This will be a short debate between myself, a fair tax supporter, and someone who opposes it. I am not opposed to a flat tax over our current tax code, I just prefer the fair tax.
First round will be acceptance and details of your tax plan. Debate will commence in the 2nd round.
The Fair Tax, as I understand it:
The Fair Tax would replace our current complicated and multi-tiered tax system, including all corporate, individual income, and other taxes. There would also be no more loopholes, exemptions, or need for an IRS as we know it. This is a hard concept for some I've talked to since they're so used to what we have. It would not affect individual State tax codes, just Federal taxes.
The Fair Tax is a flat SALES TAX, proposed to be about 21%, applied to all new goods sold. Used goods and services, I believe are exempt to avoid double taxation.
21% is high, but with no income tax, or withholding, the average person recieves an immediate ~30% raise on every paycheck. So that's 9% more money for the average person already, assuming they spend 100% of thier earnings. Also, there would be virtually no paperwork for the average person. No income tax, no filing, no chance of being audited.
Illegal aliens would have no choice but to pay taxes if they buy goods in the US. That would be an added federal revenue stream that is mostly unexploited now.
What about the unemployed and poor? Isn't that a lot more taxes for them, % wise, since they pay little or nothing now? The fair tax has that covered. You can't do anything about someone else's spending habits, but there is an income level for a given household size that makes it so exactly 100% of the income is spent on nesscessities, and no luxuries are afforded. The poverty line should be about there. If you can afford luxuries, you shouldn't be considered impoverished. 21% of that income figure would be spent on the national sales tax. Since your paycheck should first go to providing nesseccities for yourself and your family, rather than trips to Martha's Vineyard, you would get 21% of that annual poverty line income figure back on a debit card, spilt up into 12 monthly payments. Everyone gets that prebate, your income is none of the US buisness, and no one can't afford nesseccities because of taxes.
IRS would be phased out, and retailers would calculate and collect the Fair Tax just like any other sales tax.
The elimination of corporate taxation would mean all the added costs of taxes you don't know about that manufacturers pass on to the customer in the price of the final good wouldn't be there. Corporations wouldn't have the added cost of CPAs or tax compliance, and goods prices would decline, while still increasing profits.
Competition from start ups would increase choice, as smaller mom and pop companies can't afford compliance departments, CPA's, and handle the government paper work as easily as a company big enough to throw an entire department at the issue.
A Flat tax on income has a comprehensive measure of income without any exception based on the source of income and a single tax rate is applied to all who are taxed. In short, a flat rate tax is a proportional tax on total income. Most so called "Flat Taxes" proposed to date have modifications which often offer deductions for certain behaviors and often have variable tax rates as well. These modified flat rate taxes, although far less complicated than the travesty of a system which exists today, are still complicated enough to require a bloated agency to monitor it. This simplicity would make taxes simple enough that we could slash the Billions, 11.8 billion was the estimated cost in 2008 , spent on the IRS and personal cost of doing taxes. While most people (63%) use software, while some are free, most cost around $20, and with only 5% of people doing their own taxes, 32% of people have to pay someone else.  Obviously the cost varies tremendously based on the services, but it can be very expensive, especially if a tax attorney or CPA is involved. With a single tax rate with no deductions, getting taxes done would take no more than a few minutes and cost nothing.
Flat tax systems are fair because everyone is taxed at same rate and they "eliminate deductions, tax credits, and most exemptions, thereby eliminating biases towards certain behaviors and activities. Eliminating deductions, tax credits, and complex tax brackets also simplifies the tax code, making compliance easier. Things like dividends, interest on savings, or capital gains that result from investment or increases in asset value would not be taxed under a pure flat tax system. This is seen as increasing the fairness and simplicity of the system, as well as encouraging investment."  Such a system encourages growth by allowing those who invest in our economy and work hard to keep their money, which they will probably reinvest into our economy one way or the other. The flat tax also only taxes gained income and not investments, another measure which helps encourage investment.
Thanks for accepting, MayorCheeseburger.
