You can not assume that competition will increase under a federal sales tax. We'd still be living under capitalism, and capitalism can work both ways. Just because we'd be cutting out the business taxes that make it more expensive for businesses to produce their products, it is does not mean that the price of all goods and services will go down. In fact, it is ridiculus to assume that if the government is planning on maintaining their income, the prices on goods and services will go anywhere but up! The sales tax would have to generate enough money to replace both the business income tax AND the personal income tax. When prices rise, competing businesses could just as easily follow the raise in prices to increase profit. Capitalism doesn't always imply the lowest possible price, we could find ourselves at the hands of the country's fat cat CEOs if we put that much pressure on sales taxes.
I too am concerned about the potential of a bureaucracy to handle the prebate checks, but logic dictates that it truly cannot be any worse than what we have now with the IRS. Certainly the number of Federal Workers would pale compared to the 110,000 at the IRS.
Some products/services may have "price stickiness" where prices may not come down much if at all. Other products/services would certainly come down because of price competition. All it would take is for one company to lower their prices trying to get more market share and all of their competitors would have to follow suit.
Look Ma-Earth, if you love our present income tax system, that is fine. Defend it vigorously, but defend it honestly. With FairTax, each American would know exactly how much tax they are paying every single time they buy a new product or service. That is starkly different than now, where we are ignorant on how much tax we are actually paying - because it is embedded in the cost of the products we buy. My preference is to know exactly how much I'm paying in tax rather than it be hidden from me. I believe FairTax will expose to everyone just how much we do pay in taxes - and that is truly what pro-big government liberals fear the most. "The Truth shall set you free."
Duh, gaelons, I guess the ignorance of quite a few people gets in the way of their embracing with you the Fair Tax proposal. A National Sales Tax would be just that, just another tax added on to taxes we Americans already pay...some at the state level, county level, city level and on our utility bills and phone bills. The same people who get screwed paying taxes now would be the ones not to get tax refunds...and I personally think that the rebate program proposed under Fair Tax would necessitate as big a bureaucracy as exists now. Big Business, as usual, would gain from the Fair Tax proposal. It surely would be ignorant to think for one minute that Big Business would pass the savings along to you.
Do you not realize that only 20% of people itemize deductions?
As for deductions to charities. Nothing would change under FairTax - today you can give charities money you don't pay taxes on and under FairTax you don't pay taxes on the money you give.
Tax Deductions do NOT equal Tax Credits. For instance, if you are in the 25% bracket, if you wish to give a charity $1,000, it simply means that you can expect to pay the IRS $250 LESS than before. You still have to pay $1,000 out of your pocket! With FairTax, instead of giving $1,000 out of your post-tax paycheck to a charity then getting a $250 refund from the feds, you instead get your entire paycheck, then write a check for $1,000. You are essentially getting your deduction up front!Updated: 2005-03-09 12:15:52
Even if it is and these two deductions get off without causing any scar on our society, there are still dozens more that are not so easily fixed. Gifts to charities are deductable, and it happens that this specific deduction is used more than any other. Donations to charitable causes would probably decrease dramatically if we removed this incentive. There are more deductions that help out families who have recently immigrated into the United States and more that provide tax deductions for those who have adopted a child. Tax exemptions privide cold, hard cash to people with dependants (children, spouses) or to people that are blind. Deductions are more than a burden to our economy, they are designed to help out people who need help, and that's exactly what they do. It is true that this system is slightly imperfect. It would be much healthier for our nation to simply cut out the odd detrimental loophole while retaining the system itself.
Kris has 2 good points: No incentives for corporations to not demolish the earth or to treat workers fairly.
However, I say that legislation actually punishing (with civil or perhaps criminal infractions) for destruction of the environment is already in place (and more should be put in place). That goes outside of tax incentives... you should be punished for destroying the environment, not given tax incentives to not destroy it by saving a few bucks.
As for worker benefits, that is a good concern you bring up. However, if benefits were immediately removed, do you think there would not be a national outcry against this? Unions would grow enormously if the effect you describe actually happened.On the whole, the idea is to simplify our lives. Our problems should not be solved by complicating the tax code, they should just be solved directly.Updated: 2005-03-04 11:43:54
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