Some moron always thinks the proletariat is going to fall for this. If the founding fathers had their way, only businesses would be taxed.

Any tax plan is going to be viewed as unfair to at least some section of the population. But the Fair Tax is retarded. Just because it is called "fair" doesn't mean it is.

keiverarrow: Some moron always thinks the proletariat is going to fall for this. If the founding fathers had their way, only businesses would be taxed.

Businesses don't pay taxes, they collect them.

The Fair Tax plan would completely eliminate all federal taxes for people making less than $20,000/year. Everybody else has to pay their fair share on everything they spend after the first $20,000. Sounds pretty fair to me.

More importantly, the Fair Tax would eliminate the politicians' most effective use of power over us... the tax code. No more tax forms, write-offs, loopholes, and IRS.

This is the only thing I like about Huckabee.

mmm... pancake: keiverarrow: Some moron always thinks the proletariat is going to fall for this. If the founding fathers had their way, only businesses would be taxed.

Businesses don't pay taxes, they collect them.

Please explain how businesses don't pay taxes.

mmm... pancake: More importantly, the Fair Tax would eliminate the politicians' most effective use of power over us... the tax code. No more tax forms, write-offs, loopholes, and IRS.

No? How would the rebates be decided or who gets to decide how much is exempted ($20k? $30k? Inflation-adjusted?) Which government agency will collect the tax? What about its potential regressive attributes?

Bruce Bartlett has written very well on why the idea is pretty bad.

Three Crooked Squirrels: Please explain how businesses don't pay taxes.

Taxes are a cost of doing business. As such, that cost is passed along to the consumer, like every other cost of doing business, in the form of higher prices.

Last One Left: Bruce Bartlett has written very well on why the idea is pretty bad.

Bruce Bartlett was wrong in almost every regard...

Response: Fairtax, Flawed Tax?

mmm... pancake: No more tax forms, write-offs, loopholes, and IRS.

...only to be replaced by the new Fair Tax Bureau, tax exemptions for special interest groups, and redesigns of the same old loopholes.

The "Fair Tax," in a nutshell:

1. Its proponents claim it would only have to be 23%. First of all, that's using the logic that if you pay $1.30 for a $1 item, the tax is 23%, since its 23% of the final value. Any sane person would tell you that if the price of something rises 30%, its a 30% tax.

2. That's using extremely optimistic math. Less optimistic numbers puts the required tax at 44%, not 30%.

3. That is assuming nobody cheats! At such a high tax level, a huge black market will spring up.

DarthBrooks: mmm... pancake: No more tax forms, write-offs, loopholes, and IRS.

...only to be replaced by the new Fair Tax Bureau, tax exemptions for special interest groups, and redesigns of the same old loopholes.

Wrong on every count, sir. Read the fair tax book and you will clearly see that most objections to the fair tax are based upon misinformation, ignorance, or the fact that the fair tax takes power from the government and returns it to the people.

Why not just tax every electronic transaction that takes place in the US at a low rate? No loopholes.

Spontaneous Defenstration: 1. Its proponents claim it would only have to be 23%. First of all, that's using the logic that if you pay $1.30 for a $1 item, the tax is 23%, since its 23% of the final value. Any sane person would tell you that if the price of something rises 30%, its a 30% tax.

Inclusive versus exclusive tax.

3. That is assuming nobody cheats! At such a high tax level, a huge black market will spring up.

There would be no more motivation for tax fraud than there is now. There will be tax fraud with any system.

DarthBrooks: ...only to be replaced by the new Fair Tax Bureau, tax exemptions for special interest groups, and redesigns of the same old loopholes.

No, no, you don't understand! See, we scrap the IRS and the income tax, and then the magical chocolate elves from the never-never land forest ride in on their rainbow fairy unicorns and everyone has more money and the government revenues go up!

No one ever lost money on the ability of most Americans to vote against their best interests. However:

Supporters of the sales tax plan are particularly drawn to the feature that calls for repealing the 16th Amendment and abolishing the Internal Revenue Service.

Not going to happen.

would encourage widespread illegal tax evasion, black market transactions and other forms of cheating, creating a cycle that would require even higher tax rates.

This.

"The public rich desperately desires a better way to collect federal taxes for the common their own good and recognizes the current system as both inherently flawed and then further corrupted by inside-the-Beltway machinations because there are are a few Congresspeople I can't buy," Leo E. Linbeck Jr., the multimillionaire founder of Americans for Fair Taxation, wrote in a recent letter defending the decade-old proposal.

