FairTax in Ways and Means committee...

[insein]

The approach I suggested previously is exactly how the sales tax is implemented here in New York State (and, I assume, in other states as well). Since you don't pay tax to begin with, the money is in your pocket now, you don't have to wait for a rebate check and have to fill out forms to boot.

The problem I see with the proposed approach is that it is still focused on income, the government would have to determine the "poverty line" and so on. It's too complicated.

Businesses will be responsible for collecting taxes, there won't be a need for a large beauracracy called the IRS.

Which is the plan. The IRS becomes little more then a collection agency then. Little paperwork etc.

 

[KarlMarx]

Furthermore, the implementation of a "fair tax" will abolish the double taxation on SSI (Social Security Insurance) which is nothing more than a tax but is taxed as income, nonetheless.

And I just had a thought, make SSI contributions tax free, effective immediately. Since SSI is collected up to a certain income, this tax cut would, in effect, be the much ballyhooed "tax cut for the middle class and needy".

Come to think of it, if silly, stupid little ol' me sitting in the sticks up here in Upstate New York can think of such a thing, why haven't the Democrats?

The answers are so obvious, my fingers are tingling with anticipation to tell you why.

Why it's a tax cut! On Social Security! Two things that Democrats won't stand for!

 

[ScreamingEagle]

Some well-stated concerns about the Fair Tax proposal:

The proposal to replace the current income tax system with a national retail sales tax is a bad idea for several reasons.

First, politicians cannot be trusted with a new tax traded for some existing tax. We'll end up with both: the sales tax on top of the income tax.

American history is replete with politicians promising to deliver a later benefit to the American people if they get more taxing authority immediately.

During World War II, American workers were for the first time subject to the withholding tax, having been told that it was only a temporary wartime measure.

The war ended more than 59 years ago; the withholding feature lives on.

In 1982, President Reagan – the most celebrated of all tax-cutting presidents – agreed to an income tax increase on the promise from Congress of a $3 reduction in spending for every $1 increase in taxes. Reagan boasted to the American people of the bargain he had engineered. Americans suffered the tax increase but never saw the promised spending reductions.

Why so many people are anxious to repeat these foul experiences is baffling. The clear lesson is: never pursue tax trades with politicians.

Further, the FairTax proposal can be passed by a simple majority of both houses of Congress plus the President's signature. But the much-touted repeal of the 16th Amendment, which authorizes the income tax, requires a much more demanding 2/3 vote in each house and then approval by ¾ of state legislatures. The likelihood of ending up with both the 23% federal tax and the current income tax is therefore all the greater.

Second, the proposed national retail sales tax will be set at 23 percent to replace the revenues from the individual and corporate income tax, as well as the payroll taxes for Social Security and Medicare. Added to this 23 percent tax will be the states' average sales taxes of more than 6 percent. A 29 percent sales tax will generate pressure to turn the sales tax into a value-added tax (VAT).

This will happen because such a large tax will generate a black market in goods to avoid the added tax. Politicians will find it in their self-interest to transform the FairTax into a tax at various stages of production – a VAT. This same process developed after the income tax was instituted – withholding was created in part to mask the actual level of taxation.

Third, the much-touted end of the Internal Revenue Service is a sham. Some enforcement agency will be needed to handle tax collections. One provision of the national retail sales tax is to issue rebates equal to the sales taxes paid on essential goods and services to ensure that no American pays taxes on necessities. There will have to be a way to distinguish who gets these monthly checks. So a federal agency that tracks individuals will persist. Changing the name of the IRS while maintaining its functions is pointless. Added to this is the very serious concern of so many Americans becoming accustomed to a monthly check from Uncle Sam. A massive constituency will be created which will pressure Congress for increases in the definition of necessities. The FairTax will indirectly become the means of an ever-greater expansion of government.

Further, the Social Security Administration will keep records for the federal government to determine an individual’s Social Security benefits based on…their income. Here’s the way it’s stated at the FairTax website: "…Social Security [will] operate exactly as it does today, …Employers will continue to report wages for each employee…."

And fourth – and most importantly – working on this tax trade diverts scarce political energy from the cause of limiting federal spending and taxation to the cause of rearranging the means of tax collections.

One could believe that this entire movement is a grand conspiracy to waste the time and energy of political activists – activists who are now chasing after insignificant differences in the way taxes are collected and therefore ignoring the real issues of obscenely high federal taxes and obscenely high federal spending.

March 29, 2005
Jim Cox is an Associate Professor of Economics at the Lawrenceville Campus of Georgia Perimeter College and author of Minimum Wage, Maximum Damage.

http://www.lewrockwell.com/orig4/cox4.html

 

[pegwinn]

You wanna get a reality check? Wait until you get a bill for taxes. No withholding. Just get a bill (and a due date). Think property tax.

