Americans for Fair Taxation

[OneBlueSky]

this proposal proceeds from the premise that the current Federal income tax system is broken, and that patching up the existing code is pointless . . . it's time for a fresh approach, the FairTax . . .

http://www.fairtax.org/

Simply put, the FairTax replaces the way we're currently taxed - based on our annual income - with a tax on goods and services. The FairTax is a voluntary “consumption" tax: the more you buy, the more you pay in taxes, the less you buy, the less you pay in taxes.
It's simple.

Everyone pays their fair share of taxes, and with the FairTax rebate, spending up to the poverty level is tax free. The Federal government is fully funded, including Social Security and Medicare, and you don't need an expert to determine your Federal taxes. It's simple.

[Killarney]

1. The rich will find a way around it

I know people now that whenever they buy expensive jewelry, they never have to pay the state sales tax because they know the jeweler (from buying so much from him) and they do it under the table.

That's what will happen this this so called fairtax. It will be all shady deals under the table. The poor and middle class will be paying the sales tax when they buy a car, but the rich guy who's buying an $80K Lexus SUV will pay $0 because he "knows a guy".

[AP]

16. They don't need to search. Consumption tax IS a way around getting taxed

for the rich.

That's where its proponents get the money for a web site to propagandize for it.

[BlueEyedSon]

2. Regressive. Tax. Sucks.

[bemildred]

3. Ditto that. nt

[NewHampshireDem]

5. Exactly ...

any consumption tax is regressive in nature, as those who are at the bottom of the ladder spend a higher percentage of their income on consumables, rather than saving or investing.

You would also lose out on some of the great things in our tax code, such as deductions for health insurance, mortgage and student loan interest, and child care.

[zeemike]

4. I think it is obviously fair

Too most people and I would love to see it made into law.
But good luck getting anyone to talk about this much less actually submit a bill to congress. The present system is very profitable for some.

[baldguy]

9. How is a regressive tax fair?

Taxes are used to pay for gov't services. A tax on consumption forces the poor to pay a larger percentage of the money they have to the gov't for those services.

Do the poor use more gov't services that everyone else? Do our aircraft carriers protect only the blighted inner cities? Is the wear & tear on our highways greater when a poor person travels on them? Does the Federal Reserve system give better interest rates to banks that invest exclusively to people with low incomes?

The very idea is absurd.

The fact is that, while theoretically gov't exists to serve all the people - those who benefit from those services are dis proportionally wealthy. Enron gets to set "our" national energy policy. We pay for often redundant sports stadiums for "our" teams. We give tax breaks to major corporations to offer the privilege of employing our neighbors at the lowest prevailing wage and polluting out air and water for generations.

[AP]

15. Exactly.

[zeemike]

25. I don’t see the regression.

The question is do the poor consume more than the rich?
I think not if there income is 20k a year they could not afford to by a 50k SUV or a million dollar summerhouse, or a 100-dollar bottle of wine.
I do though support exempting basic food from this tax that would help the poor more than anything.

[AP]

26. The poor spend a higher % of income on consumption (that's why they're...

...poor). And the rich are rich because they have more left over after they spend what they spend.

If you spend 10% of what you make every year, and there's, say, a 17.5% tax on consumer goods, your effective tax rate is less than 2%.

Say you spend 110% of what you make every year, your effective tax rate is closer to 20%.

How is it fair for a rich person to have an effective tax burden of 2% and a poor person to have an effective tax burden of 20%?

[zeemike]

29. But you are counting money that is not spent

Yes a rich person could spend the same as a poor person each year and save money, but how many of them do that? They will by the luxury item and they will pay. And if they don’t what happens to the money? They save it in the bank and reduce interest rates. But at some point it has to be spent ot it has no value.

[AP]

31. But even the things rich people buy become assets that still keep their

wealth high.

You buy a million dollar boat, it's still worth 800K the next year. Sometimes, its value increases.

Poor people buy things that depreciate faster, like to 0 immediately. Food, clothes, rent, crappy furniture, gas, diapers, etc. Those aren't assets. That's just throwing money away to live with a modicum of decency.

And rich people, with a consumption tax, don't just stick their money in savings account and not get taxed. They buy collectibles, land, stocks and bonds, and with the consumption tax don't get taxed on the transaction or the money they make when the value goes up and they sell the item, and if they buy things that do get taxed by consumption tax, if the item doesn't actually increase in value, it usually retains its value better than the equivalent item a poor person would buy (eg, a Timex vs a Rolex, or a Rolls Royce vs a Hyundai, or an anitque chair, desk and table vs an Ikea chair, desk and table).

That's why rich people like the consumption tax.

Get it?

[NewHampshireDem]

6. BTW ...

Check out their links page ... it pretty much says it all:

http://www.fairtax.org/links.asp?PageID=27

[ayeshahaqqiqa]

7. I like it!

My husband has been advocating a variation of this for years. In his scheme, food and drugs wouldn't be taxed; neither would used goods. Everything else would be, and no rebate.

True, there would be some under the table deals, but it would be hard to purchase everything you buy under the table.

[workforpower]

10. Next time you buy ,

Something big ,like a car consider the tax. Sticker price-20,000,tax will be 10,000 plus sales tax plus interest. When the piece of junk dies you still owe on it.

[AP]

14. If you didn't tax used goods, then you'd be allowing people who

buy and sell collectibles huge amounts of tax free income.

If you sell something for a profit (ESPECIALLY IF THAT'S YOUR BUSINESS, AND THAT'S HOW YOU MAKE YOUR MONEY), that income should be taxed just like anyone alse who gets taxed on earned income, or pays business tax.

[bemildred]

8. A counter proposal:

1.) Eliminate FICA and Medicare tax and pay SSI from general funds.
That's where the money goes anyway.

2.) Restore a highly progressive income tax with brackets going
to 90% at the top end and no taxation up to twice the poverty rate.

3.) Restore taxation on corporations as in #2.

4.) Remove all that baroque shrubbery and giveaways in the tax code,
most of which is the result of corrupt bribery, so all players in
the economic arena are treated the same ("fairly"). This would
include removal of the variuous incentives to outsourcing,
offshoring, and so on. Companies that do business in the American
market can pay American taxes on the proceeds and hire American
workers.

5.) Fund all elections from public money and forbid the use of
private money in elections. The currency of elections should be
votes.

[AP]

13. If you had an (ACTUAL) fair tax system, you wouldn't need

a 90% top rate on income. Or at least you'd need one on a level of income that is so high that it only reaches one or two people. But that's actually what you want, I guess.

You'd want to take some of that wealth that the top 1 or 2 people are making at really high levels, and then use that money to create a world with more and more people who could reach that level and other high levels, and then when more people are making that leve of wealth, you lower the tax rates on that level of income (and push the 90% rate to an even higher bracket).

That's sort of what the US did during the 50s and 60s.

[bemildred]

56. Exactly.

I want to avoid occurrences of Bill Gates and
Michael Eisner, nobody "earns" that kind of money,
and it has a number of pernicious effects on our
theoretically egalitarian society.

[AP]

11. The richer you are, the more you like a consumption tax.

Why are rich people rich? Because they earn way more than they save.

Psst. 20% of Americans have a net worth of -$10,000. That's NEGATIVE TEN THOUSAND DOLLARS. In other words, MANY Americans are CONSUMING MORE THAN THEY EARN.

So, for those Americans, a consumption tax is in effective tax rate of ... well... it's a tax on money you don't even have. Fore the rest of America, the richer you are (the less you consume as a percentage of your total income) the lower your effective tax rate is.

Money changes hands a lot of different ways -- interest income, dividends, inheritance, earned income, consumption, purchase of services. The tax code is its the fairest when it makes sure that money is taxed a little every where it changes hands, and when it burdens higher and higher levels of wealth with slightly higher levels of taxation.

It's NOT fair when it lets a lot of ways wealth changes hands tax free, and makes sure that rich people are able to exploit those avenues of wealth transfer, while poorer people cannot, and when it creates high effective tax rates for the poor and low effective tax rates for the wealthy.

