Consumption Tax (aka FairTax)

[Estayland]

A lot of my friends are FairTax supporters. I am not. Since Ashterotopia brought it up in the immigration thread, I thought we should separate it into a different discussion.

The Fair Taxx:

...

Closes all loopholes and brings fairness to taxation
Abolishes the IRS

First on the loopholes and fairness. There are currently THREE loopholes in the FairTax:

1. Only new retail sales are taxed. New homes, new cars, new clothes will include the tax in its final sales price. Which means used homes, used cars, used clothes etc. are not subject to consumption tax.

2. Education is exempt per the FairTax book.

3. Sales overseas are exempt from FairTax. This is technically consistent with VAT and GST in other countries.

Next, you cannot abolish the IRS with a consumption tax. Who will collect the tax? Who will conduct audits to ensure proper collection of tax? Even state and local governments have divisions that do that for their sales tax.

Supporters also won't recognize that the FairTax is just as corruptible as an income tax. Just wait until more things are exempt. We had Cash for Clunkers, Home Buyer Credits, and appliance rebates. You'll see these added to the consumption tax.

And while some products will cost less because of the elimination of corporate tax, those products with low margins will actually increase in price. Look at gasoline (aka petrol). Exxon makes less than 10 cents per gallon (about 3.5 cents corporate income tax). A 23% (30%) consumption tax will make $2 gasoline become $2.60 (60 cents consumption tax).

If I thought a consumption tax truly meant less government control, maybe I'd be a bigger supporter. But it's just as easily corruptible and controllable as an income tax.

[Guy]

What what what what what?

Are you proposing a less progressive tax to replace all current federal taxes? Well, you lost me. Taxes aren't progressive enough in any Western nation.

[Estayland]

Just come out and say you're a commie, guy

[Guy]

Well, actually, although I am on the extreme left-wing, I do not support the economic system of communism.

[McMulliness]

you bring up some good points. I lack knowledge on this area but would like to know if the loophole of not taxing education is not taxing students who buy education or not taxing the education system?

[Estayland]

From what I understand, if you spend $1000 on tuition, there is no tax assessed on it.

[Anime Daisuki]

Like Guy said, one big problem with the proposal to use consumption tax to replace income tax is it is not progressive. Most people, rich and poor alike, need to spend a minimum amount of money for food, transport, and housing. If we tax consumption, the poor would be unfairly penalized.

Also, there are ways to circumvent that kind of tax system, the well-to-do can use company funds or set up shell companies to acquire things like real estate and cars, so they won't be taxed themselves. This is already happening even under the present system, and would only get worse if there is no personal income tax.

[ashterotopia]

Quick Idea to throw Out there To get your ideas While I work on The List you have with problems and create an idea that would work

But the Quick Idea Would be What about Lowering the consumption Tax And Still keep property Tax. To My Knowledge and understanding of what you had said in return of the education problem of not Being taxed tuition so loss of money there. But in turn Does that not Mean Education is more affordable for the student? Well Yes it would be a drop in funds but Would allow Generations of Highly skilled workers in the future with more trained workers in the field.

Its just a quick idea i came up with as i was Making Coffee from Waking up after reading your Thread

[Estayland]

May 3, 2010 11:40:44 GMT -5 Anime Daisuki said:

Like Guy said, one big problem with the proposal to use consumption tax to replace income tax is it is not progressive. Most people, rich and poor alike, need to spend a minimum amount of money for food, transport, and housing. If we tax consumption, the poor would be unfairly penalized.

Also, there are ways to circumvent that kind of tax system, the well-to-do can use company funds or set up shell companies to acquire things like real estate and cars, so they won't be taxed themselves. This is already happening even under the present system, and would only get worse if there is no personal income tax.

AD,

There is a "pre-bate" system in which citizens receive an amount equal to the consumption tax paid on purchases up to the poverty line. Also, the tax is on retail sales... so corporations who purchase goods at retail are still taxed on it.

[Anime Daisuki]

May 3, 2010 13:16:13 GMT -5 Estayland said:

AD,

There is a "pre-bate" system in which citizens receive an amount equal to the consumption tax paid on purchases up to the poverty line. Also, the tax is on retail sales... so corporations who purchase goods at retail are still taxed on it.

True but the point is the cost is shared among shareholders although usually only one or two persons (e.g. the boss) enjoys the benefits.

