FairTax

[HuskyCaucasian]

The "FairTax" has really been in the spotlight recently with the surge of Mike Huckabee in the Republican primaries, I wonder what your thoughts of it are.

 

I am actually going to start a 3 month tracking of my expenses vs income and see just how a "FairTax" would effect me (middle class).

[kapkomet]

It would probably be a disaster. Any regressive tax is not what we need to be doing.

 

[HuskyCaucasian]

It would probably be a disaster. Any regressive tax is not what we need to be doing.

I dont know on the final outcome, but the transition would be hell.

[Balta1701]

It would probably be a disaster. Any regressive tax is not what we need to be doing.

IMO, you could certainly design such a system where it wasn't regressive. The problem is that the tax code would probably wind up being even worse than it is now. You'd literally have to go product by product and decide..."Hmmm, what tax rate should we put milk at? But what about those higher cost gallons up there? What about the organic/soy varieties? They may be luxuries for some people but what about for people who can't drink milk" and on and on. And it'd open up an even bigger vat for lobbyists, because what better way to kill your competition than to have the government raise the sales tax on say, foreign made cards as opposed to those made by Ford and GM. Salvation for the auto industry! Great for Jobs! What could go wrong!

[southsider2k5]

It would probably be a disaster. Any regressive tax is not what we need to be doing.

 

thank you. This is a tax increase on the non-voting poor, to benefit the middle class.

[Texsox]

We've had this thread before and SS convinced me a long time ago how bad an idea it is. The system we have, although with plenty of built in and bolted on problems, is about as good as it gets. I'd like to see some serious balanced budget proposals, but I know that will never happen.

[kapkomet]

We've had this thread before and SS convinced me a long time ago how bad an idea it is. The system we have, although with plenty of built in and bolted on problems, is about as good as it gets. I'd like to see some serious balanced budget proposals, but I know that will never happen.

I agree.

[NorthSideSox72]

thank you. This is a tax increase on the non-voting poor, to benefit the middle class.

I don't think it has to be, if you structure the sales tax correctly, and ONLY remove the income tax (meaning, keep cap gains, etc.). You would need a bevelled approach of course, product groupings like you said - but that doesn't have to be overly complicated. I think it could be done, and done well, to the benefit of the country.

 

[southsider2k5]

I agree.

 

You shouldn't. If we are indeed being talking into a recession, the LAST thing you want right now is a balanced budget. The spending cuts or tax increases to make it happen will turn a garden variety recession into a full blow depression.

[Texsox]

I don't think it has to be, if you structure the sales tax correctly, and ONLY remove the income tax (meaning, keep cap gains, etc.). You would need a bevelled approach of course, product groupings like you said - but that doesn't have to be overly complicated. I think it could be done, and done well, to the benefit of the country.

 

Think about the ubber rich, they may spend the first million they will earn this year, but not the next 20. I just do not see being able to recoup that without seriously crippling those in the $15,000 to $45,000 range.

[NorthSideSox72]

You shouldn't. If we are indeed being talking into a recession, the LAST thing you want right now is a balanced budget. The spending cuts or tax increases to make it happen will turn a garden variety recession into a full blow depression.

Only true in the short term. Deficit spending creates debt, and debt creates more debt if you never run a surplus. So we end up paying more and more out of government coffers every year to interest, which is not programmatic money from the government that can help keep the economy going. Long run, the economy will be much stronger with a balanced budget amendment, IMO.

 

[NorthSideSox72]

Think about the ubber rich, they may spend the first million they will earn this year, but not the next 20. I just do not see being able to recoup that without seriously crippling those in the $15,000 to $45,000 range.

Does the next $20M get stuffed in a mattress? No, it gets invested. That's why I specified that you keep taxes on cap gains, interest, etc. The more they invest, and the more EVERYONE invests, more money is put into the budget to play with (and the more the tax rates can be reduced).

 

[southsider2k5]

Only true in the short term. Deficit spending creates debt, and debt creates more debt if you never run a surplus. So we end up paying more and more out of government coffers every year to interest, which is not programmatic money from the government that can help keep the economy going. Long run, the economy will be much stronger with a balanced budget amendment, IMO.

 

It will be true on a cyclical basis. Not only would it happen now, it would keep happening everytime we had a decent recession. The metrics involved are the sameones that led to the Great Depression, and many of the large panics and recessions of the 19th and early 20th centuries. You cannot cut spending in a recession and not expect disaster. It just doesn't work that way.

[jasonxctf]

let me just preface this comment with the fact that I know absolutely 0 about Fair Tax.... however a thought occurred to me.

 

if the fair tax is based upon taxing consumption at the 23-26% level, tied with the increase in the global economy/internet, wouldn't many individuals (and corporations) buy as much as they could on-line or overseas and ship it in at a dramatically lower cost?

 

Basically, rather than walking into Old Navy and getting $100 worth of items + (23% tax)= $123, couldn't I just go on-line and purchase this from Old Navy in Canada and ship to the US for far less???

 

On a far larger scale, couldn't a business order all of their papergoods from Mexico???

 

How would fair tax effect eBay sales?

[southsider2k5]

Does the next $20M get stuffed in a mattress? No, it gets invested. That's why I specified that you keep taxes on cap gains, interest, etc. The more they invest, and the more EVERYONE invests, more money is put into the budget to play with (and the more the tax rates can be reduced).

 

Beause of the forced reserves of banking and the higher savings rate of the rich, there is a lot of money taken out of circulation by the upper classes. Its not like giving money to the poor who have zero savings rates. The multipliers are MUCH different in these classes.

