The FairTax - Familiar With It? Never Heard Of It? - Page 4

The FairTax - Familiar With It? Never Heard Of It?

This is a discussion on The FairTax - Familiar With It? Never Heard Of It? within the Off Topic & Humor Discussion forums, part of the The Back Porch category; Originally Posted by gdalton And I would also add that the used houses that do not have the new tax will not be devalued by ...

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  1. #46
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    Quote Originally Posted by gdalton View Post
    And I would also add that the used houses that do not have the new tax will not be devalued by the market because of it. I believe the home prices will pretty much stay the same (apreciating yearly when all is well) and the cost of new versus used will stay the same as well.
    They could well bring a premium:

    New House A: $100,000 with tax;

    House B, 6 months old, next door, same square footage, landscaping, identical in all respects that cost Homeowner B $77,000.

    Which would you buy?

    I'd buy House B; and if identical in all respects, I'd pay up to $100,000 if that represented FMV. If I had to buy either A or B, that'd be the answer in a theoretical world.........


  2. #47
    Member Array ptmmatssc's Avatar
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    As for the small business start ups, if the price of the goods after the FairTax is basicly the same (give or take a percent or two) then there is no difference. Same price is the same price.
    But it isn't . Company A buys their "raw materials " for a low cost (bulk) and pays no tax on it .
    Company B , being small and just starting out , pays more for the raw materials as well as 23% in taxes .

    Believe me , it's more than just a percent or two of a difference .

    As far as people skipping out on taxes . Right now it isn't the common man that is cheating the system , it's the very companies this plan would give a pass to . Believe me , if someone is going to buy a yacht etc , they will buy outside the US to avoid the 23% tax . Kind of like how taxes are avoided right now through off shore accounts etc.

  3. #48
    VIP Member Array aus71383's Avatar
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    I think if the small business bought their stuff at retail and paid the 23% tax on it, they can should be able to just keep records and not charge tax on the other end. If anyone (the IRS is gone, so who would?) has any doubts they can look at their records of how they paid the 23% tax up front already.

    I still don't like it though. I think the flat tax is the only fair way to go.

    Austin

  4. #49
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    Quote Originally Posted by ptmmatssc View Post
    Company B , being small and just starting out , pays more for the raw materials as well as 23% in taxes .
    It's only on retail sales, right? Thus, the size of the company makes no difference on the tax. The cost of input - yes - smaller is at a disadvantage..........


    Quote Originally Posted by aus71383 View Post
    I think if the small business bought their stuff at retail and paid the 23% tax on it, they can should be able to just keep records and not charge tax on the other end. If anyone (the IRS is gone, so who would?) has any doubts they can look at their records of how they paid the 23% tax up front already.

    I still don't like it though. I think the flat tax is the only fair way to go.

    Austin
    Probably yes - it would be a creditable amont, to be fair.

    Still, a lot of games to be play.

    I just thought of another reason this is being pitched as an "inclusive" tax too - it makes it very opaque. It lacks any transparency, and consumers thus "forget" about how much they're paying!

    I.E. You pay $100 for a widget. OK - the receipt says $100, and there's no separate line for $23 in federal tax because it's inclusive. Gee - its not there, so everybody forgets about it!

    Versus:

    You buy the widget for $77, and darn, that $23 in tax sure is large! What'd I get for my $23?

    Just like the federal excise tax on gasoline - you forget it's there!

  5. #50
    Member Array gdalton's Avatar
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    Quote Originally Posted by Rock and Glock View Post
    I just thought of another reason this is being pitched as an "inclusive" tax too - it makes it very opaque. It lacks any transparency, and consumers thus "forget" about how much they're paying!

    I.E. You pay $100 for a widget. OK - the receipt says $100, and there's no separate line for $23 in federal tax because it's inclusive. Gee - its not there, so everybody forgets about it!

    Versus:

    You buy the widget for $77, and darn, that $23 in tax sure is large! What'd I get for my $23?

    Just like the federal excise tax on gasoline - you forget it's there!
    Actualy it will be on the reciept, just like the sales tax you pay now is on the reciept.

    And as for the 77k house befor the tax the same house will be 77k after the FairTax, not 100k. You see now there is a built in tax burden on the developer who passes that burden on to the customer through the final price, so once you remove that burden the price falls and then you add in the FairTax and your right back where you started. So prices should not rise (in theory the market will keep prices level) you will just be removing one tax and replacing it with another.

