The Fair Tax: A real attempt at Economic Reform

[Len Larson]

Sorry, I didn't see anything about cutting spending. This is just a distraction.
Unless we cut spending, no tax plan will work. If we do cut spending, then most any tax would work, including zero tax.

 

[erowe1]

Sorry, I didn't see anything about cutting spending. This is just a distraction.
Unless we cut spending, no tax plan will work. If we do cut spending, then most any tax would work, including zero tax.

+1

The amount we are taxed is always exactly equal to the amount the government spends. This rule is inviolable.

 

[Len Larson]

No direct taxes as the founders designed. The federal government could levy taxes on states, but not individuals. How the state collected those revenues was up to the state, and the design pitted state legislators against federal legislators as a balance of power. I'd like to see a return to that. The income tax was imposed to pay for war. We don't need the wars, and we don't the income tax to pay for them.

WINNER!

 

[Aldanga]

Can you provide the exact quote where he says that, complete with whatever caveats he made?

Ron has only ever said that the Fair Tax is very slightly superior to the income tax. He would support it, but only if the income tax was totally abolished. Still, he does not like it. It's a "lesser evil" in his eyes.

 

[erowe1]

Ron has only ever said that the Fair Tax is very slightly superior to the income tax. He would support it, but only if the income tax was totally abolished. Still, he does not like it. It's a "lesser evil" in his eyes.

I don't have any problem with someone seeing it that way. I'm pretty impartial about it myself. I just don't see how anyone could be positively excited about it.

I'd still like to see an exact quote though.

 

[Zippyjuan]

Yes, if there are no cuts in spending and you want to have a balanced budget a national sales tax ("fair tax") would have to be 30% in order to balance the budget. Consider also that in 2010 48% of all tax filers ended up owing no income tax. Under the Fair Tax their tax rate would go from zero percent to 30%. These are people at the median and lower incomes. Those who are also in under 30% tax brackets would also end up paying more in taxes than they do today. Those at the lower income levels get hurt the worst- they spend the vast majority of their income on goods and services. Everything they buy would suddenly cost them 30% more when the tax gets added in. $3 gallon of milk suddenly soars to $3.90. $4 a gallon for gas becomes $5.20. The vast majority of tax payers would be made worse off by the so-called "Fair Tax".

 

[flightlesskiwi]

I don't have any problem with someone seeing it that way. I'm pretty impartial about it myself. I just don't see how anyone could be positively excited about it.

I'd still like to see an exact quote though.

“I lean toward a flat tax. But I want to make it real flat, like zero.”
--Ron Paul, Jay Leno show, Oct. 31, 2007.

 

[Zippyjuan]

Ron Paul on taxes in general including the Fair Tax. Says he would not sponsor a Fair Tax bill but would probably vote for it if it came up but that he doesn't expect it to come up. Interesting that later on he says that higher prices are bad and hurt people yet the fair tax would significantly raise prices for people. Bit of a conflict in my opinion. I don't like the idea of the "fair tax" myself.

 

[Ashhhhh]

Some of you guys are as bad as Obama supporters. You really think that considering we're 15 trillion in debt RP can just wave a magic wand and we'll have no income tax or any tax at all? You are occupying a fantasy land and its pure idealism.

 

[flightlesskiwi]

lulz.

this coming from the person who hasn't said anything about cutting spending.

Some of you guys are as bad as Obama supporters. You really think that considering we're 15 trillion in debt RP can just wave a magic wand and we'll have no income tax or any tax at all? You are occupying a fantasy land and its pure idealism.

 

[CaptUSA]

Ashhhh, understand how a senior citizen that has spent his working years paying taxes on his income his entire life, and now, after saving all this time for retirement, you're going to tax him again on that wealth. Same thing goes for anyone who has savings. That money has already been taxed once when it was earned. If you tax it again when they spend it, it's double taxation.

Forget all the moral implications, for this reason alone, the "fair tax" will never happen. If you were starting from point zero, a consumption tax is better than an income tax, but that's not where we're starting.

 

[enoch150]

Some of you guys are as bad as Obama supporters. You really think that considering we're 15 trillion in debt RP can just wave a magic wand and we'll have no income tax or any tax at all? You are occupying a fantasy land and its pure idealism.

Ron Paul has proposed a balanced budget in three years. It would have to go through Congress, obviously. After that, as long as the rate of spending increases slower than the rate of revenue taken in, then the income tax could eventually be phased out and replaced with nothing.

