There are many differences between the Fair and Flat tax,although both are a much needed improvement to our current system. With a flat tax system everyone gets taxed the same amount, now at face value this may seem like a "fair tax" but let's give an example: let's say the flat tax rate is $5,000 a year, now you have two families, A) which makes $40,000 a year and B) which makes $100,000 a year, it will be alot easier for the family B to afford the tax without any real drawbacks then family A who already makes $60,000 less BEFORE TAXES. But let's not stop there, the flat tax is still an income tax that is out of your control and it still taxes capital (dividends, investments, etc.) and wages where as the Fair tax is basically a nation wide sales tax. Also the Fair tax eliminates income tax and capital tax, it enables workers who are already in debt because of gas, utilities, insurance, and the rising cost of living and health care to bring home more of their hard earned money at the end of the week. Our tax system is in dier need of reform and the Fair Tax is the way to go. Please respond with your thoughts and comments.
- Sign in or Sign up to post comments
- send to friend
- report as spam
Either one would be fine for me under one condition - it can effectively and simple be set whereby the tax revenues incoming will cover the fiscal expenditures going out. I'm all for simplication and putting the kibosh on that onerous Social Engineering Lobbyist/K-Street "Full-Employment" Beast called the Federal Tax Code. We also need to set it where we can start to make the Entitlement Programs (Soc Sec, Medicare, Medcaid, corporate welfare) somewhat actuarially sound as well. And I think a fair tax or flat tax on income (excluding tax on capital gais and savings/investments) will go a long way to boosting savings all the way a round and investment in the future.
It would be a tremendous boon to what we need to promote here above allin Unity-land and America in general - An "Endowment For the Future Mentality" as opposed to the "Entitlement Mentality" that has taken hold in recent years esp with the middle and upper class elites (see corporate Welfare subsidies/tax expenditures) of late and the older generation. It is that Entitlement "Borrow-Borrow/Spend-Spend get-something-for-nothing" mentality more than anything that is driving this country into fiscal oblivion and robbing our kids/grandkids of their futures. The 20,000 page Federal Tax Code is its biggest manfestation. Put the kibosh on that onerous and indecipherable Code and maybe the 60,000 lawyers/lobbyists on K-Street and Gucci Gulch up there on Cap Hill would have to get REAL jobs!
DC - 3rd ward - milligansstew08@yahoo.com
http://milligansstew.blogspot.com
You totally misundertand the Flat Tax.
The Flat Tax is not a head tax. Rather, it is flat tax rate that everyone pays on their income, usually somewhere between 10% and 18% - not including Social Security payroll taxes. Under your example, the $40,000 family would pay $4,000 while the $100,000 family would pay $10,000 (assuming the lowest tax rate). Of course, if you start adding exemptions and deductions you have a modified flat tax, not a true flat tax - and then what you are talking about reforming the existing system rather than initiating a flat tax.
The problem with the flat tax, by the way, is that people still have to file under penalty of perjury.
The Fair Tax is a national sales tax. However, there is a problem with it. Actually there are a few. The first is that, unless you include sales to the government, the rate is so high that tax evasion becomes a real problem.
The second problem is one most anti-taxers have not thought of. If you have a flat tax, any tax subsidies you think you are getting rid of will be replaced by spending subsidies. Every home owner will suddenly demand a government subsidized mortgage - now available only to low and moderate income homebuyers. Any energy subsidies will soon become grant programs. The list goes on ad infinitum.
The real kicker, however, is that the tax payers are no longer in control of how the subsidies are used. Instead, these decisions will be made either by bureaucrats or through earmarked spending as part of the appropriation process. I can easily see Exxon-Mobil asking for some portion of the DOE budget for oil exploration "grants".
Privatizing government also is affected - although everyone will want a government contract since for all practical purposes the income from it will be tax free.
There are better alternatives, which I will post in a separate entry.
