FairTax run around

kuyu

macrumors 6502a
Original poster
Sep 16, 2003
694
0
Louisville
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???
 

Desertrat

macrumors newbie
Jul 4, 2003
2
706
Terlingua, Texas
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
 

stubeeef

macrumors 68030
Aug 10, 2004
2,702
2
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.....
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,915
1,466
Palookaville
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.
 

Desertrat

macrumors newbie
Jul 4, 2003
2
706
Terlingua, Texas
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
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,915
1,466
Palookaville
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.
 

Desertrat

macrumors newbie
Jul 4, 2003
2
706
Terlingua, Texas
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
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,915
1,466
Palookaville
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.
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,915
1,466
Palookaville
Desertrat said:
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.
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.
 

stubeeef

macrumors 68030
Aug 10, 2004
2,702
2
a national sales tax will do one thing. Increase cheating in the biggest way ever. Barter and off the books sales will BOOM!
 

kuyu

macrumors 6502a
Original poster
Sep 16, 2003
694
0
Louisville
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.
 

skunk

macrumors G4
Jun 29, 2002
11,745
4,004
Republic of Ukistan
kuyu said:
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.
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!
 

Desertrat

macrumors newbie
Jul 4, 2003
2
706
Terlingua, Texas
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
 

kuyu

macrumors 6502a
Original poster
Sep 16, 2003
694
0
Louisville
Dont Hurt Me said:
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.
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
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,915
1,466
Palookaville
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.
 

zimv20

macrumors 601
Jul 18, 2002
4,388
7
toronto
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.
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,915
1,466
Palookaville
Desertrat said:
IJ, could you post a couple of the more egregious bogus statements? That might be helpful in understanding.

'Rat
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.
 

Desertrat

macrumors newbie
Jul 4, 2003
2
706
Terlingua, Texas
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
 

miloblithe

macrumors 68020
Nov 14, 2003
2,076
28
Washington, DC
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.
 

takao

macrumors 68040
Dec 25, 2003
3,825
432
Dornbirn (Austria)
Desertrat said:
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.

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...
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,915
1,466
Palookaville
Desertrat said:
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
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.
 

IJ Reilly

macrumors P6
Jul 16, 2002
17,915
1,466
Palookaville
miloblithe said:
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.
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.
 

kuyu

macrumors 6502a
Original poster
Sep 16, 2003
694
0
Louisville
IJ Reilly said:
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 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