Tax Rebates

[old timer]

"Twelve to 20 million consumers will pay their share

They live in the US and use government funded services. But under the current system, illegal immigrants do not pay federal income taxes. "

http://www.fairtax.org/site/PageServer

First, any factory worker (say, Excel) even if illegal pays FICA, payroll taxes, etc. out of their check. That underground workers will pay something would be true -- but that is certainly not defined by the term "illegal immigrants." In fact, one problem always found in the migrant farm workers issues in California was that the tax taken from them by their employees was not sent in to the government. And I don't think that the illegal economy is going to collect sales taxes -- do you?

Of course one point I can't find on the site you sent me to -- list a URL -- is what happens to morgage deductions ? Gone I guess ? That will be an economic shock to the whole middle class. (just found http://www.fairtax.org/site/PageServer?pagename=about_fairtax_four#regressive

but it doesn't address current home owners that bought with the deduction as part of their cost issues.

And IF and that's a big IF, food and clothes (say up to $250 per purchase) are not taxed at all, then maybe you gain something for the middle/lower class working family. And, of course, medical related services. But that means you start a new tax policy with this or that not included. Various industries would be killed if they have to raise their prices by 23 percent in competition with China, etc. -- another issue I'll look for again on the site.

Fact is it will not happen anyway -- tax lawyers/congressmen won't let it happen. But the reduced paper work would be a joy, for sure. And the opportunities for retail scamming of money will be another issue, also.

This paragraph I'm just not bright enough to read correctly:

"The FairTax actually eliminates and reimburses all federal taxes for those below the poverty line. This is accomplished through the universal prebate and by eliminating the highly regressive FICA payroll tax. Today, low and moderate income Americans pay far more in FICA taxes than income taxes. Those spending at twice the poverty level pay a FairTax of only 11.5 percent -- a rate much lower than the income and payroll tax burden they bear today. Meanwhile, the wealthy pay the 23 percent retail sales tax on their retail purchases."

Perhaps you can explain it to me ?

That paperwork would still be needed on a massive scale due to the rebate application requirement is another issue I don't see as a way to reduce overhead.

Americans For Fair Taxation: Why the Fair Tax Will Work

"My guess is that billionaires won’t bother applying for the FairTax rebate and Congress wouldn’t worry about sending them rebate checks if they do. "

I will sell you a bridge cheap in NYC if you believe that the wealthy won't get everything due to them is true.

BUT: I'll keep reading about it -- for sure. As someone lucky enough to never have to buy almost anything but food, clothes, and gas (grandma's furniture was solid in the 1930s, and dad's gold watch, etc & I like old cars) it might be a thought. And for those living on what would be non-taxed interest payments from investments, hey, bonus. And I guess there will no tax when I sell stock ? Double bonus....

[Bubba]

Here is what I like...

How does the prebate work?

All valid Social Security cardholders who are U.S. residents receive a monthly prebate equivalent to the FairTax paid on essential goods and services, also known as the poverty level expenditures. The prebate is paid in advance, in equal installments each month. The size of the prebate is determined by the Department of Health & Human Services’ poverty level guideline multiplied by the tax rate. This is a well-accepted, long-used poverty-level calculation that includes food, clothing, shelter, transportation, medical care, etc. See chart in Figure 1 below.

FAQ-2007 Prebate Chart-lower 48

That means if you don't have a valid Social Security number (i.e.- illegal) you will not get the prebate and will pay the full tax on all purchases!

[ksgrainman]

sales tax is by far the fairest tax of any, I don't like it either!!! Wish the Gov. made all their own money for roads, welfare, protecting our FREEDOM ! They don't . The poor contribute nothing but burden on you.

[Bubba]

Hopefully this will explain your question about whether the illegal business will collect the tax. It explains about compliance and evasion.

Does the FairTax improve compliance and reduce evasion when compared to the current income tax?

The old aphorism that nothing is certain except death and taxes should be modified to include tax evasion. Tax evasion is chronic under any system so complex as to be incomprehensible. As a percentage of gross domestic product (GDP), tax evasion in 2001 is beyond 2.6 percent, compared to 1.6 percent in 1991. This represents over 16 percent of taxes due. Almost 40 percent of the public, according to the IRS, is out of compliance with the present tax system, mostly unintentionally due to the enormous complexity of the present system. These IRS figures do not include taxes lost on illegal sources of income with a criminal economy estimated at a trillion dollars. All this, despite a major enforcement effort and assessment of tens of millions of civil penalties on American taxpayers in an effort to force compliance with the tax system. Disrespect for the tax system and the law has reached dangerous levels and makes a system based on taxpayer self-assessment less and less viable.

The FairTax reduces rather than increases the problem of tax evasion. The increased fairness, transparency, and legitimacy of the system induces more compliance. The roughly 90-percent reduction in filers enables tax administrators more narrowly and effectively to address noncompliance and increases the likelihood of tax evasion discovery. The relative simplicity of the FairTax promotes compliance. Businesses need answer only one question to determine the tax due: How much was sold to consumers? Finally, because tax rates decrease, tax evasion is less profitable; and because of the dramatic reduction in the number of tax filers, tax evaders are more easily monitored and caught under the FairTax system.

This also...

"The FairTax will not be enforceable and evasion will be rampant"

The truth: More than 80% of all tax returns are eliminated under the FairTax--every individual filing. What remains are retail outlets collecting the FairTax. Of these, 80 percent of all retail sales now occur at large retail chains like Wal-Mart. The point is oversight will still reside under the Treasury Department but the government's responsibility will be over a far smaller "universe" of tax collection points making compliance oversight far less costly and far more effective than the current system which costs $265 billion a year in compliance costs and still comes up $350 billion a year short of what is owed.

