Discussion | 2 comments

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• chrispytahoeFebruary 21, 2013 - 5:39 pm

  I am no tax expert, but if tax revenue is only collected through a tax on retail goods (excluding basic necessities!) I think social security and Medicare will not be around for younger folks. This would benefit older people that have paid into the system for a while already, but a high tax on retail will have people questioning their 'want' and 'need' purchases a lot closer. This will result in far less tax revenue. I support a 15% flat tax. Everyone pays the same rate.

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• ChuckBFebruary 22, 2013 - 4:45 pm

  What is being illustrated here is effort to educate folks on the FairTax within a word limitation levied on the writer.  What was conveyed was the big picture for getting rid of the cost of collecting the income tax plus the inherent capability of a booming economy when unleashed from the destructive income tax.  If you take into account the cost of operating the IRS, tax compliance costs, taxes avoided (not collected) through cheating the present system, and taxes not paid (not collected) in underground economy (illegal aliens, drug dealing, prostituting, etc.), these costs/loses add up to about $1 Trillion.  In 2011, "the federal government collected $2.3 trillion in taxes. Most of that came from two sources: Individual income taxes and payroll taxes." -- What America Pays In Taxes, by LAM THUY VO and JACOB GOLDSTEIN, April 13, 2012.  What Jim's article above points out is that present income tax system requires individuals and corporations to spend over $400B of their own money to collect the tax, $12B to enforce collection, while losing (not mentioned in his letter) over $350B to tax avoidance and over $200B to the underground economy.  Since the government sets the amount of money it wants each year from income taxes, the taxes on last two groups have to be made up in tax increases on everyone else. The point to be made is the $400 plus Billion is money wasted on collecting the income tax, while the other $550 plus Billion has to be covered by "honorable" taxpayers in some way.     The FairTax is a single rate sales tax on new products and services collected only one time at the point of retail sale using "pre-tax dollars".  The FairTax is defined to be revenue neutral and replaces the income tax.  There are no exemptions allowed or required as explaind below.  However, 35% of the FairTax is allocated to Social Security and Medicare, and is required by the Bill (HR25/S122) to be maintained in two actual trust funds.  The tax base will grow from approximately 160 million tax filers to over 350 million American and visiting foreign consumers each year.   Since there is no longer an income tax, there are no individual income taxes, no more business-to-business taxes, no payroll (Social Security or Medicare) taxes, no self-employment taxes, no estate taxes, no gift taxes, no taxes on investments or dividends, no more AMT, no taxes on education and no taxes on charitable giving.  The latter two are considered investments under the FairTax and are not taxible. This all amounts to a very business friendly environment.   Further, no-one living at or below the poverty level is taxed.  Each year in January, the Dept. Of Health and Human Services sets the yearly poverty level it decides will cover the necessities of life for a given sized household.  It is calculated by household size, not income.  Under the FairTax, no household pays the tax on these necessities, which are determined by each head of household.  The amount of tax to be paid on necessities for a given month is reimbursed to the the head of household on or before the 1st of each month, through a rebate.  Since the reimbursement is received at the beginning of the month, before it is spent, it is called a prebate.  In other words, the prebate is is the FairTax feature that allows you to pay for your necessities (food, clothing, shelter, healthcare, transportation, etc.) tax free before you have to pay a tax to the government.   Finally, since there are no income or payroll taxes, you receive your whole paycheck and the prebate before the government has a chance to skim off the top.  As mentioned before, you now pay your federal taxes when you buy something new.  No taxes on the necessities of life.  Everyone pays the same tax rate at the point of retail sale, but the prebate compensates for the necessities.  No forms to fill out to disclose personal data to an impersonal government.  April 15th is not "pay your due to the government" day anymore.   Why would anyone want to "stick with" a flat income tax taken out of his check each payday before being taking care of his necessities of life?

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