[thinkingwoman]

129. I'm poor but I like it

I lived in CT for a year when there was no income tax but a higher sales tax than I had before I moved there.

Food, of course, was exempt. But so were basic goods that everyone needs like low end clothing.

In fact, CT considered any article of clothing priced under $50 to be low end! That means no tax on any of them. If you spent $200 on 4 sweaters you paid NO TAX.

I happen to think that is excessive, especially in the midwest. Here I'd say tax clothing above $30 per.

But the point is that claiming that only the rich want a consumption tax to replace income tax is wrong. It's a knee jerk response. When I was much poorer than I am now, I STILL would have been better off with consumption tax.

[Fla_Democrat]

12. Never gonna happen

Too much power in using the tax code for political leverage. Why should the politicians give up the club used to bash their opponents? :shrug:

[AP]

17. The rich got rid of the inheritance tax. They could get this too if they..

...really worked for it.

The reason it wouldn't pass is that it would lower consumption dramatically and there are too many companies which sell things to middle and working class people who would protest, which is good.

[kiahzero]

19. Me personally, I think the best tax cut would be

a sales tax cut. Think about if Bush had taken the lost money from the federal tax cuts, and instead handed it to the states with the mandate that they cut their sales tax.

Consumption would spike, especially if were a "limited time" kind of thing.

[AP]

20. I agree with that. Cut sales tax. That would boost consumption and/or

savings among the peopel who disproportionately bear the burden of sales tax -- people who spend most of their income (ie, the middle and working class and the poor).

States would be forced to make up for the shortfall, but the message would be: get it from a progressive source.

[kiahzero]

21. Well, my idea was

If Bush couldn't resist tax cuts, he could have left federal taxes as they were, and given that money to the states to eliminate their sales taxes.

Then again, I'm in Delaware right now, so it wouldn't change anything for me personally. :D

[kiahzero]

18. Extremely regressive

Sales taxes are the worst kind of taxes - they tax the poor at a higher rate than the rich.

[zeemike]

27. I just don’t see it

If I spend 10k a year as a poor person and the tax is 10% I pay 1000 in taxes
If you as a rich person spend 100,000 a year the tax would be 10,000.

[kiahzero]

28. The cost of living is a much higher percent for the poor than the rich

If you're living from paycheck to paycheck, you're paying taxes on all your income. If you're only spending the same amount of money, but are making much much more, you'll be paying a smaller percentage of your income in taxes.

[zeemike]

30. If the rich live like the poor

They can save money…Sounds like a good plan to me.

[AP]

32. Buying a Modigliani or a Rolex isn't living like the poor.

They pay 17.5% on a "consumer good" which holds its value or increases in value, they're still paying a lower percentage of their income in taxes when they end up MAKING MONEY off their consumer good purchases.

Or how 'bout, they buy a jet, pay 17.5%, but then make money by renting it out to other people. They make more than they paid in taxes, they get the income tax free, and again are paying a lower tax burden.

People have this image of rich people spending all their money on depreciating consumer goods, but that simply isn't the case.

Rich people are rich because they don't have to do that. You buy a Ferrari because you like to consume, sure, but also becaue you know it's also an asset that retains its value and might actually be worth more in the future.

That's what being rich is all about.

How many appreciating assets do poor people buy when they 'consume.' For 99.9% the answer is NOTHING. All their outflows are lost capital.

[kiahzero]

33. You're missing the point

Person A makes 10 times the amount as Person B, who makes x dollars a year.

Person A and B both spend y dollars in that year on taxable purchases.

A's tax burden = (y*rate)/(10*x)
B's tax burden = (y*rate)/x, or 10 times as much.

[AP]

35. Exactly, and, furthermore, there's a qualitative difference between the...

things rich people consume and the things poor people consume.

Rich people buy ordinary consumer goods (watches, furniture, cars, etc) which retain a greater value than the things poor people buy. Even an ordinary consumer good is a potential investment. So poor people pay tax on consumer goods which is never recovered.

If a rich person buys something that ends up increasing in value by 20%, they've made their money back. If it only holds its value, the only thing they lost in the transaction was the tax on it. If they the thing drops in value by only 50%, the rich person is still doing better than the person who paid consumption tax on something they used until it broke, wore out, or had no further value.

[zeemike]

38. No, I see the math and how it is done

But that is not the whole story. What we are talking about is the consumption of energy and consumables.
A rich man living in a 10,000 Sqft house pays thousands of dollars a month to heat, air condition and other utilities to be able to live there. How much does it cost to fill a swimming pool with water and maintain it? How about yard care and landscaping?
If he wanted to save all that money he could move in to a 1200 Sqft house and just think of the good he would do in terms of consumption of energy?
If he makes money on collectables then the value of it goes up to the next rich person that buys it and he pays the taxes.
A rich mans boat consumes thousands of gallons of oil and he pays taxes on it, the same is true for his personal Jet.
The rich will eat caviar and drink high priced wine, and eat in expensive restaurants, all of that far above the cost of a regular meal for the poor.
I say if it encourages them to spend less and live more frugally it can only be good for the environment.

[wuushew]

40. How are things in New Mexico working for you?

FAST FACTS

Gross state tax revenues (rank): $4 billion (35)

State tax revenues per capita (rank): $2,188 (13)

State tax revenues as % of personal income (rank): 9.9% (2)

State and local taxes as % of personal income (rank): 12.7% (5)

Standout characteristics: One of the most centrally funded states; top state in ratio of return from federal government ($2.08 for every $1 put in); one of most successful states in reducing disparities in education funding.





40% of general revenue from sales tax?!


http://governing.com/gpp/2003/gp3nm.htm

[AP]

41. A person 100,000 times wealthier than another would be hard pressed to

consume 100,000 times more of the things that depreciate to zero or near zero once they're consumed (ie, non-investments/assets).

And you're also relying on this mythologized version of wealth.

About two years ago there was an article in some magazine profiling millionaires and 50 millionaires and 100 millionaires.

Guess what. They drive Accords, many clip coupons, and do all the other non-profligate things you'd expect of people who tend towards increasing wealth rather than decreasing wealth.

I'm not sure I want to base a tax code on a myth.

[zeemike]

44. Just look at where they live

Do you have any idea what it cost to build and maintain a 10,000Sqft house? And this is small by most rich people standards. Many of them have 50,000Sqft homes and several of them
A 1200 Sqft house can be air conditioned with 5 tons of AC But 10,000Sqft would need more than 50 tons. Especially if there large picture windows which are favored by the rich.
I don’t have the figures but I would bet that they consume far more of the energy than does the average person.

[wuushew]

45. The Millionaire Next Door

Thomas J. Stanley, former professor of marketing at Georgia State University, shows that the critics of capitalism are dead wrong. Prof. Stanley, you may recall, is the author of the huge best seller, The Millionaire Next Door, which I reviewed last May in Forecasts & Strategies. Now he has a new book out, and it's a blockbuster. According to The Millionaire Mind, (available from www.amazon.com or Laissez Faire Books www.lfb.org) millionaires are model citizens. Here are the results of his survey of over 1,000 super-millionaires (people who earn $1,000,000 a year or more):

They live far below their means, and have little or no debt. Most pay off their credit cards every month; 40% have no home mortgage at all.
Millionaires are frugal; they prepare shopping lists, resole their shoes, and save a lot of money; but they are not misers; they live balanced lives.

97% are homeowners; they tend to live in fine homes in older neighborhoods. (Only 27% have ever built their "dreamhome.")
92% are married; only 2% are currently divorced. Millionaire couples have less than one-third the divorce rate of non-millionaire couples. The typical couple in the millionaire group has been married for 28 years, and has three children. Nearly 50% of the wives of the super-rich do not work outside the home.

Most are one-generation millionaires who became wealthy as business owners or executives; most did not inherit their wealth.
Almost all are well educated; 90% are college graduates, and 52% hold advanced degrees; however, few graduated top of their class -- most were "B" students. They learned two lessons from college: discipline and tenacity.

Most live balanced lives; they are not workaholics; 93% listed socialiazing with family members as their #1 activity; 45% play golf. (Stanley didn't survey whether they were avid book readers -- too bad.)

