http://www.latimes.com/la-na-salestax24dec24,0,5286232.story?coll=la-home-center WASHINGTON -- Mike Huckabee, one of the most conservative Republicans in the 2008 presidential race, has embraced one of the most radical ideas on the campaign trail: a plan to abolish all federal income and payroll taxes and replace them with a single 23% national sales tax. Among the early advocates of a national sales tax were members of the Church of Scientology, a group that battled the IRS for years to gain recognition as a legitimate religious institution eligible for tax-exempt status.
From the article (fair tax) Independent analyses have concluded that the tax would have to be far higher than 23% to maintain the government at current levels -- especially if Congress did not eliminate popular tax breaks, such as the mortgage-interest deduction. Who said the government shold be maintained at current levels? Why would chopping down the size of entitlements, debt, military or wasteful spending be so bad? Sounds like the pigs at the feeding trough are a little dis"grunt"led William G. Gale, a tax expert at the centrist Brookings Institution think tank, estimates that the levy could run as high as 50% -- a tax so steep that it would be an invitation to mass tax evasion. And we don't have mass tax evasion now?
I find it very interesting proposal, although it is nothing new. 1) Corporations don't really pay taxes as they pass that cost on to the consumer. Of the taxes they are exposed to, they have complicated legal structures that allow them to get around them too. That is why universities churn out lawyers instead of doctors and scientists. So this new tax scheme would not change that. 2) I don't like the fact that the tax multiplier is linear. I think that the tax multiplier should follow an exponential curve with respect to the price of what you are buying. That means that if you buy food for example, it should be taxed at a lower percentage than if you buy an airplane. If you buy a house, it should be taxed at a rate between buying a loaf of bread, and buying a $100M pleasure cruise yatch. 3) Taxing at the consumption level only is dangerous. That means that potentially the very wealthy could corner the liquidity of cash by making tons of money, and storing it in a vault and not buy anything or investing it. It would be an extreme situation. But it could be used as a form of terrorism. Think "petrodollars". 4) If one day people woke up and realized they don't need 80% the shit we buy now, governments on this system would go kaputz. You could argue that our economy would go awry in that case no matter what, since we are consumers. I do not believe that it is axiomatic that capitalism automatically means consumerism on the scale we see today. All this said, the IRS is one of the most horrendous government institutions in existence. nitro
^^Nitro, my understanding is that food and medicine would not be taxed under the Fair Tax... I like the idea of Uncle Sam not tapping into any of my paycheck!
Good points, nitro. I like the fair tax as long as it is accompanied by: 1. A "prebate" of some sort to account for that key part of income used for basic living expenses. I also like your non-linearity pinciple in point two below. My fear though is that this makes a "clean' tax quite murky and before you know it we are back to where we are today with thousands and thousands of exemptions and credits. So on balance maybe the prebate in (1) above is sufficient to address the linearity effect. Finally as rcanfiel said above: WE DO NOT NEED TO MAINTAIN GOVT SPENDING at current levels. as a start the 572,000 troops the USA keeps overseas as the policeman of the world is a great place to cut this massively bloated govt spending.
It will never happen. Congress will never give up the power the tax system gives it. If they tried, there are so many politically powerful groups that would be hurt under the so-called fair tax, that it would go nowhere. For example, retirees. Having paid income taxes on their earnings for a lifetime, under a fair tax their retirement savings would be exposed to even more taxation. Another example, the mortgage and related home ownership tax breaks. Keep these and the system breaks down. Try and get rid of them and have mass rebellion. How do you deal with transactions at intermediate production stages? If you tax them, you give vertically integrated companies a big advantage. If you try to address that with a value-added tax, you have introduced a level of complexity that makes the current system look simple. Plus, how do you deal with foreign-made goods? If you ignore wholesale transactions, you open a huge loophole. How do you deal with the transition period? Keep the income tax and the fair tax? Do that and we'll end up with both forever. Or risk a massive revenue shortfall? The fair tax is a nice sounding idea that falls apart on serious analysis. Far better to have a flat tax. One suggestion I like is giving taxpayers the option of using the regular tax system or a simplified flat tax. Many taxpayers do that already in effect with the AMT, which is basically a flat tax that excludes most deductions. The AMT is a penal tax however, with a rate that is too high and it unfairly takes away deductions that people have a legitimate expectation of being able to use. The real question people need to be asking Huckabee is what he will do with our current system. He knows the fair tax is not happening, but he disingenuously uses it to avoid getting pinned down on tax rates,etc. Based on his record, I have grave doubts he would be a president who would face down democrats on tax increases. McCain also fails this test, as he actually voted against tax cuts. If there is one issue republicans should be able to agree on, it is taxes. Even Guiliani is for tax cuts. A weak record on taxes should be a disqualification for a republican candidate.
I like the idea. Let me spend my money how I see fit. Even if you dont like the idea give him kudos for actually standing up and saying "this is my idea and what I believe in". http://www.fairtax.org/site/PageServer?pagename=calculator&autologin=true
here we go again national sales tax is always brought up as a way to 'encourage saving' but the first thing it does, is kick the crap out of anyone who actually DID save, by converting existing savings into pre-sales tax income savings that survived heavy income taxes, stock market roller coaster, and inflation
You have to be pretty naive to think.... #1) Congress will give up its biggest stick #2) That a 23% tax of any sort would not create a huge black market. Not directed at you z, just at the idea in general. A Fair tax could work, but it would have to be in the area of 10%. A tax rate of the size 23% would create too big of an incentive to avoid it.