 

[heavenlyboy34]

Yes, if there are no cuts in spending and you want to have a balanced budget a national sales tax ("fair tax") would have to be 30% in order to balance the budget. Consider also that in 2010 48% of all tax filers ended up owing no income tax. Under the Fair Tax their tax rate would go from zero percent to 30%. These are people at the median and lower incomes. Those who are also in under 30% tax brackets would also end up paying more in taxes than they do today. Those at the lower income levels get hurt the worst- they spend the vast majority of their income on goods and services. Everything they buy would suddenly cost them 30% more when the tax gets added in. $3 gallon of milk suddenly soars to $3.90. $4 a gallon for gas becomes $5.20. The vast majority of tax payers would be made worse off by the so-called "Fair Tax".

Exactly! Amazing. I've finally found something I agree with you 100% on.

 

[heavenlyboy34]

Some of you guys are as bad as Obama supporters. You really think that considering we're 15 trillion in debt RP can just wave a magic wand and we'll have no income tax or any tax at all? You are occupying a fantasy land and its pure idealism.

Everything the government is given authority to do in the constitution can be funded by indirect taxes and tariffs. You are the one "as bad as Obama supporters" and "occupying a fantasy land". (btw, what you said is not a counter-argument at all)

 

[erowe1]

Some of you guys are as bad as Obama supporters. You really think that considering we're 15 trillion in debt RP can just wave a magic wand and we'll have no income tax or any tax at all? You are occupying a fantasy land and its pure idealism.

If you could provide some reason to like the Fair Tax, maybe you would get a more positive reception. But so far I don't see one. It looks like an attempt to get just as many feathers off the goose with less squawking. The real problem isn't the squawking, it's the feathers.

 

[Zippyjuan]

Ron Paul has proposed a balanced budget in three years. It would have to go through Congress, obviously. After that, as long as the rate of spending increases slower than the rate of revenue taken in, then the income tax could eventually be phased out and replaced with nothing.

His balanced budget includes the assumption that revenues (tax collections) grow by 25% over that time. His net revenue projections rise from $2.476 trillion a year to $3.069 trillion a year. You can see for yourself here: http://www.ronpaul2012.com/the-issues/ron-paul-plan-to-restore-america/

 

[enoch150]

His balanced budget includes the assumption that revenues (tax collections) grow by 25% over that time. His net revenue projections rise from $2.476 trillion a year to $3.069 trillion a year. You can see for yourself here: http://www.ronpaul2012.com/the-issues/ron-paul-plan-to-restore-america/

The individual income tax confiscations in 2010 were 26% below what they were in 2007, as a percentage of GDP. Corporate income tax confiscations are down 52%, as a percentage of GDP. Overall, taxes confiscations are down 20% from 2007 to 2010, as a percentage of GDP. So if the recession ends and the GDP starts growing, a 25% increase in tax confiscations is not unreasonable, even with the tax cuts Paul adds in.

See page 35 for source.
http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/hist.pdf

 

[Zippyjuan]

25% growth in our current economic situation would be a highly optomistic estimate. Last year it was one percent (in the third quarter of 2011, latest available info, it was growing at an annual rate of 1.8% http://www.tradingeconomics.com/united-states/gdp-growth ). As a percent of GDP they are also projected to rise which means that not all of the revenue growth comes from economic growth (going from 15.3% of GDP to 15.9% of GDP).

Compared to 2010, he reduces spending by $700 billion or so right off the bat and lets it rise slightly each year after that. The remainder of the gap is closed by higher tax revenues. (2010 total outlays were $3.5t and in Ron's first year outlays are $2.8 trillion).

Give him credit though- nobody else is willing to provide any details on how they would reduce the size of government beyond some vague phrases and calling for a Balanced Budget Amendment or blaming somebody else like the other party.

 

[tttppp]

Sales tax is a bad idea, especially if its a significant percentage like Herman Cain's plan. One point that was not addressed in the opening post is the fact that it creates a disincentive for consumers to purchase goods. This can significantly slow down the economy.

There are much better solutions than the fair tax.

 

[enoch150]

25% growth in our current economic situation would be a highly optomistic estimate. Last year it was one percent (in the third quarter of 2011, latest available info, it was growing at an annual rate of 1.8% http://www.tradingeconomics.com/united-states/gdp-growth ). As a percent of GDP they are also projected to rise which means that not all of the revenue growth comes from economic growth (going from 15.3% of GDP to 15.9% of GDP).

Compared to 2010, he reduces spending by $700 billion or so right off the bat and lets it rise slightly each year after that. The remainder of the gap is closed by higher tax revenues. (2010 total outlays were $3.5t and in Ron's first year outlays are $2.8 trillion).

Give him credit though- nobody else is willing to provide any details on how they would reduce the size of government beyond some vague phrases and calling for a Balanced Budget Amendment or blaming somebody else like the other party.

Not a 25% rise in GDP in one year. The bulk of it would come from reduced unemployment over three years. GDP would have to grow some over three years, but not by any spectacular annual amount.