Let's call the "fair tax" proposal( being pushed by Congressman John Linder (R-GA) and radio Neil Boortz) what is really is - a national sales tax. Unless we abolish our military and entire social safety net, thenational sales high will have to be quite high in order to make upfor the lost income tax revenues. If enacted, the "fair tax" would increase the price of houses, vehicles, appliances and other items by at least 25%. Even if the proposed national sales tax exempts basics like food and medicine - the working class and the middle class are likely to pay a higher percentage of their income in taxes that the wealthy. If the "fair tax" becomes a reality - the working class will suffer as the rich investor class reaps the benefits. We will see even more of a gap between poor wage earners and a wealthy few.The notion that we could abolish the I.R.S. if a national sales tax is enacted is simply unrealistic. Most states depend primarily on voluntary compliance from businesses. A lot of sleazy businesses are already shorting the state governments on sales tax receipts or perhaps not paying any sales tax. Many companies do business in multiple states. Even with a national sales tax, we will need a federal tax collection of some form.
Ending progressive taxation is likely to have a devastating impact on the non-profit sector. Wealthy people are not going to give as much money to charities if they have no way of getting a tax break. A lot of great things have been accomplished by rich individuals trying to minimize their tax liabilities. If the incentive to give make charitable contributions is taken away - social service agencies, arts and cultural organizations, religious societies and churches are going to see a large drop in donations. Of course, this will have a negative effect on our social fabric as religious and charitable insitutions are weakened.
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I was disappointed to see your comments about the FairTax as you apparently do not understand how the legislation works. The truth is that this legislation will make the very wealthy pay much more than they do now in federal taxes, while the truly poor will pay nothing (which is not the case currently). I will attempt to address each of the inaccurate points you make in your text. I think you will find the FairTax would strongly appeal to those of us on the left side of things as it achieves a very progressive tax system that closes the loopholes that the very wealthy exploit constantly.
Myth #1: "If enacted, the "fair tax" would increase the price of houses, vehicles, appliances and other items by at least 25%."
False. What you are forgetting is that current prices already have taxes embedded in them in the form of payroll and corporate tax, around 22% in fact. Since the FairTax would eliminate these taxes, prices would not be significantly different, and meanwhile, people would be taking home 100% of their paycheck.
Myth #2: "Even if the proposed national sales tax exempts basics like food and medicine - the working class and the middle class are likely to pay a higher percentage of their income in taxes that the wealthy. If the "fair tax" becomes a reality - the working class will suffer as the rich investor class reaps the benefits. We will see even more of a gap between poor wage earners and a wealthy few."
False. The FairTax is MORE PROGRESSIVE than our current tax system, and here's why: The FairTax provides a "prebate" to all American citizens that ensures that they pay no tax on any of the necessities of life. In fact, the poorest among us will make money with this system! Meanwhile, because people will be taking home their entire paychecks, folks in the lower end of the income spectrum will suddenly be presented with a choice on elective purchases as to whether they want to pay tax. This will undoubtedly increase our national savings rate, something we desperately need, and improve the wealth equation for all Americans. Meanwhile, the truly wealthy, who are extraordinarily good at dodging income tax, will now start paying their fair share on everything they consume - and believe me, the extravagantly rich live an extravagant lifestyle and will finally start paying for it!
Myth #3: "The notion that we could abolish the I.R.S. if a national sales tax is enacted is simply unrealistic. Most states depend primarily on voluntary compliance from businesses. A lot of sleazy businesses are already shorting the state governments on sales tax receipts or perhaps not paying any sales tax. Many companies do business in multiple states. Even with a national sales tax, we will need a federal tax collection of some form."
45 of the 50 states successfully depend on sales tax to at least partially fund the government. Are there a few cheaters? Of course, but the fact remains the vast majority of businesses are not interested in taking the risk of breaking federal tax law. In regards to your claim that we "can't abolish the IRS" that's just silly. The cost of strengthening our proven sales-tax collection infrastructure throughout the states would be a drop in the bucket compared to the cost of the IRS. Also, keep in mind that only 24 million retail sales tax returns will be tracked instead of the current 140 million personal and business income tax returns, and will be tracked by no less than 45 current State tax collection systems all of which have been proven year after year to be effective, so finding those that "cheat" will be much easier than the current IRS system.
Myth #4: "Ending progressive taxation is likely to have a devastating impact on the non-profit sector. Wealthy people are not going to give as much money to charities if they have no way of getting a tax break."
False. This has been proven to be incorrect historically (see charitable giving rates following the Tax Reform Act of 1986). But more significantly, did you know the majority of charitable giving in the United States comes from people that DO NOT ITEMIZE THEIR DEDUCTIONS ON THEIR TAX RETURNS! By and large, Americans don't make donations to avoid taxes, they make donations to charities because they feel it's the right thing to do. And the FairTax will give them more of their own money to make these donations if they so choose.
FairTaxSupporter640 offers....
Myth #1 - False. What you are forgetting is that current prices already have taxes embedded in them in the form of payroll and corporate tax, around 22% in fact. Since the FairTax would eliminate these taxes, prices would not be significantly different, and meanwhile, people would be taking home 100% of their paycheck.
And, his answer is...... MISLEADING at best.
"100% of their paycheck means what?" The same after tax paycheck folks receive right now.
That is the only way producers can drop prices. Employee's salary and wages are reduced by the amount of taxes withheld and thus costs to the employer producer so they can drop prices.
If the producer merely changes who he pays these taxes to from the government to the employee, the producer has no cost reduction and can not reduce prices as claimed.
Its typical of the Fair Taxers to pitch some miraculous economic change while arguing that the Fair Tax won't change prices, won't change wages paid, won't change.....
Sorry.... No change will produce no change. Not miraculous economic benefits.
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