Fixed that for him. Of course, I generally mistrust multimillionaires who would probably benefit greatly from a plan like this.

By the way, wouldn't this affect the current mortgage deduction allowed on income taxes, screwing up the housing market even more when prices fall again to take the new tax structure into account?

kronicfeld: No, no, you don't understand! See, we scrap the IRS and the income tax, and then the magical chocolate elves from the never-never land forest ride in on their rainbow fairy unicorns and everyone has more money and the government revenues go up!

Take yourself back to the early 20th century...

One guy promotes a tax system that allows the Government to take money out of every one of your paychecks and requires you to follow 60,000 pages of tax rules. There are exemptions, write-offs, loopholes in addition to rules that reward "good" behavior and punish "bad" behavior. If you know how to work the system you'll get money back. If not, you'll pay more.

The other guy promotes an inclusive retail sales tax that is the same for everybody and applies to everything. Everybody receives a monthly "prebate" check for the taxes one would expect to pay on basic necessities.

Are you honestly going to say that the first option is the better one?

damageddude: Fixed that for him. Of course, I generally mistrust multimillionaires who would probably benefit greatly from a plan like this.

How?

By the way, wouldn't this affect the current mortgage deduction allowed on income taxes, screwing up the housing market even more when prices fall again to take the new tax structure into account?

No.

Something that a certain group of people love about abolishing the IRS and every other tax in favor of the Fair Tax is this: no more ESTATE tax.

Now, you can pass on your $1 billion fortune to your children, who will pass it on to their children, etc. Perhaps in a few generations there won't even have to be a money system, the rich could just own massive amounts of property while the poor works for them for life. I'm sure this has never been tried before with disastrous results.

Because really, that's what the American dream is all about. Being lucky enough to inherit a massive fortune so you or your children never have to work a day in your life.

/screw the poor
//they're poor because they're lazy

mmm... pancake: Response: Fairtax, Flawed Tax?

I didn't mean his WSJ article. I meant this (PDF).

Boortz comments don't get to the heart of the issue at all. In fact, his claim that the prebates are based on the poverty level and family size indicate that the FairTax will be more regressive than what exists now.

McArdle has more.

Besides, I have more than my share of doubts when I read something like this:
"The FairTax, looked at correctly, is actually pretty progressive," contends Mr. Kotlikoff, who has been paid by the FairTax organization for his research. "Liberals should love it: it lowers taxes on wages and imposes a tax on wealth."

damageddude:

By the way, wouldn't this affect the current mortgage deduction allowed on income taxes, screwing up the housing market even more when prices fall again to take the new tax structure into account?

I think it would have a very strange affect on the housing market. If I understand the paln, only new houses would be subject to the tax. So who would ever buy a new house? The construction industry would get crushed. But if you own a home (or you and the bank do), it is suddenly worth more because if someone wanted to buy it from you, they wouldn't have to pay the 30% tax, so it is a more attractive asset.

Etchy333: Something that a certain group of people love about abolishing the IRS and every other tax in favor of the Fair Tax is this: no more ESTATE tax.

Now, you can pass on your $1 billion fortune to your children, who will pass it on to their children, etc. Perhaps in a few generations there won't even have to be a money system, the rich could just own massive amounts of property while the poor works for them for life. I'm sure this has never been tried before with disastrous results.

Because really, that's what the American dream is all about. Being lucky enough to inherit a massive fortune so you or your children never have to work a day in your life.

/screw the poor
//they're poor because they're lazy

So, even though this plan would completely eliminate the federal tax burden of the poor, it's a bad idea because it doesn't punish the rich folks enough?

I guess to some folks it's more important to make the wealthy poorer than it is to make the poor wealthier.

mmm... pancake: How?

He'll never notice the increase in the cost of goods and services.

This sounds like a real disaster, on the other hand the tears of the first babysitter dragged into court for not collecting taxes will sustain me.

That will be an awesome thread.

Three Crooked Squirrels: I think it would have a very strange affect on the housing market. If I understand the paln, only new houses would be subject to the tax. So who would ever buy a new house? The construction industry would get crushed. But if you own a home (or you and the bank do), it is suddenly worth more because if someone wanted to buy it from you, they wouldn't have to pay the 30% tax, so it is a more attractive asset.