[The Theban Legion]

Ashterotopia A new tax on top of the old ones is a horrible idea. My idea would be a flat tax accept in the case of the impoverished who just wouldnt have to pay taxes anyway, as that is the case currently. Thats why 60 percent of the US population doesnt pay taxes.

[Guy]

" Thats why 60 percent of the US population doesnt pay taxes. "

Really? 60 percent of the adult U.S. population doesn't pay tax? I find that hard to believe.

[The Theban Legion]

Your right the top 5 percent of earners pays 95% of the taxes. I dont know who pays the rest. And sorry I got that backwards, around 40% pay no federal income tax, though I'm assuming they pay some other form of taxes.

[Dragon Heirs]

Any research on how high this consumption tax would have to be to equal the current income tax?

[Estayland]

Dragon: 23% inclusive or 30% exclusive rate is what proponents say will be revenue neutral.

Guy and Theban: The top 5% pay over 60% of income taxes. The bottom 50% pay a little less than 3% (which includes those that get a refund larger than the income tax they paid). (2007 figures)

www.ntu.org/tax-basics/who-pays-income-taxes.html

As you can see in the link above, the top 10% of wage earners actually paid in a higher percentage of income tax AFTER Bush tax cuts than before.

[Guy]

OH c'mon Estay. We both know the Bush tax cuts benefited the rich.

Now, I'd really like to understand your POV. What is wrong with equality through taxation? Why can't we live in an egalitarian world?

[Estayland]

The Bush tax cuts benefited everyone that paid income taxes, not just the rich. Look at the example at the link below. It explains it with beer.

www.theologyonline.com/forums/showthread.php?t=52281

Equality should not be a goal to achieve. To achieve equality, we would have to go to the lowest common denominator. Have you ever read Harrison Bergeron by Kurt Vonnegut? Have you ever read Animal Farm? Equality is never achieved. Everyone is equal, but some are more equal than others.

[Guy]

Of course it can never be fully achieved, because there are too many people like you and not enough like me.
Some are more equal to others is one of the biggest pieces of shrubbery I've ever read. When a poor person dies because they can't afford health insurance, while a billionaire owns 60 sports cars, 6 mansions etc., how is that equality?

Hahahaha I absolutely adore that post. It is a pure example of how to convince your readers of something while knowing you are deceiving them.

The tenth man should pay the most because his income is the largest. That's fair in my world.

But.. Some of it is factually wrong. Anyone in the original $6,000 - $27,950 bracket did not get a cent more.

Also, it is way more polarised than what the actual income brackets are.

It's 2am, but I can still tell you this. Rich benefited. That's bad.

[Estayland]

The billionaire worked hard to get the 60 sports cars, 6 mansions, etc. He shouldn't be punished for his success. If you make everyone equal, there is no incentive to make yourself better. Innovations won't be made, advances in medicine to help that poor person won't be there. People are driven by some sort of a motive. If I knew I would make the same amount of money making more widgets, why should I make more widgets?

[SovietPrussia]

The idea that achieving total, 100% equality is possible or even desirable as Estay points out, is ridiculous. Especially when attempted by a central government and its accompanying bureaucracy. It would involve that bureaucracy having to allocate resources top-down, having to judge in each individual case which person needs them most. If the government decides you're not serving society well enough in your dream job as a librarian for example, you've now been moved to a housing estate halfway across the country to work as a plumber. Enjoy!

But leaving no safety net at all is just as ridiculous. We'd go back to Dickensian Britain which isn't an issue of economics or politics; it's just barbaric.

Taxation is a necessary evil. Even if you don't support it being used in a state health system or whatever, we can all agree that it's needed to fund the police, military, justice system, the things which protect our rights. So to keep the damage to personal finances as negligible as possible, those who are able to pay more without their standard of living being noticeably damaged should pay more in taxes than those who seriously need every penny/cent to make ends meet.

[Guy]

May 18, 2010 11:06:24 GMT -5 Estayland said:

The billionaire worked hard to get the 60 sports cars, 6 mansions, etc. He shouldn't be punished for his success. If you make everyone equal, there is no incentive to make yourself better. Innovations won't be made, advances in medicine to help that poor person won't be there. People are driven by some sort of a motive. If I knew I would make the same amount of money making more widgets, why should I make more widgets?

Of course, raising the issue of incentive. The oh-so-overused response to any suggestion our society could be just a little more equal.

Do you really believe everyone has the same starting point in any society today?

