The FairTax Thread: Discussion Only

[Handsome Rob]

OK, here's an example of how this "Fair Tax" would effect a single mother, living in Georgia, and working for minimum wage.

1st, she makes $5.15/hour, so that equates to $206/week, without factoring taxes. Now, she has a 9 year-old son, so she spends at least $60/week in groceries, $20/week in gas to get back and forth to work, $10/week for her son's school lunch, and at least $15/week for incidentals. Now, that's $105/week in expenses leaving $101/week for everything else. Now, if she wants to buy anything special for her son for Christmas it will now cost her 23% more. Let's use the Wii for example, it normally cost $250, now saving $15/week to save up for it would take her roughly 4.5 months to reach the $250. Now add the 23% tax and the price jumps to $307.50 and would take her over 5 months to come up with. Now, tell me how this "Fair Tax" helped her in any way?

But you have to factor in taxes. Going with a simple 10% witholding, she now takes home $185.00 (rounded). But, there's also Medicare Tax (approx $3.00) and SS Tax (approx $12.00). Now she's taking home $170. So, assuming the same cost of expenses, she now has $65 for everything else.

Now, for fun, let's take your expenses and multiply them by the Fair Tax rate of 23%, assuming these expenses do not go down in price. $105 * 1.23 = $129.15 in weekly expenses.

Here's a month's worth of money for her. Ready for this?

Before the FairTax, she has $65 * 4 = $260 a month

Now, with the FairTax, she will take home $824 a month (no taxes withheld, remember?). Less expenses of $517 (129.40 * 4 and rounded), she'll have $307 ($76 a week, which is more than she would have before the FairTax) left over.

BUT . . . that's not all! She gets a $262 prebate at the beginning of the month under the FairTax, which brings her monthly leftover money to $569. So, she now has $142 a week left over.

$142 - $101 = $31 more per week under the FairTax than under the system you laid out. Or, $77 more a week when income/SSN/MCare taxes are factored in (my example).

Check the math--the FairTax works.

First post!

EDIT: And, if she put the difference ($31) alone toward the Wii, she could buy it in 10 weeks, or approximately 2.5 months--roughly 2 months sooner than she could have, before.

 

[Superman4ever]

What I don't understand is how the Fairtax will help the poor. If you are already in the poverty level how is paying 30% sales tax helping you? Food stamps only pay for food. How will a single mother of 2 who makes $20000 a year benefit from a 30% increase on diapers or even a toy?

EDIT: Reading the post from above...nevermind for the moment!

 

[Mysterio]

Fair Tax is one of those things that is great in theory, but will never be fully understood until it is actually applied. Communism is wonderful on paper, but the practice of it is fair different. The problem with something like that is that we won't know if it works or not until we try it. If it doesn't work we are up a certain creek without a certain paddle.

it's a very simple concept, really. the tax code now is thousands of pages long. the FairTax is a pamphlet compared to it. it's basically a 23% national sales tax that will completely replace the federal income tax.

The verdict is still out on this one for me. It seems like it could work, but so did trickle down economics-- and we all know how that turned out. If I understand Fair Tax correctly, rich people will be taxed on their big purchases. While that's all fine and dandy, an economic relapse resulting in fewer rich people purchasing fewer expensive items could only end in economic disaster. I think there are too many variables with Fair Tax.

you do not understand the FairTax correctly. everyone, regardless of income, is paying the FairTax at the retail level no matter if it's a yo yo or a yacht.

and trickle down economics did, and does, work. taxes and elimination of tax cuts stand in the way of trickle down economics. thankfully, the FairTax would eliminate that.

 

[Hotwire]

No, they would not receive a card saying tax exempt. They, as well as everyone, would receive a Prebate into their Checking account or a check in the Mail equal to the Taxes they would have paid on foods and necessities.

So, under this system, the feds would send me a check for $525/month? What if I don't spend that much in sales tax for my essentials that month, or if I spend more than that? Who keeps track of this?

