Possible New Fair Tax System...

[Sureshot324]

One big bonus is people would buy a lot more used items, since the tax only applies to new items. We would throw a lot less stuff away and produce less useless crap. There are a lot of potential loop holes, though, that would be hard to enforce. For example buying stuff from other countries.

 

[Ranger X]

If it's only a 1-3% increase on everything you buy, then it's darn good. Otherwise, that 23% tax on anything new sucks REAL bad. It just wouldn't be worth buying a new car or anything new, really. I think while people will have more money to spend, less people will be buying and more people will be saving. This doesn't exactly stimulate our economy much, does it?

 

[Ryan]

Originally posted by: Ranger X
If it's only a 1-3% increase on everything you buy, then it's darn good. Otherwise, that 23% tax on anything new sucks REAL bad. It just wouldn't be worth buying a new car or anything new, really. I think while people will have more money to spend, less people will be buying and more people will be saving. This doesn't exactly stimulate our economy much, does it?

How much do pre-tax prices for goods and services go down under the FairTax? All goods and services already contain the embedded costs of the current tax system in their prices. When these embedded taxes are removed, prices come down. Dale Jorgenson, Ph.D., former chairman of the Economics Department at Harvard University, has projected an average producer price reduction of 22 percent for goods and services in just the first year after the adoption of the FairTax. In addition, the FairTax lowers compliance costs by an estimated 95 percent and the removal of these costs will force prices down even lower.

 

[gsaldivar]

Whenever you see the word "FAIR" used in politics.....

RUNNNNNNNNN

 

[OrByte]

Originally posted by: Ryan

Originally posted by: Ranger X
If it's only a 1-3% increase on everything you buy, then it's darn good. Otherwise, that 23% tax on anything new sucks REAL bad. It just wouldn't be worth buying a new car or anything new, really. I think while people will have more money to spend, less people will be buying and more people will be saving. This doesn't exactly stimulate our economy much, does it?

How much do pre-tax prices for goods and services go down under the FairTax? All goods and services already contain the embedded costs of the current tax system in their prices. When these embedded taxes are removed, prices come down. Dale Jorgenson, Ph.D., former chairman of the Economics Department at Harvard University, has projected an average producer price reduction of 22 percent for goods and services in just the first year after the adoption of the FairTax. In addition, the FairTax lowers compliance costs by an estimated 95 percent and the removal of these costs will force prices down even lower.

Why do I get the feeling that when the rubber hits the road, we would see a price reduction of ohhhh around 6% in retail cost. THEN retailers install the new 23% tax for a combined cost increase of ohh around 15-17%.

just how exactly does this "force" prices to go down lower? What are the incentives for retailers to do so at a level that makes this conversion all equal out?

 

[5LiterMustang]

Originally posted by: birdpup
It seems as if no one who has yet commented has taken an economics class. A flat tax is a "regressive tax", which means it taxes the poor heavier than it taxes the rich. The purchases required to sustain a moderate life would cost a far larger percentage of a poor person's income than it would of a rich person's income.

Please go to school and pay more attention in your classes. I am tired of having my life affected by uneducated people's opinions, which allow lawmakers to continue to acquire more methods of control over the people of America with their propaganda. This is a good example why the rest of the world laughs at the stupidity of Americans.

EDIT: there may be one or two people who touched on the idea of a regressive tax.
EDIT: went too far crapping over everybody. I formally apologize for that, since it is not my style. It upsets me greatly to see so many people taken over by our government's propaganda.

rofl I find it hard to believe you're educated you dont have a clue what you're talking about. The flat tax is NOT a regressive tax. Social Security is an example of a regressive tax. The flat tax is the SAME for everyone 17% hence the name FLAT TAX. Thats NOT regressive. And if you'd do some reading aka SELF EDUCATION on the subject you'd know that the exemptions are more generous under the Flat Tax proposals than they are under todays current income tax proposals. And things like EITC still exist. So before you come in here calling everyone uneducated maybe you should educate yourself.