BTW I think we should have a 10 percent flat tax and a 2% Federal Sales Tax. The 10% Flat applies to all income (personal or corporate) and is collected each pay period for individuals and each quarter for business. You never see it again, it ain't negotiable, and April 15 is just another day. The Fed Sales Tax is to be used exclusively to pay down the debt. When the debt is paid down sufficiently, then it is to fund SS.

I'm sure that anything so simple could not survive ways and means.

BTW, It's not important what gets into W&M it's what comes out. Watch the FT and see how it changes in committee.

 

[Nienna]

My feeling also, is that for such a tax to be fair, it will be simpler (and much easier) to exclude housing, medicine, food and clothing from such taxation rather than rebate the taxes on the first 50,000 dollars. Since most people in Kathianne's situation spend most of their disposable income on such things, they would, in effect, be paying little in federal taxes.

I agree that these things should be exempt from taxes.

What I can't figure out is the effect it would have on businesses. If the end products were to be taxed so heavily, wouldn't this discourage consumerism, and thus slow down the economy?

 

[Mr. P]

Some well-stated concerns about the Fair Tax proposal:

March 29, 2005
Jim Cox is an Associate Professor of Economics at the Lawrenceville Campus of Georgia Perimeter College and author of Minimum Wage, Maximum Damage.

WOW!!! a Professor from our local 2 year community college, I'm impressed! NOT!

 

[ScreamingEagle]

WOW!!! a Professor from our local 2 year community college, I'm impressed! NOT!

pffft. and I suppose you were impressed with John Kerry because he went to Yale?

 

[ScreamingEagle]

I agree that these things should be exempt from taxes.

What I can't figure out is the effect it would have on businesses. If the end products were to be taxed so heavily, wouldn't this discourage consumerism, and thus slow down the economy?

That's an excellent question. What I indicated before is that the reason they are pushing this type of consumption-based tax versus keeping our income-based tax system is because of falling prices. Our global economy is headed for a big recession and probably deflation due to trade imbalances and excess capacity.

 

[ScreamingEagle]

You wanna get a reality check? Wait until you get a bill for taxes. No withholding. Just get a bill (and a due date). Think property tax.

BTW I think we should have a 10 percent flat tax and a 2% Federal Sales Tax. The 10% Flat applies to all income (personal or corporate) and is collected each pay period for individuals and each quarter for business. You never see it again, it ain't negotiable, and April 15 is just another day. The Fed Sales Tax is to be used exclusively to pay down the debt. When the debt is paid down sufficiently, then it is to fund SS.

I'm sure that anything so simple could not survive ways and means.

BTW, It's not important what gets into W&M it's what comes out. Watch the FT and see how it changes in committee.

Do you really think politicians would just send us a tax bill? I wish they would - it would really wake up people - but I think politicians are too smart to do that.

What I see happening instead is all sorts of new taxes happening under the auspices of the states - such as taxes related to property. They say under the Fair Tax system we would not have to pay a sales tax. However, they are not mentioning the transfer tax. Some states have a big transfer tax like here in WA. We pay almost 2% in "excise tax" everytime a house is sold. For an average $300k home, that amounts to $6,000. That's a huge bite into your equity. This tax, here and elsewhere, is probably going to increase. Plus they are cooking up other stuff related to real estate.

 

[Mr. P]

pffft. and I suppose you were impressed with John Kerry because he went to Yale?

John WHO?

 

[Mr. P]

That's an excellent question. What I indicated before is that the reason they are pushing this type of consumption-based tax versus keeping our income-based tax system is because of falling prices. Our global economy is headed for a big recession and probably deflation due to trade imbalances and excess capacity.

No no no...this proposal has been around for many years..It's not new.
Regardless, here's a short historical view of income tax.

http://www.legalzoom.com/articles/article_content/article13954.html

 

[ScreamingEagle]

No no no...this proposal has been around for many years..It's not new.
Regardless, here's a short historical view of income tax.

http://www.legalzoom.com/articles/article_content/article13954.html

That wasn't the point although that was a nice history lesson. Let's get back the 1% rate! The point is the proposal is now getting some traction because the politicians are beginning to see the writing on the wall....meaning less tax receipts from the business world...they want to keep the same amount of taxes coming in.... so why not stick it to John Q. Public instead?

 

[Mr. P]

That wasn't the point although that was a nice history lesson. Let's get back the 1% rate! The point is the proposal is now getting some traction because the politicians are beginning to see the writing on the wall....meaning less tax receipts from the business world...they want to keep the same amount of taxes coming in.... so why not stick it to John Q. Public instead?

Don't look now, but...yep...they already do that... :duh3:

 

[ScreamingEagle]

Don't look now, but...yep...they already do that... :duh3:

Once again, I think you are missing the point. Due to trade imbalances and excess capacity, the cost of goods goes down. Thus there will be less taxes from the business world to the government. The consumer gets more for his money because things cost less. What is the government to do? Less taxes coming in? Not a good option, right? How to fill the gap?

