“Fair Tax” by GOP would be fairy tale windfall for the rich

fairy dustLeave it to the greedy politicians and their wealthy puppet masters to come up with yet another “reform” that will benefit the upper class at the expense of the other 99%. This time it’s called the “Fair Tax”, and it’s made of fairy dust for the entitled.

Every GOP candidate for President appears to have been told this is the official goal for the year. It’s now a mainstay for every  conservative campaign, along with the standard “reforms” – abolishing Medicare (offering instead, a stipend to buy an imaginary “inexpensive” private plan for 70, 80, and 90-year-olds), plus. the usual GOP and “centrist” Democrat brainstorm to hike the retirement age for Social Security to 69 or 70 at first (and then increase it annually, according to some chart not yet invented by the Cato or Heritage whiz bangs).

When you read the description from the Fair Tax website, it appears almost logical:

The Fair Tax Plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar for dollar federal revenue replacement, and, through companion legislation, the repeal of the 16th Amendment.

This nonpartisan legislation (HR25/S155) abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self employment taxes and replaces them with one simple, visible, federal retail sales tax, administered primarily by existing state sales tax authorities.

The IRS is disbanded and defunded. The Fair Tax taxes us only on what we choose to spend on new goods or services, not on what we earn. The Fair Tax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.

The term bipartisan is used in many proposals that go against progressive principles, and it usually means someone from DLC has endorsed the idea in order to gain votes in a contested state. There are at least a dozen such Democrats, mostly hatched by Bill Clinton, when he was in the White House gutting programs like Aid to Dependent Children and rewarding Wall Street with repeal of Glass Steagal Act regulation of financial giants like J P Morgan.

The “retail sales tax” mentioned is a 23% national sales tax, which means you will pay an additional $4,600 to buy a $20,000 car, and that doesn’t count state sales taxes of $1,2oo to $1,600 (6% to 8%) or local sales taxes up to 3%. Gasoline will go from $4 a gallon to $4.92, because of the additional sales tax. That $100 at the grocery store will now cost $123, and on an on. The new $200,000 house will now cost $246,000.

There’s more. The $200 doctor visit will cost $246. The haircut will be taxed 23%, along with a myriad of other items.

The Fair Tax is a national sales tax that treats every person equally and allows American businesses to thrive, while generating the same tax revenue as the current four-million-word-plus tax code. Under the Fair Tax, every person living in the United States pays a sales tax on purchases of new goods and services, excluding necessities due to the prebate. The Fair Tax rate after necessities is 23% compared to combining the 15% income tax bracket with the 7.65% of employee payroll taxes under the current system — both of which will be eliminated!

To supposedly offset this new and additional tax, under the same prebate will go out every month to every similar-sized household. For example, a mother and one child would receive $3,664 a year. paid monthly (about $300) to offset the new costs of food, etc.  No more EITC (Earned Income Tax Credit) for her, or mortgage deduction, but if she earns and spends $40,000 a year, her sales tax would be $9,200, versus current taxes of some $3,000 for FICA, and perhaps $2,000 for Income Tax, depending on expenses. This lady will be more than $4,000 behind the eight ball, even before counting the loss of tax credits.

If the average person, the 99%, will pay much more under this so-called fair tax, will it raise a huge amount of extra funds to pay off the national debt or offer free healthcare, or fix roads and bridges? No! The plan is described as revenue neutral, which means it raises the same amount of money as we get from the current income tax system.

How can this be? The people pay more taxes, but the total stays the same? Seniors who paid income tax on their savings will now find prices are 23% higher? The disabled will take a huge cut in their standard of living?

If one thing goes up and another goes down – that’s neutral. In this case hundreds of billions of dollars each year will be added to the cost of goods and services, and that same money will go directly to, you guessed it – corporations and the wealthy. Remember the formula. No more corporate tax, progressive income tax, no dividend or capital gains tax and no more inheritance tax.

And since the rich already own nice houses, cars and furniture, it is unlikely they will pay much consumption tax on new purchases. And if they do buy a yacht, they can purchase it overseas, and pay no U.S. Fair Tax. If they buy if for their business, they can buy it here and pay no tax. If they spend $100,000 a night at a French castle – no tax. Trip around the world if it starts overseas – no tax. If they buy $100,000 and earn $200 million the same year – $23,000 in fair tax, versus $75,000,000 under the current income tax laws.

The candidates have hired their agencies, readied the commercials, sure you will buy their plan to end the IRS and replace it with something just wonderful – for them and their handlers.

8 responses

  1. Linda Donaldson | Reply

    Simple-sounding idea crafted to fool the unsuspecting. Tax estates, stock transactions and those greedy pseudo-people corporations – let the working people keep more of their wages and savings. We’d like to have investments. We just don’t want to pay for others’ bad ones.

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    1. Linda Donaldson, the Fair Tax proposal is actually non-partisan.

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  2. I never thought of it that way. Thanks, Fred, for your simplification of a dense and deceiving plan.

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    1. Anne Kaler, this blog post is full of inaccuracies.

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  3. […] Congress pretends to not raise taxes, they always mean just those dreaded-by-the-rich income taxes. Dozens of taxes and fees have increased, but nothing had such impact as this Part B hike. And this […]

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  4. The Fair Tax benefiting the rich-that is bull… Under the Fair Tax, everyone gets to keep every penny they earn, regardless of their income.

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  5. […] The government must lower the tax burden to stimulate the economy.” Johnson wants a National Sales Tax, but no income tax or corporate tax. […]

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  6. The criticisms of the Fair Tax are not credible. Claiming that it benefits the rich only is absurd.

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