Hey U-T re: Fair Tax

#1
vader

vader

El Chingón
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#1
I never thought I would be one to request an argument, but I have seen posts by you where you have stated strongly that a "Fair Tax" was not a good idea (I am too lazy to pull those up). I would like to see a well thought out, civil discussion about the pros and cons of a reformed tax system by the deeper political/economic thinkers on the board.

Why would it not work?
 
#5
#5
Well I am not a big fan of Fairs. Hell the food is great but those rides make you sick. They make enough money so why give them a tax?:yes::whistling:
 
#6
#6
One minute from my post about you Fine. Took longer than I thought.
 
#9
#9
I am in an extreme hurry so let me just say one quick thing.

I am not against the Fair Tax because I think it is a bad idea. I am just against the current Fait Tax proposal being issued by Huckabee and FairTax.org or whatever their bias site states

I look at this FairTax propsal as Version 1.0 in what could be released around Version 5.0. There are too many holes to their proposal AND one thing people don't get is how hard it would be to actually implement most of its idea.

To hear most of its supporters talk, I wonder if they actually understand what would occur if we put into effect the Huckabee tax plan in terms of putting it to use in America today. Any talk of getting rid of the IRS if flatly absurd as that shows me that someone really has no idea what the IRS does AND how they would be desperately needed even IF the FT was put into effect.

Do I agree with some of the FT's ideas? Yes. But I also think that the FairTax was championed by Huck not to actually be put into place and used but used because it is more of a "cool" way to attract voters and it is a plan that on the outside has all sorts of positives to the average joe that hasn't a clue how the tax system works.

The Tax system without doubt needs changes. I am NOT saying to keep it the way it is. The AMT should be eliminated along with other taxes BUT the ideas of the FairTax are too simplistic and unrealistic, in my eyes.

I think many of the Pro-FT supporters from the Media (like Greenspan) make very good points on why it would succeed but even THEY point out the utter harsh realities it would face.

More reason it needs to be tweaked and massively changed before it comes out
 
#15
#15
Why the Fair Tax will never make it, as I overheard from some co-workers discussing the subject:

"It would be cool if they set it at $800 but if they set it at $5000 then I don't think that is very fair".

:crazy:
 
#16
#16
What does the Fair Tax do to state/local sales taxes? Would I be paying 33% (23% fed + 10% local) on every purchase?

Another issue deals with impact on consumption - while in aggregate, FT advocates say it is revenue neutral I wonder if it will change consumption patterns and thus revenues.

As a quick example, Alabama funds a large portion of education on sales tax. As a result, budgets go through a boom/bust cycle along with the overall economy.
 
#17
#17
droski said:
first of it encourages the black market. second it would kill tourism.
Click to expand...

Any tax system, including the one we have, will encourage some negative behavior or another for the purpose of avoiding the tax. If the tax system changes, the negative behavior will shift from one area to another. The proponents of the fair tax claim that, at the end of the day, tax revenues will be roughly the same or slightly more than they are now, because many segments of society that don't pay income taxes will be forced to pay fair (sales) tax.

Furthermore, I'm not sure the Huckaby plan, as I understand it, would encourage a black market because it would only apply to new goods, and not to used goods.

As for killing tourism, I think the theory is that the cost of goods would stay roughly the same because the increase resulting from the tax would be offset by elimination of the built-in costs resulting from the current tax system. In other words, if Company X makes widgets, and Company X pays certain income taxes under the current system, the amount of those taxes is built in to the cost of the widgets. If Company X no longer pays the income tax, the cost of the widgets goes down. Thus, it would be a wash from the point of a tourist.
 
#19
#19
volinbham said:
What does the Fair Tax do to state/local sales taxes? Would I be paying 33% (23% fed + 10% local) on every purchase?

Another issue deals with impact on consumption - while in aggregate, FT advocates say it is revenue neutral I wonder if it will change consumption patterns and thus revenues.

As a quick example, Alabama funds a large portion of education on sales tax. As a result, budgets go through a boom/bust cycle along with the overall economy.
Click to expand...

I think this is true of any tax system. When the economy is doing well, the government makes more money, just like everybody else.
 
#20
#20
U-T said:
I am in an extreme hurry so let me just say one quick thing.

