Have you taken the plege? TheFairTaxPledge.com

There is no reasonable equity of distribution under the current INCOME tax system. What’s more, the TAX CODE has become a TINKERERS’ PARADISE for 53% of the lobbyists who game it in Washington DC. It’s a lucrative business, and the U.S. TAXPAYER pays for ALL of it in higher prices (a hidden tax which is incomprehensible to the average working person). Prices AFTER FairTax would look SIMILAR to prices BEFORE FairTax – NOT 30% HIGHER as opponents contend; competition would see to it.

So, the FairTax rate on new items would be 29.9% (on the new, reduced cost of items because business isn’t taxed under FairTax – thus lowering retail prices by 20% to 30%), or 23% of the “tax inclusive” price tag – this is the way INCOME TAX is figured (parts of the total dollar).

The effective tax rate percentages that would be paid are calculated by crediting the monthly “prebate” (rebate of tax on necessities, precalculated, and delivered monthly) against all likely spending that citizen families (sized 1-member, and greater) are likely to spend. (Dept. of HHS would serve as the basis upon which prebates would be calculated. A single person might receive ~$200/mo. A family of four might receive ~$500 – in addition to receiving their WHOLE paycheck.)

With regard to these effective percentages that different income groups would pay under the FairTax, Prof.’s Kotlikoff and Rapson (10/06) have said,

“…the FairTax imposes much lower average taxes on working-age households than does the current system. The FairTax broadens the tax base from what is now primarily a system of labor income taxation to a system that taxes, albeit indirectly, both labor income and existing wealth. By including existing wealth in the effective tax base, much of which is owned by rich and middle-class elderly households, the FairTax is able to tax labor income at a lower effective rate and, thereby, lower the average lifetime tax rates facing working-age Americans.

“Consider, as an example, a single household age 30 earning $50,000. The household’s average tax rate under the current system is 21.1 percent. It’s 13.5 percent under the FairTax. Since the FairTax would preserve the purchasing power of Social Security benefits and also provide a tax rebate, older low-income workers who will live primarily or exclusively on Social Security would be better off. As an example, the average remaining lifetime tax rate for an age 60 married couple with $20,000 of earnings falls from its current value of 7.2 percent to -11.0 percent under the FairTax. As another example, compare the current 24.0 percent remaining lifetime average tax rate of a married age 45 couple with $100,000 in earnings to the 14.7 percent rate that arises under the FairTax.”

Study: http://snipurl.com/kotcomparetaxrates

Further,

“…once one moves to generations postdating the baby boomers there are positive welfare gains for all income groups in each cohort. Under a 23 percent FairTax policy, the poorest members of the generation born in 1990 enjoy a 13.5 percent welfare gain. Their middle-class and rich contemporaries experience 5 and 2 percent welfare gains, respectively. The welfare gains are largest for future generations. Take the cohort born in 2030. The poorest members of this cohort enjoy a huge 26 percent improvement in their well-being. For middle class members of this birth group, there’s a 12 percent welfare gain. And for the richest members of the group, the gain is 5 percent.”

Study: http://snipurl.com/kotftmacromicro

Now, go tell a friend. (And, thanks David, back atcha.)

You’re right that some government body would still have to pay out the prebates etc. However it would be drastically reduced in size from the current IRS. There would no longer be the 60,000 pages of tax code to be enforced and 300 million individual returns to be tracked, each with a unique set of complicated deductions and exemptions. I don’t think that I need to explain it more than that. Suffice it to say that there will be significantly less work to do.

Rooming with other people would not be as difficult as you are trying to make it sound. This aspect would not be much different from the current system. Does one of your roommates currently claim “head of household” on their return, with each of you being his/her dependent? Why would this be any different? If each of you are single, independent people, then you would receive the prebate accordingly. You would each receive the prebate of a single person. Very simple.

“You really think the drug dealer with his ILLEGAL money is really going to buy LEGAL goods from a store?” Um, yeah. Where else will he get his food? At the secret, underground, grocery store for drug dealers only? Same with his Cadillac Escalade, he’ll buy it from a dealership. I don’t think criminals will be able to perpetually drive around in a stolen car without getting caught. Even if they wanted to, they wouldn’t be able to buy most things from some kind of under-the-radar merchant. It is inconceivable that there would be an underground economy vast enough to provide a criminal with everything he wishes to purchase. Most, if not all of there money will end up being taxed, as opposed to none of it now.

