Thread: Americans Still Won't Trade Deductions for Lower Taxes

Americans Still Won't Trade Deductions for Lower Taxes

Monday, April 17, 2017

Even if it means lower tax rates, Americans still aren’t ready to eliminate tax deductions, but they wouldn’t mind a flat tax rate system.

The survey of 1,000 American Adults was conducted on April 13 and 16, 2017 by Rasmussen Reports. The margin of sampling error is +/- 3 percentage points with a 95% level of confidence. Field work for all Rasmussen Reports surveys is conducted by Pulse Opinion Research, LLC. See methodology.

http://www.rasmussenreports.com/publ...or_lower_taxes

nntrixie, I posted this for you. We were discussing the Rebate aspect of the FairTax on another thread a few days ago, but I couldn't find the exact one, so posted the Rasmussen poll about deductions in a new thread here. This attitude of preferring personal and dependent deductions to exempt essentials from tax which is the reason for the Rebate for the FairTax seems to be what the people prefer. There is something about the federal government taxing essentials and so forth that most Americans find odious, even if not doing so increases the overall tax rate. My position is different than that, I would prefer the lower tax rate instead of the deductions or the Rebate with respect to the FairTax, but I'm in the minority of this.

The FairTax team of economists that developed the FairTax plan did surveys all over the country with all types of businesses, workers, investors, over a three year period, to determine what features would work and which ones wouldn't work. So apparently things haven't changed, they like a flat rate type system according to Rasmussen but still want the deductions (or an equivalent like the Rebate on the FairTax).

I don't subscribe to Rasmussen so don't have the full report shown here, but you can sign up or maybe someone else who does subscribe to it could post the whole poll results for us.

Adding up the Fair Tax

By Angie Drobnic Holan on Wednesday, January 23rd, 2008 at 7:42 p.m.

SUMMARY: Mike Huckabee says a national Fair Tax will be like a "magic wand." We say magic wands don't exist.

Mike Huckabee has won support from a segment of the Republican Party that avidly supports what it calls the Fair Tax, a national sales tax that would replace the traditional income tax. So what is the Fair Tax, and is it a good idea?

See related rulings

For starters, the Fair Tax is a federal sales tax on all new goods and services. Sometimes it is called a flat tax, but that's not really correct terminology. A flat tax means taxing all incomes at the same rate with limited deductions. (In 2000, candidate Steve Forbes advocated a flat tax, saying people could file their income taxes on a postcard.)

The Fair Tax would be a sales tax that would replace a number of income taxes: the individual income tax, the alternative minimum tax, business and corporate income taxes, capital gains taxes, Social Security taxes and Medicare taxes. Legislation to create it is introduced annually in Congress; the latest version can be found here .

Proponents say the Fair Tax would spur savings and create economic growth because people would be allowed to keep all of their paychecks and decide by their spending choices how much tax to pay.

Critics of the Fair Tax are legion: The harshest say the idea is ridiculous nonsense; the mildest say it's an interesting thought experiment that can't work in practice. Few mainstream economists find the idea a worthwhile policy proposal for several reasons.

There are a few primary arguments against a national sales tax: It's regressive; it's not enforceable; it's not politically feasible. Let's take these arguments one by one.

A regressive tax means it impacts people with lower incomes more than it does those with high incomes. For example: People who earn a poverty-level wage are likely to spend all of their wages every year, so they are taxed on 100 percent of their earnings. Rich people, though, might only spend a fraction of their annual income, and are only taxed on that portion. So the wealthy person pays a lower tax rate than the poor person.

Fair Tax proponents answer this problem with what they call the prebate. Under this plan, the federal government will mail checks to all U.S. citizens as a refund on the sales taxes they pay for basic necessities. For a single person, that would be $183.43 per month, according to The FairTax Book by Neal Boortz and John Linder that advocates for the Fair Tax. (Linder is a U.S. congressman.)

Bruce Bartlett, a former Treasury Department official, says the prebate does little to change the regressive nature of the tax, because people will spend their prebate and it will be taxed at the same 23 percent rate.

