I think there is another benefit of Fair Tax that has not been touched upon.
As I understand it, the Fair Tax would also do away with corporate earnings tax. This would make American companies more competitive overseas, since they could use their increased earnings to lower prices (helping to offset the increase in price from the sales tax here at home) or invest in more efficient production methods here at home. I think this would go a long way at helping to revive (or at least slow the decline) of the American manufacturing industry. It would also encourage foreign businesses to move to America where they wouldn't have to pay tax on their earnings.
No I don't think Fair Tax would solve all our problems (it wouldn't stop the inflation tax for example and last time I checked, social security is going to go bankrupt around 2040), but I think it is overall a lot better than what we have now.
I think there is another benefit of Fair Tax that has not been touched upon.
As I understand it, the Fair Tax would also do away with corporate earnings tax. This would make American companies more competitive overseas, since they could use their increased earnings to lower prices (helping to offset the increase in price from the sales tax here at home) or invest in more efficient production methods here at home. I think this would go a long way at helping to revive (or at least slow the decline) of the American manufacturing industry. It would also encourage foreign businesses to move to America where they wouldn't have to pay tax on their earnings.
What motivation would the company have to lower its prices? I doubt a company being able to justify with its shareholders why it decided to willfully lower profits.
A company lowers its prices in order to stay competitive, and without the corporate tax burden could be equally profitable. Only companies that practically have a monopoly would even have the option to not lower its prices. Once a company's competitors begin to lower prices, so will that company, which should happen in relatively short order, less than a quarter for most retail outlets I personally believe, especially considering the pricing power of a few select mass retailers.
A lot has happened since we shocked the DC establishment with the FairTax book in 2005. Books on taxes just flat-out don't debut No. 1. The FairTax Book did. Since that time it has been virtually impossible for any Congressman or Senator to show up at a town hall meeting without having to field questions on the FairTax.
Over the past three years I've been buried under stacks of letters from these elected officials .. letters sent to constituents in response to queries about the FairTax. To put it in polite language ... I've never seen such a collection of unadulterated bullshit in my entire life. That, my friends, is why Congressman Linder and I wrote FairTax, The Truth.
Some have asked if this new book explains the FairTax in detail. I'll give that a qualified yes. You don't, however, get the benefit of the complete story behind the FairTax and our current tax system. More importantly, I think, is the fact that FairTax, The Truth responds to the misinformation, confusion and outright lies that have been spread throughout the media relating to the FairTax:
* The FairTax does not increase the price of everything you buy by 30% * The FairTax does not put an increased burden on the poor. It literally "untaxes" them. * The FairTax does not destroy the middle class. * Scientologists had nothing to do with it. * What is the truth behind the "you get to keep your whole paycheck" concept * Retired Americans living on their investments and savings are not "double taxed" by the FairTax. * The FairTax rate will not have to be 40, 50 or 60 percent. * The FairTax will not "destroy" our economy, no more than nutritious food would damage a starving child.
We've been listening for a couple of weeks now about some sort of a grand economic stimulus plan from our keepers in Washington. They're idea of economic stimulus is to put about $600 or so in the hands of millions of carefully selected Americans ... .selected on the basis of vote-buying. It's a joke, my friends. All these politicians have been doing is trying to target some specific voters out there with a little walking-around money in order to get their support in November.
* You want economic stimulus? Great .. I'll give you some economic stimulus. How about making the United States the number one tax haven for business in the entire world? * How about freeing up anywhere from $300 to $500 [billion] that is spent by Americans and businesses to comply with our current tax code? * How about bringing some of that $13 trillion – that's with a "t" – that has been working overseas to escape our punishing tax system, bringing that money back home to work here, in our economy. * Instead of giving some households a $600 goodie just this once, how about giving every legal household in this country hundreds of dollars every month to offset the taxes on their basic necessities. * How about totally removing the tax component from all capital and labor in this country. * How about letting people invest with untaxed dollars, and then not taxing the profits from those investments?
I have not heard the allegation that Scientologists have anything to do with the Fair Tax, and I find it laughable especially considering the history of the cult. All one has to do is look at Operation Snow White and realize that the leaders of Scientology find the information collected by the government, especially that of the Internal Revenue Service, invaluable.
