Concerning the Fair Tax; are you for or against it, and why?

Question

Please don't give me an opinion if you have not read up on the Fair Tax. I'd like a little intellectual give and take here.

Answer 1

I'm for it because the income tax system we have now punishes achievement and is far too complicated. And thanks for your answer. Christian, NRA Life Member, lover of American freedom here...

Answer 2

In short, it's a proposal where federal payroll taxes would be abolished, and in its place what amounts to a national sales tax would be collected when you buy anything new - including food, clothes, medicine, cars, houses.....

The proponents say that a tax of 23% would be enough to fund the government. Opponents don't agree, and feel the % would be much higher.  And even by the proponents’ calculations, the 23% is the % of the total price of something that would be paid, which calculates to an add-on of 30%.

Each family would get a "prebate" each month to cover the tax on an amount equal to the poverty level.

This is a real good deal for the rich, since as a group they'd pay a lot less tax than they do currently. For the poor, with the prebate they might come close to breaking even - unless they are currently getting EIC or other benefits that wouldn't exist any more under this plan, then they'd lose big-time. The middle class would pretty much get the shaft, especially those with kids who now get child tax credits and maybe EIC.

There are a huge number of other problems with it, that Mr Boortz for example just glosses over in his book.

Fair? Well, that's a matter of opinion.

Answer 3

Against it. It's regressive--penalizes the poor disproportionately and favors the top 1% that's getting the breaks now. The "Fair Tax" to work would have to be much higher than the 23% I've heard about. It would need to be closer to 29% to be revenue neutral.

It would discourage municipal bonds and make it harder for cities to raise money for public works. The proposed rebate program would act as kind of involuntary welfare and therefore discourage production. It would encourage the underground economy. It would increase the cost of goods since unless a complicated system of exemption were imposed goods that go along through manufacturing processing would be taxed at every level.

I can't see any way to phase it in fairly, either. The present system is not as bad as all that.

Answer 4

The Fair Tax sounds good in theory - eliminate payroll taxes, and exclude those below the poverty line from paying FICA taxes. The problem is this - income taxes are potentially progressive (as in, the rich generally pay more because they have higher incomes - although income taxes are less progressive today than they were in the 1930, 40s, 50, 60s, or 70s); and those below the poverty level are already eligible to get full income tax rebates - no tax liability. The Fair Tax advocates "luxury" progressive sales tax is a sham - sales taxes are generally regressive, because those who make below a certain income generally spend 100% of their earnings - and they are taxed on every dollar - their tax burden per sales dollar is disproportionately high. There is not one good argument on the Fair Tax website that factually refutes what I have just said here. They are dreaming.

Answer 5

I would have to study it a bit more.  I thought government was spending about 1/3rd of GDP working its way towards 40%.

It looks good on paper (or their calculator), if it does not include home sales (would it include new homes?).  30% sales tax on top of state sales tax could put a serious damper on foreign travel to this country (sales tax in Chicago just went up to 10.25%), unless goods became significantly cheaper.

And what about exports, would those include the federal sales tax?  Or would the gov't just be happy with tax on imported goods offsetting that?

I just spent thousands of dollars over the past few years converting IRA to Roth IRA, and that would be money wasted if this was actually implemented.