FairTax: Good for GLBT couples?
One of the features I liked best about Queercents was the end of the year round-up they did for all of their bloggers, which allowed me to read posts I might not have read before throughout the year. Through that method, I found this post about FairTax, which is basically a new tax proposition being advocated by at least a couple of presidential candidates (Huckabee, Gravel).
What is FairTax? Basically, it’s a flat tax, that replaces all current tax codes with a 23% flat tax. The post explains that
It is estimated that the embedded costs of taxes in what we buy today is approximately 22%. Some of the goals of the FairTax act are to eliminate these embedded taxes, as well as the income tax, the estate tax, the gift tax, etc… and replace it with a national sales tax of approximately 23%. Changing the need of the IRS as a governing authority over the 300 million American taxpayers and reducing their authority to the 20 million American businesses. Fewer entities would result in lower Fraud and improved control.
In general, I believe in progressive rather than regressive taxation, since there’s a floor to how many items someone can choose to buy (meaning that the poor, many of whom pay no taxes at all in the status quo, would have to pay more in the world of a flat tax), but I thought that the GLBT implications of this proposal were interesting and deserving of consideration. These potential benefits were as follows:
LGBT Issues:
Filing Jointly - There would be no such thing as filing in FairTax, therefore equalizing this problem in our current tax code.
Taxing Benefits - My partner receives his health benefits from my employer, but unlike my straight married colleagues, I must tax on his benefits. Does this sound fair? FairTax removes this inequality.
Estate/Inheritance Tax - Today, if a same sex couple own assets together and one of the couple dies, the estate has to pay tax on these assets before it can be transferred to the other. Married couples do not have to pay as there is a right of transfer of their jointly owned assets. By removing the estate/inheritance tax, this situation goes away.
Gift Tax - Many same sex couples own a house together. In a situation where one of the members of the household makes the house payment, the IRS can look at the other member as receiving a “gift” of equity and could be forced to pay tax on that gift should they be audited. Married couples do not face this challenge as assets are jointly owned. Gay couples are not legally allowed to pass money between them without resulting in gift tax that they should report to the IRS. Think about retirement age, or is one of them got ill and had large medical bills. FairTax eliminates this unfair taxation.
What do you think? Is FairTax a good idea for people in general and GLBT folks in particular?
GLBT, FairTax, taxes
February 14th, 2008 at 1:04 pm
Actually, Fairtax does have some great points — if it worked. How wonderful it would be to not have an IRS!
Sadly Fairtax book isn’t about taxes — its about snake oil, magic beans, and BS. BS for ccouples, BS for everyone.
Fairtax might have to be HIGHER than 46%. In fact, one study by a tax group assigned by the presidential commission on taxes, said a sales tax would have to be 57%.
And it might have to be HIGHER than that.
Here is why.
Do you know that fairtax taxes the federal government, to pay for the federal government?
This isn’t demogoging — Neal Boortz wrote “The federal government itself will become a major taxpayer” (Page 148 in his Fair Tax Book,)
The federal government will be a major tax payer – to itself?
Right then, people should have said “Say what?
This is one of the most astonishing fallacies, but its not even the biggest. But lets look at it, first.
Isn’t that a bit like me, pretending I can pay myself 10,000 to cut my own grass? I can write the check, I can even deposit the check. And I can do this every day.
But at the end of the month, I don’t have 300,000 dollars.
Fair tax advoates want to claim the government “will become a major taxpayer” because on PAPER – Fairtax has to claim revenue streams that will form a lake of 2.3 trillion.
Fairtax can’t make a lake that large – can’t collect that many taxes, even on paper. UNLESS _- it says it can tax itself.
So this error (deception?) alone, means the fairtax rate has to be more like 35% — not 23% — to collect 2.3 trillion dollars.
Are there any other fallacies?
Yes.
Fairtax has another major fallacy. It is correct – PEOPLE pay all taxes. And wow, will people have to pay this.
Fairtax only works IF it can collect 460 billion in taxes — from people who get health care.
This isn’t demagoguery, Fairtax really puts a large sales tax – at least 35% — on all medical cost. From everyone – on everything. From childbirth, to cleaning your teeth, to routine check ups, to ER visit, to second opinions, lab work, EVERYTHING.
People who get heart bypass surgery, cancer surgery — people who are in nursing home. These are the people who suddenly will get BY FAR THE LARGEST TAXES IN AMERICA.
In effect, Fairtax shifts the tax burden to two main groups – the government (which we have shown is really impossible) and to people getting health care.
Families fighting leukemia and other expensive illnesses will get incredibly hard by the “fairtax”. One family, who has a child with leukemia — could get a 40,000 SALES tax.
One nursing home patient, who gets by on her social security — would get a sales tax of 25,000 a year — plus more tax for any other medical costs.
Is this demagoguery? Or will health care really be taxed?
Health care will be taxed.
One cancer patient, with surgery, chemo, and radiation, could have 50,000 in “sales taxes”.
