I know many of you graduated with an economics degree.
Can someone explain the Fairtax? How different is it from out current tax system?
I know many of you graduated with an economics degree.
Can someone explain the Fairtax? How different is it from out current tax system?
Go to fairtax.org
Not an economists wrote:
I know many of you graduated with an economics degree.
Can someone explain the Fairtax? How different is it from out current tax system?
I believe the fair tax proposal is a regressive sales tax. In other words, the more you consume the more you pay Uncle Sam. It is meant to penalize big spenders more than poeple who save more. It would replace the income tax, which penalizes people who work harder to earn more.
This is a very basic definition. I haven't delved into teh details, but I did read one critique on it that said the Fair tax proposal could never work. You'll have to do a little research to learn more - and fill me in when you do.
[quote]Not an economists wrote:
I know many of you graduated with an economics degree.
quote]
Nice.
It's basically a national sales tax. You'll get to keep much more of your paycheck, since there will be less withholding, but will be taxed when you buy something. I believe they're talking about somewhere around 23%. There are various versions being touted, some exempt certain staple items from the tax, such as food, clothes, medicine, etc. Others advocate a rebate, based on family size, to offset the tax on these items.
Some of our esteemed econ grads can elaborate, I'm sure
It is not going to happen. Too many vested interests to keep the current system alive.
How many people with mortgages are going to go along with this scheme? Remember that people will no longer be able to deduct the interest of their mortgage.
How many people will want to pay for something like $60,000 in taxes for a $200,000 house?
It's a national sales tax, I think around 23%. It would replace the income tax and eliminate the IRS.
It's a bad, regressive tax. It would also hurt the economy because of greatly reduced consumer spending.
Not to mention a greatly increased black market.
I have seen estimates that the tax would be closer to the 30 to 33% rate.
Will wrote:
It's a national sales tax, I think around 23%. It would replace the income tax and eliminate the IRS.
It's a bad, regressive tax. It would also hurt the economy because of greatly reduced consumer spending.
That's the big problem. The consumer makes up 70% of the economy. The consumer would be spooked by the huge increase in costs of everything and cut down on spending. Maybe in the long term it could work but initially there would likely be a long recession period.
I believe the 23% number is the tax-inclusive rate as opposed to the tax-exclusive rate.
By way of explanation, our income taxes are tax-inclusive (i.e., the amount of income on which the tax is based includes the amount of the tax that we ultimately pay). This is in contrast to sales taxes, which are tax-exclusive (i.e., the rate is based on an amount that does not include the amount of tax being paid).
So, the fairtax folks are being disingenous by putting forth a 23% rate which is tax-inclusive, but would be imposed in a manner that is more familiar to everyone as being tax-exlusive. The 23% tax-inclusive rate would end up being about a 30% tax-exclusive rate, which is how it would appear when we buy goods and services.
And yes, it is extraordinarily regressive and subject to just as many special interests (e.g., in providing exemptions, rate reductions, etc.) as the regular income tax.