    Oh yeah and the raw goods question, if you want to pay wholesale now you get a wholesaler liscence and if your state has a sales tax you are resposible for collecting and paying that tax on each sale, and they track that through your liscence. So if you want to start a business under the FairTax and not pay the tax because it's a business to business transaction then get your wholesalers liscence and find a wholesaler.

    If that didn't make enough sense I will try again tommorow, I'm tired so I'm going to bed.
    Somebody kicked my dog Mavis and I'm going to find out just who the hell it was.

  6. #51
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    Quote Originally Posted by gdalton View Post

    And as for the 77k house befor the tax the same house will be 77k after the FairTax, not 100k. You see now there is a built in tax burden on the developer who passes that burden on to the customer through the final price, so once you remove that burden the price falls and then you add in the FairTax and your right back where you started. So prices should not rise (in theory the market will keep prices level) you will just be removing one tax and replacing it with another.
    In theory I agree! In practice and in actuality is wherein the devil's details wreck havoc!

  7. #52
    Member Array MnemonicMonkey's Avatar
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    I first heard about this on the radio a couple years ago and it makes a lot of sense to me. I'm a self employed carpenter and am tired of seeing 30+% of my income going to the government. (Don't forget the fair tax would eliminate the 7.5% your employer could be paying you, but is sending to the social insecurity system.) I like the idea of your taxes being on the receipt- people would be much more aware of how much they're being taxed.

    As for compliance/black market/buying items across borders, it will happen, but the fair tax system would (if I remember right) cut non-compliance in half from the current system. Right now, the IRS estimates only 84% compliance with the current system. I wish I could find the figure, but I think I remember seeing that the top 6 US retailers account for 90-some percent of all retail sales. So unless Wal-Mart, Kroger, Home Depot, Albertson's, Sears/Kmart, and Target can all beat the system (don't think they won't be checking those books), then we will have more people paying their share than do now. Essentially, Wal-Mart replaces the IRS by reprogramming a few thousand cash registers! (Which their IT department could probably do in a half hour from their Blackberry's.) How's that for efficiency???

    As for the computer sales question:

    Since business purchases are not taxable, how does the FairTax keep individuals from pretending to have a business so they can buy things tax free?

    The FairTax has several features that make it difficult and very risky for persons to have a scam business in order to purchase items tax free. First, in order for any person to purchase items tax free for business purposes, the business has to be a registered seller and possess a registered seller certificate issued by the state sales tax authority. Registered sellers are expected to file monthly or quarterly sales tax returns with the state (depending on sales volume). The certificate enables the business to purchase tax free from wholesale vendors, but the vendor must retain a copy of the registration certificate to justify not having collected tax on the sale. When a business purchases items for business use from a retail vendor, they have to pay the tax on the purchase and take a credit against the tax due on their monthly sales tax return. They must keep invoices/receipts to document what they purchased and the amount of the purchase. They might also make note of the purpose of the purchase on the invoice.

    Also, as registered sellers, they are subject to the possibility of being audited by the state. During such an audit, they will have to produce the invoices for all the “business purchases” that they did not pay sales tax on and will have to be able to show that they were bona fide business expenses. If they cannot prove this, then they will have to pay the taxes that should have been paid when the items were purchased, plus interest and penalties. The probability of being audited will be much greater than it is under the current system with its over 140 million tax filers. Under the FairTax, there will be less than 20 million businesses that will be filing sales tax returns and thus subject to the possibility of being audited. Thus, the probability of tax cheats getting caught will be much greater than it is today, making tax evasion riskier than it is today. Additionally, while the FairTax has much stronger taxpayer rights than does the current tax system, the FairTax legislation provides for a number of fines and penalties for noncompliance. It also authorizes a mechanism for reporting tax cheats and obtaining a reward. An example would be 1-800-TAX-CHET.

    Another potential scam would be to have a “fake” family business in order to buy things for family members tax free. The FairTax has a specific provision to prevent this. Although it does not prohibit businesses from providing taxable property or services as gifts, prizes, rewards, or as remuneration for employment, the gift, reward, etc. is considered to be the conversion of property or services from business use to personal use and is therefore taxable. Likewise, there is a similar provision to prevent abuse of employee discounts. Under the FairTax, employer-provided employee discounts over 20 percent are taxable. The term “employee discount” means an employer’s offer of taxable property or services for sale to its employees or their families for less than the offer of such taxable property or services to the general public. If the employee discount amount exceeds 20 percent of the price to the general public, then the sale of such taxable property or services by the employer to the employee is considered the conversion of property or services to personal use and is subject to tax. The taxable amount is the amount by which the discount exceeds 20 percent of the price to the general public.