Example: If you buy a $100,000 house today there are approximately $23,000 of taxes embedded in the cost of that house. If those taxes are removed from the various level of production of that house and are replaced with a 23% inclusive tax at the point of sale, the house still costs $100,000.

Last One Left: Boortz comments don't get to the heart of the issue at all. In fact, his claim that the prebates are based on the poverty level and family size indicate that the FairTax will be more regressive than what exists now.

Nobody pays taxes on the first $20,000 they spend. For every dollar over that everybody pays their fair share. If you make and spend $30,000, you pay taxes on $10,000. If you make and spend $40,000 you pay taxes on $20,000. Nobody pays taxes on the necessities.

mmm... pancake: Example: If you buy a $100,000 house today there are approximately $23,000 of taxes embedded in the cost of that house. If those taxes are removed from the various level of production of that house and are replaced with a 23% inclusive tax at the point of sale, the house still costs $100,000.

Won't the construction company still have to buy the materials somewhere and presumably pay a 23% tax on it (rather than the current 0-8%)

mmm... pancake: So, even though this plan would completely eliminate the federal tax burden of the poor, it's a bad idea because it doesn't punish the rich folks enough?

Call me a pinko, but capitalism needs a socialist balance to make sure that wealth doesn't get too centralized. Centralized wealth would mean one group or family would be king and the rest would be serfs.

The estate tax is not a "punishment," it's simply a statement that says "you know what? Your kids will have to work for their money just like you did."

Bah, the "FairTax" is yesterday's news. All the cool kids prefer the land value tax.

Bowen: Won't the construction company still have to buy the materials somewhere and presumably pay a 23% tax on it (rather than the current 0-8%)

The tax would only apply at the retail level, as opposed to the wholesale level.

mmm... pancake: The tax would only apply at the retail level, as opposed to the wholesale level.

Contractors do most of their shopping at Home Depot these days, will there be a separate register?

I'm not trying to bust your balls, just trying to understand.

mmm... pancake: Nobody pays taxes on the first $20,000 they spend. For every dollar over that everybody pays their fair share. If you make and spend $30,000, you pay taxes on $10,000. If you make and spend $40,000 you pay taxes on $20,000. Nobody pays taxes on the necessities.

Move to a state like California or Hawaii and try to live off $20,000 a year. Better yet, become a single parent and do that!

I double dog dare ya!

Also, does this mean I'm going to have to document EVERY SINGLE THING I BUY????

I'm going to head over to Starbucks and grab a coffee. I'll be back in 2 hours since I need to pick up a federal 345B form.

mmm... pancake: The tax would only apply at the retail level, as opposed to the wholesale level.

Yeah, I can't see any loopholes there.

mmm... pancake: There would be no more motivation for tax fraud than there is now. There will be tax fraud with any system.

No motivation for tax fraud? Are you kidding? The markup on a $20,000 car would be $4600, you think that some car salesman won't look the other way on the sales tax to get the sale? And the fact that the Fair Tax includes no regulatory organization to enforce tax collection means that there is no incentive to pay the full tax value to the government.

Its not that there is tax fraud everywhere... its the fact that the Fair Tax encourages tax cheating on the part of the retailer.

mmm... pancake: Nobody pays taxes on the first $20,000 they spend. For every dollar over that everybody pays their fair share. If you make and spend $30,000, you pay taxes on $10,000. If you make and spend $40,000 you pay taxes on $20,000. Nobody pays taxes on the necessities.

I understood that. But that would be a tax rate which is progressive on consumption, not on income. Besides, if family sizes are used, as Boortz proposes, a larger, richer family gets more in prebates than a smaller, poorer family.

Besides, where does the $20k figure come from? Will it be inflation-adjusted? I'm not going to even get into spending on debt issues.

Bowen: Contractors do most of their shopping at Home Depot these days, will there be a separate register?

I assume businesses and individuals could be rung up at the same register.

kronicfeld: mmm... pancake: The tax would only apply at the retail level, as opposed to the wholesale level.

Yeah, I can't see any loopholes there.

Hmm... I'm an officer of an LLC... let me think for a moment.
*lightbulb*
I now fully support the fair tax! Go fair tax!

Code_Archeologist: No motivation for tax fraud? Are you kidding? The markup on a $20,000 car would be $4600, you think that some car salesman won't look the other way on the sales tax to get the sale?

No moreso than they do now for state sales tax.

Code_Archeologist: Hmm... I'm an officer of an LLC... let me think for a moment.
*lightbulb*
I now fully support the fair tax! Go fair tax!