52% attend church at least once a month; 37% consider themselves very religious.
They share five basic ingredients to success: integrity, discipline, social skills, a supportive spouse, and hard work.
They contribute heavily to charity, church and community activities (64%).

Their #1 worry: taxes! Their average annual federal tax bill: $300,000. The top 1/10 of 1% of U.S. income earners pays 14.7% of all income taxes collected!
"Not one millionaire had anything nice to say about gambling." Okay, but his survey also showed that 33% played the lottery at least once during the year!


http://www.mskousen.com/Books/Articles/richbetter.html

[Yupster]

65. As a stockbroker,

these are the people I deal with every day. Mostly not the super-rich, just the 1-5 million rich. Most of them you'd never know were rich. Most owned small businesses or still do. Few grew up rich.

[AP]

69. But but but...we need them buying yachts and Ferraris so that the poor

don't end up carrying the whole income tax burden.

[AP]

54. Do you know how much more they make when they sell those homes?

Do you know how much they can do with the money they make if they chose to take a loan against the value of the home?

It's an asset that helps them increase their wealth.

It's not a money pit, like, oh, say, renting is.

[NuttyFluffers]

109. *sigh* do they buy the same home over every year?

do they pay rent on it?

this is easy math, they are still one person and cannot consume equivalent to their greater wealth.

do rich people inhale 10,000 times more meals than you do?

do rich people drive 10,000 times more miles in a year than you do?

do rich people go through 10,000 times more clothing than you do?

do rich people routinely purchase 10,000 times more furniture than you do?

do they smoke 10,000 times more than you do?

do they consume 10,000 times more entertainment than you do?

do they flood their house with 10,000 times more cosmetics and toiletries than you do?

sure they buy expensive luxury goods. but people often forget expensive goods *last*. it's usually one purchase and you're good to go for nigh generations.

sure they buy high quality food, entertainment, necessities, staples, etc. but you forget the factor of numbers. eventually there's a cap on how expensive a product will go, eventually there's a limit how much one person can use. then numbers come in and totally swamps this equation. there comes a point where it's too hard to spend all that money away just by the day to day living of life. that's why they can play in the major games of politics and money - there's nothing left to do, there is no more real want or need.

it sounds good, but i've been to that website before and i then did more research. i've come to be very wary of that site and another famous site talking taxes. they sound like they are for the taxpayer, but often if you dig deeper, you find these are shills for the elite's theoretical wet dreams.

be more diligent in digesting this 'panacea,' the temptingly beautiful fruit is not always sweet to the taste.

[AP]

110. Furthermore, definition of rich is that you're getting more than you spend

and the definition of poor is that you're spending what you make (or even more than you make).

Just look at Muriels numbers below for the VAT in the UK.

With a 17.5% sales tax, the top quintile has an effective tax rate that's less than half that of the bottom quintile. It's because the bottom quintile is spending so much more of their money on taxed items.

[AP]

42. Furthermore, since when is this about the environment?

Have a tax code which lowers their effective tax rate from 20% to 2% and they won't be buying LESS oil for their yachts. They'll be buying more yachts. They'll be buying more homes with swimming pools. They'll be buying bigger homes.

If you're worried about the environment, give working class people a tax credit to buy hybrid vehicles, and poor federal money (from progressive income tax) into universities so they can do research on alternative energy sources and electric engines.

[zeemike]

46. But if they buy those tings

They will no longer be paying 2%tax now will they?
Using your figures of 17% if they by a million dollar house they would pay 170,000 in tax on that house and the same for the energy it took to maintain it. Every thousand dollars of utilities would cost them 170 in taxes.

[AP]

53. 20% of Americans are worth -10K

Let's say, for the sake of argument, they have $1 a year in net income (I'm giving them 10,001 bucks).

The people who can afford all that oil for their yachts -- let's say they have 2,000,000 in income every year.

They have 2,000,000 times the income of people who would have a 20% effective tax rate.

There is no way you can get those people to spend so much that they'd have an effective tax rate that fairly matched the people who have the 20% rate.

[zeemike]

57. You have to talk apples to apples.

Money not spent has no value until it is spent.
If Bill Gates lives on 20k a year what good does the billions of dollars do him? It sits in investments and grows for sure but until it is distributed in some way or another it is just paper.
Look, I am a radical and I want to see radical change that not only works but is fair and improves our society. I am simply saying that you should not blow this idea off until you see how it works.
Make a model and figure everything in it and see who would be paying the taxes and if it is fair or not. It is not that hard, the Gross national product is the total of all goods sold and so the amount of money needed to run the government divided into the GNP would be the percentage needed.
I would exempt all basic foodstuff and medicines as well as the first 100k for a first home. Foreign imports would not be a problem because the tax would be due when it entered the states.
We should have this dialog and have experts give us the figures before we just blow it off as a crazy idea.
BTW I first saw this idea 40 years ago in Readers Digest.It was called the Value Added Tax then

[AP]

64. You act like this idea isn't being realized already. States are already...

...shifting tax burdens through sales taxes, and it's easy to see where this is leading.

It's not radical to shift the tax burden down the income ladder.

And other countries have a VAT, and it's obvious what it does there: shifts the tax burden to people who spend most of their money -- the poor and the middle class.

[JanMichael]

22. I'm sure Woody Guthrie would be proud.

Since he was so into not taxing Income and Wealth...

[OneTwentyoNine]

23. Works great for Limbaugh,Boortz etc...

Lets see...they go from paying 33-35% down to 22-23%. When you make 25 million per year like Pigboy thats one HELL of a tax cut. Meanwhile someone trying to pull down $12,000 per year gets to pay 22% on EVERY purchase they make.

Oh I know you can cut back and save money. Sure,just stop eating,buying clothes,having your junk car worked on,buying tires. All of those items repairs etc.. will cost you almost 400% more in sales tax here in Kansas. If you only made about 12K per year your income tax would be very low,almost nil if you have kids and the sales tax in Kansas would be a little over 5%.

Of course the BS the rich will use to try and shove this through is no sales tax on food and maybe some other necessities. Yeah right...for a year or so and then the tax will go up another percent or two when the Government realizes this 22% isn't enough to run the country on.

It might sound good on the surface but its a scam to increase taxes on the poor and middle class and take less money from Rush's $25,000,000 per year income. Yeah thats fair....

[RUMMYisFROSTED]

24. Horseshit.

[Pithlet]

34. That about sums it up for me, too.

Every once in awhile this regressive tax scheme rears its ugly head around here. It's not that hard to get past the fairness veneer and see it for what it really is; just another way for the rich to get away with not paying their fair share, and socking it to the poor. It's just dressed up in a pretty little package that makes it seem fair to those who either don't want to think about it too much, or can't understand proportions.

[AP]

36. And, seriously, this must be the tenth time I've seen someone link to this

website making this same argument, and it has been debunked again, just as it was the 9 previous times.

[RUMMYisFROSTED]

37. When an organization out of Houston, TX starts telling me

that they have a "fair" answer to taxes....


It's a Ponzi scheme.

[Andy_Stephenson]

47. AMEN!

n/t

[zeemike]

39. I am not rich

And am far from a conservative, and I can see the value in this.
I think you should give it a chance and think about it, because the real problem we have in this country is rampant consumption, and the poor are not the ones that are doing it.
I would bet that if you figured it up the rich consume far more energy in there life style than do the poor, and there is nothing to discourage them. In fact if a rich businessman buys a Hummer this year he gets a tax break.

[AP]

43. Uhm, the REAL problem in America is that we have a shift in wealth

straight to the top, and that many Americans have to spend 110% of their annual income just to consume what they need to live with a modicum of dignity (and a big chunk of what they earn is going to pay taxes so that rich people don't have to).

The plan you see value in will further compound that problem.

[zeemike]

48. Under the present system

Only the little people pay taxes. Remember who said that?
And it is true because they are not taxed on consumption but on income, which is a fungible item on the tax form with plenty of shelters to hide it.

[AP]

50. They ARE taxed on consumption. Sales taxes and users fees...

...are becoming more and more popular both on a federal level and on a state and local level. And it's no coincidence that governments are turning to consumption and fee-based tax collecting as income tax becomes less and less progressive.