With the Fair Tax, the consumer gets stuck with the original tax bill because the 23% rate is based upon the past amount of taxes that used to come in - not per the newer, deflated economy.

 

[insein]

Lots of speculation on both sides. I think the idea to maintain is that regardless of what we think, the Congress is going to make a decision on this. I know thats not the way its supposed to work and we can dream of lobbying our congressmen and women through phone calls, emails etc but i believe in the minds of most of them, they have an idea of which way they are voting.

 

[BaronVonBigmeat]

So this is supposed to replace the income tax, eh? Prediction: If it passes, the income tax will not be canceled immediately. It will be scaled back perhaps; and then they will announce a "roadmap" or something, where it is due to fade into nothingness after say, 10 years.

Then, when 10 years are nearing completion, the new congress (full of politicians who weren't in office when that promise was made) will discover some new emergency that just MUST be funded. And then we will have two nice big taxes, sucking wealth out of the private sector.

The correct answer to the IRS is to eliminate it and replace it with nothing. We got along fine without the IRS for many years; we can do so again if enough people insist that the federal government obey the constitution and cut every program that is in violation of the 10th amendment.

 

[Mr. P]

So this is supposed to replace the income tax, eh? Prediction: If it passes, the income tax will not be canceled immediately. It will be scaled back perhaps; and then they will announce a "roadmap" or something, where it is due to fade into nothingness after say, 10 years.

Then, when 10 years are nearing completion, the new congress (full of politicians who weren't in office when that promise was made) will discover some new emergency that just MUST be funded. And then we will have two nice big taxes, sucking wealth out of the private sector.

The correct answer to the IRS is to eliminate it and replace it with nothing. We got along fine without the IRS for many years; we can do so again if enough people insist that the federal government obey the constitution and cut every program that is in violation of the 10th amendment.

Wrong..if passed, this will not go into effect until the 16th amendment is repealed.. which allows collection of income tax..

 

[Annie]

So this is supposed to replace the income tax, eh? Prediction: If it passes, the income tax will not be canceled immediately. It will be scaled back perhaps; and then they will announce a "roadmap" or something, where it is due to fade into nothingness after say, 10 years.

Then, when 10 years are nearing completion, the new congress (full of politicians who weren't in office when that promise was made) will discover some new emergency that just MUST be funded. And then we will have two nice big taxes, sucking wealth out of the private sector.

The correct answer to the IRS is to eliminate it and replace it with nothing. We got along fine without the IRS for many years; we can do so again if enough people insist that the federal government obey the constitution and cut every program that is in violation of the 10th amendment.

In this vein, I think we should repeal the income tax amendment, then we should insist the government come to the taxpayers for an up or down vote of whether or not we will fund their wonderful ideas. My guess, dems and reps and those of all stripes will say, "No!" 98% of the time, in most circumstances.

Funny thing, mostly we want to do it ourselves.

 

[BaronVonBigmeat]

Wrong..if passed, this will not go into effect until the 16th amendment is repealed.. which allows collection of income tax..

Hmm okay, I missed that part. That does sound kind of good, except there's still a couple of problems I can think of.

1) It does nothing to cut spending, which is the real problem. Any way the government gets it's hand on more money--taxes, borrowing, or inflation--they all bleed wealth from the private sector.

2) When the 16th amendment was passed, the feds were still sticking to the constitution somewhat. The constitution basically says that the federal government may do a limited few functions, and nothing else. The income tax wasn't one of those, so they had to pass an amendment.

But since the 30's, our government has "interpreted" the constitution, as if it were written in ancient Sanskrit. The 10th amendment now supposedly means the opposite of what was originally meant, and there is no reason why congress would need an amendment to have any tax it wanted.

edit: I suppose it depends on the wording of the amendment that would nullify the 16th. If it explicity bans an income tax, it might work. But there's still any number of different taxes they could pass, if they feel the need.

 

[rtwngAvngr]

Hmm okay, I missed that part. That does sound kind of good, except there's still a couple of problems I can think of.

1) It does nothing to cut spending, which is the real problem. Any way the government gets it's hand on more money--taxes, borrowing, or inflation--they all bleed wealth from the private sector.

2) When the 16th amendment was passed, the feds were still sticking to the constitution somewhat. The constitution basically says that the federal government may do a limited few functions, and nothing else. The income tax wasn't one of those, so they had to pass an amendment.

But since the 30's, our government has "interpreted" the constitution, as if it were written in ancient Sanskrit. The 10th amendment now supposedly means the opposite of what was originally meant, and there is no reason why congress would need an amendment to have any tax it wanted.

edit: I suppose it depends on the wording of the amendment that would nullify the 16th. If it explicity bans an income tax, it might work. But there's still any number of different taxes they could pass, if they feel the need.

Yeah. There's gotta be something, right?