 

[5LiterMustang]

Originally posted by: birdpup

It is still a regressive tax, just with an artifically set lower limit. That lower limit is present with the current tax system. Thus, my comments still apply. A flat tax will remain a regressive tax irregardless of its conditions and will therefore remain an inappropriate tax for the majority of people.

Dude you're wrong, a regressive tax is one that TAXES higher income folks LESS. AKA lower tax brackets and/or elimination of taxes above certain income levels. Flat tax does NOT do that.

and before you say I'm uneducated, I could have gotten a minor in economics, I took tons of econ classes in college I love this stuff.

 

[zebano]

Originally posted by: dullard

Originally posted by: Juice Box
that is a good point....I guess they'd have to find some way around that

You begin with a great simple tax idea. Then as you fill each loophole, you create another loophole or another problem. Eventually, this simple tax plan becomes a massive tax nightmare. Just like what happened to our simple income tax system.

Other things to think about:
[*]The welfare system is based on income and so are many other benefits to the poor (cheaper housing, school lunch, reduced phone bills, etc). What do we do with all these programs? What about colleges and scholarships and student loans? No more income to verify for all of this.
[*]Income tax is double checked - employer and employee both submit documents. Sales tax has just one check. Massive fraud is possible. Suppose a store reports just 1/10th of their true sales and collects the "fair tax" as profit. No one can possibly verify the truth of the sales.
[*]Social security must be completely redone. It is based entirely on income tax.
[*]Most retirement plans (based on income) must be scrapped and replaced.
[*]Housing will be significantly affected. Say goodbye to the mortgage tax deduction, and many will default.
[*]Wealth redistribution must be redone. Currently a family of 3 on $50k income is a lot wealthier than a family of 5 on that same $50k income in the same city. Thus, the government assists the family of 5 with child tax credits. The fair tax taxes the family of 5 more (since they cannot save as much and must spend more). Same goes for all other wealth redistributions.

I'm not saying that redoing some of the above is a bad thing. But the "fair tax" must incorporate a lot more than the simple idea that website says. We are talking about scrapping virtually everything we know and replacing it with something different. One person may benefit greatly, but another will be greatly harmed. Which are you? If you are greatly harmed would you still vote the same way? Or would you (like most people) vote without realizing that you might lose (or gain) bigtime in other areas?

Benifits to the poor are still trivial to check. Simply continue to have employers submit w-2's to the IRS and audit companies regularily. This is no longer double checked, but the IRS doesn't catch all that many people now. Most happens due to whistleblowers within corporations.

SS is fck'd anyway. Let it die. Just remember, all those bonds amount to a "SS trust fund" but we shouldn't worry about balancing the budget when we are going to need them.

The only retirement plans that need to be scrapped are those run by the government. If you have a pension based on salary, your company knows what it paid you. If they try and cheat you, take a copy of your paychekc with you to court...

Housing will be significantly affected.. why? AFAIK the mortgage tax deduction isn't based on tax brackets (but I could just be putting my foot in my mouth).

"Wealth redistribution must be redone." - I don't know how to respond to this, it's not the governments place to do this. If you don't want to pay for 5 kids, don't have 5 kids.... It's not a crime to not be rich, and you can certainly live on 50k/yr. Quit spending my money you a-holes

 

[Zontor]

Originally posted by: birdpup
It seems as if no one who has yet commented has taken an economics class. A flat tax is a "regressive tax", which means it taxes the poor heavier than it taxes the rich. The purchases required to sustain a moderate life would cost a far larger percentage of a poor person's income than it would of a rich person's income.

Please go to school and pay more attention in your classes. I am tired of having my life affected by uneducated people's opinions, which allow lawmakers to continue to acquire more methods of control over the people of America with their propaganda. This is a good example why the rest of the world laughs at the stupidity of Americans.

