In response to Jordan Puckett's Income Tax post.
I understand Mr. Puckett's claims that the sales tax operates completely on the amount of money you spend, the so called "tax on consumerism", however I feel he has failed to address the true effect and fiscal disparity the sales tax incurs. While it is true that the sales tax is a simpler method of extracting money from the population, it is not a "fair tax" at all. Mr. Puckett claims that mention the effects of the tax on the poor is "barely worth mentioning" considering many items are exempt from the sales tax. However he failed to mention a few key points. While a fair tax that is proportional across all levels sounds fair and wise, it is extremely misleading. Using the word fair is simply a means for the very wealthy to trick voters into thinking they are getting a good deal. A fair tax victimizes the poor by forcing them to actually pay more proportionally. Let's say that you have a family earning 10 dollars a month and a family earning 100 dollars a month. Now let's say that both families buy clothing and a computer and it costs 2 dollars, tax included. Those 2 dollars consist of 20% of the poorer families income, while the richer family is paying 2% of their income. This leaves the poorer family with 8 dollars to pay rent, buy a car, pay for gas, buy non-essentials, and pay utility bills. Now of course one could argue that the richer family would buy more luxury goods, perhaps a luxury tax would be involved, but in terms of the sales tax/consumption the richer family would have to spend ten times as much as the poorer family in order to be "fairly" taxed. While it is mentioned that many items such as groceries and baby products are exempt from the sales tax, many items that are crucial to surviving in the 21st century such as computers and the internet.
In terms of my personal beliefs, I find it hard to believe that millionaires and billionaires will pay the same with a sales tax, as opposed to an income tax. Perhaps a better solution would be implementing a higher income tax for the mega wealthy, and instituting a fair tax instead of an income tax on the middle class.
Essentially I don't think that a "fair tax" is nearly as fair as it sounds, and while the income tax is a beast not easily tamed, at least it forces the wealthy to pay a small part their fair share. I encourage you to read about regressive taxes in order to understand my hesitation with a fair tax.
I'm glad that someone brought up the fact that consumer taxation is regressive. This has unshackled me from the constraints of the assignment, opening the floor to the pending national Fair Tax Act (H.R. 25/S. 122). Since this isn't a Texas-specific piece of legislation, it was off the table. The wondrous thing about the regressiveness of consumer taxation is the ability to easily make it progressive. It's called a prebate. The concept is simple: pre-pay citizens the amount of taxes they would pay up to the poverty line. It works similar to the income tax rebate, but you get it before you pay any taxes, and you get it monthly instead of annually. What makes it progressive is that everybody, rich and poor, get the same amount of money, relative to the number of people in their household. As Mr. Nicot pointed out, poor family expenses are proportionally more of their income than rich family expenses. So a prebate of, let's say $2 (referring to Mr. Nicot's example) would be proportionally more money to the poor family than to the rich family. So how is this prebate figured? Take the federal poverty rate ($11,490 for one person in 2013), and multiply it by the consumer tax rate (FairTax would be 23%). That comes to $2,642.70, split monthly into payments of $220.22. Mr. Nicot is free to disagree with this, but $220.22 would be proportionally more money to a poor person's income than to a rich person's. This applies to a national level of course. States would be encouraged to do something similar for their tax revenue. This is one of the few ways that a consumer tax would be more progressive than an income tax. There are many other points to discuss, so please keep the rebuttals coming. Please challenge me (fwbtexas@blogspot.com) on how a 23% tax rate would be so unfair. Or how eliminating payroll taxes would hurt employees. Another suggestion would be to challenge the notion that the FairTax would make the United States of America more globally competitive; stimulating domestic job growth, increase exports, and bring offshore money back to America. Let's discuss how imbedded costs and taxes inflate the purchase price of everything, even tax-exempt items. As far as reading material, check out The FairTax Book and FairTax: The Truth, both written by Neal Boortz and John Linder. If there are any recommendations of what I should read, I suggest referring to them by name rather than as an arbitrary suggestion.
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