How does that differ from now? If you buy yourself something under the LLC, you write it off do you not?

Last One Left: I understood that. But that would be a tax rate which is progressive on consumption, not on income.

Who consumes more? Rich people or poor people?

mmm... pancake: I assume businesses and individuals could be rung up at the same register.

Consumer: "I'd like to buy this box of nails."
Retailer: "Are you a business or are you buying this for yourself?"
Consumer: "What's the difference?"
Retailer: "If you buy it for yourself, assuming you've already spent your $20,000 that the government allows you, I'll have to charge you 23% extra."
Consumer: "Oh, so if I lie, there's a big penalty and jailtime, right?"
Retailer: "Nope, there is no regulatory agency to enforce this system."
Consumer: "I'm a business."

mmm... pancake: No moreso than they do now for state sales tax.

For state sales tax you have to give a full accounting of your receipts to the department of revenue... and they will audit you at random... sucks to be you if you can not justify your sales and your sales tax collection.

The Fair Tax allows for no similar regulatory machinery for enforcement.

How does a "retail" outlet like Home Depot know if they're selling something that is truly at the "end point" such that it is supposed to be taxed? I could just walk in and say I'm a subcontractor buying a sink to be installed in a new house I'm building. Who are they to know any different, and what possible verification method could ever exist?

Afternoon_Delight: Taxation by inquisition is the great 20th century achievment of the American left; lifted straight from the Communist Manifesto

I heard a rumor that taxes existed before Karl Marx was born, but that must have just been a liberal lie.

mmm... pancake: Who consumes more? Rich people or poor people?

Who uses more of their income for consumption? That's the real question. By its very nature, a flat tax on consumption is regressive. That's why the prebate exists. But it doesn't solve much, since the prebate is also based on consumption.

mmm... pancake: Code_Archeologist: Hmm... I'm an officer of an LLC... let me think for a moment.
*lightbulb*
I now fully support the fair tax! Go fair tax!

How does that differ from now? If you buy yourself something under the LLC, you write it off do you not?

No, you outsource your supply chain to third world countries, do your manufacturing overseas using cheap labor (and none of that pesky OSHA or EPA nonsense to bother with), and import your finished product under 'protected' import catagories.

That way you can hide your costs from the government AND your investors while taking advantage of the local US tax breaks and delivering a product with a built in market advantage over domestic competition. The best part? if anyone catches on to your rape of the US import/export laws, you scream 'free trade', wave the flag and imply that anyone with legitimate concerns is a commie bastard for daring to question your adherence to 'capitalism'.

kronicfeld: How does a "retail" outlet like Home Depot know if they're selling something that is truly at the "end point" such that it is supposed to be taxed? I could just walk in and say I'm a subcontractor buying a sink to be installed in a new house I'm building. Who are they to know any different, and what possible verification method could ever exist?

A business license.

Code_Archeologist: For state sales tax you have to give a full accounting of your receipts to the department of revenue... and they will audit you at random... sucks to be you if you can not justify your sales and your sales tax collection.

The Fair Tax allows for no similar regulatory machinery for enforcement.

Um...the state sales tax has no regulatory machinery for outsourced manufacturing or even internet sales/distribution networks. That's partly why so many corporations are moving production facilities overseas. Easier to screw over the domestic competition that way.

Afternoon_Delight: Taxation by inquisition is the great 20th century achievment of the American left; lifted straight from the Communist Manifesto

I agree, life was a lot better in the 19th century. No electricity, clean water, highways, transportation, etc.

Of course this is where you say "All those things happened despite what the liberals did!"

Weaver95: No, you outsource your supply chain to...rest redacted

Ssshhhhh... dammit. Ixnay on the anplay

I love the Fair Tax!

Weaver95: No, you outsource your supply chain to third world countries, do your manufacturing overseas using cheap labor (and none of that pesky OSHA or EPA nonsense to bother with), and import your finished product under 'protected' import catagories.

That way you can hide your costs from the government AND your investors while taking advantage of the local US tax breaks and delivering a product with a built in market advantage over domestic competition. The best part? if anyone catches on to your rape of the US import/export laws, you scream 'free trade', wave the flag and imply that anyone with legitimate concerns is a commie bastard for daring to question your adherence to 'capitalism'.

Can I get some Chinese boy to buy my groceries over there and mail them to me?

Hmm... sounds like a business model.