Death and Taxes

[YoungTulsan]

Sadly, if the federal government suddenly came up with a solution (a flat or "fair" tax) to simplify taxes, we'd still have the State of Oklahoma, Tulsa County, and the City of Tulsa leveeing fees and taxes on everything.  It wouldn't get any simpler.

It's also hard to imagine how much of the federal tax revenue comes from taxing the same money multiple times.   So a one time bottom line simple flat or fair tax that eliminated all the taxes built into millions of different things, it would have to be very high to equal the same revenue.

[iplaw]

quote:Originally posted by Chicken Little
I know what he's pitching, and I think it's a con.  Neal Boortz loses me when he says things like "Why didn't some of these students fight back?".  I just don't think he's a credible source of information.

What about it is a con?  

If you don't like Boortz, how about:

*  Professors David Burton and Dan Mastromarco, University of Maryland and The Argus Group
*  Laurence Kotlikoff, Boston University
*  Stephen Moore, The Cato Institute
*  Professor Dale Jorgenson, Harvard University
*  Bill Beach, the Heritage Foundation
*  Jim Poterba, The National Bureau of Economic Research
*  Professor George Zodrow, Rice University and the Baker Institute for Public Policy
*  Professor Joseph Kahn, Massachusetts Institute of Technology

I'll ask again, have you actually read the Fair Tax plan?  If you have the questions you asked don't reflect it.

[Conan71]

CL, points well taken, I see where you are coming from in your logic.  Looking at your math, the family who makes $400K per year would still put four times the amount of taxes back into the system than the middle-income family.  

With this system, at 60% consumption, that family has $240K per year to save and essentially re-invest in college educations for their kids who, with better paying jobs will put more back into the economy.  They will save more personal funds for retirement, which means they need to take less out of SS and MC when they retire.  They also get into investments which provide capital for economic growth.

Why are we so focused on tax rates?  The bottom line is the total amount which flows into gov't coffers.  The present tax cuts are generating record over-all tax revenues due to what happens when money is in the hands of individuals and corporations instead of the government.  It is a proven concept which works.  The present deficits have far less to do with tax cuts, than a Congress and admin which spend money like drunken sailors on payday.

Please don't let personal paradigms about Boortz keep you from wanting to learn more about this.

[Chicken Little]

quote:Originally posted by iplaw

What about it is a con?

It's a proposal to eliminate most forms of taxation and replace them with a 23 cent sales tax on the purchase of goods and services.

As I have said, twice, and demonstrated once, under this system, the rich would pay less than they currently do and the middle-class would pick up the difference.  That's regressive, and I believe it is a misrepresentation to call it a "fair" tax.

If someone presumes that I hate the rich, think again.  With taxes, ultimately, it's about how much we have to surrender to the state.  Under this consumption tax, a smaller group of wealthier people will surrender less.  Presuming the government will still take the same amount of money, that means that a much larger group of middle-class people will have to surrender more in order to make up the difference.  So, most of us will pay more and a few of us will pay less.  That doesn't seem fair.

[iplaw]

quote:As I have said, twice, and demonstrated once, under this system, the rich would pay less than they currently do and the middle-class would pick up the difference.

You haven't DEMONSTRATED anything.  You've repeated yourself twice, which not the same as demonstrating.  What statistics or figures do you have to back up this claim?  What you have demonstrated is bumper sticker and slogan level of knowledge about the Fair Tax.

BTW, sorry CL.  I didn't see your calcs above...my bad, but I think CF has addressed it thoroughly.

[Conan71]

I fit the definition of a middle-income American.  I just pulled out my tax info for this last year.  

All based on the return I filed last month:

Just to be stupid, I calc'd 100% consumption.  I'd pay about $500 more per year in taxes under Fair Tax.  Then I calc'd an 80% consumption rate, after housing expenses (which I don't believe would be taxed) so I would come out on the high side.

According to my calcs, between what my wife and I paid on Federal (actual net, less miniscule refund), SS withholding, and Medicare, we would save about $5K per year in taxes under the Fair Tax.  That's before researching the pre-bates and exempted items.  

Looks like tax relief to me.

The Fair Tax would also eliminate itemized exemptions that the wealthy are able to take advantage of that the average family can not take advantage of, unless they are in over their heads on a mortgage they struggle to pay each month.

Before you poo poo it, run the numbers for yourself and see what it works out to.  If it doesn't work out for you then fine.  I'd rather take a serious look at the message on this issue than to ignore it because of the messenger.

