FairTax: is it fair and could it work?

[Ridgerunner]

A Fair Tax would needs to be accompanied by something by a different Social Security benefit plan.

JJ

I agree, but not just because of the reporting, etc. Social Security is truly bizarre. Rewards least those who need it the most. Rewards most those who need it the least.

 

[Ridgerunner]

A Fair Tax would needs to be accompanied by something by a different Social Security benefit plan.

JJ

I agree, but not just because of the reporting, etc. Social Security is truly bizarre. A welfare system that rewards least those who need it the most, and. rewards most those who need it the least.

 

[rlg94086]

I’ve always assumed that we have to do a complete overhaul of Social Security with the Fair Tax. Would seem to me we’d pretty well have to do everyone gets the same. Otherwise, if you pay no tax on income, but your Social Security benefit is based on income. I guess a lot of people would report a lot of income.

The Fair Tax site used to just say employers would continue to report wages and nothing would change. A lot would change. Everyone would suddenly want cash instead of benefits. And there’s always self employment tax. Anyone can report earned income for themselves. If there is no tax on earned income, but there will be benefits paid out based on earned income, well, I honestly don’t think it would work. It would be like a survey on How much Social Security benefit do you feel you should receive?

A Fair Tax would needs to be accompanied by something by a different Social Security benefit plan.

JJ

Actually, it is addressed in the FAQs as well:

1. 
   *]How is the Social Security system affected?

1. 
   

   Like all federal spending programs, Social Security operates exactly as it does today, except that its funds come from a broad, progressive sales tax, rather than a narrow, regressive payroll tax. Employers continue to report wages for each employee, though, to the Social Security Administration for the determination of benefits. The transition to a reformed Social Security system is eased while ensuring there is sufficient funding to continue promised benefits.

   Meanwhile, Social Security/Medicare funds are no longer triple-taxed as under the current system: 1) when payroll taxes are initially withheld; 2) when those withheld payroll taxes are counted as part of the taxable base for income tax purposes; and 3) when the promised benefits are finally received.

   
   Back to FAQ Index​

   *]How does the FairTax affect Social Security reform?

   FairTax.org is a one-issue organization: Tax replacement. However, its proposal does benefit any Social Security reform proposal. The FairTax.org plan does not change Social Security benefits or the structure of the Social Security system. All it does is replace the current revenue source (narrow, regressive payroll taxes) with a new revenue source (broad, progressive sales taxes paid by all consumers).

   Additionally, research shows that consumption is a more stable revenue source than income. If Social Security is reformed or privatized in a way that reduces the government’s need for revenue, then the FairTax rate can be reduced. For example, if a mandatory private savings program is implemented where people must save ten percent of their income and Social Security benefits are curtailed, then the FairTax rate can be reduced just as payroll taxes would be reduced.

 

[estesbob]

Actually, it is addressed in the FAQs as well:

Note that it does say one word about how this effects the self employed. One of the problem with the fair tax is is assumes all earned income will be reported on w2s.

 

[rlg94086]

Note that it does say one word about how this effects the self employed. One of the problem with the fair tax is is assumes all earned income will be reported on w2s.

If there is no longer a payroll tax, why would the self-employed be an issue?

 

[estesbob]

If there is no longer a payroll tax, why would the self-employed be an issue?

Payroll tax is Social security and medicare. It 15.3 of net income for a self employed individual. To arrive at net income some sort of schedule C will still be required under a fair tax. in addtion since the rebate is based on earned income everyone but those who only recieve w2s is going to have to file some sort of return with the IRS to prove up their earned income.

 

[rlg94086]

Payroll tax is Social security and medicare. It 15.3 of net income for a self employed individual. To arrive at net income some sort of schedule C will still be required under a fair tax. in addtion since the rebate is based on earned income everyone but those who only recieve w2s is going to have to file some sort of return with the IRS to prove up their earned income.

Bob,

1. Did you read my last post at all? The FAQ I posted regarding Social Security says that Social Security (and Medicare) would be funded out of the sales tax revenues. There would be no payroll tax.
2. The prebate is not based on earned income. Everyone gets a prebate, which is to cover sales taxes up to the poverty level. Now, I don’t know how you would prove that you have a business and/or are working for someone, but I don’t see a need for a w-2 for the purposes of the prebate. Perhaps, everyone gets the prebate regardless of their work status? That wouldn’t concern me at all.

EDIT ADD: I do see that Social Security benefits will be based on an earned income, so w-2s will be needed for that. I guess business owners will still need to show their net profits to calculate their benefits. Again, I don’t see this as an argument against the Fair Tax. Even if the government didn’t require that information, a smart businessman would have an accountant doing it anyway.

 

[RobHom]

I hate to be cynical…but the notion of a “fair tax” is borderline to hysteria.