I'd like to point out that I do not oppose the Flat Tax, I just have a preference for the Fair Tax over any income tax. If the Flat Tax makes it to the Floor before the Fair Tax, I would not oppose it.
Advantages Fair and pure Flat taxes have in common:
Advantages of Fair over Flat tax:
Although my opponent talks about his tax will force illegal immigrants to pay taxes, the reality is much different. Most Illegal immigrants already pay taxes  and these high taxes will hurt poor immigrants coming into the country and dissuades intellectuals such as doctors, engineers, etc from immigrating who will have tremendous cost coming into the country. Illegal immigrants, contrary to popular opinion, have a neutral to slightly beneficial effect on the economy, as they cannot use many of the services they pay into, do not directly compete with Americans for most of the job they do, and provide services the average American would not do for a reasonable price.
The 21% rate that pro has told you about is in fact a teaser rate. To further explain it You are familiar with seeing the price of an item ($100) and calculating in your head what the sales tax would be ($5 at 5%). The $100 is known as a tax exclusive price. $105 is the tax inclusive price. There are two ways to state what the taxes are in this case. You could say the sales tax is 5% of the price of the item tacked on, or you could say it"s 4.8% of the total price you pay at the register. That is to say $5 is 4.8% of $105. So your state could advertise that your sales tax is 5% of the tax exclusive price or 4.8% of the tax inclusive price. In the interest of public relations, it would appear the proponents of the fair tax quote the equivalent of the 4.8%, which is the 23% number discussed already. When you convert the 23% tax inclusive number into the exclusive number (like 5%, a number we can actually relate to) the actual Fair Tax rate is 30%." 
Not only is the actual tax rate higher, it's been calculated that the total percentage tax (assuming there"s no slowing in amounts of purchases) about a 34%  tax is necessary to compensate for the loss of the income tax. Here in lies the problem, the best way to lower the personal cost of the tax, people have to spend less. This will reduce the amount of spending, and too little spending is not good for the American Economy. This paradoxically would force the government to increase the tax rate and affect the sales and manufacture sector in America (more expensive goods) and probably many thousands would lose their jobs. This high cost for goods, would create a black market demand for goods as lower and middle class families would be priced out of affording many goods due to taxation and increased cost of housing. This black market would increase violence, hurt the economy further and favor the economies of nearby countries. Another problem is with goods bought during the transition period with credit would essentially go untaxed. Although the federal income tax has disappeared, state taxes still exist and many residents in progressive states such as NJ, CA, or NH, you could be paying as much as 40% in sales tax and an Income tax.  Look at citations  and  and , which all show the problems with the GST when enacted in Australia, which was much less severe than what Pro has prosposed.
The flat tax on the other hand does not bind the amount of goods purchased with the well being of our national coffers. It encourages growth by not excessively taxing the "wealthy" and allows to stimulate the economy through the purchase of more goods with no federal tax. Although both of the taxes are better than the progressive tax, one of them is inherently flawed and sets it's self up for failure due to the taxation of a vital part of our economy.
This whole illegal alien/undocumented worker thing is making my head spin for reasons I won't go into here, but: In my opponent's source #1, they are referred to as both. Following the citations about $6-7bil in SS and $72bil in Medicare and Medicade in the article, led me to a cascade of 3 different news articles, and finally a mention in the Seattle Times about 2009 SS statistics.
“...workers who could not be matched to legal Social Security numbers.
That total hit a record $90.4 billion, earned by 10.8 million workers, in 2007, just before the recession. Some of those were legal workers who simply made paperwork mistakes, but the majority are believed to be illegal immigrants.”
No one collecting data knows that these are illegal immigrants, or why their SS# doesn't match, it's just a guess. Growing up in an area with migrant camps and large populations of illegal workers, I know many are paid under the table. It seems more probable someone looking for cheap, hard working labor would pay in cash rather than risk being caught, and the illegal would prefer NOT to pay taxes out of their paycheck, then turn around and report zero income when applying for benefits. But the bottom line is, how many illegals pay taxes and into benefits is unknown. The Fair Tax would guarantee that they would pay federal taxes, paperwork or not.
