The Fair Tax could save the middle class!!!

[catnhatnh]

Not what they've proposed but a national flat sales tax that truly was fair. Suppose we took them up on their proposal and made it truly flat?Say a $20K exemption for each family member on EVERY TAX AND FEE IN THE ENTIRE US??? That's right,each and every one of us totally untaxed till the magic number is reached by either federal, state, county, or city taxes....What could be more fair???
It would be the responsibility of the Federal government to raise the flat tax rate high enough to reimburse the states counties and cities for the taxes and fees waived and lost revenue.Let's look at a two person household making 35K and see how that feels.....
You wake up in the morning and prepare a breakfast of bacon and eggs. They cost a lot less because you don't pay the portion of the food costs that are involved in farm subsidies or fuel taxes...those are gone.Since the morning is nippy you leave the stove on for a few minutes after the food is done since electric is so cheap without delivery surcharges and stranded costs fees....those are reimbursed federally from higher earners who can better afford it.You light a cigarette to go with your coffee-they're cheap as hell,about 50 cents a pack and one of your few indulgences other that a two dollar bottle of scotch every couple of weeks.Next month is your birthday and you have to renew your license and re-register both cars...Thank God that's free.
You remember the layoff last year when both cars had to be registered the same month you used to owe a property tax payment and how close you came to loosing the house. Now that things really are fair you're more secure every year.
You jump in the car and head for work. Since fuel is expensive it's a good thing you were able to get your hands on a used honda....it makes the best use of that pricy $1.75 per gallon gas. And how nice that as you pass the two toll booths between you and work the EZ Pass on your bumper rings up zero-one more monthly bill gone. Driving in you reflect on the unfairness of life-your boss Bob works like an animal to make just 20K more a year than you,but as a single guy his net pay is less than your's.In the old days your spouse would have had to work too but now someone can take care of the home and if Bob wants a more lavish lifestyle he is just going to have to find a mate and set up a household-after all being a hermit or loner has it's cost.The days of high living singles and Dinky's eating gouda and vintage wine in Soho brownstones are over.
Seems like everyone you know is livin' smaller, but better.At work you do what you always did but at your level the stress seems lower, really it's the upper management levels that seem stressed. The poor bastards only knew how to shelter income and dividends from taxes, but never how to live a life of old time middle class...it's a hard life when children want so much that's taxable...The workday ends,at least for you-those "rich" people will struggle for hours more,pumping highly taxed Maalox and Xanax...it seems almost unfair that if you needed them it would cost less...
Tonight is the night you do the bills.You'll pay your mortgage that is about what it always was.Phone, electric, and cable are almost a joke compared to last year-almost nobody realized how much of the bills were actually taxes.Going home at night is a gift now-who knew that a really fair tax system would mean a "household" was best off with a "homemaker"...most your friends go home to an unstressed husband or wife who has had a full day for both cooking and cleaning-but also some extra time....most of them spend some of that on personal improvement or volunteering,sure-but also a bit of it every day doing something nice for the wage earner. It's nice to share and not compete.
At the end of the day there is gratitude-a ton of it really. Who could have imagined that at the end of the day that a system championed by Ron Paul and Mike Huckabee would when taken to it's logical conclusion, come to this-the common man freed from the shackles of government and the rich chained to their devalued cash???

[antiimperialist]

1. Too much to read, with no spaces between paragraphs

Can you tell me if you are for or against the Fair Tax?

[catnhatnh]

2. Nope...

if I can spend an hour writin' it,you can spend five minutes readin' it...if you won't read my arguement,why would it matter where I stand?? Sorry for failing to break paragraphs though...

[DemocratSinceBirth]

3. I Think He Likes It...

I can't imagine the black market a 35% federal sales tax would create... Especially on top of a nickle to dime state sales tax...

[jefferson_dem]

4. No telling how many business owners would not report sales and pocket the extra loot...

The "faux tax" is a sham.

[DemocratSinceBirth]

6. I Don't Think Used Cars Are Taxed... Are They?

I think it would kill the new car industry...You would have a Cuba like situation where it's 2010 and people are trying to keep their 1994 Ford Escorts running...

And the more something costs the more a person thinks about buying it...Adding thirty five percent seems like it would curtail spending...That's the last thing a consumer driven economy needs...

[jefferson_dem]

12. Used goods purchased by consumers are not taxed...

...but goods purchased by state governments from the federal government are. Imagine that.

The scheme is bogus on its face.