So you will have the absurdity of a person who is actually taxed MORE sales tax than they have income. A cancer patient could have 300,000 in medical cost – and only make their pension. But in Fairtax there are no exemptions – none – so the cancer patient would get a bill for 90,000 in sales taxes, even if their income is 25,000.
This is math. Its not demagoguery. Its what would really happen if someone making 25K a year got cancer, and had 300,000 in medical cost.
What will happen when millions of people suddenly get huge taxes on their health care? On their cancer surgery? On their chemo? On their child’s leukemia?
They will scream like bloody murder – that’s what.
Therefore, one way or another — these patients will get exemptions, either defacto exemptions — by not paying it. Or dejure exemptions - by getting an official exemption.
EIther way, the Fairtax can’t possibly collect 460 billion-dollars from these folks.
Most likely, the outcry from even attempting to tax an 80 year old stroke victim in a nursing home, would result in Congress exempting all health care cost from the “fair” tax.
Any OTHER groups that fairtax plans to tax – but wont be able to?
Yes – renters.
Renters will get the fairtax.
Fair tax has to get 150 billion in taxes — from people as a tax on their rent.
That’s not demogogury — thats the fact. Fairtax taxes rent. All rent. People who rent will have to pay it.
Now supposedly Fairtax lowers cost so much, that most prices will drop so much, the added fairtax “will be a wash” as Neal Boortz claims.
According to the fuzzy math of Fairtax, your rent can go down 22%, because the landord saves so much.
Really?
By far the biggest expense on apartment complexes are the payments they make to banks. Less that 1% of an apartment complex expenses is FICA- for the employees. That’s the biggest “embedded tax” that can be passed on, if it were removed. And its less than 1%.
How can an apartment complex cut its price 22%, when the biggest savings they would get, is less than 1%?
Our family has a business and we looked over the numbers. We save less than 2%, if Fairtax were enacted. Our employees also save — they save more in fact, as a group.
But they save that, we don’t. They wouldn’t pay income tax or their FICA. Great! But we don’t save that. We can’t pass along what they save.
Thats not demagoguery . Thats simple facts.
To cut our prices even 6% — not 22 — our employees would have to give us ALL their income tax and FICA. To cut our prices 22%, our employees would have to work FOR FREE.
So Fairtax has a lot of problems. Not the least of which is math.
Sure, it sounds great, as long as you don’t look real close.
Imagine if you wake up one day, and the fairtax is passed. Suppose you rent a nice place near the ocean, for 2,000 a month, and you just had a knee replacement.
You open your mail, and get 400 dollars prebate. And you get your entire paycheck in the mail, since you are off for the surgery. So you are happy, you will be ahead 1500 a month!
Then you open your rent statement.
Your 2000 a month rent went up to 2800. Wow, Thats 800 gone, of that 1500.
Then you open your utility bill. You were paying 300 month, but that went up to 500 — fairtax 200.
Then you open up your medical statement. Hope you are sitting down. Your 30,000 knee replacement is now 40,000 — 10K taxes.
And you get your car insurance — . It was 200 a month, but now its 300 month, fairtax added.
And you get your cable bill, your phone bill, your health club bill. Fairtax added.
You haven’t even gone outside to buy gas, or food, or a restaurant. Yet you have 14,000 in taxes. For one MONTH. Hopefully you won’t have other big medical expenses.
So — some people will get CLOBBERED with this tax, absolutely clobbered. If you rent, if you have medical cost, if you pay insurance premiums.
There is a notion in defense of Fairtax, that you can buy USED products, so dont worry. Just buy used cars, and used homes.
Fine - but you can’t get used rent. You can’t get used cancer chemo. You can’t get used nursing home care. And if everyone got used everything – there goes the economy.
That’s not demagogueing. That’s simply fair tax, how it will work, if its passed.
If its passed– those people who are clobbered — nursing home patients, cancer patients, renters — will scream bloody murder, and get exemptions.
Im sorry, Fairtax can’t work.
April 12th, 2008 at 2:30 am
You have the gall to talk about fuzzy math? How is $300 with an additional 35% tax added on equal to $500? 2000 becomes 2800? 200 becomes 300? Maybe you should learn to do simple math before trying to play tax analyst.
As for your assertion that people with huge medical bills will be hit hard, you’re sort of right. As with any consumption tax, anyone who spends more than they make will be paying more taxes than under an income tax.
Of course, the problem of health costs for individuals will be gone very soon. All three of the major presidential candidates support either universal health care or (in McCain’s case) tax credits which would completely cover health insurance premiums. These services could still be taxed, it would just be the American populace that bears the burden rather than the individual.
By your own calculations (even with your poor math skills), your example person ends up paying about the same amount as they do now. Except they don’t have to pay a tax preparer or spends hours filing their taxes themselves.
The FairTax also cuts down on tax evasion because the IRS (or whatever they would be called under the FairTax) would not have to monitor the activities of individuals. They would be able to spend all their time and resources on monitoring businesses instead. Also, we would be able to reduce their $11 billion per year budget, helping save this country from going even further into debt.
The only people that the FairTax hits hard are the people involved in the tax industry: tax preparers, attorneys, the IRS, and lobbyists who fight for corporate interests.