Even if the starting points are the same. And they aren't. Why should a person who is not successful in life die, while they have their mansions? I'm not saying we should take all their mansions. I'm saying we should take one mansion away, in order to save the lives of tens or even hundreds of people.

[SovietPrussia]

Why anyone could value that one mansion over the lives of hundreds of people, even if they don't know them personally, baffles me.

[Estayland]

Okay, so what have you two done to help those that you think need to be helped? Have you ever donated money to some charity that benefits these people? Or do you think that should be exclusive of those with 6 mansions and 60 sports cars?

[Guy]

Actually, Estay, I have donated quite a bit of money to many charities. I do not believe SP can legally donate in the UK, but you'll have to wait for his reply to verify that.

However, if the money has to be forced to come from somewhere, I'd much rather it be from the guy with the six mansions and sixty sport cars.

[Estayland]

I'll give you credit for donating and putting your money where your mouth is. I am about freedom... not force. Forced charity isn't charity at all.

[The Candy Lane]

May 18, 2010 11:06:24 GMT -5 Estayland said:

The billionaire worked hard to get the 60 sports cars, 6 mansions, etc. He shouldn't be punished for his success. If you make everyone equal, there is no incentive to make yourself better. Innovations won't be made, advances in medicine to help that poor person won't be there. People are driven by some sort of a motive. If I knew I would make the same amount of money making more widgets, why should I make more widgets?

wats ur definition of worked hard? win a lotto? have a hardworking-but dead uncle? founder of an effective scam like the shamwow? seriously there is a very realistic point when amassing or controlling wealth becomes morally wrong. (if u want some examples ill be more then happy to give them...)
the motive for medical advancements shouldnt be to get rich, but to help people.

As for giving, when a bilionaire give a couple million dollars to a charity im not all that impressed. they can afford to give a lot more. bybuying sports cars or vacation property they dont help anyone, by striving to make the highest profit possible they only think selfishly.
Im pretty sure if Donald Trump wanted to, he could find a cure for cancer. or at least get really freaking close.

[Luke 21:1] As he looked up, Jesus saw the rich putting their gifts into the temple treasury. [2] He also saw a poor widow put in two very small copper coins. [3] "I tell you the truth," he said, "this poor widow has put in more than all the others. [4] All these people gave their gifts out of their wealth; but she out of her poverty put in all she had to live on."
Jesus teaches proportional giving.

[Guy]

May 19, 2010 16:36:24 GMT -5 Estayland said:

I'll give you credit for donating and putting your money where your mouth is. I am about freedom... not force. Forced charity isn't charity at all.

No, it is not. But it has to come from somewhere.

[Estayland]

Candy Lane, that passage you mentioned from the Bible is more about sacrifice and meaning, not "proportional giving." A millionaire can give away 20% of his yearly earnings (the Bible only asks for 10%), but it may not mean that much to him. Now, someone who makes $20k a year gives away 10% or $2k more makes a bigger sacrifice. Jesus is saying that the $20k person probably gives more sacrificially and more out of their heart.

If you also noticed, the Bible never said anything about the government forcing the charitable giving. We render unto Caesar what is Caesar's, but Caesar doesn't take from the rich and give to the poor.

On another line of thinking... why should the government tell us what we should and shouldn't give to? If I feel passionate about helping homeless people get back to work, my hard-earned money shouldn't be forced to be given to just giving homeless handouts.

[SovietPrussia]

Well being a high school student without my own source of income makes giving sizeable donations to charity a little difficult. Might have been able to get a part time job, but I'm busy revising and preparing for exams so I can get the qualifications to get into a good uni, so that 20-30 years down the line when I do have 6 mansions and 60 sports cars (I'm an Oxbridge hopeful you see, so entirely possible ) I'll be able to significantly help the disadvantaged by my own charity and what I pay through taxation.

Edit after seeing Estay's post:

Unfortunately charity alone didn't make much of a difference to the 35% of London living in extreme poverty in 1889 (Labour and Life of the People, Charles Booth). The most powerful and wealthy nation in the world of the time operated from a city where a third of its inhabitants were barely able to survive on a day-by-day basis. I'd rather not be going back to that kind of society.

[Guy]

May 20, 2010 14:03:07 GMT -5 Estayland said:

On another line of thinking... why should the government tell us what we should and shouldn't give to? If I feel passionate about helping homeless people get back to work, my hard-earned money shouldn't be forced to be given to just giving homeless handouts.

You vote the government in. That's why you are given a vote.