It's all part of the same scam to give poor and middle income people greater tax burdens than rich people.

[muriel_volestrangler]

49. The rich have many more opportunities to avoid sales taxes

than the poor. If you're rich, you can put off having your swimming pool built for a couple of years, in the hope that the tax system will change, or buy your second home in the Caribbean rather than the USA (and then spend your money there, including a foreign airline to fly you there who don't charge a sales tax). If you're poor, you pretty much have to buy what you already do. Those in the middle get some choice, but nowhere near as much as the rich.

You can exempt some items (like groceries), but what about, say cars? Spending on a car (both capital outlay and running it) is a major part of poorer people's expenditure. But richer people spend a smaller proportion of their income on a car. Setting one tax rate for all 'non-essential' spending means it has to be pretty high - and the poor will suffer, compared to today.

If you insist on a sales tax, it has to be progressive - so that spending $100,000 would get you taxed say $40,000, while $20,000 gets you taxed $4. But a flat rate of sales tax makes any additional spending by those just above the allowance very expensive for them. So you need, like income taxes, a gradual increase in rates. But while this is relatively easy to arrange for income (most people have a small number of sources of income), totaling up the complete expenditure of everyone over a year would be a logistical nightmare.

The site shown in the original post is very short on how they work out the rate of sales tax they claim would be needed. In particular, I think they have not taken into account the rebate they propose to send to everyone in the country - which would increase the tax rate by almost half again, I reckon. If you can show some figures on how the flat sales tax rate is derived, that would be a starting point for discussion and comparison with the present system. I believe you'll be shocked how big a sales tax would really have to be, and how much a shock to the whole economy it would be.

[Solon]

52. You were suckered.

Think of it this way, let's say someone making 80,000 dollars a year decides to buy a Hummer, and pays the tax on it, let's say at 2%, that would make it around 1,500 dollars. Hummers go for what, somewhere around 25 to 30 grand. So that person paid almost HALF their yearly income on ONE purchase. Now same senario but the person in question makes 10 mil a year. For that one purchase it was a drop in the bucket for him, and also you forget about the resources of the rich compared to the middle class or poor. What is to stop a millionare from buying products direct from overseas, at reduced costs, and then shipping them here? That is why they push for this, and they are always happy to point out that food and drugs are not taxed, because then they REALLY get a discount.

How about this senario, let's say there is a middle class family that makes somewhere around 5,000 dollars a month. Now you add up all the utilities and let's say it is around 500-600 dollars a month. That is ten percent of their income a month, not including clothes, food, or extras. Now it is true that the rich consume more resources for their homes, on average. So I'll go by my Uncle Mel's income and costs of living. He makes around 50 thousand dollars a month, and his home costs 2,000 dollars a month for all utilities(1.5 million dollar mansion). Seems like a lot doesn't it, however he pays less than half as much in utilities proportionalty than my family does. Is that fair? BTW: I have talked to him about this idea in my libertarian days, he laughed, "Easiest way to ruin small business." is how he put it. He mentioned that it would lead to economic collapse quite quickly if ever implemented.

[AP]

55. Repeptition for emphasis. Forget the Hummer. The poorest 1/5th

of Americans are going into debt year over year. They're spending 10K more than they have. Once they reach that negative spending territory in, say for the sake of argument, September, then every dollar they spend on sales tax is a tax on money they don't even have.

And it's profit for the credit card company, because it means you have to finance your spending -- say there were no sales tax, you'd have another couple of weeks every year before you were going into debt to buy things you need -- but, actually, you're really going into debt every pay check, since most people get their income and spend their money at weekly or biweekly or monthly increments, so that you're already in debt by January 7th and you're financing your debt from the get go.

[SharonAnn]

51. Nope, I think that screws the poor and middle-class. They spend

nearly all they have just to live. The rich can invest some of the money/income instaed of spending it and it wouldn't be taxed.

This type of tax is another way to prefer capital and to protect it. It allows the accumulation of wealth while everybody else pays for the government system that protects the wealth.

Be very suspicious of anybody with "tax reform". They're usually trying to protect their type of income/wealth.

[zeemike]

58. Every time we have had a Repug president

We have had tax reform, and it most certainly helped the wealthy. Particularly when Reagan was in.
This is not reform but restructuring.

[wuushew]

59. This is the same crap that Republicans were pushing in the mid 1990's

Also your site referrences H.R. 25 a.k.a "The Fair Tax Act of 2003". In that bill it is proposed to eliminate ALL inheritence and gift taxes not just estate taxes. Now I don't know about you but I am of the opinion that high wealth inequities are inheriently bad for society. Countries such as Western Europe have low wealth inequities while many countries in South America have the opposite situation. Your Fairtax.org asserts that intergenerational wealth is consummed completley by the heirs. I must say that this is naive and not born out in American history.

Even during the prosperous Clinton years the wealth gap increased faster than the overall rate of economic growth, putting to rest the tired myth that a rising tide lifting all boats. If there was ever a "golden" time ecomomicly in the United States it would have been 1968 when wealth inequity was at its lowest historical levels, Nixon had not yet defunded much of LBJ's Great Society and strong unionmembership allowed a fair wage for a day's work. Mind you this was all against a backdrop of by our current standards extremely progressive taxation.

If you wish to simplify the tax code why not start with eliminating corporate welfare. Even progressive schemes can be simplified. The advent of computers long ago eliminated any need for tax brackets. Keep in mind also that the current system for all its flaws incorporates many social engineering aspects like child, education and disability credits. How does a flat tax address these aspects?

[zeemike]

61. I would like to answer that.

Under a Value Added Tax corporations would pay in the same way that you and I would pay, as we bought goods and services. The tax would be a part of the price. It would be collected at the point of sale.
Example; US Steel would by taconite from Minnesota Taconite and MT would add the tax to the sale price. When US Steel sold the steel to Ford, ford would pay the tax, When Ford sold to us we would pay the tax. As value is added tax is charged to that value. Now social programs are even easier to add
No tax at all on foodstuff. And you could be as specific as you wanted there. Beer and wine could be taxed, so could caviar or anything not considered healthful like Twinkies and candy. The first 100k of a first home would help the poor to have a home. The same flexibility you see in the present code would be so much easier in a VAT tax.
Now this does not address the problem of concentration of wealth that is a separate problem and needs a separate solution

It is funny, but when I herd this for the first time about 40 years ago it was considered a crazy liberal and maybe even socialist idea. Now the neo cons have modified it and clamed it as there own.
But the flat tax is just that, a flat percentage of everyone’s income. A value added tax is what I am talking about and what is fair.

[Pithlet]

62. There is no way a system like this could be anything but

regressive, unless everyone had to carry cards identifying what their household income is, to determine how much added tax they should pay on goods, and I don't see how you could implement such a system honestly. There is nothing fair about a tax that disproportionately affects those of us who are not rich. You just cannot get around the fact that such a tax is going to affect someone like me, who is far from poor but not a multi-millionaire, a hell of a lot more than someone who makes millions a year and already doesn't pay nearly as much in taxes proportionately as I do. If it's going to hurt me, imagine what it is going to do for people lower middle class and below. Those who live paycheck to paycheck would afford to buy even less than before, while the ultra-rich buying power remains pretty much the same. How on earth is that more fair?

There is nothing remotely liberal or socialist about such a tax.

[zeemike]

70. You still don’t understand how this works

If the VAT tax is set at 17% then US steel pays 17 dollars on every hundred dollars of Taconite they buy, and Ford pays 17 dollars on every hundred dollars of steel they buy and you pay 17 dollars on every 100 dollars of Ford you buy. There is no sliding scale.
The social adjustments come by exempting such things as food. It is very likely that the poorest of people would pay no tax at all. And the rich could also pay no tax at all if they were willing to live at the same level as the poor.
How would it affect you and me? Right now we pay 25% at least on our income and another 13% FCIA plus state tax and sales tax and tax that we don’t even know about. My guess is that we would pay less than now, and by avoiding consumption of Twinkies and candy and beer we could avoid paying even less. And we could by used cars to avoid any value added tax. (There is no value added to a used car so there would be no tax.)
Could you afford to buy more if you had the 40 or 50 percent you now pay in taxes back?

