The FairTax Thread: Discussion Only

[El_Citrus]

Would the government make the same amount/more money from the Fairtax than the current code? They collect plenty from us right now, but how much would they collect, as a general estimation, under the Fairtax?

 

[Malice]

Would the government make the same amount/more money from the Fairtax than the current code? They collect plenty from us right now, but how much would they collect, as a general estimation, under the Fairtax?

Depending on the tax rate...23% the fair tax would bring in what the income tax and all the other taxes brought in...

If they increase the %, then they would bring in more....

 

[SuBe]

It is Revenue Neutral. Meaning, it collects exactly what they collect today, only through different means.

Now, because the IRC is scrapped, and the FairTax rewards saving, work, ambition, and innovation: i.e., the Economy will Grow, the Government will end up collecting MORE. Just like today, if the Economy is booming and everyone is working, more people are paying Income Taxes, therefore more is collected by the Government. Under the FairTax, because more people have more money, and more people are working, the Government collects the more revenue.

The cool thing about the FairTax is, the more they collect, they more likely (if spending remains the same) we'll end up in a Surplus every year. That can be used to pay down the National Debt. It can be used as fodder for the cut taxes politicians. Which means, After that initial 23%, it could be 22.5% or 22% in just a matter of years, as politicians work to lower the FairTax Percentage.

 

[SuBe]

Medicine for the Achilles Heel of Our Democracy?
Wednesday, April 22, 2009
By: Ken Hoagland

Intergenerational Theft and the FairTax

The massive amounts of money we are borrowing and spending today to save our economy—and satisfy powerful interests--comes, in truth, from the future earnings of generations of Americans yet to be born. It is nothing less than intergenerational theft on a scale that would even make Bernie Madoff blush. This destructive path is both irresponsible and immoral and is only accepted by the public because our system of taxation has so effectively divorced our perception of government spending from the truth of where that wealth comes from--us. No recovery effort can fully overcome the inevitable damage that such practices create.

To be fair, the economic tools at hand and our recent economic history almost require this of modern American politicians. President Obama, Members of Congress and financial experts on the national stage have become sophisticated in the magician’s art of misdirection. Little wonder. To admit that we are borrowing trillions of dollars against the earnings of unborn generations and then printing so much money that both foreign debt and our own purchasing power is devalued would both invite voter scorn and undermine the faith of foreign lenders whom we now count upon to finance our budgets.

The most compelling virtue of the FairTax, the national retail sales tax designed to replace the income tax system, may be that it turns every consumer in the United States into a "stakeholder" who will finally pressure politicians to limit irresponsible spending. The nation desperately needs this perspective because our politicians can't help themselves when it comes to spending our money. It is the surest path to election.

Advocates for FairTax legislation--which Washington loves to hate--rail against the destructive effects and unfair application of the income tax system. They point to trillions of dollars investment that is expected to flow into the United States with elimination of corporate and capital gains taxes. They love the idea of illegal immigrants and the entire underground economy joining the tax base. And they like the idea of a simple, visible tax on consumption that makes April 15th just another day and which frees desperately needed economic activity from the destructive effects of taxation.

But it is the medicine for the Achilles Heel of our democracy that may prove the most compelling strength of the FairTax. Thomas Jefferson and others warned that when, in a democracy, the public discovers that it can vote itself wealth from the public treasury, self-government may destroy the economic foundation of the nation. Many would argue that cynically ambitious candidates and elected officials have been buying votes with the public treasury for years.

Under the FairTax, every retail purchase of new goods and services is subject to federal taxation. The tax paid at the cash register is visible, unlike taxes that are now hidden in payroll withholding and embedded within the price of goods and services. Connecting government spending--however worthwhile--with what comes out of our paychecks is the currently missing "check and balance" that allows those who create wealth to fairly judge how government spends some of that wealth. If, as one wild example demonstrates, our leaders decide that colonization of the moon requires increasing the FairTax rate from it's current revenue neutral rate of 23% to 25% on all purchases, every consumer will demand a word about that. Today, by contrast, massive spending for entitlements, stimulus projects, pet projects and every other government program seems like “free money” to most voters. One need only look at the courting of the powerful senior citizen’s block of voters, or the growth of “earmarks” to understand the siren song of such promises both to elected officials and to the body politic.

The effect is destructive as politicians from both parties have taken us down a path of unsustainable spending. Some economists, like Laurence Kotlikoff of Boston University, cite current and obligated future government debt at the local, state and federal level as so large that it threatens the “full faith and credit” of the United States. Others wonder if we are approaching the point when foreign creditors no longer believe that we can ever satisfy such debt—the definition of national bankruptcy.

Our collective answer to such worries has been to spend more by borrowing more from foreign creditors—both to assuage public fears and to address real problems. We are now spending the earnings of our children and grandchildren on both the challenges of a modern society and the politically popular wishes of entrenched interest groups across the political spectrum. The other answer from national leaders has been to collect less by legislating tax cuts in the legitimate hope that such cuts will spur investment and growth. If we were not already in such deep debt, the debate between the two sides might make sense and a rational middle ground might be achieved. But with more than $11 trillion of national debt, another $50-60 trillion in obligated entitlement spending almost upon us and another $40-60 trillion of debt at the state and local level, this argument begins to look a lot like ideologues endlessly arguing over whether to bake bread or grow wheat while standing in the middle of a long-parched desert.

Last year we borrowed about $160 billion from foreign lenders to send stimulus checks to taxpayers to spark consumption here. In the months leading up to April 15th, however, Americans paradoxically spent an estimated $300 billion on tax preparation costs. The FairTax eliminates these wasted tax system costs, spurs massive private investment and, perhaps most importantly, makes clear to every American the real cost of government promises and programs. In this, the FairTax may prove not to just be a better national tax system but the best way to both save our economy and provide badly needed medicine for our Republic.





more ...

