FairTax Act-Is it a viable solution?

Where did you dream up this? You think the federal government will ever pass legislation eliminating all city, county and state taxation?? This will never happen!

Whatever the federal government decides in regards to taxation...is in addition to city, county and state taxation...

 

Not quite true. The US has a system with progressive elements. In terms of time series analysis, there has been a concerted attempt at eliminating some of those elements. Those at the top of the income distribution, for example, has seen dramatic reductions in marginal tax rates since the 1960s because of changes in corporate taxes and in estate and gift taxes

 

The FairTax is applied to anything that is new.

So to answer your question. What happens to the guy who tries to get around taxes. What happens to anyone who tries to beat the tax man.

It's called jail.

 

Your are reading into my statement.

Once you eliminate all federal taxes on businesses, prices will drop like a stone. Then the FairTax will be applied to the new lower price.

Second, states will have to decided if they want to keep a sales tax or not.

 

And where in the FairTax law does it say he cannot sell a product for any price he wishes? And if it does - where does it specify exactly how little he can charge for that product before he is breaking the law?

The only way that can be illegal is if the FairTax people put a minimum amount that businesses are allowed to sell EVERY SINGLE PRODUCT - which would be a bureaucratic nightmare.

And even then - what if he wants to have a sale? Does he have to get permission from the FairTax people before he legally can? And what if they say 'no'? Does that mean he is stuck with those out-of-date products that no one wants because they are too overpriced - but since they are technically still new, he cannot drop the price to unload them? So he has to carry them on his lot forever?

 

No matter the changes...no matter the trends...the IRS tax system today is progressive...

 

You can't say that. You don't know the marginal rates of tax. As I said, it has progressive elements (with marginal rates of tax consistent with progressivity sometimes). However, that's distinct from a simple system that is assuredly progressive

 

Sure I can say that...the more adjusted income a person has the higher the tax rates. There is a distinct difference between 10% of $8500 and 35% of $379,150. There is a huge difference between $850 and $132,702...especially when both people have nearly the same foot print with the federal government. It is 100% obvious that some people are paying for other people...and this makes it progressive...

 

No, to refer to a progressive system you'd have to know all marginal rates of tax and show that they increase as we move up the income distribution. You don't have those marginal rates of tax. You just know that there are progressive elements.

 

You don't know what you are talking about. The businessman can change whatever price he/she wants. The businessman can sell a million dollar worth of inventory for 1 dollar. It doesn't matter. The government does not care. All the government cares about is a million dollar worth of inventory was sold. What price you charged is your problem. They still get their cut.

Look buddy. If it were impossible to have a sales tax. No state government would have one.

 

No, it's you that apparently does not understand.

'The Fair Tax Act (H.R. 25/S. 13) would apply a tax once at the point of purchase on all new goods and services for personal consumption.'

http://en.wikipedia.org/wiki/FairTax

It is NOTHING to do with the wholesale price.

The purchaser pays the 30% sales tax on the item he/she purchased.

Got it now, 'buddy'?


Now please answer my questions:

'And where in the FairTax law does it say he cannot sell a product for any price he wishes? And if it does - where does it specify exactly how little he can charge for that product before he is breaking the law?

The only way that can be illegal is if the FairTax people put a minimum amount that businesses are allowed to sell EVERY SINGLE PRODUCT - which would be a bureaucratic nightmare.

And even then - what if he wants to have a sale? Does he have to get permission from the FairTax people before he legally can? And what if they say 'no'? Does that mean he is stuck with those out-of-date products that no one wants because they are too overpriced - but since they are technically still new, he cannot drop the price to unload them? So he has to carry them on his lot forever?'

 

Indeed, making a comment like 'US has a progressive tax system' quite ludicrous.

 

No matter the tax bracket, as income rises so does the tax rate. If all incomes rise, and all tax rates rise accordingly, then it's progressive. Those with a lower ability to pay will pay less and those with a higher ability to pay will pay more. For me, this 'element' is enough to define our federal tax policy as progressive...

 

The government cares about taxable income. Business cannot over or under-state inventory value without getting into some trouble. Inventory is held on the books at a marketable value and is relieved when something is sold. These and other rules are very strict in a public company. Any businessman, who has $1 million in inventory value on the books, and sells this for $1, just gave away $999,999!

I think a national sales tax is a fine idea; but I won't support one that starts first by exempting some, prebating others, etc. We don't do this crap at state and local levels so why do this at the federal level? And lastly, I wouldn't support a sales tax, or another dime of federal tax, until presidents and Congress' stop their out of control spending...

 

As a business person we try to keep our profits as high as possible. But our product and service prices are determined by the market. I can design a business sector to sell something for $50 and believe I have profit of $5. But if the market pushes the sales price down to $40, I can resist and just go out of business, or I can figure out how to get my costs down to $35 or $36 in order to show some profit. Most of the time we're the tail on the dog, and those who succeed make the necessary adjustments. This is an example of why for 20-30 years we have more and more outsourcing; prices are hard to control but costs are fully controlled, so if you cannot change the prices, then start reducing the costs...and for a couple of decades this has been off-shore...

 

That's nonsense. You know you don't have the marginal rates of tax available. Its actually a very difficult thing to calculate given the multiple taxes and benefits at play. You're therefore assuming progressivity without proof. In reality you only have a rather bland "some progressive elements" comment

 

Progressive tax definition from financial dictionary:

"A tax with a rate that increases as the amount to be taxed increases. For example, a taxing authority might levy a tax of 10% on the first $10,000 of income and increase the rate by 5% per each $10,000 increment up to a maximum of 50% on all income over $80,000. A progressive tax often uses high rates on relatively large incomes and tends to encourage tax shelters. The federal income tax, many state income taxes, and the unified gift-estate tax are progressive taxes."

Please explain why the above definition is not accurate?

Please explain why the top 10% of earners pay 73% of the taxes collected by the federal government?

Maybe it's not as progressive as it once was...but it's nonetheless progressive...

 

I've already explained it to you and you've ignored it. To refer to a progressive system you have to show that marginal rates of tax increase as we move up the income distribution. You cannot do that as you do not have those marginal rates available. You can only refer to progressive elements

Note that you make zero mention of marginal rates of tax. That's where you're going wrong

 

My review of the effective rates indicates that they move up and down along the brackets, with some higher brackets paying somewhat less than some lower brackets. It's difficult to measure this accurately. But it's clear that as to effective rates there isn't a lot of progressivity in our tax system, and there hasn't been since Reagan. So your point is well taken.