 

[Mysterio]

But the big chunks of taxes will come out of big purchases like yachts, Ferarri's and mansions, does it not?

lol, no.

And yes, I have the oppurtunity to save more and buy my yacht, but--uh oh! Now that yacht is taxed like a motherf**ker! Now I can't afford it because the government wants their piece. Like I said, too many variables to just say "yeah, it works"

Steve, i don't know what the hell you're talking about, but i do know you aren't talking about the FairTax. currently, every item you purchase contains roughly 23% of embedded taxes. when you pay $100 for a tv, $22 dollars of taxes are already built into that price. under the FairTax, those embedded taxes are replaced by a 23% sales tax. you'll still be paying $100 for the television. there aren't "too many variables"; you're just making stuff up because you don't understand it. if you want to discuss the FairTax, we're more than willing. if you want to make up fictions about the FairTax because you don't understand it and then attack those fictions, that's another matter.

 

[Hotwire]

But you have to factor in taxes. Going with a simple 10% witholding, she now takes home $185.00 (rounded). But, there's also Medicare Tax (approx $3.00) and SS Tax (approx $12.00). Now she's taking home $170. So, assuming the same cost of expenses, she now has $65 for everything else.

Now, for fun, let's take your expenses and multiply them by the Fair Tax rate of 23%, assuming these expenses do not go down in price. $105 * 1.23 = $129.15 in weekly expenses.

Here's a month's worth of money for her. Ready for this?

Before the FairTax, she has $65 * 4 = $260 a month

Now, with the FairTax, she will take home $824 a month (no taxes withheld, remember?). Less expenses of $517 (129.40 * 4 and rounded), she'll have $307 ($76 a week, which is more than she would have before the FairTax) left over.

BUT . . . that's not all! She gets a $262 prebate at the beginning of the month under the FairTax, which brings her monthly leftover money to $569. So, she now has $142 a week left over.

$142 - $101 = $31 more per week under the FairTax than under the system you laid out. Or, $77 more a week when income/SSN/MCare taxes are factored in (my example).

Check the math--the FairTax works.

First post!

EDIT: And, if she put the difference ($31) alone toward the Wii, she could buy it in 10 weeks, or approximately 2.5 months--roughly 2 months sooner than she could have, before.

Hmm, under this plan, she's actually making money from the prebate. It's giving her back about $65/week, yet under your example, she's only paying out about $24/week. Now the Fair Tax would have my vote. Of course the government can't really run by spending more than it's bringing in.

 

[Mysterio]

OK, so we pay taxes on food and other essentials, but the government gives us this money back? Then why even bother paying them in the first place. Unless, and this is the fun part, there would ultimately be a lapse in amounts. Meaning we'd eventually overpay and the government would pocket the extra.

everyone receives a check at the beginning of the month that would offset the taxes on those essentials. one month maybe you'll spend $200 on groceries. one month maybe you'll spend $100. there's going to be fluctuation in your spending habits just as there is right now, but you aren't overpaying for anything.

 

[Hotwire]

everyone receives a check at the beginning of the month that would offset the taxes on those essentials. one month maybe you'll spend $200 on groceries. one month maybe you'll spend $100. there's going to be fluctuation in your spending habits just as there is right now, but you aren't overpaying for anything.

But you didn't answer the main question. Why pax this 23% sales tax on these essentials in the first place? If the government is going to give us "all" this money back, why pay it in the first place at all?

 

[Mysterio]

I've added some comments to your post, I hope they show you what a load of BS the idea of this "Fair Tax" is.

well, they don't.

To think that a company would not just keep charging what they have been and just pocket the difference. As for the example of the $5.00 airline tax, that was $5.00, this would be $100+.

this is the basic free market economy at work. embedded taxes are eliminated under the FairTax. those embedded taxes are around 23%. so 23 dollars of a $100 sticker price is embedded taxes. sure, some retailer could continue to sell that tv for $100 and keep his price point the same as it was with the embedded taxes, but others wouldn't. pretty soon, that guy is going to have to lower his price to market level if he doesn't want to be stuck with inventory.

