Discuss.

10/30/2009 1:44:24 AM

Isn't that an either-or fallacy? What about the flat tax?

But given the two choices--even though they are both consumption taxes--I would chose the national sales tax. I don't want taxation at each level of value added--it seems to me to be somewhat of a disincentive to add value, among other issues.

Of course, many will argue that the national sales tax will disincentivize purchases, which will eventually hurt capital investments and so on. But I would rather keep more of my own money--and if I have more I'll spend more and have more control over it.

10/30/2009 2:18:09 AM

can we just btt the 10 page thread of discussions from before?

10/30/2009 7:17:26 AM

The flat/fair plans strike me as so awful that I question the motives of their proponents. They're not aiming to create a better tax system-- they're trying to shrink the government. An astoundingly punitive tax system is an ends to a means.

The VAT is terrible, too, but not retardedly so.

[Edited on October 30, 2009 at 8:31 AM. Reason : ]

10/30/2009 8:31:03 AM

Quote :

"The flat/fair plans strike me as so awful that I question the motives of their proponents. They're not aiming to create a better tax system-- they're trying to shrink the government. An astoundingly punitive tax system is an ends to a means."

Uhh, what? Are you serious right now?

A flat rate consumption tax isn't awful at all. For one, it doesn't require the bureaucracy that our current system requires, which is good in and of itself. I can hear it now, though: look at all the IRS and tax-related jobs we're saving with our bloated federal income tax system! Why do you hate middle america!???

The point of it is that you get taxed for money you spend, rather than money you save. You call this a punitive tax system, but our current system is punitive. If you want to save money, you get punished - and then you get punished again when you decide to spend that money. We should be encouraging savings, at all times, and a flat rate consumption tax is a good way to do that. It's more than capable of providing the revenue that we would need to operate government. It just wouldn't require the bureaucracy, the audits, the invasions of privacy, and the inherently unfair progressive tax structure.

[Edited on October 30, 2009 at 8:38 AM. Reason : ]

10/30/2009 8:37:24 AM

A national sales tax will shift the tax burden to the lower and middle classes. Assuming the government stays the size that it is, everyone posting in this thread will pay more taxes under such a system.

10/30/2009 9:16:51 AM

^^ If the singular goal of tax policy were to encourage people to not spend any money at all, then yes, a sales tax would do it.

Yes, we currently punish saving. A little. We also punish spending. A little. We distribute the tax burden across all types of transactions. Dumping the entirety of the tax burden on any one type of action is mind-boggingly retarded. You do realize that the economy depends on consumption of goods and services, no?

And can you imagine the black market a ~27% sales tax would create? We'd be trading accountants for FBI agents. Imagine the invasions of privacy.

10/30/2009 9:33:48 AM

Quote :

"If the singular goal of tax policy were to encourage people to not spend any money at all, then yes, a sales tax would do it."

It wouldn't encourage them to not spend any money at all. It might encourage them to spend less, though. There's a difference.

Quote :

"Yes, we currently punish saving. A little. We also punish spending. A little. We distribute the tax burden across all types of transactions. Dumping the entirety of the tax burden on any one type of action is mind-boggingly retarded. You do realize that the economy depends on consumption of goods and services, no?"

Actually, we do way more than punish saving. If you put money in the bank right now, at current rates, you're guaranteed to lose money over the next few years. The income tax just taxes income...whatever you make, a percentage of it automatically comes out. So it punishes everything you could possibly do with your money. And the economy does depend on consumption, but it depends on savings just as much. Without savings, you don't have money to invest or produce.

There was a time when it was accepted that you save money for your entire life so you will have money after you can no longer work. Now, it's don't save any money, because the government will have you covered.

Quote :

"And can you imagine the black market a ~27% sales tax would create? We'd be trading accountants for FBI agents. Imagine the invasions of privacy."

