House Republicans are bringing the bill on the floor to vote, in short, it would eliminate all federal income taxes, payroll taxes, estate and gift taxes, and social security withholdings in favor of a 23%-30% national sales tax. This would also eliminate the IRS and I think leave state taxation departments in charge of collecting the sales tax and turning it over to the feds. There is a rebate for low income levels that's dependent dependent like the EITC. The sales tax would not apply to real estate and stocks and I'm not sure what other exceptions there are. You'll here more talk about this in the near future. If you want to read the bill yourself you can down load it https://www.google.com/url?sa=t&source=web&rct=j&url=https://buddycarter.house.gov/uploadedfiles/text_fairtax_act_118th.pdf&ved=2ahUKEwjo7PGCytT8AhVUrYkEHXKSDxAQFnoECBMQAQ&usg=AOvVaw1zvRlbQleBbXwvpp4jn9NI . What do you think?
Terrible idea. Sales taxes are entirely regressive and this has been shown over and over again. The evidence is overwhelming.
The other big problem with this is it would decrease overall demand in the economy by a significant amount for goods, services, etc. that aren’t excluded (read: basically everything you need to live your day to day life). It’s literally shooting the economy in the foot.
This bill is a nonstarter and will go nowhere. I’m convinced it’s a way for the House Rs to demonstrate *something* to their base as it’s completely unworkable yet sounds good on paper if you don’t consider the ramifications for even half a second.
This would also require a Constitutional amendment to repeal the 16th Amendment and good luck with that
I wouldn't go about it this way, but it's a good start and at least they're trying something, even if it will go nowhere. I'm not going to claim to have a perfect solution but here are some things I'd like to see:
1. Abolish SS (or at least allow an opt-out program), it was a terrible idea when it was conceived and it's blatant theft now. This should be task number one. It's existence will cost me about $1.5m by the time I retire and so to will it cost millions of others my age, get rid of this scam.
2. Get rid of all deductions and loopholes. The US tax system is absolutely atrocious with its complexity, just set a standard rate and forget about it. There is no reason why an ordinary person shouldn't be able to easily file their own taxes on a single sheet of paper and know exactly what they owe.
3. Raise the maximum allowable investment in IRAs and 401k plans to at minimum $20k. There shouldn't even be a limit but that ship has sailed, so I'll concede in allowing one. You want to promote people investing in the markets, not cap their ability to access compounding returns.
Just a few ideas, I'm sure there are plenty of others out there but these were top of mind.
Social Security when started, meant well. It was something like 10 people putting in, to 1 pulling out. Now it is something like 2 pulling out to every 1 putting in. George W talks about it in his book when he tried to get Social Security Reform, but he was so under water politically, he never had a chance to get anything to pass.
I agree on the tax system is way over complex. The IRS knows what you owe, so they should tell you. And from that number, you come up with deductions. As a business owner, it is almost impossible to find a CPA at this point in my area. I feel personally like I over pay every year in fear of missing something and getting sent to Gitmo!
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The reason it'll never fly, What about all the people that already paid tax on the money they saved.
Now they'll get dinged twice over. This only works for future earnings that haven't been taxed yet.
I think a better idea is a 15%-20% flat tax
Worth noting that the only reason there’s a vote on this is because McCarthy promised hardline members of the fReEdOm cAuCuS to hold this vote in exchange for their votes for him to become Speaker.
All you need to know is that the communists want larger government and higher taxes (for everyone except themselves) and Republicans want smaller government and lower taxes.
I think SS could still work if it was changed up a bit; instead of having a "pool" of money everyone contributes to (and politicians dip into for other things), make it a trust tied to our SS# that we pay into every pay day, and can't touch until 65.
The bill, as proposed, would shift the entirety of the tax burden onto middle and lower income citizens but hey, I guess that’s a core tenant of modern Republican belief
First off let’s not pretend Democrats care about the lower and middle class - The “ Biden transitionary inflation” is crushing them, this was intentional.
Second, upper income earners spend way more money than lower and middle class..the more you buy the more tax you pay. Majority of the money would still come from the same people, if not more from them..So let’s not pretend low and middle class would be paying majority of the taxes, we both know that is completely false..
What you fail to consider is the relative portion that middle and lower income people spend relative to their income. Middle and lower income people spend the vast majority of their income, and thus would be paying a much higher share of the tax relative to their income.
This isn’t an R vs D thing, and I never once mentioned the Dems lol. This is about a very small number of House Republicans demonstrating to their hardline base that they “did something” while fully acknowledging that this is merely for optics and has zero chance of going anywhere.
This. Cut out the IRS and flat tax income so that we don’t have to do the bullshit dance every year.
As a person who is paid on a W2 and cannot hide any income I already pay 25-30% federal income tax on every penny I make. I would much rather only pay tax on money I spend and increase my savings and investments by 25-30%. Also, this will collect tax on all money, no matter how it’s made.
I haven’t failed to consider that, but now you’re stating something completely different..You said the tax burden would shift to low and middle class, which is completely false.