Let's use my friend the contractor again. He already gets 100% of his check. Now, let's say his AC unit dies. Now, this easily a $1000 item that with the addition of this tax would now cost $1230. So, his situation goes from bad to worse. And what about buying a car? Do these taxes now go to 23%? suddenly a $20,000 car jumps to $24,600. So, I don't think trivializing a price increase is really the way to address these concerns. And if the state keeps it's income tax, but raises it a few percentage point, that's not ok.

your contractor friend does not get 100% of his paycheck; ultimately, he pays a check on April 15. as for prices, see my above point. that $1000 item contains $230 of embedded taxes. The FairTax REPLACES those embedded taxes. embedded taxes are an INCLUSIVE tax. the FairTax is an INCLUSIVE, not an EXCLUSIVE tax as you are mistakenly posting in your example here. that item will still be $1000 under the FairTax.

you have completely mischaracterized the FairTax. i urge you to read the FairTax book and to visit www.fairtax.org and this concept will be explained to you.

 

[Hotwire]

well, they don't.

To think that a company would not just keep charging what they have been and just pocket the difference. As for the example of the $5.00 airline tax, that was $5.00, this would be $100+.

this is the basic free market economy at work. embedded taxes are eliminated under the FairTax. those embedded taxes are around 23%. so 23 dollars of a $100 sticker price is embedded taxes. sure, some retailer could continue to sell that tv for $100 and keep his price point the same as it was with the embedded taxes, but others wouldn't. pretty soon, that guy is going to have to lower his price to market level if he doesn't want to be stuck with inventory.

Let's use my friend the contractor again. He already gets 100% of his check. Now, let's say his AC unit dies. Now, this easily a $1000 item that with the addition of this tax would now cost $1230. So, his situation goes from bad to worse. And what about buying a car? Do these taxes now go to 23%? suddenly a $20,000 car jumps to $24,600. So, I don't think trivializing a price increase is really the way to address these concerns. And if the state keeps it's income tax, but raises it a few percentage point, that's not ok.

your contractor friend does not get 100% of his paycheck; ultimately, he pays a check on April 15. as for prices, see my above point. that $1000 item contains $230 of embedded taxes. The FairTax REPLACES those embedded taxes. embedded taxes are an INCLUSIVE tax. the FairTax is an INCLUSIVE, not an EXCLUSIVE tax as you are mistakenly posting in your example here. that item will still be $1000 under the FairTax.

you have completely mischaracterized the FairTax. i urge you to read the FairTax book and to visit www.fairtax.org and this concept will be explained to you.

Let's se some invoices showing these imbedded taxes.

 

[Mysterio]

But you didn't answer the main question. Why pay this 23% sales tax on these essentials in the first place? If the government is going to give us "all" this money back, why pay it in the first place at all?

you're not getting "all" this money back, because once again, spending is not constant. there may be months where you spend beyond your prebate check on the covered essentials. get it?

 

[Mysterio]

Let's se some invoices showing these imbedded taxes.

holy ****. are you serious?

http://boortz.com/nuze/200509/09152005.html

As explained in The FairTax Book, there are taxes embedded in everything we buy. Every entity which provides a product or service in the design, production, marketing, distribution and sale of every consumer good or service will incur some tax liability as they perform their particular function. This tax liability will be incorporated into whatever these individuals or business entitles charge for their services, and will all passed through to become a part of the final cost of the product or service.

Now here's what we didn't explain well in the book. Every employee of any company involved in American commerce is also a provider of a service, and, as such, the employee incurs a tax liability as a result of his or her work. This tax liability is incorporated into what the employee charges the employer for their services, and is eventually incorporated into the final retail cost of the employer's product or service. Each employee is essentially a separate business entity providing a product, be it physical or mental labor, to the employer.

