The Fair Tax will cause a depression
This person has it mostly wrong. The fair tax will be a disaster and he proves my point. “Finally, remember that under the Fair Tax, you and I get a choice as to
when we get taxed. If we choose to save our money or buy a used item instead of a new one, there is no tax. If you buy a less expensive item, it has a lower amount of tax. Buying used clothing, used cars, used furniture, etc. can help the elderly avoid taxes in many instances as well. Many already make such frugal choices as it is and the fair tax would reward that.”
If people made the choice to buy used items or not buy at all their would be a massive depression in the US. Many people who choose to buy will buy from a black or gray market and the government would get nothing.
23 percent is really 30 percent if you do the math correctly and that will not even cover it. Now put state and local sales taxes on top of that 30 percent and you are talking about a 40 percent tax on everything you purchase. Like I said the Fair Tax is a recipe for a depression. Imagine buying a house, car, pill, groceries or anything else that suddenly costs 40 percent more.
Date posted: Monday, December 31st, 2007 2:24 pm | Under category: Uncategorized
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Get your facts straight. Do you really, ignorantly, believe that an individual can exist without buying from the legal market? The FairTax would NOT CAUSE INCREASE IN PRICES AT ALL. Embedded taxes account for much more than 30% of each item. Read the book.
People can certainly buy some of what they need on the black market, cigarettes is a prime example today. Sure there are embedded taxes in the products we buy but they are nowhere near the rates you suggest. Books are just the view of the author and until you hear a rebuttal of their theories you do not have the facts.
A fair tax still has to come up with the money to replace the income tax and by the time they get done adding all the giveaway programs to all the government dependents it will not be a “fair tax” at all anymore. And don’t tell me they wont do that.
The “fair tax” is a dead issue because nobody wants a consumption tax here. Once government starts a consumption tax they will play Europe and still retain income tax for the wealthy that progressively will move down to the middle class like the Alternative Income Tax. The real problem is way too much government spending and people on the dole. You will never have fair taxes as long as that is the reality in this nation.
The FairTax bill that I support calls for the total abolition of the IRS and income tax. Compared to our current abominable tax code, I believe that people would support the tax if they actually bothered to learn about it. I would like to know what you know about embedded taxes, and I have indeed studied oppositions to the FairTax. The main problem is indeed too much government spending, and the FairTax clearly addresses that problem. It is true that politicians will fight to keep the income tax, but the creators of the FairTax would not allow modifications such as retaining the income tax. You simply cannot say that everything will cost 40% more. Consider the reduction in prices caused by the removal of taxes on businesses. Businesses from all over the world will move to this country. It will bring the greatest economic growth this country has ever seen. It is not simply an additional tax on everything we purchase. I would never support that. Not only would prices fall, but people would have 100% of their paycheck to spend invest or save. I think that they will be able to afford much more.
Most corporations and businesses pay much less taxes than you realize. They only pay taxes on their profits. Most find ways to dump profits back in the business rather than pay the taxes. So Federal embedded taxes are mostly an illusion especially in times like these and local embedded corporate income taxes do not count because the Fair Tax does not address local taxes. Do some research on the amount collected from all U.S. corporation in Federal income taxes and fees and compared that to their total sales revenues and you will see that the real embedded taxes on sales are no where near what the Fair Tax people told you.
The Fair Tax does not address too much government spending either. Perhaps people who are behind the Fair Tax want less spending but they do not run this nation nor can they stop the interest debt burden. We are heading more toward a socialist welfare state not away from it. That is not going to change because of a new way to collect Federal taxes. Democrats and Rino’s control 3/4 of our Congressional representatives. Socialist policies are not going to be done away with unless the government is ready for the resulting riots. You cannot create a class of government dependents and then cut them off without serious social consequences.
