Wednesday, July 12, 2006

Questions regarding the Fair Tax Act

Alright all of you Fair Tax supporters, please help me with these issues.

  • How will gas be taxed? There is no mention of repealing the federal gas tax in the Fair Tax Act of 2005. Does that mean that the 23% sales tax will be in addition to, and on top of the current federal gas tax? What about state gas tax? Will the sate tax that many of us pay, be taxed again by the federal tax? That's going to drive gas prices to near $4.00 a gallon.
  • How will business to business transactions be taxed? If they are not taxed, what will prevent people from making personal purchases under the guise of that business?
  • Fair Tax supporters mention that the Wal Mart effect will eventually bring prices down due to competition. How will this work with monopolies such as utility companies in many areas?

Here is an interesting article to read about some of the potential flaws in the Fair Tax Act.

These are just a few questions. If anyone has other questions to add, let me know. If anyone has the answers (Axe), please post them to educate us.


BlackLabelAxe said...

I'm so glad you asked...

Gasoline is a consumer good purchased at the retail level, therefore it is subject to the National Sales Tax.

The Fed already collects around 18 cents per gallon on fuel, which makes it our only user-based tax. This is beyond fair, because the Fed's gas tax goes to road improvements. Those who drive the most use the most gasoline, therefore pay the most tax towards road improvements. More fuel-efficient consumers use less fuel, and pay lower tax. It's like a write-off, except without the NAZI-like aggression of the IRS.

BND, you are correct to postulate that the FairTax will (temporarily) increase gasoline prices, albeit by approximately $.50 per gallon. Within months, this margin will be eliminated as corporations from oil producers to tank liners are relieved of their income tax burden and compete their additional savings down the line to consumers. Basically, instead of the corporation raising their own prices to hide the cost of this tax, the consumers will know exactly how much tax is being levied against our purchases.

I'd like to remind everybody that the FairTax would allow all of us to keep 100% of our paychecks, and we would never have to report income to the Federal Government ever again, because it is none of their business what we earn.

The State tax on fuel is up to the states. Most likely is that the states will follow the lead of the Fed and also switch to a consumption-based tax. This would probably have extremely little impact on fuel prices, but just like the National Sales Tax, would ultimately lower our effective tax rate for all except the wealthy.

Business transactions will not be taxed, because they are investments. Education is also an investment, and will not be taxed. This benefits America by promoting corporate investment. According to a study of 500 international corporations, 400 (80%) said they would move at least one manufacturing plant to the United States if we passed the FairTax, and 100 (20%) said they would move their corporate headquareters here. Keep in mind that not taxing investments makes us the banking capitol of the world. There's no more need for Swiss or Cayman bank accounts when your money isn't taxed here until you spend it.

Wal-Mart will face competition from other retailers, even in places where they seem to be the only show in town. Wal-Mart's prices are not unique to each community, and will reflect their other markets where retailers engage in price wars every day.

I also have concerns with the FairTax, and it's not perfect. What I'm sure about is that it's 100% more Constitutional than the income tax, and it's a huge improvement. Even the wealthy people I talk to who don't support it (they have enourmous tax write-offs and good accountants) admit that our country needs this to promote new business and invigorate the economy.

BlackLabelAxe said...

It's really just a matter of accountability and transparency. Consumers already pay for coporate income taxes, they get passed down the line, except that we don't actually know how much tax is rolled into the cost of the goods we buy. The FairTax gives us crysal transparency to know what taxes we're paying. If poli-chickens raise the tax, we'll know next time we stop to buy a soda. They can't do it anymore by paying off certain people on a certain commitee pushed by some lobbyist that doesn't benefit anybody but the coporation's elite and the politician.

ken hawk said...




well i bOiLD a ho tdOG today.


but tHEn i screwd iT up.

BlackLabelAxe said...

Okay, I read that article, and I'll comment (breifly) on it:

He does bring up valid points, but he's reaching way beyond the scope of the tax. The tax is revenue-neutral, meaning that it does not raise any more or less money than the current scheme. He wants to curb government spending, as do I. The FairTax does not curb government spending, it is an instrument to fund the government. What we do with the money is a very serate topic.

The businesses that collect the tax have an incentive to report, because they get a 1/4% kick-back for complying. No, the boy that mows your lawn will not report the $20 you payed him, but that amount represents 0.000005% of the GDP, and isn't currently taxed anyway. What he will do is spend that $20 on baseball cards or video games at Wal-Mart, and that 23% will be collected, and Wal-Mart will keep 1/4% to give them incentive for not cheating.

He mentioned the Representative from Texas who isn't on board yet. Reason? Do you think that Representatives, even Republicans, are so concerned about taxpayers that they'll ignore their lobbyist benefactors? Hell no.

It is true that when they pass the FairTax, it will not automatically repeal the 16th Amendment. That will have to be done, but the amendment will be obsolete. The IRS will be shut down, and unable to steal from our paychecks. However, it is valid to say that in transition, the government will have the theoretical ability to tax us at the cash register and our paychecks. They just won't have anybody to do it.