In black markets, prices go up. I'm pretty sure someone isn't going to pay 50-150% more for a product just to avoid the tax. Also, I think the tax would have to be higher than 27% to even come close to covering current government expenditures. A tax like this couldn't come about until the realization that debt is out of control and we have no way to fund current programs, resulting in slashing programs across the board.

[Edited on October 30, 2009 at 9:56 AM. Reason : ]

10/30/2009 9:49:14 AM

Quote :

"Now, it's don't save any money, because the government will have you covered."

Damn, that's news to me. Guess I'll cash out my 401k now.

10/30/2009 9:53:25 AM

Well, any relatively young person with a brain is saving money or investing because there's obviously not going to be a SS program when we're old.

10/30/2009 9:55:41 AM

The first part of that sentence is a bit of a tautology, isn't it?

10/30/2009 10:00:14 AM

Quote :

"Actually, we do way more than punish saving. If you put money in the bank right now, at current rates, you're guaranteed to lose money over the next few years."

BS. Are we taxing capital gains at >100%, now?

Quote :

"So it punishes everything you could possibly do with your money."

In other words, it spreads out the tax burden across all types of economic activity.

Quote :

"A tax like this couldn't come about until the realization that debt is out of control and we have no way to fund current programs, resulting in slashes programs across the board."

In other words: "they're trying to shrink the government. An astoundingly punitive tax system is an means to an end."

Thank you for being honest.

[Edited on October 30, 2009 at 10:22 AM. Reason : ]

10/30/2009 10:02:27 AM

shrinking the government is a good idea no matter how its done.

10/30/2009 10:03:46 AM

Quote :

"no matter how its done"

There are ways that will destroy the economy and ways that won't.

10/30/2009 10:04:58 AM

I dont see how.

10/30/2009 10:07:48 AM

Quote :

"BS. Are we taxing capital gains at >100%, now?"

No, you're losing money to inflation. And, yes, I'm fully aware that many of you are still maintaining the delusion that there isn't inflation, there never will be inflation, and the economy is fine. Talk to me in 5 years, and we'll see if keeping your cash in the bank was a good idea.

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"In other words, it spreads out the tax burden across all types of economic activity."

Yes, and I'm saying there's a better way.

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"In other words: "they're trying to shrink the government. An astoundingly punitive tax system is an ends to a means.""

We do need to shrink government, but it isn't an ends to a means. I'm saying that with our current debt, we'd basically need to do a 75% sales tax or higher to have any chance of paying it off. That's probably not going to happen. The only way for this tax (or any tax) to work is for us to get the budget under control. Income taxes aren't coming close to providing the revenue we need either.

Quote :

"There are ways that will destroy the economy and ways that won't."

Expanding government has proven to be a pretty good way to destroy it. For example, I don't know, the United States for the past 8-9 years.

[Edited on October 30, 2009 at 10:15 AM. Reason : ]

10/30/2009 10:10:39 AM

They are both regressive and therefore impact a majority of American's far more negatively then the wealthy class.

VAT, at least can be placed on items considered 'wants' like electronics, cars, boats etc. A flat tax would be placed on everything.

In fact, this too idiotic to even discuss.

[Edited on October 30, 2009 at 11:09 AM. Reason : ^.^]

10/30/2009 11:09:33 AM

Quote :

"shrinking the government is a good idea no matter how its done."

So it wouldn't matter if we started by getting rid of the police, for example?

10/30/2009 11:52:52 AM

If by police you mean FBI/CIA/NSA that might not be such a bad idea. But what i meant was shrinking the power of the federal government. Tossing out social security, medicare, cutting back military spending, etc... etc... The smaller the government, the lesser the impact of abuse.

10/30/2009 1:04:45 PM

Im a big supporter of the fairtax. What I like best about it is that it treats everyone the same and gives people the option on how much tax they pay, encourages saving, and rewards production. As boone has stated, it COULD shrink the govt as now EVERYONE would have to pay SOMETHING towards any new spending increase with taxes. Boone probably hates this bc he prefers the current system of promising enough people something for free then taking it from the minority.. ah, fair indeed.