Concession: Con is correct about 23% actually being 30% on your receipt, something I didn't know until he pointed it out. HOWEVER, you should be spending less than you make, so your income will be greater than your expenses. With the Flat Tax, the larger $ is taxed (income), with the Fair Tax, the smaller $ is taxed (expenses). So the Fair Tax still takes a lower % of every dollar you make, unless you spend more than you make every year. In which case, no tax system can help you.
“Progressive” States are going to have high tax rates, and more taxes, as long as they stay progressive. Your federal Flat Tax rate combined with State income taxes would mean you pay a very high income tax total, and a moderate sales tax. Your federal Fair Tax rate combined with State income taxes would mean you pay a very high sales tax, and a moderate income tax. Progressive states just have higher taxes, and that's that.
Con also argues that the effects of the GST (another name for a Value Added Tax implemented in '00-'01) in Australia has hurt the economy. Apples and Oranges. The GST replaced some taxes, but they still have an income tax and capital gains tax.  The Fair Tax replaces all other taxes. Furthermore, a VAT is different from the Fair Tax in that it is often invisible on the receipt, and is open to more fraud on the producers' level because of how it is enforced and calculated. 
“flat tax...does not bind the amount of goods purchased with the well being of our national coffers.”
No tax plan or rate can solve the current issues with our national coffers. The real problem is with ever increasing government spending. I argue that either the Fair Tax or a lower Flat Tax would be better for the country specifically because it's primary concern is NOT the national coffers. Also, I didn't come up with the current Fair Tax rate of 30%, but from what I understand, it is based off of gov't spending figures, which I'd like to see reduced. When gov't appetite is reduced, the Fair Tax rate can be reduced.
With income taxes, people lie about income to evade taxes. With sales taxes, there are black markets and people purchase goods and services across borders. Crossing the border doesn't bother my conscience, but I don't endorse tax evasion. But the government shouldn't be able to take the first fruit of your labor, and you shouldn't be targeted because of how much you make. Covetous as people are, a flat tax would be more prone to be modified to a multi-tier system like we have now to “stick it to the rich.” The Fair Tax would eliminate the ability of the government to tax income (legally) by repealing the 16th Amendment. 
Because I am more concerned with recognizing a better tax plan than winning this debate, I will submit to Con and the audience that an advantage the Flat Tax holds is that you can see every year how much you've paid in taxes, whereas with the Fair Tax, you would need to do careful personal accounting.
My opponent assumes that people who illegally snuck into the country and often send the money they make back to their families will spend money on services and goods. There are very few taxable services that Illegal Aliens would need, such as a place to live, and many ways to get around it. They could rent rooms, stay at homeless shelters, stay at a church (Catholic), and others. Illegal aliens don"t buy plasma TVs, get manicures, or other luxuries the Average American can enjoy and even if they did, the criminal element which often comes with immigration could surely provide for that need.
"Con also argues that the effects of the GST (another name for a Value Added Tax implemented in '00-'01) in Australia has hurt the economy. Apples and Oranges. The GST replaced some taxes, but they still have an income tax and capital gains tax.  The Fair Tax replaces all other taxes. Furthermore, a VAT is different from the Fair Tax in that it is often invisible on the receipt, and is open to more fraud on the producers' level because of how it is enforced and calculated. "
"flat tax...does not bind the amount of goods purchased with the well being of our national coffers."
The point I was trying to make was when goods cost more, people buy less of them and when that"s the only way government makes money, you"re shooting yourself in the foot. This paradoxical effect will simply keep pushing up the tax rate. Here"s an analogy, I own a house (America) and you currently pay rent (income tax). One day a little birdy says to me, don"t make them pay rent, instead make them buy all their goods from you and make a profit by jacking up prices (fair tax). I get out my calculator and abacus, number crunching ensues. I figure out that it takes a 34% mark up to get what I was getting before, so I open up shop all happy. Time goes by and I realize that I"m coming up short and I"m hemorrhaging money, sticking with my idea I raise the mark up to 40% (I do pay water and electricity (socialism)) to stay afloat. Ironically I get even less money then before because people realized that they could get all the same goods and services elsewhere for 40% less and since I"m not collecting rent I go broke :( One could argue my tenants would have shorted me on rent, which is true, however I can tell whether or not they have paid rent due to my book keeping and my slow cousin (the IRS) who I use to intimidate them into paying. With this new approach, I can"t tell if they are just being thrifty or cheating me out of my hard earned money.
