Would the ‘Fair Tax’ tax used cars? 8


By Tom Quiner

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The Fair Tax is a national sales tax designed to replace ALL other taxes.

It would replace a tax on productivity (the income tax) with a tax on consumption. The plan has been impressively researched at great expense. Advocates for this tax emphasize that it is NOT tax reform. It is tax replacement.

All of the following taxes would be eliminated:

√ federal income taxes

√ personal taxes

√ estate taxes

√ gift taxes

√ capital gains taxes

√ alternative minimum taxes

√ Social Security taxes

√ Medicare taxes

√ self-employment taxes

√ corporate taxes.

So, what WOULD be taxed? FairTax.org tells us:

“The FairTax is a single-rate, federal retail 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. A prebate makes the effective rate progressive.”

The key words are “only once.” A new car IS taxed; a used car isn’t, since it has already been taxed.

Same goes for consignment shops selling used clothing. The clothes were already taxed the first time they were sold.

A Quiner’s Diner reader expressed a legitimate concern on the plan in my previous post on the subject (“The time has come to abolish the IRS. Here’s how …”). Since the proposed Fair Tax rate is 23%, wouldn’t that amount to a tax increase on most working class families? After all, most people fall into the 15% tax bracket. The answer is no, the Fair Tax would not be a tax increase. In fact, it would probably amount to a tax cut, explains FairTax.org:

“Most people are paying that much or more today — much of it is just hidden from view. The income tax bracket most people fall into is 15 percent, and all wage earners pay 7.65 percent in payroll taxes. That’s 23 percent right there, without taking into account the 7.65 percent employer matching! On top of that, you have to add in the business taxes and associated compliance costs passed on to consumers in higher prices.”

The tax code currently stands at 4 million words. That’s about five times the length of the Bible. Congress tinkers with it constantly, usually increasing its complexity as it taxes new things; at the same time, they exempt others that have more persuasive (richer) lobbyists.

The Fair Tax eliminates the tax code. It strips away power from the politicians and their lobbyist buddies and puts the power where it belongs: in the hands of the people.

If you’re sick of a corrupt IRS bullying the little guy at the behest of the elites who control government, you should support the Fair Tax.

Spread the word on Facebook, Twitter, and other forms of social media. The time has come.

 

 

 

8 comments

  1. Please correct me if I am wrong, but the rate per dollar would be 29 cents IIRC. If you then calculate 29 cents out of 1.29, you get the 23% that they are talking about. IIRC, there is also a “prebate” where ALL tax payers would receive a certain sum based on the approximate taxes a person at the poverty level would pay, essentially refunding their tax BEFORE they pay it.

    I was a big proponent of the FAIR tax at one point. Now I think it should be a graduated tax with very few deduction, but a lower rate than there is currently. THis could also be accomplished fairly simply by a flat tax of 18-20%, with a basic per person deduction for dependents, say 30,000 for the first and 15K deduction for each successive dependent.

    This needs to be accompanied by spending cuts, and means testing and age adjustments for “entitlements”. They are simply no longer sustainable.

    • You are right on the percent, which is .30, even though the effective rate would be .23. You’re right on the prebate, as well. The idea of a flatter tax is also a good one, and more easily accomplished than a Fair Tax, although there will still be complexity and highish compliance costs compared to a Fair Tax.

  2. “The income tax bracket most people fall into is 15 percent, and all wage earners pay 7.65 percent in payroll taxes. That’s 23 percent right there, . . .”

    As long as we keep using the highly misleading “tax bracket” terminology instead of “effective rate”, when explaining the benefit, the plan is going to be suspected of half-baked construction. If the proponents must make the current situation look FAR worse than it really is, in order for this plan to make sense, I want no part of it.

    • I can’t imagine a more half-baked system than we’ve got now, can you? Here is how FairTax.org responds:

      Effective tax rates vs. stated tax rates
      Because the 23-percent FairTax rate of $0.23 on every dollar spent is not imposed on necessities, an individual spending $30,000 pays an effective tax rate of only 15.5 percent, not 23 percent. That same individual will pay 17.3 percent of his or her income to federal taxes under current law. See effective tax rates for a family of four at various spending levels in Figure 2.
      chart

  3. I absolutely love the idea, in theory at least. I thoroughly resent being taxed multiple times on the same money: Basically, they tax it when I earn it, and then tax it again when I spend it.

    I’m no mathematician, but it seems to me that it would only be a tax hike for those in the 15% bracket if they spent all their money on taxable goods. If they did that, then their income would indeed be taxed at 23%. But chances are most people would give some money to charity, give some as gifts, spend some on used items, pay some as interest on loans, etc., so your entire income won’t end up being taxed.

    Besides, again, most of us have our money taxed multiple times. So even if my salary is only taxed at 15%, I also have to pay sales taxes, property tax, vehicle registration fees, Social Security, etc.

    By the way, would the various state taxes be eliminated, e.g. state income tax, property tax, vehicle registration, etc.?

    • I agree, I like the way the Fair Tax eliminates multiple taxation. You hint at another interesting idea: two people who earn the exact same amount of money could pay different amounts of tax since taxation is based on consumption, not income. The frugal person who leads a simple life style would pay less than a person who likes to spend and run up their credit cards. Keep in mind, each household would receive their monthly prebate check which covers taxes for basic necessities for the upcoming month. For a family of four, the prebate checks would add up to $6341 a year. Regarding your last no question, no, state taxes are not affected.

  4. Love the idea so much that it seems too good to be true… which means it probably is.

    Maybe that is what would kill it in the end. The public is so cynical that support could be lacking.

    As for support from our political leadership, my own cynicism holds little hope for this ever happening because good ideas like this one just become another polarizer for no apparent reason other than for polarization’s sake.

    • I don’t know if this can happen or not. Here’s what FairTax.org has to say about their chances:

      “Do women have the right to vote in this country? Did we pass Prohibition? Did we repeal it? Do Civil Rights guarantee freedoms far beyond the lunch counter and mass transit? Do free-market economies dominate Eastern Europe, peoples once under the boot of communism? All these were grassroots efforts that affected significant changes in our nation and the world. Is the current income tax system any less a yoke around the necks of otherwise free peoples? We think not.

      Passing the original 16th Amendment and the income tax wasn’t easy and repealing the income tax and the 16th Amendment won’t be easy either. That is why the FairTax has undertaken to build a grassroots movement and grassroots alliances to support the effort. When the FairTax generates unprecedented economic growth in the first few months of its effective date, citizens nationwide will make it clear to Washington that they want to make the change permanent. But this will only happen when the American people rally behind the effort, throw off the yoke, and demand rectification of 90 years of wrongs done by the income tax.”

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