Friday, March 21, 2014

The Fair Tax. I think not.

So, while researching the candidates for the Senate Seat for John Rockefeller, I noticed one candidate supported the Fair Tax.  Now I vaguely recall reading a flyer for it while at work one night, but outside of being bored out of my mind on a quiet night, sitting on a mine, it quickly exited my mind.

SO what is this Fair Tax?  Basically, as a worker you would keep the total of your paycheck.  Employers would not pay taxes, no one would pay taxes in the way we know them today.  When you would spend that check, you would pay taxes.  Basically a national sales tax, I have heard between 20 and 30%.  So my limited understanding of this "Fair Tax" would mean, you buy something for 100 dollars 30 of it is taxes.  This is what fair tax proponents call an inclusive tax, the tax is bundled with the item.  Another aspect of this tax is the "prebate" a monthly stipend to help cover the sales tax to the poverty line.  Basically everyone who potentially spends gets this check in the mail, to cover the cost of the sales tax.  Regardless of socioeconomic class, with the larger checks going to larger families. 

Now there are pros and cons to using this system, which amounts to a consumption tax.  The more you use, the more you pay.  First it would benefit your local overl... I mean business owner.  Sure this plan is a boon for businesses, they wouldn't pay any taxes, which means profits, lots of profits.  But profits do not always entail better pay.  Of course it is also a boon for traders, which we might all be wise to do, if this actually makes it out of theory.  See we would only be taxed on what we spend, not what we invest or make.  We could be sitting on a million dollars, but if we can find a way to not spend that money, we wouldn't pay on it.  Of course it is simpler, we would know exactly what we are paying in the terms of taxes, we would also be able to figure out exactly to the penny what they government would have to spend, within reason.  Of course your business would see more profit, that is if prices didn't fall.  See people seem to think that the prices of goods would decrease as the cost of taxes are passed onto the consumer.  There is the prebate check, tied to the current poverty level.  It would eliminate the IRS, smaller government.  Of course, since this is a credit dependent Union these days, proponents seem to think that it will lead to more responsible spending habits.  People would spend less on credit, because they would pay tons more at the end.  Oh and this is a big one.  No deductions, you can't squirm out of it, if you want to eat, you will pay your taxes.

Of course, there are issues with this plan.  As a poor person, I am going to pay more.  Even though we are paying the same percentage of taxes, my little 290 a week won't go as far as your 1000 a week, or the 8,600 a week a NFL player makes.  Unless of course that NFL player is spending all 8,600 he makes.  Now, you might think that we can avoid tax evasion under this system.  Not true.  Why spend my money when I have a cow in the back, and you have a something I need?  Why should we both pay 30% taxes when we can trade.  Of course, I could also work around the system of buying something, by going online and getting some bootleg copy or something that is not taxed from out of the country.  But this leads to the next issue, I simply won't spend in the economy, I will go black market, trade my money for goods outside of the store, or otherwise will do without.  That is bad, very bad for the economy.  Rather than buy a DVD, I will watch it online, which puts people out of work.  That means less income for all.  Then as the last pro said, no deductions, which means people loose out on those breaks which lower their tax rate.  This is a meh thing.  As I pay taxes, I get a benefit from having those college loans, just like many get breaks for having a mortgage, which we kind of depend on for other things.  Of course, this could also raise the price for homes and cars, of which the housing market is already overpriced and dieing a slow death.  Making matters worse, you would still have state taxes, so that 290 I referenced before would be less, I would say 240-250$, and I would not recover that money.  Plus the personal property taxes, and state sales taxes, so in some areas you might actually be paying 40%+ in terms of taxes.  Yeah, nothing like half your check going just to eat for a week.  I will also point out this is a consumption tax, you know based on people spending, yeah I cannot stress this enough.  See spending responsibility comes with a price.  We spend less, companies have less, which means they pay fewer people, which means those people spend less, and more people have less to spend, and so we see a downward spiral.  "Col. Blake's plane was shot down over the Sea of Japan.... It spiraled in... There were no survivors..."  Yeah, I can see a man reading that on the evening news as silverware and plates hit the ground.  Substitute Col Blake, for our economy, and you have my vision of it.  Oh and if this is not bad enough, if you came here legally, guess what?  Your living expense just went through the roof, while your spending power went into the grave.  See, they likely won't get that prebate check.  You do not get that prebate check until you get your green card and become a citizen.  So you are looking at at least three months of living like an animal after you left a place where you might have been living like an animal.

So yeah the fair tax isn't so fair is it?