No, a 'Fair Tax' is not a good idea

Let's take a look at the "Fair Tax" and see how fair it really is.

Yes, it would tax health care and health insurance.  Why would people think United Health Care, Aetna, and other very profitable companies would not only not pay income taxes or payroll taxes, but would also be somehow exempt from the fair tax as well?

Almost everything would be taxed, or else they wouldn't collect the money the federal government supposedly need. 

The Fair Tax Act would impose a 30 percent national sales tax

Beginning in 2025, H.R. 25 would impose $30 in tax on each $100 purchase.** Proponents call this a "23 percent tax" because the $30 tax payment is 23 percent of the tax-inclusive price of $130. Yet described in more conventional terms — such as those used for existing state sales taxes — the $30 paid in tax is, in reality, a 30 percent tax on the cost of the goods or services purchased.

The new tax would apply broadly to nearly everything Americans buy, including goods and services often exempt from state sales taxes, such as housing, health care, and groceries.*** The Fair Tax Act includes a "family consumption allowance" that would provide families with a "prebate," calculated as a percentage of the federal poverty level.

What about cars?  GM, Carvana, all car manufacturers, and car-dealers would not only not pay income taxes or payroll taxes, but also be exempt from the national sales tax?  Only a childlike mind would believe that. 

Well, perhaps the monthly prebate will solve the problem for the poor, and that will take care of that.  But how many bureaucrats would it take to calculate the prebate, administer it, and send out the money?  How would they calculate it for people who don't file income taxes?  Would the prebate reflect the difference in cost of living among states and cities?  How would the prebate help the middle class?

Then there's the claim that several layers of business would not be taxed, as with oil.  So the drillers, refiners, truckers, and pipeline operators would not be taxed?  That is amazing, that so many businesses would get off scot free. 

In reality, the lobbying for exemptions from the tax would be massive, but whatever exemptions were given would have to be replaced with higher tax rates. 

The bill envisions states getting the administrative funds that the IRS got to administer the national sales tax.  States had a tremendous problem with fraud and everything else on unemployment funds on COVID, yet somehow they are supposed to handle this massive tax system and remit the money to the federal government? 

The tax would be a monstrosity to administer, with a great incentive to cheat.  States would clearly target all the people who sell online through eBay, Amazon, and elsewhere. 

As Trump's recent "Ron DeSalesTax" ad said truthfully, a national sales tax would greatly harm consumers, which is all of us.  Rich people would have a great incentive not to spend, at least in the U.S.

Image: pasja1000 via Pixabay, Pixabay License.

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