Return of FAIRtax

It is coming back. So-called FAIR tax, meant to solve all our tax problems. The return still pushes a lot of flaws. Rather than rebut them all, I’m going to hit three that never seem to go away.

For those who’ve missed it, it is a national sales tax on end user items only (which distinguishes it from a VAT).

Problem one. The plan always contains the step “eliminate the IRS”. Look, folks, it’s a tax that’s going to the feds, and if you eliminate the IRS some other agency will have to take over handling the money – counting it, paying rebates, etc. Further, you’ve got exemptions. If you’ve got exemptions you will have people who should pay but don’t – mistake or fraud, the money still needs recovered. The arbitrary claim that the states will be the collectors doesn’t eliminate those points. It won’t eliminate the IRS, it’ll just rename it.

Problem two, those exemptions. This is supposed to simplify the issue. Exemptions are complications. This is especially ugly when you see one constant exemption: investments. Very bland, that word. What it means is that people who presently pay capital gains will pay nothing. By the way, this is also supposed to eliminate corporate income taxes. Bottom line, a detailed examination shows the code would be just as complex, but the rich would pay less than they do now.

(An argument I used to use applies here. The rebates mean the poor pay less. The exemptions mean the rich pay less. Since this is supposed to bring in just as much, who is making up the difference from the rich and the poor?)

Problem three is more obvious to people now, and that’s the unstable nature of sales taxes. In bad years, the government doesn’t have the money it needs to cover and assist the people.

That’s three (or more honestly four) major problems with this that never seem to go away. The only one I’ve seen argued is the last, and the argument there is more a question as to whether that is a bad thing. Perhaps it is not surprising to discover these people are also balanced budget fanatics.

FAIR tax isn’t. As long as that’s true, I will object.

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3 thoughts on “Return of FAIRtax

  1. Unfortunately, once again we have some one spouting off about FAirtax who has not even done simple research about the bill. The House Bill is H.R.25. The Senate Bill is S296 It has never gone away and is beginning to gain momentum. If we could just get people like you to stop telling lies about it we might actually be able to save the economy of the US before it plummets off the edge. To start with, find out why it is not a sales tax, it is a consumption tax. Start by learning the difference. The method of collection is done using the sales tax collection system that is already in place in every state except Alaska and Oregon. They are, to the best of my knowledge the only states to not have a state sales tax. It is highly likely, they would eliminate their own state income tax at the same time and instead implement a consumption tax collected at the same time as the FAirtax. Those two sates are the only ones which would have to do any thing differently when the tax is implemented. Likewise, every statement you have made shows a complete lack of understanding of the FAirtax. Your attempt at being smarter then the economists that have studied the Fairtax just shows your ignorance. If you first research the bills and then have valid questions, I would be more than happy to address any concerns you might have using facts and studies to back up any statement. In the mean time, Please stop spreading lies. If you do not wish to read the actual bills, you may go to http://www.fairtax.org/site/PageServer?pagename=about_main
    to find almost any negative statement, almost any one has ever come up with and you will find it is already addressed somewhere on this web site.

    • If you look deep in my archives, you’ll discover I’ve researched and reviewed FAIR tax for several years. Still, since I rather enjoy a decent discussion, let’s begin.

      First, I note you’ve not rebutted a single point of mine. So instead, let’s respond to your accusations.

      1. The difference between a sales tax and a consumption tax. A sales tax is a type of consumption tax. “A tax only on income that one spends on goods and services. A common example of a consumption tax is a sales tax.” (Fairlax Financial Dictionary, 2009.)

      Further, it is a tax applied on goods at the point of sale that are based on the sales price. Not on an assessed or apprised value but applied specifically as a percentage of the price. It is simply and literally a sales tax.

      I do understand why the proponents of this like to claim it as different. The reason comes with the old 23%/30% argument. Calling it a sales tax makes the 30% argument more apparent. Claiming they’re different allows the 23% argument to stay stronger.

      2. I did not state that states would or would not have to do anything different. Instead, I said that it would not eliminate the IRS. States would collect, according to both bills and the book, but money in state accounts is not money in federal accounts. There must be a federal agency to collect the amounts.

      3. There is a common assumption that states will cease using income tax and instead increase their own sales taxes as well. It is possible. On the other hand, I think it unlikely. It’s politically unpalatable.

      Let’s take the state of Georgia. To recover the 5.5% individual income tax as a FAIRTax model, the state would have to add 10% to the 23% of the national FAIRTax, all on top of the 5% sales tax already existing. Actually, it means that 39% of each sale (before the local sales taxes applied) would go to state and federal coffers. Right now, if you purchase a $10.00 widget, in Georgia you will pay $10.50, of which .50 goes to the state. If this went into play, the price would be $14.75. The retail still gets $10.00. And let me point out that honesty will require the $4.75 in taxes WOULD be differentiated on the receipt.

      • Yaknow, this is actually kind of frustrating. I got told to read the bill by someone who obviously never read the bill. The most obvious clue to that is the fact that HR25 calls it…
        a sales tax. See, well, pretty much the whole thing to include the intro and title II.

        Does there need to be a federal agency whether it’s called the IRS or something else? Yes – see sections 402 and 404.

        I’m angry. I got called a liar by someone who is wrong on every single factual data checked. David Shipp, I recommend you read the bill yourself. And if you insult your host again while presenting false and incorrect information I will deny you posting privileges. You are free to insult but you’d better be right when you do it.

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