"No tax plan or rate can solve the current issues with our national coffers. The real problem is with ever increasing government spending. I argue that either the Fair Tax or a lower Flat Tax would be better for the country specifically because it's primary concern is NOT the national coffers. "
So going broke isn"t a bad thing?
"Also, I didn't come up with the current Fair Tax rate of 30%, but from what I understand, it is based off of gov't spending figures, which I'd like to see reduced. When gov't appetite is reduced, the Fair Tax rate can be reduced."
Your assuming that government spending will be reduced, and considering that currently we only have Neo-Cons and Democrats, we are screwed.
"Covetous as people are, a flat tax would be more prone to be modified to a multi-tier system like we have now to "stick it to the rich." The Fair Tax would eliminate the ability of the government to tax income (legally) by repealing the 16th Amendment. "
What makes you think that the government wouldn't change your fair-tax proposal to favor the poor? Government is known to take a simple idea and make it ten times more complicated.
The fair tax would work well if we had a minuscule federal government, however in our day and age it is not a good solution. The problem only compounds itself when we consider all the alternatives to buying goods through a large store since the internet, globalization and companies evading the tax. Is the flat tax perfect, no, but it is the least flawed of the two systems. It doesn't rely on a sales tax, which discourages sales (which considering that a sales tax is the only way government makes money will increase),  and instead taxes at a flat rate which doesn't discourage making more money or sales.
It seems to be the case that illegal aliens aren't high-rollers. No means of getting money from them would ever yield much. The point of taxing illegals would be to put economic pressure on them by making them pay at least some taxes, not extract large amounts for the treasury. Why should crime pay? (Crossing the border ILLEGALLY is a crime. DNC and GOP, I'm looking at you.) No, they don't generally buy big items, and they could find ways around some sales taxes, but they still buy food, gas, and other common goods at the supermarket and other common stores. If they aren't legal, they wouldn't have a way to collect the prebate.
“Here"s an analogy, I own a house (America) and you currently pay rent (income tax). One day a little birdy says to me, don"t make them pay rent, instead make them buy all their goods from you and make a profit by jacking up prices (fair tax).”
I like your analogy. As I said before, I'm more interested in discovering a better tax plan than pushing a particular one, so I will request that you lay your math out in more detail in the last round for the above point. I want to see the numbers work.
“So going broke isn"t a bad thing?”
Of course going broke is a bad thing. There are two ways of going broke, and two different parties that can go broke in this scenario we live in.
You go broke by spending more than you make. You can either spend too much, or not make enough. The government certainly makes enough. They spend WAY too much. It's like millionaires Michael Jackson or Mike Tyson, who had no good excuse to go broke. Both tax plans, as they stand, take less from the American people than our current system, and in a fairer manner. No tax plan can fix government spending, that's a separate debate, and you're right, we are screwed. The way the government spends now, it would still go broke under the Flat Tax, as well.
The two parties that can go broke are the government, and the governed. The government can go broke and governed can reform it. The governed go broke, we go hungry, we get kicked out onto the street or move back with Mom and Dad, then the government goes broke too from a dwindling tax base. Yes, in a government collapse people lose their jobs, but it's not the constant oppression of an over-burdensome Sheriff of Nottingham. I'd much rather see most of the federal government shut down than 35% taken from my paycheck, plus who knows how much in hidden corporate taxes on goods.
The price of freedom is constant vigilance. At least one avenue of taxation is shut down with the repeal of the 16th Amendment, and that's a bigger step in the right direction than a Flat Tax alone.
MayorCheeseburger forfeited this round.
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