The "Fair Tax" explained.

Just a thought...

When the income tax was first enacted, it was intended and promoted as a tax on the SUPER-RICH only; but that was NOT the result -- the unintended consequences have warped our society in untold ways (everything from requiring churches to register and "toe the line" to retain 501(c)3 status to a complete corruption of savings, debt as well as charitable AND business investments... who these days makes ANY capitol investment without considering the "tax implications").

One of the MANY unexpected consequences of the so called "FAIR" tax is that it would be a pervasive means...of extending COMPLETE government control over virtually EVERYONE in the middle and lower income brackets.

Why? How?

Simple.

First, the tax will actually be at a MINIMUM rate of 30% -- the 23% is a ruse -- which means that EVERYTHING you buy "new" will cost 1/3 more (note that your state and local sales taxes would still be computed on TOP of the "fair" tax because that tax in "integrated" into the price of the product -- aka it is a "hidden tax" -- this would mean a "boost" of state sales tax revenues of essentially 30% or more.) And of course it is VERY unlikely that they will be able to leave the rate at 30%; indeed since implementing it in a dramatic "single day" would cause havoc in the marketplace, they would probably end up "phasing it in" slowly -- starting at say 1%, while purportedly "phasing out" the income tax... People would then become used to the constantly increasing prices (and what effect THAT would have on an economy no one CAN know -- unless hyperinflation models are used) -- and when and at what % it would stop would be anyone's guess.

Second, the "prebate" that is planned on being mailed to EVERY adult resident, every month -- would essentially put EVERYONE on the government dole, and therefore significantly under government control. You do something wrong, violate some "rule" or miscellaneous "regulation" -- miss a child-support payment, forget to pay a parking fine, etc -- they simply "confiscate" a portion of or "temporarily suspend" your "prebate" deposits. Ergo they cut-off a significant portion of your income. (And you better believe it, THIS can and would be done at the drop of a hat. Your recourse? Some long-involved paperwork appeal process before an "administrative board.")

Third, can you imagine what this "prebate" will do to families? When your son or daughter turns 18, you will -- automatically -- no longer receive their "prebates" but instead the money will be deposited directly in their name -- regardless of who is paying for their roof, clothes, food, etc. This will end up creating significant friction -- centered around money -- between young adults and their parents... guaranteed!

Finally, since the tax will be applied to everything "new" and technically will not be applied to "occasional sales" (think rummage sales) or "used" items -- there will instantly appear a HUGE black market for a significant amount of things. States already have trouble dealing with this issue -- should they really go around to all of the street fairs and flea markets and FINE people for simply reselling some old junk? What about sales of home-made "crafts"? How about rummage sales? Should they send the police around to make certain EVERY person having a rummage or garage sale charges the state and local sales tax? Normally this is dismissed as counter-productive, because the amount of money gained at 4% or even 8% is nowhere near the cost involved -- much less the animosity it would create. But if it becomes a matter of 30% or higher? Well, suddenly the equation changes.

And consider what will happen in sales of LARGE dollar objects -- cars, and homes? Those cannot be "black market" but will almost certainly become partially "gray" markets, as buyers AND sellers reach "under-the table" agreements and other "workarounds." And the other "large price" objects -- be they appliances, computers, etc. will almost certainly flourish in the new black markets that will spring up overnight across the United States.

Suddenly "used" will take on a different meaning -- as will the need for enforcement of the presence of RFID tags on virtually everything whether manufactured domestically, or imported... which will lead to significant incentive to smuggle goods into the country that are NOT tagged, or which are tagged with "false" RFID's.

Think this "Fair Tax" through to its logical conclusions, and its a recipe for disaster. In the end, it is a recipe for putting EVERYONE even further under the thumb of the government, making us all virtually employees of the government -- essentially socialism for the "masses" and "riches" for the elite.

Only one step away then from changing the "prebate" into your "full compensation" and confiscating your entire paycheck. Thus the government could allocate you just the amount of money it thinks you "need".

Farfetched? Consider that when the income tax was first proposed and implemented, it was only going to be ?at a rate of 1% -- and would only apply to the "rich" (those earning over $3,000 a year -- $ 300,000 in 2006 "dollars" roughly adjusted for inflation of the intervening century). During WW1 this was raised to 73% with the lower bracket at 4% and the number of people being taxed increasing dramatically due to wartime inflation. Another 25 years later and Milton Friedman (scum!) pushed the idea of direct payroll deductions to ensure that EVERYONE paid their "fair share" of income taxes (the only holdouts being those w/o paychecks: farmers and small businessmen). A far cry from the 1% tax on the "rich."

The fair tax does two thing I like, no more IRS and if you read between lines, it creates lots of jobs. Let me explain my position:
(1)The fair tax eliminates all corporate tax. Think for a second now. What company in their right mind would not re-domicile to the US? Dubai goodbye.
(2) The fair tax would create a cottage industry in used goods. before anyone would rush out to buy new goods, certainly taking a look a used items makes sense.
(3) The fair tax encourages saving. Who would want to pay 30% more for anything and finance it as well? You would have to be desperate or stupid.