Have you read Fairtax.org? How can you evade paying taxes when it is an automatic occurence through your purchase of new goods and services with NO EXEPTIONS? Any person, corporation and any governmental dept. who spends on new goods or services will automatically pay a sales tax! Companies with employees will no longer have to pay half of every employees social security tax because it will no longer be deducted from their payroll check. How much money will that save every business and what will they do with it?.... I say that they most likely will expand ops and hire more, maybe even paying a prevailing wage. Fair Tax is the only logical tax change. Fairtax.org.
The fair tax is not really fair. It is a national sales tax. The goods and services are taxed at a percentage and it affects lower income families more than upper income. We all need to buy the same goods. A lower income person may use 50% of their income for necessary items. while a upper income person may only need to spend 25% of income. The rebate system is unrealistic as it does not take in account how much "float" is required to offset waiting periods. The last thing if you want to buy a 100k house and the tax is 20%, that same house now costs you 120K. The government is not going to rebate you 20K so in essence you spent 20K for the privilege of being allowed to buy a house. The Western Europeans (France, Germany, etc.) have had a VAT tax(value added tax) for decades. It does not work. A national sales tax won't work. The Eastern European countries (Croatia, Georgia, etc.) have used a flat tax on all income. The revenue has been so overwhelming they have cut taxes several times. The Flat tax is the only way to go.
The Western Europeans have also eliminated Social Security type plans and replaced it with a forced, privatized IRA/401K plan. Their retirement plans are swimming in money and America's Social Securuty system is constantly in the red. We need to stop listening to the politicians and start listening to the free market pros.
I personally like the flat tax with a standard deduction, ie. say $2500.00 for each person or whatever, That way everyone will be paying the same amount of taxes relative to their income. If a family of four makes $50.000 a year and the tax rate is say 20% they would pay $0 but a family making $100,00 would pay $10,000 a year, 200,000 would pay $30,000 a year, and so on. Everyone would be paying 20% minus the standard deduction per person. There would be no other deductions and 5 minutes of your time to fill out your return. It would bring in more revenue because tax shelters, offshore accounts, would be useless. Instead of the IRS spending huge amounts of money trying to make sure everyone follows a tax code that is impossible to understand, even for them, they could spend a small amount of money going after tax evaders. The working poor and middle class would benefit because they would not have to carry the burden of propping up the entire country and the rich will have to pay their share. The rich generally have a huge amount of deductions and end up paying less then those making 50 or 60 thousand dollars a year. Corporate profits could be taxed on the same idea, right now they pay nothing or next to nothing which means that the owners of these corporations are making tons of money and paying little.
My problem with the fair tax is that even though one would bring more home at the end of the week they would also be putting out more to live. They rich would just order from overseas so they could avoid most of the taxes. It would also take a large amount of administrative record keeping for both businesses and the government. The flat tax would reduce record keeping for both. The IRS could shrink considerately and save tons of money for the tax payers. IMHO, they main problem with government agencies is that their administrative cost sometimes outweighs their usefulness. We need the IRS but we do not need a huge agencies that cost billions of dollars a year to operate.
The numbers I used was just numbers I pull out of my head and I am not suggesting they represent the proper balance. However, I do not believe that Washington is going to change the way they collect taxes anytime soon since their is big money and a whole lot of power derived from such a system.
Betty
Betty327@ptd.net
Your "standard credit" would have the family of four, making $50,000 a year, pay nothing. Why would you have anyone pay nothing? It seems as if you are stuck on this whole "rich vs. poor" thing. If everyone pays the same percentage of their income in taxes, then those who make the most will pay the most anyway. So reduce the percentage if you want low income to pay less, and eliminate the deductions and shelters so that everyone pays this lower percentage.
someone making 50k would deduct 2024 but still pay taxes on 48k. where is that some are paying nothing?
Betty
Betty327@ptd.net
The first couple sentences of your post say deduction, but as someone pointed out, the way it is stated it should say credit. Anyway, you state that the family of four making 50k would pay 0.
My mistake. Although I think a family living under the poverty level should not have to pay taxes, but that's my opinion.