Imagine a black market with a 27% sales tax. Why do you say that? People wont want to pay 27%? But I guess you expect those evil rich to pay over half thier income. hahah. I honestly dont think it would be too big of an issue. People would take home what they earn.

10/30/2009 9:04:32 PM

If we keep a progressive tax system, we should have a progressive voting system I think. 1 vote for every dollar you actually pay. You agree with that boone?

10/30/2009 11:18:45 PM

Quote :

"Im a big supporter of the fairtax. What I like best about it is that it treats everyone the same and gives people the option on how much tax they pay, encourages saving, and rewards production."

The same could be said for a VAT. They're both consumption taxes.


As I've said before, I could get on board with a mix of both a (reduced, and preferably less progressive) income tax and a consumption tax of some sort.

Quote :

"Also, I think the tax would have to be higher than 27% to even come close to covering current government expenditures. "

So in that regard, it's pretty much just like what we have now, haha.

Maybe the problem isn't on the taxation end of the equation.

Quote :

"They are both regressive and therefore impact a majority of American's far more negatively then the wealthy class. VAT, at least can be placed on items considered 'wants' like electronics, cars, boats etc. A flat tax would be placed on everything."

"Not progressive" does not necessarily imply "regressive". Furthermore, the FairTax approach to a flat sales tax specifically addresses the issue of "wants" versus "needs" with the prebates.


But regardless, this thread is not titled "National sales tax (i.e., Fairtax) and/or VAT versus conventional progressive income tax as we currently know it", and it's not just because it wouldn't fit in the title line.

I know you fiscal leftists love your redistribution of wealth and ability to monkey with the tax code that we currently have. I know you aren't going to champion, say, the FairTax. I am asking for discussion specifically about how different consumption tax plans stack up against each other. All of you seem to have missed that in your spring-loaded jump to spout off your respective party-line talking points.

10/31/2009 2:24:19 AM

FairTax

it's designed to make the people with the most money (and thus more likely to buy new things) pay more taxes

10/31/2009 5:59:07 AM

Duke, I really believe you will see the VAT pushed hard in the next couple of years. Esp as we move towards socialized medicine. I believe every country with it has a VAT. The problem is that we wont abolish the income, payroll, coorporate, capital gains tax before we get a VAT, we will simply add it. So I would strongly oppose it as long as the others stay in place.

As for compairing the VAT to the fairtax duke, I think the fairtax will be simpler with less chances of fraud, easier to police than a VAT. IMO

10/31/2009 8:33:06 AM

Quote :

"I am asking for discussion specifically about how different consumption tax plans stack up against each other."

Then it's the VAT by a kabillion miles.

Seriously you all, the libertarians have estimated that a single sales tax to replace all our current taxes would be 27%. If a 27% national sales tax on final goods isn't self-evidently dumb-sounding to you, I don't even know where to begin.

Quote :

"fraud"

We'll hopefully learn from Europe's experience.

10/31/2009 3:44:55 PM

Quote :

"Seriously you all, the libertarians have estimated that a single sales tax to replace all our current taxes would be 27%. If a 27% national sales tax on final goods isn't self-evidently dumb-sounding to you, I don't even know where to begin."

Why does it sound dumb?

10/31/2009 3:45:42 PM

The fair tax isn't an awful idea. Its just not realistic at all, could never work, and will never be considered. Its not even worth discussing other than the rich right pipedreams.

Only if there were some sort of communist utopia where everyone took home the exact same amount of money, could you theoretically have a flat tax. Progressive income tax is the only check to capitalism.

10/31/2009 4:12:19 PM

I'm not sold on the Fair Tax, but people keep throwing around the 27% number like it's some huge thing, but the reality is people, middle class working people, are already paying 25-30% of their income in taxes already. What's the big deal, or is it just the fact that so many people don't realize how much they pay in taxes and if they did it would be harder to get new taxes approved?