I am sure I will get some criticism for this post, but it would be one way to transition into no tax by removing the income tax.

The article linked to doesn't include the provision for those in poverty.

To offset taxing those below the poverty level and dealing with deductions, Mike's Fair Tax has the federal government mailing 'prebate' checks for about $200/month for each adult and $70/month for each child, including legal resident aliens. It's an all-new welfare system.

I have the following problems with the Fair Tax:
It requires a welfare prebate to offset taxes on the poor.
It's way too high (just like the current tax code). I think most people think it's a massive tax hike because they don't realize how much taxes they pay now.
Huckabee isn't pushing for a significant cut in government spending to go with it.
It taxes interest payments other than mortgages.
It taxes health care.
It retaxes people who are living off of their savings that they earned before the Fair Tax (I don't know how to fix this fairly).

I would support the Fair Tax with the following changes:
NO welfare prebate.
NO taxes on interest of any kind (CC, student loans, business loans, mortgage). Interest isn't a product, it's just a redistribution of wealth. It's unfair to tax people who obviously don't have enough money as it is.
NO taxes on medicine and medical treatment.
NO taxes on home rent payments.
NO taxes on groceries.
NO taxes on childcare, up to the median cost for your area.
NO taxes on tuition & schoolbooks.
No taxes on water, electricity and heating fuel, up to the average usage for your area.
NO taxes on local public transportation (buses, subway).
Cut the rate from (exclusive) 30% to less than 10% (I like zero best too), combined with Dr. Paul's massive federal spending cut proposals.

Either way, Dr. Paul needs to better hammer on the fact that abolishing the $1T income tax would still leave us with the $1.7T revenue that we needed to fund the federal government under Clinton's 1999 budget. I think most people believe that income taxes account for 90+% of federal revenue.

here's an Analysis of Huckabee's proposed "Fair Tax"plan

Summary: The required sales tax rate would have to be at least 45% to 53%, possibly as high as 60%.
source: http://www.itepnet.org/sale0904.pdf

Excerpt:

To assist the public in understanding the implications of replacing most federal taxes with a national sales tax, the Institute on Taxation and Economic Policy (ITEP) has evaluated such a plan using our state-by-state microsimulation tax model. Specifically, we looked at H.R. 25, the leading sales tax proposal introduced in Congress, that would scrap most federal taxes in favor of a national sales tax.

H.R. 25, introduced by Rep. John Linder (R-Ga.) and others, would replace all federal personal and corporate income taxes, Social Security and Medicare taxes, and estate taxes with a retail sales tax on a very broad base of personal spending. Beyond the usual items that are often subject to existing state sales taxes, the proposed national sales tax would also apply to things such as health care, purchases of new houses, rent, etc.. H.R. 25 confusingly advertises its sales tax rate as 23 percent, but that’s rather disingenuous.

On a $100 purchase, for example, sales-tax proponents tell us that the tax would be $30, which most people would accurately call a 30 percent rate. The so-called 23 percent figure comes from dividing the sales tax by the cost of purchases plus the tax. To be sure, $30 divided by $130 does equal 23 percent, but no ordinary person would think of computing a sales tax that way.

The fact that the sales tax, even by its proponents’ own figures, entails a 30 percent tax rate is only the beginning of the math problems. Allegedly, almost a third of the projected sales-tax revenues are supposed to come from taxes that the government will pay to itself.

Build a road, pay yourself a tax. Buy some planes for the Air Force, pay yourself some more. And so on. Unfortunately, that can’t work. Without these phantom governmental tax payments, the sales tax rate would have to jump to 42 percent to break even.

In addition, a quarter of the remaining sales taxes are supposed to be paid on things like church services, free care at veterans hospitals and a variety of hard-to-tax financial services like free checking accounts. If we disregard the supposed taxes on these items, the sales tax rate would have to climb to 50 percent or more to break even.

So, merely to match current-law tax revenues would require either a much higher sales tax rate than H.R. 25 provides or alternatively, keeping a large portion of the current taxes that H.R. 25 would repeal. Rather than trying to determine how H.R. 25’s sponsors might resolve this mathematical dilemma if their plan were ever taken seriously, we simply computed a break-even sales tax rate that would match current revenues from the taxes that H.R. 25 would eliminate.

For 2005 (a relatively low-tax year), we calculate that the required break-even sales tax rate would be between 45 percent and 53 percent, depending on how certain tax-base issues are resolved.

A recent analysis by William Gale of the Brookings Institution finds that to match expected federal revenues over the upcoming decade would require a sales tax rate of about 60 percent.
That figure is consistent with earlier analyses by Citizens for Tax Justice and the congressional Joint Committee on Taxation.

if the 'fair' tax is passed, we will STILL have the 16th amendment making it possible for BOTH taxes. step #1 is the repeal of this amendment, then we can discuss what will take it's place. my vote is with Dr. Paul, replace it with nothing.
and read the plan, it gives money to people. how quickly will the politicians decide that this group doesn't need to receive their monthly check? that group needs a larger check? this product good & needs an exemption? that service is dangerous & should have a higher rate?

but something positive about it, it has a nice name.