Here is an overlooked issue with the our tax system, and fair tax. Our current system charges you tax based on your income, which means it lowers your income and thus provides you with an incentive to work more to make up for what is lost due to tax. Fair tax does not provide an incentive to make more money, it in fact provides an incentive to not spend money, because it raises the cost (perceived or real) and thus makes saving better then spending.
It seems to me also that the more people here seem to argue for it the more it seems that this tax completely removes the burden on business' to pay tax. Which doesn't make sense to me, I understand that doing this could lower prices and whatnot, but there is no incentive for businesses to do that. Why should they lower their prices to account for this tax when they can keep them where they are and make more money? This holds especially true for businesses that sell to other businesses since those transactions would not be taxed the 20% or 30%. And in a country where we treat corporations like people, shouldn't those corporations being paying taxes?
Here is an overlooked issue with the our tax system, and fair tax. Our current system charges you tax based on your income, which means it lowers your income and thus provides you with an incentive to work more to make up for what is lost due to tax. Fair tax does not provide an incentive to make more money, it in fact provides an incentive to not spend money, because it raises the cost (perceived or real) and thus makes saving better then spending.
The income tax does not provide an incentive at all to work more, the more you work, the greater chance you have of going into a higher tax bracket and making even less money. Basically it provides an incentive to work a very specific amount at a very specific wage. Any more or less and you wouldn't be maximizing your income for a given wage range.
And with a negative savings rate in the United States, I think an incentive to save instead of spend is sorely needed.
It seems to me also that the more people here seem to argue for it the more it seems that this tax completely removes the burden on business' to pay tax. Which doesn't make sense to me, I understand that doing this could lower prices and whatnot, but there is no incentive for businesses to do that. Why should they lower their prices to account for this tax when they can keep them where they are and make more money? This holds especially true for businesses that sell to other businesses since those transactions would not be taxed the 20% or 30%. And in a country where we treat corporations like people, shouldn't those corporations being paying taxes?
This is a very basic law of capitalism, competition will force the businesses to lower their prices baring some sort of collusion which is typically illegal in the United States. Cartels are also rarely sustainable due to the prisoner's dilemma. Those business that don't compete will get a metaphorical bitchslap from the invisible hand.
The income tax does not provide an incentive at all to work more, the more you work, the greater chance you have of going into a higher tax bracket and making even less money.
NO. This is not how it works. You don't lose money by going into a higher tax bracket. Only the money in that bracket is taxed at a higher rate.
The income tax does not provide an incentive at all to work more, the more you work, the greater chance you have of going into a higher tax bracket and making even less money. Basically it provides an incentive to work a very specific amount at a very specific wage. Any more or less and you wouldn't be maximizing your income for a given wage range.
When is the last time you heard someone say "Fuck, I got a raise at work. This sucks!" or "Shit I won the lottery and have to pay a 49% tax!" Yeah, that income tax is really a huge disincentive to people working harder and making more money.
And with a negative savings rate in the United States, I think an incentive to save instead of spend is sorely needed.
Oh, so you want the economy to be in the shitter? Fantastic. You realize that the economy is in the crapper right now because people aren't spending enough. When we spend our money, it makes more jobs for more people who will respend that money, etc. When everyone spends a lot, that means more work for more people to have nice things.
I'm not saying that you shouldn't save any money ever. That's just stupid. What I'm saying is that if within the overall economy there is too much saving and not enough spending going on, then people start to lose their jobs. It will be much harder to fix a huge increase in unemployment when goods and services are much more expensive. People without incomes will have a much shorter time to get back on their feet before they are completely bankrupt.
The fair tax is a great example of a phenomena that I don't know the name for. Basically people see something that they recognize as being a problem, i.e: the current tax system in the US. Thus, any solution to this problem that is presented that also makes sense, or is presented in a way that makes you believe it makes sense, will be praised. When something is broken, people will get to a point where any change is viewed as good. They don't realize the good that they've got until it gets worse. People lower their standards of evidence when presented with an alternative to something they do not like.