[cannon_fodder]

Chicken Little - this is long (1500 words to be exact, wait, I just added some more, damnit!), I know, but please skim it and read the bottom.  I'm not interested in arguing, I want to try and figure out what your concerns are and what the Fair Tax does to remedy those concerns:

quote:Originally posted by Chicken Little
Let's say that the family that earns $80K spends 80% of of its income on goods and services with a 23% sales tax.  That means they would pay $14,720 in taxes.

So,
14,720/80,000 = an effective tax rate of 18.4%

And if the family making $400,000 spends 60% of their income on goods and services, you're right, it is quite a bit more.  At 23% thChicken Little - this is long, I know, but please skim it and read the bottom.  I'm not interested in arguing, I want to try and figure out what your concerns are and what the Fair Tax does to remedy those concerns:

Originally posted by Chicken Little
Let's say that the family that earns $80K spends 80% of of its income on goods and services with a 23% sales tax.  That means they would pay $14,720 in taxes.

So,
14,720/80,000 = an effective tax rate of 18.4%

And if the family making $400,000 spends 60% of their income on goods and services, you're right, it is quite a bit more.  At 23% they'd pay $55,200 in taxes.

And,
55,200/400,000 = yields an effective tax rate of 13.8%

There are several things not considered by your argument:

1) You ignore the fact that most families earning any amount of money over the poverty line spend close to 85% of their income.  There is a reason that 'rich people' live in big houses, drive expensive cars, go on lavish vacations, have giant diamonds, eat at fine restaurants, and buy $1000 purses.  

The last on is because they are insecure, but the other items are explained because they SPEND MONEY.  

2) As IPLaw pointed out, you ignore the fact that the money will be spent EVENTUALLY.  The system will be a wash in the long run.  If I indeed only spend 60% of my earnings over a 10 year period (apparently saving carefully for retirement) I have saved up $2.4 MILLION.  This money will be spent continuing to live my lavish lifestyle when I retire - and taxed at that time.

If I earn zero dollars in retirement in a family of 2 and spend $240,000 a year getting a government rebate of $6,440 my effective tax rate is... infinite percent.  He will pay  $56,000 a year in taxes on zero income.  Now THAT's a tax on the rich, you must the thrilled.

Likewise, the middle class man who saved up 20% of his earnings over ten years at 80K saved $160,000.  Since he didnt save much for retirement he would have to cut back to $16,000 a year to retire for the ten years (10 years is of course arbitrary for easy math), when he spends his 16K he will be taxed $4,160 and receive a rebate of $6,440 for his family of 2.  For a net GAIN on taxes of $2,280.00.  So his effective tax rate is negative infinity on earnings.

So the rich pay infinite taxes after earnings cease and the middle class get PAID after retiring.

Ignoring the ridiculous example, it illustrates how spending patterns after retirement wash out the difference.

3) Legacy Fortunes

If you are worried about large legacy fortunes not being taxed fear not!  If there is one thing legatees can do well it is spend their inherited money.  

Basically, in response to your fears of cash hording, the entire point of wealth is to effectuate its buying power.  No one, NO ONE hordes wealth forever. it is circulated and distributed in the long run.  At any given moment there are people saving excesses of money and other people spending excesses or money.

In the long run, the system is a wash.

4) Investment
The piles of untaxed cash you are worried about would not likely sit buried in the sand.  They would fund development in this country and others.  People with money generally give large sums to charity, to venture capitalists, and to investments.  Savings fund new businesses, new ideas, and new projects that employ new people and provide new opportunities.

Currently, these excesses of capital discouraged by the tax system and largely confiscated by the government to be spent on crap we dont need for problems we likely caused with out last bout of spending.

6) The tax punishes the rich.
You seem to be interested in punishing the rich for their wealth.  Or at very least, making sure they pay their fair share, which appears to be something like their share and the share for 7 or 8 other people according to the latest statistics.

But you are not punishing them for being rich, currently the tax system punishes them for EARNING money.  If they are already wealthy it is not taxed - they are free to sit on their piles of money as they see fit.  If it is earned over seas and spend here it is not taxed. If it is made in capital gains it is taxed less.  If they run their own business or set up a shame corporation to siphon money (legally of course) it is taxed less deductions and offset by past or future losses.  If they wish to transfer money to their children they can hire attorney's and accountants to set up tax abatement trusts or overseas venture investments with tax free maturity.

People with money currently pay less taxes than the middle class family does.  Because we tax earnings, not riches. This is detrimental as it discourages wage earners with high potential from staying the work force and encourages expensive measures to avoid taxation - that are unavailable to the middle class.