EDIT: there may be one or two people who touched on the idea of a regressive tax.
EDIT: went too far crapping over everybody. I formally apologize for that, since it is not my style. It upsets me greatly to see so many people taken over by our government's propaganda.

QFT...

In its simplest terms:

Thats why the wealthier *love* these types of taxes. To make it simple:

Suppose you buy $1000 worth of groceries over a year and have a 10% sales tax. Your tax in this purchase would be $100.

The sales tax would be 1% of your income if you made $10,000 a year.

Same terms but you make $100,000 a year. Now your sales tax is .1% of your income.

Yes it is somewhat true that the wealthy would spend more $$, but overall a regressive tax favors the wealthier...

In a regressive tax, the less you earn, the higher your tax rate.



Edit: can't spell

 

[upsciLLion]

Originally posted by: Zontor

Originally posted by: birdpup
It seems as if no one who has yet commented has taken an economics class. A flat tax is a "regressive tax", which means it taxes the poor heavier than it taxes the rich. The purchases required to sustain a moderate life would cost a far larger percentage of a poor person's income than it would of a rich person's income.

Please go to school and pay more attention in your classes. I am tired of having my life affected by uneducated people's opinions, which allow lawmakers to continue to acquire more methods of control over the people of America with their propaganda. This is a good example why the rest of the world laughs at the stupidity of Americans.

EDIT: there may be one or two people who touched on the idea of a regressive tax.
EDIT: went too far crapping over everybody. I formally apologize for that, since it is not my style. It upsets me greatly to see so many people taken over by our government's propaganda.

QFT...

In its simplest terms:

Thats why the wealthier *love* these types of taxes. To make it simple:

Suppose you buy $1000 worth of groceries over a year and have a 10% sales tax. Your tax in this purchase would be $100.

The sales tax would be 1% of your income if you made $10,000 a year.

Same terms but you make $100,000 a year. Now your sales tax is .1% of your income.

Yes it is somewhat true that the wealthy would spend more $$, but overall a regressive tax favors the wealthier...

In a regressive tax, the less you earn, the higher your tax rate.



Edit: can't spell

That argument operates under the assumption that rich people buy the exact same food as poor people. I claim that's not true. A similar example uses a Honda Civic and how the tax on that hurts a low income person more than a high income person. Do you know many people that make a quarter of a million dollars per year that own a Honda instead of a Benz or a Porsche?

 

[Zontor]

Originally posted by: upsciLLion

Originally posted by: Zontor

Originally posted by: birdpup
It seems as if no one who has yet commented has taken an economics class. A flat tax is a "regressive tax", which means it taxes the poor heavier than it taxes the rich. The purchases required to sustain a moderate life would cost a far larger percentage of a poor person's income than it would of a rich person's income.

Please go to school and pay more attention in your classes. I am tired of having my life affected by uneducated people's opinions, which allow lawmakers to continue to acquire more methods of control over the people of America with their propaganda. This is a good example why the rest of the world laughs at the stupidity of Americans.

EDIT: there may be one or two people who touched on the idea of a regressive tax.
EDIT: went too far crapping over everybody. I formally apologize for that, since it is not my style. It upsets me greatly to see so many people taken over by our government's propaganda.

QFT...

In its simplest terms:

Thats why the wealthier *love* these types of taxes. To make it simple:

Suppose you buy $1000 worth of groceries over a year and have a 10% sales tax. Your tax in this purchase would be $100.

The sales tax would be 1% of your income if you made $10,000 a year.

Same terms but you make $100,000 a year. Now your sales tax is .1% of your income.

Yes it is somewhat true that the wealthy would spend more $$, but overall a regressive tax favors the wealthier...

In a regressive tax, the less you earn, the higher your tax rate.



Edit: can't spell

That argument operates under the assumption that rich people buy the exact same food as poor people. I claim that's not true. A similar example uses a Honda Civic and how the tax on that hurts a low income person more than a high income person. Do you know many people that make a quarter of a million dollars per year that own a Honda instead of a Benz or a Porsche?