The extensive research behind HR 25, The FairTax Bill, shows that the average embedded taxes in every consumer product or service is about 22%. In some industries, such as leather goods, the embedded tax is smaller. In other industries, such as homebuilding and construction, the embedded tax is higher, but it averages out to somewhere between 22 and 23%. With the passage of The FairTax Bill, those embedded taxes disappear. These embedded taxes include the combined tax burdens of all entities involved in bringing those goods or services to market, and that includes you, the employee, and the taxes you incur as a result of your employment.

 

[Hotwire]

you're not getting "all" this money back, because once again, spending is not constant. there may be months where you spend beyond your prebate check on the covered essentials. get it?

Ok, look. If I pay, let's say $100 in taxes on essentials, and the government turns around and gives it back to me, why should I pay it in the first place?

 

[keith_v]

I think the prebate situation could just be handled by having items listed as tax exempt, so when you pay for them at the register, the tax is not added into the total.

I would be very interested in seeing this put into play in at least an isolated community somewhere. Of course the Fair Tax system incorporates a "pay for performance" philosophy. The problem in this country is that the people that want money for nothing, and while doing things like robbery and selling drugs worked out for them before, now if they want to use that money they made illegally, they'll still get taxed. I think Fair Tax sounds great, but it will have a whole of crime symapthizers protesting it.

 

[SuBe]

I'm always amazed at how many people are willing and resigned to continue feeding the uncontrollable insurrection that is big government. Some people are actually worried that under this system, the government won't get enough money. The government already gets far too much of our money, and happily mishandles and wastes it without regard to us, the taxpayers who earned it in the first place.

That is an excellent quote. Thank you, I feel the same, why keep a decieving, burdensome, and impossible to understand system?

 

[Hotwire]

holy ****. are you serious?

Um, yeah. See, until this whole "Fair Tax" discussion, I'd never heard of the embedded taxes. I know there are gas taxes in the price I pay per gallon, and I know there are cigarette taxes in the price per pack. But, I'd never heard of and embedded tax in everything I buy.

 

[SuBe]

But you have to factor in taxes. Going with a simple 10% witholding, she now takes home $185.00 (rounded). But, there's also Medicare Tax (approx $3.00) and SS Tax (approx $12.00). Now she's taking home $170. So, assuming the same cost of expenses, she now has $65 for everything else.

Now, for fun, let's take your expenses and multiply them by the Fair Tax rate of 23%, assuming these expenses do not go down in price. $105 * 1.23 = $129.15 in weekly expenses.

Here's a month's worth of money for her. Ready for this?

Before the FairTax, she has $65 * 4 = $260 a month

Now, with the FairTax, she will take home $824 a month (no taxes withheld, remember?). Less expenses of $517 (129.40 * 4 and rounded), she'll have $307 ($76 a week, which is more than she would have before the FairTax) left over.

BUT . . . that's not all! She gets a $262 prebate at the beginning of the month under the FairTax, which brings her monthly leftover money to $569. So, she now has $142 a week left over.

$142 - $101 = $31 more per week under the FairTax than under the system you laid out. Or, $77 more a week when income/SSN/MCare taxes are factored in (my example).

Check the math--the FairTax works.

First post!

EDIT: And, if she put the difference ($31) alone toward the Wii, she could buy it in 10 weeks, or approximately 2.5 months--roughly 2 months sooner than she could have, before.

Thank you very much, you seem to have a very good understanding of the Fairtax. I am honored that this is your first post, did you sign up for the Hype just because of the Fairtax? If so, I am humbled.

 

[Mysterio]

I think the prebate situation could just be handled by having items listed as tax exempt, so when you pay for them at the register, the tax is not added into the total.

i disagree. again, people can spend beyond the prebate on these items. say you get a $200 check to offset your estimated taxes for that month, but you wind up spending $250 that month instead. i don't think everyone is going to match the check dollar for dollar every month.

 

[keith_v]

I think that it would be interesting to see how much tax money is brought in areas where there are large amounts of illegal immigrants. The only way to avoid taxes under Fair Tax is only to buy necesities, and how many people will commit to that.