The Fair Tax wouldnt punish people for earning excesses of money - it would punish them from spending excesses of capital.  It would punish the exuberant lifestyle that they choose to live, not their success at their occupation.

Should the person who lives next door and drives the same car and spends similarly to you be taxed more simply because he is more successful at work?  Or should the person who choses to buy a new Excursion pay tax by virtue of his consumption? As I said before, in the end game his wealth will be taxed.

6) The poor
The poor are not an issue in this discussion because under current federal law they pay no taxes (over 50% of American's are a net DRAIN on the Federal Government. They get more in handouts, entitlements, and "tax rebates" than they pay in to the system).  Under the Fair Tax a person who spends less than the poverty limit will pay no federal taxes either.  In theory, it would be possible to live off of the rebate check you get every month if one so chose.

7) Tax Avoidance
Currently the wealthy have the advantage in tax avoidance - because it costs significant money to find the loopholes and set up the accounts/trusts and ensure compliance.  However, under the fair tax the poor have the advantage.  The rebate system coupled with the taxation of NEW GOODS only would ensure that most major purchases by the poor and middle class would go tax free.

A rich person is much more likely to buy a brand new house, a new car, or a new appliance than a person of lesser means.  I have a used washer and dryer, 2 used cars, an older house, and a used computer: all would have been tax free.  Some people I know need the latest and greatest and would never dream of driving "some ones old car."  So let them pay the tax, I'd be happy to see it happen.
------


Basically, Chicken Little, I am not tell you that you are wrong.  I'm trying to explain to you why I believe your fears are unfounded.  At the end of the day the rich would likely pay more in taxes as they consume much more and nearly exclusively new goods.  Legacy fortunes would be taxable and umbrella trusts could provide no shelter while enabling wealth to be maintained by responsible people if they so desired.

Additional benefits:
1) Simple compliance: end product new goods are taxed.  Period.
2) Transparency: We would know how much we pay in tax, and could EASILY work out what penny went where (1 cent of every dollar I spend goes to the Iraq war!  Thats BS!)
3) Special Interests:  The current tax code is manipulated repeatedly to support special interests.  Those interests are more often than not something that does not help most people.  Oil companies are a recent example, or car manufacturers, or railroads...etc.  Money talks in Washington, you can buy your industry favorable tax status.  The Fiar Tax would remedy this.

I'm not interested in telling you that you're wrong.  I want to convince you that the Fiar Tax is not the regressive monster that you fear.  What do you remain unconvinced of and how can I alleviate your concerns?

[iplaw]

quote:What do you remain unconvinced of and how can I alleviate your concerns?

What's it gonna take for me to put you in a Fair Tax bracket today?[]

[MichaelC]

You're not likely to convince me.  War was made on the Progressive System years ago, if you had a "fair" replacement instead of a euphemism, it would have been done by now.

quote:Originally posted by cannon_fodder

6) The poor
The poor are not an issue in this discussion because under current federal law they pay no taxes (over 50% of American's are a net DRAIN on the Federal Government. They get more in handouts, entitlements, and "tax rebates" than they pay in to the system).  Under the Fair Tax a person who spends less than the poverty limit will pay no federal taxes either.  In theory, it would be possible to live off of the rebate check you get every month if one so chose.

That's a pretty bold statement there.  "50% are a DRAIN", even if true on an individual level, these are the people that allow corporations to operate.  Their work allows companies to thrive, and wealthy people to get wealthy.  They are, indirectly, the tax base of the US.  Through their distribution of purchasing power and through their work, they are the driving force of the US economy.

This concept, that they could live off the money  granted to them by the US gov't, is interesting.  The whole argument against welfare is that the money is there in the first place, makes people not work.  You want to expand that and institutionalize "free money" on a massive level.

You're taking a system that is complicated but works, and want to exchange that for something you believe in.  You believe "pools of wealth" don't exist, you believe "poor are a drain", you believe "the wealthy have been punished", you believe "it can work".  Let's just call it a "Faith-Based Tax", sounds fairer.

[iplaw]

quote:Originally posted by MichaelC

You're not likely to convince me.  War was made on the Progressive System years ago, if you had a "fair" replacement instead of a euphemism, it would have been done by now.

You think "fair" would be enough to motivate those in Congress.  Pfftt.

You do realize that there is a massive machine that is the IRS and its associated "bot" agencies and thousands of professionals which feed off that system don't you?

Those in charge aren't interested in the Fair Tax for the same reason those in OPEC aren't interested in green technology for cars.