Betty
Betty327@ptd.net
Betty,
That's the beauty of The Fair Tax. People living at the poverty level would receive a pre-bate at the begining of every month that would cover the estimated taxes on neccesities. If they are only buying the neccesities, they would end up with a net taxes paid of zero. Furthermore, if they purchase their neccesities for less than the estimated amount, they would end up with a gain, very slight, but still a gain.
Autobob,
I never said I would be against the fair tax. My concern is, and it could be that I just don't understand it completely, is that corporations and the rich could go offshore to buy many of the things they want and that would still leave the middle class holding the bag.
Betty
Betty327@ptd.net
Betty,
The way I understand it, the cost off goods will be reduced by approximately the increase for taxes, due to the reduction of the embeded taxes built in by all manufacturers to recoup their taxes and cost for compliance. With the cost remaining the same there would be no reason to purchase off shore as the price would be very similar. As far as businesses are concerned, they would not pay taxes on product purchased for manufacturing or re-sale at the retail level, so again there would not be reason for this attempt at evasion. Also, anything purchased used, be it a house, yacht, or a Ford, would not have taxes because goods are taxed only on the original sale.
Betty please go to fairtax.org. we have always paid a hidden sales tax on most things. Businesses include this in their cost to manufacture and then pass it along to the retail consumer. Also you can reduce your personal tax burden by not purchasing new goods or services. Under the fairtax premise you will only pay sales tax on "new goods and services. Any new goods shipped to the U.S. will be taxed so even the wealthy will have to pay taxes. Record keeping will be completely streamlined,I will never have to chase a deduction again or pay someone to do my taxes unless of course I become a retail supplier, in which case, whats left of the IRS will take care of most likely through register generated receipts.
The fair tax is not really fair. It is a national sales tax. The goods and services are taxed at a percentage and it affects lower income families more than upper income. We all need to buy the same goods. A lower income person may use 50% of their income for necessary items. while a upper income person may only need to spend 25% of income. The rebate system is unrealistic as it does not take in account how much "float" is required to offset waiting periods. The last thing if you want to buy a 100k house and the tax is 20%, that same house now costs you 120K. The government is not going to rebate you 20K so in essence you spent 20K for the privilege of being allowed to buy a house. The Western Europeans (France, Germany, etc.) have had a VAT tax(value added tax) for decades. It does not work. A national sales tax won't work. The Eastern European countries (Croatia, Georgia, etc.) have used a flat tax on all income. The revenue has been so overwhelming they have cut taxes several times. The Flat tax is the only way to go.
The Western Europeans have also eliminated Social Security type plans and replaced it with a forced, privatized IRA/401K plan. Their retirement plans are swimming in money and America's Social Securuty system is constantly in the red. We need to stop listening to the politicians and start listening to the free market pros.
stumpylarue, Try buying a house thats not new........zero tax...furthermore resell it and pay zero capital gains tax. eliminate all individual tax paperwork and save billions every year. btw..poverty level spenders will receive a monthly pre-bate according to necessity spending and I do beleive that lower income people spend closer to 100% of their earnings for basic needs. fairtax.org NO EXCEPTIONS
Stumpy,
Go to the Fairtax website and look at the example for building a new home. When the upstream taxes are eliminated and you use untaxed income to purchase you still pay less for the final product.
Autobob. I have not seen the website however a national sales tax can't work. The tax makes a tax collector out of every business man, which means they will need to hire administrative staff, in turn they will need to raise prices to pay staff. You, as the consumer, will need to pay higher prices for your goods and services. This also means you, as the worker, will need to make more money which will raise the costs of your employer. The hidden costs are never figured into any tax plan.
Also, How will the government tax capital gains, interest income, rental income, profits from a corporation, bartering income, investment returns on capital, deferred compensation income, annuity income, retirement income, deferred interest. Municipal bond interest, sales of real property? You may believe all the taxes on this income will be eliminated but do you really think the state and federal government will let all that cash just sail through the system free and clear. Do you really think the government will let you buy a house and not tax it under "Fair Tax" plan?