I am not against the Fair Tax because I think it is a bad idea. I am just against the current Fait Tax proposal being issued by Huckabee and FairTax.org or whatever their bias site states

I look at this FairTax propsal as Version 1.0 in what could be released around Version 5.0. There are too many holes to their proposal AND one thing people don't get is how hard it would be to actually implement most of its idea.

To hear most of its supporters talk, I wonder if they actually understand what would occur if we put into effect the Huckabee tax plan in terms of putting it to use in America today. Any talk of getting rid of the IRS if flatly absurd as that shows me that someone really has no idea what the IRS does AND how they would be desperately needed even IF the FT was put into effect.

Do I agree with some of the FT's ideas? Yes. But I also think that the FairTax was championed by Huck not to actually be put into place and used but used because it is more of a "cool" way to attract voters and it is a plan that on the outside has all sorts of positives to the average joe that hasn't a clue how the tax system works.

The Tax system without doubt needs changes. I am NOT saying to keep it the way it is. The AMT should be eliminated along with other taxes BUT the ideas of the FairTax are too simplistic and unrealistic, in my eyes.

I think many of the Pro-FT supporters from the Media (like Greenspan) make very good points on why it would succeed but even THEY point out the utter harsh realities it would face.

More reason it needs to be tweaked and massively changed before it comes out
Click to expand...

I don't understand what's so complicated about it. Simply eliminate all of the existing Federal taxes (income, FICA, employment, SS, etc.) and replace them with an across-the-board Federal sales tax on new goods. Virually all sellers of new goods already collect sales taxes, often more than one, so it would be very simple to just add another tax at the point of sale. Why would that be difficult?

Yes, we would still need IRS agents, but not nearly as many as we need now. Policing a simple sales tax would be infinitely simpler than policing the current tax system, which is nearly impossible.

It seems to me that the most difficult aspect of the whole idea is amending the US Constitution to prohibit the federal government from charging an income tax. That itself will take some political maneuvering, but the tax plan itself is quite simple.
 
#21
#21
jamesd1628 said:
I think this is true of any tax system. When the economy is doing well, the government makes more money, just like everybody else.
Click to expand...

It is the magnitude of the swings that is different.

For comparison - many other states rely more heavily on property taxes as a source of educational funding. Since property values do not adjust as rapidly as the economy, tax revenues are more stable.

The same is true of income taxes. Downturns in the economy do not put the same downward pressure on income as it does on spending - as a result, income tax revenue is more stable than sales tax revenue.
 
#22
#22
The Fair Tax, as proposed by Boortz and Linder, would in no way kill tourism nor would it encourage the black market. Obviously, Droski, you have not read the actual proposal. The Fair Tax would simply replace all the built in costs of all Federal Taxes (would in no way effect local taxes) incurred throughout the process of taking the raw material and turning into a retail consumer good. At that point, the retail good would be taxed once, and only once.

What is going to be sold on the black market, Droski? Anything in which the tax will make a material difference is usually too sophisticated or the hassle of buying from the black market is too steep. Fruits and vegetables might be the only evidence of your argument meaning absolutely anything. Feel free to try to buy a car off the black market in which someone has not yet bought it retail...
 
#23
#23
volinbham said:
It is the magnitude of the swings that is different.

For comparison - many other states rely more heavily on property taxes as a source of educational funding. Since property values do not adjust as rapidly as the economy, tax revenues are more stable.

The same is true of income taxes. Downturns in the economy do not put the same downward pressure on income as it does on spending - as a result, income tax revenue is more stable than sales tax revenue.
Click to expand...

Is it a matter of magnitude or timing (or both)? I'm no expert on the macro economy, but I would think the main issue might be one of timing. I would assume that spending trends adjust more quickly than income trends, but they both have to adjust. Wouldn't these adjustments have to be somewhat equivalent over time? In other words, in the long haul, how can spending levels increase if incomes do not?
 
#24
#24
It is both. You could end up in the same place x years out but the path to get there could be very different.

A simple example over 2 observations:

Case 1: 10, 0 equals an average of 5
Case 2: 5, 5 equals an average of 5

So, while the end result may be essentially the same, the impact of volatility can be disruptive more so than a smooth, steady path.
 
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