ahead of the our fellow humans.  I would not live anywhere else on earth, this United States of America is the best there is or has ever been.

[Seagoon]

Personally I'm sick to death of our 67,204 page tax code* which no one is capable of being entirely conversant with and which the average American taxpayer violates in ignorance every year. I'm tired of having to spend time and money to make an "educated guess" as to how much I owe. I'm also tired of having to fork over 20% of my relatively small take-home pay to the state and federal government, and then continue to pay local tax, property tax, and sales taxes in addition to that. To put it frankly, I'm sorry Mr. Morbidly Obese Government, but I can't afford to support you, you spend too danged much.    

I'd happily trade the current system for a flat or fair tax, hey I'd trade it for a poll tax, a window tax, a stamp tax, or even a system of local tax collectors paying a portion of their takings to the Roman government. But my suspicion is that neither major party will ever support a complete revamp of the tax code because the current system is too politically useful to both of them. Lets face it without a system that the Democrats can use to soak the "rich" and redistribute wealth and which the Republicans can propose cuts to on a regular basis, how on earth would anyone get votes? Neither party wants a fair system that can't be constantly adjusted or added to.

So I gripe and try to be content that someday rendering unto Caesar will end forever.

- SEAGOON

* for comparison, the average English translation of the Bible has less than 2000 pages.

[lasersailor184]

Originally posted by storch
mars it was repealed after the civil war.  uncle sam got himself in trouble and needed to pay for the spanish american war.  the income tax was then voted in, I believe in 1913 with the ratification of the 16th amendment.  yes,  we the people of the early 20th century voted to be taxed and amended the constitution to allow the congress to tax us.

Wrong.  The 16th ammendment had nothing to do with congress' ability to tax us, but their ability to spend that tax money.