There are so many loopholes and favored treatments in the current codes that its beyond ridiculous. Who in their right mind could possibly for a moment conceive that those recipients of those gratuitous benefits and the largess entailed would be amenable to surrendering their precious favored treatment for the good of all?

The answer: NOT A SINGLE ONE!!

Why? What motivation could they possibly have? And can you actually imagine a “serious politician” inside the crazy ring at DC actually committing “political suicide” by even mentally supporting a tax structure that would be punishing to his or her greatest benefactors?

Even if they foisted such a plan on the country, you can bet your bottom dollar there will be more amendments to it granting special favors than raindrops in a hurricane… Look at the current system…and even the number of changes over the years and how the middle and lower classes have lost most all of their actual deductions…but the wealthy get “tax breaks”… Go figure.

Besides, who’s going to foot the bill for all those poor displaced career civil service people the IRS no longer needs? Uhh, Us, as in the “taxpayer”…think about it.

Sorry to be pessimistic…but that’s how I see it.

 

[sodak]

And if I were in her position, I would rather pay more taxes (this is an acceptable price and I do not consider it a significant burden), and having that money would allow me to engage in significant philanthropy just like my hero George Soros.

Why wait? You can pay more right now. The IRS will accept your check if you choose to pay more.

But that’s not the point, is it? What if a rich person DID consider it a significant burden? You’re quite comfortable using the force of government as a weapon to force them into compliance, aren’t you? BTW, I think Soros is a crook.

I note that you pay no taxes and it is very easy for those who pay no taxes to lecture the rest of us on how much we should pay

I see this all the time.

If a certain “tax and spend” politician gets elected come November, my wife and I are already making plans for me to quit my job and stay home. It’s pretty sad that you have to plan around the tax code, rather than plan to use your talents for the good of society. But I refuse to get taken to the cleaners. Of course, it will mean less for everyone, less taxes, less for charity, etc. But more time with my kids, which will be great!

I find it interesting that many talk of paying your fair share. I consider taxes to be (almost) inherently immoral in and of themselves.

 

[rlg94086]

I hate to be cynical…but the notion of a “fair tax” is borderline to hysteria.

There are so many loopholes and favored treatments in the current codes that its beyond ridiculous. Who in their right mind could possibly for a moment conceive that those recipients of those gratuitous benefits and the largess entailed would be amenable to surrendering their precious favored treatment for the good of all?

The answer: NOT A SINGLE ONE!!

Why? What motivation could they possibly have? And can you actually imagine a “serious politician” inside the crazy ring at DC actually committing “political suicide” by even mentally supporting a tax structure that would be punishing to his or her greatest benefactors?

Even if they foisted such a plan on the country, you can bet your bottom dollar there will be more amendments to it granting special favors than raindrops in a hurricane… Look at the current system…and even the number of changes over the years and how the middle and lower classes have lost most all of their actual deductions…but the wealthy get “tax breaks”… Go figure.

Besides, who’s going to foot the bill for all those poor displaced career civil service people the IRS no longer needs? Uhh, Us, as in the “taxpayer”…think about it.

Sorry to be pessimistic…but that’s how I see it.

You are absolutely right! We should just accept the current system and embrace the bureaucracy.

I share you pessimism, but defeatism isn’t the answer. And, as mentioned before, worrying about displaced civil servants is a pretty sad argument against reform.

 

[RobHom]

You are absolutely right! We should just accept the current system and embrace the bureaucracy.

I note your acquiescence to my twisted sense of humor.

I share you pessimism, but defeatism isn’t the answer. And, as mentioned before, worrying about displaced civil servants is a pretty sad argument against reform.

I fear I am a little “pessimistic”…when it comes to our government and some of its actions… But, I am not the least bit concerned about “displaced civil servants”… in fact one of my greatest desires is that someone who reform the civil service rules and eliminate the “job for life” provisions that protect non-productive government employees from discharge. I think they should be subject to normal rules…like the rest of us.

 

[goofyjim]

No matter how you do it someone is going to weasel their way out of paying taxes. I think the fair tax would work because everyone keeps complaining about the income tax being a burden on the rich or the poor. The only way to make the income tax “fair” is a flat percent on anything over the poverty level. Below the poverty level goes tax free.

 

[St_Francis]

One reason I like the Fair Tax is that it taxes a morally neutral activity.

Currently, we are taxed according to ur income.Most people get their income by working, which is a morally good activity. People who work illegally (drug dealers, for example,) or under the table, don’t get taxed at all.

But those who work are taxed! And the more you work the higher you are taxed!

That seems wrong to me.

 

[St_Francis]

Another thing that bothers me is all this talk about Social Security. It is based on how much time a person spends in the paid work force.