[kcr]

71. Your post is full of inaccuracies

no one pays 40-50% of their income in taxes. This is a commen right wing lie -- but they have never been able to produce even a hypothetical person who would pay this amount

Also, the idea that the poor would pay not tax is just flat wrong. Do the poor not need to buy fuel to go to work? Do they not spend money on clothes? On books? on entertainment?

This is a regressive tax aimed soley at labor, and meant to lagely exempt capital.

[AP]

75. If you tax good every time value is added (ie, not just on the retail ...

...sale) you're going to discourage businesses that "add value." Ie, you're going to give huge businesses with vertical monopolies on the entire supply chain HUGE competitive advanatages, that would, in turn, create a hugely UNCOMPETITVE marketplace. Which would mean consumers would pay even MORE for goods (in both the retail cost AND the tax).

Also, you're calculations are pie in the sky.

Really, you're lowering income tax by 90% on the top income earners, and there's no way you're going to make it up by charging the middle and working class anything but MORE in taxes.

Why do you keep promoting this BS tax idea that Bush cronies are promoting?

[zeemike]

79. I am so tired

I can’t keep trying to explain. I just wish people would look at this objectively and not assume it is a right wing idea because it is not. In fact the conservatives oppose the VAT tax in it’s original form because it is used in countries they consider to be socialist and makes business responsible for the tax.
But screw it if people do not want change for the better, they deserve the government they have now.

[AP]

82. Please respond to post 60. Why do you think people like that are paying

to spread propaganda about consumption tax?

Some conservatives who care about businesses selling consumer goods to a wealthy middle class don't like the VAT.

But most conservatives today love the consumption tax because it shifts the tax burden off the wealthy and because they don't give a shit about a wealthy middle class which can buy consumer goods and amass wealth. And in fact, a wealthy middle class promotes a strong democracy, so they're really eager to do things that hurt the middle class ... like a consumption tax.

[wuushew]

84. Where does it mention of a VAT on fairtax.org?

I see no mention of it, only a straight consumption tax.


This is from their section on manufacturing/timber

• The Primary Benefit: Timber Owners Will Enjoy a Zero Rate of Taxation

Like farming, ranching, and fishing, mining, and other extractive industries, the timber industry would benefit greatly from the repeal of the income tax and its replacement with a federal sales tax. Unless timber is sold at the retail level for final consumption (to a consumer as firewood, for example), it will not be taxed upon its sale to the processing industry. This means that all sales of timber to sawmills or planing mills, pulp mills,paper or paperboard mills for use in furniture,homes, packaging or paper would be free of taxation. The timber industry would also benefit from the elimination of the payroll tax in its entirety.

[muriel_volestrangler]

101. Would a real world example help?

Figures from the UK - where VAT is 17.5% (except for food (but restaurant food and chocolate is taxed at 17.5%), children's clothes, newspapers and books ; and household natural gas/electricity, which is taxed at 5%). New houses are exempt, but repairs and extensions aren't (that anomaly needs sorting out).

http://www.statistics.gov.uk/articles/economic_trends/effects_taxes_benefits_household_income_01-02/revised/Table3.xls (Excel table for all taxes)

                               households 
paid as VAT       poorest 20-40 40-60 60-80 richest
% of gross income  11.5     7.5   7.0   6.3    4.7 
% disposable inc   13.0     8.7   8.6   8.0    6.1 

So you see, richer households do spend a lot less of their income on 'non-essential' items than poor ones.

[AP]

103. For emphasis: tax burden on bottom 5th is DOUBLE burden on top 5th.

It's amazing that people need to see this in black and white to understand its obvious impact. But, there it is.

I thought when people saw who was propagandizing for this thing (Bush cronies) that would be the last word.

But this HAS to be the last word.

How can people continue to push this thing after seeing this stat?

[AP]

104. I'd love to see the top 1% vs bottom quintile. I bet ratio is 10 or 20:1

And that's the REAL reason Bush cronies want a consumption tax.

[zeemike]

112. Look

You seem to be hung up on percentages, and nothing but percentage will satisfy your fear.
So what if the rich have a lower percentage than the poor, we already knew that. That the rich have many advantages to the poor, and that is why most people want to be rich.
Why not give them that advantage in return for real tangible help for the poor and middle class?
Can you compromise?
I see a possibility for meaningful change by joining with the RW for a change in the way we get taxed. A compromised solution that answered the fears of bouth sides.
Yes the conservatives have picked up on it, but they want it to be consumption tax not a VAT tax. They have modified the original intent to suit themselves.
Why can’t we say, “give us a VAT tax and we will let the rich have there percentage advantage?

Instead of percentages how about real figures?

Now I know what a poor person spends. They spend most of everything they make and most of that is just for living. But the things that they spend the most of could be exempt from tax, and so the poor could just as easily avoid tax as the rich. If they rode their bike or took public transportation they could pay little or no tax.
But we need figures so lets just say they spend 1000 dollars on non-exempt items and would pay 170 dollars in tax.
Now what about the rich, what do they spend on taxable goods?
A How much for energy
How much on there toys (boats and such)
Well I don’t know but I read that the former chairman of GE had a 20,000 a month wine bill. The tax on that would be 3400 dollars right?
So if it cost a rich man 1,000,000 a year to live he would pay 170,000 dollars in tax. If those kinds of burdens will finance the government and provide for the common welfare I say screw the percentages, it seems fair to me.

[AP]

114. I already addressed this. Progressive taxation is all about percentages.

It's about the idea that your value of a dollar is a function of how many dollars you already have. If you tax a person with many dollars the same marginal rate as someone with a few dollars, you're actually asking the poor person to give up way more value than the rich person.

So, it's important to compare relative tax burdens in terms of percentages of gross income that they're paying.

It's not 'fear' it's math and it's taxes.

And percentages are "real" figures.

At least now you're admitting that a consumption tax is a right winger idea.

And I really can't believe that you're advocating bike ridership (or public transportation when there is none) as the way for poor people to avoid tax. Say you get paid by the hour, does it make sense to quadruple the time you spend trying to get to work just to avoid tax? I don't think so. As Muriel pointed out, the poor don't have the option of avoiding most taxes. They can't chose to receive compensation as dividends or cap gains rather than earned income, and they can't chose not to consume most of the things they consume.

By the way, the chairman of GE was so extraordinary wealthy, and so rare, I wouldn't form a tax code around what you think he's going to spend on taxes. And you've already said that you think they'll consume less, so where are you going to get tax revenue from?


And AGAIN, the person who spends 1,000,000 in discretionary consumptive spending is paying more than 170,000 in taxes. He'd love to only spend that much.

And AGAIN, many people who spend 10,000 a year on sales tax items RECEIVE an Earned Income Credit. Your tax system would take that away and then charge them more, while reducting the tax burden for the 1,000,000 spender (who's an earner 100,000 richer than the 10,000 spender).

You can't make this fair.

[zeemike]

121. The distribution of wealth is another matter.

And cannot be solved with any taxes system as you already admit when you say that it is accelerating the disparity as it most surly is.
I have a separate solution for that but I am afraid to even bring it up for fear of being run out of town on a rail.
My solution to the iniquities of the concentration of welt is making usury illegal.
(Ducks and covers up)

[AP]

126. Two thins have shifted wealth up ladder in last 30yrs: (1) TAX CODE

and (2) THE DEVALUATION OF LABOR.

I laughed when I read your line, "cannot be solved with any taxes system" when it's the tax system which has done the most damage.

[AP]

66. You can't just tax one avenue where wealth transfers. What it will mean,

as Muriel said, is that people who have no option but to transfer wealth that way will bear almost all of the tax burden.

You can see this with stock options. Gain from stock options is taxed when the stock is sold at a lower rate than earned income. But who had the choice of getting paid through stock options rather than a salary? Not the janitors, school teachers, doctors and lawyers. Super rich people who make their money from corporate activity have that chocie.