[China_cat]

34. They are here in SC.

Plus we pay tax on vehicles EVERY YEAR. Not just plate renewal, it's called personal property tax and is based on the value of the item (car, truck, boat, mobile home).

The so-called 'fair' tax also never mentions the fact that it doesn't abolish state and local or city sales taxes. So that needs to be added into the computation of how much you'd really end up paying.

[catnhatnh]

11. Actually, I think the rate might exceed 75%...

The proposal they make is bottom up-everyone pays 23 (really 30)% from nickle one with no other changes....I propose a more logical top down deal-above the 20k IN PURCHASES you pay on every nickle spent and the Feds reimburse all fees to all other entities not collected on the exemptions...If you strip away the multitude of supposed fees payed at the bottom (do you really think there is a relationship between cost and fees when you are charged $100 a year to "register your car"-in NH they pull up last years info on a computer,type in the date, hand you two 1" stickers for your license plate) and state taxes like state sales and real estate taxes you really would establish a tier where a large percentage of the populace could live decently and those with higher incomes and interest and dividend interest would pay more-as is fair when you get more from the commons.

[papau]

5. I think you are just pointing out that "fair tax" sales tax is nuts - giving gov 100,000 when you

buy a 300,000 house really does not sell all that well. :-)

Plus the "23%" is as you know really 30% ($23 on a $77 purchase) and becomes about 60% if you exclude housing and food - and gets close to 100% once you start giving back several thousand to every tax payer so as to make the tax "progressive" and not such an obvious killer of the poor.

The idea was fun to dump on when Forbes tried to sell it - I really do hope Huck gets the GOP nod as it would be fun to shame him with the facts - of course some like Forbes never admit the idea is nuts, but then who still takes Forbes seriously on anything since he went public as a "fair tax/sales tax" believer.

[DemocratSinceBirth]

7. I Don't Think Homes Are Taxed

But the idea is a loser...Anything that makes things more expensive in a consumer driven economy is not going to work...

[papau]

16. Afraid homes are taxed since they take all purchases - which includes real estate - as the base to

apply the sales tax that they call "23%" to in their calculation includes all consumption - it's a world where every 77 dollars of consumption resulted in 34 dollars of tax.

But I do like the ability of these GOPers to keep a straight face as they tell the bald face lie that is the rate is 23% - seems that to admit 30 dollars on each 100 dollars sold did not focus group test well! And god forbid anyone point out that "23%" does not reproduce the current receipts of the government from the FIT and from the Social Security payroll tax. Guess there is always that hole plugger called future savings from privatization!

And our media says nothing, or at most buries an analysis 20 pages deep while allowing the GOP assertion to be on page 1 with no "fact check box" next to the statement.

[DemocratSinceBirth]

18. The Housing Market Is Already Moribund

People see their equity reduced as we speak...If current prices are too high they will be higher by 23% more under the Fair Tax...

Hmmm...

[papau]

23. OK - point taken - you can't kill the already dead - and if you are "underwater" with a loan

that exceeds the cash you could get by selling, the losing of another 23% of that cash is not going to change the situation.

[napi21]

8. Whatever you had tonight, I WANT SOME! To be able to halucinate like

THAT, it's gotta be some GREAT STUFF!

[tkmorris]

9. That is one of the silliest things I ever read.

First of all you seem to have no real idea what the hard figures might be; at what level the taxes kick in, what rate they would be, and so on. Yet you are somehow certain that if this was done everyone would suddenly live the happy joyful life on Candy Mountain.

Secondly, any tax which is flat in rate, i.e. it does not increase as income or spending levels go up, is punitive. The reason for this is that at ANY income level the less you earn the greater percentage of it is spent on goods and services. That effect does not magically disappear at 20k, or at any other number. A family earning 100k will spend a greater percentage of their income just staying alive than will a family earning 500k, but under your system they would pay a larger percentage of that income in taxes.

Third, this nation RUNS on retail. Right or wrong, that's the way it is. Any tax on spending or consumption has a depressive affect on the economy. Your proposal would send our whole economy into a tailspin that would make the Great Depression look like a roaring good time. Not only that but it has a positive feedback loop inherent in it. Once a tax rate and spending point is imposed that would raise the necessary revenue, the normal and very predictable reaction by consumers would be to simply spend less, thus avoiding prohibitive taxes. By doing so they actually decrease the revenue the government receives, forcing a raise in the rates to make ends meet. This further discourages spending and the cycle continues.