We'll slay Leviathan later. Let's start with the IRS.

BlackLabelAxe said...

Ken Hawk:

You know I have you listed as a "Hero" on myspace?

Reading your posts is the reason I get up every day.

ken hawk said...

thAts areal hOnoR whats yOUr paGE

BlackLabelAxe said...

The Methamphetamine dealers that buy Sudafed at Walgreen's will now have to pay taxes on it.

The dope dealer will now pay taxes on his munchies, or the Escalade and the $10,000 wheels he put on it.

The underground economy will always exist, but over 80% of consumer spending is done at big-box retailers, who are not going to risk federal crack-down to save you a few bucks on your groceries.

Besides, there will be 87% fewer people filing their taxes, increasing the number of federal agents to investigate fraud by sixfold. Instead of fucking with homeowners, they'll be fucking with illegal arms dealers and pimps.

BlackLabelAxe said...

BigNewsDay said...

So what you are saying is that since federal and state gasoline taxes are built in taxes, the Fair Tax Act will essentially be taxing taxes?

How will we keep people from buying personal goods under the name of their businesses. If a business owner wants a car, he will buy that car with the business rather than under his private account. This creates a loophole. Everyone will be starting small busineses as a way to avoid paying taxes. Right?

BlackLabelAxe said...

Businesses will pay taxes on goods like vehicles and office supplies. They won't pay taxes on investments like education for employees or smaller business acquisitions.

I'm not sure how they'll handle the gasoline tax. From my understanding, it will replace the tax we already pay on gasoline. That's how it's written anyways. You'd have to purchase gigantic amounts of every expensive gasoline to offset the pay increase from the FairTax.

It's also the only chance we have for making social security and medicare solvent. Illegal immigrants pay the full fury of the tax system with no prebate check, so they can use medicare if they want to because they're paying for it. Foreign tourists will be paying into our retirement plan when they come here.

B.L. Sabob: now "completely heterosexual" said...

Hey, its quite simple. If you want to bring down taxes for all Americans without bankrupting the nation, all we have to do is stop subsidizing business. And while we're at it, lest stop paying mercenaries, oops sorry, "contractors" from doing the job our military should be doing for ten times the pay we give our grunts.

Consider this fact:
"Welfare for very low income people totaled $193 billion in 2004. Aid to dependent corporations exceeded $800 billion."

B.L. Sabob: now "completely heterosexual" said...

hell, anyone can get a business licence. All it takes is a few hundred bucks and about 1/2 of filling out forms. I own two corporations and don't even have a real business. Its the easiest scam in the book.

Ann Coulters bastard son said...

Fair Tax my left ass cheek. Take a look at who’s promoting the damn thing—Neal Boortz. This hectoring fascist blow-monkey has been talking about that shit for years on his insipid radio show, and even co-authored a book about it. This asshole has more money than brains thus he sits in the top income tax bracket—and bitches about it till your ears bleed. What he’s done is convince all his dip-shit listeners who are not anywhere near his top bracket that they as well are taxed way too much and need to change the entire system—for him.

BlackLabelAxe said...

Boortz can be a self-serving, intolerant ass at times, but he's dead right on this.

The FairTax is so much more progressive than the income tax that anybody who calls this a rich-get richer scheme should be beaten half to death with a stack of economics textbooks.

Yeah, based on the way it's written you might think that the rich pay more taxes under the income tax. What's not written is that they have accountants move their money to offshore tax shelters where it's not helping our economy at all.

Therefore, middle class mules like us end up paying the legal amount of taxes, unable to manipulate high-stakes Caymen or Swiss bank accounts that would get us out of it.

If you can think of a better way to make everybody do their share, then I'll be happy to listen to it.

LiveWire120v said...

I can't believe the number of people falling for this! Any increase in revenue by sin taxes is drawfed by the unspent income, Which must be made up somewhere.
The people I have talked to support this in lieu of the logical economic facts --- Scary ---. This says they have been indoctrinated. Propaganda is one of the leading expenses in the world.
One simple point is that the unspent income is not taxed. This will not be the poor or middle class but the wealthiest income earners. ( Not the non-income rich i.e. born rich.) These wealthy income earners presently pay 80% of the taxes and save the most of any other class. What a tax break.
I'm for tax cuts but the U.S. has limited currency so to make up for the massive deficiet taxes must and will be raised.
Accounting for the tax being paid will be a riot. You think cheating now is easy? I agree with my counter part, beat these people who think the rich will not get richer should be beaten with economic books.
I for one can't afford to drive across the border and make major purchases ( Cars. Jewelry, Ect...). The rich can.
I hate the tax system but will only vote for real change not popular problematic solutions.
Cut all entitlements, welfare and any freebies by any other name and cut 50% of spending.
Back U.S. currecy with something and the value of the dollar will soon be back up above canadian currency.
Fine companies alot for each instance of hiring illegal aliens and when you catch one give them 3 years work detail by incarceration. After all money talks and none walks. Problem solved without the cost of a fence.
Truley this is a real joke for solving the tax problem and no dogmatic movement will help me save money but legal theft of more of this 50K a year earner.