Friday, December 21, 2007

Fair Tax Follow-Up

After writing these posts about the "Fair Tax," which seems mostly like yet another way to repackage a truly stunning tax cut for the very richest, I sent the following question to the "Ask the Expert" section at the Fair Tax website:
------------
You call the Fair Tax "progressive" because the rich would pay more as a percentage of spending. But the rich can save more (which would not be taxed), so wouldn't they likely pay a lower percentage of their income than the middle class?
------------
I sent this in on December 2. No reply yet. Hmmmm . . .

3 comments:

Anonymous said...

I'm in favor of the Fair Tax because it take the government out of my life, as compaired to the current tax system.
The rich will buy more ( New )product and more expensive product, therefore pay their fair share of taxes, on the other hand the poor buy less product and used product therefore they would pay their fair share of taxes.
(Example)
Rich people buy new cars and more expensive cars (Jaguar) than poor people. Poor people buy used cars (Ford Chevy) therefore pay no taxes on the car.

Dutchman3 said...

Anon,

True, the less fortunate folks won't be paying any tax directly to the federal government when they buy a "used" car that the tax has already been paid on. But, let me suggest that they will not be saving any more money by buying used than they would today. It's called the "embedded cost of the Fairtax". You see, when buying used, the price will include a portion of the original sales tax . Surely you don't expect the original buyer to take the usual 20% (or whatever) hit when driving off the lot and lose the 30% sales tax amount in addition?

If you just don't want to see any tax money go to the federal government, buy used. But don't expect an additional sales tax windfall. It's in there!!!

Jim Bennett said...

Comment to Dutchman 3
Yes, the original Fair Tax will be embedded in the cost of the car new, unless the car was already used at the dawn of the Fair Tax. However if the car was held as inventory at the dawn of the Fair Tax, the dealer will receive an inventory credit to offset that price increase. If the car is produced after the dawn of the Fair Tax, its production costs will drop, thus offsetting partially the Fair Tax.

~Jim Bennett
Summit, NJ