http://www.fairtax.org/site/PageServer?pagename=calculator
This Fair Tax idea is relatively new to me. I was very intrigued after taking 5 minutes and working through this calculator. It's still preliminary, but I'm struggling to come up with a reason why this is not the BEST IDEA EVER.
It was interesting, people should look around the site a little just doing the calculator does not explain that low income people can receive a rebate so the tax does not take a big chunk of their income.
It'd probably be a good idea to counter balance that calculator with the Factcheck.org article on the fairtax. Some consider it to be biased against the fairtax but I'm sure people can decide on their own the merits of their information and conclusions. One thing we can say for certain is that fairtax.org is certainly biased for the fairtax and their calculator reflects many of the inherent assumptions pointed out in the factcheck.org article.
I'd argue that the fairtax.org calculator is inherently biased and inaccurate since you can pretty much put in any scenario and end up paying less in taxes according to it, but somehow this tax system is supposed to make hidden taxes apparent and still raise the same revenue? If it's too good to be true, it usually is.
Perhaps only someone evading income taxes, legally or illegally, would see any negative results from the fairtax.org calculator? Their taxes will obviously go up under the fairtax. But will this disproportionately affect the middle and lower income households who currently get various tax credits and/or deductions or the very small percentage of high income tax earners who "cheat" the system with various tax shelter schemes?
Another major concern of mine is that veterans benefits do not appear to be addressed anywhere on the fairtax.org site or by anyone pushing this taxing system. The proposed bill doesn't seem adjust compensation for disabled veterans or any other currently untaxed compensation.
As far as I can tell the fairtax proposal is a "too good to be true" proposal that raises taxes on lower incomes, lowers taxes on higher incomes, screws disabled veterans and probably many others, and being pushed by people who either can't explain it, don't understand it, or are intentionally being deceptive about it. Perhaps I just haven't heard the right explanation yet? I'm a good student with an open mind, so I'd hope that if this is actually a reasonable proposal that someone can convince me.
In the mean time I'm going to continue supporting tax cuts for all incomes and reductions in federal spending to ensure a balanced federal budget.
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Glock21 Op/Ed
Despite Glock21's evaluation, I will not work to support the current tax structure as he does. I favor a straight line federal income tax based upon gross income. It fair, easy to understand and litterly eliminates the wasteful billion dollar tax preparation industry, restructures the IRS back to being a 'service' which the S stands for and focuses our Federal elected to be better stewarts of our tax dollars as we would really know how much money they spend.
"Despite Glock21's evaluation, I will not work to support the current tax structure as he does."
I didn't comment either way about keeping or changing the structure. Just that I want lower taxes generally and less federal spending. I'm open to ideas on how to accomplish that through restructuring and completely different tax systems.
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Glock21 Op/Ed
I don't like the idea in the current proposal of taxing capital gains at the progressive income tax rate. I like the idea that I can develop a property, make a killing, and only pay 15% on the gain. I'm not doing anything wrong. According to the fair tax, I think I'd get that gain straight-up and then pay taxes on what I buy. If I spend it I'm paying taxes at 23% which is greater than 15%, then I take a hit. What happens to all my write-offs? It's not perfect in every regard, but it seems fair. Most importantly, it sounds simple. It relates to RETAIL tax, so we don't expose ourselves to shady gross receipts proposals. We're going to be benefiting more from all the tourism, the foreign college students, the foreign residents who (I think) don't need to pay income taxes. All those people who get paid off the books are going to be paying taxing one way or another now. A drug dealer's income will be getting taxed. The people who buy more stuff will be paying more in taxes so it covers the progressive argument to a significant degree.
The thought of simplifying something so unnecessarily complicated is most attractive to me at this point. I'm trying to keep an open mind, but it has my attention and has me excited. I'm going to watch these two sites and analyze the back and forth. My biggest concern is that is still doesn't address the state, but I realize that is a moot point. I suspect that if consumers are the ones paying taxes, they will appreciate how much government costs, and pay a little more attention to fiscal policy. It will hopefully deter the practice of stealth taxes that are passed down to the customer in the price of a product or service.
I didn't even consider foreign tourism on this. Imagine how attractive a vacation to the US will be with everything 23% (inclusive sales tax) to 30% (exclusive sales tax) more expensive. Seems kind of discouraging to me. As the calculator makes clear, it also blatantly discourages purchasing new items over used items, which I'm sure will make e-bay happy and direct-ship retailers in Canada big bucks. Perhaps it won't hurt tourism and domestic industry as much as it screws over disabled veterans, but it still doesn't sound like this bill has come anywhere close to being totally thought through yet, in spite of supporters' claims.
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Glock21 Op/Ed
This potentially screws over the wealthy more than anyone else. All those untaxed gifts up to $11,000 that are not currently taxed would get taxed down the transaction pipeline at 23%.
Glock, ever been to france? They charge a huge retail tax and offer some complex and convoluted rebate system. I'm pretty sure tourism is strong in that county.
"Glock, ever been to france? They charge a huge retail tax and offer some complex and convoluted rebate system. I'm pretty sure tourism is strong in that county."
No I haven't been to France. I want to go, but I can't afford it. Coincidence?
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Glock21 Op/Ed
I have similar concerns with this reform, although I would definitely like to see something that levels the tax preparation industry.
Either way, thanks for posting this. It was interesting.
The "fair tax" could be the greatest idea ever if there was no current system. But we have to deal with all the stuff that comes with where we are now.
1. Roth IRA's - these become worthless with this change.
2. People will resist such a huge tax increase on transactions. Black markets will develop for many things to avoid these taxes because it will be very profitable.
3. It will slow the economy because it would discourage transactions. People will keep their cars, furniture and appliances longer. This is not a terrible thing for society, but not great for GM or GE.
4. People are used to paying an income tax and politicians are used to playing with income taxes. Special deductions, tax credits, ... The worst of all scenarios would be a big national sales tax, with an income tax brought back later anyway.