I also said:

Yes it is somewhat true that the wealthy would spend more $$

However the wealthy often chooses to spend money in ways that avoid sales taxes (eg. labor-based services such as accountants, lawyers, etc).

The poor don't really have these choices.

The "trickle down" effect (eg. the rich spending money that ultimately benefits the lesser because it "trickles down" to the poor) is over-rated - note that I didn't say not true here....

Overall though regressive taxes still benefit the wealthy....

 

[Ilmater]

It would greatly increase increase profits at American companies, and I could pay off my debt REALLY quick (ie. avoiding buying things I don't need now = even more money saved)

 

[TheAdvocate]

Originally posted by: 5LiterMustang

Originally posted by: birdpup

It is still a regressive tax, just with an artifically set lower limit. That lower limit is present with the current tax system. Thus, my comments still apply. A flat tax will remain a regressive tax irregardless of its conditions and will therefore remain an inappropriate tax for the majority of people.

Dude you're wrong, a regressive tax is one that TAXES higher income folks LESS. AKA lower tax brackets and/or elimination of taxes above certain income levels. Flat tax does NOT do that.

Actually, he's not wrong. He explained perfectly why it is regressive. Not to mention the "like kind exchange" loophole. He may have been harsh, but he's right. I'm sick of Boortz and other self serving talking heads filling peoples' heads up with their spun version of a regressive tax.

It really bothers me becuase, beside sbeing unfair, and shifting the burden to the middle class, it will create an aristocracy, the likes of which hasn't been seen since 18th century Europe. The founding fathers started this country to escape the monarchy,a nd the aristocracy that created the unrest and lack of freedom that they sought. Maybe it's too much of a logical leap to post on a message board, but i do not feel like giving a 30 page history and economics lesson on why it's a horrible idea. As "immoral" as Boortz has convinced people that wealth redristribution is, it's ultimately necessary to assure the amercian dream. I will readily agree that the estate tax, and other taxes are out of control, but this knee jerk polar opposite philosophy is sheer folly. And it saddens and frustrates me to see smart, but gullible people fall for it.

Let me also lay into one of the worst arguments for it that I repeatedly see:

How does the FairTax protect low-income and lower middle-income families and individuals? Under the FairTax plan, poor people pay no net FairTax at all up to the poverty level! Every household receives a rebate that is equal to the FairTax paid on essential goods and services, and wage earners are no longer subject to the most regressive and burdensome tax of all, the payroll tax. Those spending at twice the poverty level will pay a tax of only 11.5 percent ? a rate much lower than the income and payroll tax burden they bear today.

Utter crapola. The marginal rates in the lower or middle brackets ARE higher than 11.5%, but the EFFECTIVE tax rates are much, much lower. This is the actual tax you pay after deductions, allowances, and credits. Eliminating the income tax eliminates these credits and actually forces these same folks to pay a HIGHER effective tax rate.

Lost in that discussion is the ability for the societal engineering through the tax code. Again, I agree it has gotten out of hand and needs to be scaled back, but the home mortgage interest deduction is one of the pillars of our consumer economy. The infrastructure of our economy would take a nearly fatal blow if this was removed, and it would no longer be advantageous to buy and own real property. Boortz would call people that oppose the plan "commies", but when's the last time you've heard a commie saying that we should own, and be encouraged to own, real property?

He's a talking head folks. And he has capital. The "fair tax" plan is nirvana for the haves and oppressive hell for the have nots. We need a more balanced solution, and it needs to be focused on CURBING GOVERNMENT SPENDING, not redistributing who pays for it. Go directly after the problem, don't pass the buck to the middle class and the poor.

 

[TheAdvocate]

Originally posted by: Zontor

Originally posted by: birdpup
It seems as if no one who has yet commented has taken an economics class. A flat tax is a "regressive tax", which means it taxes the poor heavier than it taxes the rich. The purchases required to sustain a moderate life would cost a far larger percentage of a poor person's income than it would of a rich person's income.

