Alternative To Federal Income Tax, Whattaya think?

[Swanny]

Was surfin' about trying to learn what the government plans to do to us next, when I came across this article. Let us know what you think about this scheme.

Effort to dump income tax gains steam

[Richard Bercot]

This overall plan does not sound real bad to me. There will be several questions on my behalf.

I am glad to hear that there would be no tax an essential items. But who and what determines what is essential and what is not?

Would Telephone systems be taxed higher then what they are today? If you wish to work you must have a Telephone.

Would Automobiles be taxed? If you live in town you MIGHT be able to do without it if some kind of mass transportation was available to you. But if you live in the country side, there is no mass transportation system. Maybe that can be determined by the value of your automoble?

Utilities? Your must have electric, some kind of refuse system, heating, as for some water and waste. I would imagine that these would be classified as essential.

Cable TV, for the most part is a luxuary but I do know of a City where TV antennas are not permitted at all. So for them what or would TV just be classified as nonessential. I heard it reported that in England the is a Tax per TV, I cannot remember if it was 200 dollars or pounds per TV.

Doctor? Is this to be classified as a Service?

Just so many things to think about and I know it would require some adjustments for people. But I could see this being done.

If you just want it, then you will pay for it.

[maisky]

Good suggestion, sir. Certainly SOMETHING different would be worth trying.

[Shamalama]

http://www.fairtax.org/

Simply put, the FairTax replaces the way we're currently taxed - based on our annual income - with a tax on goods and services. The FairTax is a voluntary ?consumption" tax: the more you buy, the more you pay in taxes, the less you buy, the less you pay in taxes.

Everyone pays their fair share of taxes, and with the FairTax rebate, spending up to the poverty level is tax free. The Federal government is fully funded, including Social Security and Medicare, and you don't need an expert to determine your Federal taxes.

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http://www.ncpa.org/pi/taxes/tax7.html

The Flat Tax. "here is hereby imposed on the taxable income of every individual a tax equal to 20 percent (17 percent in the case of taxable years beginning after December 31, 1998) of the taxable income of such individual for such taxable year."

[tsargent62]

So, how would this "conusumption" tax work? It sounds like a sales tax to me. If it is, how are you supposed to get a rebate? I don't understand how this is supposed to work. Although, on the surface, it sounds pretty good. You would have everyone up and down the economic spectrum picking up their fair share of the tax burden.

[Shamalama]

Under the fair tax everyone would pay, say 20% sales tax, on all purchases.

The federal government would decide what the poverty rate is (say $12k per person, $20k per family).

If, at the end of the year, you are under the poverty level, then you would receive a rebate check from the fed equalling the total tax on the "necessary goods". Let's say, for an off-the-wall example, that it costs $5000 to feed/house/clothe a person per year. Then a poor individual would get a check for the 20% that was deducted from the $5000 you spent on necessary goods - in effect making your necessary purchases tax free. But those $10k rims on your new SUV would not be allowed to be a necessary purchase and become part of the rebate.

[tsargent62]

So what you're saying is that the Federal Government is going to track every single purchase I make? Oy! How is that better? People complain about too much "big brother" now. That'll make that even worse. From an IT perspective, the cost of a program like that would be astronomical.

[Shamalama]

No tracking. Just assumptions.

You (rich) buy a gallon of milk for $2 plus $0.40 for tax.
I (poor) buy a gallon of milk for $2 plus $0.40 for tax.

At the end of the year the Fed says that you're rich and don't get a rebate.
At the end of the year the Fed says that I'm poor and I get my $0.40 back.

This is because milk is a necessary item and is included in the list of stuff that everyone requires.

The Fed assumes that a person will have to buy (for example):
- 50 gallons of milk, meaning $20 worth of tax on all that milk
- 5 pairs of blue jeans, meaning $25 worth of tax on all those jeans
- 50 tanks of gasoline for the car, meaning $240 worth of tax on all that gas
- 100 pounds of ground beef, meaning $60 worth of tax on all that beef
- etc.
Then at the end of the year I'd get all that tax back ($345) because I'm poor. Now I could forget the milk and beef and buy a Hummer and go hungry and naked, and I'd still get the rebate ($345) because (1) I am poor, and (2) it is assumed by the Fed that I was spending it on necessary (as defined by the Fed) items.
You, being rich, fill out no forms and get no rebate.

[tsargent62]

I don't think I like that idea of someone sitting in Washington decidinng how much I consume. There better be some kind of formulas for figuring this out at tax time.

[Richard Bercot]

People would cry that this is not equal taxation for everyone if rebates were given.

[Mailagnas maqqas Dunaidonas]

A consumption tax can be just as much of a mess as an income tax. For example, here in NY, some food items are taxable if purchased for consumption on the premises where sold, but not taxable if purchased for consumption at home. Whether we stay with the current system, or move to another one, Congress will find a way to make it sufficiently complicated to keep attorneys prosperous, and me busy editing lawbooks.