I am curious as to what my fellow cigar aficionados think of John Lender’s (Rep GA) Fair Tax bill. If you are not up to speed on the concept it is basically the removal of all income and social security taxes and replacement with a national retail sales tax (fairtax.org) has a much more in-depth explanation of all the intricacies. I personally love the concept!

Flat tax. Pure and simple.

Do away with corporate loopholes and off-shore companies looting the system.

Thomas Paine.

As a staunch Libertarian, I whole heartedly agree with the complete and total abolition of the IRS.

"Giving money and power to government is like giving whiskey and car keys to teenage boys."

-PJ O'Rourke

Before you get behind this bill think about what the rate of tax would have to be to replace our current system. I estimate 28 to 32%. Remember that those so called "wealthy" taxpayers who supposedly pay the lion's share of taxes in this country have rates as high as 33%. Bring them down to the same level as everyone else, and remember this is a consumption tax, not an income tax, and you understand just how high the rate would have to be to make this plan work.

Wagner

What Wagner said!

Charlie

The more you make the more you spend.

A flat tax spreads it out evenly and fairly. I'm tired of the "Tax the rich" mantra. They do pay the lion's share right now. In a flat tax the poor, rich and middle class get it all the same.

If you can show me an example of an ultra rich person living modestly then I might change my mind, but most have 2nd and 3rd homes. Some have properties overseas, jets, yachts and condos. Furnishing all of them, maintaining all of them and getting to all of them would affect THAT person and not the entire class that person belongs to.

It really is quite fair and then perhaps we can dissolve the criminal IRS that'll garnish wages and freeze accounts over petty offenses and are answerable to nobody!

The same groups that cry "socialist!" somehow seem to like this idea.....I find it silly.

I'm not saying we don't need something better, but this is not a good thing. It's like communism....it looks good on paper, but in reality it doesn't work.

The poverty level this thing describes is so low that it is impossible to live at that level. The wealthy would be the only ones to really benefit from this.

It would hit the middle class the hardest.

I'm sure there's a better way, and this just isn't it.

DrMaddVibe: I suggest you read The Millionaire Next Door by Thomas J. Stanley, William D. Danko.

The vast majority of people with $1 million+ of disposable wealth live very modestly and spend minimally on consumer goods. The notion that most wealthy people live elaborately is simply unsupported. There are very,very few whose wealth measures in the 100s of millions of dollars, a fraction of 1%, that live in a manner of constant spending. Most do not.

A flat rate tax will hammer the middle class, as a group, hardest of all, because the middle class spends virtually all of its income, with a savings rate less than 2% of gross.

My wife and I are retired. We pay considerable state and federal income tax, property tax, sales tax, and federal excise tax. The amount of consumer goods we currently purchase is minimal. While ten years ago, I may have spent $1000 on a business suit, now I'm in cords and a T-shirt that I bought five years ago. A national sales tax on consumer goods would basically make us tax free, which I would certainly enjoy, but I'm not sure how fair it may be.

I have the book.

It's amazing what you can find out about yourself too!

PAW household here!

I was talking more about the Trump's/Rockfeller's/Gates'/Kerry's of the world than I was anyone.

Whether this idea will work is certainly a debate worth our attention.

Even a "flat tax" is technically unfair.

Does a rich person use our roads more than a poor person? Does he benefit more greatly from our military?

Quite the contrary. The poorest, who pay the least (or none at all), benefit the most with federal programs supported by the rich and middle class.

So, knowing that we're not even attempting to make the "fair", we need to understand what is the most easy to swallow by all three income brackets.

Using that logic, a Flat Tax seems the most appealing. As long as rich business owners and CEO's can't hide their earnings in stock options, that is.

Tailgater:

You're missing one of the most important point of a flat tax--it isn't based on income but rather on consumption. Since tax on income probably averages about 20-22% (my guess after having prepared several hundreds of tax returns for all types of clients), and since income ,at least for the wealthy, is substantially more than their expenditures the actual flat tax rate will have to be upwards of 28%. In other words they won't have to spend a penny on taxes for their earnings over and above what they purchase. They can shelter money for their heirs or whatever they want to do with it. Still think it's the fair way to go?

Also, how would you feel about paying that (28-32%)on top of the cost of a new car or a new house (let alone one's cigars)? I say it will kill our economy.

Wagner

Tailgater:

I should have begun by stating the flat (or "fair") tax refered to above in the thread is a consumption tax. A flat tax can, in fact, be based upon income alone.

Apologies,

Wagner

Lender's Fair Tax Bill is predicated on a federal sales tax.

It is not a flat rate tax. A flat rate tax is a non-progressive income tax, taxing all income at the same percentage rate, generally without exemptions and deductions, such as mortgage interest, state taxes, etc. It's a great idea until you start asking what's fair. Should a handicapped worker in a protected workshop be required to pay the same tax rate on his/her minimum hourly wages as an able bodied worker making $100K a year? If you say, no...the Pandora's box is opened to exceptions. If you say, yes...how do you sleep at night?

I like the idea. Here in MN our sales tax is not on food, clothing(except lux. clothes)utilities, rents, etc. So if you make Min. Wage and spend all your $ keeping yourself fed and a roof over your head, you pay nothing. The more you spend on goodies the more you pay. The Problem is how to talk the old timers into it? They got soaked their entire lives with income tax. Now they they want to spend it they get hit with sales tax. Bill

A federal sales tax will be on all goods and services, including food, clothing, etc.