You say the Fair Tax creators will not allow them to keep the income tax system but in today’s political realities you will never have just a pure consumption tax passed with rates anywhere near the level you have been told. Do you really believe that all of a sudden Congress is going to take away earned income credits, deductions for dependents, interest deductions for houses etc etc. There would be rioting in the streets. No. even with a fair tax they would add these deductions back in and the rate would end up being 10 to 20 percent higher then what they are telling you.
A Fair Tax might encourage business to move to this country if the Fair Tax was low but I am telling you it will never be anywhere near as low as they are telling you because government will still have to pay for all the government programs, the government dependents living off of government, and interest on our national debt and the rapidly arising entitlements. Spending beyond are means and our debt load are the real problem and anyone who thinks this is going to stop before the collapse of our dollar is not really understanding the issues.
Perhaps after the Revolution back to constitutional small central government and after a default on our debt and the resultant weaning from forced socialism we can have a Fair Tax that will work. However, this is not going to happen under the present socialistic and economic realities. Right now the tax shortfalls a “Fair Tax” would bring with the reduction in consumption would just bring us one step closer to a depression but it now it seems that we are determined to go to either a depression or an inflationary depression in any case.
Over 40c on a dollar is already going to pay taxes in this country and we should be collecting at least 60c to not go further in debt. Then how in the world is a 23c tax on products we buy going to fund the 60c we need. It will not.
I’m not sure why you’d want to abolish the income tax and start taxing consumption exclusively instead. What will happen next? They’ll start taxing the hell out of consumption if income tax doesn’t give them enough revenue, as they do in Europe where we have a VAT (Value Added Tax) that can even be as high as 21% in Belgium. I don’t see what’s so fair about that. Consumption ensures that corporations get a revenue. Prices should reflect their actual value. These taxes distort prices and require a whole bunch of additional administration to keep VAT separate. That means more gov’t regulation and control, and a lot more attempts at fraud – which is totally understandable from my point of view.
Also, there’s absolutely no reason to believe that they will eventually abolish all other taxes. You still have local taxes, state taxes, and God only knows what they’re going to suck out of you next with people like Obama in charge that believe in the climate change hype.
I think you might be better off with a flat sales and income tax. And more importantly, government reform aimed at preventing government from overspending and having to raise taxes as a result in the first place.
This rather lengthy but interesting article from the Mises Institute offers an critical view on taxing consumption: http://www.mises.org/story/1768.
The FairTax is entirely different than the VAT. The VAT is a sales tax that is added at every step in the production of retail items. It is hidden from consumers and makes a huge amount of money for the government. Consumers have no idea how much tax they on each sale in countries that have a VAT. “The VAT is the most efficient way to raise revenue for the government. It is also the most effective way to increase the size of government.” – Milton Friedman. The FairTax is added only once at the point of sale. “When you hear someone referto the FairTax as a VAT, you can be sure youre listening to someone who hasnt done their research.”
And I agree on the climate change topic. It infuriates me when the government has projects such as the ethanol plan that waste my money trying to save the world from junk science.
Tate, I sure know that the Fair Tax is not a VAT. The reason I brought up the VAT issue is that you are arguing in favor of taxing consumption. I don’t like progressive taxation and I am not convinced that taxing consumption of goods is a moral alernative to income taxation. After all, your income is meant to provide you a living. Consumption is a vital part of the economy, and whether you’re rich or poor, you will always consume. What will happen if people get a choice by either buying a new high quality but taxed product or a 2nd handed product? It seems to me like this FairTax would reduce incentive for innovation. Also, what you buy and consume should not anybody’s business – especially not that of the government. I’d rather have a flat income tax rate and be entirely free to buy whatever I want without having to get taxed progressively for what I buy and how much. Paying 23% to the state per product is still a heck of a lot, frankly, and even here in Europe with these high VATs we are not paying that much per product we buy either. In some cases it is 12% or 6%, though it varies from country to country. Yet despite all these taxes, our governments still progressively tax income up to over 40% and take part of your income away for social security/redistribution, not to mention what other special taxes apply to all sorts of other things. That being said, I believe the real problem is government overspending. I’m afraid the FairTax you propose will simply create a whole lot more bureaucracy. Sure glad we agree on the climate change topic though.