Please go to school and pay more attention in your classes. I am tired of having my life affected by uneducated people's opinions, which allow lawmakers to continue to acquire more methods of control over the people of America with their propaganda. This is a good example why the rest of the world laughs at the stupidity of Americans.

EDIT: there may be one or two people who touched on the idea of a regressive tax.
EDIT: went too far crapping over everybody. I formally apologize for that, since it is not my style. It upsets me greatly to see so many people taken over by our government's propaganda.

QFT...

In its simplest terms:

Thats why the wealthier *love* these types of taxes. To make it simple:

Suppose you buy $1000 worth of groceries over a year and have a 10% sales tax. Your tax in this purchase would be $100.

The sales tax would be 1% of your income if you made $10,000 a year.

Same terms but you make $100,000 a year. Now your sales tax is .1% of your income.

Yes it is somewhat true that the wealthy would spend more $$, but overall a regressive tax favors the wealthier...

In a regressive tax, the less you earn, the higher your tax rate.



Edit: can't spell

Thank goodness someone gets it. I can sleep tonight.

 

[MikeyIs4Dcats]

you had me until the 23%....

 

[dquan97]

Originally posted by: upsciLLion

Originally posted by: Zontor

Originally posted by: birdpup
It seems as if no one who has yet commented has taken an economics class. A flat tax is a "regressive tax", which means it taxes the poor heavier than it taxes the rich. The purchases required to sustain a moderate life would cost a far larger percentage of a poor person's income than it would of a rich person's income.

Please go to school and pay more attention in your classes. I am tired of having my life affected by uneducated people's opinions, which allow lawmakers to continue to acquire more methods of control over the people of America with their propaganda. This is a good example why the rest of the world laughs at the stupidity of Americans.

EDIT: there may be one or two people who touched on the idea of a regressive tax.
EDIT: went too far crapping over everybody. I formally apologize for that, since it is not my style. It upsets me greatly to see so many people taken over by our government's propaganda.

QFT...

In its simplest terms:

Thats why the wealthier *love* these types of taxes. To make it simple:

Suppose you buy $1000 worth of groceries over a year and have a 10% sales tax. Your tax in this purchase would be $100.

The sales tax would be 1% of your income if you made $10,000 a year.

Same terms but you make $100,000 a year. Now your sales tax is .1% of your income.

Yes it is somewhat true that the wealthy would spend more $$, but overall a regressive tax favors the wealthier...

In a regressive tax, the less you earn, the higher your tax rate.



Edit: can't spell

That argument operates under the assumption that rich people buy the exact same food as poor people. I claim that's not true. A similar example uses a Honda Civic and how the tax on that hurts a low income person more than a high income person. Do you know many people that make a quarter of a million dollars per year that own a Honda instead of a Benz or a Porsche?

According to the Millionaire Next Door, their poll of millionaires indicate that most rich people look like you and me, in that they buy ordinary goods and services. Only the flashy ones buy the Benz or Porsche.

 

[Hammer]

1-3% is a joke. in reality it would take between 17-23% to take in enough money to cover what income tax provides now.

 

[upsciLLion]

Originally posted by: Zontor
However the wealthy often chooses to spend money in ways that avoid sales taxes (eg. labor-based services such as accountants, lawyers, etc).

The poor don't really have these choices.

The "trickle down" effect (eg. the rich spending money that ultimately benefits the lesser because it "trickles down" to the poor) is over-rated - note that I didn't say not true here....

Overall though regressive taxes still benefit the wealthy....

What do you feel would best replace the current system?

 

[Zontor]

Originally posted by: upsciLLion

Originally posted by: Zontor
However the wealthy often chooses to spend money in ways that avoid sales taxes (eg. labor-based services such as accountants, lawyers, etc).

The poor don't really have these choices.

