FairTax run around

Discussion in 'Politics, Religion, Social Issues' started by kuyu, Jun 11, 2005.

  1. kuyu macrumors 6502a

    kuyu

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    Sep 16, 2003
    Location:
    Louisville
    #1
    I'm a big fan of the FairTax system that's under debate in Washington. Rich pay their fair share (finally!), middle class are about even, poor get a free ride. I'm pretty sure the bills are H.R. 25 and S. 25.

    Anyway I called my rep, Ben Chandler-D, last week to tell him that his constituents support this plan and to ask for his endorsement. The guy who answered the phone basically gave me the run around, and told me that he can't really say anything to Mr. Chandler about it. I asked him if he ever speaks with Chandler, he replied yes. So I said, "Next time you see him, tell him that people are calling about FairTax."

    Based on the guys tone of voice, I am 100% sure that nothing will ever be said to Rep. Chandler.

    My question; is FairTax a republican thing? I voted for Chandler (twice, he lost the other race), and I'm a little peeved that my requests will go completely unnoticed....

    Any thoughts???
     
  2. Desertrat macrumors newbie

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    Location:
    Terlingua, Texas
    #2
    I'm behind the curve on the details of Fair Tax. In previous "reform" discussions here, I've broached the idea of both a flat rate tax on income, and a national sales tax; the combination to provide roughly the same income as the feds now have. (A minimum entry level for tax on income; certain items to be exempt from the sales tax.)

    A problem I've always seen is the definition of "fair" as to tax rates on upper incomes.

    From some radio talkshow discussions on Friday, it seems to be favored--to some extent, I think--by conservatives. As usual, the devil is in the details.

    Thanks for the numbers of the Bills.

    'Rat
     
  3. stubeeef macrumors 68030

    stubeeef

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    #3
    My best friend is on the planning board for my county. He said the planning staff wants to raise property taxes significantly after the next local election. I pay over $300 month for my house alone, more for cars, then 7% sales, 7% state income tax, and over 15% after deductions on my gross income to the feds, not including the 6.75% to Social Security and Medicare/Medicaid.

    Knowing there is not "supposed" to be double taxation, what is up, cause just my property tax, state income tax, and federal and SS/MC/MC total total 40% without sales tax, car property tax, license fees, etc.....
     
  4. IJ Reilly macrumors P6

    IJ Reilly

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    #4
    Tax rates are only a small part of the "fair taxes" issue. The really big issue is the way taxable incomes are calculated. Nobody really wants to deal with this one, because some much beloved deductions have to be reconsidered -- like the mortgage interest deduction and the wide variety of tax deferred savings schemes we've accumulated over the years.

    So whenever I hear politicians talk about flat taxes or fair taxes, but they're only addressing tax rates and not taxable income calculations, I know they're trying to pull the wool over our eyes.
     
  5. Desertrat macrumors newbie

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    #5
    I went to Thomas Locator. Read through HR 25 in a browsing fashion.

    It's a 23% sales tax for "just folks", salaried employees. No further income tax withholding or FICA. Of tax monies received by the feds, some 64% goes into general revenue; the rest, essentially, into SS and Medicare.

    As a function of one's poverty level, there is a monthly rebate paid back to the household.

    I haven't really read carefully through the tax pattern within businesses and corporations. It's more complex and requires more care in reading and understanding the terminology.

    "On paper" is a pretty good-sounding appeals setup. No idea how it will work out in reality, of course.

    'Rat
     
  6. IJ Reilly macrumors P6

    IJ Reilly

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    #6
    Like I said, tax rates are only half the story. Or less than half, because tax paying is a two-step process, and the calculation of taxable income is the first step.

    A few elections back one of the candidates (I think it was Steve Forbes) liked to use a postcard as a prop to illustrate his tax reform scheme. This would be the American tax return if he had his way, he said. Of course what Forbes preferred not to mention was that his plan also exempted unearned income from taxation entirely. The way this approach would shift the tax burden is pretty clear, but still some people who aren't as rich as Steve Forbes were hoodwinked. He was just playing the old game of "hide the pickle." Having seen it all before, I'm very wary of taxation schemes that claim to be fair but don't even look at how taxable income is calculated.
     
