The FairTax Thread: Discussion Only

The Fairtax: I would like to tell everyone in this country about this tax plan. Please read everything below and post any questions you have. Please critique it, please ask questions. I will answer any and every question, but please be civil. This is not a Democrat vs. Republican issue. This is just a way for you to receive 100% of your paycheck and bring more jobs to this country. Please don’t make this a partisan debate. Please be civil. I wrote every word on this post, do me the courtesy of doing as I asked. Thank you, now onto the Fairtax:

1. Paycheck
2. Corporate Taxes Embedded Taxes.
3. Economy.
4. Prebate
5. Critics

We need a Fairtax. The Fairtax, or HR 25 as known in Congress, is a comprehensive Tax plan to overhaul the entire US Tax Code by eliminating the following:

-Payroll taxes
-Income Taxes
-Death Taxes
-Gift Taxes
-Corporate Taxes
-Social Security Taxes
-Medicare Taxes

All of these taxes will be balled up and place at the end of the retail sale, called the Fairtax. I will be going into detail how these taxes affect the Retail price and the economy as a whole.


1. Paycheck:

You receive 100% of your paycheck. No more Income taxes to be taken out of it. You actually see what your real pay is. I can’t stress this enough. 100% of your paycheck! Currently, if you make $50,000 a year, you are paying about $16,500 in Federal Taxes alone. The average is about 33%, nationwide. With all of the Income taxes and Payroll taxes are out, you get to see a shiny check with 100% of the money you earned!

2. Corporate Taxes, Embedded Taxes

Corporate Taxes are a Myth. If you ever hear a Politian come out and say that they want to lower your taxes by taxing Big Corporations, they are lying to you. Read more to learn how:


HYPOTHECITAL SITUATION: I’m going to make the math simple, but the principle is still the same: Image I make Widgets. These are amazing widgets. 100% Made in America Widget. Everyone needs one of my amazing Widgets. I run the Business and I hired someone to make Widgets. It currently costs me $50 to make a widget. I sell this Amazing Widget for $100. That is a 50% markup. That means after I sell this Widget, I have $50 “gross profit” and $50 to go out and make another Widget. This year we had a great year, I report to the Government by April 15th that I sold 100 Widgets. That means that I made great profit! Now I can invest in a 2nd Widgeteer and we can hopefully sell 200 Widgets next year! The government looks at the Reporting I sent in April 15. The Politicians who want to get elected go out and tell their Voters, “I’m going to lower your taxes by taxing the Evil Widget Makers, they have Record Profits this year!” Now they lower the Income Taxes by .03% per Person! But the Government has to make up the lost revenue somewhere so they tax my Widgets. The Government lost $300 dollars, so now they tax me an extra $300 a year.
I could do one of a few things, (Option #1) fire my new Widgeteer to keep my Widgets the same cost, now that is affecting this young aspiring Widgeteer. Or (Option #2) I could start to order cheaper Widget Making Parts from China. Now, that means that the People that supplied the Widget Making Parts in America are out of a Job and the end consumer doesn’t have as a high quality Widget that they once had. Or (Option #3) I increase the prices of the Widgets. Any way you look at it, the Somebody loses.

Consumer pays all taxes in this country. Not Evil Corporations, you and me. Let’s look at Option #3. The Widgeteers make $250 a year, and pays 30% income tax and 3% in Medicare and Social Security taxes. That is going to leave the Widgeteer with only $167.50 on his paycheck. Less money to save for his kids college, or that fancy TV or even food.
As a business owner who only makes 50% margin, I have to pay payroll taxes, this “Widget” tax of $300 a year, Matching Medicare and Social Security Taxes. I have to past this cost in the price of my Widgets to make up for the “Embedded” taxes. This makes the price of Widgets go up.
In the End, Consumers always pays.

In a Fairtax world, there are no Income Taxes; the Widgeteer takes home the $250 he was hired at. The Business owner doesn’t have to file with the Government on Profits. There are no Payroll Taxes. This will lower the Price of the goods, by an equal amount of the taxes that were applied and then the 23% Fairtax is applied at the end, so the Consumer sees exactly what he is paying for and pays the tax and gets his Amazing Widget. No Paperwork, no filing, everything is visible and out in the open. Not a burdensome, impossible to understand tax code.

3. Economy

Currently with our tax code, the Taxes are built into the price on the goods we sell over seas. This inflated cost on goods only hurt the American Manufacture and his employees back home. Now in a Fairtax world, these widgets are sent to an overseas market. The Fair Tax is not applied to it since it is not sold in the United States. This will make the Widget market in that country really favor the American Made Widget, costs on the widget is down 23% compared to before, we know that American craftsmanship is the best in the world. They gobble it up. Now back home, The Widget Manufacturer needs to hire more Widgeteers, and order more supplies from the Widget Making Parts People. More and more good news at home! More money for the Widget Manufacturer means more he can pay his Employees. More Jobs!

