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BillyDkid
10-11-2007, 05:58 PM
Mind you, I pay a lot of income tax and I have no doubt a consumption tax would be better for guys like me, but how do you counter the argument that a consumption tax is regressive and would hurt only the poorest among us? I realize a genuine free market would ultimately help everyone and while we might not artificially create as many billionaires as we currenty do, we would create a lot more middle class or even moderately wealthy people, but I need a better understanding of the impact of a consumption tax on all the many people who barely get by as it is without paying any tax. I think the argument is that there would be so much more money in the hands of the people who actually keep the economy moving - the middle class and the backbone of this country - that all sorts of new opportunities for the disenfranchised would open up, but still there would be lot of poor people in the beginning for whom a consumption tax would be a huge burden. Can someone who understands economics better than I do explain this for me? Thanks, BDK

murrayrothbard
10-11-2007, 06:03 PM
Why are you arguing for a consumption tax?

BillyDkid
10-11-2007, 06:05 PM
Why are you arguing for a consumption tax?Isn't that Ron Paul's position - a consumption tax. I could be wrong, but I thought he said that.

murrayrothbard
10-11-2007, 06:07 PM
I'm pretty sure RP's position is to eliminate the income tax and replace it with nothing...

libertarianguy
10-11-2007, 06:07 PM
test

BillyDkid
10-11-2007, 06:09 PM
Ok, well, nevermind. I thought I heard him talk about it at one time.

Flirple
10-11-2007, 06:33 PM
The leading consumption tax plan in congress is the FairTax. Ron Paul has not signed his name to that bil (H.R. 25) because he views it as a distraction to the real issue which is spending. But, he has stated over and over that if it did come up to a vote he would vote for it as long as he was convinced the Income tax was definitely eliminated. So yes he agrees that if the bill was passed in it's current form it would be a big improvement but I think that he has little faith that this congress would ever pass the bill in it's current form and fears we may end up with both the income tax as well as the new FairTax.

I am a big supporter of the FairTax as far as something to lobby your current congresswoman or Senator. But you don't waste your time with an issue such as the FairTax when you currently have Thomas Jefferson running for president. The FairTax is baby-food compared to a Ron Paul veto pen and troop withdrawal.

But to answer you original question, The FairTax plan (as written) eliminates almost all current federal taxes and replaces them with one flat national sales tax. The more you buy (the richer you are the more you tend to spend) the more taxes you will pay. The less you buy (as poorer people tend to) the less taxes you pay. But everyone is always paying the same 23% tax rate no matter what you buy, or how much you're spending. So there is incentive to save money and make more money without fear of being bumped up into the next "tax bracket" as is currently the scenario.

Remember, with the FairTax you would no longer be paying estate, AMT, Income, etc. taxes. Everyone, would have more money to spend. Poor people should be all over the FairTax. But they should be all over Ron Paul first.

margomaps
10-11-2007, 07:00 PM
In theory, I like a consumption tax as a transition between an income tax and NO tax. But, I'm afraid that the fedgov would eventually get what it wanted anyway. Need more money? Congress approves an increase to the sales tax. Starts off at 23%, and pretty soon it's 30%. Before long, everyone's paying more than they did in the income-tax scheme.

Also, a large, broad sales tax will encourage black-market activity. To get around that, the government would likely go the VAT route ala Europe, taxing businesses on every transaction leading up to the sale of each item. The problem with this, of course, is a massive compliance cost because businesses are forced to keep track of every single widget bought and sold along the entire production cycle.

FWIW, if we did have a consumption tax, I would support a graduated increase (progressive) in order to not crush the very poor people. i.e., the first $x,000 would not be taxed, the next $y,000 would be taxed at 10%, the next $z,000 taxed at 15%, and so on up to the top level.

JosephTheLibertarian
10-11-2007, 07:10 PM
I support voluntary contributions. People want their police? their defense? their civil liberties protected? let them contribute to their government! Government would be forced to budget what it receives. It's great. It'll force the military to probably be more voluntary than career, politicians might also go payless, so I think there would be a lot of benefit to this.

SouthernGuy15
10-11-2007, 07:20 PM
Ron Paul has made it VERY CLEAR.

He wants to abolish the income tax and replace it with NOTHING!

Flirple
10-11-2007, 07:33 PM
I support voluntary contributions. People want their police? their defense? their civil liberties protected? let them contribute to their government! Government would be forced to budget what it receives. It's great. It'll force the military to probably be more voluntary than career, politicians might also go payless, so I think there would be a lot of benefit to this.