  7. Desertrat macrumors newbie

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    #7
    Here is a list of FAQs, from proponents:

    http://www.fairtaxvolunteer.org/smart/faq-main.html#23

    IJ, why give a hoot about "the rich"? The more they spend, the more tax they pay.

    Buy a Ford Escort, pay little. Buy a Ferrari, pay a lot.

    And below some designated poverty level, pay nothing.

    Why care if a guy makes a high salary, vs. buying and selling equities? Neither pays tax on either source of income. They're at last equals under the law.

    Frugal folks make out a lot better than profligates. What's wrong with that?

    'Rat
     
  8. IJ Reilly macrumors P6

    IJ Reilly

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    #8
    Huh. I thought you were interested in a "fair tax" concept. But now (and please feel free to correct me if I'm wrong) you don't care (or want me to care) whether the rich pay their "fair share." What kind of a taxation plan will come out of that criterion?

    And once again, so I'm sure it's totally clear: talking about tax rates without talking about how taxable income is calculated is fruitless. It's worse than fruitless, because often as not, it's an effort to hornswoggle the public into believing that taxation is fair.
     
  9. IJ Reilly macrumors P6

    IJ Reilly

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    #9
    Sorry for the extra post -- but of course they aren't even under current law. Somebody who makes $100k a year in salary will pay far more in income taxes than somebody making $100k in capital gains. The tax system is set up to favor investment over labor. Nearly always has.
     
  10. stubeeef macrumors 68030

    stubeeef

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    #10
    a national sales tax will do one thing. Increase cheating in the biggest way ever. Barter and off the books sales will BOOM!
     
  11. kuyu thread starter macrumors 6502a

    kuyu

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    #11
    IJ, the calculation for taxable income under the fairtax system is easy; there is none. It's a sales tax. The gov't, under this system, couldn't give a hoot what you make, only what you spend.

    As well, investment income is not taxed in any way. You get your ENTIRE paycheck. If you want a ferrari, better be ready to pony up 23% sales tax. Want an '88 civic; no taxes. There are no taxes on homes or used goods, and all taxes paid up to the poverty line are reimbursed 100% on a monthly basis, because the poor (your's truly included) can't afford to wait a year for our money. I believe the Democrats would call this a "pay as you go" system... ;)

    Rat, corporations and businesses are not taxed at all under this system. The boon for us, as consumers, is lower prices. Depending on price-elasticity, some goods may fall in price as much as 30%!!! All goods will get cheaper though, by about 15% on average. The invisible hand will see to this.

    What does this mean for America? For starters, we can finally compete with cheaper overseas products, while retaining our high wages and high standard of living. The government's income will actually be more stable than it is now, as the standard deviation of consumer spending is far less than taxable income. The rich lose their "tax shelters", the poor pay no taxes, and the middle class stays employed because it's suddenly cheaper to open a factory in America, and little Timmy can go to a better school because Uncle Sam stays out of his college savings account. Illegal immigrants will have to pay taxes, but they won't get a monthly rebate, and drug dealers will have to pay taxes on those rediculous looking spinning wheels and all the other crap they buy (I know a few).

    As to the underground, barter-like economy; what's stopping this very thing right now? I pay 6% at every cash register already. Haven't seen one person willing to lose their job to save me the sales tax, and I probably never will.

    To be fair, however, there are some downsides. One, the IRS gets shut down. Although, only IRS employees will care about this. As a workaround, I suggest that we let the current IRS audit the government for a change, and maybe then we'll know why a toilet seat in the Whitehouse costs $3,000. Two, paper companies will lose their biggest customer and the pre-print guy who makes the 1040, 1040ez, 740, W2, 1099, etc. will lose his job. Three, the entire library of congress will have to be rearranged to compensate for the missing 35,000 pages of US tax code. ;)

    It's certainly not a perfect system, but theft by force is never perfect, but always systematic.
     
