Topic: Fair Tax Act
Lyra pointed out in another thread that this has gained very little attention in the media. The "Fair Tax Act" not only repeals the income tax, but also payroll, estate, and gift taxes. It replaces them with a sales tax (starting at 23%) which is levied against goods and services purchased for personal use. Business uses of goods and services, as well as "intangible" assets, such as copyrights and securities, are exempt from levy.
I wanted to create a thread to discuss the possible implications of this passing Congress, as the other thread is more about the fact that it's not getting media attention, which is an interesting subject in itself.
OK on to the penny tossing. .
The most common argument against abolishing the income tax and replacing it with a general sales tax (usually in the ballpark of 25%) is that it will benefit the wealthy at the expense of the poor. Considering that a "poor" person pays about 15% of their income in tax, it would seem like this would take more money out of their pockets.
The issue is debatable, but unfortunately very few people actually sit down and consider what the impact of abolishing the income tax would have on them personally. Usually arguments are focused on how it will impact certain "groups", the definitions of which are sometimes quite questionable.
The broader philosophical issue, is whether tax should be assessed when one earns money or one spends money. Taxes are levied against people and corporations as a recompense for damages occured by the State. If you actually investigate the legal terms used to come up with the idea of a tax, it turns out to be quite different than what is commonly taught about taxation- that is is simply a means of the government to raise money.
So let's say you go to the store and you purchase a product. The price is what you are paying for the product itself. The tax is what you are paying to reimburse the State for damages incurred to bring that product to you. The cost of regulating industry and transportation. The cost of transportation itself, as evidenced by environmental damage, and wear and tear on roads. The cost of legal fees and research fees related to the product. And so on.
But now let's say that you go to work, and you earn money for your time. Who is the one "damaged" here? You are. You are the one who is investing your time and your labor, which could be invested somewhere else. Why should you pay the State for working? Working is not a privilege. The State should be encouraging people to work not penalizing them.
When I was in high school, I dated a girl whose father had died, and whose mother was collecting social security benefits. She actually wanted to work, but the problem was if she got a job she would lose her benefits, and there was no way she could make anywhere near the same amount of money working, especially after income taxes were taken out.
Then there's the whole deal with the IRS, the Fed, and the IMF which I think has stunk up the place long enough, so even if we maintained an income tax, I think I would still get behind abolishing the IRS and putting a new system of collection in place.
The key is to make sure we are not replacing the current system with something worse.
Another interesting idea, which is very rarely talked about, is to abolish all federal taxes completely, pass laws requiring the federal gov't to operate within a balanced budget, and then simply print the money necessary to cover its expenses.