I can tell you this evidence that I have. The United States is the greatest economic force to ever exist. Since the 16th amendment was ratified in 1913, and we're doing just fine. The economy may be down at times and up at other times, but since the great depression it has only been going up and up. The fact that filing taxes is annoying and complicated is an issue that can be fixed without completely overhauling the system. We have a system that works, and has worked longer and better than just about any other system in history. Economists largely understand it, and know how to work with it. If you fuck with it, you're just asking for trouble. The communists had a system that looked really good on paper too.
NO. This is not how it works. You don't lose money by going into a higher tax bracket. Only the money in that bracket is taxed at a higher rate.
I'll have to take your word for that, but only proves the point that the income tax in the US is needlessly complicated and not transparent.
Still Kiey seems to subscribe to the Parable of the Broken Window. Of course people will work more to make more income if you take it from them, still how much of that work would be necessary or couldn't be focused more efficiently elsewhere?
I'll have to take your word for that, but only proves the point that the income tax in the US is needlessly complicated and not transparent.
No, it just proves that you can't understand it. Also, if the only problem with the US tax system is that it is complicated, there are ways to make it easier to understand without switching it from being income based to sales based.
I'll have to take your word for that, but only proves the point that the income tax in the US is needlessly complicated and not transparent.
It's not that difficult to understand from the perspective of an average person with average sources of income and average deductions. If you just read the little books that the federal and state governments send you every year, pretty-much everything is explained. The real problem is that most people are incapable of or unwilling to learn what little they need to know.
I'll admit freely that the system's interface could be streamlined, and that the system itself could be vastly simplified, improved, and fixed. I can think of a wealth of tax reform that is sorely needed. Still, the system performs a lot of very important functions very well. Throwing it all away for something that I honestly believe is batshit (Fairtax) seems like throwing the baby out with the bat(shit)hwater.
The fair tax is a great example of a phenomena that I don't know the name for. Basically people see something that they recognize as being a problem, i.e: the current tax system in the US. Thus, any solution to this problem that is presented that also makes sense, or is presented in a way that makes you believe it makes sense, will be praised. When something is broken, people will get to a point where any change is viewed as good. They don't realize the good that they've got until it gets worse. People lower their standards of evidence when presented with an alternative to something they do not like.
You mean the grass always being greener on the other side of the fence?
OK, here's why I think that this whole 'fair tax' idea (which I've never heard about before) is bad: 1. Things will become more expensive, thus people will buy less, this is basic human psychology. This will fuck the economy the fuck up. 2. Businesses don't lower their prices unless they absolutely have to. Yes, there's competition, but there is also a common interest for the margins to not become too thin. 3. Families will be at a disadvantage, because they need more things than people without kids. This will fuck up the demography further, which is a problem already. 4. The gap between rich and poor is too big already, especially in the United States, and it's growing. A flat tax or a fair tax will accelerate this process. If that's what you want, go for it.
<<blockquote rel="nlatimer"> And with a negative savings rate in the United States, I think an incentive to save instead of spend is sorely needed.
Oh, so you want the economy to be in the shitter? Fantastic. You realize that the economy is in the crapper right now because people aren't spending enough. When we spend our money, it makes more jobs for more people who will respend that money, etc. When everyone spends a lot, that means more work for more people to have nice things.The American economy is having problems because people have been spending more money than they have, and banks have been foolhardy enough to give people credit they can not afford. Spending and creating jobs is all well and good, but bad debts and foreclosures help no one.
No, it just proves thatyoucan't understand it. Also, if the only problem with the US tax system is that it is complicated, there are ways to make it easier to understand without switching it from being income based to sales based.
Of course there are, you could eliminate all of the 2,500 - 2,500,000 pages of code that relate to taxes and simplify it into say three tiers of rates. But that was done before in the 1980s, it was then added upon by the politicians due to lobbyists wanting to obtaining preferential treatment, and furthermore by politicians wanting to shape the behaviors of taxpayers.
1. Things will become more expensive, thus people will buy less, this is basic human psychology. This will fuck the economy the fuck up.
Things won't, hence they won't, and it won't.
2. Businesses don't lower their prices unless they absolutely have to. Yes, there's competition, but there is also a common interest for the margins to not become too thin.