  12. Dont Hurt Me macrumors 603

    Dont Hurt Me

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    #12
    With Republicans running everything who in their right mind thinks this bill has a snowball's chance of ever becoming anything more than a dream.
     
  13. skunk macrumors G4

    skunk

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    Location:
    Republic of Ukistan
    #13
    I may not know much about the US income tax regime, but I do know about a high rate of sales tax. We have 17.5% VAT over here, and the amount of evasion which goes on is huge. It's not so much the shop purchases as the services: on a 200,000 building contract, there's an extra 35,000 to avoid paying. And how would you deal with barter? Maybe you wouldn't: you might end up with an anarcho-syndicalist set-up...now that would be interesting!
     
  14. Desertrat macrumors newbie

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    Terlingua, Texas
    #14
    Yeah, kuyu, I went through more of the Bill, and some of the FAQs. Comprendo about the corporations.

    Looks to me, IJ, that this proposal is neutral as to investment vs. salary as one's source of money.

    IJ, I absolutely despise the very concept of increasing income tax rate with increasing income, as I reckon you'll remember. That's Unfair. It penalizes one who works harder and longer than others. I've never understood why I should be in a higher tax bracket if I work 16 hours a day instead of only eight.

    One thing about the psychology of this new system: It removes the notion of, "Screw'em! I ain't working so somebody else can sit on their butt!" that is rather prevalent today.

    It further encourages savings, at which the US is terrible. You don't spend, you don't pay much tax, so you stick it into some sort of investments.

    I guess it'll cut into sales of TurboTax, won't it? :D

    'Rat
     
  15. kuyu thread starter macrumors 6502a

    kuyu

    Joined:
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    Location:
    Louisville
    #15
    Well, as I mentioned the original post it was a Democrat's office that gave me the shaft. I, to the surprise of many here, vote a split ticket. Chandler was one of the Democrats I voted for. Needless to say, I won't be voting for him again.

    Plus, of the bills 54 cosponsors, 53 are republicans. Kudos Rep. Peterson!
    http://www.geocities.com/cmcofer/asupp.html
     
  16. IJ Reilly macrumors P6

    IJ Reilly

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    #16
    Look, I'd be the first one to argue for tax simplification and doing away with the IRS. We spend around $1,500.00 a year on tax preparation between our two individual returns and business and it goes up every year. Writing that check hurts more than writing the check to the US Treasury.

    But I was reading through the FAQ for FairTax and came across too many fairy-dust stories, unsubstantiated claims and outright bogus statements. Now my BS radar is hollering red alert.

    For one thing, sales taxes are notoriously regressive. FairTax just fobs that off entirely, making just the opposite claim -- attributing it to "leading economists." Who are these "leading economics?" Don't know. They don't say.

    I have no problem with progressive taxation. If I was hauling down seven figures I'd be delighted to be "punished" a little for taking so much out of a system that rewards the vast majority of people with far less, but depends on them just the same.
     
  17. Desertrat macrumors newbie

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    Terlingua, Texas
    #17
    IJ, could you post a couple of the more egregious bogus statements? That might be helpful in understanding.

    'Rat
     
  18. zimv20 macrumors 601

    zimv20

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    Location:
    toronto
    #18
    i'll remind everyone that, under our progressive income tax system, those who make more pay higher taxes only on that greater portion. deductions aside, we all pay the same amount on our first (say) $40,000.
     
  19. IJ Reilly macrumors P6

    IJ Reilly

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    #19
    I've already posted one of their bogus statements (egregious is your word). Care to respond to that one before asking me to post another? That might help with my understanding.
     
  20. Desertrat macrumors newbie

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    #20
    IJ, I guess you're referring to the regressiveness of a sales tax?

    Isn't that historically a "poor folks" issue? And, isn't that addressed via the monthly rebate deal? (At least in part as the Bill was first written.)

    Again, looking at those nasty details, I see it as easy to do as is the case in Texas: No sales tax on rents or houses; not on grocery store food. That is, certain exemptions on certain necessities. It seems to me to be possible that there be a floor as to the price of a necessity: E.g., no tax on shoes below some price; on other clothing below some price. In today's computerized world, this should be no problem to build into a WalMart's checkout system.