If you collect all your sales tax from consumption, that will be the end of consuming for rich people. You want a boat? Provide a seervice for someone, and contract with them to be paid with a boat. Or, buy shares in a boat manufacturer and get your dividends in the form of a boat. Or even, just get a long lease on the boat, rather than buy it. The rich will be able to avoid the VAT. However, if you're poor and you need diapers, a watch, gas, furniture, plates, a lamp, or whatever, you'll be paying 20% sales tax.

[zeemike]

72. Well

If there is value added to a stock then it would also be subject to the Value added tax collected at the point of sale just like any other good.
I would hope that the rich would slow down there consumption. Consumption cannot continue to grow every year forever because there is a finite amount of supply. Things that grow constantly are called cancer and they usually kill the host eventually.
But lets be realistic there is no point in being rich if you live like a poor person just to satisfy some obsession for not paying taxes. But even if they did all the money they would accumulate would be out of circulation for the most part and cause deflation of the currency, which would mean the money poor people had, would buy more.
And they would not be able to trade for a boat because the manufacture that built it is responsible for the tax, if he did not charge you for it he would still have to pay out of his own pocket.

[AP]

77. The more you say, the more apparent it is that you either don't understand

how taxes work, or you do understand and you are propagandizing for a tax policy you know is inequitable.

Read again the posts which accurately point out that many millionaires (the vast majority) aren't profligate spenders, and certainly don't spend a great deal of their income on goods that depreciate to zero (or even 50%).

You have this fantasy about the rich being huge, wanton spenders and about how they're going to float the tax burden while aslo decreasing consumption creating an enviornmental nirvana.

You're all over the place.

And you're not responding to any of the arguments other people are making.

And the boat manufacture is going to evade taxes just as its investors will. It'll monopolize the entire chain of production so there are now sales/purchases for any of the inputs and will use investment schemes and/or long leases to transfer value.

[zeemike]

119. Have you ever been to the beaches in Florida?

I can direct you to places where there are hundreds of beach houses 10.000 sqft or more with 5 or 6 air conditioners each sucking up megawatts to keep them cool and comfortable for the owner who only comes there a short time each year.
Who the hell built all of that? And was any tax paid for this extravagance?
The answer to that is that you and I paid for it, because we made up the difference between what would be paid in a VAT tax and an income one.
You see most of the rich find a way to build that house and charge it off as a business expense thus reducing the amount listed as income on there taxes. And this will continue as long as we have the present system because the politicians depend on the rich for contributions to there politician campaign.
A VAT tax is collect at the point of sale of any added value goods. (By the way Timber is a value added product. It starts off as a tree is changed to a log, then lumber, then a house. Value is added at each step.)

[AP]

123. Poor people spend a greater percentage of their income on energy

than wealthy people no matter how big those houses are.

And the profit those rich people make off those houses will almost definitely offset their energy costs.

That isn't the case with renters and poor home owners.

[zeemike]

125. Yes

And because of that they use a whole hell a lot less of it.
There is no impediment to the rich and no advantage to conserving energy.
And that beach house may or may not sell for a profit. If it is 20 years old it most likely be sold as a tear down and a new extravagance built on the land.

[AP]

128. I don't think any of that is responsive to anything I've said here.

And I've noticed that you tend not to respond to any of the points made that deflate your argument.

[starroute]

60. AFT is backed by Bush-connected Houston businessman Jack Trotter

Remember James Bath, the man who ducked out of taking the flight physical with George Bush, and who later became an agent for Salem bin Laden and then for other Saudis connected with BCCI and with funding of terrorism?

The man who introduced Bath to influential Houston business circles in the middle 1970's was Jack Trotter. Trotter was a business partner of Bush Sr.'s close friend (and largest financial contributor) Walt Mischer -- and Mischer was closely connected with Sidney A. Adger, the Bush family friend who'd gotten Bush Jr. into the Air National Guard. Many members of this circle were deeply implicated in the S&L scandals of the 1980's, and in related allegations of money laundering, drug smuggling, and CIA involvement.

In the 1990's, Trotter re-emerged as a proponent of such right-wing causes as tort "reform" and tax "reform." Americans for Fair Taxation is one of his projects. If for no other reason, Trotter's connection with it should make it highly suspect.


http://www.chron.com/content/chronicle/page1/98/04/06/salestax.html (1998)

Two-and-a-half years later, this triumvirate -- construction magnate Leo Linbeck Jr., Cogen Technologies Chief Executive Bob McNair and attorney Jack Trotter -- has built a grass-roots movement claiming more than 100,000 members, all lobbying to gut the income tax and replace it with a 29.9 percent national sales tax.

Over the last few months, Linbeck and his tax rebels -- calling themselves Americans for Fair Taxation -- have argued their case from the Sugar Land Community Center to the Oval Office.


http://www.tucsonweekly.com/tw/2000-07-27/curr.html (2000)

The Arizona Taxpayer Alliance, which seeks to eliminate the state income tax, had raised $194,774 as of May 31. The group has picked up an additional $150,000 in contributions of $10,000 or more since the end of the reporting period. Contributors include Houston businessmen Robert McNair ($25,000), Jack Trotter ($25,000) and Gordon Cain ($25,000) and the Houston-based Enron Corporation ($10,000). The Texas contributors have been sponsors of the political group Americans for Fair Taxation, which has spent millions of dollars in a campaign to eliminate the Internal Revenue Service and replace the national income tax with a 30 percent national sales tax.


(Note the mention of Sugar Land. I am starting to believe that whenever that name appears, something dirty is afoot.)

[AP]

68. That has GOT to be the final word on this subject. Are you on Bush's side

or are you a Democrat?

[bhenries]

63. I never considered that

That's a good idea. Under your plan, it would seem like those who spend the most (i.e. the rich) would pay the most.

Kudos!

[AP]

67. The rich don't spend more as a % of their total income. That's why ...

...they're rich.

Their tax burden would be LOWER than it is today.

A lot of poor people who pay 10% tax would end up paying more becuase poor people are poor because they don't make much more than spend every year.

That isn't fair.

[zeemike]

76. Is percentage a measure of fairness?

It is odd but the argument I heard forty years ago against the VAT tax was that the rich had to pay more than the poor.
The poor would only pay say 1000 a year in taxes and the Rich might have to pay 100,000 dollars. They would say that it was not fair; if one man had to pay 1000 then so should every man.
So if percentage is a measurement of fairness and the top 10% pay 50% of the taxes that would also be unfair right?

[AP]

78. It is the best measure because the value of an additional dollar is...

...a function of the number of dollars you already have.

If you don't have many, you really need the next one you get. If you have many, you don't put much value on the next one.

A person with little money is willing to work an hour to get 6 dollars more. A person with a million dollars wouldn't do that. So, you can't charge those two people the same amount in taxes on another dollar in income. It wouldn't be fair.

That's the basic logic of progressive income tax.

And, as has been pointed out, (1) a sales tax charges everyone the same amount of money for a dollar spent, and (2) as the % of your income that you spend increases, the closer your overall burden comes to that tax rate. So if go into debt, you could spend over 20% of your income on taxes (and if you pay interest on your tax because you're forced to finance the purchases you make which have that high tax component driving you deeper into debt, you could really start paying super high rates of tax+interest, with the interest being private profits for banks, which is the big reason Republicans like consumption taxes). If you save most of your money, you could turn a 20% VAT into a 1% or 2% overall effective tax rate.

It's the definition of UNFAIR.

[AP]

80. If poor guy is getting an EIC today, and the rich person is paying 300K in

taxes, then making the poor person pay 100K and reducing the rich person's burden to 100K is defnitely less fair. And if you reduce consumption of things people really need to live dignified lives, you're destroying jobs, and commerce, and creating misery too.

And the real key is the marginal rate, but the overall rate of taxation gives clues about tax burden too. A 10K earner should have the same overall tax rate as a 1,000,000 earner.

And it's totally fair for the top 10% to pay 50% of the tax burden if they control 50% of the assets and earn 50% of the income. And the fact is that today the top 10% don't pay a tax rate that matches their wealth. The burden has shifted off the top 10% over the last three decades.

Everybody who knows this. I can't believe that you seem to have such a firmly held opinion on these issues but seem to lack knowledge about these basic issues.

