The Fair Tax

Pacomc79 wrote:

Once the embedded taxes are removed free market competition will drive the prices down.

Huh? This makes no sense. The "Fair" Tax introduces embedded taxes. It doesn't remove them. Right now corporate taxes are paid on profits. Effectively, you will now quadruple taxes on a corporation's cost of goods sold. So if a business is high-margin like my own, you basically eliminate my tax burden since my cost of goods sold is largely just untaxed salaries. However, a business whose products are dependent on taxable widgets gets ass-raped by your 20% tax or whatever it is, thereby forcing them to dramatically increase prices. And since the majority of the products purchased by the poor are low-margin items like food and disposable products rather than services, they'll bear the brunt of those price increases.

farfromglorified wrote:

Huh? This makes no sense. The "Fair" Tax introduces embedded taxes. It doesn't remove them. Right now corporate taxes are paid on profits. Effectively, you will now quadruple taxes on a corporation's cost of goods sold. So if a business is high-margin like my own, you basically eliminate my tax burden since my cost of goods sold is largely just untaxed salaries. However, a business whose products are dependent on taxable widgets gets ass-raped by your 20% tax or whatever it is, thereby forcing them to dramatically increase prices. And since the majority of the products purchased by the poor are low-margin items like food and disposable products rather than services, they'll bear the brunt of those price increases.

FFG, I'll talk about it later, It's easier to explain if you get a chance to read the book or check out the website, I've got to do some work now. Cheers.

desandrews wrote:

What about the effects on businesses? We all know that businesses don't pay taxes, they pass them on to their consumers.

This is an overstatement that is entirely dependent on perspective. Right now, my business is taxed on its profits. Those profits come out of the pockets of consumers, so you could say that consumers are just paying those taxes. But at the same time, other business are paying those consumers, so you can just say that other businesses are paying my taxes. And so on and so on.

Labor pays for taxation, and to differentiate between corporate labor and consumer labor is kind of silly since both are effectively the same thing.

We also know that most other governments don't tax companies for their sells overseas, we do. Establishing the Fair Tax plan would put US companies in the ultimate advantage. They would be able to sell their products at a competitive price and may change America's number one export, manufacturing jobs to something else.

If you want to put US companies at the ultimate advantage, just stop taxing them altogether. But do that because corporations aren't actually people. They can't vote, they don't have rights. Their votes and their rights extend from the votes and rights of the people who work for them, and those people are already paying taxes - corporate taxation is redundant taxation. Eliminating a corporate tax system makes a hell of a lot more sense than just trying to rig a contrived system in their favor, especially when the unintended consequences of this plan will screw over a lot of businesses.

soulsinging wrote:

you keep saying that, but you show absolutely zero math to support it. again, how do the poor lose money on this tax?

he said he lives "paycheck to paycheck" which means he is consuming all of the income that me makes every pay period. He consumes 100% of his income. That means he pays 23% of 40K which is 9200


Thats more than 5500 that he pays now, correct?

http://www.fairtax.org

How does the FairTax protect low-income and lower-middle-income families and individuals?

Under the FairTax plan, poor people pay no net FairTax at all up to the poverty level! Every household receives a rebate that is equal to the FairTax paid on essential goods and services, and wage earners are no longer subject to the most regressive and burdensome tax of all, the payroll tax. Those spending at twice the poverty level pay a tax of only 11.5 percent – a rate much lower than the income and payroll tax burden they bear today.

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, thus harming low-income people 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 rebate, 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.


Back to FAQ Index



Is it fair for rich people to get the exact same FairTax rebate from the federal government as the poorest person in America?

Let’s look at a billionaire under the FairTax – if he spends $10,000,000 dollars he pays a tax of $2,300,000 and gets a rebate of $4,508 (assuming he is married and has no children). His effective tax rate as a percent of spending is 22.95 percent.

Now, let’s look at a middle-income married couple with no children under the FairTax – if they spend $40,000, they pay $4,692 net of their rebate for an effective tax rate of 11.7 percent. The effective tax rate increases as spending increases, but never exceeds 23 percent!

Figure 4: Comparison of effective tax rates: FairTax, Income tax

FairTax Current Tax
Expenditures = income $40,000 $40,000
Net tax $4,692 $5,870
Effective tax rate 11.7% 14.7%

In contrast, if this same couple earns $40,000 in wages today under the current tax system, they pay $2,810 in income taxes and $3,060 in payroll taxes for a total of $5,870 in taxes (14.7 percent). In addition, their employer pays another $3,060 in payroll taxes. Most economists agree that the employer payroll tax is actually borne by employees in the form of lower wages. Looked at this way, this couple is paying $8,930 (22.3 percent) in taxes today, which doesn’t even include the hidden taxes they pay every time they make a purchase.

Finally, let’s look at a low-income couple under the FairTax – they pay no net FairTax at all. Today, under the income tax system, they not only pay 15 percent in payroll taxes, but they also pay hidden taxes – arising from corporate taxes, private sector compliance costs, and payroll taxes passed on to consumers and embedded in the price of everything they buy.