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I am in favor of replacing all income tax with a consumption tax- one that is really easy to calculate, like the Fair Tax. The Fair Tax may have some kinks tha

I am in favor of replacing all income tax with a consumption tax- one that is really easy to calculate, like the Fair Tax. The Fair Tax may have some kinks that need to be ironed out, but the concept is really solid.

andrewflnr 13y ago
My understanding is that consumption taxes (we're talking about things like sales tax right?) disproportionately affect poorer people, who spend more of their income, as opposed to rich people who tend to invest more. I'm not 100% sure of the science, but it makes sense. I'd rather just see a simple income tax.
- ensignavenger 13y ago
  Yes, typically a sales (consumption tax) does effect to poor more than the rich, because the poor tend to consume 100% of their earnings to survive, whereas the rich only consume a very small portion of their overall earnings. The Fair Tax attempts to address this via 2 mechanisms- first, it does not tax used goods. Poorer people are more likely to buy used goods than new ones. Second, the Prebate. Under the Fair Tax, the a prebate is given, based on the Federal Poverty Line, and the amount of tax that would be paid if a family spent up to the federal poverty line. Families that are spending less than the Federal Poverty line actually would pay negative taxes, and those spending more, would progressively be taxed more. As written, some analysts of the Fair Tax have criticized it for putting the squeeze on the middle class- because many spend everything/most of what they earn, but earn well over the poverty line. Whereas the wealthy still consume very little of their overall income, and the poorest of the poor pay negative taxes. I would tweak the prebate a little from this model, requiring the legislature to specify the prebate level each year as a part of their budget. This means they can't hide behind tweaking the way the poverty line is calculated- they have to make the decision directly, and be held accountable for it. I would also require the legislature to set the actual tax rate annually or at some other regular interval.

andrewflnr 13y ago

My understanding is that consumption taxes (we're talking about things like sales tax right?) disproportionately affect poorer people, who spend more of their income, as opposed to rich people who tend to invest more. I'm not 100% sure of the science, but it makes sense. I'd rather just see a simple income tax.

ensignavenger 13y ago
Yes, typically a sales (consumption tax) does effect to poor more than the rich, because the poor tend to consume 100% of their earnings to survive, whereas the rich only consume a very small portion of their overall earnings. The Fair Tax attempts to address this via 2 mechanisms- first, it does not tax used goods. Poorer people are more likely to buy used goods than new ones. Second, the Prebate. Under the Fair Tax, the a prebate is given, based on the Federal Poverty Line, and the amount of tax that would be paid if a family spent up to the federal poverty line. Families that are spending less than the Federal Poverty line actually would pay negative taxes, and those spending more, would progressively be taxed more. As written, some analysts of the Fair Tax have criticized it for putting the squeeze on the middle class- because many spend everything/most of what they earn, but earn well over the poverty line. Whereas the wealthy still consume very little of their overall income, and the poorest of the poor pay negative taxes. I would tweak the prebate a little from this model, requiring the legislature to specify the prebate level each year as a part of their budget. This means they can't hide behind tweaking the way the poverty line is calculated- they have to make the decision directly, and be held accountable for it. I would also require the legislature to set the actual tax rate annually or at some other regular interval.