There is no way such a proposal can work. Back to Econ 101 with whoever dreamed that one up.

[DemocratSinceBirth]

14. That's What I Said In #7

You stated it more eloquently...

A 2008 Honda Accord that cost $20,000.00 now miraculously costs $27,000.00...

[denem]

19. A 2008 Honda Accord costs $25,000.00 right now

in Denmark, Norway and Sweden, those notable economic basket cases. 25% on: $5000 tax. 15% tax is mandatory to be a EU member. That's why Turkey and a few eastern European notions are trying so hard to escape EU membership.

[denem]

15. It was done all over Europe without killing their economies

... at least initially. It's an EU rule - a goods AND services tax 15 - 25 % is mandatory to fund the EU 'government' and it's member countries. No - they did not axe income tax, and no there was no great depression, to put it mildly.

[papau]

20. a bit of a lie- "value added tax" applied to only non-financial transactions and the fair tax includ

that home sale and bank deposit and divident payment, etc. - I realize that financial transactions must be exempt if we are to have an economy - but they do not exclude financial transactions when they calculate that "23%" that is actually 30% (23 dollars on every 77 dollars of "consumption"). The math is a bit nuts as the point is to not tax savings - but the results of that calculation was a sales tax over 50% - and that is too hard to sell.

The VAT was/is seen as a way to beat WTO rules (a subsidy for exports via no VAT on exports). No corporate income tax was the original idea but most countries now also have a FIT for both individuals and for companies.

As the top 5% get 90% of their income from investments, the result is the effective end of taxation of the very rich (please recall the 1993 "luxury tax - meaning tax on high cost boats/other goods" - that the rich found so easy to avoid).

[denem]

24. I don't disagree with you

but VAT is now 25% in Norway, Denmark and Sweden, with highly progressive income tax and without economic desolation. If the 'Fair Tax' includes financial transactions, it's beyond comprehension. Every exchange is penalized. Walmart might start things moving by taking over Fed-Ex.

[papau]

25. I think we are both saying a US VAT might be a good idea - but what is being sold by the GOP as the

"fair tax" is nuts.

[denem]

30. Pea-nuts cash-ews and almonds

thumbsup

[tkmorris]

21. He's talking about ELIMINATING income taxes

Not about a VAT, which is what has been done in Europe. The VAT, as is usually implemented, supplements income taxes and is an attempt to improve upon direct sales taxes. They are BOTH regressive taxes. They both tend to depress consumption, and thus production, and do have a chilling effect on economies. The versions imposed in Europe are nowhere near the rates the US would have to apply if we eliminated income tax altogether as proposed.

It's a bad idea, and frankly I think the only people it serves are those who have very high incomes and hate government spending.

[denem]

26. A 25% VAT, policed to exhaustion could proably do away with Federal Income Tax

but without enough money to compensate low income earners. It's just a guess but the amount raised by VAT is enormous - its a lax on everything barring financial transactions, exports, and usually health. Everything - every sevice, every sale taxed at 25% right up the line to the end consumer.

It's a terrible idea - no arguments there. I am just capping some of the more flamboyant claims made here. 15% VAT is the minimum everywhere in the EU. Yes they pay a lot a tax, and have public health care as well. You would be hard pressed to find a country with universal public health care without a VAT.

[DemocratSinceBirth]

27. I'm Confused

Any sales tax is regressive is because the less money you make the greater percentage of it you spend on the necessities of life even if food is exempt....

[denem]

31. A VAT is very regressive.

I am not advocating it. The idea is supposed to be that at the outset you compensate low income earners, but suck 'compensation' is eroded steadily over time. It's bad news. It is an indication of how heavily Europe is taxed.

[xchrom]

33. turkey is most certainly NOT trying to avoid EU membership.

germany is trying very hard to keep them out.

the battle over established and ''new comer'' economies.

[catnhatnh]

17. Your's is a reasoned response...

AS to the "Candy Mountain", Right you are-if you remove regressive taxes and fees from the bottom it sure would look rosier for all lower earners.
Secondly a flat rate is not punitive if it is set at a decent subsidence level-IE:you live well and have food and fuel and shelter before taxes kick in.
Third-why does a tax change that.If applied across the board it doesn't...

[denem]

10. catnhatnh - why not pay everyone a lump sum

that would compensate for tax paid up to 30K. It has the side effect of eliminating welfare. Nixon was actually thinking about a proposal along these lines in 1970. If you want pie - go for the sky. Edit - figure amended to 30K.

