Replacing the income tax with a consumption tax

[Mormon Red Death]

Originally Posted by Indy Coug

It's going to be fun watching a burgeoning black market of "off the books" purchases.

I guess they don't have any black markets right now.. good point

[BlueHair]

Originally Posted by Mormon Red Death

www.fairtax.org

All Income and payroll taxes go away and people pay tax on new items bought.

this makes the most sense to me...

In your opinion, how would inflation be impacted? The website talks about real estate booms, etc. I have always been in favor of consumption taxes rather than payroll taxes. Also, on the surface it looks like evasion would be a little harder. One would be hard pressed to buy everything on the black market. It seems like the first year or two might result in less tax revenue due to people anticipating the new tax and buying before it goes into effect. Of course, increased compliance might make up the difference.

[BlueK]

Originally Posted by Indy Coug

It's going to be fun watching a burgeoning black market of "off the books" purchases.

would that be worse than the current tax evasion that goes on?

[BlueK]

Originally Posted by Indy Coug

They claim that Florida and Texas are essentially doing this, but that's only at the state and local level.

Texas and Florida have bigger economies than many nations do, especially Texas.

[BlueK]

Originally Posted by BYU71

If this is done the government is going to lose a lot of the control they have in manipulating people's lives.

Yup, that's the real reason they won't want to change it.

[BlueK]

Originally Posted by Indy Coug

There are several very important questions that I haven't really seen satisfactorily answered regarding a consumption tax

1. How do you transition from the current to the new system?
2. What will be the consumption tax rate? I'd like to see who thinks they can peg that tax rate to generate approximately the same revenue
3. How will that rate be adjusted going forward?
4. How will this not end up adversely affecting the poor more than the middle and upper class?
5. What becomes of state and local income taxes?

There's a lot more, but that's just for starters. I'm not opposed to finding an alternative method of taxation, but it appears to me that every proposed system is more or less 6 of one kind, a half dozen of the other.

As far as the poor are concerned, there is no tax out there right now that hits them harder than does the social security tax. The fair tax eliminates it.

[Mormon Red Death]

Originally Posted by BlueHair

In your opinion, how would inflation be impacted? The website talks about real estate booms, etc. I have always been in favor of consumption taxes rather than payroll taxes. Also, on the surface it looks like evasion would be a little harder. One would be hard pressed to buy everything on the black market. It seems like the first year or two might result in less tax revenue due to people anticipating the new tax and buying before it goes into effect. Of course, increased compliance might make up the difference.

Inflation actually stagnates as the fair tax is only on new items bought. business doesn't pay any taxes for supplies thus the cost to produce actually goes down. For example, a house building company no longer pays payroll tax (7.65% of payroll) and the supplies they buy are cheaper because there are no taxes from their suppliers which makes the products produced (in this case new houses) cheaper. At the end you add on 18% for a tax and it comes out to the consumer about the same as they would have paid in the system we currently have

[Indy Coug]

Originally Posted by BlueK

Texas and Florida have bigger economies than many nations do, especially Texas.

Texans and Floridians are still paying the same federal taxes as everyone else.

[SeattleUte]

Originally Posted by BYU71

Can anyone tell me a country that uses this tax method. I would like to look at their economy and see how it has done.

If this is done the government is going to lose a lot of the control they have in manipulating people's lives. I would imagine also the churches and charities wouldn't be happy.

The state of Washington. A consumption tax is really just sales tax. Here in Washington we don't have a personal income tax (businesses pay something called a B&O tax). State government is financed by sales tax including heavy taxes on real estate transactions. I understand Texas and Nevada are similar.

This is how you know Washington/King County liberals are just all talk. The problem with sales/consumption tax is that it's steeply regressive. The rich pay a much smaller percentage of their income as tax than do the middle class and poor. Here in Washington Bill Gates' father has has led efforts to generate and initiative repealing state sales tax and instituting state income tax on this basis. These efforts have been unavailing.

[Mormon Red Death]

Originally Posted by SeattleUte

The state of Washington. A consumption tax is really just sales tax. Here in Washington we don't have a personal income tax (businesses pay something called a B&O tax). State government is financed by sales tax including heavy taxes on real estate transactions. I understand Texas and Nevada are similar.

This is how you know Washington/King County liberals are just all talk. The problem with sales/consumption tax is that it's steeply regressive. The rich pay a much smaller percentage of their income as tax than do the middle class and poor. Here in Washington Bill Gates' father has has led efforts to generate and initiative repealing state sales tax and instituting state income tax on this basis. These efforts have been unavailing.

the good thing about the "fair tax" is that everyone receives a credit (called a prebate) every month to pay for basic necessities.

tp://www.fairtax.org/PDF/FairTaxPrebateExplained2007.pdf