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Can the Fair tax ever be passed and enacted?

Discussion in 'Economics, Business, and Taxes' started by Supposn, Mar 6, 2015.

  1. Supposn

    Supposn Council Member

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    Can the Fair tax ever be passed and enacted?


    I’m a proponent of the Fair tax but I do not believe it’s politically or economically practical to replace our entire taxes on net incomes with a sales tax.


    It would be financially imprudent and politically less feasible and may be impossible to pass a bill transferring our entire federal taxes upon net incomes to a sales tax in a single step. I’m continuously told that Fair tax proponents would not support a fair tax bill to be passed and enacted as other than to be accomplished in a single step; the consequences of retaining such a position is the Fair tax bill will never be attempted on a federal level.


    I believe the first incremental step to enact the Fair tax should be to replace all of our FICA payroll tax funding for Medicare and half of FICA’s funding for Social Security with a federal sales tax.

    [FICA is our most regressive federal tax; the 15.3% FICA taxes upon payrolls can be reduced by 9.1% of payroll and replaced by a 4.55% general sales tax. If USA payrolls subject to FICA do not exceed 50% of transactions subject to the sales tax this would somewhat reduce the net taxes paid by those dependent upon wage and salary incomes and thus there’d be no need for additional provisions to compensate the working poor.

    The increase of tax revenues would be proportionally related to the extent that the amounts of transactions subject to the sales tax exceed double payroll amounts subject to the FICA tax. Eliminating only half of FICA’s social security funding conceptionally retains our association of retirement benefits relationship to individual’s life time wages and salaries].


    After the major portion of our FICA taxes has been substantially replaced with a federal sales tax, the following incremental steps should replace portions of individual and corporate taxes upon net incomes with increases of the federal sales taxes. These increases of sales taxes would require some compensating provisions for persons of lesser incomes.

    Steps following the initial step (that substantially reduced FICA and enacted the federal sales tax), for the enactment of the Fair tax should simultaneously:

    (1) Reduce individual and corporate regular income tax rates upon all income brackets by a uniform portion of net taxable incomes.

    (2) Increase the federal general sales tax rate.

    (3) Increase the provisions to compensate low income purchasers for the increased sales taxes.


    I expect that after one of the incremental steps, we’d have a federal sales tax approaching an unacceptable tax rate; but if I’m wrong, federal income taxes could be entirely eliminated.


    Respectfully, Supposn
     
  2. Woolleybugger

    Woolleybugger Mayor

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    Before anyone can comment, can you define what Fair means?
     
  3. fairsheet

    fairsheet Senator

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    ...it looks as if you tossed a little gravel in those gears!
     
  4. Woolleybugger

    Woolleybugger Mayor

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    Fair is in the eye of the beholder. No one can really answer this question fairly..lol
     
  5. fairsheet

    fairsheet Senator

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    Sounds fair to me.
     
  6. Woolleybugger

    Woolleybugger Mayor

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    The issue of fairness is a key difference between the left and right. The left believes fairness is more than a simple tax rate. The right believes fairness is about money and therefore taxes. In reality, fairness is a concept that has many facets to it and involves the type of society one wishes to create. Is Denmark or Sweden more or less fair than the USA? To the average Dane or Swede, their system seems perfectly fair and ours is a Hobbesian hell hole. To a right winger, the idea that everyone by birthright is entitled to a basic standard of living is sacrilege. In a nutshell, this is the real debate going on between the two sides. How to define fairness and how to make it happen. When you cannot agree on what it means, you cannot expect progress across generations can you?
     
  7. fairsheet

    fairsheet Senator

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    Steve Forbes is an advocate for this "Fair Tax" scheme. More power to Steve Forbes, but if he thinks it's fair, it probably isn't for me!

    Lots of folks bemoan the fact of our spending so much time trying to minimize our tax exposure. I don't. A properly designed, evolved, and maintained tax scheme is intended to encourage us to take full advantage of it. In simpler terms, let's say that in good faith, we legislate a tax break for capital that takes on more labor. Don't we WANT capital to advantage itself of that tax break?

    Alas, we've left our tax system stuck in the 20th-Century, for a decade and a half now. In our modern world, a decade and a half is a coupla lifetimes! We should be analyzing and reconsidering out tax policy on a constant basis. That capital we extended that hiring tax break to?....Is capital actually hiring that labor?....or, have they arrived at a workaround that gives them the break without the hiring? And if they have, who's "fault" is that? Isn't it OUR fault for not recognizing it and legislating some sort of fix or adaptation?

    This goes to what "flat taxes" and "fair taxes" are all about. They cut capital loose to do as it always has - seek workarounds, as it severely limits American society's ability to react to those end runs.
     
  8. Woolleybugger

    Woolleybugger Mayor

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    Fairness is in the eye of the beholder. I think that fairness is complete confiscation of wealth upon death. To me that is perfectly fair. Some differ. So what exactly does fair mean?
     
  9. fairsheet

    fairsheet Senator

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    I see fairness and efficiency, as inextricably linked. I know..."efficiency" sounds pretty dry, impersonal, and objective for us to rely on. That's not necessarily true, for it's we humans who define efficiency for ourselves. In the case of your proposal to peg inheritance tax rates of 100%, is that REALLY the most efficient number? Over time, is this the rate that generates the most tax revenue? And what about the broader impact? Does 100% generate the greatest societal net gain, or might some lesser figure grow us an even larger pie?