In regards to the mortgage deduction, you’re only looking at one side of it. Yes, it’s nice to get a deduction on your taxes each year, but you also pay property taxes each year. With the FAIR Tax, you will pay taxes once on a new home, when you purchase it. Currently you pay taxes on your home forever, even after your home is paid off, and even as your home’s value continues to gro. On top of that, only new homes will be subject to the tax. You will not have to pay it on previously built homes. According to their studies (again, you should read the book) the cost of new homes will go down, despite the tax. This is because the cost of doing business for the mortgage company, contractors, etc. will go down so much without having to pay tax attorneys, accountants, etc., to interpret and manipulate our ridiculous tax code.

“Why in my right mind would I want to be a teacher, police officer, fireman, or any type of civil servant if I have to pay the same amount in taxes as someone in middle management?” Life is about tradeoffs, everybody has to make a decision about the proper balance between money and happiness in their career. This has nothing to do with taxes. But do you really think that people choose those jobs because of the tax benefits, and that if we change the tax code, fewer people will be willing to take those jobs? You’re really stretching now. Nobody is going to throw their hands in the air and switch occupations because they suddenly don’t have the option of skipping out on Social Security. There wil continue to be people who will take those jobs, even with unions restricting entry as they do now.

@Ian, well said.

The problem with the “inept” government (also with some readers of this blog) is that each individual thinks that their idea is the only way for the country to proceed and no one wants to actually discuss pros and cons and come to a NEW MIDDLE POSITION that both sides can see SOME merit to.

While taxing income is easy, it makes no sense because money represents potential. But, when you tax consumption, you are taxing the use of money. The more money you use, the more tax you pay. So, everyone pays the same tax if they spend the same amount money. They have control of their taxation.

You can counter that while all people are obligated to use a certain amount of money to survive, poor people don’t have the option of spending more money to offset any tax they pay. For that, I believe, the Fair Tax advocates giving all taxpayers a fixed refund so that it erases the tax on the poorest. The effect is to raise the consumption tax rate as a percentage of money spent.

You can’t get any fairer than that!

Even with the foregoing notwithstanding, do FairTax naysayers really believe:

• Workers love having their pay confiscated, hourly, through gov’t withholding and don’t mind getting their money back by involuntary servitude – to the tune of 50 hours/year (on average) – preparing an annual tax return?

• That certifying the number of persons in your family (annually, and, ancillarily, upon change in household) is an abrogation of our freedom – more intrusive and complex than filing a tax return every year subject to threats and intimidation by theIRS.

• It’s better to have theIRS fishing through citizens’ income transactions (complete with audits, interest, penalties, and threats against individuals, families, businesses as well as confiscation of their homes, property, and bank accounts) rather than – Gawd forbid – issuing a gov’t check to an individual (while pretending that Social Security payments disbursement logistics really can’t work for “prebates”)?

• That an monthly advance tax rebate is the same thing as “being on the dole” ? (Only lobbyists, special interests, and business deserve “handouts” ? – the politician gets a payoff from a lobbyist, the lobbyist gets a payoff from its client, and the citizen gets higher taxes and/or prices that pay for it all.)

• “Hidden taxes” in higher prices are fine because they’re not “taxes,” per se? (Hey, forget that families are really paying business’s costs for complying with a business income tax code – staff, consultants, submittals, etc.)

• It’s far better to have a gargantuan tax collection “service” in Washington, than to have 50 decentralized, smaller, leaner state collection agencies collecting taxes from fewer sources?

• That the work by notable economists (paid tens of millions of $’s by Americans for Fair Taxation) doesn’t carry weight because it was paid for by private funds instead of some gov’t / quasi-gov’t enterprise?

• That FairTax’s backing by many economists (**) doesn’t carry any weight because (the Brookings’) Wm Gale’s testimony before the President’s Commission on Tax Reform is – somehow – above all that?!

(NOTE: The Commission/Gale made up their own “consumption tax” requirements, as if that constituted a legitimate rebuke of the FairTax plan. Dr. Kotlikoff has requested – but never received – Gale’s technical “modus operandi” which would definitively explain just how Gale’s conclusions can be reconciled with Kotlikoff’s well-documented technical work (***).

(*) http://snipurl.com/meltdowninprogress (If what Prof. Kotlikoff is saying is true, timely replacement of the income tax with the FairTax consumption tax MUST HAPPEN SOON.)

(**) http://snipurl.com/econsopenletter (Lists every tax that FairTax will eliminate, together with the power they represent to pol’s and lobbyists.)

(***) http://snipurl.com/taxpanelrebutted (No fair equating the Tax Panel’s idea of a consumption tax with the FairTax plan.)

America’s working families are paid because the companies they work for sell goods and services. Let’s pay for government the way America’s families are paid – when something is sold. Let us work, together, to end the enslavement of the Tax Code and to restore Liberty to America’s working families: http://snipr.com/scrapthecode