The margins will remain the same due to the embedded taxes being eliminated.
The American economy is having problems because people have been spending more money than they have, and banks have been foolhardy enough to give people credit they can not afford. Spending and creating jobs is all well and good, but bad debts and foreclosures help no one.
Way to demonstrate that you have no clue what you are talking about. The problem with all these foreclosures was largely a screwup on the part of underwriters and such. It was explained on an FNPL, but I forget which one.
Oh, so you want the economy to be in the shitter? Fantastic. You realize that the economy is in the crapper right now because people aren't spending enough.
A government cannot tax itself into prosperity, and neither can a nation borrow and spend its way into prosperity.
You cannot bring about prosperity by discouraging thrift. You cannot strengthen the weak by weakening the strong. You cannot help the wage earner by pulling down the wage payer. You cannot further the brotherhood of many by encouraging class hatred. You cannot help the poor by destroying the rich. You cannot keep out of trouble by spending more than you earn. You cannot build character and courage by taking away mans initiative and independence. You cannot help men permanently by doing for them what they could and should do for themselves.
Do you have a source for that quote or is it just your own delusion?
Listen: if you live in society, you will be taxed. If you dn't like it, move outside of society. If you think the tax system is unfair, try to get your elected representatives to make reasonable changes. Reasonable changes do not include scrapping the whole system.
Do you have a source for that quote or is it just your own delusion?
Fixed. And once I again, I don't think such comments are necessary, and simply lower the level of discourse. Perhaps your methods would be welcome on Fox News, but not here.
Listen: if you live in society, you will be taxed. If you dn't like it, move outside of society. If you think the tax system is unfair, try to get your elected representatives to make reasonable changes. Reasonable changes do not include scrapping the whole system.
Wouldn't the entire system we had have been changed when the income tax was implemented? I would not have called it a reasonable change.
1. Things will become more expensive, thus people will buy less, this is basic human psychology. This will fuck the economy the fuck up.
Things won't, hence they won't, and it won't.
They will. I base this on when the sales taxes were increased in Germany not too long ago. Things became more expensive, despite sinking costs for enterprises in other tax areas.
About the margin-thing: When you lower your prices without changing your production, the margins become thinner. Therefore there is an aversion to lower prices. Higher prices, higher margins. Lower prices, lower margins. If you increase the business's margins by altering the tax system, the business won't just give it up miraculously. There is competition, but there also is economic interest. It's not like competition is like gravity, and will just pull the price down until it hits rock bottom.
They will. I base this on when the sales taxes were increased in Germany not too long ago. Things became more expensive, despite sinking costs for enterprises in other tax areas.
Were all other taxes on the federal level also eliminated in Germany? From what I understand Germany also has an income tax and a VAT. You can't create a strawman and expect your argument against it to hold up here.
About the margin-thing: When you lower your prices without changing your production, the margins become thinner. Therefore there is an aversion to lower prices. Higher prices, higher margins. Lower prices, lower margins. If you increase the business's margins by altering the tax system, the business won't just give it up miraculously. There is competition, but there also is economic interest. It's not like competition is like gravity, and will just pull the price down until it hits rock bottom.
You seem to be forgetting one thing which are lower input costs, especially on labor. Elimination of payroll taxes paid to the government can be utilized in one of two ways by the business, being reinvested in the business, or as a pay raise to the laborer. Also its important to remember that businesses don't pay taxes, they just pass them onto the customer.
Mr. latimer, I know you probably fancy yourself a tough guy, one of the "strong" who doesn't want to be "weakened", but I've got a prediction: One day, your strength will wane, and then you'll be pretty damn happy there's a safety net that came at the expense of . . . yes, taxes.
And another thing: You don't need to defend the rich. They have plenty of defenders as it is. They're not going to share their money with you.
This is a very basic law of capitalism, competition will force the businesses to lower their prices baring some sort of collusion which is typically illegal in the United States. Cartels are also rarely sustainable due to the prisoner's dilemma. Those business that don't compete will get a metaphorical bitchslap from the invisible hand.