[Texsox]

You shouldn't. If we are indeed being talking into a recession, the LAST thing you want right now is a balanced budget. The spending cuts or tax increases to make it happen will turn a garden variety recession into a full blow depression.

Is it because

1. We need to spend that exact amount and not a dime less?

2. We need to collect that exact amount and not a dime more?

3. It has to be a debt?

 

It would seem that we tax and spend not to run the country, but to manipulate the economy. I agree that "free" money today is a nice thing for the economy, but that "free" dollar becomes more and more expensive as it needs to be repaid. It also gives politicians a free ride to just give us stuff with the promise that someone else will pay for it.

[Texsox]

Beause of the forced reserves of banking and the higher savings rate of the rich, there is a lot of money taken out of circulation by the upper classes. Its not like giving money to the poor who have zero savings rates. The multipliers are MUCH different in these classes.

 

Correct, which is why any large scale sales tax program is tough, even with serious luxury taxes. Currently that exec or baseball player with $21M is taxed on $21M, with a sales tax, how much is he really going to spend? And I'm using an extreme example, but even take a $500,000 salary. We'd only be collecting taxes on a smaller percentage of those earnings.

[NorthSideSox72]

Beause of the forced reserves of banking and the higher savings rate of the rich, there is a lot of money taken out of circulation by the upper classes. Its not like giving money to the poor who have zero savings rates. The multipliers are MUCH different in these classes.

Sure - and the multipliers only help that, if I understand what you mean. It means lower tax rates on other things.

 

[southsider2k5]

Is it because

1. We need to spend that exact amount and not a dime less?

2. We need to collect that exact amount and not a dime more?

3. It has to be a debt?

 

It would seem that we tax and spend not to run the country, but to manipulate the economy. I agree that "free" money today is a nice thing for the economy, but that "free" dollar becomes more and more expensive as it needs to be repaid. It also gives politicians a free ride to just give us stuff with the promise that someone else will pay for it.

 

The definition of a "recession" is two consecutive quarters of GNP shrinkage. In this event tax revenues fall, which means that the US budget would have to contract to meet that smaller tax receipt. This means less programs, jobs, funding ect for people who depend on the government for income. Either that or they have to raise taxes to meet the current budgetary levels, which again, takes more money out of the general economy, and exsaserbates the recession.

 

You can have a balanced budget in good times, but you can't in bad times, unless you want big and long bad times.

[NorthSideSox72]

It will be true on a cyclical basis. Not only would it happen now, it would keep happening everytime we had a decent recession. The metrics involved are the sameones that led to the Great Depression, and many of the large panics and recessions of the 19th and early 20th centuries. You cannot cut spending in a recession and not expect disaster. It just doesn't work that way.

The Great Depression was not caused by cuts in government spending. Certainly, once the disaster occurred that resulted in it took hold, then the New Deal used a lot of deficit spending to revive the economy. That sort of drastic action was needed at the time. But government spending levels were not a causation.

 

I would be open to conditions on the balanced budget amendment... 3/4 super-majority to override, or a declaration of War (and only applicable to that spending), for example. You always want to have that last resort option available. But that is what it should be.

 

And there are multiple cycles to look at here. If the government can consistently keep and spend more money, it has more reserves to tackle economic issues. Also, that larger flow of services and jobs to the public would help stave off future recessions or soften them. No doubt this sort of thing would need to be implemented in phases over a long period, but the end result is very positive, in my view.

 

[HuskyCaucasian]

Currently that exec or baseball player with $21M is taxed on $21M, with a sales tax, how much is he really going to spend? And I'm using an extreme example, but even take a $500,000 salary. We'd only be collecting taxes on a smaller percentage of those earnings.

He would be taxed roughly $7,336,103 based on the current system.

So, he would need to spend the equivalent of $24,453,676.67 today (24,453,676.67 x 30% sales tax = $7,336,103.00)

Edited January 10, 2008 by Athomeboy_2000

[HuskyCaucasian]

I would be open to conditions on the balanced budget amendment... 3/4 super-majority to override, or a declaration of War (and only applicable to that spending), for example. You always want to have that last resort option available. But that is what it should be.

Agreed.

[Texsox]

The definition of a "recession" is two consecutive quarters of GNP shrinkage. In this event tax revenues fall, which means that the US budget would have to contract to meet that smaller tax receipt. This means less programs, jobs, funding ect for people who depend on the government for income. Either that or they have to raise taxes to meet the current budgetary levels, which again, takes more money out of the general economy, and exsaserbates the recession.

 

You can have a balanced budget in good times, but you can't in bad times, unless you want big and long bad times.

 

That makes sense, but shouldn't we look at income projections and spending projections to determine what is off? The little trick of just increasing the projected income and spend is dangerous.

 

Would it make sense to perhaps broaden the window and be balanced over a two or three year period?

[HuskyCaucasian]

That makes sense, but shouldn't we look at income projections and spending projections to determine what is off? The little trick of just increasing the projected income and spend is dangerous.

We did that at my church for years. "oh, we'll project a giving increase of 7%". Well, then it would increase 3% or less and we'd be screwed. Now they take a much more modest look at it.

[kapkomet]

You shouldn't. If we are indeed being talking into a recession, the LAST thing you want right now is a balanced budget. The spending cuts or tax increases to make it happen will turn a garden variety recession into a full blow depression.

I mean over the longer term, not the short term.