Max:
You sound like you’re deliberately attempting to poke holes in the plan instead of considering any benefits of it, which is unfortunate. The plan doesn’t need to be perfect so long as it is a vast improvement from what we have now, which it is.
To address some of your points:
2. Federal income tax is only one piece of taxes we pay to the federal government. It’s pointless to only discuss this subject in regards to the income tax as the FairTax replaces much more than that.
3. The bottom 60% will benefit for the following reasons. a) The prebate makes up a much larger percentage of their income than the top 40%, b) many of the goods people in the bottom 60% purchase are used/second hand such as vehicles and homes, and as such would be tax free. c) People in this segment desperately need opportunities to save money and build wealth; the FairTax promotes this by giving them their entire paycheck and allowing them to choose how to save/spend it. The reason the “rich are getting richer and the poor are getting poorer” is not income, it’s assets. The truly wealthy are able to accumulate wealth through assets, whereas the lower income brackets never have a choice to save pre-tax money because the government takes it out of every paycheck before they ever see it.
4. People who get bent out of shape about the 23/30% thing are the ones that seem to be trying to play devil’s advocate and being deliberately obstructive. The bottom line is that we’re talking about replacing the income tax system, so it’s perfectly reasonable to calculate it in the same way that your effective income tax rate is calculated. The bottom line is that $.23 cents out of every dollar you spend on new retail goods and services. It makes you feel better to call that 30%, knock yourself out, but the number is the same either way.
5. Lower product price is not just a result of the elimination of payroll tax, it is also a result of the elimination of corporate tax, compliance costs, and economic inefficiencies related to complying with the tax code. There is no double counting here.
6. Wrong. The truly wealthy have a myriad of legal ways they can avoid paying tax currently. Under the FairTax, most of those legal loopholes will be eliminated. While there will still be people who try to cheat the system, the reality is the vast majority of Americans are not interested in violating tax law.
7. They could pay a lot less as well, that’s where choice comes into play. You do believe in choice, don’t you?
8. You mock this line, but it’s an important point. We currently live in a country that has a negative savings rate. We have a borrow and spend culture. Our tax code is of no help because it essentially punishes working harder in order to save money. Under the FairTax, savings is encouraged because it is not taxed. People can get a second job to pay off their debt or save for their kids’ college and they are not penalized by being stuck in a higher tax bracket. Think about it!
9. There are two issues here, cost and price. The cost of new homes has an above-average amount of labor costs in them that will be reduced should the FairTax be passed. The price of resale homes will be dictated by the market, not by how much of the retail price was tax.
12. We’ve seen real world of examples (such as Ireland) where dramatically reducing corporate tax results in substantial economic growth. In an economy as powerful of that of the United States, that growth would be explosive and reach across all sectors of our economy especially because the FairTax would eliminate corporate tax altogether.
14. It’s much tougher to cheat under the FairTax than under the income tax. With the income tax you have the inherent conflict of interest of people doing their own taxes. Meanwhile, the FairTax would reduce the number of sources of tax returns by 80% since it would collect from retail businesses and not individuals. This means it would also take two parties (the seller and buyer) conspiring to avoid taxation. Will there be cheating? Of course, some will always cheat, but it’s much harder to do under the FairTax. Also the majority of FairTax revenue will be collected from a relatively small number of large retailers who have no interest in violating federal tax law. In addition, a big part of our problem now is not illegal tax dodgers, it’s the people who are dodging taxes using perfectly legal loopholes. Most of those loopholes get closed with the FairTax.
15. You are completely neglecting the fact that our exported products currently are at a disadvantage because of the huge corporate tax, tax compliance costs, and payroll tax costs that are embedded in the price of the goods before they go overseas. They are then taxed AGAIN by the importing country. By removing the embedded taxes, it would put American goods on EQUAL FOOTING with domestic goods in foreign markets. This would be a huge boon for our export industries, and would bring manufacturing jobs back to America.
16. I’m one of the people who would raise their hand. Warren Buffet has already come out and admitted he pays less in tax than his secretary. Why? Because he gets most of his money through investments, not traditional income sources. And guess what, if Buffet has a bad year, he might not pay much in the way of tax at all. Does that sound fair to you? I’d rather Buffet’s consumption be taxed, because I know that not only will be a more stable source of revenue, but it will continue to be stable regardless of what the rest of the economy does. The FairTax insures the truly wealthy among us pay their fair share, regardless of what accounting shenanigans they can pull off under our current system.