The "trickle down" effect (eg. the rich spending money that ultimately benefits the lesser because it "trickles down" to the poor) is over-rated - note that I didn't say not true here....

Overall though regressive taxes still benefit the wealthy....

What do you feel would best replace the current system?

That is a hard question....in a Utopian society I would have to pick a socialist model - however that will never happen.

A bit of blunt history is on order here to explain my next point:

Historically there have been three classes

1] Low
2] Middle
3] Rich or aristocracy

The Aristocracy wants to stay where they are.
The middle class wants to become Aristocracy.
The Lower classes just want a better life and strive for the middle class.

The middle class usually enlists the lower classes to help them overthrow the aristocracy. After this happens, the middle class becomes the aristocracy and the lower class stay exactly where they always were - poor.

The point to make is that you (arguably) need a healthy middle class - I'm not sure there *is* a better tax system there are many smarter than I who have tried ... although we could make our existing tax system better. There are many theories you can read on how best to do this.

Much of our current tax system is a result of the Rockefeller oil monopolies and the anti-monopoly laws of the late 1800's and early 1900's. The laws were created (by the upper class) in response to the fear that one company would control all of a single resource.

The ideas of corporations, trusts, etc. were fleshed out further.

The catch 22 is to provide the wealthy the incentive to invest and create companies (tax breaks) yet tax everyone fairly. You really have to look at *who* makes the laws...what is in THEIR best interest (eg. to get elected again they have to please the voters in their home area....think: pork barrell projects.)

I'm sure, in your area, you have areas that will give you an incentive to buy a house there or build or start a business. How do you provide incentive yet tax across the board?

Arguably the breakup of the Rockefeller monopolies made the Rockefellers richer since they went after control of transportation of the oil....but thats another story.

 

[exilera]

Originally posted by: 5LiterMustang

Originally posted by: Juice Box
There is a new 'Fair Tax' system that is being proposed in washington which would basiclly work as follows:

1) You keep 100% of your paychecks...no income tax
2) You are only taxed on the things you buy
3) Federal Sales tax would go up 1-3% on everything you buy

IMO...this would be MUCH better than a flat tax becuase it taxes people for their SPENDING rather than their EARNINGS....which would be more fair to the poor and end up taxing the rich. Any opinions on the system?

http://fairtax.org

I've read about a dozen books on flat taxes and NST's, I have to say the latest book I'm reading by STeve Forbes on the Flat tax has just about convinced me. 3% is NOT nearly enough for an NST to work. In fact the lowest number I've read about being proposed is 8% realistic estimates put it around 18%.

ANYTHING is better than what we have now but I'm starting to think the Flat Tax at 17% with generous personal and child exemptions is by far the best alternative.

I agree; 17% flat tax would work imo.

 

[exilera]

Originally posted by: PawNtheSandman
Sounds good, but it looks like I would be buying everything on eBay in order to get around the taxes.

Oooh yea, put lots of money into eBay stock, because if this passes, a lot more people will use it.

 

[imported_benkenobi]

The poorest citizens are hurt the most by this, but if you dont care about them then by all means this is the tax system for you. We are so in debt right now that this would bankrupt the government most likely however.

 

[Ryan]

Originally posted by: benkenobi
The poorest citizens are hurt the most by this, but if you dont care about them then by all means this is the tax system for you. We are so in debt right now that this would bankrupt the government most likely however.

Dude - RTFT!!!!

 

[sandmanwake]

How would you make it fair to those of us who have Roth IRA's and have already paid taxes on our savings vs. those who have regular IRA's who have deferred their taxes?

 

[upsciLLion]

Originally posted by: sandmanwake
How would you make it fair to those of us who have Roth IRA's and have already paid taxes on our savings vs. those who have regular IRA's who have deferred their taxes?

A lot of people get hung up on Pareto Improvement analysis like this. It's sad because it quite often slows/prevents changes that could be quite beneficial.