The “prebate” would reduce the regressive effect on income at the consumption level, but would leave the fair tax highly regressive in terms of middle-class and wealthy Americans.

“I know of no professional economist that would recommend increasing federal income taxes when the economy is entering a recession.”

I could introduce you to a few. But that’s not the point, since Obama proposes to reduce taxes on almost all Americans.

The question becomes, is it wise economically to reduce taxes on most Americans during a recession, while returning taxes on the wealthiest Americans to their levels before the temporary Bush tax cuts? I would say yes, but that’s just my opinion.

Yes, sales taxes are regressive.

This is the reason for the prebate that is part of the Fair Tax proposal.

Suggest you go to this site for the details:

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

“What is the FairTax plan?
The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.

The FairTax Act (HR 25, S 1025) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.

The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.

The FairTax:

Enables workers to keep their entire paychecks
Enables retirees to keep their entire pensions
Refunds in advance the tax on purchases of basic necessities
Allows American products to compete fairly
Brings transparency and accountability to tax policy
Ensures Social Security and Medicare funding
Closes all loopholes and brings fairness to taxation
Abolishes the IRS
We offer a library of information throughout this Web site about the features and benefits of the FairTax plan. Please explore!

Then read Neal Boortz and John Linder books:

The FairTax Book
Neal Boortz, John Linder

FairTax: The Truth: Answering the Critics
Neal Boortz, John Linder

I have already blogged about Obama and his tax proposals:

Barrack “Taxman” Obama–Yes He Can Take Your Money–But Only You Can Stop Socialism!

Obama looked like a fool when asked about the capital gains tax:

http://www.youtube.com/watch?v=54jr3Ceu894

I know of no professional economist that would recommend increasing federal income taxes when the economy is entering a recession.

Obamanomics: A Recipe for Disaster!

http://www.youtube.com/watch?v=_TN0b0WR0d0

Thomas Sowell, an economist has written several articles on the subject of Obama and his economic policies:

http://www.realclearpolitics.com/articles/author/thomas_sowell/

Taxing Times
By Thomas Sowell

http://www.realclearpolitics.com/articles/2008/10/taxing_times.html

Obama’s Worn-Out Economic Ideas
By Thomas Sowell

http://www.realclearpolitics.com/articles/2007/02/obama_on_economics.html

Penny-wise Politics
By Thomas Sowell

http://www.realclearpolitics.com/articles/2008/09/pennywise_politics.html

Just a reminder as to who pays the taxes:

Who Pays Income Taxes? See Who Pays What

For Tax Year 2006

Percentiles Ranked by AGI
AGI Threshold on Percentiles
Percentage of Federal Personal Income Tax Paid

Top 1%
$388,806
39.89

Top 5%
$153,542
60.14

Top 10%
$108,904
70.79

Top 25%
$64,702
86.27

Top 50%
$31,987
97.01

Bottom 50%
<$31,987
2.99

Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service

For Tax Year 2005

Percentiles Ranked by AGI
AGI Threshold on Percentiles
Percentage of Federal Personal Income Tax Paid

Top 1%
$364,657
39.38

Top 5%
$145,283
59.67

Top 10%
$103,912
70.30

Top 25%
$62,068
85.99

Top 50%
$30,881
96.93

Bottom 50%
<$30,881
3.07

Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service

For Tax Year 2004

Percentiles Ranked by AGI
AGI Threshold on Percentiles
Percentage of Federal Personal Income Tax Paid

Top 1%
$328,049
36.89

Top 5%
$137,056
57.13

Top 10%
$99,112
68.19

Top 25%
$60,041
84.86

Top 50%
$30,122
96.70

Bottom 50%
<$30,122
3.30

Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service

For Tax Year 2003

Percentiles Ranked by AGI
AGI Threshold on Percentiles
Percentage of Federal Personal Income Tax Paid

Top 1%
$295,495
34.27

Top 5%
$130,080
54.36

Top 10%
$94,891
65.84

Top 25%
$57,343
83.88

Top 50%
$29,019
96.54

Bottom 50%
<$29,019
3.46

Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service

For Tax Year 2002

Percentiles Ranked by AGI
AGI Threshold on Percentiles
Percentage of Federal Personal Income Tax Paid

Top 1%
$285,424
33.71

Top 5%
$126,525
53.80

Top 10%
$92,663
65.73

Top 25%
$56,401
83.90

Top 50%
$28,654
96.50

Bottom 50%
<$28,654
3.50

Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service

For Tax Year 2001

Percentiles Ranked by AGI
AGI Threshold on Percentiles
Percentage of Federal Personal Income Tax Paid

