Has anybody heard about this yet? Or better yet, studied up on it? I liked the idea of a flat tax but am beginning to like a national sales tax even more. Here's some faqs and a link.
1.
What is taxed? The FairTax is a single-rate, federal sales tax collected only once, at the final point of purchase of new goods and services for personal consumption. Used items are not taxed. Business-to-business purchases for the production of goods and services are not taxed.
2.
Exactly what taxes are abolished? The FairTax is replacement, not reform. It replaces federal income taxes including, personal, estate, gift, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes.
3.
How does the rebate work? All valid Social Security cardholders who are U.S. residents receive a monthly rebate equivalent to the FairTax paid on essential goods and services, also known as the poverty level expenditures. The rebate is paid in advance, in equal installments each month. The size of the rebate is determined by the Department of Health & Human Services"™ poverty level multiplied by the tax rate. This is a well-accepted, long-used poverty-level calculation that includes food, clothing, shelter, transportation, medical care, etc. See chart in Figure 1 below.
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How does this affect U.S. competitiveness in foreign trade? Since all U.S. exporters immediately see an average 20-percent reduction in their production costs, they experience an immediate boost in their competitiveness overseas. American companies doing business internationally are able to sell their goods at lower prices but similar margins, and this brings jobs to America.
In addition, U.S. companies with investments or plants abroad will bring home overseas profits without the penalty of paying income taxes, thus resulting in more U.S. capital investment.
And at last, imports and domestic production are on a level playing field. Exported goods are not subject to the FairTax, since they are not consumed in the U.S.; but imported goods sold in the U.S. are subject to the FairTax because these products are consumed domestically.
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This has been talked about a good bit in this area for the past two or three months. A local talk show host has been talking it up a good bit and from what I've heard it makes a lot of sense. The only individual that has made any negative remarks about it so far has been a tax accountant worried about his job. There is a book being published in the next couple of months that is supposed to explain in more detail just how the whole thing works and I am looking forward to learning more. Anything that can be done to get the tax monkey off our backs is a plus.
Good question, Taz, and it is the question that stalls the discussion and possible implementation every time. Currently a business pays essentially no tax on goods and services acquired in the process of creating business income, which is as it should be. A national sales tax must address this problem first.
In the process of addressing those tax deductions you are backing away from the simplicity of the basic idea.
In the process of addressing those tax deductions you are backing away from the simplicity of the basic idea.
vc I agree the simplicity of it is great, but it creates a huge amount of business and investor income that would be virtually tax free as a result the only ones paying taxes are the consumers.
This is one of the reasons I find the flat tax more appealing, I have always felt a business should be taxed just like an individual, and the flat tax would be the fairest method IMO of what I have seen proposed.
A business or an individual makes no money or loses money they simply pay no taxes, no write off for next year or when ever. If an individual or company makes money they both pay a flat tax at the same rate.
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The Tazman aka Martin Price
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Taz, your reasoning is flawed. Businesses should be allowed deductions for the cost of doing business.
If I make decide to open a business that sells lemonade, the first thing I must do is go buy lemons. All I have done so far is take money from my pocket. Why should I immediately pay tax on that money in the form of a national sales tax?
Then I hire help. Again, I have created jobs, so why should that money not be tax deductible to me after I sell some of my lemonade?
$1.00 for lemons
$1.00 of labor
Product sells for $3.00. Business has $3.00 of "income?"
Its success hinges on these poor souls being bad at math - which may well prove to be the case!!
You said a mouthful. A lot of taxes hinge on that no-so-variable variable. In fact, a lot of not-so-poor souls are also apparently bad at the math involved in these questions.
Has anybody heard about this yet? Or better yet, studied up on it? I liked the idea of a flat tax but am beginning to like a national sales tax even more.
Flat tax is the only truly fair and viable way of doing it. Otherwise you would have 60% sales taxes at the end of 2 years. plus all the do gooders out there would force a $100 tax on a 6 pack of beer etc.
What was the sales tax rate that was proposed?Sales tax in Erie county NY is at 9.25% already.I know many places are lower than this.I would probably make out on this deal.No tax on used goods is something I can't see govt. giving up.Look at the taxes collected on cars.You buy a new car and pay sales tax.You sell that car in a few years and the new owner pays sales tax.You go to junk it and the junkyard pays sales tax.Alot of proposals seem good,but until the govt is totally sure one is right,we cannot make a change.In NY the lawmakers banned smoking in public places.That was fine.They didn't look at the big picture and now they are scrambling to make up the millions of lost tax dollars because bars and restaurants are not doing as much business.I know for a fact that my buddy's bars taxes for the 1st quarter after this bill went into affect were down $2500 and he owns a small corner bar.Multiply this by the many bars and restaurants that just went out of business and their new law has cost the state millions if not ,billions of dollars.Where can they make it up?raise other taxes.And that is exactly what they are doing.So before anything can be done they better make sure of the consequences.
National Sales Tax??
