Fair Tax. Scrapping the Income Tax?

[MetroMan]

During the last Republican Debate, candidate Huckabee got a huge cheer from the crowd when he said his first act as President would be to scrap the IRS.

I've looked into this and it actually makes lots of sense. A fair and uncomplicated tax. Income tax would would be scrapped. Tax would be moved away from income and towards purchases.

Instead of paying through complicated tiered schemes, a 30% tax would be added to all purchases. Poor people buy less, they pay less. The rich spend a lot more, so they also pay more. No more annual headaches filling out complicated forms. A ton of bureaucracy eliminated (and money saved).

What do you think? Should we consider this in Canada?

 

[waterloowarrior]

I think The poor would actually pay more tax, because they pay little or no income tax right now and spend proportionately more of their income on things like sales tax than richer people. Plus a bunch of the sales tax exemptions might get eliminated as well if this was the main form of taxation.

http://www.thestar.com/News/Canada/article/274517

And the rich would probably pay less tax....
Let's say someone makes $1 million a year
Previously they lost (for example) 40% or $400,000 to taxes
Now they lose 30% of what they spend.... even if they spent the entire $1 million, they'd only pay $300,000 in taxes
If they spent, for example, 60% of what they made, they'd pay only $180,000 in taxes

How does the government make up for the loss of 10s of thousands of dollars from that person?


Also, wouldn't paying under the table/not reporting things get a lot worse and violators be a lot harder to track down?

 

[allabootmatt]

That's the idea. The FairTax scheme massively benefits the rich, and screws the poor. Hence its support among the GOP presidential candidates, and groups like Americans for Tax Reform.

That said, the American tax code is far too complicated for its own good. But no need to throw the baby out with the bathwater.

 

[unimaginative2]

Also, what if they made all that money in Canada and spent it in Europe or the States? Then they could potentially pay virtually no tax. This idea is extremely regressive, and punishes the poor far more than the rich. Much better to re-jig our current tax system. Higher VAT is probably good, but we still need PIT, and ideally with fewer loopholes.

 

[rbt]

What if they made all that money in Canada and spent it in Europe or the States?

It still works with goods if there are strong controls at the border but services would be impossible to deal with in that way.

I'm for a 25% VAT buried into the price of goods and moving the lowest bracket to 5% while retaining current tax rates for the remaining brackets.

 

[TrickyRicky]

"The FairTax scheme massively benefits the rich, and screws the poor."

You mean it taxes the rich less thereby forcing them to contribute less to the state administrated social programs used by the poor?

I'm all for a strongly progressive tax system but I think it has become too tempting for governments of all political persuasions to make endless incentives and credits because they can't resist social engineering to make it look like they are doing something. In my opinion they should throw out most of the credits and loopholes and complexity and stick roughly to a simple one page form with progressive income level threshholds.

 

[unimaginative2]

"The FairTax scheme massively benefits the rich, and screws the poor."

You mean it taxes the rich less thereby forcing them to contribute less to the state administrated social programs used by the poor?

No. Never mind what the money's spent on, this system massively favours the rich. Poor people are far more likely to spend most or all of their income on consumption. They're also very unlikely to spend any of their income outside the country. The wealthy, on the other hand, take many vacations and save a large proportion of their income. Under a purely consumption tax system, none of that would be taxed. As a percentage of income, the tax hit on the poor would be far, far higher than on the rich.

 

[Hydrogen]

This is not a new idea.

 

[Jdot]

Slightly off topic....
If we could only get listed prices to INCLUDE the sales tax, I would be a happy boy. I know this idea has been looked into before. I just dont see why we havent implemented it. I like paying $30 for something that is advertised at $30.

 

[unimaginative2]

Absolutely! Mulroney decided that it was immoral to have a "hidden" tax, but I don't think anybody's going to forget that the GST exists. It's right there on your receipt anyway. It would make life so much easier for people if they didn't have to guess at what the final price will be. It would even save the government money! Think of all the pennies that would no longer need to be minted.

 

[JasonParis]

I believe all of Europe (including the U.K.) has taxes included in the ticketed price. It's much easier.

 

[wonderboy416]

Slightly off topic....
If we could only get listed prices to INCLUDE the sales tax, I would be a happy boy. I know this idea has been looked into before. I just dont see why we havent implemented it. I like paying $30 for something that is advertised at $30.

You'd probably be spending more this way as retailers would be more likely to "round up" things to the nearest $.25, $.50, $75 or dollar.

Dollar stores would be dealt a bit of a blow.

 

[afransen]

They're just as likely to round down. Retailers like to advertise nice round numbers.

$999+tax is worse than $1099 taxes in...