[Stop Cornyn]

13. Go to bed, Mike, you have a busy schedule campaigning tomorrow

[Warpy]

22. Well, we went through the one spouse being an unpaid domestic

servant to the other back in the 50s and it didn't work out too well for most of us. Valium and vodka helped us live in paradise.

$20,000 a head is parsimonious. No one can live on that. Start your "fair" tax at $200,000 and we'll talk.

Marriage isn't for all of us, not even if it's egalitarian, both have reasonable careers, and they share child care and other shitwork. Some of us are old and off the market, widowed or divorced. Leaving us with a poverty income and lifestyle doesn't make a whole lot of sense in a country that pretends to be modern, does it?

Right wingers always want to return to the 50s, not realizing the 50s were the way they were because wages were high, unions were strong, and a progressive tax system fell heavily on the plutocrats and barely touched labor.

That's the only way you're gonna get the Cleavers back, Binky, by raising their wages, lowering their taxes, and redistributing the wealth of this country among the people who create it by the sweat of their brow.

[catnhatnh]

29. OK...I like your perspective...

In my family one of four kids went 50's (Homemaker/Cleaver/Slave as partner) yet that was the most enduring marriage.I could see a higher exemption.I would like to see a dynamic that allows a stay at home partner-I don't see that now in the lower tiers. As always, rich folk can afford what they want-it would be nice to see that as a wider option.
While my name Ain't "Binky" nor am I planning on enslaving a gender, can you admit this might be a nice option for all people instead of just the wealthy?

[laconicsax]

28. "a system championed by Ron Paul and Mike Huckabee"

What planet are you on? No income tax and an $80,000 tax exemption on a family of four? You can't spend money you don't have, so any family of four earning that much per year or less wouldn't pay taxes on anything. A family making $100,000 per year that spent every cent still wouldn't pay 80% of their income on the myriad of taxes that exist. Sure, the middle class would thrive under this scheme, but neither local, state, or federal governments would have sufficient revenue to pay for anything.

How much do you need to spend to pay S20,000 in sales tax? Let's say that it's Huckabee's 23% tax. You would need to spend $86,956.52 to pay that much in taxes. How many people spend $87,000 in a year? How much would a family of four need to spend to pay $80,000 in sales tax? $347,826.08. Spending doesn't increase proportionally to income. It levels off at a point because there's only so much money you can spend in a year.

How do you propose to waive the various taxes that add to the cost of a product before it's sold and some sort of system to track who owes what on every single purchase? It would take an enormous bureaucracy that the federal government wouldn't have enough revenue to fund in the first place.

Add any of these to your little fantasy: A fire ravages through your town, destroying everything because the fire department had practically zero money and only the super wealthy were able to save their homes with their private fire departments. Someone breaks into your house, rapes your children and steals some valuables and goes free because the police doesn't have the money to enforce the law. That same person, feeling guilty turns himself in, but still goes free because there's no money to prosecute him criminally and even if there was, there's no money to operate a jail. Your drive to work is plagued by roads with such poor condition, you wonder if dirt would be better. A large, deadly accident takes place at the intersection in front of you because the DOT doesn't have the money to maintain stoplights, and failures are regular. The accident turns into perpetual gridlock because there's no one available to clean up, tend to the wounded, etc. That night, your family freezes to death because the utilities, being so underfunded have broken down, leaving you without heat in your house.

[catnhatnh]

32. I would like to thank everyone who replied to this thread...

Because this is one of the first threads I've seen that really addresses where and how a flat tax might be imposed.I posted the original piece because the disconnect between the name "fair tax" and the reality of the full range of taxes and fees past the federal level would make the "flat tax" a joke...I've seen posts on DU that approach this tax as if it made sense or was fair-it does not and it is not...If you enjoyed this please K&R for tommorrow-I think the discussion is worth it.

[Thothmes]

35. Really not sure what your point is

What you describe is not what the "fair tax" proponents are calling for nor does it appear to be a logical extension of that tax plan. As I understand the fair tax proposal, it is not a flat tax, nor a VAT. It in no way interferes with a states right to levy and collect its own taxes. There are not exemptions from the tax on new purchased items. I do not agree with some of the major assumptions made by fair tax proponents. But in my opinion, perfectly logical and well reasoned arguments can be made against the "fair tax" scheme without resorting to fantastic exaggerations.