"Even with the rebate counted the way the Fair Tax supporters want it calculated — as a reduction in tax liability rather than an increase in income — there would be an enormous shift in the tax burden from the wealthy to those with lower middle incomes," Bartlett wrote in a story for the magazine Tax Notes.

Enforcement is also a significant concern for the Fair Tax. The 23 percent tax rate supported by the Fair Tax proponents assumes that most people would pay the taxes they owe. Economists say that when sales taxes reach that level, the incentive for people to cheat rises. People will try to buy things off the books, and underground economies will develop. To compensate for tax evasion, the tax would have to be raised even higher, which would lead to more evasion. Abolishing the Internal Revenue Service would exacerbate this problem, said economist Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C.

"At the end of this story, when you add in some state sales taxes, we could be close to 50 percent," Baker said.

Finally, political opposition to the Fair Tax is likely to be intense, and even the plan's proponents acknowledge this. One of the most popular tax deductions, the home mortgage interest deduction, will go away under the Fair Tax. Retirees, who already have paid taxes on their income, will strongly oppose the Fair Tax on the grounds they are in effect being charged twice.

The transition process alone could cause economic disruptions as people across the country stock up on goods before the sales tax takes effect.

"The economy would experience a surge in demand for goods as the switchover date approached and then demand would collapse," wrote David Cay Johnston in his book on tax evasion and enforcement,Perfectly Legal.

Even Huckabee seems to admit the Fair Tax will be a hard sell. "I recognize that passage of the Fair Tax will not happen overnight. In the meantime, I will eliminate the Death Tax, and seek to reduce counterproductively high personal and corporate marginal tax rates," he said in a statement from his campaign.

It's hard to tell how many supporters of the Fair Tax are out there. Americans for Fair Taxation, the group that runs the Web site www.fairtax.org, says on its site that it has "hundreds of thousands of members and volunteers nationwide." It seems fair to say, though, that the Fair Tax has a vocal group of adherents within the Republican Party. (For an example of their robust defense of their plan, check out their response to Factcheck.org's take on the FairTax here .)

It appears Huckabee is winning the votes of at least some of the Fair Tax proponents since he has taken up their cause. Americans for Fair Taxation is a nonprofit group that does not endorse political candidates. This led Huckabee to declare recently at a South Carolina rally, "I realize that the Fair Tax organization does not endorse candidates, but let me be very clear: I endorse you."

http://www.politifact.com/truth-o-me...dding-fairtax/

Excerpt:

How Much is my "Prebate"?
Probably the saddest part of this scam called the is the prebate. The Tax plan supporters claim it doesn't tax the necessities of life so everyone gets a prebate check in the mail each month supposedly to cover the tax on life's necessities (just the tax). What they don't tell you up front is that the maximum prebate per person is only $187 per month and they are only refunding the "" tax a person at the poverty level would pay. No real tax exemptions. So FairTax prebate = the fairtax a person at the poverty level would pay or $187 a month. Since they are only refunding the minimum a person in poverty would get, then the middle class loses big time. But wait a minute! I'm not at the poverty level...so where's my tax rebate on my necessities that I actually purchased? Answer: You lose it all except $187 under the FairTax.


The poverty level is ridiculously low and has no basis in reality. Real necessities per month = food + clothes + rent + heat + electricity + gas + healthcare. For a single person living in the ghetto and eating the cheapest foods imaginable and wearing used clothes and the minimum on everything else stacks up like this: Necessities per month = $400 + $80 + $600 + $100 + $50 + $150 + $200 = $1580 minimum per month for basic life support. At a rate of 30 percent that means our true poverty level prebate should be $475 a month to cover the taxes on minimum necessities. It reality it should be as high as $1500 per month for a middle class family to truly cover the minimum costs (not just the tax) of living at the poverty level.


But oops, there's even more bad news, if the FairTax is passed, all those prices (food + clothes + rent + heat + electricity + gas + healthcare) go up by 30 percent. This means the true cost is this (adjusted up 30 percent): Necessities per month = $520 + $104 + $780 + $130 + $65 + $190 + $260 = $2054 minimum per month for basic life support. At a rate of 30 percent that means our true poverty level prebate (With FairTax) should be $617 a month to cover the taxes on minimum necessities. It reality it should be as high as $1950 per month for a middle class family to truly cover the minimum costs (not just the tax) of living at the poverty level.


