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Tags consumption tax , irs

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Old 10th January 2023, 10:07 AM   #1
Ranb
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Fair Tax Act

House Republicans to vote on bill abolishing IRS, eliminating income tax

https://www.foxnews.com/politics/hou...ing-income-tax

Quote:
Republicans in the House of Representatives will vote on a bill that would abolish the Internal Revenue Service (IRS), eliminate the national income tax, and replace it with a national consumption tax.

Fox News Digital has learned that the House will be voting on Georgia Republican Rep. Buddy Carter's reintroduced Fair Tax Act that aims to reel in the IRS and remove the national income tax, as well as other taxes, and replace them with a single consumption tax.

The vote on the bill was made as part of the deal between House Speaker Kevin McCarthy, R-Calif., and members of the House Freedom Caucus and was pushed forward in his quest for the gavel.
All I could find online was a 2021 bill from the 117th Congress.

Summary: H.R.25 — 117th Congress (2021-2022)
https://www.congress.gov/bill/117th-...ll/25?r=96&s=1

Quote:

This bill imposes a national sales tax on the use or consumption in the United States of taxable property or services in lieu of the current income taxes, payroll taxes, and estate and gift taxes. The rate of the sales tax will be 23% in 2023, with adjustments to the rate in subsequent years. There are exemptions from the tax for used and intangible property; for property or services purchased for business, export, or investment purposes; and for state government functions.

Under the bill, family members who are lawful U.S. residents receive a monthly sales tax rebate (Family Consumption Allowance) based upon criteria related to family size and poverty guidelines.

The states have the responsibility for administering, collecting, and remitting the sales tax to the Treasury.

Tax revenues are to be allocated among (1) the general revenue, (2) the old-age and survivors insurance trust fund, (3) the disability insurance trust fund, (4) the hospital insurance trust fund, and (5) the federal supplementary medical insurance trust fund.

No funding is authorized for the operations of the Internal Revenue Service after FY2025.

Finally, the bill terminates the national sales tax if the Sixteenth Amendment to the Constitution (authorizing an income tax) is not repealed within seven years after the enactment of this bill.
https://en.wikipedia.org/wiki/Consum...onsumption_tax

Quote:
Consumption taxes are often criticised to be regressive, meaning the average tax rate decreases with increasing income. However, it depends on income measurement. If income is measured annually or monthly, consumption taxes are truly regressive, as higher-income individuals can afford to save more, thus reducing the tax base for consumption tax more significantly than lower-income individuals. But if lifetime income is used to measure the ability to pay, the burden tends to be more equitable as over a lifetime, lifetime consumption is a good approximation of lifetime income.

What are the odds that the GOP will make sure this benefits the rich more than it does the lower and middle class?
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Old 10th January 2023, 10:21 AM   #2
The Great Zaganza
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imagine how much more tax revenue we would have without the IRS!
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Old 10th January 2023, 10:24 AM   #3
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Won't pass the Senate of course, but in the event that the House does pass this bill, it raises the specter of what would happen if they controlled the Senate as well.
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Old 10th January 2023, 10:49 AM   #4
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Originally Posted by Ranb View Post


What are the odds that the GOP will make sure this benefits the rich more than it does the lower and middle class?
It does on its face.

It totally ignores the idea that tax policy aimed at eliminating massive accumulation of wealth isn't as much about revenue as it is preventing massive accumulation of wealth in and of itself as a danger to society. It eliminates the estate tax and removes any apparatus to tax the ultra-wealthy.

It will also still require an IRS to function. The provision about paying people based on poverty level and income. There will be the same whack-a-mole loophole cops and robbers game we have now. They will make things exempt for policy reasons and rich people and corporations will still pay lawyers a ton of money to dream up ways to pervert them.