10/31/2009 4:41:33 PM

Your definition of middle class

10/31/2009 7:21:04 PM

By anybody's definition of Middle Class. To wit:

Quote :

"I think you misunderstand your source. The quote you get for the federal taxes is: "Today, Americans are paying roughly 11.8% of their personal income in federal taxes, compared with 9.6% in late 2003, Wachovia reports. Mr. Silvia says he expects the federal tax burden to keep rising." Note that the subject is americans, not families of 4 earning 75k. That would include all americans including poverty. Otherwise, you are seriously suggesting that people making 75K are only paying less % in taxes than someone who makes 8k / year (brackets for your reference http://www.moneychimp.com/features/tax_brackets.htm). Also note that incomes between 45k and 75k are in the same tax bracket for most filing purposes. So let's look at your 45k shall we? If you're single, making 45k: Your average (federal income) tax works out to about 17% (FWIW if you're making 30k it's about 14%) So, 17% + say 7% state taxes (your numbers not mine) = 24% in just state and federal. + 7.5% in SS and medicare = 31.5%, and that as I said is before sales, investment, utility and gas taxes. And to get to 33% you only need to tack another $675 on to that. So lets figure gas tax averages about $.40 / gallon. Say you fill up a 15 gallon tank once a week, 52 weeks a year. That's $312 in taxes. Do you think after you add up your utility and sales taxes and other fees that you pay to the government each year that it amounts to significantly less than $363? If you're making 30k single (~14/hr), take 3% off. If you're self employed, add 7.5%. Like I said, a third is hardly exaggerating. Edit: ----- Also note that I'm assuming that your state numbers are including property taxes. If not, well, you get the idea. "

Also, the last time this topic came up, we already established that no one would actually wind up paying 27% of their income in taxes.

[Edited on October 31, 2009 at 8:16 PM. Reason : asdf]

10/31/2009 8:11:32 PM

would this change in taxes be revenue-neutral? if so, where would the extra money that wouldn't be taxed from the rich come from? thought so.

oh yeah and

Quote :

"Say you fill up a 15 gallon tank once a week"

jesus gaz-guzzler christ.

[Edited on October 31, 2009 at 8:16 PM. Reason : .]

10/31/2009 8:13:40 PM

^ Not really a huge stretch, especially around here.

10/31/2009 8:22:24 PM

the big deal is that there would be a LOT less loopholes in order to reduce or eliminate your overall tax burden. it would also increase the amount of taxes paid by the lower income brackets which is somewhat of a problem (although it has generally been stated that there would be a tax rebate for lower income brackets).

10/31/2009 8:24:43 PM

Quote :

"although it has generally been stated that there would be a tax rebate for lower income brackets"

and there come back your loopholes.

10/31/2009 8:26:22 PM

typically its been a flat $XXX per person/month. I agree though that its basically the start of loopholes

10/31/2009 8:31:35 PM

bump by request

7/26/2011 5:57:28 PM

Thetan-based taxes. Xenu demands it.

7/26/2011 7:29:45 PM

Flat tax 17%. I want my tax rate to go down. I'm tired of paying for entitlement programs for people who turn around and vote against my interests. I'm going full Libertarian. Everyone for themselves.

7/27/2011 6:00:59 AM

Thanks theDuke866.

Yesterday, the House Ways & Means Committee held a hearing to discuss FairTax (HR25) as a possibility of tax reform. The hearing immediately following was about a VAT.

My biggest concern would be that they add a VAT on top of income tax rather than reforming the system completely.

Here is Rep. Rob Woodall's response (R-GA):

http://www.youtube.com/watch?v=Ph9i-VLD9tM

7/27/2011 8:15:42 AM

Quote :

"The flat/fair plans strike me as so awful that I question the motives of their proponents. They're not aiming to create a better tax system-- they're trying to shrink the government. An astoundingly punitive tax system is an ends to a means."

It's a better system AND shrinks the government. And there's nothing wrong with that. Government is too big, too powerful, and does too much. Less money = less government.