In the end, the government may just walk away from this with more money than they are now.

 

[Mysterio]

Um, yeah. See, until this whole "Fair Tax" discussion, I'd never heard of the embedded taxes. I know there are gas taxes in the price I pay per gallon, and I know there are cigarette taxes in the price per pack. But, I'd never heard of and embedded tax in everything I buy.

honest question then: how are you able to judge the FairTax then? how can you call dismissively call it BS when you don't even know what embedded taxes are?

 

[SuBe]

What I don't understand is how the Fairtax will help the poor. If you are already in the poverty level how is paying 30% sales tax helping you? Food stamps only pay for food. How will a single mother of 2 who makes $20000 a year benefit from a 30% increase on diapers or even a toy?

EDIT: Reading the post from above...nevermind for the moment!

There are a lot of detail when thinking about the Fairtax that dont come through if you dont understand every angle of it.

1. You receive 100% of your paycheck, minus State Income taxes (the Fairtax does not solve State Income Tax), unless you work in a without a State Income Tax like Florida. But Most States Income tax is based off of a formula of S=F*.0I, but if F=0, S=0. It is simple math, if the Federal Income equals zero, the State Income would equal zero, then they would move to a system of Sales Tax, which still, you only pay tax when you purchase goods, not when before you ever see your money.

2. A fair understandin of the Prebate. You would be untaxed of Food and Necessities up to the Poverty level. People making below that are Untaxed since they would be getting the Taxes back that they paid on Foog and Necessities. Not TVs, Cell Phones Etc. Only Food and Necessities.

3. It is a 23% Inclusive Tax, not a 30% Exclusive Tax. If a price tage said $1.00 you would pay $1.00. $.77 would go to the Retailer, $0.23 would go the the Government.

 

[Hotwire]

you're not getting "all" this money back, because once again, spending is not constant. there may be months where you spend beyond your prebate check on the covered essentials. get it?

But you didn't answer the question. Why bother with this system at all when it comes to essentials? If your only going to give back taxes paid on essentials, why charge it? And as for not getting "all" this money back, that would mean the government is pocketing the rest. And the simple fact they would charge taxes on the essentials and then give you your money back, leads me to believe that they are banking on you paying out more than your prebate check. So, the question still stands...
If you are getting reimbursed for the Fair Tax you pay on essentials, why bother charging it?

 

[keith_v]

i disagree. again, people can spend beyond the prebate on these items. say you get a $200 check to offset your estimated taxes for that month, but you wind up spending $250 that month instead. i don't think everyone is going to match the check dollar for dollar every month.

But having a system of predicting how much you'll spend on necesities for a month seems cumborsome and unnecesary. There should be products listed as "bare-minimum" that are tax exempt. These would be basic eggs, basic milk, the most simplest of housing or apartments, etc. Should Belgian dark chocolate be considered prebatable just because you can eat it? No, it's a luxury item. By not having Belgian chocolate (and other luxury items) marked as tax exempt, and necessary items as tax exempt, will iron out a lot of the problems that could occur when someone is think about whether or not the products they plan on buying that month are prebatable.

 

[SuBe]

So, under this system, the feds would send me a check for $525/month? What if I don't spend that much in sales tax for my essentials that month, or if I spend more than that? Who keeps track of this?

That is the Beauty of it, no one keeps track of it. They Govenment is out of your life. They do not need to know your personal business. They send you a check, basically for the average of taxes a family your size pays on food for a month. Thats it, no questions asked. You live your life knowing that you did your American duty paying your taxes when you bought something.

 

[SuBe]

Hmm, under this plan, she's actually making money from the prebate. It's giving her back about $65/week, yet under your example, she's only paying out about $24/week. Now the Fair Tax would have my vote. Of course the government can't really run by spending more than it's bringing in.

Yes, it would be possible under the Fairtax to be in a Negative Tax Burden. But it would be extremely rare. But Fair since you now have a choice when you pay taxes, not the the money is seized from you well before you ever see it.