That's before we get to the idea that a dollar is not always worth a dollar. That taxing a poor person and a rich person at the same rate is not equitable because from the perspective of the person every extra dollar means more to the poor person.
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Old 10th January 2023, 10:53 AM   #5
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All for show.
Kind of like when they voted to eliminate Obamacare over and over, except when they controlled both houses and the Presidency.
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Old 10th January 2023, 11:06 AM   #6
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Wouldn't this type of a swap in taxation focus cause a massive inflation spike? I can see some individual rich guys wanting this but in general this would slaughter the economy and consumer market businesses or am I just missing the magical economic genius in this?
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Old 10th January 2023, 11:10 AM   #7
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Ssshhh, that's too much thinking for Republican voters.
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Old 10th January 2023, 11:27 AM   #8
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Consumption taxes are really quite common around the world, including the capitalist dystopias of Europe.

This will not pass but it is not obviously a bad idea.

Clearly a few democratic voters aren't thinking beyond, GOP bad.
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Old 10th January 2023, 11:31 AM   #9
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Wait....we are still basing the tax rebate off of income? How is that adjudicated?
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Old 10th January 2023, 11:34 AM   #10
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Originally Posted by ahhell View Post
Consumption taxes are really quite common around the world, including the capitalist dystopias of Europe.

This will not pass but it is not obviously a bad idea.

Clearly a few democratic voters aren't thinking beyond, GOP bad.
Eh, it's worth discussion (and I think it has been discussed quite a bit on this forum), but it is a major change coming out of nowhere (I am not aware of any GOPer campaigning on it), and will almost certainly heavily favor the wealthy at a time when it is pretty clear the wealthy already have too much money.
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Old 10th January 2023, 11:44 AM   #11
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Originally Posted by ahhell View Post
Consumption taxes are really quite common around the world, including the capitalist dystopias of Europe.

This will not pass but it is not obviously a bad idea.

Clearly a few democratic voters aren't thinking beyond, GOP bad.
Most states already have a sales tax. It is common here already.

I don't think assuming that the merits of a federal consumption tax would be besides the point when the people proposing it have such a bad faith history of wanting to do anything to assist the wealthy and starve the government of funding.

Eliminating the IRS and the estate tax is the tell here. There is no reason to do that and it's lunacy to assume that the feds wouldn't need an entity to oversee tax.
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Old 10th January 2023, 11:50 AM   #12
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Originally Posted by ahhell View Post
Consumption taxes are really quite common around the world, including the capitalist dystopias of Europe.

This will not pass but it is not obviously a bad idea.

Clearly a few democratic voters aren't thinking beyond, GOP bad.
And they all have income taxes as well. Imagine the UK/EU countries being 100% funded via VAT. What rate would be required?
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Old 10th January 2023, 11:51 AM   #13
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In the UK, this is VAT. In Australia, it is GST. Other names/acronyms in other countries. In the USA, you pay federal, state and even local sales taxes already. So this legislation is boosting these taxes while eliminating income and payroll taxes? Do they understand stagflation?
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Old 10th January 2023, 11:53 AM   #14
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Originally Posted by Norman Alexander View Post
In the UK, this is VAT. In Australia, it is GST. Other names/acronyms in other countries. In the USA, you pay federal, state and even local sales taxes already. So this legislation is boosting these taxes while eliminating income and payroll taxes? Do they understand stagflation?
No, their understanding of economics is at a grade school level if that.
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Old 10th January 2023, 11:56 AM   #15
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Originally Posted by Trebuchet View Post
All for show.
Pretty much. One of the disadvantages of a political system that enshrines gridlock is that it encourages this kind of posturing.
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Old 10th January 2023, 12:09 PM   #16
Norman Alexander
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Originally Posted by lobosrul5 View Post
No, their understanding of economics is at a grade school level if that.
Mine is less than that. I'm not an economist's bootlace. But even I can see that boosting sales taxes greatly will lead to hoarding and the stalling of the economy.

It will also lead to a huge increase in tax-avoidance schemes such as the non-monetary barter economy. A variant will be conducting online sales in non-taxable regimes (i.e. outside the USA). Of course, legislation and a government tax police force will need to be formed to combat that and collect the revenue due...
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Old 10th January 2023, 12:41 PM   #17
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A PROGRESSIVE consumption tax would be a good idea - but that's not the plan here.
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Old 10th January 2023, 12:49 PM   #18
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Originally Posted by Norman Alexander View Post
Mine is less than that. I'm not an economist's bootlace. But even I can see that boosting sales taxes greatly will lead to hoarding and the stalling of the economy.