Now your saying lower and middle class would pay more sales tax relative to their income- this is true. That being said, they would not be paying other taxes. So without running the numbers for varying incomes and spending levels you can’t say it would be better or worse.
Me personally- I would have to analyze all the taxes I pay versus just paying a sales tax, either way I would be paying a lot..
Frugal people would benefit…reckless spenders would get crushed..
"Fair Tax" is an oxymoron.
Yes, I misspoke. What I should have said is that it eliminates ALL corporate taxes, so that the only tax revenue is coming from US citizens, which is hilariously bad policy. This would then disproportionately affect most Americans, namely low and middle income people.
No matter how we try to explain or rationalize it, it’s a terrible idea and terrible public policy. Again, done to satisfy the hardline base of a very small group of House members while having zero chance or expectation of passing. It’s a dog and pony show
It would not eliminate corporate taxes at all- that is also a false statement. Corporations would pay sales tax on everything they buy!
Let’s take Yamaha for hypothetical example, they build motorcycles out of parts purchased from suppliers. They would be paying a flat sales tax on all those purchased components. Depending on the company I suspect some could be paying far more tax.
Neither one of us has enough data to say this is good/bad whatever for each individual or company.
Your critical thinking skills are being clouded by your politics…
Are we sure that's the way it would work? Would there not be supplier/re-seller tax exemptions like there are in many states now? Are we sure the upper class won't be able to write off most of their life like they do now?
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It’s very simple, just go to a pure consumption tax. The more you consume, the more tax you will obviously pay.
Exclude food (not restaurants)
Exclude healthcare
Go to a pure consumption tax on everything else. This ensures three important things.
1. everyone pays something. It’s extremely important everyone have some skin in the game.
2. Those that make more money, tend to buy more things. Hence they will be taxed more. This is a very basic thing.
3. It puts you in much more control over how much you pay in taxes. Want to pay less…then spend less. You don’t have to get that BMW. You can get the Corolla if you want to pay less in taxes. What a great thing to give back that responsibility and authority back to the individual tax payer.
If you want the BMW, go for it, just be prepared to pay a consumption tax on the higher price of the car. And that’s absolutely your right to buy what you want. And to consume what you want.
Get rid of all taxes on the American people and go to a flat consumption tax.
Flat tax with zero credits, write-offs , deductions. Make sure everyone pays their share. Both rich and middle. No accountants needed. No complex tax code with a million loopholes. All money made taxed the same. Earned or not.
Could even make the first 10-15k tax free. So it doesn't hurt poor as much.
All I know is that the current tax system is a joke...I'll take a flat tax (no write-offs, no deductions), or a consumption tax (which I'd prefer) like TXDirt described...they may not be perfect, but they are absolutely better than what we have now.
The amount of money the government withholds from my checks every pay period is ridiculous...I'd much rather keep that money, and pay more sale tax...
Absolutely not, I want nothing to do with any forced government savings fund that robs me of the opportunity to access compounding interest. There is absolutely no reason anyone my age (27) should be sitting in cash with their retirement funds and lose out on critical investment years. Like I said before, all said and done this ponzy scheme is going to cost me over $1m in retirement because incompetent financial planners force me to pay into it, so they and any program like it can go to hell.
There is no financial advisor on earth that would tell you to save not invest over the long term, yet that’s exactly what SS forces you to do. It’s an outdated scheme that does nothing but rob wealth from future generations to distribute to older generations.
How about the the people down voting this explain why you prefer something else over a consumption tax. And what that “else” is.
How is a consumption tax not equitable to everyone?
People living in poverty will pay very little in tax. The bulk of their income should be going to food and healthcare. Perhaps exclude tax on housing costs. That has to mean like 90% of their income goes to those three things. All that could be untaxed.
The middle class will pay the lions share of all taxes as this is the largest tax base. And they will actually greatly boost the economy and jobs market by having a much larger chuck of money to spend. Now that there would be no need for a payroll tax.
Rich people will pay the most on a per individual basis. They consume the most. That’s obvious.
What part of that don’t you like?
Or is the part about giving the decision and authority over how much you pay in taxes back to the individual tax payer the part you don’t like?
Is it you need to control everyone and every thing?
Please explain…
Question concerning point number 3 of your previous post.
I'm not American, but why should people who work their ass off to become successful have to pay more taxes for wanting nicer things like cars, houses, etc.
Your question though is not logical. Tax money has to come from somewhere. We agree on that.
The government is going to take your money. Either at the time you earn it (payroll tax) or at the time you spend it (consumption tax)
The payroll tax takes 100% responsibility and authority over my money from me and instead gives it to a government. In this case the US government.
The consumption tax gives back 100% of that responsibility and authority back to me.
How, you might ask?
Because I control the things I buy and consume. If I want to pay less in taxes, then consume less.
It’s that simple. I have control over MY money Not a bunch of politicians.
Because of the silly payroll tax, many wealthy people pay little to zero in taxes. There are soooooooo many tax loopholes.
Go straight to a consumption tax and everyone pays their fair share and has 100% control over the money they earned.