    Wuz I doing the deal, I'd have no federal sales tax on used items. Then again, I don't like that at the state level, either...

    'Rat
     
  21. miloblithe macrumors 68020

    miloblithe

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    Location:
    Washington, DC
    #21
    I'll never understand the argument that a higher marginal tax rate above, say, $100,000 discourages people from working hard. As if someone wouldn't be interested in a $200,000 a year job because they will only recieve $60,000-70,000 of that extra $100,000. Stupidest argument ever.
     
  22. takao macrumors 68040

    takao

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    Location:
    Dornbirn (Austria)
    #22

    it _is_ no problem they are doing that kinda stuff for years with the different VAT rates
    groceries: only 10% VAT (but books, public transportation)
    normal : 20%
    (luxury goods: 30% historic got scrapped)

    but i can't exist without exceptions.. like wine sold at a "farm" directly: only 12% (which makes olidays in those regions pretty funny because wine is not only good but cheap as well ;) )

    i rember they had around 6 or even more different percentages in past though...
     
  23. IJ Reilly macrumors P6

    IJ Reilly

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    #23
    I'm referring to the regressiveness of sales taxes generally because consumer spending is not a linear relationship with income -- a concept the FairTax people try to talk around with the silly "filet mignon" argument. This one is especially regressive because it doesn't exempt food or medicines. They then go on to say "necessities" are exempt from the tax. So which is it?

    The rebate is one of the more troubling aspects of this proposal. Doesn't everyone, no matter their income, get exactly the same amount? Even infants (if they have a social security number)?

    Maybe you can help me with Table 1 in the FAQ. I can't make head or tail of it.
     
  24. IJ Reilly macrumors P6

    IJ Reilly

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    #24
    I worked with somebody years ago who refused a promotion because she didn't want to pay more taxes. More than once. No kidding -- a college graduate, no less. So I suppose this tax scheme could be sold to some otherwise educated people on the basis of their hazy comprehension of the concept of marginal tax rates.
     
  25. kuyu thread starter macrumors 6502a

    kuyu

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    Sep 16, 2003
    Location:
    Louisville
    #25
    I apologize in advance for the extremely long post, but here are the economists that endorse the FairTax plan.