Oh of course, but you are compairing the perfect to the good. This is my point. We would be stupid to push Ron Paul to support the FairTax because he gets it. But for the rest of the corrupt economic flunkies in congress I think it is a great thing to lobby for. And to the point that switching to a flat sales tax would create a black market is incorrect. First of all our current overly complex tax system is forcing people to look for ways of doing business which avoids the tax code (who can blame them). But the important thing about the FairTax is that we would be taxing the income of drug dealers, prostitution, illegal immigrants, etc. when they buy goods. This would reduce the tax burden on the rest of us as right now they don't pay income taxes for thier black market employment.

My point is this: Ideally taxes would never be obtained by coercion. Since that is not even an option to our political world today, the next best thing would be a Ron Paul presidency. If that fails to happen and you still want to try to lobby your current pathetic representatives (who can't even fathom the principles Ron stands for) for at least some meaningful tax reform the FairTax would be a huge improvement over the current state of things. But the FairTax should be compared to our current tax code not Ron Paul. Ron Paul is in a completely different league and is already way beyond the sizable benefits of the FairTax.

Flirple
10-11-2007, 07:41 PM
Here is Ron Paul answering this question specifically on CPAN's Washington Journal.

http://video.google.com/videoplay?docid=-3884440510374595532&q=%22ron+paul%22+washington+journal&total=11&start=0&num=10&so=0&type=search&plindex=4

bobmurph
10-11-2007, 08:19 PM
I was a big Fairtax guy myself before I discovered Ron Paul. And, while I do believe it would be much better than the current tax code, Ron Pauls plan is FAR FAR better. There are several key problems with the Fairtax that don't get any attention.

First, and foremost, the Fairtax is a "revenue neutral" tax, meaning the revenue generated from the Fairtax would be the same generated by the current taxation system. All of the revenue is STILL coming from the public AND it does nothing about SPENDING which just as important is having low taxes.

Second, THE FAIR TAX IS NOT 23% IT IS 30%. Nobody calculates a tax rate after the purchase. Don't believe me??? Do the math. The Fairtax makes a big deal about a $77 item having a $23 tax to make a total of $100. $77 + 23% is $94...not 100. $77 x 1.30 is $100. Make it clear...the fair tax is 30%. Calling it a 23% tax is a sly marketing trick.

Finally, the Fairtax is the MOST progressive tax plan. The more you spend, the more you're taxed. Remember the communist manifesto calls for progressive taxation. In fact, I'm shocked that more Democrats are NOT adamant supporters of the Fairtax, it completely eliminates the tax burden from the poor and anihilates the rich! Actually, they don't support it because they know the rich are already taxed to the hilt and they need to tap into the middle class to fund their big government entitlement programs.

The Fairtax is good....but not great. Here is a great article on Mises about the Fair Tax Fraud (http://www.mises.org/story/1814)

JosephTheLibertarian
10-11-2007, 08:44 PM
23% for EVERYTHING? What the hell..... I don't know much about Fair Tax, I'll admit that much. What in the world is wrong with a voluntary system of taxation? You send the government money in order to show gratitude for the various public services, what's wrong with that? It's fairly straight forward. Crisis? War? Well, that would probably make the people want to donate more, right? Same thing with the military. If you're in war time, if your people support the government, then they will join up and they will WANT to fight. This is all a good indicator, imho, of support of the government.

thatnerdyguy
10-11-2007, 08:49 PM
From my understanding, it boils down to:

Pros:
- Makes people who get paid under the table (i.e. illegals) pay their fair share, because they have to buy food, clothing, and other stuff
- Much simpler (from a citizen viewpoint) than that annoying income tax

Cons:
- Makes every man, woman, and child dependent on the goverment toll, because you will get a "pre-bate" every month or so from the feds to cover basic living expenses
(so that the tax doesn't tax poor people into oblivion)
- Possibly much more complex for stores and the feds to administer, we would need nationalized interconnected systems for tracking and auditing the sales tax for all businesses

I myself am kinda on the fence, leaning slightly toward "Yeah, I guess it seems ok". But, eliminating spending seems like it is just easier. :)

JosephTheLibertarian
10-11-2007, 08:51 PM
so.... I'm gonna be getting a check every month if we implement Fair Tax?

bobmurph
10-11-2007, 08:57 PM
23% for EVERYTHING? What the hell..... I don't know much about Fair Tax, I'll admit that much. What in the world is wrong with a voluntary system of taxation? You send the government money in order to show gratitude for the various public services, what's wrong with that? It's fairly straight forward.

Not everything. Only NEW goods & services. Used products would be tax free.