    Source: http://www.fairtax.org/site/PageServ...ut_faq_answers
    I think others have explained the house thing pretty well, but since I understand it firsthand, I'll give you the carpenter's version.

    NOW: I build a 3br/2ba house and sell it for $100,000 and pay my subcontractors $50k (who pay ~30% ($15k) income/ss taxes) and suppliers $30k leaving me with a profit of $20k that I have to pay ~35% tax on ($7k)

    Taxes paid: $22,000
    Profit: $13,000

    FAIR TAX: I build a 3br/2ba house and sell it for $100,000 (market price hasn't changed) and pay my subs the same $35k they got before. I pay my suppliers the same $30k, and the treasury $23k, leaving me with $12k.

    Taxes paid: $23,000
    Profit: $12,000

    (This assumes a transition that fixes net wages, which I believe is what would happen.)

    Notice house prices didn't change, only how the corporation pays it's taxes. New vs used has no effect because you were already paying the same amount of "corporate tax" before, you just didn't know it. That's why congress cleverly taxes corporations that pass the tax onto you!

    So see, even with me pulling numbers out of my rear after working 12 hours today, it works out pretty much the same, and the market will take up the slack. The difference is, now we're aware of how much we're being taxed (remember, you'll hand the new homeowner a receipt at closing saying, "Oh, by the way, you just paid $23,000 in taxes!!!"), and the IRS, 1040's, schedule SE's, estimated quarterly taxes, mileage deductions . . . . ALL GONE!!!

    I'd take that for $1000!!!
    "Lord, help me to be the person my dog thinks I am."

  8. #53
    Member Array gdalton's Avatar
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    Thanks MnemonicMonkey, I was not getting some of the finer points across very well (damn it Jim I'm an engineer not a poet) you have explained this far better then I.
    I love this idea because taxing consumption and not production just makes more sense to me, and it makes the tax system easier to see and understand as compared to the 10k pages of tax laws we have now. Plus we take away a lot of power from the congress and give it back to the people, and you gots to love that.
    Somebody kicked my dog Mavis and I'm going to find out just who the hell it was.

  9. #54
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    Hey, you supporters are doing a fine job. Sorry I've been MIA, but thanks for the help.

    Man, I wish I had time to get into all the things I need to get into, but I just don't. I still have some specific equations of Rock and Glock's to address and that will definitely take (me) longer than the 10 or 15 minutes I have available right now. But I would like to address one thing that Rock and Glock surmised later in the thread.

    I just thought of another reason this is being pitched as an "inclusive" tax too - it makes it very opaque. It lacks any transparency, and consumers thus "forget" about how much they're paying!
    Others have already correctly informed you that all retail receipts will have the tax burden to the consumer itemized, so it should be apparent to everyone that this plan is the most transparent plan ever offered Americans.

    The reason the plan is "pitched" as inclusive is simple; the tax that it replaces is calculated as inclusive too. More than being a "pitch," the fact is, the plan is the result of 20 years and more than $20 million bucks in research. The authors of both the research and the bill are just trying to compare apples to apples, as quoting the FT as exclusive while citing the current system, which is inclusive, would automatically put the FT at a disadvantage of perception. If you're not comfortable with citing the FT as inclusive, that's no problem as long as you also cite the income tax system the same way. (See image below)

    Before posting the image, I would like to say that this plan is not a scheme to defund government. It is not a tax break for anyone, unless you consider corporations, whose growth and efficiency are stifled heavily under the current system, as "someone(s)." The plan is researched and concluded to be revenue neutral, meaning that government will still take in approximately the same, and tax-payers will pay generally the same. The difference is in fairness, efficiency, transparency and the ability of average folk to understand the system they fund. It is, simply put, nothing more than an alternative way to fund government. That is where we're coming from. If you've got questions or concerns about the plan, that's great! It means you're thinking, interested and involved! But it would be much easier to address those questions and concerns if they weren't presented as assuming that the plan is trying to pull one over on the unthinking masses. I would not involve myself with just another run-of-the-mill scheme that, in the end, will accomplish nothing and just screw the citizens of the United States again. Anyway, here's the comparison of tax inclusive vs. tax exclusive for both the FT and the current system. It's rather eye-opening when you see that, just like the FT can legitimately be shown to be the same at 23% and 30% depending on the methodology, the income tax, as it presently stands, can be as much as 73% while it is "pitched" as 27%.

