Two men entered a liquor store: Mr. Goldflab and Mr. Thinspittle.
Making typical purchases, both spent $100.00, paid a sales tax of about $8.00, and left.
Over the period of one year both men, who were married, made frequent trips to the store to purchase inebriant (did I mention they were married?) and both paid about $200.00 in sales tax that year for these purchases.
Thinspittle worked retail and barely made $20,000 a year. He ended up paying 0.1% of his earnings in sales tax to that liquor store.
Goldflab, an investment banker, earned $200,000 a year. He paid 0.01% of his earnings in sales tax for the same purchases.
In summery, both spent the same amount of money but Thinspittle paid a much larger percentage of his earnings (.1%) than Goldflab (.01%).
Therefore, if the nation went to a national sales tax and eliminated income tax, the poor would get an extra burden because they pay a greater percentage of their income in sales tax, whereas the rich would be no worse off because percentage wise they pay much less sales tax, and would be much less affected by a sales tax increase.
Therefore the FairTax would benefit the rich and penalize the poor.
However, if we keep the federal income tax, the rich would then pay a greater percentage of their income because they are in higher federal income tax brackets. For example Thinspittle, making $20,000 a year may pay $100.00 in federal income tax but Goldflab, making $200,000 a year pays $50,000 after deductions. This balances things out. With both a sales tax and an income tax, the rich and the poor pay their fair share. This balance would be plunged into chaos by going to a FairTax and the poor, and their children, would suffer.
Thus ends the only logical argument I’ve heard against the FairTax.
When I get the chance, I’ll post a rebuttal.
Grimgold
September 1, 2007
A Rational Argument Against the FairTax – Grim
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Like I said in an earlier post, the Flat Tax” is regressive.
I’m dying to see you refute basic math.
–Volt–
Comment by Volt — September 1, 2007 @ 7:55 pm
Don’t expect a miracle, Volt. I’m no smarter than you.
Comment by grimgold — September 2, 2007 @ 9:59 am
Grimmy,
You are in more trouble than I thought!
-Volt-
Comment by Volt — September 2, 2007 @ 7:52 pm
Thanks, Grimgold, for your honesty about the flat tax. I know you strongly prefer a national sales tax to a progressive income tax, but the argument against it that you’ve presented here is one that is really difficult to overcome. For me, it’s a deal-breaker. Your candor in this case is refreshing. Maybe you aren’t so bad after all!
Comment by Harry Vellum — September 2, 2007 @ 8:35 pm
Don’t get too excited. He’s about to point out that liquor is a luxury and the poor have no business wasting their money on it.
Comment by Peregrin — September 2, 2007 @ 11:59 pm
And of course how will the basic funding of government be met when there’s a recession and people don’t have money to spend? Every flat tax model out there assumes there won’t be a recession.
Comment by greyhawk — September 3, 2007 @ 6:23 am
Volt, I’m in deep trouble, you’re right. I tried using the scanner to scan in pages 85, 86 from the FairTax book. I need to hire a 12 year old to help out.
Harry, thanks for the compliment.
Peregrin, I want you to know that liquor is a luxury and the poor have no business wasting their money on it.
GH, the national sales tax is not a flat tax. But you are right in that it will tie the govt directly to the economy. However this is a good thing. They might even consider cutting pork/earmark spending, then reducing taxes as a way to stimulate the economy (gasp!).
Grimmy
Comment by grimgold — September 3, 2007 @ 9:45 am
GH, I’m wrong. the FairTax is a flat tax. But it’s not THE flat tax (a federal income tax that taxes all at the rate of some percent reguardless if the pitiful poor or the hated rich). You knew that.
Point is we need to tax people when the spend money not when they earn it, says me.
Comment by grimgold — September 3, 2007 @ 12:03 pm