It will also lead to a huge increase in tax-avoidance schemes such as the non-monetary barter economy. A variant will be conducting online sales in non-taxable regimes (i.e. outside the USA). Of course, legislation and a government tax police force will need to be formed to combat that and collect the revenue due...
You would think they'd chase down sales outside of the country if you bring a product back into the US but with no IRS or equivalent, I guess not. That states are supposed to enforce it... what would their motivation be for that?

Someone very wealthy would absolutely love this system. Buy rental properties, no tax on gains... bet they still let them deduct mortgage interest. After a few years, quit your job and move somewhere with a low usage tax.

ETA: I went to their website and read up on it... the only, and I mean the only thing good that I can kind of see is, right now the federal gov gets nothing from visitors coming to the USA. Other countries get VAT money paid by tourists... of course our states and localities do but its not spread around evenly.

ETA2: other parts... just how ******* dumb is this :"Everyone Pays Their Fair Share

Tax evasion and the underground economy cost each taxpayer an additional $2,500 every year! But by taxing new products and services consumed, the FairTax puts everyone in the country at the same level at the cash register. Further, only legal residents are eligible for the prebate. Learn more ."

Right, I'm sure everyone conducting illicit transactions will pay their 23%!

Last edited by lobosrul5; 10th January 2023 at 12:57 PM.
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Old 10th January 2023, 12:58 PM   #19
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This will never get past the Senate and Biden's desk, but I'm sure there's millions of ********* out there who are all for this but will be among the people hurt by it. The GQP is the party of "teh stoopid."
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Old 10th January 2023, 01:04 PM   #20
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Originally Posted by Trebuchet View Post
All for show.
Kind of like when they voted to eliminate Obamacare over and over, except when they controlled both houses and the Presidency.
I suspect it won't even pass the House.

This is ominous:
Quote:
... part of deal between Speaker McCarthy and House Freedom Caucus

Last edited by Skeptic Ginger; 10th January 2023 at 01:06 PM.
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Old 10th January 2023, 01:39 PM   #21
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Originally Posted by Norman Alexander View Post
In the UK, this is VAT. In Australia, it is GST. Other names/acronyms in other countries. In the USA, you pay federal, state and even local sales taxes already. So this legislation is boosting these taxes while eliminating income and payroll taxes? Do they understand stagflation?
Agreed. These taxes have a couple of known problems.

1. They are pro cyclical, i.e. they make booms worse and busts worse, one could speculate that they favour stock market speculators who are able to make profits in both directions...

2. They are retrogressive, i.e. a poor person 'spends' a much greater proportion of their income and therefore has a higher effective tax rate.
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Old 10th January 2023, 01:41 PM   #22
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It's just prepping the debt ceiling Christmas list.

This won't be on it as it's just too much too soon, but they need a lot of wacky stuff to not ask for as well.
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Old 10th January 2023, 01:51 PM   #23
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We cannot escape the reality that if you tax something, an economy produces less of it, whether it is income or consumption (on the margin).

For example, if my wife was to look for a job, it would have to be entry level. But our married tax bracket makes the marginal increase of income significantly lower than a single individual or a married couple where the other partner also has an equivalent entry level pay. There are aeguments to not tax income.
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Old 10th January 2023, 02:04 PM   #24
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Originally Posted by BobTheCoward View Post
We cannot escape the reality that if you tax something, an economy produces less of it, whether it is income or consumption (on the margin).

For example, if my wife was to look for a job, it would have to be entry level. But our married tax bracket makes the marginal increase of income significantly lower than a single individual or a married couple where the other partner also has an equivalent entry level pay. There are aeguments to not tax income.
Does this mean that their repealing the so called "death tax" will cause a massive die off?

Sounds reckless. Better make the estate tax 200% of the estate with no exception and we will all live forever.
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Old 10th January 2023, 02:05 PM   #25
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Originally Posted by Suddenly View Post
Does this mean that their repealing the so called "death tax" will cause a massive die off?