    "A free people ought not only to be armed and disciplined, but they should have sufficient arms and ammunition to maintain a status of independence from any who might attempt to abuse them, which would include their own government." -- George Washington

  10. #55
    VIP Member Array Tubby45's Avatar
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    No one should pay 23% tax for ANYTHING. Also, the .gov would be neutered down to its Constitutional size and powers. That means the Depts of Education, Interior, Transportation, ATF, Health, OSHA, most of the IRS (due to the decrease in tax stuff, a lesser force is needed to handle the stuff), etc. If it ain't in the USCON, the .gov shouldn't do it. Smaller government means less people to pay means their budget can be substantially smaller.

    Politicians will be paid at the rate of the average American's hourly wage and will be paid HOURLY, not a salary, and only get paid for time actually spent in session. Research and meeting with people counts as in session. Their "work ethics" will be overwatched by civilians. Last congress was in session for 92 days out of the year and most make over $100K per year. That has to STOP.

    There should be two taxes. Property tax and sales tax.

    Property tax is calculated on a cost per acre basis, not on the value of the home, and is due per year. A guy with 10acres should pay more than a guy with 5 acres because he is taking up more space. Who cares if there is a $5 million home on the 5 acres? Say the rate is $5 per acre, so the guy with 10 acres pays $50 per year for property taxes to the Federal government for their operations.

    Sales tax is a straight up 5% across the board for everything commerical sales. Private party sales are ALWAYS tax exempt. Online sales are subject to the 5% tax.

    The sales tax money goes to the state in which the goods or services are purchased and the local governments get 3% of that. The larger cities with more businesses will do more sales and have more money for police, fire, ems, etc. The smaller cities don't require the overhead that larger cities do. The smaller cities can get tourism to increase their sales.

    That is their budget they have to work with. There are also funds set up for each local government for donations from citizens. This is strictly voluntary and if you want to send a little extra in above the sales tax, you can at your will, be it $1 or $1000.

  11. #56
    Moderator
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    Blues and Others:

    Got it. Thanks! I just didn't see it'd be itemized on all receipts - if it in fact itemized - it is transparent - much more so than currently. I thought it was to be "buried" with a "Gross" type receipt.

    Good explanations and descriptions.

  12. #57
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    14 hours today. The first 4.5 hours or so were when I felt the best and produced the most for my employer, but I consider that third of the day as my slavedom to Uncle Sam, so the government gets the best part of me every weekday. 1/3 of our working lives on average belongs to the government. For some, you know, the "more fortunate," the evil rich, it's closer to half. My wife and I do pretty well, but it's gotten to the point that when one of us gets a raise, it's more nerve-racking than anything else because, as we progress through different deduction brackets, we see a smaller and smaller percentage of our raises in our paychecks. Sure, we can tweak our deductions, and do most every raise, but why on Earth a pat on the back by one of our employers in the form of a raise should cause consternation and worry until we can tweak it just so is well beyond my capacity to understand. It just hardly seems ummm.....fair, now does it?

    Give yourselves about an hour to view this video taped workshop at Newt Gingrich's American Solutions gathering from this past weekend. It's Rep. John Linder and Neal Boortz, co-authors of the definitive work intended for public dissemination, "The FairTax Book". Just so you're not tempted to dismiss the book as nothing more than a profit-making venture for two clever guys who wrote a book about tax policy fer cryin' out loud, that stayed at the number one spot of the NY Times Best Seller List for 6 weeks, all the profits from the book went/go to charity. Boortz and Linder have never seen a dime from the book, nor will they see any profit from an upcoming 2nd book on the subject. They are credible and believable. Do yourselves a favor and give 'em a listen.

    Blues
    "A free people ought not only to be armed and disciplined, but they should have sufficient arms and ammunition to maintain a status of independence from any who might attempt to abuse them, which would include their own government." -- George Washington

  13. #58
    VIP Member Array aus71383's Avatar
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    +1 Tubby45 that sounds pretty fair.

