h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

Hello Two Bit. I'm bringing this conversation over here cos I think it would detract from the 'Political Capital' thread, and you know how easily a thread can drift around these parts

I like the idea of being taxed on what you spend. At first sight it seems to be the fairest method of taxing - the more you spend the more tax you pay, and people with more money tend to buy more things. It could also remove a lot of the loopholes people use to avoid paying tax, although I reckon new ones would somehow be invented.

It also encourages environmental issues because some people (but by no means all) will be more inclined to look after what they have and lead less of a throwaway lifestyle.

But of course, every silver lining has a dark cloud attached to, and in this instance it's the people who currently don't pay any tax because they're income is so low. They currently pay the same amount of sales tax as those who pay income tax, but if income tax is abolished, sales tax will have to rise to make up the shortfall, no matter what anyone may say about boosts in the economy.

So once again, the poorest find themselves with the shitty end of the stick. Does Fairtax have any ways to deal with this? I did see something about a rebate on their front page, but couldn't find any other reference to it.

The rebate should address this. The government would figure up how much the essentials of life are for each individual would cost. Then a check for the tax on those amounts would be sent to each individual or family every months.

That's how we'd address the tax of the poor.

The benefits to society would probably help the poor as well as everyone else. We would become a big tax haven with a lot of money moving through our markets. We'd be a great place to invest money for corporations.

We'd also capture more taxes. For instance, illegal aliens and others in the underground economy who don't have to pay taxes now, would have to pay every time they bought something. They wouldn't get a rebate check because they're not documented. The same would be true of people who go through elaborate schemes to conceal their income. There's no point, because they'll be charged tax at the point of purchase.

One of the big things I like about it is that it will show the American people just how burdened we are with taxes. The rate will probably be somewhere in the 20%-25% range. I don't think we really appreciate how much we pay in taxes. In addition to income taxes, we pay excise taxes on alcohol, tobacco, and firearms. We pay payroll taxes for Social Security and Medicare. Our employers have to pay the same amount, so we never even realize that we're essentially paying twice the tax as shows on our pay stubs.

I like the idea. I think there are some problems. How will this jive with the social security system. That's paid through a payroll tax, which would be inconsistent with this new philosophy. I don't know how they'd resolve this with the 'private accounts' social security system that I hope we'll implement soon. I also suspect that it will depress the housing market unless home sales are exempted. Another thing to keep in mind is that this just deals with federal taxes, and it will have no direct effect on state and local taxes.

Sounds interesting

I'll have to come back later on though - got to get ready for work.

Anyone got an opion on Flat Tax

http://www.adamsmith.org/economy/index.php/publications/details/flat_tax/