Is there a downside to the Fair Tax?

[Anonymous]

It makes sense to me, to tax expenditures rather than income. Those who have more, spend more, and therefore have higher taxes. Without filing, there are no loopholes. I'll leave it to DCUM to point out any downsides to me in the event I don't have my head fully wrapped around it.

http://www.fairtax.org/site/PageServer

[Anonymous]

Yes because it is regressive. The people who make out the best are the ones who are the wealthiest and therefore most able to pay taxes.

[Anonymous]

The wealthier do pay more taxes but also save/invest more money (which is not in and of itself, a guarantee of job creation). So if I spend 50% of my income and save 50%, I'm getting taxed at X * .5 percent. Someone who has to spend 80% of their income is taxed at X * .8 percent of their income.

[Anonymous]

Anonymous wrote:The wealthier do pay more taxes but also save/invest more money (which is not in and of itself, a guarantee of job creation). So if I spend 50% of my income and save 50%, I'm getting taxed at X * .5 percent. Someone who has to spend 80% of their income is taxed at X * .8 percent of their income.

Yeah but in reality some family making 100-150K is spending almost everything except their 401(k), which they would save anyway. And I am spending maybe 35% of my income, and I would continue to do the same. But now the government is going to miss out on 2/3 of my tax bill. Great for me, but awful because it has to come out of someone else's pocket.

Here is the thing that no rich person (except the honest ones like Buffett) wants to say. Rich people spend what they spend. They are not going to reduce their consumption patterns dramatically in order to reduce their tax bill. They are already plowing a lot of cash into their portfolios. In this new world, I will also put the tax savings in that account, which is somewhat useful, but government spending employs people because people largely consume government benefits and federal paychecks, and that results in higher employment.

It is a good thing to encourage thrift, and to encourage investment. But I think that this plan comes at a cost to those who make 80-150K. They have significant income above the poverty level exemption, and they will probably need to spend most of it, so they are going to get hit the hardest.