    Henry Demmert Santa Clara University
    Arthur De Vany Professor Emeritus Economics and Mathematical Behavioral Sciences
    University of California, Irvine
    Pradeep Dubey
    Leading Professor
    Center for Game Theory
    Dept. of Economics
    SUNY at Stony Brook
    Demissew Diro Ejara
    William Paterson University of
    New Jersey
    Patricia J. Euzent
    Department of Economics
    University of Central Florida
    John A. Flanders
    Professor of Business and
    Economics
    Central Methodist University
    Richard H. Fosberg, Ph.D.
    William Paterson University
    Gary L. French, Ph.D.
    Senior Vice President
    Nathan Associates Inc.
    Professor James Frew
    Economics Department
    Willamette University
    K. K. Fung
    University of Memphis
    Satya J. Gabriel, Ph.D.
    Professor of Economics and
    Finance
    Mount Holyoke College
    Dave Garthoff
    Summit College
    The University of Akron
    Ronald D. Gilbert
    Associate Professor of
    Economics
    Texas Tech University
    Philip E. Graves
    Department of Economics
    University of Colorado
    Bettina Bien Greaves, Retired
    Foundation for Economic
    Education
    John Greenhut, Ph.D.
    Associate Professor
    Finance & Business Economics
    School of Global Management
    and Leadership
    Arizona State University
    Darrin V. Gulla
    Dept. of Economics
    University of Georgia
    Jon Halvorson
    Assistant Professor of
    Economics
    Indiana University of
    Pennsylvania
    Reza G. Hamzaee, Ph.D.
    Professor of Economics &
    Applied Decision Sciences
    Department of Economics
    Missouri Western State College
    James M. Hvidding
    Professor of Economics
    Kutztown University
    F. Jerry Ingram, Ph.D.
    Professor of Economics and
    Finance
    The University of Louisiana-Monroe
    Steven J. Jordan
    Visiting Assistant Professor
    Virginia Tech
    Department of Economics
    Richard E. Just
    University of Maryland
    Dr. Michael S. Kaylen
    Associate Professor
    University of Missouri
    David L. Kendall
    Professor of Economics and
    Finance
    University of Virginia's College
    at Wise
    Peter M. Kerr
    Professor of Economics
    Southeast Missouri State
    University
    Miles Spencer Kimball
    Professor of Economics
    University of Michigan
    James V. Koch
    Department of Economics
    Old Dominion University
    Laurence J. Kotlikoff
    Professor of Economics
    Boston University
    Edward J. López
    Assistant Professor
    University of North Texas
    Salvador Lopez
    University of West Georgia
    Yuri N. Maltsev, Ph.D.
    Professor of Economics
    Carthage College
    Glenn MacDonald
    John M. Olin Distinguished
    Professor of Economics and
    Strategy
    Washington University in St.
    Louis
    Dr. John Merrifield,
    Professor of Economics
    University of Texas-San
    Antonio
    Dr. Matt Metzgar
    Mount Union College
    Carlisle Moody
    Department of Economics
    College of William and Mary
    Andrew P. Morriss
    Galen J. Roush Professor of
    Business Law & Regulation
    Case Western Reserve
    University School of Law
    Timothy Perri
    Department of Economics
    Appalachian State University
    Mark J. Perry
    School of Management and
    Department of Economics
    University of Michigan-Flint
    Timothy Peterson
    Assistant Professor
    Economics and Management
    Department
    Gustavus Adolphus College
    Ben Pierce
    Central Missouri State
    University
    Michael K. Pippenger, Ph.D.
    Associate Professor of
    Economics
    University of Alaska
    Robert Piron
    Professor of Economics
    Oberlin College
    Mattias Polborn
    Department of Economics
    University of Illinois
    Joseph S. Pomykala, Ph.D.
    Department of Economics
    Towson University
    Barry Popkin
    University of North Carolina-Chapel
    Hill
    Steven W. Rick
    Lecturer, University of
    Wisconsin
    Senior Economist, Credit Union
    National Association
    Paul H. Rubin
    Samuel Candler Dobbs
    Professor of Economics & Law
    Department of Economics
    Emory Univeristy
    John Ruggiero
    University of Dayton
    Michael K. Salemi
    Bowman and Gordon Gray
    Professor of Economics
    University of North Carolina at
    Chapel Hill
    Dr. Carole E. Scott
    Richards College of Business
    State University of West
    Georgia
    Carlos Seiglie
    Dept. of Economics
    Rutgers University
    Alan C. Shapiro
    Ivadelle and Theodore Johnson
    Professor of Banking and
    Finance
    Marshall School of Business
    University of Southern
    California
    Dr. Stephen Shmanske
    Professor of Economics
    California State University,
    Hayward
    James F. Smith
    University of North Carolina-Chapel
    Hill
    Vernon L. Smith
    Economist
    W. James Smith
    Dean of Liberal Arts and
    Sciences and Professor of
    Economics
    University of Colorado at
    Denver
    John C. Soper
    Boler School of Business
    John Carroll University
    Roger Spencer
    Professor of Economics
    Trinity University
    Daniel A. Sumner, Director,
    University of California
    Agricultural Issues Center
    and the Frank H. Buck, Jr.,
    Chair Professor,
    Department of Agricultural and
    Resource Economics,
    University of California, Davis
    Curtis R. Taylor
    Professor of Economics and
    Business
    Duke University
    Robert Vigil
    Analysis Group, Inc.
    John H. Wicks, Ph.D.
    Professor Emeritus
    Department of Economics
    University of Montana
    F. Scott Wilson, Ph.D.
    Canisius College
    Mokhlis Y. Zaki
    Professor of Economics
    Emeritus
    Northern Michigan University

    Plus, multiple polls show public support for this plan...
    http://www.myfairtax.org/polls.html
     

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