The format of the letter is as follows: My points from other articles are written in bold, the letter writer's text is in a regular font and my responses are in italics. Here we go:
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1. Economist William G. Gale at the Brookings Institute has determined that most low income families will pay more taxes. "Under the Americans for Fair Taxation proposal, taxes would rise for households in the bottom 90 percent of the income distribution, while households in the top 1 percent would receive an average tax cut of over $75,000."
2. You are right in saying that the "FairTax is actually a tax on accumulated wealth". I think that might be the biggest reason why it will never pass. Senior citizens as a group have the largest accumulated wealth of any demographic group and they'll get hit hardest by the tax. I can't imagine a tax plan that hits the elderly the hardest will ever be implemented, particularly when it also gives a break to the highest income earners.
Mr. Gale's statement numbered 1 indicates the poor will pay more while those in the top 1 percent (they are going to have accumulated wealth) will receive a tax cut. Your answer numbered 2 indicates that the Kennedys, Rockefellers, and Gates's are going to pay more in taxes.
No, it doesn't at all. While Gates might have a high accumulated wealth, he also has a high income. So while he pays a lot more sales taxes, he pays a lot less income taxes. Since the savings rate for high income earners is less than low income earners, the net effect will be a large reduction in taxes for the top 1% of income earners.
My sense is that you can't have it both ways. Gale's point that the rich are going to pay less and your point that the rich are going to pay more contradict one another.
Only if you equate wealth with income, but they're not at all the same thing. Senior citizens as a group have high wealth, and low income so they get hurt. Gale's report, if you haven't read it, may make the issue more clear.
Under the FairTax income is either going to be spent, or invested. If it is spent it will be taxed. If it is saved or invested it will create capital for further economic growth. Also, it is illogical to separate very high incomes from accumulated wealth.
You fail to point out that poor elderly people will not have their pensions, IRA's, investments, savings, or Social Security income taxed. They will also receive the monthly rebate, which will cover the cost of the FairTax for them. You also fail to point out that the estate tax will be gone. The gift tax will also be history in case they wish to give funds to a loved one.
Seniors only pay the estate tax if they're the recipient of an estate. Do seniors really receive more estates than the rest of the general population?
I realize that every group will receive a benefit. But every group will receive a cost, namely the cost of paying the sales tax. For some groups the benefits will be higher than the costs, for others it will be less than the costs.
What I'd like the FairTax supporters to do is tell me one thing: Which group will pay more taxes? The FairTax plan is revenue neutral and supposedly the poor will be paying less taxes than they do now. So somebody has to be paying more to offset that. Who are these people?
Be sure to continue to page 2 for the next part of the letter.