Keep in mind that the Fairtax would eliminate the "embedded" tax on products. Embedded tax is essentially corporate tax which is simply passed onto the consumer in the price of goods...which amounts to 20-25% for varying goods. For example, the embedded tax on a $100 item is 23%, so if it was eliminated the price of the product is $77. The fair tax is a 30% sales tax...which gets the price of the $77 item back to $100. So basically, goods would cost the same as they do right now, and you would not have to pay a federal income tax.

bobmurph
10-11-2007, 08:58 PM
so.... I'm gonna be getting a check every month if we implement Fair Tax?


YUP...every person in America would get a check every month...

talk about entitlements!

born2drv
10-11-2007, 08:59 PM
In theory, I like a consumption tax as a transition between an income tax and NO tax. But, I'm afraid that the fedgov would eventually get what it wanted anyway. Need more money? Congress approves an increase to the sales tax. Starts off at 23%, and pretty soon it's 30%. Before long, everyone's paying more than they did in the income-tax scheme.

This is actually why I like the fair tax. Setting it at something fixed like 23% or 30% and making it applicable for everyone, with no legal mumbo jumbo to read or paperwork to fill out, etc.... takes out all the confusion and makes the whole thing much more transparent. Someone could run on decreasing taxes which would have to mean decreasing spending. Someone who tried to raise it would be tarred and feathered immediately. But with today's tax code it's politically correct to say let's tax the rich more or what have you, you can divide americans and pit them against one another. This would be impossible in a fair/flat consumption tax so it would make politicians much more honest and put pressure on them to actually take better care of our money.

I'm sure if push came to shove and RP couldn't eliminate the spending/revenue from income tax, he would want to put in a fair/flat type tax instead at least. Remember, the income tax is unconstitutional in the sense it violates our liberties and privacy, the government has no right to know how much money we earn. How much gold we own. Things of this nature. When we buy a house we have to provide our tax returns as proof of income... yes I can understand why our banker would want to know our income but the government has no business in knowing what we earn, where we get paid from, etc... as long as we obey the law.

bobmurph
10-11-2007, 09:00 PM
Welcome to the forums, thatnerdyguy!

The fairtax has alot of supporters. If they hear the RP message they will be converted quite easily. Like I said...fairtax is good...Ron Paul is better!

JosephTheLibertarian
10-11-2007, 09:03 PM
YUP...every person in America would get a check every month...

talk about entitlements!

how much? lol I can't say no to that :cool: Fair Tax it is!

bobmurph
10-11-2007, 09:06 PM
But with today's tax code it's politically correct to say let's tax the rich more or what have you, you can divide americans and pit them against one another. This would be impossible in a fair/flat consumption tax so it would make politicians much more honest and put pressure on them to actually take better care of our money.



Politicians could still use class warfare with the fair tax. Since the tax burden is eliminated from the poor by the pre-bate, any tax hikes would only affect the middle-class & rich because the pre-bate would be adjusted as well w/ the tax rate increase.

bobmurph
10-11-2007, 09:08 PM
how much? lol I can't say no to that :cool: Fair Tax it is!

The pre-bate would offset whatever the tax would be on the cost of goods and services at what is determined to be the poverty level. I believe it would be around $400/ month by todays poverty standards for a family of 4? Something like that.

JosephTheLibertarian
10-11-2007, 09:12 PM
The pre-bate would offset whatever the tax would be on the cost of goods and services at what is determined to be the poverty level. I believe it would be around $400/ month by todays poverty standards for a family of 4? Something like that.

ha. $400 a month for doing nothing? wow... and that's not counting regular work, either. So you'll be getting the rebate + your regular income?

bobmurph
10-11-2007, 09:14 PM
ha. $400 a month for doing nothing? wow... and that's not counting regular work, either. So you'll be getting the rebate + your regular income?

YUP...as I said before...its almost amazing that democrats are not all over the fair tax. It would be the most progressive tax ever! Communist manifesto in action!

JosephTheLibertarian
10-11-2007, 09:16 PM
YUP...as I said before...its almost amazing that democrats are not all over the fair tax. It would be the most progressive tax ever! Communist manifesto in action!

I thought the eventual goal of communism is the elimination of currency altogether? But, uh yeah, Fair Tax beats what we have currently, so I'll take it over the income tax system any day ;)

bobmurph
10-11-2007, 09:20 PM
I thought the eventual goal of communism is the elimination of currency altogether? But, uh yeah, Fair Tax beats what we have currently, so I'll take it over the income tax system any day ;)

Correct, but one of the steps to convert a capitalistic society to a communist is enaction of a progressive taxation system...which is exactly what the Fairtax is.

Ron Paul = No tax on income. No tax on goods. No tax on services.

JosephTheLibertarian
10-11-2007, 09:24 PM
Correct, but one of the steps to convert a capitalistic society to a communist is enaction of a progressive taxation system...which is exactly what the Fairtax is.