[Army_of_One]

Sales tax if fair because a poor person might drive a 2000.00 car consequently paying less tax than a wealthy person driving an 80,000 car. The more you spend the more you pay in taxes. How is that not fair? We have this idea in this country that some how wealthy people should pay more and more taxes. I think that is wrong. I think we should not penalize those that are successful.

[Highwayman]

Originally Posted by Army_of_One

Sales tax if fair because a poor person might drive a 2000.00 car consequently paying less tax than a wealthy person driving an 80,000 car. The more you spend the more you pay in taxes. How is that not fair? We have this idea in this country that some how wealthy people should pay more and more taxes. I think that is wrong. I think we should not penalize those that are successful.

If you look it doesn’t impose a tax on a used car, only a new car. I’m sure the car makers are going to love seeing the bridge between new and used increase discouraging the purchase of a new car. The end result will be an increased demand for used cars with fewer new ones to enter the market causing an increase in the price of used cars. Unintended constituencies. The price of a cheap ride for low income folks just went up.

Since it’s a sales tax the black market will surly grow. As more folks find ways to avoid a sales tax the rate will be increase to cover the shortfall.

As much as I like the idea of a sales tax because you will no longer have to report your income to the feds (it’s none of their business what you make), it has its shortcomings. It also requires the repeal of the 16th Amendment because without the repeal we have no protection against Congress imposing an income tax on top of a sales tax anytime they feel like it. Amending the Constitution is a hard thing to accomplish.

I favor a flat tax, no loopholes, no deductions and no lobbyists trying to bribe Congress for loopholes and deductions. Much simpler and faster to put in place because you don’t need to amend the Constitution to implement it.

The Flat Tax Policy Homepage -- FreedomWorks.org

[Outofdodge]

Originally Posted by Army_of_One

Sales tax if fair because a poor person might drive a 2000.00 car consequently paying less tax than a wealthy person driving an 80,000 car. The more you spend the more you pay in taxes. .

I was transferred out of South Carolina in 90's and I have no clue if the law is still on the books but prior to my leaving, there was a cap on the amount of sales tax paid on car purchases. IIRC it was $300.00. The wealthy dude buying a Porsche paid the same amount as the guy buying a used Impala. SC did and probably still does tax automobiles as personal property like KS does. They were pretty high too IIRC.

Originally Posted by Army_of_One

How is that not fair? We have this idea in this country that some how wealthy people should pay more and more taxes. I think that is wrong. I think we should not penalize those that are successful.

Oh bull poop!

No what we have is a taxation system that differentiates between earned and "unearned" income and treats it differently. The tax tables are also weighted towards earned income which is of course wages in the normal course of employment. On top of that the social security and medicare wages are an extra 7.65% or so of a person's wage until the SS max is met ($102,000 in 2008). Therefore a person in the average tax bracket of 15% is really paying taxes on almost 23% of his/her taxable income.

The tax rates on unearned incomes (dividends, capital gains, interest) are often advantaged either through lower tax rates or non-taxablility (certain dividends). Also the "wealthy" are more apt to earn more than the social security so their social security/medicare with-holdings drop to 1.something percent. Since the "wealthy" are the ones usually getting the lion's share of the unearned income then their effective tax rates are often well below the tax bracketts published by the IRS. That's where the *fairness* issue arises.

Like it or not, the income tax not only serves as a government funding vehicle, it is also a wealth distribution methodology. Even with the tax increases in the Clinton years, the rates were well below historical highs. IIRC again, the top marginal tax rate had hit 70% by the time Nixon was in office, if not sooner.

The marginal adjustments in the early years of the Bush administration for the middle class was but a dog treat compared to the tax advantages given those in the higher income levels. It's not penalizing them for being successful, its asking them to pay a share equal to their standing so others won't have to.

[Army_of_One]

Originally Posted by Outofdodge

Like it or not, the income tax not only serves as a government funding vehicle, it is also a wealth distribution methodology. .

Distribution of wealth...you know...somehow that doesn't sound fair.

The car thing may be correct in SC but not in KS. Plus you pay property tax based on the value of your vehicle. So someone driving a 2000.00 car pays much less than someone driving a 60,000 car. Now...if a "wealthy" family has a couple of cars 50K + they pay MUCH more in property taxes to drive those cars than the guy driving the 2K car.

[old timer]

As I was hearing the empowered George W last night, I was empowered with an empowering thought (ok, used empowered enough) --

A national sales tax of suggested 23 percent would do one thing needed -- cut back consumption. Now initially that would be a real blow to the economy, but since we will (George W. -- did he talk about it?) have to cut back over the next decade due to oil, water and energy issues, I guess that will be bonus.

You can suggest that it will put more money in people's (some) budgets, but if you fully know that each purchase is costing you 23% additional in taxes, I would suggest that putting the money in the bank will be a clear easy decision for many.

And with interest not being a purchase, will it be taxed ? If not, than holding on to capital would be my goal.

Now again, it will screw up our economy in many ways, but with the lower middle class spending more at WalMart, et al, it will certainly help China's.

And without federal deductions for investments in new businesses, I can only guess that fewer new businesses will start, etc. Again, a savings of energy and a good way to cut our GNP by a chunk.

Thoughts, Bubba ?

[The Rev]

Originally Posted by Army_of_One

I would agree...I wonder how much of the tax rebate will go on lottery tickets and booze for some people?

at least the money they spend on Lottery Tickets stays in Kansas.