That is just wishful thinking my friend. The estimated national sales tax required to implement the current government costs is upwards of 45%. That does not include state taxes.
Stumpy,
Please take a few minutes to read through the FAQ area of the Fair Tax website:
http://www.fairtax.org/
To answer a few of your concerns:
"The tax makes a tax collector out of every business man, which means they will need to hire administrative staff, in turn they will need to raise prices to pay staff."
Every business is currently collecting taxes of some sort (payroll or sales) and must have someone compute, collect, and remit. The Fair tax would actually reduce the required staff because sales taxes are now only collected on new items, thereby reducing the staff required, and cost associated with collecting all of the payroll taxes and sales taxes on "used" items.
"This also means you, as the worker, will need to make more money which will raise the costs of your employer"
You, the employee, now have increased buying power because you take home your entire paycheck. Your employer now has less cost associated with getting you this paycheck because no one is required to compute, collect and remit your payroll taxes.
"The hidden costs are never figured into any tax plan"
One of the beautiful things about the Fair tax is that it is eliminating much of the "hidden costs" of the current system.
"You may believe all the taxes on this income will be eliminated but do you really think the state and federal government will let all that cash just sail through the system free and clear. Do you really think the government will let you buy a house and not tax it under "Fair Tax" plan?"
Yes, I believe they will because the system, as stated, will actually increase the dollars collected in much the same way that tax cuts do. When we have more investment, due to more take-home pay, and a "business friendly" tax code, which will allow businesses to also take advantage of our incredible workforce, both blue and white collar, the growth will be incredible.
"The estimated national sales tax required to implement the current government costs is upwards of 45%. That does not include state taxes."
The estimated sales tax, to remain revenue nuetral, is approx. 23%. This is about the same cost of embeded taxes currently paid, so product pricing will be about the same.
I have read on both the Flat tax and the Fair tax, and while both are better than the current system, I believe the Fair tax is far better.
Autobob. I am basing my info on a factcheck.org article on the fair tax. This is why I think flat tax is better. See web site below( copy and paste in your browser) www.factcheck.org/taxes/unspinning_the_fairtax.html
Stumpy,
I read the Factcheck piece, then searched "factcheck" on the Fair Tax site and came up with this. Please check it out and read your way around the site while your there. It is the Fair Tax rebutal to the Factcheck article.
http://www.fairtax.org/site/PageServer?pagename=news_myths_factcheck
Again, I think the Fair Tax or Flat tax would be better than the current system, but I'm all for eliminating the need for filing returns by taxing consumption only.
I think you mean a credit of $2500 per person. A deduction is a subtraction from the income figure, not the tax figure, so a $50,000 per year income with 4 members becomes $40,000 with an $8,000 tax liability. Ouch. A credit would mean $0 taxes. Also, if the credit were refundable so that a family of 4 with no income received it, this would be a start - although I suggest a $6,000 per person credit, refundable semi-monthly or bi-weekly. Of course, a bi-weekly credit should be $6,500 annually, or $250 per person every two weeks. Note that someone still has to work to make ends meet, but work at least pays under that scenario.
I am still baffled why we should have people file at all when the alternative is to let the employer pay the tax and pass on the credit under a business income tax scheme - which they would do anyway under a flat tax except that the employee also files under that scenario. However, if you have employees you are still writing a check to the federal government from your funds for your employee's taxes and are required to file complete information on the transaction.
BTW, the rich actually pay more in taxes, however with Social Security included they pay a smaller percentage of their income in taxes - which is different than paying less. The solution to that problem, however, is not to take away all deductions but to remove the cap on Social Security contributions.
The reason we must keep the employee involved in taxes, is to keep them honest. Given a tax on business only , how long before the employees vote to raise those taxes to fund some benefit or other? There would soon be no center. We would have the party of business, and the party of employees.
That's what I said, $2500. I just put a decimal point and two 00 behind it.
Betty
Betty327@ptd.net