Fair tax

“Fair tax” describes a proposed shift of USA’s major tax revenue source from income to consumption. Consumption taxes, (sales taxes) are simpler than income taxes. The government’s administration and enforcement, and the taxpayer’s compliance expenses are less.

Value added tax, (VAT)

Transactions of goods and services have taxes imbedded within them. It’s generally uncertain as to how many levels of transactions goods or services have passed or been processed through or what are the total taxes imbedded within them. The EU has successfully implemented a form of sales tax described as “Value added Tax”, (VAT). Since each member nation is a sovereign nation, the economic concept of a European common market would have been less feasible without such a tax method.

Enterprises deduct all the VAT they paid from the VAT they collected, sending the paperwork and difference on to the government. Thus the compounding of the sales tax is prevented due to only carrying foward taxes on the additional value added due to handling or processing of goods and services. VAT is a simpler and more business friendly species of sales tax. Enterprises enjoy fast and complete rebate of all sales taxes they paid.

If the poor aren't compensated, "fair" tax is unfair.

Americans with low or no taxed income, (those who are retired, welfare recepients or dependent’s of taxpayers) now pay only those hidden taxes imbedded within the goods they consume. Fair tax advocates promise methods to compensate these people for the additional sales taxes they'll pay. (Such compensation is only feasable outside of the sales tax system itself). IMO the U.S. Congress will renege on that promise. They'll grant insufficient compensation.

There's no "fair" tax but a consumption tax could be a "fairer” tax. It will be so if the nation's economic benefit of transforming from income to consumption tax is great enough to sufficiently mitigate the gap between the promise and the compensation for low or no income taxpayers. It is dependent upon what the U.S. Congress delivers.

Respectfully, Supposn

Administative, compliance and enforcement expenses

A general consumption tax is among taxpayer's least expensive taxes to comply with, (if the sales tax itself is not considered as part of the taxpayer’s compliance expense). They are also among the least expensive taxes for government to administrate. Sales tax of goods is also among the least expensive for goverment to enforce. It is much more expensive to enforce sales tax of services.

The "value added tax", (VAT) species of sales tax is particularly less expensive to enforce. VAT grants strong audit trails and provide sellers with fast and complete rebate for any sales tax they paid (in the course of their business). It does not compound the effect of the sales tax by imbeding the tax within the prices of goods or services. There’s little inducement for intermediate participants, (commercial purchasers) to request that the sales tax be evaded.

Government’s enforcement expenses for non-vat sales taxes upon sale of services would not be measurably less than for taxes of income derived from such transactions. Government’s expenses for VAT of services may or may not be less but not significantly less than their expenses for taxing the income derived from such transactions.

If a government were to tax only sale of goods (rather than sales of both goods and services), it would induce billing invoices to overvalue labor and undervalue materials. This in effect grants preference for maintaining, repairing or rebuilding what exists rather than producing from “scratch”. Of the greater significance, exempting services from sales tax would greatly reduce revenue or increase the tax rate. I’m opposed to exempting services from sales taxation.

Government must obtain similar data and perform similar tasks for taxing of services or incomes derived from their sale. If government taxes all sales and the income derived from the sales, the government accountants can and should share those attributable expenses between the two methods.

Sales tax can not replace all income tax revenues

The U.S. Congress should not and will not imprudently transfer our entire major government revenue from income tax to consumption tax in a single step. Those who advocate otherwise would effectively hinder if not actually prevent congress from passing any federal sales tax.

I believe that all democratic nations dependent upon consumption tax as a major revenue source also have an income tax. IMO that’s due to voters balking at unacceptable tax rates. If a gradual complete transformation (from income to sales tax) is begun and I’m incorrect, a complete transformation could be accomplished in approximately four years.

If all major nations that employ consumption taxes are correct, the transformation would be halted when sales tax increase approach an unacceptable rate. At that time USA’s income tax rates will be greatly decreased. Lesser dependence upon income taxes revenue would then be an opportunity to equalize the remaining income tax’s burden.

Fair tax would still require the IRS

“Fair tax” is a species of consumption, (sales) tax. I’m aware of no simpler administration and enforcement of a general sales tax than the “value added tax”, (VAT).

The United Kingdom’s collectors of VAT are the “HM Revenue and Customs”. They are comparable to USA’s IRS. The experience of the UK and all nations employing consumption taxes indicate government’s sales tax collection expenses will be less (than for income taxes), but still of significance. Fair taxer’s hopes of severely downsizing or eliminating IRS’s functions are unrealistic.