It really amused us to read the comments in one of the FairTax forums on the web. When asked why the real necessities aren't covered by the FairTax prebate instead of the poverty level FairTax prebate of $187, the supporters said that only gluttons would eat that much food or spend so much on necessities and that the poverty level was totally reasonable. Give me a break.


Because the FairTax gives back billions to the wealthy one would think that the poor and middle classes would get something in return. Not so. The big money conservatives that promote the FairTax deceptively advertise that it will not tax necessities of life. This is a lie. The necessities of a middle class person are much higher than the $187 figure for just the poverty level taxes they pulled out of a hat. Alternatively, the progressive No-Tax Plan makes food, rent, heat, electricity, gas, education, and healthcare tax free to all working people - please check it out.


Shouldn't food, clothes, rent, and healthcare be tax-free? Not according to the FairTax. If fact, the excuse used in the FairTax Book for not making food tax-free is that it would benefit the wealthy disproportionately. Give us a break. Who do they think they are fooling? You would have to be an uneducated moron to believe that. The provides no exemptions, just a paltry $187 to cover a poverty-stricken persons tax on necessities. The wealthy get back billions under the FairTax. The poor, the middle class AND the wealthy get a tiny monthly prebate check. It doesn't sound FAIR to me.

http://www.fairtaxfraud.com/fallout.asp

There are several problems with that article.

1. Retirees. Retirees are not paying twice. They actually make money off the FairTax. For example, the income tax is already embedded in the prices of all goods and services, new, tax exempt, used, business to business, all of it. The FairTax removes all these embedded income taxes so prices are free of them, - 23%. The FairTax adds itself to just new goods and services, + 15%. The FairTax Rebates 23% up to the Household Consumption Allowance, +23 on that portion. The FairTax doesn't tax Individual Retirement Accounts of 401 K's, many of which excluded income tax to begin with, the purpose of which was to defer income taxes to retirement, and then you only pay after retirement as you draw it out. Because the income tax has been completely eliminated, these retirement accounts will never be taxed by an income tax. Retirees make out like bandits under the FairTax. And I have no problem with that at all. Retirees need every possible advantage to sustain themselves successfully and pleasantly during their Golden Years.

2. Poor people. Poor working people make out like bandits as well under the FairTax. Not only are their prices of essential products reduced by 23%, they receive 23% in a Rebate if they choose to sign up for it as I'm sure most will. So they have a -23% in reduced pricing on new goods and services, plus another -8%% from FairTax exclusion on used goods, plus -23% FairTax Rebate, plus -7.65% on elimination of payroll taxes. Poor people who don't work, don't pay income taxes or payroll taxes direct, so they receive the benefit of -23% in price reductions, -8% in used goods exemption, plus -23% for FairTax Rebate. Both poor and working poor make out great under the FairTax.

3. Transition. The transition process is as easy as pie. Retailers in 45 states have been collecting state sales taxes for decades. For the 5 who haven't can hire some people to collect it for them or the Fed will do it for them. Couldn't be easier to transition to the FairTax. The majority of the country doesn't have to do anything except stop withholding or paying income tax. How hard is that? Nothing could be easier. For the retailers, they just collect another sales tax, just like they did when there state sales taxes but no city or county sales taxes, and then cities and counties added another sales tax to their job. But unlike state, city and county sales taxes all these retailers collect in return for no compensation, they are compensated by the FairTax, based on a statutory formula of $200 per month or 1/4% of collections, whichever is greater. They deduct this from the FairTaxes they collect and send the balance to the states on the same report they use for the state sales tax, the same as they do for city and county taxes.

4. Transfer of Tax Burden to Wealthy. No, there is no transfer of tax burden to the wealthy. The retirees make out, regardless of income, the poor make out, regardless of income, the middle class makes out, regardless of income, and the wealthy make out the same as everyone else. They pay the FairTax on all new goods and services, they can sign up if they want for the Rebate, they make more, they spend more, they pay for FairTax than those with less expendable income.

