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According to the 2007 Income Tax schedual (), a couple earning $30K and filing jointly had to pay 10% on their first $15,650 ($1,650) plus 15% on the remaining $14,350 ($2,152.50) which totals $3,802.50. Now I didn’t do the math but, I’m pretty sure they would have saved some money under the Fair tax.
Also keep in mind that more than half of the total income tax burden on the middle class is collected at the register rather than garnished from our wages. That’s because business never really pay taxes, we do. Taxes on businesses raise prices by about 22% and that effects everyone including the poor and elderly. The Fair tax does replace those hidden taxes with it’s own tax but, the prebate refunds 100% if it to the poor and the elderly so they stand to see a 22% drop in their cost of living. At the same time, corporations would save fortunes on income taxes. That’s a GOOD thing for everyone! It would untax the whole economy, create more jobs and allow American products to compete in the global economy. Foreign companies would bring trillions of investment dollars here to build new plants and create even more jobs. It all adds up to one thing- more power to the America people.]]>
Of course, what’s fair and what’s not is debatable. The arguments against the national sales tax are the same as those against a regressive income tax. On the other hand, some say that since people derive utility from their wealth only when they spend it on something, only consumption should be taxed.]]>
Also, I can’t see how FairTax would lead to more regulations for Small Business start ups. If anything it will greatly simplify the accounting for those businesses, which is a huge hump to get over when you expand a business from a couple people to more employees.]]>
Yes, paychecks will be bigger, and people may spend more… so for those foolish people, the change will be a wash. For more prudent people, it will be a gain. I highly doubt you’d see a net negative based on this aspect.
Using your example for a couple that makes $35,000/yr and spends $30,000/yr, under the current tax system I highly doubt such a couple is walking away with any more than $2000 at the end of the year without some good (expensive) tax help.
Any criticism that uses Warren Buffett as an example is highly suspect. He’s an outlier in every sense of the word.
For the poverty rate, that’s a valid criticism, though it seems a pretty trivial problem to tackle, as you’ve noted.
For corporations, sure, people are willing to pay $100 for something today, but those same people probably won’t be willing to spend $130 on it tomorrow. Corporations will have to lower their prices to keep the total cost of the item within the same range that it’s currently in. Though, honestly, how corporations will react is pretty much mostly conjecture at this point, there is a decent argument to be made in either direction, but capitalism works both ways: if one company keeps the price high to take in extra profit and another lowers their price to maintain profit and capture market share, which do you think consumers will choose?
50 state governments do not have to buy into it, as federal tax is wholly distinct from state & local tax. They’ll have to option to model their taxes after the federal system, but it’s not required for it to work and to benefit people.
And, all of this ignores the expense (in both money and time) that people and corporations incur to comply with the current tax system. That’s a savings beyond the basic tax rate, and it will have a significant impact.
Now, all of that said, I’m not an economist, and I don’t have all of the answers. I support the Fair Tax because I think it’s a net win. I wouldn’t make the claim that it’s perfect because I just don’t have the kind of basis to make that claim. I like it on a personal level because it gives me control that I don’t have otherwise. There needs to be changes made to the tax system, and this is the most viable proposal I’ve ever heard. The status quo is not sufficient.]]>