 

[SuBe]

 

[Paradyme]

Who would've thought that the first state to pass a FairTax would be Missouri. I feel like once this passes and quite a few more states start to catch on it'll just be a domino affect. It'll be pretty historic when this passes, I think.

 

[SuBe]

It's going to be a huge boost.

 

[BatMatt]

One of my final exam questions for my Public Policy and Administration class is in relation to FairTax

 

[SuBe]

Awesome, what's the question?

 

[BatMatt]

Define each and identify whether and why the fair tax or the national consumption tax is a more extreme solution to the federal income tax system.

 

[SuBe]

This is really interesting that they are teaching it. What is your opinion on the leasons about the FairTax? How are they teaching it?

 

[BatMatt]

It was taught as an open idea, I think a lot in class hadn't been aware of FairTax before

 

[SuBe]

It's interesting. Good luck on the test.

 

[BatMatt]

Thanks I only have to choose from 3 of like 10 questions, so I'm not sure if that's one I'll choose yet or not.

 

[SuBe]

No problem.

In the mean time, watch this video:

BatMatt. If you can, watch this video. It's very informative. It might help you if you choose the FairTax question.

 

[BatMatt]

Appreciate the video link SuBe

 

[VampElvis]

OK, so I finally watched it and have a couple of initial questions.

1. Did I miss an explanation before they claimed there was no tax on raw materials?
2. What is the proposed mechanism for managing the prebate program? More specifically:
- are there any structural guidelines for this organization - ideally ones meant to discourage bloat
- method for determining "dependents"

 

[SuBe]

OK, so I finally watched it and have a couple of initial questions.

1. Did I miss an explanation before they claimed there was no tax on raw materials?
2. What is the proposed mechanism for managing the prebate program? More specifically:
- are there any structural guidelines for this organization - ideally ones meant to discourage bloat
- method for determining "dependents"

There is only one tax at the Point of Final Consumption. That means, the Retail Level. Because, with the Current Tax Code: ALL taxes flow down to the Consumer Level. Take the Bread Analogy:

the Farmer has Taxes, the Mill has Taxes, the Baker has Taxes, The Bag Vendor has Taxes, the Box Vendor has Taxes, the Pallet Vendor has Taxes, the Truck Driver has Taxes, the Distributor has Taxes, the Grocery Store has Taxes. They are all passed from one to the Next. Then finally, you when you feel like eating a ham Sandwich pay the Taxes of every link in the chain. On average, 20% or so of the entire cost of that bread is Tax Liability or Tax Complience Costs.

Every level of the chain of Production has a Tax embedded onto the cost to produce it. The Vendor sells it to the Retailer with the Taxes embedded in their Margin, and it gets passed onto the Consumer.

The "Corporate Tax" as paid by Corporations is a myth.

Dependants are determined by SSN. It's you, your wife and one child. You are all American Citizens or Naturalized Citizens. You have Social Security Numbers. You fill out Paper work to the Federal Government one time, just to say how many dependants you have, and you list their SSNs. The Government, through their Databases verify that your SSN matches your Childs SSN and the SSN of your wife. They inturn send you monthly checks or direct deposit it into your Bank account, or you set up the Prebate Account through the Treasury Department. It'll be your choice.

The Prebate does 2 things, it ensures that NO AMERICAN ever pays the Government if they can't afford Taxation under the Poverty Level, and it is an incentive for Illegal Aliens to become Naturalized through the Legal Process.

For more information:
http://www.fairtax.org/PDF/FairTaxPrebateExplained2007.pdf

I don't know what you mean by "Bloat".

You only get the Prebate based on family size, not income.

The 2008 Prebate Schedule:

I don't have a copy of the 2009 Prebate yet. I'll get it and upload it later.

But, as you can see, if it is you, your wife and one child, you get back $468 a month. This pays you back for the Taxes you pay on food and necessities each month.

 

[VampElvis]

By bloat I meant this. There would likely, I think, be an organization created to manage this aspect of the system Are there proposed any checks to keep this organization from growing overly large beyond what is necessary.

 

[Kelly]

I'm single with 2 dogs.....what do I get back?

 

[Handsome Rob]

By bloat I meant this. There would likely, I think, be an organization created to manage this aspect of the system Are there proposed any checks to keep this organization from growing overly large beyond what is necessary.

None that I'm aware of. But, if the FairTax remains as it is, there's no real reason for a bloated government agency handling it. It's a simple concept, which is great. Part of the problem with the current tax system is the amount of effort and expense that has to go into just understanding even a part of it. I'm a CPA, so I have a better grasp of the Internal Revenue Code than most; but, there is so much out there that I just flat out don't know. Here's an example:

I have a friend who is an attorney--he does financial planning and charitable planning services for wealthy individuals and organizations. He and I were talking at Starbucks a couple of weeks ago, and he asked me about doing his taxes next year. I told him I would, if I had professional tax software (around $2,000). Why? Because given the complexity of his return (he has rental properties, investments, etc., in addition to his work--he's also on different boards of directors), I would NEED a computer program to help me, or I'd end up billing him for so many hours of just research on trying to minimize his tax liability. I'd get a lot of money out of it, but it wouldn't help him any.

 

[Handsome Rob]

I'm single with 2 dogs.....what do I get back?

A monthly prebate for one person, and daily licks on the face.

 

[Kelly]

A monthly prebate for one person, and daily licks on the face.

I can handle that....

 

[SuBe]

Myself and members of the Florida FairTax Educational Association. If you live in FL, join us at www.flfairtax.org

 

[SuBe]

Myself and Mr. Neal Boortz, Author of the FairTax Book.