    Austin

  14. #59
    VIP Member Array packinnova's Avatar
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    Quote Originally Posted by Tubby45 View Post
    No one should pay 23% tax for ANYTHING. Also, the .gov would be neutered down to its Constitutional size and powers. That means the Depts of Education, Interior, Transportation, ATF, Health, OSHA, most of the IRS (due to the decrease in tax stuff, a lesser force is needed to handle the stuff), etc. If it ain't in the USCON, the .gov shouldn't do it. Smaller government means less people to pay means their budget can be substantially smaller.

    Politicians will be paid at the rate of the average American's hourly wage and will be paid HOURLY, not a salary, and only get paid for time actually spent in session. Research and meeting with people counts as in session. Their "work ethics" will be overwatched by civilians. Last congress was in session for 92 days out of the year and most make over $100K per year. That has to STOP.

    There should be two taxes. Property tax and sales tax.

    Property tax is calculated on a cost per acre basis, not on the value of the home, and is due per year. A guy with 10acres should pay more than a guy with 5 acres because he is taking up more space. Who cares if there is a $5 million home on the 5 acres? Say the rate is $5 per acre, so the guy with 10 acres pays $50 per year for property taxes to the Federal government for their operations.

    Sales tax is a straight up 5% across the board for everything commerical sales. Private party sales are ALWAYS tax exempt. Online sales are subject to the 5% tax.

    The sales tax money goes to the state in which the goods or services are purchased and the local governments get 3% of that. The larger cities with more businesses will do more sales and have more money for police, fire, ems, etc. The smaller cities don't require the overhead that larger cities do. The smaller cities can get tourism to increase their sales.

    That is their budget they have to work with. There are also funds set up for each local government for donations from citizens. This is strictly voluntary and if you want to send a little extra in above the sales tax, you can at your will, be it $1 or $1000.
    Among the problems I see with this is that you're just swapping items..for example: Houses for Acres. WTH is the difference?
    Property should NEVER EVER be taxed. Property is what we have to show for our hard work. It's already been paid for in blood, sweat, and tears. No one should be allowed to devalue or take value from it.

    Sales tax and commercial vs private sales: Commercial sales ARE private sales. If not, what are they?

    Now on to the good part...Your last paragraph.... That last paragraph covered EVERYTHING!
    "My God David, We're a Civilized society."

    "Sure, As long as the machines are workin' and you can call 911. But you take those things away, you throw people in the dark, and you scare the crap out of them; no more rules...You'll see how primitive they can get."
    -The Mist (2007)

  15. #60
    Member Array ptmmatssc's Avatar
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    Tubby45 and packinnova both have some goods points




    . Personally , "flat tax " , "fair tax" , "_____ tax" , it doesn't matter . "tax reform" is nothing but shifting where the taxes come from . Rather than trying to make any tax seem "fair" , why not work on eliminating the very reasons for taxes in the first place?

    Sales tax and commercial vs private sales: Commercial sales ARE private sales. If not, what are they?
    Good point. Unless a company is state/gov owned , then they are a private entity . The monies earned go into private hands , the same way my paycheck does for the work I provide my employer . The idea that we should give a pass to companies on paying taxes because " they will invest in people and community" or "it will free up money to employ more people" is naive at best . You only need to look around at what the upper echelon of companies pay themselves , while cutting back their workforce , to understand that it's plain and simple greed . They of course like the idea of the "fair tax" because it frees up more money they can use for their own wages .

    Having worked for both the fed gov and large private companies , I can say that "tax reform" is nothing more than a shell game . It comes down to who can convince the others that it's "good for them" to take the burden of taxes . REAL tax reform is cutting spending , cutting unnecessary programs, cutting pet projects , accountability , and consensus of the people to institute a tax for a single purpose , not a "general fund" etc .

    Btw , property tax is tantamount to "renting" what you have paid for . It's sad that a person can lose their home/land for lack of paying taxes .

    The following seems more appropriate for taxation , if moneis are needed .

    An across the board national sales tax would unquestionably increase the
    cost of production on American soil, as previously pointed out. To avoid
    this, and other unwanted effects of an across the board national sales tax,
    common sense dictates we must exclude from the list of taxable items, tools of production, supplies necessary to conduct business, services needed to sustain business, and the necessities of life (food, shelter, clothing, medical expenses) i.e. all those items which makes labor possible must also be excluded.
    http://usafoundingfathers.blogspot.c...-tax-plan.html

    May be just someones blog , but seems to make more sense to me than the current spend ,borrow,tax scheme we have going now .

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