Time to get rid of all federal taxes except a national sales tax. Our Rube Goldberg tax system has got to be the single biggest drag on economy. Imagine the money that goes into complying with taxes doing something constructive.
People just don't seem to get it: We have a byzantine tax code to made people do X instead of Y and to not do Z in favor of Q.
Congress wants to do these things, and the tax code is the easiest way to do them. Congress will STILL want to do these things even if you do fair tax.
If the fair taxers get their way, we'll likely end up with income AND vat 10 years down the line. Ech.
And you realize: Fair Tax would ALSO cover all investments? Buy a house: 40% to the governement. Buy stocks: 40% to the governemnt, etc.
"Congress wants to do these things, and the tax code is the easiest way to do them. Congress will STILL want to do these things even if you do fair tax."
Well, I think that's a step backwards, but at least that would mean you were willing to admit that what we're doing right now isn't working any more. [immediate edit:] Most of us have too much knee-jerk nationalistic pride to think about changing the system on a fundamental level.
there's nothing like going all meta during a discussion to kill one's political power ;). Arguing over the details is a lot safer than looking at the big picture, I would think.
Bhutan had a king that everyone loved. He decided that his country would degrade under a new king after him who may not be so benevolent, so he instituted a Democracy.
The country has since degraded. Families have broken up over arguments about who should be elected, which laws should be passed, etc...
The current Fair Tax legislation is tied, not merely to abolishing income taxes, but also to repealing the 16th amendment. Last I read about it, it would not go into effect, even if it passed, until Congress lost all ability to levy income tax at all.
And FairTax has a pretty narrow conception of what constitutes consumption. Certainly not stocks, as you suggest. Investments in general are excluded. And any used items--used homes in your example--are excluded.
This may be true, but how sure are you that the proponents of the FairTax will keep control of the process to ensure that outcome?
The income tax gives politicians tremendous power over the entire above ground economy and almost all the population, why would they give that up?
Since when have tax reforms in the West resulted in a wholesale replacement of one type of tax by another, instead of a layering? If you could point to a few exceptions I'd be interested.
It's not a question of history, but of the way the bill is written. In stark contrast to the law that is the topic of this thread, the bill has been online to view for years, and even has a summary in plain english: http://www.fairtax.org/PDF/PlainEnglishSummary_TheFairTaxAct...
How do I know the income tax will really be gone? Section I of the bill abolishes all income, estate, payroll and gift taxes, repealing sections A, B, and C of the Internal Revenue Code in their entirety. Sec 301 disbands and defunds the IRS, and requires that all its records be destroyed in a year. And sec 401 contains a sunset clause that negates the whole thing (both the sales tax and the abolishment of the income tax) if the 16th amendment to the constitution is not repealed within seven years. Thereafter, any attempt by congress to bring back an income tax would be, not merely unpopular, but actually unconstitutional. And they'd have to build up the infrastructure from scratch.
Whether or not you think the Fair Tax is a good idea (and obviously I do), it's a model for how law ought to be made. In public, with a lot of visibility and discussion up front, a lot of time for question and answer, the full technical details exposed. The bill is not a tangled mess of amendments, but a well thought out and cohesive whole.
Ummm, what magic set of legislative rules would allow this bill to get a single up or down, no amendments, vote?
There's also the inconvenient fact that no Congress can tie the hands of a future Congress.
The only way to accomplish this in our system would be to get a single amendment to the Constitution that would simultaneously repeal the 16th Amendment and replace it with the FairTax, and then get 3/4ths of the states to ratify it.
It does apply to new houses, but you can't consider the sales tax in isolation. It's offset by the fact that you get to keep your entire income. Not just the portion on the pay stub, either; your employer would no longer owe payroll taxes. In general, you would get some or all of those, too.
Financing a 30% more expensive house and paying for it out of a 30% bigger paycheck would be somewhere between neutral and a win for most people.
It makes a silly imbalance between new and old properties. The immediate second you buy that new house, it's price drops in value 30%. So you have little incentive to buy new as you can get 30% more house for buying slightly used.
Doesn't seem to stop people from buying new cars. ;)
Nah, the sale of a used house is a totally private transaction. It's not as though there's a magical base price for a house of that size, and then a tax. It'll be sold for whatever the seller can get for it. If it's practically new, it might be the original price including the tax. Heck, it might be higher.
The original builder doesn't get to keep as much of the retail price as a subsequent private owner would. That's the distinction between new and used.
Nor is it as though buying a fixer-upper avoids the tax entirely. Materials and labor for renovations are taxed. That can be a significant portion of what's put into a home.
There's nothing inherently complicated about a progressive income tax; it's the fact that we insist on having a deduction for mortgage interest, R&D, asset depreciation, hiring new workers and hundreds of other things that all individually might be things we want to encourage, but together add up to a complex and cumbersome system.
A sales tax is regressive. The lower your income, the higher your tax burden as a percentage of income. Even the fair tax understands that which is why most versions of it has a huge tax credit per year.
A sales tax doesn't have to be regressive. If you tax luxury items while not taxing essentials you'd probably get an even more progressive system than we have now.
That's true, but making a sales tax progressive creates the same complication that exists in the current system, only with even more incentive for corporations to lobby for special exemptions, reclassifications, credits, etc., for the products that they produce.
It wouldn't be that difficult. Lots of states that have sales tax don't tax food. Simply make the essentials untaxed or any product of a particular category under a particular price untaxed. We have these measures in the current system. If you earn under $6,000 you pay no tax.
The benefit is that you take the burden off the individual and leave it all to computers. There's a "Taxable" flag and the equation is simple. IF (item.category == Food or price < (select minprice from categorylimits where categorylimits.category = item.category)) then tax = 0 else tax = 0.25 * item.price
Exactly; all the companies who make goods that might conceivably qualify for an exemption start spending a lot of their focus on getting that (since it's a big discount if they do) instead of focusing on providing the best product/best price/whatever.
The tax system is complicated not because of the taxes themselves, but because of all the tax credits created to incentivize behaviors.
The vast majority of tax cuts are really just government spending in disguise -- pork for a special interest group that gets allocated by the constituents' accountants instead of in a spending bill, and adding directly to the national debt instead of through the budget.
This nails exactly what wrong with the tax system. In the history of civilization, the ebb and flow of empires has always consisted of tax disputes wedging factions into alliances who fight for more control. Taxes cause this process! It doesn't matter what the tax is, who pays, or who is paid, just that there's all this extra drain on the natural activity of flowing capital.
The logic is Microecon 101: Taxes are the equivalent to the a transaction+holding cost of using Uncle Sam's currency. Use gold, well,
then you're paying to store and transport it. If Uncle Sam was smart about his paper, he would make the Federal Reserve into Federal PayPal, having the Federal Gov't charge, oh say, a 0.001% transaction fee on any exchange of US currency. Same difference, amirite?
