Almost the time of the year to talk about the FairTax

Meh, fair tax unfairly punishes people that spend money and keep the economy going.

If someone makes $130K currently, and paid out $37k in income and property taxes, and then spent every dollar I would pay an additional $8.5K in sales taxes in a place that has 10% sales tax.

In order for the government to collect the same amount of money, they'd need to raise that sales tax to 53%.

Why wouldn't I just buy everything in cash and not pay the government anything in that case?

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Why wouldn't I just buy everything in cash and not pay the government anything in that case?

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Maybe I'm just misreading something, but if there is a national sales tax, how would paying cash help you avoid it?

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FairTax = national sales tax that replaces income tax

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Wouldn't that inhibit spending?

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I mean if I want to buy a car from you, what's to stop me from paying you $20K in cash and have neither party record the transaction at actual value instead of paying $30K in cash and you paying the government $10K?

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Nothing. But no tax is collected on used goods under the Fair Tax proposals I've seen

In either system, the taxes are gonna be too damn high. Our gov will raise taxes in any system to try and sustain its grown.

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That would be fraud. Fraud already occurs in the status quo.

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I just don't see how you would be able to set up such a system without increasing the amount of fraud.

That being said, how would it apply to buying and selling shares of companies on the stock market?

Has there ever been such a society set up?

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That being said, how would it apply to buying and selling shares of companies on the stock market?

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1. Many, if not most, people have money invested in the stock market. What will be the impact of the FairTax on the stock market and their investments?
First, it should be noted that not even the smartest minds in the country can predict the behavior of the stock market with any consistancy, but general rules and treands are usually accurate, so we'll use those and focus just on corporate stocks in this FAQ. We'll address corporate and municipal bonds under a different FAQ.
A corporate stock represents a partial ownership in a corporation, and the value of that stock is a function of many different variables. First off, will the company grow and increase in value, or will it lose market share, shrink, and decrease in value. In addition, is the company likely to share it's earnings with investors, in the form of dividends, over the coming years, or does the company have a history of putting those earnings to work in growing the company.
Interest rates also play a major role in the value of stocks in a very complicated manner. When an investor uses their money to purchase a company's stock, he loses the use of that money, which has a cost associated with it, often referred to as the "time-value of money". For instance, if an investor spends $1,000 on company stock, he loses all the interest that his $1,000 would have earned if he had just kep the money and put it into a savings account. The higher the interest rate, the more interest he loses by making the stock purchase, and the greater the time-value of the money.
What this means is that when an investor purchases company stock, he discounts what he thinks he'll get back in the future by the amount of interest he thinks he'll lose by making the purchase.
Let's work an example. If an investor thinks one share of corporate stock will be worth $1,000 five years in the future, and he doesn't think the company will be issuing any dividends during that time, what is the most he will be willing to pay for it. If we assume an interest rate of 5% for the intervening five years, the most our investor will be will pay is about $784. This is because if he puts his $784 in the bank and earns 5% interest, he will make about $216 over the five year period. Looking at it another way, our investor has to be able to buy the stock for less than $784 in order to make any money.
If our investor thinks the interest rate will be lower over the five year period, say 3%, then he can afford to pay a bit more for the stock and still make money because his potential interest is less. For example, in order to get the same $1,000 in five years, our investor would break even if he invested $863 in the company stock.

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More info

Why even talk about it? It has zero chance of ever getting off the ground and is a total waste of time. I did my thesis on it a decadeago for my masters. It was obvious then it was a non-starter.

Yeah, sorry if I was rude. I just had to spend an inordinant amount of time on the flat or fair tax and write a paper and give a presentation on it followed up by a PhD grilling me on the position I took that it would never happen in the U.S.

Trust me, not happening in the U.S. Ever.

If GOP wins Senate, I hope there is a legit push for it.