Monday, July 14, 2008

The Fair Tax

Okay okay, I know this is an atheist blog, but I don't feel like posting about lack of belief today. As we speak I am on hold with the fucking IRS. So today I'm going to write about how awesome the Fair Tax would be if we stupid, greedy Americans put it into action. For those of you who do not know what the Fair Tax is, I'll tell you. It would do away with the IRS and the federal income tax. People would no longer be taxes on how much money they make, but how much they spend! That's right, the federal income tax would be replace with a federal sales tax. What turns people off most about this sales tax is that it would be 22%...BUT there is already a 20ish% embedded tax in everything so companies can comply with the IRS tax laws. Well if the Fair Tax was passed, then there would be no embedded tax...thus making everything approximately the same as it is now! The best part is this; you KEEP 100% of your paycheck! You only have to get taxed on new goods and services that you purchase. The other best part is the pre-bate you get every month from the government. That's correct, they'll pay you! You get a predetermined amount of money every month for your family to cover the tax of the necessities such as food and clothing. This seems too good to be true doesn't it? Well it isn't! There will be no more tax evasion. Aliens will be paying taxes, drug dealers, mobsters, hookers, all those who work under the table. That is why they call it the Fair Tax! Everyone pays!!! Okay so the Pros...100% of pay kept; government pre-bate; no evasion by the rich; only taxed on new goods and services; no April tax crunch time; sales tax that equals an embedded tax that will disappear; and you only get taxed on what you buy, so if you don't buy anything, you DON'T pay! Cons..........hmmm....nope, can't think of any. If you are interested in learning more, a really great book to read is Neal Boortz and some other dude's The Fair Tax Book. Or visit


praiseNull said...

I think it has a lot of flaws. The current system sucks, but changing it will most likely make it worse for you and me.

First, a flat tax is unfair to lower income people because 15% (or 22% or whatever) of $20k affects their lifestyle more dramatically than the same % of $150k affects a higher income earner. At lower levels you're talking about differences in enough food and shelter for the family; at higher levels you're just adjusting luxuries.

Second, the IRS won't magically go away. If everyone reported and paid their taxes properly there wouldn't be a need for the IRS now. Whatever it's called, there will still be a policing agency to collect and audit taxes, and it will still prowl with the assumption that people are trying to cheat it out of tax revenue. (And people will try to find ways of cheating it. The black market may become a bigger problem. And do garage sales and neighborhood baby sitters have to charge sales tax? If so can you see tax ID problems? If not can you see ways to cheat the system?)

I am generally suspicious of major changes in policy, and I am suspicious when they keep having to promote the idea with names like "fair" and feel-good ideas like "the IRS will go away". I am not convinced that this will make things better in any way. All the arguments I've seen for it tout the simplicity and idealism behind it but don't address the problems I can imagine and don't address any problems I don't imagine. Seriously, is it possible for a tax collection to be simple? Does that happen somewhere in the world? Can a state try it out first?

Not that this should be a reason to avoid change, but I haven't heard talk of what will happen to all the tax lawyers, CPAs, H&R block and such who are in the industry. I think the economic ripples of instantly obsoleting that entire industry is something to be considered.

atheist girl said...

you raise so very good questions, they are the same concerns that most people worry about. i'll address what i can but i am no expert. first, it is not a flat tax...well not really. it is a flat 22% tax on new things that you buy. so lower income families who spend less are therefor taxed less. higher income people who spend more are taxed more. it is no longer a tax based on what you make, it is based on how much money you spend. also, people who only buy necessary items such as food and clothing are essentially not being taxed at all due to the tax pre-bate. And lets not forget about the embedded tax that will go away (albeit not right a way) making items with the Fair Tax the same price as they are now.

what i have read on the matter says that the IRS will go away or become incredibly smaller. the paying of the taxes will be done the same way the paying of the state sales tax is the register. so there will be no w-2 and 1040's.

As for garage sales, the Fair Tax only taxes new goods (since items are to only be ever taxed once), so they would not be expected to charge tax. as far as the black market goes, im not sure how that works entirely, and you raise a good point with that. i am pretty sure that The Fair Tax Book talks about it tho. but black market items would be the only way to evade taxes with this system, unless someone bought it first and paid tax...then they cant be tax because it isnt new. but again you cant get everything on the black market and will not be evading taxation completely.

as far as services go, yes you will have to pay tax on services, such as dr appts and cable installation type stuff. although i dont think suzie q babysitter will be responsible for charging tax unless she has a business license.

I dont know if the Fair Tax will make things better, i think it will. it is fair-er than the current tax system that's for sure. also, it could boost the economy by doing something i cant remember but it is in The Fair Tax Book, AND it can create more jobs for americans because companies wont need to put factories in other countries because of the current tax system. i know im not explaining this part very well, but if you have a few hours and are interested in learning more from actual experts, read The Fair Tax Book. It is a very easy and surprisingly fun read. the authors do a way better job addressing every single one of your questions and also ones you didnt ask.