Is the FAIR tax FAIR?
Debate Rounds (3)
The first thing I found wrong with it,was the rate. if you inform any supporter they will say its a 23% inclusive tax 23% of the final cost is tax. That's all fine and good but if you mention its a 30% (23/77 actually) tax on goods they claim you are changing the tax. The trouble is a merchant cannot use a 23% inclusive tax,they need a tax on the item to figure the final cost. IE if a merchant spends 20 dollars on a widget and has a 20% overhead the cost plus overhead is 24 dollars to figure how much tax you use 30% or $7.20 for a final value of $31.20 .if you use the 23% of the $31.20 you get $7.20. mathematically its the same,but they will not even admit that much.
Another problem with the fair tax,that they will not admit. is that income,social security and Medicare are NOT inclusive tax. The argument is that by getting rid of inclusive federal taxes ,that will lower prices. Income 1/2 of social security, and 1/2 of Medicare are NOT inclusive. they do not effect price of goods,because they are part of your pay.If I make $2000 a month and $300 goes to income tax and $100 to ss tax and $100 to Medicare tax. The cost to the employer is $2200. $100 for employer share of ss and $100 for employer share of Medicare. eliminating the taxes will mean the cost to the employer will be $2000.I Would get $2000,but the impact of my wages will be only the $200 employer share not the $700 in total taxes I paid before. The only way for the prices to go down by full amount is if the employer says,well I 'added' the amount you paid in taxes to you income,since we don't have the tax I can now take it out of your income.ie a massive pay cut for most Americans. Not an easy to sell.
Another argument is the creation of jobs,because of the lower costs, which goes back to last argument of lower wages. The tax is only on NEW items. So a new house would have 30% added to the cost, a used will not. The cost of a house has very little to do with how much it cost to make. Its based on what someone will pay for it. So all things equal a new house on the market for $200k will cost $260k. a used house on market for $200k will cost $200k. So you can buy a used house for $250k have a better house and pay less than the new one that was listed for $200k.
Just watch the housing market die. The same thing for cars,a used car will be a better deal.
Also under the wording of the law, The consumer is responsible for taxes. I the merchant did not pay and you cant prove you paid.YOU have to pay. Companies are NOT required to pass any savings on to consumers. Babysitters will be required to collect and pay taxes. A person buy a $5million painting pays no tax,but if you buy a $50 black velvet Elvis you will
The bottom line is that middle and lower class will pay a larger % of income in taxes because its only new goods. If they wanted it to be fair it would be on all goods. It is mainly a way for business, who came up with this plan,to cut wages. You can bet you bottom dollar if passed every CEO will become a 1099 before it went into effect.
One interesting side effect is that a Canadian car dealer could buy a US made car for less,since there will be no sales tax.So you could open a dealership in Canada ,sell a US car for let's say $20k which will save $6k in taxes. Offer to fly US buyers to Canada and put them up in a hotel and they drive back in their car. Just by raising the price to $24k. thus they save $2k and you make more. Just think of all the bargains people in border states will have shopping in Mexico and Canada.
My understanding of the fair tax system, is that you would switch the current income tax to a sales tax that would be one flat sales tax rate to stop the curved income tax rate we currently have in the US (15-35%). Mostly the rich argue that they have been 'punished' for making to much money and want something fair.
The advatages of having a fair and flat taxes is that more money could be pushed into the economy, and invested, and that federal taxes returns would become a lot simpilar because individuals would not have to file on a tax level.
Also, the main point my opponent seems to miss about the system is that it taxes would not be added to stuff that is currently untaxed (like food and neccasities); also I can't see how re-selling a house would be untax able. The whole only 'new' stuff argument makes no sense at all. When you re-sell a house right now, you have to pay taxes on the sale price for selling it. In the fair taxes system, I suppose only the buyer would have to put out the sales taxes, because capitol gains taxes would be gone, but the resale would still involve sales taxes on items like houses and cars.
But back to the Fair tax which the debate was supposed to be on. either post an argument for the fair tax or I will report you as wasting my time. frankly I think you are for the fair tax ,but couldn't argue the facts so posted this nonsense. I never mentioned capital gains taxes. so you do know what I am talking about.
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