No one is stopping a millionaire from buying a Bentley.
You would just pay a % tax on it at purchase.
No different than if I buy a Corolla. I would also pay a tax on it. Same % as the millionaire buying a Bentley. I’m just buying a cheaper car.
Typically those in poverty don’t buy a Bentley. Hence the vehicle they purchase would be a much smaller tax on them.
You could ask the reverse question, why can’t a person in poverty buy a BMW?
Well, under a consumption tax, they absolutely can. That’s totally their choice.
A consumption tax is both fair and responsible and equitable to all.
If a millionaire wants to buy a Corolla because he doesn’t like paying more in taxes then great! More power to him. Or he can buy the BMW. Or buy a used car.
I would love it if I could could be responsible for the money I’ve EARNED. I can decide what I want to buy. And I can ultimately decide how much I want to pay in taxes based on my consumption.
A person in poverty cannot buy the BMW because he or she either doesn't have the education, skills, work ethic, etc. in order to earn enough money to justify the purchase of said vehicle while the millionaire possesses those things in order to afford it.
IMO, a millionaire shouldn't have to pay more taxes on the things they consume.
We have something new in Canada called the luxury tax. It sounds like what you want across the board.
It targets vehicles and planes above 100k and boats above 250k.
The luxury tax is equal to the lesser of 10% of the taxable amount of the subject vehicle and 20% of the amount above the price threshold. Buyers are required to pay one of the two taxable amounts, which is calculated as so:
1.The taxable amount multiplied by 10%
2. The amount that results from subtracting $100,000 from the taxable amount and multiplying the difference by 20%
We're liable to pay a tax that is either 10% of the total taxable amount or 20% of the amount above the price threshold, whichever is lower.
Let's you want to buy a car that costs 200k, you would have to first calculate:
1. 10% of the cost (20k).
2. 20% of 100k (the difference between 200k and 100k), which is 20k.
Since they are both the same price, choosing the lowest figure isn't an option, so you'd have to pay 20k in tax.
If the car was 150k then you would be paying 10k in tax since 10% of the total taxable amount (15k) would be lower than 20% of the amount above the price threshold, which for a 150k car would be 10k.
And then:
"All other improvements (excluding accessibility modifications), additions, taxes, duties, charges, fees and amounts paid in respect of the delivery or importation will be included in the total price. The resulting luxury tax is then added to the cost of the subject item for the purposes of calculating the GST/HST. This results in GST/HST being calculated on the luxury tax."
Where I live HST is 13%.
Nevermind the luxury tax for a moment.
Buy a Corolla for 30k and pay $3900 in HST tax.
Buy a 200k Bentley and pay 26k in HST tax.
Shouldn't that be enough taxes paid?
Income taxes exist because they are compulsory and the government (and everyone, really) likes predictability of income, sources, budgets, etc.
No entity, governmental or otherwise, could possibly operate effectively without some level of stability. Like dang, consumer spending is down this quarter, I guess we won’t have a military next year.
Maybe that’s the point though
That argument really doesn't hold though, because during a recession as people lose their jobs, income goes down, and corporate profits decrease the tax income decreases as well. The business cycle will always dictate tax revenue even under the current system.
The consumption tax is exactly needed because of everything you just typed out.
Let’s just call it a 10% tax on everything. But let’s exclude food, healthcare, and housing for a moment.
It’s not a luxury tax. It’s a consumption tax.
You need to look at it differently.
It shouldn’t matter the things you buy. Who cares if it’s a luxury, or a necessity. That’s subjective. Your luxury might be my necessity. And vice versa.
You consumed (purchased) it. You pay a modest federal tax on it.
Lets first look at the starting point.
A. You start with more money because you are not taxed on what you earn. So, benefit immediately to you.
That is unless you prefer to have a smaller bank account. You earned it. You keep it.
Now let’s look at the car situation as an example.
Let’s say you make $100,000 a year. And let’s say I make $500,000 a year.
We are both in the market for a car. The consumption tax says every purchase we make is a 10% consumption tax.
BMW: $100,000
Tax on it: $10,000
Corolla: $50,000
Tax on it: $5,000
Both of us can afford either car.
Because I’m making $500k a year, I can obviously afford either one, so I go for the BMW because that’s what I want.
You, you can also afford either car. Sure, you are stretching your budget but you always wanted one.
What should you do?
Answer: Buy whatever car you want.
The consumption tax gives you choices.
Now, I didn’t get rich by being glitzy, I’ll do just fine with the Corolla. So I decide to buy the Corolla.
Wow! We both get choices.
Now just apply it to everything.
I like to buy fancy knives. I’ll pay 10% on those fancy knives, just the same as you will pay 10% on regular knives off Amazon.
Maybe you want to fly to Europe for vacation. You will pay the same 10% on tickets just like I’ll pay the same 10% staying state side for a staycation.
When it comes to a consumption tax (not a luxury tax) there isn’t one scenario you can provide that will show it to be unfair, or to reduce choice.
It increases fairness, it’s equitable to all, and it gives responsibility and authority over my money back to me. The person who earned it.
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