    Whether or not it's "fair" in and of itself, that some rich heir should pay whatever amount, is but an unfortunate diversion. What do I care how the rich heir, or anyone else for that matter, is made to feel by my tax policy? Shouldn't "fairness" come down more than anything, to the greatest "bang for the buck"?

    P.S. I'm not suggesting any specific answers to the questions I pose. All I'm doing is hinting at the existence and relevance of those questions.
     
  10. Supposn

    Supposn Council Member

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    WolleyBugger, both our evaluations of the extents that political policies achieve or proposals are likely to achieve our political preferences and the extents that those preferences correctly conform to our categorical labels for those proposals, (e.g. fairness, tax equity and populist) are certainly subjective.


    There are numerous waivers and exceptions of “special” factors or exclusions from taxable incomes that are not readily available to those dependent upon wages and salaries. I do not believe that our progressive rates of taxes upon net incomes are all that progressive or populist.


    I advocate incrementally and simultaneously reducing all income brackets’ tax rates by the same “flat” rate from taxable incomes and provide compensating economic considerations for lower income earners, (many of whom do not pay income taxes).

    I contend the consequences after each incremental step would be more populist rather than regressive net taxes paid and no net reduction of government’s tax revenues.


    Respectfully, Supposn
     
  11. Woolleybugger

    Woolleybugger Mayor

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    if fairness involves taxing us less then your recipe for fairness involves either cutting spending or increasing deficits. Is it truly fair to make the poor pay the same rates as everyone else?
     
  12. Supposn

    Supposn Council Member

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    WolleyBugger, you refer to MY “recipe for fairness” but are you familiar with what I do or do not consider as equitable or what tax policies I advocate or oppose?


    Respectfully, Supposn
     
  13. fairsheet

    fairsheet Senator

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    "A" fair tax can be legislated. Thankfully, "The Fair Tax" cannot.
     
  14. Woolleybugger

    Woolleybugger Mayor

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    I really don't know and the issue is not relevant to a discussion of tax policy. First and foremost, taxes are a way for government to make us do this or that depending upon what government wants us to do. The first thing the government wants us to do is use dollars. So, they tax us and make us pay them only in dollars. That forces us to use the dollar as a medium of exchange. Secondly, they tax us to speed up or slow down the economy or money supply. Thirdly, they tax us to support end games which they feel are good for society, at least that is the principle, the practice is anything but that but we all know that anyway so why belabor the point. If the government thinks vast amounts of inherited money is bad for society, it taxes inheritances. If they think we should buy houses, they let us deduct mortgages. If they think dividend income is more important than labor income, they give dividends a tax break. That is the essence of tax policy. In the past, tax revenues were supposed to come close to expenditures but that was the ideal, not the practice. Remember this, money comes from the government and their proxy, the banks. Unless they spend money or let us borrow money, there is no new money.
     
  15. Supposn

    Supposn Council Member

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    Woolley Bugger, the “butterfly wing’s” concept is that a flap of a single butterfly alighting upon a specific spot on the face of the earth has some effect upon the entire universe.
    The concept does not the consequences of all occurrences, (i.e. individual, simultaneous or otherwise orchestrated occurrences) are or our not of huge or significant consequences upon any single or multiple things or creatures.
    I make mention of the “butterfly effect” because our post touches upon multiple topics that are not germane to the topic of this thread, (i.e. “can the Fair tax ever be passed and enacted?”.
    The concept of the “Fair tax” is to replace our federal income taxes with a general sales tax.
    Your post does not discuss comparisons between taxes based upon incomes and or upon sales transactions; it does not discuss the feasibility of a federal sales tax being enacted; it doesn’t discuss if a general federal sales tax should be enacted or if our federal income taxes should be reduced or eliminated to be replaced by a federal sales tax.
    Respectfully, Supposn
     
  16. Fast Eddy

    Fast Eddy Mayor

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    If you make special provisions for the poor, then its not fair, everyone needs some skin in the game.
     
  17. Lukey

    Lukey Senator

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    The problem is that the government LIKES having the taxes it collects all broken up and hidden here and there and everywhere (but where a regular Joe can see them added up).

    The government spending as a percent of GDP averages about 20% - so that's the sales tax it would take to replace everything. If you want to add a component for debt reduction (and maybe a rainy day fund for recessions) you'd have to get that up to around 25%. And that is on every transaction by everyone. If you want to exempt food, housing, etc. and/or exempt the working (and non-working) poor, you'd need a sales tax approaching 40% (or maybe more). Anyone up for that? Anyone? Bueller?
     
  18. Jets

    Jets Conservative Pragmatist

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    I support the Fairtax proposal, but the Prebates need to be raised to offset the impact on lower incomes. Any method that allows a pwerson to take home an entire paycheck should at least be considered. IMHO
     
  19. Supposn

    Supposn Council Member

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    WooleyBugger and FairSheet, I do not know if the words attributed to Eleanor Roosevelt, “Great minds discuss ideas; average minds discuss events; small minds discuss people” were actually fist spoken or written by her; but I do accept those words as true.

    I contend that the comparative proportional relationships among individuals and their dependents actual net incomes are less accurately reflected by their income tax returns and more accurately reflected by their purchases.

    My interest is tax policy rather than a sematic discussion of the word “fair”.

    Respectfully, Supposn
     

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