[AP]

81. Also, please respond to post 60 and to Murieal V's post as well.

[rman]

100. Reminds me of this scam i pulled on my little sister once,

when both of us were very young. We both had gotten an equal amount of candy. I had eaten most of mine, my little sister had eaten only a few of hers.
Then i went about comparing my amount of candy to her amount, side by side. It was obvious she had more candy. So i said to her this isn't fair, it'd be more fair if we would put all of our candy in one bunch and then split it evenly. I mean, share equally, that's fair, right? I could tell she figured something wasn't right but she couldn't point it out, so she agreed.

I wasn't really aware i had conned my sister, to me it was just a way to get more candy.

Later she told mom what had happened, and mom explained to me how bad i'd been. This was an important lesson in morality for me.

The way in which many capitalists/rw-ers/repubs go about things, the arguments they put forth, reminds me of that scam of mine quite regularly.

Turns out that "The People" are in many ways as gullible is my little sister was.

--

Now lets turn that rediculous "everyone has to pay an equal amount in taxes"-argument up side down ( i realize it's not zeemike's argument - i think):
"The rich get to spend 1,000,000 per year on goods and services, the poor get to spend only 10,000 per year. I say that's not fair, if one man gets to spend 1,000,000 then so should every man."


Really, just by putting forth such arguments the RW is insulting our intelligence. Or they would be, if it wasn't so that a significant part of the population actually falls for it. Ie we've accepted the scam of "trickle down economics" for several decades now. For accepting such a scam, we the people get to blame only ourselves.

To the RW i'd like to say: please try to pull more of such scams, the more rediculous the better. Then eventually enough people will recognise it for what it is.

[AP]

105. One reason that argument is deceptive is because a guy who spends

1,000,000 a year on taxable goods is definitely not 100 times richer than a person who spends 10,000 a year. He's more like 15,000 times richer

There aren't many places in America where you could spend less than 10K a year on food, rent and whatever else you need just to conduct a live that makes even minimum wage. Spending 10K a year is what people who get the EIC spend. Hell, people who get the EIC probably spend more than that.

A person who finds a way to spend 1,000,000 a year on totally deprceicable consumer goods probably makes over 15,000,000 a year, and when you're making that much money, you figure out a way to buy things that don't depreciate to zero, or you find a way to write those expenses off of your taxes. In any event those people should be paying 30% of their income in taxes at least. So taxing them the "same" as a poor person would mean that their tax burden is going down and the person who was getting the EIC before would now have a huge tax burden compared to before.

Is it fair to tax a person 15,000 times richer than another they same amount (or LESS) on an additional dollar of income, which is what the consumption tax would do?

[zeemike]

124. I agree

We have been scammed and continue to be scammed by our own government, which is largely owned by the few rich.
My point is that a VAT tax is ultimately simple and fair because it taxes the value of goods and services before it ever gets mired down in income which can be manipulated just about anyway.
And it is fair to tax people on how much they spend on non-essential items. It taxes wealth itself at its source.
And if the rich do put all the money in a bank to avoid paying taxes it only would make money have more value (so says the law of supply and demand)

[AP]

127. VAT can be manipulated too: vertical monopolies get a tax advantage.

It drives out of business people who buy and resell.

It's also just a regressive sales tax, which unburdens the super rich.

[bhenries]

86. Nonsense

"Rich" people often make purchases in excess of their income and/or net worth.

For example, someone making $200,000/yr could easily be expected to purchase a $1M house -- 5X their income. If they merely buy a $60,000 car every two years(or get a lease equivalent), that is 30% of their income right there in one shot in the purchasing year. And, for those capital expenses, their are associated costs to maintain, e.g., gas, electric, phones, etc. -- all taxed.

I think such a consumption based tax would actually help less well-off people keep themselves in better financial shape. E.g., there is a big problem with lower-income individuals racking up HUGE credit card debt. If their large purchases were subject to a consumption tax (in excess of the usual sales tax) is would serve as a disincentive to spend money they don't have on frivolous goodies -- expenditures that would hurt them and they they shouldn't be making anyway.

Unless a "rich" person is living very modestly, they will spend more than a less well-off individual. Nobody shoves money under pillows anymore or just lets it rot in a bank earning lousy interest rates. People who have money will spend it one way or another -- and when it is spent, it will be taxed.

Another good indicator of "fairness" is the percentage of all taxes collected paid by various groups. Right now, I think that the IRS reports that the top 5% or so of all tax payers foot over 50% of the total U.S. tax bill. 5% paying 10X their of their individual representation share seems quite progressive.

[wuushew]

87. You are going to have to back those claims up

conservatives often like to interchange the terms wealth and income. The rich do play a substantial amount in income tax but most of their wealth is untouched. I am willing to believe you just provide a link.

[bhenries]

88. Which figures

Would you like me to provide data for?

[wuushew]

89. last sentenence...individual overall tax burden

Another good indicator of "fairness" is the percentage of all taxes collected paid by various groups. Right now, I think that the IRS reports that the top 5% or so of all tax payers foot over 50% of the total U.S. tax bill. 5% paying 10X their of their individual representation share seems quite progressive.

[bhenries]

91. Here is the link from the IRS's own website

http://www.irs.ustreas.gov/pub/irs-soi/01in01ts.xls

It is an Excel file.

[wuushew]

94. This is income tax data

rather pointless in a thread about consumption taxes. I did ask for the OVERALL tax burden, I have seen plenty of tax burden charts over on the Hertitage Foundation and CATO Institute.

[bhenries]

96. Do you have access to those?

[wuushew]

98. You might find it on the Congressional Budget Office site

this seemed helpful but slightly dated

http://www.cbpp.org/4-10-02tax.htm

[AP]

106. If top 5% earn and control more than 50% of the wealth, then they aren't

paying in their fair share if they're only contributing to 50% of tax revenues, and that's exactly what they do.

Their share of the tax burden has steadily dropped in the last 30 years and has slipped below the percentage of wealth they get each year.

[bhenries]

90. P.S.

Wealth -- or net worth -- had to have been accumulated as income at one time or another, i.e. it had to be earned to accrue.

Under the current system, when it was earned, it was taxed. So, all "wealth" has been "touched" at one time or another. The number of individuals living of massive, Rockefeller-type inheretances for generations and generations, unlike Great Britain, is almost statistically insignificant in the U.S. -- but even that wealth was taxed at the time it was earned (as is the interest earned on it, in general).

[wuushew]

92. Yes they will be taxed at current capital gains rates

which thanks to Bush are ludicrously low, especially on property holdings.

[bhenries]

93. Capital Gains

Are only relevent at the sale of a capital asset.

When the income later used to buy the asset was earned, it was taxed as ordinary income. When the asset is sold, the net appreciation value is taxed a second time as a capital gain.

[wuushew]

97. Did it ever occur to you that the income to buy the asset was in itself a.

capital gain? 5% plus 5% sure doesn't add up to the 30%+ marginal rate the wealthy should be paying. Also since any tax rate below the earned income rate acts as incentive I fail to the logic in setting the rates so low. Is Amerika suffering from an investment drought?

[bhenries]

116. Yes, and that is why

A consumption tax is better. Instead of having JUST the gain taxed -- whether as ordinary income or at a lower CG rate -- the WHOLE second purchase is taxed as a taxible expenditure.

E.g. If you have an asset worth $10 today that is worth $15 tomorrow. The capital gain when you sell it tomorrow for $15 is $5 ($15-$10). You pay a tax on $5.

Under the consumption tax, if you took the whole $15 dollars and purchased something else for $15, you would pay tax on $15, not $5.

So, in this capital gains scenario, the base taxed under the consumption scheme is 3X that of the income tax scheme.

P.S. The whole $15 would never be taxed as income on the sale under any scheme because $10 of it isn't income. You can only get to it under a consumption tax scheme.

[AP]

118. it is terribly regressive, as everyone else realizes.

[bhenries]

95. Also, low cap gains rates

Help transfer wealth/property from those who have it to those who want it.