Ron Paul = No tax on income. No tax on goods. No tax on services.

then how would the government operate? I don't think Ron Paul has proposed a voluntary system of taxation.

bobmurph
10-11-2007, 09:26 PM
then how would the government operate? I don't think Ron Paul has proposed a voluntary system of taxation.

Corporate Tax. I cannot cite this, but I heard from another Ron Paul supporter that the income tax only generates 1/3 of federal revenue. So, if you can cut spending by 33%, you can eliminate the income tax and break even!

Johncjackson
10-11-2007, 09:27 PM
I dont really pay any federal income taxes. However I would hypothetically prefer a tax system that would hurt me more personally if it were more fair in general. Especially if it encouraged increased production.

"They" say that people vote for things that help them personally, but I think a lot of US just want what is fair and right.

TruckinMike
10-11-2007, 09:58 PM
I look at the tax a little differently.

I look at it as a psycological tool slowly bringing the poor in alignment with US. How? right now, they pay no taxes. NO tax pain is felt. with the fairtax, they would feel the pain that we feel. PAYING money to the GOV. They have never experienced that before. A shock to their system would insue. Thus, a shrinking of government expenditure would take place.

Just a thought.

Also, if we can't get rid of the income tax and IRS then...

I think we should stop the employer matching of SS.. that would wake America up if the employee had to pay both halves. Many people that I talk with have no clue that their employer pays the same as they do into their social security. And if you're self employeed, you pay both haves. Welcome to the world of the self employeed.

Truckinmike

Johncjackson
10-11-2007, 10:08 PM
The pre-bate would offset whatever the tax would be on the cost of goods and services at what is determined to be the poverty level. I believe it would be around $400/ month by todays poverty standards for a family of 4? Something like that.

Edited: I was thinking of poverty level figures and not the tax burden..

Currently a family of 4 can make about $23,000 with standard deduction, no income tax. Actually negative income tax because ( assuming 2 children) would also get about $4000 or so in Earned Income Credit. SO probably more around $30,000 ish before you have any tax burden. Of course if you make more than that you only get the tax free part on the first 23 grand or whatever.

As far as regressive/progressive and income tax. The fair tax would replace FICA, right? FICA is completely regressive as it is. It starts at dollar 1 and then is capped. So for the argument, perhaps the poor might not really pay more when you consider FICA now and the prebate.

There is also the idea that if people pay a visible consumption tax they will demand less spending and lower rates.

regardless, Paul isnt the Fairtax guy, thats Huckabee.

ClampIt
10-11-2007, 10:58 PM
Politicians could still use class warfare with the fair tax. Since the tax burden is eliminated from the poor by the pre-bate, any tax hikes would only affect the middle-class & rich because the pre-bate would be adjusted as well w/ the tax rate increase.
The FairTax is unfair and a joke. It's number one problem is the fixed beginning rate of 24%, consumer-only rate that violates Adam Smith's dictate not to have an tax greater than 10%, but it is also "revenue neutral" and therefore does nothing to control the growth of government. Too, it doesn't repeal the 16th amendment and doesn't even address expansion of state and local tax rates and tax plans. It is just "another" tax.

ClampIt
10-11-2007, 11:17 PM
Correct, but one of the steps to convert a capitalistic society to a communist is enaction of a progressive taxation system...which is exactly what the Fairtax is.

Ron Paul = No tax on income. No tax on goods. No tax on services.

I'm for a tax limit that fixes the ratio of all government (federal, individual entitlement, state and local) to a percent of GDP. Where is Ron Paul's tax plan?

Flirple
10-11-2007, 11:28 PM
bobmurph has it right: "FairTax good. Ron Paul better"

JosephtheLibertarian, there is nothing wrong with a voluntary tax system. that of course is the ultimate goal. Except that has no chance of being implemented right now. The FairTax bill has over 50 or 60 co-sponsers in the house. It has a grassroots movement supporting it which is made up of mostly neoconservatives. I personally like the fact that neoconservative voters are spending their time on a productive cause like the FairTax instead of something counterproductive.

And I don't think it's a fair criticism to say that the FairTax doesn't cut spending necessarily because it is not intended to. That is a different issue (an admittedly much more important one) entirely and the FairTax is just trying to address efficiency in the way taxes are collected. To address the spending issue and the efficiencey of the tax code all in one bill would for sure guarantee it would never have any chance of getting passed by the current band of thugs in D.C. Remember, we only have one Ron Paul in congress to work with right now.

I think it should be noted that I am rather confident that Mike Huckabee's support for the FairTax is a huge reason for why he is polling better than Rudy in Iowa right now. I know the the media keeps playing up the narrative about the base looking for a real social conservative and are finding it in Huckabee, but I think everyone is overlooking that it's largely the FairTax thats making him rise in the polls.