To get back to this point, just because business have operations here doesn't mean they will sell their goods here. Last I checked companies don't tend to have actual things for sale in tax havens, they just setup a headquarters there to take advantage of the country for tax purposes. So you might start seeing Japanese companies setting up headquarters in Hawaii but that doesn't mean you are going to start seeing a flood of Japanese goods into the US because of it. And it wouldn't necessarily even bring in more jobs, because they would most likely man these places with people from their own country rather then Americans.
OK, here's why I think that this whole 'fair tax' idea (which I've never heard about before) is bad: 1. Things will become more expensive, thus people will buy less, this is basic human psychology. This will fuck the economy the fuck up. 2. Businesses don't lower their prices unless they absolutely have to. Yes, there's competition, but there is also a common interest for the margins to not become too thin. 3. Families will be at a disadvantage, because they need more things than people without kids. This will fuck up the demography further, which is a problem already. 4. The gap between rich and poor is too big already, especially in the United States, and it's growing. A flat tax or a fair tax will accelerate this process. If that's what you want, go for it.
I'll do my best to address each of these points with regard to Fair Tax.
1. Prices are already artificially high in the U.S. because of cooperate earnings tax, which effectively becomes a hidden embedded consumer tax. When you tax a corporation, it will pass the cost of the tax on to the consumer by raising prices. So, much of the 23% sales tax would be offset by the elimination of cooperate earnings tax. But let us assume that not all the sales tax is offset and prices increase by some amount less than 23%. The average American would have a lot more money in their pocket due to the elimination of all personal income tax. People would be inclined to spend or invest this money as they see fit (even if consumer goods prices are higher, the effects would likely offset). What about poorer Americans who currently pay little or no federal income tax? How will they pay for higher prices when they don’t get any money back from the elimination of the federal income tax? This is something I will address in point three and four as it is in response to the families and rich/poor gap points.
2. I don’t understand exactly what you are saying with this point in that you acknowledge competition as a force to keep prices low but then suggest this would not actually happen because of profit margins. But profit margins are the exact mechanism that would drive companies to keep prices low in order to remain competitive and sell more of their product. A company can gain a higher profit margin not just by increasing prices but by selling more products. I suppose all the nations retailers could conspire to keep prices high, but this can happen regardless of what the tax code is and there is anti-monopoly legislation that addresses this very issue.
3. Families will not be at a disadvantage. The more children a household has, the more pre-bate pay the family will get to eliminate the tax spent on needed goods (food, clothing, medicine). The pre-bate amount is determined to be 23% of your areas poverty line income level. It is not a welfare check, but rather is designed to eliminate (by directly compensating for) the sales tax on the needed goods for a family of the given size in that given area (as you know, cost of living differs in different areas, but this would be taken into account). The way this is set up, poorer families will end up paying less effective federal tax as I will explain further in point four.
Fair tax will also greatly help middle class families. Many families in this bracket are at the perilous point where they are not eligible for federal or state aid to send their kids to college but they are not quite rich enough to send all their kids through without taking out loans and/or taking extra jobs. Many of these families try to invest early when their kids are young but are not able to invest as much as they want because of income tax. These Americans should be given the option of whether they want to spend their money or save and invest it for when they need it down the road.
4. Finally and perhaps most importantly your point about the rich/poor gap. Let me first point out that you should not try to tie Fair Tax and Flat Tax together as they are completely different. Flat tax is a readjustment of our current tax system which retains the income tax but seeks to make it simpler whereby everyone would pay roughly the same percentage of their income. Fair tax completely eliminates all federal income tax on persons and companies and replaces it with a single sales tax at the retail level with a system of rebates given out to all Americans to assure they are not taxed on needed basic goods for them and their families. While they are not taxed on their income, poorer Americans under the current tax system are still effectively paying federal tax. The price of food, clothing, and medicine are artificially raised because the cooperate earnings tax is taken from every company that has a hand in their production, distribution, and sale. As stated earlier this is effectively a hidden consumer tax which currently affects all Americans who purchase products, even those who are poor and buy just the basic necessities. Under Fair Tax, all the tax on basic necessities is compensated for through pre-bates. So a very poor individual who spends all his money on necessities up to the poverty line does not effectively pay any federal tax. Under the current system, the poor do pay the hidden consumer tax without compensation. This is, as best I can explain it, how Fair tax ‘un-taxes’ the poor.