7/27/2011 8:20:17 AM

^ And because of that, it would never pass. Congress might act as if it is going to pass, but will decide it needs to wind down the income tax after the sales tax revenue has stabilized...whenever that is.

7/27/2011 9:02:41 AM

at 27%, the plan is revenue neutral.

the way the plan stays revenue neutral is by reducing enforcement cost (i.e. getting rid of a large chunk of the IRS) and by enlarging the base by capturing revenue on international tourism and on underground economies that have to buy new goods (drug dealers, prostitutes, etc.). This neutrality comes even though we would be taxing a majority of Americans less, by taxing wealth, not income, in all brackets, most importantly, the highest brackets.

The FairTax is actually MORE progressive than the current income tax because of the aspect that it taxes wealth and spending, not income. Lets say, Warren Buffet decides to throw a steak dinner and purchases 1000 steak dinners at $100 apiece with income from dividends and stock options. Under the current tax code, he would pay $0 taxes on the ability to throw the steak dinner. Under the FairTax, he would pay $27000 in taxes. This is the mechanism that would help the lower income brackets pay less of the burden. Couple this with the prebate of anticipated taxes up to the poverty line (prebate is based on household size, not income), and households at and below the poverty line have $0 tax liability.

i don't envision enacting the FairTax as a mode of shrinking government other than reducing the size of the IRS. there will still need to be enforcement, just not as much.

[Edited on July 27, 2011 at 9:14 AM. Reason : clarity]

7/27/2011 9:13:24 AM

Sales taxes become ineffective much above 10%.

7/27/2011 9:31:59 AM

how so? what do you mean by ineffective? will it stifle consumption?

7/27/2011 10:26:38 AM

Quote :

"The FairTax is actually MORE progressive than the current income tax because of the aspect that it taxes wealth and spending, not income."

Then you don't know what "progressive" means. It is tied to income. It means as income goes down, tax rate goes down. It's kind of impossible to be more progressive than an income tax, you might not like the term progressive, but you can't just change it's meaning.

Quote :

"Lets say, Warren Buffet decides to throw a steak dinner and purchases 1000 steak dinners at $100 apiece with income from dividends and stock options. Under the current tax code, he would pay $0 taxes on the ability to throw the steak dinner."

He has to pay capital gains taxes on dividend payments, and stock options are non-transferable, so assuming he wanted to buy steaks with them, he would have to pay capital gains taxes when he cashed out those additional stocks. Both are forms of income, and both are taxed.

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"Under the FairTax, he would pay $27000 in taxes."

Actually, Warren Buffet's steak dinner is likely a BUSINESS expense, thus an INTERMEDIATE GOOD, and simply a step of value adding. Since Fairtax only taxes FINAL GOODS, Warren Buffet would pay $0 in taxes as opposed to the $35,000 dollars he would pay in short term capital gains tax (if it all is STCG, I dont really know, depends where it was invested, how much, and how long; but it is certain he would pay some level of cap gains on it).

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"i don't envision enacting the FairTax as a mode of shrinking government other than reducing the size of the IRS. there will still need to be enforcement, just not as much."

I disagree. I think the fairtax would take more enforcement. There are more than TRILLIONS of transfers of cash to goods every year, while there are far less transfers of cash from employer to employee. Based on the level of reciepts alone, fairtax would require a great deal more enforcement and policing.

7/27/2011 11:37:16 AM

Quote :

"how so? what do you mean by ineffective? will it stifle consumption?"

Not at all. Sales taxes above 10% quickly becomes unenforceable as black markets spring up to sell goods that "fell off the back of the truck" or out the back door of the store by simply under-reporting sales to the sales-tax agency.

7/27/2011 12:02:03 PM

Quote :

"Then you don't know what "progressive" means. It is tied to income. It means as income goes down, tax rate goes down. It's kind of impossible to be more progressive than an income tax, you might not like the term progressive, but you can't just change it's meaning."