That means that those who stay at home to raise their children, some of whom homeschool, end up not only with less family finacial resources (income, retirement savings, etc), but fewer quarters in Social Security.

It’s not as if children do not eventually benefit society. All my children will be helping to pay off the Social Security of other people, while I will get very little, and they will have less money to help me out, if I were to need it.

 

[Ridgerunner]

Another thing that bothers me is all this talk about Social Security. It is based on how much time a person spends in the paid work force.

That means that those who stay at home to raise their children, some of whom homeschool, end up not only with less family finacial resources (income, retirement savings, etc), but fewer quarters in Social Security.

It’s not as if children do not eventually benefit society. All my children will be helping to pay off the Social Security of other people, while I will get very little, and they will have less money to help me out, if I were to need it.

It’s worse than that. Social security benefits are based on the income you received during your working years. The more you made, the more you get, up to a maximum benefit. The maximum benefit is based on the maximum income upon which you paid it. So, the higher they raise the amount of income upon which SS tax is paid, the higher is the amount of income you have to have had in order to receive the maximum benefit. Those now in the work force who make less than $90,000, the maximum income upon which the tax must be paid, will receive less than the maximum benefit. Some politicians, in the name of making “the rich” pay “their fair share” by raising it above $90,000 are actually lowering the relative benefit those who are not making the big income, will receive.

High earners usually have the greatest ability to provide for themselves during their retirement. Therefore, SS benefits most those who need it the least and benefits least those who need it the most.

Both parties are guilty of this mess. Whenever you hear politicians talk about “saving social security”, you will notice they never talk about adjusting benefits to the other sources of income the recipient has. They’re actually just talking about either lowering benefits on those most in need or taxing more, which also lowers the relative benefits of those most in need.

 

[Al_Masetti]

The present tax code is 70,000 pages.

Absolutely incomprehensible.

The present tax code punishes the people and organizations that create jobs. The rest of the world has gotten the message and cut corporate tax rates. So that now, the United States has the second HIGHEST corporate tax rates in the world. No wonder jobs are going overseas. Ireland cut their corporate tax rates and their economy took off.

Just take a look at the IRS instruction booklet for the Individual Retirement Arrangements … IRA’s were supposed to be something simple that folks without a pension plan could use to put some money away. Originally the instructions were only two pages, Now the instructions are over 100 pages and in some cases are misleading or in error.

Read Neal Boortz’s book on the Fair Tax.

amazon.com/FairTax-Book-Neal-Boortz/dp/0060875410

Also keep an eye peeled for when Boortz and Linder appear on BookTV.

In fact, their segment on BookTV has been archived and you can watch it on your computer; just click here:

booktv.org/program.aspx?ProgramId=9156&SectionName=Politics&PlayMedia=No

And then click on “Watch Now”

 

[stinkcat_14]

Most people get their income by working, which is a morally good activity.

Working is not always and everywhere a morally good activity though. For example, my wife works on Sundays when she doesn’t need to. The reason is very simple, she values money more than God. So her work in this case, is a morally bad thing. So there may be times when it might actually be desirable to discourage work in the market.

 

[St_Francis]

It’s worse than that. Social security benefits are based on the income you received during your working years. The more you made, the more you get, up to a maximum benefit. The maximum benefit is based on the maximum income upon which you paid it. So, the higher they raise the amount of income upon which SS tax is paid, the higher is the amount of income you have to have had in order to receive the maximum benefit. Those now in the work force who make less than $90,000, the maximum income upon which the tax must be paid, will receive less than the maximum benefit. Some politicians, in the name of making “the rich” pay “their fair share” by raising it above $90,000 are actually lowering the relative benefit those who are not making the big income, will receive.

High earners usually have the greatest ability to provide for themselves during their retirement. Therefore, SS benefits most those who need it the least and benefits least those who need it the most.

Both parties are guilty of this mess. Whenever you hear politicians talk about “saving social security”, you will notice they never talk about adjusting benefits to the other sources of income the recipient has. They’re actually just talking about either lowering benefits on those most in need or taxing more, which also lowers the relative benefits of those most in need.

Good points, and ones which I never thought of as I had thought it was based on the number of quarters worked rather than the amount put in.

 

[St_Francis]

Working is not always and everywhere a morally good activity though. For example, my wife works on Sundays when she doesn’t need to. The reason is very simple, she values money more than God. So her work in this case, is a morally bad thing. So there may be times when it might actually be desirable to discourage work in the market.

OK, so we will tax all income from unessential Sunday work… but everyone else just gets the FairTax!

 

[stinkcat_14]

OK, so we will tax all income from unessential Sunday work… but everyone else just gets the FairTax!

Ok, how would you tax the executive who is working 80 hours a week and neglecting his family. Would you give him the punitive tax or the fair tax?