Sounds reckless. Better make the estate tax 200% of the estate with no exception and we will all live forever.
On the margin, it would have an effect.
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Old 10th January 2023, 02:07 PM   #26
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Originally Posted by Ranb View Post
House Republicans to vote on bill abolishing IRS, eliminating income tax

https://www.foxnews.com/politics/hou...ing-income-tax
I just heard the CBO scored this as losing 114 billion in revenue to the government.
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Old 10th January 2023, 02:12 PM   #27
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Originally Posted by ahhell View Post
Consumption taxes are really quite common around the world, including the capitalist dystopias of Europe.
yes, forms of consumption taxes exist, to varying degrees of success.

Quote:
This will not pass but it is not obviously a bad idea.

Clearly a few democratic voters aren't thinking beyond, GOP bad.
This wasn't a serious submission. Does the QGP deserve any serious consideration as legislators? What about the last 10+ years makes you think they earned that?
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Old 10th January 2023, 02:33 PM   #28
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I don't even think it will pass the House.
Fact is, McCarthy gave promises to individual members for their votes, knowing that on the floor they would lose.
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Old 10th January 2023, 02:34 PM   #29
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Originally Posted by ZiprHead View Post
I just heard the CBO scored this as losing 114 billion in revenue to the government.
No, that's the amount they lose by "saving" money not hiring IRS agents to investigate rich people.

This consumption tax stuff is kind of out of left field, not something they have been pushing for months like the IRS security secret police force nonsense.
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Old 10th January 2023, 02:42 PM   #30
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Originally Posted by Random View Post
No, that's the amount they lose by "saving" money not hiring IRS agents to investigate rich people.

This consumption tax stuff is kind of out of left field, not something they have been pushing for months like the IRS security secret police force nonsense.
If the 23% really was on ALL personal spending in the United States, and spending did not go down as a result it would still be a net loss in revenue.

2021: US Federal revenue was 4.03 trillion.
2021: Personal consumption spending was 15.9 trillion, so 3.657 trillion at 23%.

And thats if somehow no one changed their spending habits which is unlikely.
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Old 10th January 2023, 02:45 PM   #31
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Originally Posted by Random View Post
No, that's the amount they lose by "saving" money not hiring IRS agents to investigate rich people.

This consumption tax stuff is kind of out of left field, not something they have been pushing for months like the IRS security secret police force nonsense.
Oh its been around for sometime:

https://en.wikipedia.org/wiki/FairTax

FairTax was a single rate tax proposal in 2005, 2008 and 2009 in the United States that includes complete dismantling of the Internal Revenue Service.[1] The proposal would eliminate all federal income taxes (including the alternative minimum tax, corporate income taxes, and capital gains taxes), payroll taxes (including Social Security and Medicare taxes), gift taxes, and estate taxes, replacing them with a single consumption tax on retail sales.
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Old 10th January 2023, 02:48 PM   #32
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We really need this bill to offset the wealthy from the oppression that they endure simply for having more than everyone else.
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Old 10th January 2023, 02:50 PM   #33
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Originally Posted by lobosrul5 View Post
Oh its been around for sometime:

https://en.wikipedia.org/wiki/FairTax

FairTax was a single rate tax proposal in 2005, 2008 and 2009 in the United States that includes complete dismantling of the Internal Revenue Service.[1] The proposal would eliminate all federal income taxes (including the alternative minimum tax, corporate income taxes, and capital gains taxes), payroll taxes (including Social Security and Medicare taxes), gift taxes, and estate taxes, replacing them with a single consumption tax on retail sales.
Yeah, the idea has been around for a while, but there hasn't really been any indication that this was something they would push this cycle.
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Old 10th January 2023, 03:43 PM   #34
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Originally Posted by ZiprHead View Post
I just heard the CBO scored this as losing 114 billion in revenue to the government.
And of course the GOP legislators who can't do the math with very large numbers deny there will be a revenue shortfall. After all, look at all those zeros in the number of dollars the IRS collects.
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Old 10th January 2023, 03:44 PM   #35
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Originally Posted by Random View Post
Yeah, the idea has been around for a while, but there hasn't really been any indication that this was something they would push this cycle.
As I siad, McCarthy probably promised a vote to some congressman in return for his support.
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Old 10th January 2023, 03:45 PM   #36
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We are going to see a lot of crackpot bill sin this house, which even most in the GOP will find too much.
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Old 10th January 2023, 03:46 PM   #37
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Originally Posted by lobosrul5 View Post
Oh its been around for sometime:

https://en.wikipedia.org/wiki/FairTax

FairTax was a single rate tax proposal in 2005, 2008 and 2009 in the United States that includes complete dismantling of the Internal Revenue Service.[1] The proposal would eliminate all federal income taxes (including the alternative minimum tax, corporate income taxes, and capital gains taxes), payroll taxes (including Social Security and Medicare taxes), gift taxes, and estate taxes, replacing them with a single consumption tax on retail sales.
Repeal and replace ... yep. The ACA repeal caught them off guard but enough time has passed they can start a new mantra.
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Old 11th January 2023, 08:07 AM   #38
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Originally Posted by lobosrul5 View Post
If the 23% really was on ALL personal spending in the United States, and spending did not go down as a result it would still be a net loss in revenue.

2021: US Federal revenue was 4.03 trillion.
2021: Personal consumption spending was 15.9 trillion, so 3.657 trillion at 23%.

And thats if somehow no one changed their spending habits which is unlikely.
Spending habits are going to change. This would be effectively a very large raise for people with higher than average income so they might spend more, etc. However...

Forecasting this is totally meaningless because 23% is too high stakes and it will be loopholed into oblivion by lawyers and lobbyists. The only forecast is that this will collapse the federal government.

Getting rid of payroll tax and replacing it with a national more like 3% sales tax exempting food and clothing to earmarked for social security / medicare would be worth looking at as that would be redistributive.
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Old 11th January 2023, 11:31 AM   #39
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Originally Posted by Donal View Post
yes, forms of consumption taxes exist, to varying degrees of success.



This wasn't a serious submission. Does the QGP deserve any serious consideration as legislators? What about the last 10+ years makes you think they earned that?
Not much but I'd rather talk about the merits of the actual policy that just call people names. Not much about name calling convinces me that there's anything really wrong with this.

As to whether it was telegraphed that the fair tax would be a thing prior to now. That is almost certainly a result of the compromises McCarthy made. For most of the last 10 years, individual members haven't really advanced legislation. Its basically bee a top down thing. The Speaker's staff crafted legislation then springs it on the house and gives them a day at most to decide to vote for it.

This sort of goes back to whether I think the GOP legislators are serious, the never Kevin crowd mostly aren't, but they did have some valid points and demands. For instance, the house gets 72 hours to read a bill before they vote on it.

Last edited by ahhell; 11th January 2023 at 11:39 AM.
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Old 11th January 2023, 11:35 AM   #40
lobosrul5
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Originally Posted by Suddenly View Post
Spending habits are going to change. This would be effectively a very large raise for people with higher than average income so they might spend more, etc. However...

Forecasting this is totally meaningless because 23% is too high stakes and it will be loopholed into oblivion by lawyers and lobbyists. The only forecast is that this will collapse the federal government.

Getting rid of payroll tax and replacing it with a national more like 3% sales tax exempting food and clothing to earmarked for social security / medicare would be worth looking at as that would be redistributive.
3% of PCE wouldn't even come close to replacing payroll tax. Payroll tax in 2021 generated $1.3 trillion. 3% of 15.9 trillion is only .48 trillion. And thats before any exclusions for tax on food and necessities, or a "prebate".

ETA: thinking about this, we just don't collect that much in the way of taxes... thats our main problem with the deficit. Total discretionary spending is only about 1.6 trillion, over half of which is for defense and veteran benefits. Mandatory spending is almost completely to keep seniors out of abject poverty and provided with healthcare. Even if you consider ALL other spending to be pork it only comes to $2,000 per year per person.

Last edited by lobosrul5; 11th January 2023 at 11:43 AM.
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