1. no sales tax on anything considered an investment. only on "consumer" retail goods.
2. if you owned say a farm to grow food and owned a company or factory or machinery that could provide for you all the goods and services you needed (directly, without "selling" it to you) then you would pay no federal sales tax and therefore no federal tax at all, of any kind. Guess what class of people would most likely to be able to pull that off? That's right, the very rich, especially the inherited rich (remember, no tax on inheritance in this scheme!). Oh but you'd still have to buy the farm/factory/company right? But that would be an investment. No tax on buying an investment/asset.
3. buy a "used" good there would be no federal sales tax. only when buying a new good. (This would probably be abused. Imagine a bunch of people suddenly only wanting to buy "used" new things (one previous owner, still in new condition, no more than say 1 day old, etc.)
4. only retailers would have to collect this tax. if one private individual sold something to another private individual (or business!) then no tax.
Also, in a system like they propose where there is no IRS and no income tax reporting, how do they know who is below or above the poverty line? Psychic powers?
I'll stop now. I haven't even dug very deep.
FairTax.org has some attractive elements but it has a lot of suspicious elements too that makes me think it's a ploy by the rich/aristocratic class.
I think 1 is not a loophole because ultimately the reason you invest is so that you can consume more down the line, and that ultimate consumption should be taxed.
I also don't see problems with 3 or 4. 3 maybe if you get a "poor" person to buy something where they'll get reimbursed and then sell it back to you, but couldn't that be fixed by limiting the amount of reimbursement they get to their total income or some fraction of it?
2 does seem like a real potential problem. Maybe businesses would also have to pay the fair tax on their purchases of capital goods, but they can offset those taxes with credits from taxes they collect further down the line? So if a farmer spends 100k on a tractor and never sells anything, then he has to pay taxes on that tractor. If he later sells 100k worth of goods, he can cancel out the taxes he had to pay on the tractor. In theory, that 100k tractor should let him collect more than 100k additional revenue overall, so this should work out.
1) Yup. Encourages saving/investing over spending, and credit for more spending. Not a loophole, this is a win.
2) Yes, a very rich person owning a farm, and the tractors to farm. No private jet, no Ferrari, no mansion. If someone is able to produce every luxury item they need, from scratch, then yeah, that wouldn't be taxed. But its such a tiny minority, I don't think it matters.
3) Um, ok? Sounds like the person that owned it for the one day got hosed.
4) I think thats good, too.
There are problems with FairTax, to be sure, but you listed none of them.
I pointed out 4 loopholes which let one evade paying any taxes at all to the Federal government under this system. Meanwhile, said citizen would still be benefiting from the expenditures made by that same government (defense, highways, welfare net, etc.) I didn't even list all the loopholes or flaws with it (for example, no gift tax allows some pretty evil hacks to evade paying taxes as well. Also a citizen could buy goods and services from foreign countries and have them mailed home to him, and pay no tax to Fed govt.) Therefore from my perspective it's a horribly broken proposal as it stands now.
Also any tax scheme which allows the rich to not pay any taxes at all, while still requiring working class to do so, cannot be described as a Fair Tax. If anything the name is an Orwellian mindfuck where the substance is the opposite of the surface.
What's good about it is the attempt to drastically simplify the tax code and reduce the amount of government spying on private lives. That goal (assuming that was their actual goal) is noble. The means described, however, are not.
1. no sales tax on anything considered an investment. only on "consumer" retail goods.
2. if you owned say a farm to grow food and owned a company or factory or machinery that could provide for you all the goods and services you needed (directly, without "selling" it to you) then you would pay no federal sales tax and therefore no federal tax at all, of any kind. Guess what class of people would most likely to be able to pull that off? That's right, the very rich, especially the inherited rich (remember, no tax on inheritance in this scheme!). Oh but you'd still have to buy the farm/factory/company right? But that would be an investment. No tax on buying an investment/asset.
3. buy a "used" good there would be no federal sales tax. only when buying a new good. (This would probably be abused. Imagine a bunch of people suddenly only wanting to buy "used" new things (one previous owner, still in new condition, no more than say 1 day old, etc.)
4. only retailers would have to collect this tax. if one private individual sold something to another private individual (or business!) then no tax.
Also, in a system like they propose where there is no IRS and no income tax reporting, how do they know who is below or above the poverty line? Psychic powers?
I'll stop now. I haven't even dug very deep.
FairTax.org has some attractive elements but it has a lot of suspicious elements too that makes me think it's a ploy by the rich/aristocratic class.