Answers to Moffatt"s Five FairTax Questions 1
Here's a letter from a reader in response to the articles FairTax - Income Taxes vs. Sales Taxes and Five Questions for FairTax Supporters. If you would like to send me a letter about the FairTax, you can do so by using the feedback form.
1.If the FairTax plan is revenue neutral and many Americans will pay less tax and corporations will pay almost no tax, who will wind up paying more and how much more?
No one will pay a great deal more, the FairTax is revenue neutral for at least these two reasons. It broadens the field and picks up the 18 million non-filers who currently pay no income taxes and the cost of compliance is so much lower the savings to the general economy are simply huge.
2. If the FairTax is really such a less destructive way to collect taxes, then doesn't that give the Federal government even more of an incentive to raise taxes under a FairTax system, knowing that it is not nearly as destructive as under the current system? Efficiency is a terrific thing, but might it have a downside? Is giving the U.S. government more efficient ways to collect taxes a good thing if you believe taxes should be lower?
Perhaps, but the political reality is that it would be political suicide to increase the rate when the tax payer can see what government really costs. Currently the rates are changed often about ten thousand times since the mid-eighties which was the most recent time the income tax was "flattened".
3. What, if anything, is exempt in the FairTax plan? Does the FairTax make a distinction between a new house and a house with a previous owner? I've read that internet access and tuition would be exempt from the FairTax? Why are they exempt? What guarantee do Americans have that it would stop there?
There are no exceptions to the FairTax. Education is an investment not a purchase. The same could be true about internet access. Every pirchase is taxed one time when it is new. (existing houses and other big ticket items have already had taxes paid on them)
4. What guarantee is there that the FairTax will not end up with as many exemptions and loopholes as the income tax? I'm from a country where the amount of federal sales tax you're required to pay differs depending on if you want to purchase a single donut or you want to purchase a dozen donuts. Why couldn't that happen in the U.S.?
That could happen in the US, of course, we have politicians who will do anything to be re-elected BUT HR 25 as it is written does not call for the complexity. There is no reason for the complexity if there are no exceptions. BY the Way, They already have a code of several millions of words while the FairTax bill is 133 pages which a fourth grader can understand.
5. Used goods are exempt from the FairTax and so are goods and services used by business. What exactly is considered a used good for taxation purposes and who pays the tax? It's not as clear as you might imagine - take for example a dealer "demo" car with 5000 miles on it. It's clearly a used car, but the dealership does not pay taxes on it, since it's a business. It seems to me that consumers could avoid paying high taxes by buying "slightly used" goods and businesses could find a way to offer them to the public.
If your question really asks will there be avoidance? the answer is yes of course but one of the main reasons the avoidance will be less is that under the FairTax it requires two or more persons to cheat. This is not true with the income tax. Very few companies will tolerate an employee jeopardizing the business for personal profit to "help your buddy".
Note, It will be much easier politically to lower the rate than make it higher. When people know what the politicians are doing they can take an interest in their own lives and the things that effect them. When you see how much government actually costs on every retail sales receipt one becomes very aware and that has not been true in any countries politics for a very long time.
I hope you have read this far.
1.If the FairTax plan is revenue neutral and many Americans will pay less tax and corporations will pay almost no tax, who will wind up paying more and how much more?
No one will pay a great deal more, the FairTax is revenue neutral for at least these two reasons. It broadens the field and picks up the 18 million non-filers who currently pay no income taxes and the cost of compliance is so much lower the savings to the general economy are simply huge.
2. If the FairTax is really such a less destructive way to collect taxes, then doesn't that give the Federal government even more of an incentive to raise taxes under a FairTax system, knowing that it is not nearly as destructive as under the current system? Efficiency is a terrific thing, but might it have a downside? Is giving the U.S. government more efficient ways to collect taxes a good thing if you believe taxes should be lower?
Perhaps, but the political reality is that it would be political suicide to increase the rate when the tax payer can see what government really costs. Currently the rates are changed often about ten thousand times since the mid-eighties which was the most recent time the income tax was "flattened".
3. What, if anything, is exempt in the FairTax plan? Does the FairTax make a distinction between a new house and a house with a previous owner? I've read that internet access and tuition would be exempt from the FairTax? Why are they exempt? What guarantee do Americans have that it would stop there?
There are no exceptions to the FairTax. Education is an investment not a purchase. The same could be true about internet access. Every pirchase is taxed one time when it is new. (existing houses and other big ticket items have already had taxes paid on them)
4. What guarantee is there that the FairTax will not end up with as many exemptions and loopholes as the income tax? I'm from a country where the amount of federal sales tax you're required to pay differs depending on if you want to purchase a single donut or you want to purchase a dozen donuts. Why couldn't that happen in the U.S.?
That could happen in the US, of course, we have politicians who will do anything to be re-elected BUT HR 25 as it is written does not call for the complexity. There is no reason for the complexity if there are no exceptions. BY the Way, They already have a code of several millions of words while the FairTax bill is 133 pages which a fourth grader can understand.
5. Used goods are exempt from the FairTax and so are goods and services used by business. What exactly is considered a used good for taxation purposes and who pays the tax? It's not as clear as you might imagine - take for example a dealer "demo" car with 5000 miles on it. It's clearly a used car, but the dealership does not pay taxes on it, since it's a business. It seems to me that consumers could avoid paying high taxes by buying "slightly used" goods and businesses could find a way to offer them to the public.
If your question really asks will there be avoidance? the answer is yes of course but one of the main reasons the avoidance will be less is that under the FairTax it requires two or more persons to cheat. This is not true with the income tax. Very few companies will tolerate an employee jeopardizing the business for personal profit to "help your buddy".
Note, It will be much easier politically to lower the rate than make it higher. When people know what the politicians are doing they can take an interest in their own lives and the things that effect them. When you see how much government actually costs on every retail sales receipt one becomes very aware and that has not been true in any countries politics for a very long time.
I hope you have read this far.