As a side note, I’ve noticed the number ad-hominem attacks increasing in this thread. If you want to address my points, or make some of your own, I’d be happy to discuss and respond. If you call me names, you’re probably just compensating for something…
Comments
As I understand it, the Fair Tax would also do away with corporate earnings tax. This would make American companies more competitive overseas, since they could use their increased earnings to lower prices (helping to offset the increase in price from the sales tax here at home) or invest in more efficient production methods here at home. I think this would go a long way at helping to revive (or at least slow the decline) of the American manufacturing industry. It would also encourage foreign businesses to move to America where they wouldn't have to pay tax on their earnings.
No I don't think Fair Tax would solve all our problems (it wouldn't stop the inflation tax for example and last time I checked, social security is going to go bankrupt around 2040), but I think it is overall a lot better than what we have now.
It seems to me also that the more people here seem to argue for it the more it seems that this tax completely removes the burden on business' to pay tax. Which doesn't make sense to me, I understand that doing this could lower prices and whatnot, but there is no incentive for businesses to do that. Why should they lower their prices to account for this tax when they can keep them where they are and make more money? This holds especially true for businesses that sell to other businesses since those transactions would not be taxed the 20% or 30%. And in a country where we treat corporations like people, shouldn't those corporations being paying taxes?
And with a negative savings rate in the United States, I think an incentive to save instead of spend is sorely needed. This is a very basic law of capitalism, competition will force the businesses to lower their prices baring some sort of collusion which is typically illegal in the United States. Cartels are also rarely sustainable due to the prisoner's dilemma. Those business that don't compete will get a metaphorical bitchslap from the invisible hand.
I'm not saying that you shouldn't save any money ever. That's just stupid. What I'm saying is that if within the overall economy there is too much saving and not enough spending going on, then people start to lose their jobs. It will be much harder to fix a huge increase in unemployment when goods and services are much more expensive. People without incomes will have a much shorter time to get back on their feet before they are completely bankrupt.
The fair tax is a great example of a phenomena that I don't know the name for. Basically people see something that they recognize as being a problem, i.e: the current tax system in the US. Thus, any solution to this problem that is presented that also makes sense, or is presented in a way that makes you believe it makes sense, will be praised. When something is broken, people will get to a point where any change is viewed as good. They don't realize the good that they've got until it gets worse. People lower their standards of evidence when presented with an alternative to something they do not like.
I can tell you this evidence that I have. The United States is the greatest economic force to ever exist. Since the 16th amendment was ratified in 1913, and we're doing just fine. The economy may be down at times and up at other times, but since the great depression it has only been going up and up. The fact that filing taxes is annoying and complicated is an issue that can be fixed without completely overhauling the system. We have a system that works, and has worked longer and better than just about any other system in history. Economists largely understand it, and know how to work with it. If you fuck with it, you're just asking for trouble. The communists had a system that looked really good on paper too.
Still Kiey seems to subscribe to the Parable of the Broken Window. Of course people will work more to make more income if you take it from them, still how much of that work would be necessary or couldn't be focused more efficiently elsewhere?
I'll admit freely that the system's interface could be streamlined, and that the system itself could be vastly simplified, improved, and fixed. I can think of a wealth of tax reform that is sorely needed. Still, the system performs a lot of very important functions very well. Throwing it all away for something that I honestly believe is batshit (Fairtax) seems like throwing the baby out with the bat(shit)hwater.
OK, here's why I think that this whole 'fair tax' idea (which I've never heard about before) is bad:
1. Things will become more expensive, thus people will buy less, this is basic human psychology. This will fuck the economy the fuck up.
2. Businesses don't lower their prices unless they absolutely have to. Yes, there's competition, but there is also a common interest for the margins to not become too thin.
3. Families will be at a disadvantage, because they need more things than people without kids. This will fuck up the demography further, which is a problem already.
4. The gap between rich and poor is too big already, especially in the United States, and it's growing. A flat tax or a fair tax will accelerate this process. If that's what you want, go for it.
Things won't, hence they won't, and it won't. The margins will remain the same due to the embedded taxes being eliminated.