Now, the International Variant of the Widget Manufacturer gets wind of the ZERO Taxes that Corporations have to pay, unlike in their Home Country. What do they do? IVWM sets up shop in the United States and bringing jobs and money pouring back into the American Economy. That would Increase the Value of the Widgeteer, I mean, he went to school a long time to be a Widgeteer.

4. Politics.
In Washington, you have 2 breeds of people: Lobbyists and Politician. Politicians write the Tax Laws, Lobbyists work for Corporations looking for Exclusions. By taxing every good and Service, you don’t leave much room for the Lobbyists for Corporations to try to get exclusions. By taxing everything, you reduce what a Politician can say “I’m going to tax only this group over here but not those people over there.” It makes it so we have more control over the people that represent us. And this is exactly what Most Politicians are scared of. No more easy elections, no more control through Class Warfare. No more looking like the good guy by increasing tax on these people to influence the decisions of others. Now Politicians have to do real work to keep their jobs.

The Fairtax is revenue Neutral, that means, it collect no more or no less than the system currently does, what it does do however, is makes it visible. You will know exactly what you are sending to the Government every time you buy something. That might make you a little bit wearier when you spend money, or really, what the Government is doing with your money. You earned that money; you want to make sure that they invest it well. Right now, you can’t begin to tell what you paid in taxes because of all the embedded taxes out there.


4. Prebate

This Fairtax would Tax Everything. It makes it fair. That’s why the Fair part is capitalized. People say that you would hurt the poor by taxing everything. Wrong, by taxing everything equally you make it better for you in the long run. (Remember, no Lobbyists for Huge Corporations trying to skate by the Tax Code) We would have what is called a Prebate. This Prebate is a refund of all the taxes you what pay on taxes for Necessities up to the Poverty Level. That means, the Poor will be untaxed! And everyone gets this. All the money you would spend for Food, and Doctor Visits, etc, you get the Taxes back. That means it’s about $196 a month for one person. The more people that you have as a dependant, the more Prebate you get. And this goes up with inflation as the Statistics come from the Department of Labor. They figure up every year what you pay in taxes for necessities, since this tax is based on a percentage. If inflation goes up, so does the Prebate.


5. Critics

1. One concern about the Fairtax is how it is measured. It is a 23% tax at the Retail level. It is an Inclusive Tax. That means if price tag says $1.00 you pay $1.00. $0.77 goes to the Retailer; $.023 goes to the Federal Government. Some people who don’t really understand the system. If was a Tax Exclusive system, like with most State Sales Taxes, it would be $1.00 on the Price tag and $.30 extra added on at the end of the sale. That’s why you would hear from time to time 30% or 23%. It all depends how you look at it.

2. People say it would hurt Home Buyers because the Home Mortgage Tax Deduction is eliminated. But, with no Income Tax to deduct anything from, that argument holds no water.

3. This will hurt the Poor, and make the Rich, richer. The Poor people would be untaxed. That means, anybody making at or below the Poverty level, DO NOT PAY TAXES. This is due to the Prebate. They would get all the money that they would send in Taxes on Food and Necessities back. The Rich have the money to by more things; they are going to pay more in taxes. The Fairtax also spreads the taxes across every person that buys anything in this country. That means, illegal aliens, drug dealers, pimps, prostitutes, tourists, you, me, the rich, anybody who buys anything, pays taxes, not just the Legal workers in the United States.



I may of missed something, but ask anything. I will do my best to answer you.
Thank you for reading

SupermanBeyond.

Sources:

http://en.wikipedia.org/wiki/Fairtax
www.Fairtax.org

 

Thanks, I typed it up on Word, so I couldn't tell. Did you read it?

 

The thing about a Flat tax is, you are still only taxing people based on their income. Before too long, we are going to have more retired people than people that are legally working. That is going to be a huge strain on our Social Security and Medicare Programs, if we supplant the taxes at the end of every sale, everyone will pay. Not just the Legal Workers who pay taxes. No more audits, no more filing, 100% of your Paycheck. April 15 is just another spring day.

 

That is correct. If we have a Fairtax, you would not be taxed on Savings or investments, and you recieve 100% of your paycheck. People below the Poverty line will not pay any taxes with the Prebate, so this will make the the Tax Code Fair!