A high cap gains rate serves as a deterrent to someone who might otherwise sell, say, a house, but for the cost imposed by the tax. The tax thus serves as a barrier to the alienation of property.

A person living in a modest house, who wants to move to a larger house, might hold off on the sale to wait for property values to increase and offset the tax before they sell. Hence, fewer modest houses are available to those who might be interested in one (people of lesser means).

If you drop the cap gains rate, the "transfer" penalty is lower, and thus, people who needs a capaital asset are likely to find that there are more available.

[AP]

108. That's why it's important to tax everywhere wealth changes hands a little

and not to overburden any one avenue (or leave any one totally untaxed).

Your arguemnt isn't one for NOT taxing cap gains. It's an argument for not overtaxing it, just like earned income shouldn't be overtaxed.

Earned income is the ONLY way most Americans get any money in their lives, so we shouldn't be getting all our tax revenue from only earned income.

And you know as well as I that if you picked any one avenue of wealth transfer to tax incredibly lightly, you'll find that super rich people figure out a way to transfer all their wealth to each other through that one avenue, whether it's cap gains, or whatever.

I bet if they chose eanred income as that one route (which they'd never do) ONLY THEN would you see school teachers getting paid in stock options and dividends.

[bhenries]

113. And that is an argument FOR a consumption tax

Because when the capital gain is used to purchase another capital asset, it is taxed at the front end.

It is also easier to achieve the targeting you outline... if you spend it, you will pay taxes on it.

As far as dividends... even I get dividends. Almost everyone gets dividends, as alomst everyone owns some stock -- even if it is a small number of shares. Companies are more willing to pay out otherwise retained earnings if the penalty for doing so is lower.

Also, taxing dividends as ordinary income is absurd because the corporation has already paid taxes on it as a corporation. Why should I -- the small investor -- be forced to pay taxes again on income that has already been taxed once?

[AP]

117. Man it's encouraging that there are so few people here who think like you.

Everything you've said in this post is addressed somewhere else in this thread.

[bhenries]

120. I haven't had time

To comb through the whole thread. But, in all candor, all of the arguments here -- for and against -- are standard boilerplate. That is because there has been enough debate on the issue in academia. So, most people whill know the theory, the reubttal, the surrebuttal, the sur-surrebuttal, et seq.

[AP]

122. My impression is that these are very easy to understand issues

and everyone except for two or three people are able to place themselves on the liberal side of this issue because they are easy to understand.

[AP]

107. In the 90s and today, lots of rich people got paid in stock options.

Only the value of the stock on the day the option vested was taxed as earned income. Gain (including dividends) over that amount was taxed at cap gains rate (as low as 15%). For a lot of very rich people, money they reinvested for further capital gains was never taxed at more than 15%, which is a lower effective tax rate than the income earned by many people who didn't have the option of getting paid in stocks, like janitors, school teachers, and even doctors and lawyers.

[AP]

102. That's not a purchase. That's an investment. Read the whole thread.

Rich peoples "consumption" is often an investment because they can "consume" items which appreciate in value, whereas poor and middle class people consume equivalent items which depreciate to zero.

A poor person pays rent. A rich person buys a house which doubles in value over their lifetime.

A poor person buys a timex. A rich person buys a rolex.

A poor person buys from Ikea. A rich person buys an appreciating antique.

A poor person buys a Hyundai. I rich person busy a Mercedes.

So a poor person pays the VAT on something that costs 100 bucks and pays a total of 120 bucks. The poor person loses the entire value. The rich person pays 1200 bucks on then equivalent item. If the item only depreciates 50% their effective tax rate on the whole transaction cuts in half. If the item increases in value by 20% they cover the tax, and end up really paying none.

Also it's absurd to say that making consumption more costly for the poor is going to be good for them. Many people who go into debt year over year are doing it because they don't have much choice. Have you heard of student loans? How about mortgages? (Did you see the statistic above that said many millionaires don't have them?) How about car ownership in a city with no mass transportation system? You have to buy these things just for the privilege of getting paid less then you need to spend to stay alive.

[Serenity-NOW]

73. HAHAHAHAHAHAHAHAHHAHAHAHAHAHHHAHAHAHAHHAAAAAAAAAA

no, I'm not laughing with you.

Whoever told you life was fair anyway? Go look up noblesse noblige and come back with a clear head.

[ComerPerro]

74. Its possibly the most regressive tax in history

period

[camero]

83. This tripe again

When all incomes are equal then all taxes can be equal. Taxes ensure that economic power in a society are distributed fairly. This tax is unfair because incomes are unfair.

[wuushew]

85. Dennis Kucinich has a real tax plan

Our tax system is in need of desperate repair. Tax cuts to the wealthiest one percent of Americans do not create jobs and do not increase wages for working people. The only way to real economic strength and security is to provide real tax relief to those who need it most, workers and families. I have a tax plan that enables real economic growth and progressive tax reform while providing fiscal responsibility.

It is a national shame that people in the bottom 20% in our society pay 18% of their income in taxes, while the Department of Labor statistics shows that those in the top 20% pay but 19%. That is not the progressive tax system that Americans need. The working poor and middle class must have the heavy yoke of taxes lifted from their back by those who have much. The first step in doing this is to rescind the $2 trillion dollar Bush tax cuts for the rich and replace them with tax cuts for the poor and middle class, by eliminating Social Security taxes for the first $25,000 in income and expanding Social Security covered wages to include all salaries. After all, it is easier to pay Social Security taxes when you are making a $1 million a year than when you are making $10,300 a year in a minimum-wage job.

The 2001, 2002, and 2003 Bush tax cuts have created a tax system that favors the wealthy over the working class. These tax cuts have complicated the tax code with more loopholes and have saddled the federal treasury with record deficits.

In response, I have introduced a bill that creates a more fair, simple, and adequate tax system that provides significant relief to workers and families. The Progressive Tax Act of 2003 gives $87 billion per year to people with modest income and to families in the middle class. The bill collects an additional $107 billion per year from the Bush tax cuts, corporate tax loopholes, and other tax giveaways. The bill therefore raises a sum total of $20 billion per year that remains available for deficit reduction or new spending.

First, the bill provides a refundable $1530 Payroll Tax Credit for people who work. This tax credit is simple, targeted to relieve a high tax burden, provides a stimulus effect, and encourages work.

Second, the bill provides a refundable $2000 Simplified Family Credit. This simplifies the tax code by consolidating the Earned Income Tax Credit, Child Tax Credit, Additional Child Credit, and exemption for children into one Simplified Family Credit. This tax credit will provide greater transparency, provide extra work incentives, and a stimulus effect.

To raise federal revenue, the bill will close corporate loopholes and set tougher penalties to prevent corporate tax shelter abuse. In addition, the bill will roll back most of the Bush tax cuts in the past three years that benefited the wealthy.

Tax cuts for millionaires have failed repeatedly to create jobs. Making permanent the tax cuts that were temporary, the ones that were supposed to give the economy a quick boost, would cost us another $1 trillion, but it won't create jobs. The Progressive Tax Act will allow the Democratic Party to put its money where its motto is: in the hands of the working people.


http://www.kucinich.us/issues/taxes.php

[rman]

99. it's a scam

1st: is't there already a tax on goods and services, where "you pay more taxes the more you buy"?

It isn't that with this "fairtax" sceme the actual tax percentage per item gets higher the more stuff you buy, right? It's just that the more items you buy, the more items you pay tax for (which is inevitable), and thus the total amount of money you pay in taxes is higher. Which is how it is now.
This is not new and not special.

2nd: "no income tax" effectively amounts to yet another taxcut that will primarily benefit the rich.

[ACK]

111. Sorry the rich did not get rich by spending all their money

This is a way for them to get around paying a lot of taxes.

The rich man did not get rich and stay rich by spending outrageous amounts and percentages of their money. They invest their money and since it just sits drawing interest and not purchasing anything this tax would be regressive against those who have to spend a larger percentage of their overall income to survive day to day.

+

[MAlibdem]

115. Awful tax

AWFUL!!!!

The poor spend much more of their income (proportionally) than the rich on such products. Thus, the poor would actually have HIGHER tax rates than the rich.

Unfair, incredibly so.