If you have less income to spend, you pay less taxes. At the poverty line, with the prebate, you pay no taxes. The definition of progressive. As the prebate becomes a smaller and smaller percentage of your tax liability, your tax rate increases, always approaching 27%.

Quote :

"He has to pay capital gains taxes on dividend payments, and stock options are non-transferable, so assuming he wanted to buy steaks with them, he would have to pay capital gains taxes when he cashed out those additional stocks. Both are forms of income, and both are taxed."

Long term capital gains and dividends are taxed at a maximum of 15%, this would almost double his effective tax rate.

Quote :

"I disagree. I think the fairtax would take more enforcement. There are more than TRILLIONS of transfers of cash to goods every year, while there are far less transfers of cash from employer to employee. Based on the level of reciepts alone, fairtax would require a great deal more enforcement and policing."

Most of the consumption in the US occurs at very large outlets; Walmart, et. al. This reduces the number of "tax returns" by 75 to 80%. Rather than individuals filing the returns, the onus would then be on businesses.

What about the elimination of the payroll taxes? The economists that have done the research predict that wages will increase by the amount of the payroll taxes, therefore Americans can expect to see a 15% increase in wages.

Quote :

"Not at all. Sales taxes above 10% quickly becomes unenforceable as black markets spring up to sell goods that "fell off the back of the truck" or out the back door of the store by simply under-reporting sales to the sales-tax agency."

Secondhand goods, homes, cars, etc. will not be taxed under the FairTax. This also lends to the progressiveness of the tax. If someone can't afford new clothes, save the 27% and shop at a thrift store or a used car lot. Since new homes will be taxed under the plan, real estate values of existing homes will be adjusted up since there will be no tax levied. Under-reported sales would fall under the enforcement of the IRS. There is already a black market there, you are not going to eliminate it, but you are still increasing the base on people that have illegitimate income.

As far as trade, imports will be taxed at the same rate as domestic goods onshore, which will level the playing field, and exports will not be taxed before they reach other countries, working to balance trade deficits.

Since corporate income tax is so high, the economists on the panel yesterday, estimate a 23% tax embedded in the costs of goods produced in the US. With the implementation of the FairTax, the net cost of goods after taxes would not change based on this premise, just the place of the tax collection, versus a a VAT, where taxes are added all along the supply chain.

In my opinion, the biggest benefit to the FairTax is choice. You have a choice whether or not to pay taxes. If you don't want to pay taxes, don't buy anything that is taxed. Currently, the Federal Government garnishes each and every one of our wages. I would like to be able to choose.

[Edited on July 27, 2011 at 12:47 PM. Reason : .]

7/27/2011 12:31:11 PM

Quote :

"If you have less income to spend, you pay less taxes. At the poverty line, with the prebate, you pay no taxes. The definition of progressive."

That's not what progressive means. In fact you could be at the poverty line and be taxed at 10% under a progressive system, as long as other incomes were taxed at higher rates.

Quote :

"Long term capital gains and dividends are taxed at a maximum of 15%"

I noted that the rate I taxed him at was short term, and 15% is only at the lowest of tax brackets, which I would doubt he is in.

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"Most of the consumption in the US occurs at very large outlets"

Proof? Additionally, you are taxing each transaction, not each entity.

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"someone can't afford new clothes, save the 27% and shop at a thrift store or a used car lot."

The price of new goods drives the price of used goods. If you can't afford new clothes, the probably can't afford used clothes either.

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"Since new homes will be taxed under the plan, real estate values of existing homes will be adjusted up since there will be no tax levied."

Which would likely lead to a rise in homelessness.

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" the net cost of goods after taxes would not change based on this premise, just the place of the tax collection, versus a a VAT, where taxes are added all along the supply chain."