 

I see a couple of different questios, I'll answer each:
1. Your situtaion with the Wii.
Remember that you are going to receive 100% of your paycheck and the embedded taxes of the Wii are gone. The 23% National Sales tax added on to the end. The Wii will cost essentially the same give or tax a $1. But you have 100% of your paycheck so it's ok.
2. IRS is dibanded, which government department would handle giving the "poor" back the money they spend on sales tax?
It is not just the poor that will get the Prebate, every citizen with a Social Security Number will get the Prebate. The Department of Treasury will send you either a check or you would be able to set up a direct deposit into your account. They already send out the Millions of checks in Income Tax refunds, Pentions, Welfare, Etc. They would be able to do this with no problem.
3.Also, what about state income tax? Would the state's have to get rid of income tax as well? And how would they make up that lost
revenue?
This is a plan for Federal Taxes, not State taxes. But most states are set up with their State Income taxes being a percentage of the Federal Income. They would have to get rid of their State Income and move to an All State Sales Tax. It works that way. I live in Florida and don't pay a State Income tax, but I do pay a little higher Sales Tax.

 

Thanks, I fixed it.

 

Please everyone, keep your cool. This is a discussion, I don't want this to be a heated debate.
1. This is a situation where the Free Market will force retailers to lower the prices, then add on the Fairtax. If one retailer complies with lowering the price of their goods, all others will to be competitive. And there are already a dozen retailers have signed the petition for the Fairtax. Walmart being one of them. Here is an example:

Under the current system: I make and sell Widgets. I include all taxes down the pike, and this are included at the retail level. I hear that the Fairtax is coming, So I can horde the extra 23%. Right? But my competitor XYZ Widget Co. is going to seize this moment to reduce his price of the widgets and gain more market share. I Mean, he can make the same profit as yesterday, and sell many, many more than I can at 23% more at the retail level. If I want to catch up, I have to reduce my price too. There is a real world example when the $5 Federal Airtavel Ticket Tax expired in 1996. The big airlines figured that this would be a good oppurtunity to keep the extra $5 dollars. It took 6 hours for a Smaller company to reduce its price, forcing the others change their prices.

2. You only get back what you pay in taxes on Necessities. Not on other goods. That includes Food, Medical Services, Etc. You would, with your employer, fill out paperwork, just like you do now, saying how many dependants you have. This paper work goes up to the Dept. of Heatlth and Human Services. On this form, it would have your SS# and an Address. They would send you the estimated Sales Tax on foods and necessities you purchase in a Month. See http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#3 for more information.

3. Remember, with the removal of the Embedded Taxes and the Addition of the Nation Sales Tax, the price of the goods would stay the same, before you add the State Sales tax. So, the Price tag on the item looks that same as it does today. If the State removes the State Income tax, that would mean that you would receive 100% totally. If they increae the State Sales tax a few Percentage Points to cover this, that is ok, because you would have all of your paycheck. So what if an Item costs $2 more for the item, you would be saving an Average of 33% from your paycheck that didn't have with our current tax code.

4. The Issue with your friends that pay all there taxes at the end of the year: Remember, they will not be filing taxes anymore. So no more having to save for that. No more having to put any money to pay off the Federal Government. They will pay the Taxes as they purchase, not a big lump sum.

I hope I answered all over these questions, if you have anymore, ask.

 

Upstart Companies would be on a level playing field to larger manufacturers that currently could pay for Lobbyists that try to get tax breaks for their products. I work in an industry that is currently taxed Federally and in every state diffently. If we remove the Federal taxes, Very Large companies have people in Washington that try to get loopholes written into the Tax code for them. If these loopholes don't exsist, New companies could sell their products at a competive price and gain more Market Share. Instead of trying to sell their products, while big companies sell there products with the Loopsholes built in for the Big Guys.

 

Remember, you untax the poor, up to the Poverty level. If you are above the Poverty level, they pay their taxes, and get the prebate, covering their tax burden on Necessities. Everyone Gets 100% of their Paycheck. Never have to file Taxes before April 15th again. You can save the extra, spend it, you choose. The government can't tell you have to file before a certain date anymore, because their is no filing. Last year I paid $13500 in taxes. Most of it was paid before I ever saw it. When I had to file, I had to pay an extra $1000. I didn't have that in my bank, so had to put it onto a Credit Card. So now, I had to pay more, in addition to what was on taken out of my payeck, and since I didn't have the money to pay $1000 and had to put it on a credit card, I have to pay the intrest on top of it.

 

You are correct. The thing that a lot of people don't understand is most people who are worth $2 billion. Dont "Earn" $2 billion in a year. Bill Gates does't earn Income. He is living off of what he has gained on Investments. If we have a system where you pay based on Income, and somebody with that much money didn't even earn income, how is that fair? But, everybody spends money. Right? So if you tax if when you spend it instead of when you earn it, that is fair. Drug Dealers don't "earn" income. But they spend it. People that get work under the table doesn't "earn" income, but they spend it. Bill Gates doesn't "earn" income, but he does spend money.