5. It's Not Enforceable. No, it's much easier to enforce than the income tax. There are far fewer entities involved, only retail entities that sell products at the final point of sale. There is only one simple number to verify, and that is gross receipts. The math is easy. The states enforce it, because they are the ones who collect it from the Retailers in their states, and the states are compensation for this service, based on again a statutory fee of 1/4% of FairTaxes collected. It's like a bounty. The more they collect, the more they make to compensate them for their service. The article also doesn't know or refused to report that the existing income tax has an evasion rate of 15% and the FairTax folks used the same evasion rate of 15% in revenue calculations, plus the FairTax is much easier to enforce.

The article also didn't mention that dividends taxes, gift taxes, inheritance taxes and interest taxes are also eliminated by the FairTax in addition to individual income tax, corporate income tax and SS and Medicare payroll taxes.

It's a beautiful tax system and only the severely uninformed, grossly misinformed, or people who just love the evil of the DemoQuack income tax oppose it.

FairTax Act of 2017: HR 25 in the US House of Representatives and S 18 in the US Senate.

Disclaimer: None of this information came from InfoWars.

I just hope anyone that is seriously considering the unfair tax plan a viable option does their homework like I did. That means not taking for granite that everything coming from their website is accurate. The website, like the talking points you provide, is misleading and deceptive.

Originally Posted by MW

I just hope anyone that is seriously considering the unfair tax plan a viable option does their homework like I did. That means not taking for granite that everything coming from their website is accurate. The website, like the talking points you provide, is misleading and deceptive.

Only for people I described above:

1. severely uninformed
2. grossly misinformed
3. people who just love the evil of the DemoQuack income tax

Before I make up my mind, I would do some more research.

The rebate or prebate is an absolute no, no. That is simply a string for the government to hold. It's an excuse for the government to continue to have a huge burearucracy. Those things do not free us - we would still be entangled through these monthly checks.

That's the reason it is included - not that they care anything about not taxing 'essentials' - they want to retain control, files, etc., on everyone.

Again, Judy, I just don't think there is any way our government would allow us to simply pay taxes based on what we purchase. We would have too much power over our own lives that way.

Also, food, medicine, etc., could be exempted - just as they are in many states that have sales tax..

As far as exempting food favoring the wealthy - I don't understand. Yes, they will spend more money on food than we simple folk. We already allow mortgage interest deduction. We simple folk certainly don't purchase the same price homes the wealthy do - so they have a larger deduction for mortgage interest.

But think about income tax - there are people in this country who have never paid income tax - if it is withheld, they get back more in 'un-earned' income tax credit.

We had a big investment one year that allowed us a large tax credit. I was telling a close friend were going to get several thousand back, and what we were going to use it for. She came unglued. She said 'No one pays that much income tax - let alone get that big a rebate. No one pays that much." She was serious. This lady had lived a middle class lifestyle while raising 3 sons, using the various forms of government programs.

So it's very easy to sell the notion of a prebate to a large segment of the population - they feel they deserve it anyway.

I think a sales tax is a great idea - without prebate/rebate/government strings. Just tax - period.

Again, Judy, I just don't think there is any way our government would allow us to simply pay taxes based on what we purchase. We would have too much power over our own lives that way.

Yes, we would have all the power over our own lives. It's not up to the government. It's up to us. We control the government, every 2, 4 and 6 years. Last year the FairTax Act had 75 sponsors and co-sponsors in the US House of Representatives plus 9 in the US Senate.

Obamacare had 8 sponsors.

We can pass the FairTax the day enough Americans say, yes that's what I want and stop making all these excuses not to save themselves.

Originally Posted by Judy

Yes, we would have all the power over our own lives. It's not up to the government. It's up to us. We control the government, every 2, 4 and 6 years. Last year the FairTax Act had 75 sponsors and co-sponsors in the US House of Representatives plus 9 in the US Senate.

Obamacare had 8 sponsors.

We can pass the FairTax the day enough Americans say, yes that's what I want and stop making all these excuses not to save themselves.

Actually, I don't have that much faith in our legislators - especially if you drop the prebate. This is the carrot they are using to get those on welfare, those who never pay taxes, to support them.

I really think it's time someone tells people that everyone should pay some taxes.