That leads to a VERY LARGE PROBLEM which you conviently ignored when I brought it up in the context of the Warren Buffet problem. Take, for example, my car. It is one of my largest expenses when coupled with insurace, gas, maintenence, and all the rest. Now you probably think my car is a final good, but not really being that it's primary purpose is to get me to work. It is actually part of the value-adding my employer does for the good it produces, as such my car would be a tax-free intermediate good.

7/27/2011 12:53:16 PM

Quote :

"as long as other incomes were taxed at higher rates"

You are ignoring the prebate. As more is consumed, more tax is collected. If all taxes are offset by the prebate, tax rate is 0%. As less and less are offset by the prebate, tax rates approach 27%.

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"Proof? Additionally, you are taxing each transaction, not each entity."

The number of transactions are irrelevant. There is already a mechanism to collect sales tax by the states, who would then be collecting the national tax and turning it over to the Fed.

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"The price of new goods drives the price of used goods. If you can't afford new clothes, the probably can't afford used clothes either."

Value of used goods drop dramatically once you purchase them. I have never seen anything that is used cost as much as new unless it was somehow changed or unless it was a collector's item. Bear in mind that we are getting an immediate 30% raise.

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"Which would likely lead to a rise in homelessness"

Bear in mind that we are getting an immediate 30% raise. In addition, rent would not be taxed.

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"Now you probably think my car is a final good, but not really being that it's primary purpose is to get me to work. It is actually part of the value-adding my employer does for the good it produces, as such my car would be a tax-free intermediate good."

If you own the car, it is a final good. If the company you work for provides a car for you, it is an intermediate good, but is part of your compensation. If you do not have the benefit of a company car, you will make more money than your counterpart that does. I have a feeling that we will see a trend of more companies providing company cars, but what is wrong with that?

7/27/2011 1:05:44 PM

Quote :

"You are ignoring the prebate. As more is consumed, more tax is collected. If all taxes are offset by the prebate, tax rate is 0%. As less and less are offset by the prebate, tax rates approach 27%."

You're ignoring what the meaning of "progressive taxation" is. As INCOME goes down, TAX RATES go down. It is not as SPENDING AFTER THE POVERTY LINE goes up, TAX RATES go up, that's irrelevant because it is not tied directly to income. By the DEFINITION of progressive taxation, only income taxes are truely progressive.

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"The number of transactions are irrelevant."

No they are not. If I am audited, the fed has to check every income payment I am given, one by one. If Walmart is audited, then they would need to check every payment made to walmart, which is more or less impossible. They can't just say "hey, walmart, did you pay your taxes? " they have to check, does the difference between the number of goods you say you've made match the number of goods you said you sold plus the number you say you haven't sold?" They have to look one by one.

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"There is already a mechanism to collect sales tax by the states, who would then be collecting the national tax and turning it over to the Fed."

And it cannot scale to this degree.

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"Value of used goods drop dramatically once you purchase them."

That depends. Do the value of gold bars go down significantly once you purchase them? Houses alos do not drastically drop in value after purchase, it depends on the durability of the good in question. However what is not debatable is that as the price for a new item goes up, the price for a used item will go up as well.

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"In addition, rent would not be taxed."

Sure it would, not directly, but the tax would most certainly effect it. You stated yourself that new house prices would rise. As new house prices go up, used house prices go up, being that less people would be able to afford new house thus the demand for used houses would rise, thus causing the price of used houses to rise. As the price of all housing rises, landlords who own those houses would be forced to charge more in rent, as it would cost them more to buy the house as well as they could make more money if they sold it.

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"I have a feeling that we will see a trend of more companies providing company cars, but what is wrong with that?"

It's tax evasion, and it's painfully simple. I'd wager we'll have a trend of companies providing company housing, food stipends, medical stipends, recreational stipends, all eliminating the need to pay taxes. Suddenly the tax rate for anyone employed goes down to almost zero and the government is completely unable to raise any sort of revenue. This would all happen extremely quickly, and the entire Fairtax system would go down like the Hindenburg in less than a few months, oh, but yeah, we'll get a 30% raise .

7/27/2011 2:52:37 PM