Top 1%
$292,913
33.89

Top 5%
$127,904
53.25

Top 10%
$92,754
64.89

Top 25%
$56,085
82.90

Top 50%
$28,528
96.03

Bottom 50%
<$28,528
3.97

Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service

For Tax Year 2000

Percentiles Ranked by AGI
AGI Threshold on Percentiles
Percentage of Federal Personal Income Tax Paid

Top 1%
$313,469
37.42

Top 5%
$128,336
56.47

Top 10%
$92,144
67.33

Top 25%
$55,225
84.01

Top 50%
$27,682
96.09

Bottom 50%
<$27,682
3.91

Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service

For Tax Year 1999

Percentiles Ranked by AGI
AGI Threshold on Percentiles
Percentage of Federal Personal Income Tax Paid

Top 1%
$293,415
36.18

Top 5%
$120,846
55.45

Top 10%
$87,682
66.45

Top 25%
$52,965
83.54

Top 50%
$26,415
96.00

Bottom 50%
<$26,415
4.00

Note: AGI is Adjusted Gross Income
Source: Internal Revenue Service

Click here to see who does not pay taxes

Manufactures are going abroad for because of lower labor costs, lower tax rates, and fewer regulations.

Like it or not the USA must compete with companies around the world.

Higher taxes and more government regulations only makes US less competitive.

This seems to be exactly what Barack Obama wants.

The more you tax something the less you get. There are fewer smokers today than 30 years ago.

There are also fewer manufactures in the USA.

The Decline in Manufacturing Jobs

http://economistsview.typepad.com/economistsview/2005/10/the_decline_in_.html

U.S. manufacturing jobs fading away fast

http://www.usatoday.com/money/economy/2002-12-12-manufacture_x.htm

CBO A series of issue summaries from
the Congressional Budget Office
February 18, 2004

What Accounts for the Decline in Manufacturing Employment?

Summary
The manufacturing sector of the U.S. economy has experienced substantial job losses over the past several years. In January 2004, the number of such jobs stood at 14.3 million, down by 3.0 million jobs, or 17.5 percent, since July 2000 and about 5.2 million since the historical peak in 1979. Employment in manufacturing was its lowest since July 1950 (see Figure 1).

http://www.cbo.gov/doc.cfm?index=5078&type=0

You argue that “the USA is losing jobs as more and more businesses leave US to manufacture goods abroad due to higher taxes and regulations in the United States.”

In fact, the U.S. has a lower tax and regulatory burden on businesses than almost any other industrialized country. Your statement is only true with respect to developing countries. The question then becomes how many and what kind of jobs are we losing to the Third World, how much that matters to us, and how much of a trade-off is involved if we sacrifice our regulations in areas such as labor practices, worker safety, and the like.

“You sound like Obama. He is an economic illiterate.”

Fascinating. I’ve never heard him utter a statement about economics that economists didn’t agree with. Either he was stating conventional wisdom, or else taking a position on an issue about which respectable economists disagree.

I’d be interested in an example or two of economic illiteracy on his part.

Either the flat tax or fair tax is better than the current system.

http://www.youtube.com/watch?v=qBAr0MzRFU0

http://www.youtube.com/watch?v=zTTMLH9jsag&feature=related

The USA is losing jobs as more and more businesses leave US to manufacture goods abroad due to higher taxes and regulations in the United States.

You sound like Obama. He is an economic illiterate. he does not understand how wealth and jobs are created.

As for Obama’s tax plan deepening the recession, his plan calls for tax cuts for almost all Americans. I’d say that lower taxes would help the economy, not hurt it. But that’s just me.

The Fair Tax would dramatically increase the tax burden on the middle class, and decrease the tax burden on the wealthiest Americans. For my money, it’s the middle class that suffers more from taxes. But that’s just me.

What should be cut is all Federal spending and the elimination of ten departments.

Business in the US are overtaxed.

The tax rates should be cut not increased.

Let people keep their hard earned money.

Government simply blows it.

If Obama does implement his tax plan the recession will be longer and deeper.

I support the Fair Tax and would eliminate the Federal income tax.

And how is it slavery reparations if most of the money goes to people who aren’t black?

“What do you think giving income tax credits or money to the 40%+ of the people who do not pay taxes is?”

John McCain’s tax plan? The tax system we’ve been using for generations? This isn’t just Obama’s plan.

You seem deeply opposed to our traditional tax system. Obama wants to return our top tax rates to their levels before the Bush tax cuts, which means Obama wants much lower tax rates for the wealthiest Americans than we had under Reagan, or in the generations before that. That hardly makes him a radical redistributionist or an advocate of slavery reparations.

What do you think giving income tax credits or money to the 40%+ of the people who do not pay taxes is?

I suspect that at least 25% of those receiving a check and did not pay any federal income taxes are black.

Money is money.

Rememeber an important fact, the bottom 50% of income earners pay less than 4% of the federal income taxes.

The top 10% of income earners pay nearly 70% of all federal income taxes.