TAXES: Fair Tax

FAIR TAX
BUT WHAT ABOUT THE POOR?
OK ... let's put on our sensitivity hats for a few minutes here and think of the consequences of the Fair Tax Act on our nation's poor, poor, pitiful poor. After all, they can hardly afford a 23% sales tax when they're living paycheck-to-paycheck in the first place, right? We're actually going to forget, just for now, that poverty is largely a behavioral disorder and consider how they would survive under the fair tax.

We begin with a reality check. Right now, for the most part, those whom we define as "poor" aren't paying any income tax anyway. In fact, many of them are getting checks from the government. The absurdly named Earned Income Tax Credit, for example. So right now the government is actually supplementing their income. How can they endure a 23% sales tax?

The implementation of the Fair Tax would fail in short order if, as the question presupposes, the net effect on the poor would be the that they would be paying today's prices for a gallon of milk or a loaf of bread, plus a 23% sales tax. But ... that would be far from the reality under the Fair Tax. Under the Fair Tax the poor won't only survive, they'll positively thrive! The Fair Tax could turn out to be the best poverty-fighting tool devised in this country since the concept of hard work.

Let's begin by considering two realities.

First, remember, please, that the poor, along with everybody else, will no longer have Social Security taxes or Medicare taxes withheld from their paychecks. Whatever they earn, they get on payday. For most of them this means an immediate 10 to 15% increase in their earnings.

Second. Don't forget the 22% in embedded taxes. It's lurking there in virtually everything poor Americans have to buy. As soon as the competitive forces of the free market work their magic these people will be paying 20% or more less for virtually retail purchase, including the basics of food, clothing, shelter and transportation. Yes .. they'll have to pay the new national sales tax, but when you factor in the lower prices caused by the disappearance of the embedded taxes you'll see that the total price paid for consumer goods will remain very nearly the same.

So ... just considering these factors, the Fair Tax delivers a winning hand to people living in or near to what we call poverty. They get every penny they earn on payday, and when you factor in the Fair Tax and the lower prices, they're actually spending less of their money for a retail purchase than before.

Pull out the calculators. Say that a single mother with two children spends $45 a week on groceries. The removal of the 22% embedded tax would bring the price of those groceries down to $35.10. The sales tax would be $8.07. This brings the total price to $43.17. That's less than would have paid under today's tax system. This single mother, whom we'll consider "poor," has just received a 10% to 15% increase in her weekly paychecks, and she's paying less at the grocery story for her basic necessities.

Well, at this point you should be thoroughly convinced that the Fair Tax would actually benefit, rather than harm the poor. But, then again, maybe not. So, here's the clincher.

The Rebate

Under the Fair Tax plan every consumer will receive a check from the federal government every single month equal to the sales tax that person would be expected to pay on the purchase of the basic necessities of life for that month. The size of the monthly payment will be based on the government's published poverty levels for various sized households.

Here's an example of how the rebate payments would have worked in 2003.

Let's say you're a married couple with two children. The Fair Tax Act sets forth a formula for computing the poverty level, based on government figures, which negates any marriage penalty. Under the Fair Tax Act in 2003 you would have been granted an annual consumption allowance of $24,240. This is what the government would assume you would have to spend during that one year to buy the basic necessities of life for your family. The sales tax on this amount would equal $5,575. The government will rebate this amount to you in 12 equal monthly installments of $465. What about a single woman with one child? Her monthly rebate in 2003 would have been $232. The lowest payment would be to a single person with no dependents. That person would receive $172 per month.

Now ... bear in mind, this rebate isn't only paid to the poor. It is paid to everyone, rich and poor alike. The purpose here is to make sure that no American has to pay the Fair Tax sales tax on the basic necessities of life. Unlike the present income tax system, the Fair Tax treats each and every person in this country exactly the same. This, of course, presents somewhat of a problem to politicians who like to use the tax code to foment class distrust or outright warfare.

OK ... let's add it up for America's lower income citizens:

They get their entire paycheck.
Even with the sales tax, and considering the drop in prices, they'll be paying essentially the same for everything they buy.
They get a check from the federal government every month to rebate any sales taxes they had to pay.
Though their tax returns aren't that complex, let's also include the time these the poor (all of us, really) will save by not having to keep tax records or file tax returns.

So, my friends, if you're looking for some reason to oppose the Fair Tax plan, you're going to have to find a better excuse than its effect on the poor.
P.S.Thanks to Crump


[edit on 4-8-2004 by Truth_Hunter_1976]

Edit: Formatting

[edit on 4-8-2004 by ZeddicusZulZorander]

[edit on 4-8-2004 by Banshee]

First of all, I reject the name Fair Tax. That is an attempt to reach a foregone conclusion using nomenclature. This is a national sales tax. Let's call it that.

Second of all, if the poor are going to be better off with a national sales tax, who is going to be worse off? Please don't argue that everybody is going to be better off. If the total revenue collected from a national sales tax equals the total revenue collected by the personal income tax, it is impossible for everyone to be better off.

This is just more economic nonsense offered to justify further shifting the tax burden from the rich to the poor.

I will have to reject your presupposition, that some members of society should be exempt from paying taxes while others should bear their burden. There is nothing fair when someone who has the same freedoms, can use the same roads, same schools, same police, same fire department, same military, same congress.. does not have to pay the same amount as everybody else. The fairest tax would be every individual paying in the same exact amount. I too reject the name Fair Tax, any extra tax on any citizen is unfair, shifting extra taxes to another person only makes it that less fair. Until there is a even tax (Say a dollar a day per person) there will be no fairness in any taxes.

First of all thank you to Banshee and ZeddicusZulZorander for editing that for me I thank you..As for the Above I see Both your Points although From a Democratic point of view I do not Understand it put the tax Burden were most Liberals want it on the rich....it seems Fair to me but maybe I am Missing the point.....Just because with the Current tax system gives me a REFUND every year does that mean I should not be able to use public Services..what would be the difference with this system??

Lets cut out the money we spend proping up companies, farmers, arts, puppet dictators, etc, Invading other countries to give them democracy at gun point, putting bases to protect countries that do not support us from other countries and so forth and so on.


Then lets see how much taxes it REALLY takes JUST to protect our country and do the few jobs outlined for the federal government in the constitution.

It would be a fraction of what we pay today, one easily divided up amongst the people.

THAT would be a FAIR tax



[edit on 4-8-2004 by Amuk]

This certainly caught my attention:

Originally posted by Truth_Hunter_1976
First, remember, please, that the poor, along with everybody else, will no longer have Social Security taxes or Medicare taxes withheld from their paychecks.

Seems the Fair Tax Act (better described as National Sales Tax like someone pointed out) is nothing more than a small payoff, unprotected by inflation, in return for abolishing Medicare and Social Security.

At this Point it will not be there when I get of age 28 SO whats the Difference? now or thirty years from social Security and Medicaid will be BANKRUPT we will be lucky if it Survives the BABY BOOMERS!!

In order to keep this thread on topic (the Fair Tax) I would like to divert the Social Security issue to this thread TAXES: The Fate of Social Security