Anybody else heard about this?

[Nyteshade]

I just glanced at this a while ago. Thoughts?

http://fairtax.org/

[Hey Bubu]

interesting.

[Adam D]

*yawn*

this again?


Yay for more regressive tax schemes.

[Nyteshade]

Got it in the work mail today and it's new to me. I had heard of a sales tax reform to simplify the different laws between states (trust me, this is a fucking NIGHTMARE when you sell goods across the country) but not for replacing income taxes.

[Nyteshade]

Originally Posted by Adam D

Yay for more regressive tax schemes.

Please explain for purpose of debate.

[Adam D]

Originally Posted by Nyteshade

Please explain for purpose of debate.

The lower on the income scale you go, the higher percentage of income one tends to spend on consumption of goods and services (outside of rent/mortgage payments and utilities of course). People who live paycheck to paycheck do not and cannot typically save money or invest, so as a result they will end up paying a higher percentage of their income in sales tax than people higher on the scale who can invest their income, save, etc. because money that isn't spent on consumption isn't taxed.

The same would be true for businesses, presuming that they would change from paying an income tax to the same consumption tax. Small businesses typically don't gain revenue from investments the way larger companies do, so they too would end up paying a higher percentage of tax than multi-billion dollar companies. Presuming that a consumption tax would be added on anything that is purchased, vendors and retailers, who make their money on buying and selling products, would pay a higher tax rate than companies who are service-based.

Granted, it might be an easier system than the income tax, but by no means would it be a fair tax. I realize some people do suggest modifying the consumption tax to allow poorer people to recapture some or all of their taxes, but if your goal is to eliminate the IRS and make it "fair" you're going to end up in the exact same place we are now. You would have to have an agency to process requests for returns and people complaining that poor people are "ripping off the system" by not paying taxes or paying less taxes.

[Nyteshade]

Something else I had realized. Everything that a company pays in for payroll taxes would now be paid by the consumers rather than the business. It would effectively raise the amount of money individuals pay in taxes.

[PETA]

Originally Posted by Adam D

The lower on the income scale you go, the higher percentage of income one tends to spend on consumption of goods and services (outside of rent/mortgage payments and utilities of course). People who live paycheck to paycheck do not and cannot typically save money or invest, so as a result they will end up paying a higher percentage of their income in sales tax than people higher on the scale who can invest their income, save, etc. because money that isn't spent on consumption isn't taxed.

Not necessarily. Those with less money have less to spend and consequently the rates of tax paid in relation to income earned may not be higher. That, however, is the assertion. But, we have graduated income tax brackets - the more one makes the higher one's rate of tax. We also try to adjust excise taxes - many states don't tax food at grocery stores for example - in order to ease tax burden on the poor who need to eat just as much as the non-poor.

Regressive taxation, imo, is more properly thought of as the notion that taxes hurt the poor harder even if the wealthy pay at higher rates makes of the decreased utility of the remaining dollars.

For example, if I make a million and I am taxed at 50% I can live just fine on the $500k. However, some one who makes $40k is taxed at 25% will have a harder time living on $30k - even though they pay half as much, as a rate, of their income in taxes.