Why does the Fair Tax hurt the working class the most?

[white_wolf]

Just to be clear I know it does, but I'm wondering why it works out that way. The "Fair Tax" (Completely RegressiveTax)is basically a nationally sales tax, correct? I'm assuming it's because the working class spends their money on food,clothes, etc. as soon as they get it while the rich can hoard it, is that correct? So while the rich might spend only 10% of his total income on food, luxuries, clothes etc. a working class person would be spending closer to 90% of their income, is that right? I'm just trying to make sure I understand the Completely Regressive Tax.

[Pab Sungenis]

1. Stop calling it "Fair Tax" for one thing

because you're right. It's the most unfair there is because the poor and middle class spend a much larger portion of their income. Any sales tax that doesn't exempt the necessities of life is completely regressive.

[white_wolf]

3. Check the OP. I fixed it for you.

[orpupilofnature57]

4. Not to mention the" Loop-holes " the rich enjoy, or the fact insuring stocks

cost all of us ,and they are the only ones that profit ,in other words all we get the Pain " Bail-outs" and they don't have to share the Gains.

[Spider Jerusalem]

2. Nothing "fair" about it

any tax levied on the purchase cost of all goods and services disproportionately affects people with lower incomes.

[banned from Kos]

5. You've been misdirected by Fair Tax proponents -- what it really does

is eliminate the

Capital Gains tax
Estate tax
Dividend tax
Corporate tax
AMT

Now ask yourself - who pays those taxes?

[white_wolf]

7. Ahh I didn't know it got rid of those. I thought it was simply a national sales tax.

Thanks. Oh,and the rich of course.

[ThomWV]

6. Because the Poor spend all of their income on taxable items, the rich don't

If you do away with an income tax in favor of essentially a national sales tax it means that the poor who spend all of their income just to clothe, house, and feed themselves will have all of their income taxed. The rich, by contrast, who save or invest most of their income, a much smaller percentage of it being necessary to clothe, house, and feed themselves. So proportionately a smaller bit comes out of their income.

[orpupilofnature57]

8. We spend ,They only invest ,they purchase a carload of toilet paper

and sell ,to avoid Buying a roll ,and our government wipes their asses after they kiss it.

[demwing]

15. If Bob makes 35k per year

and spends 30k on taxable items, he'll be taxed on 85% of his income.

If Sam earns 350k per year, and spends the same 30k on taxable items, he'll be taxed on 8.5% of his income.

Not only is this regressive, as the lower wage earners pay taxes on a greater percentage of their income, but it is rotten tomatoes for the economy, because it discourages people from spending. Why buy a new car? Ill just drive this one for another five years.

Why buy a new dryer? I'll make do with the one I've got, and maybe put up a clothes line...

[Warren Stupidity]

9. The whole proposal is bullshit from top to bottom.

1. it is at least a 34% sales tax advertised as a 23% sales tax.
2. the only people getting a break are those at the upper income tax bracket.
3. it is a tax increase for everyone else except the very lowest income levels.
4. some of what would be taxed is quit unusual - e.g. interest on credit cards and mortgages.

http://www.factcheck.org/taxes/unspinning_the_fairtax.html

[white_wolf]

10. Also I just thought of something. It doesn't replace state sales tax so that means in my home state

of TN, people would be paying 18% taxes on food. What utter bullshit.

[Warren Stupidity]

11. 18%?

even using the bills shoddy deceptive wording the national tax would be 23%.

[white_wolf]

12. Oh, I've heard the number 9% thrown around a lot.

I didn't know there was an actual bill in Congress for it.

[Warren Stupidity]

13. 23% and that is deceptive, really 30%

and to be revenue neutral it would have to be at least 34% and perhaps as high as 39%. See the fact check link I posted above.

[DataException]

14. According to their website, they explain the "regressive" issue this way -

The truth: The FairTax actually eliminates and reimburses all federal taxes for those below the poverty line. This is accomplished through the universal prebate and by eliminating the highly regressive FICA payroll tax. Today, low and moderate income Americans pay far more in FICA taxes than income taxes. Those spending at twice the poverty level pay a FairTax of only 11.5 percent -- a rate much lower than the income and payroll tax burden they bear today. Meanwhile, the wealthy pay the 23 percent retail sales tax on their retail purchases.

Under the federal income tax, slow economic growth and recessions have a disproportionately adverse impact on lower-income families. Breadwinners in these families are more likely to lose their jobs, are less likely to have the resources to weather bad economic times, and are more in need of the initial employment opportunities that a dynamic, growing economy provides. Retaining the present tax system makes economic progress needlessly slow and frustrates attempts at upward mobility through hard work and savings, thus harming low-income taxpayers the most.

In contrast, the FairTax dramatically improves economic growth and wage rates for all, but especially for lower-income families and individuals. In addition to receiving the monthly FairTax prebate, these taxpayers are freed from regressive payroll taxes, the federal income tax, and the compliance burdens associated with each. They pay no more business taxes hidden in the price of goods and services, and used goods are tax free.

How can the FairTax generate lower net tax rates for everyone and still pay for the same real government expenditures? The answer is two-fold. Firstly, the tax base is dramatically widened by including consumer spending from the underground economy (estimated at $1.5 trillion annually), and by including illegal immigrants, those who escape their fair share today through loopholes and gimmicks. In addition, 40 million foreign tourists a year will become American taxpayers as consumers here. Secondly, not everyone's average net tax burden falls. For households whose major economic resource is accumulated wealth, the FairTax will deliver a net tax hike compared to the current system.

Consider, for example, your typical billionaire, of which America now has more than 400. These fortunate few are invested primarily in equities on which they pay taxes at a 15 percent rate, whether their income comes in the form of capital gains or dividends. In addition to having the income from their wealth taxed at a low rate, the principal of their wealth is completely untaxed either directly or indirectly. Assuming they and their heirs spend only the income earned on the wealth each year, the tax rate today is 15 percent. In contrast, under the FairTax, the effective tax rate is 23 percent. Hence, the very wealthy will pay more taxes when the FairTax is enacted. In a nutshell, those who spend more will pay more but low, moderate and middle income taxpayers will benefit from the greatest gains in reduced tax liabilities.