SteveR*, That's too bad. It's a good idea but without something to help out the lower income people i don't see it going anywhere. It would be nice to get your entire paycheck and pay the tax when you choose to do so. Bill

I think that the question isn't how to tax but how the money that we collect with taxes is spent. What is the difference if the government collects X amount of tax via a flat tax, sales tax, or the current system if they waste the money that they collect?

The only fair tax in my mind is one that collects only what it needs to provide the basic governmental services (i.e. roads, schools, utlities, army, etc...)

What Buckwheat said.

"there's not too little money in the system, there's too much system in the money." Jerry doyle on Sirius radio this morning. Thought it kinda fit. Bill

The FairTax proposal is a comprehensive plan to replace federal income and payroll taxes, including personal, gift, estate, capital gains, alternative minimum, Social Security/Medicare, self-employment, and corporate taxes. The FairTax proposal integrates such features as a progressive national retail sales tax, dollar-for-dollar revenue replacement, and a rebate to ensure that no American pays such federal taxes up to the poverty level. Included in the FairTax plan is the repeal of the 16th Amendment to the Constitution. The FairTax allows Americans to keep 100 percent of their paychecks (minus any state income taxes), ends corporate taxes and compliance costs hidden in the retail cost of goods and services, and fully funds the federal government while fulfilling the promise of Social Security and Medicare.

Americans take home their whole paychecks.

Not only do more Americans have jobs, but they also take home 100 percent of their paychecks (except where state income taxes apply). No federal income taxes or payroll taxes are withheld from paychecks, pensions, or Social Security checks.

No federal sales tax up to the poverty level means progressivity like today's tax system.

To ensure no American pays tax on necessities, the FairTax plan provides a prepaid, monthly rebate (prebate) for every registered household to cover the consumption tax spent on necessities up to the federal poverty level. This, along with several other features, is how the FairTax completely untaxes the poor, lowers the tax burden on most, while making the overall rate progressive. However, the FairTax is progressive based on lifestyle/spending choices, rather than simply punishing those taxpayers who are successful. Do you see how much freer life is with the FairTax instead of the income tax?

No tax on used goods. The amount you pay to fund the government is totally visible.

With the FairTax you are only taxed once on any good or service, the sales tax is charged just as state sales taxes are today. If you choose to buy used goods - used car, used home, used appliances - you do not pay the FairTax. If, as a business owner or farmer, you buy something for strictly business purposes (not for personal consumption), you pay no consumption tax. When you decide what to buy and how much to spend, you see exactly how much you are contributing to the government with each purchase.

Retail prices no longer hide corporate taxes or their compliance costs, which drive up costs for those who can least, afford to pay.

Did you know that hidden income taxes and the cost of complying with them currently make up 20 percent or more percent of all retail prices? It's true. According to Dr. Dale Jorgenson of Harvard University, hidden income taxes are passed on to the consumer in the form of higher prices - from an average 22 percent on goods to an average 25 percent on services - for everything you buy. If competition does not allow prices to rise, corporations lower labor costs, again hurting those who can least afford to lose their jobs. Finally, if prices are as high as competition allows and labor costs are as low as practical, profits/dividends to shareholders are driven down, thereby hurting retirement savings for moms-and-pops and pension funds invested in Corporate America. With the FairTax, the sham of corporate taxation ends, competition drives prices down, more people in America have jobs, and retirement/pension funds see improved performance.

The income tax exports our jobs, rather than our products. The FairTax brings jobs home.

Most importantly, the FairTax does not burden U.S. exports as they are with the current income tax. So the FairTax allows U.S. exports to sell overseas for prices 22 percent lower, on average, than they do now, with similar profit margins. Lower prices sharply increase demand for U.S. exports, thereby increasing job creation in U.S.manufacturing sectors. At home, imports are subject to the same FairTax rate as domestically produced goods. Not only does the FairTax put U.S. products sold here on the same tax footing as foreign imports, but the dramatic lowering of compliance costs in comparison to other countries' value-added taxes also gives U.S. products a definitive pricing advantage which foreign tax systems cannot match.

The FairTax strategy is revenue neutrality:

Neither raise nor lower taxes so consumer costs remain stable.

The FairTax pays for all current government operations, including Social Security and Medicare. Government revenues are more stable and predictable than with the federal income tax because consumption is a more constant revenue base than is income.

If you were in a 23-percent income tax bracket, the federal government would take $23 out of your paycheck for every $100 you made. With the FairTax, if the federal government gets $23 out of every $100 spent in America, the same total revenue is delivered to the federal government. This is revenue neutrality. So, instead of paycheck-earning Americans paying 15.3 percent of their paychecks in Social Security/Medicare payroll taxes, plus an average of 18 percent of their paychecks in federal income tax, for a total of about 33 percent, consumers in America pay only $23 out of every $100. Or about 30 percent at the cash register when they elect to spend on new goods or services for their own personal consumption. And this tax is collected only on spending above the federal poverty level, providing important progressivity.

Tax criminals - don't make criminals out of honest taxpayers.

Today, the IRS will admit to 25 percent non-compliance with the code. FairTax.org will be generous and simply take the position that this is likely a conservative estimate of the underground economy. However, this does not take into account the criminal/drug/porn economy, which equally conservative estimates put at one trillion dollars of untaxed activity. The FairTax will tax this - criminals love to flash that cash at retail - while continuing to provide the federal penalties so effective in bringing such miscreants to justice. The substantial decrease in points of compliance - from every wage earner, investor, and retiree, down to only retailers - also allows enforcement to concentrate on following the money to criminal activity, rather than making potential criminals out of every taxpayer struggling to decipher the current code.