Listen: if you live in society, you will be taxed. If you dn't like it, move outside of society. If you think the tax system is unfair, try to get your elected representatives to make reasonable changes. Reasonable changes do not include scrapping the whole system.
About the margin-thing: When you lower your prices without changing your production, the margins become thinner. Therefore there is an aversion to lower prices. Higher prices, higher margins. Lower prices, lower margins. If you increase the business's margins by altering the tax system, the business won't just give it up miraculously. There is competition, but there also is economic interest. It's not like competition is like gravity, and will just pull the price down until it hits rock bottom.
And another thing: You don't need to defend the rich. They have plenty of defenders as it is. They're not going to share their money with you.
1. Prices are already artificially high in the U.S. because of cooperate earnings tax, which effectively becomes a hidden embedded consumer tax. When you tax a corporation, it will pass the cost of the tax on to the consumer by raising prices. So, much of the 23% sales tax would be offset by the elimination of cooperate earnings tax. But let us assume that not all the sales tax is offset and prices increase by some amount less than 23%. The average American would have a lot more money in their pocket due to the elimination of all personal income tax. People would be inclined to spend or invest this money as they see fit (even if consumer goods prices are higher, the effects would likely offset). What about poorer Americans who currently pay little or no federal income tax? How will they pay for higher prices when they don’t get any money back from the elimination of the federal income tax? This is something I will address in point three and four as it is in response to the families and rich/poor gap points.
2. I don’t understand exactly what you are saying with this point in that you acknowledge competition as a force to keep prices low but then suggest this would not actually happen because of profit margins. But profit margins are the exact mechanism that would drive companies to keep prices low in order to remain competitive and sell more of their product. A company can gain a higher profit margin not just by increasing prices but by selling more products. I suppose all the nations retailers could conspire to keep prices high, but this can happen regardless of what the tax code is and there is anti-monopoly legislation that addresses this very issue.
3. Families will not be at a disadvantage. The more children a household has, the more pre-bate pay the family will get to eliminate the tax spent on needed goods (food, clothing, medicine). The pre-bate amount is determined to be 23% of your areas poverty line income level. It is not a welfare check, but rather is designed to eliminate (by directly compensating for) the sales tax on the needed goods for a family of the given size in that given area (as you know, cost of living differs in different areas, but this would be taken into account). The way this is set up, poorer families will end up paying less effective federal tax as I will explain further in point four.
Fair tax will also greatly help middle class families. Many families in this bracket are at the perilous point where they are not eligible for federal or state aid to send their kids to college but they are not quite rich enough to send all their kids through without taking out loans and/or taking extra jobs. Many of these families try to invest early when their kids are young but are not able to invest as much as they want because of income tax. These Americans should be given the option of whether they want to spend their money or save and invest it for when they need it down the road.
4. Finally and perhaps most importantly your point about the rich/poor gap. Let me first point out that you should not try to tie Fair Tax and Flat Tax together as they are completely different. Flat tax is a readjustment of our current tax system which retains the income tax but seeks to make it simpler whereby everyone would pay roughly the same percentage of their income. Fair tax completely eliminates all federal income tax on persons and companies and replaces it with a single sales tax at the retail level with a system of rebates given out to all Americans to assure they are not taxed on needed basic goods for them and their families.
While they are not taxed on their income, poorer Americans under the current tax system are still effectively paying federal tax. The price of food, clothing, and medicine are artificially raised because the cooperate earnings tax is taken from every company that has a hand in their production, distribution, and sale. As stated earlier this is effectively a hidden consumer tax which currently affects all Americans who purchase products, even those who are poor and buy just the basic necessities. Under Fair Tax, all the tax on basic necessities is compensated for through pre-bates. So a very poor individual who spends all his money on necessities up to the poverty line does not effectively pay any federal tax. Under the current system, the poor do pay the hidden consumer tax without compensation. This is, as best I can explain it, how Fair tax ‘un-taxes’ the poor.
As a side note, I’ve noticed the number ad-hominem attacks increasing in this thread. If you want to address my points, or make some of your own, I’d be happy to discuss and respond. If you call me names, you’re probably just compensating for something…