Good article Narani, Tate is right about the Fair Tax not being a VAT it is consumption tax type three in that article.
The facts are for Federal taxes to be revenue neutral it will be about $22,000 for each family in the U.S. for any tax system. If we were actually charged what the government has been spending the last few years it would $40,000. Try putting that price on consumption and see what happens. Not to mention that they would have to exempt or rebate basic foods, medical etc. for the poor. That means some families would pay nothing forcing others to pay even more.
The only reason we have income tax at all is to pay for big government and its programs. I would support a “Fair tax” if it were 10 percent on everything with no exceptions and the Federal government budget could not exceed the revenue. However, a Fair Tax today will start at about 30 percent and after the liberals got through with all the exceptions and tax rebates it would climb to 50 percent or more. Try buying that car or house then. It is a sure recipe for a downward spiral in consumption and wages – In other words it would bring a great depression.
Then I suppose what you’d support is a flat sales tax. I wouldn’t have a problem with that either. However, I hear so much talking about raising or lowering taxes, abolishing certain taxes altoghether, or introducing new taxes to replace older ones, and I think people are really just missing the point. Lowering or abolishing certain taxes would mean less government revenue, and how many people actually really want that at the end of the day, especially in our welfare states? Virtually none. They either support taxes or just want THEIR taxes lowered and have someone else pay for the government. Governments likewise are generally not truly willing to shrink the state and their powers, having less tax revenues. So what they do is propose alternative systems that sound better but really are aimed at eventually producing just as much if not more revenue for them. When are people going to understand that?
Actually I do not support a flat sales tax as in the “Fair Tax” because like I said it would end up being 50 percent not 23 as advertised and it would cause a depression.
You are correct that all different tax proposals are really just shifting the tax burden somewhere else. The reality will be quite different than what they propose because the same people who put all the exemptions and give away programs in the the progressive incoming tax system would do the same thing with the sales tax system. They will shift back the burden so that poor pay nothing and the middle-class picks up their tab. The rich largely escape the burden of a sales tax because their consumption as a percentage of income is far less then the middle class.
There has to be a general tax revolt before we can reign in the Federal government. Some State and local taxes are also out of control.
None of us are for carbon taxes or energy taxes that will redistribute money from working methods to produce low cost energy to experimental high cost renewable energy systems and energy taxes to force us to conserve. But you can be sure they are coming with Obama. Should oil prices be low when Obama takes office I will bet they will tax it back up.
Yes, I agree. Also, I’m not dogmatically against either taxes on consumption or personal income. I prefer a system that is just and doesn’t bring a lot of government intervention or intrusion on one’s life. Most importantly, it should not distort the markets much and should not actually provide the State a lot more than is actually necessary for it to perform the jobs it is constitutionally qualified for. In certain European countries there have been proposals similar to the FairTax but it was evident that the reason they supported this had to do with its simplicity and most of all the fact that it would lead to higher State revenues. It was not actually driven by a belief in more consumer freedom or less government. In fact, some stated that they supported these proposals because it would raise more funding for government welfare programs. So you can exploit virtually any type of taxes, even those with a flat rate. What is really at stake here is the principles of economic freedom, man’s right to the fruits of his labor, and limited government.
I support a consumption tax over an income tax because it would encourage saving and investment, instead of an income tax that encourages tax evasion. I agree that a flat tax would be much better than our current socialist graduated income tax. I am looking for tax reform, but its not going to happen with President elect Obama. Everyone that I know supports Obama simply because of this “change”. They have no idea what kind of “change” is coming. We may have to take a page out of Thomas Jefferson’s book and have a revolution…
Read my latest post.
http://www.thepropheticyears.com/dddblog/2008/11/18/no-good-for-the-obama-years-just-bad-ugly-and-super-ugly.html
Tate, I think you’ve come to the right place.