[Conan71]

I'm not a fan of the beaurocracy at the IRS.  I think I'd hate it even more if I wore CF's shoes.

I haven't seen anything about the Fair Tax plan so far that raises my hackles.  I would like to read deeper into it and see if there are any catches.  I like the idea of simplification and believe it would be prudent for each individual to look at what it would do to their own tax situation prior to dismissing it alltogether.

The IRS budget, is somewhere between $10.5 and $11 bln per year.  I understand it wouldn't gut the need for compliance and accounting, but on the surface it appears it would eliminate a fair number of necessary resources under the current system.  Loss of jobs from the IRS?  They can be absorbed into the private sector helping people invest and save their money. []

[cannon_fodder]

First, it should be noted that you did not take issue with a single aspect of the Fair Tax.  You sidetracked on the name, statistical payment of taxes, and my stance on welfare.  But nothing substantive about the Fair Tax.  Even after implying that it was regressive so you did not like it, you failed to rebut any of the reasons I presented that it would not be regressive.  You should have just posted your first sentence and left it at that.

But since you didn't...

quote:Originally posted by MichaelC

You're not likely to convince me.  War was made on the Progressive System years ago, if you had a "fair" replacement instead of a euphemism, it would have been done by now.

"Fair Tax" is not a euphemism, it's the name of the bill.  Referring to death as "passing away," or to rape as "sexual assault," those are euphemisms.  It is far simpler to refer to Bills and publications by their names rather than in descriptive terms.  However, if you so desire, we can refer to the Fair Tax as the National Sales Tax as presented in House Bill 25 draft 1 or Senate Committee draft 1025. I think Fair Tax is much easier to say.

But I agree that naming bills things like "the patriot act" and "save the kittens" or whatever is over done.

quote:
That's a pretty bold statement there.  "50% are a DRAIN", even if true on an individual level, these are the people that allow corporations to operate.  Their work allows companies to thrive, and wealthy people to get wealthy.  They are, indirectly, the tax base of the US.  Through their distribution of purchasing power and through their work, they are the driving force of the US economy.

Yes, people who receive a net payment from the Federal Government are, by definition, a drain on the treasury.  I did not say they do not contribute to the overall wealth and wellbeing of our economy.   I stated they take more money OUT of the federal government than they pay in under the current system.

LIKEWISE, under the National Sales Tax as presented in House Bill 25 draft 1 or Senate Committee draft 1025 the poor would remain a net drain.  So there is no argument to be made that it is detrimental to the poor.  An argument you did not bother to raise, instead taking issue with how I stated the fact.

quote:
This concept, that they could live off the money  granted to them by the US gov't, is interesting.  The whole argument against welfare is that the money is there in the first place, makes people not work.  You want to expand that and institutionalize "free money" on a massive level.

I have no desire to hand out any more free money than is already granted.  The idea behind the rebate in the National Sales Tax as presented in House Bill 25 draft 1 or Senate Committee draft 1025 is to ensure that no one is taxed at or below a certain 100+% of the poverty level.  Instead of having complex regulations, deductions, and brackets to determine taxes it is simplified in that no one is taxed on the first $X they spend.  All other's are taxed.

So the rebate is NOT a governmental handout, it is MEANT to be a rebate of taxes paid in.  However, the government will actually save money by simply paying this money to everyone instead of trying to figure out at what point Mr. Blow spent to the X dollar.  It is nothing more than an administrative decision to reduce overhead.  Since the VAST majority of people will spend above the poverty level in a given year, rebating the money as a blanket is far easier.

However, should someone spend less than the poverty threshold set, then they will indeed be getting a government handout.  Currently this is done in the form of the "Earned Income Tax Credit" (if you want to talk about bad names, how about a tax credit you get for not paying taxes?).  The addition of the rebate ensures that the tax is progressive so long as the person making more money... spends more money (a point that you also chose not to address).

If you would like to discuss the elimination of socialism in the form of bogus tax policy in its current form, I would be happy to.  

quote:
You're taking a system that is complicated but works,

The system works in the sense that it collects money for the treasury.  Under that low threshold, nearly any system would work. The National Sales Tax as presented in House Bill 25 draft 1 or Senate Committee draft 1025 would certainly work under this definition and help streamline the process - eliminating tens of BILLIONS in compliance costs and closing loopholes.

quote:
and want to exchange that for something you believe in.

 
Of course.  Only a fool would deny wanting to exchange the current system with a system they feel is far more efficient.

quote:
You believe "pools of wealth" don't exist,

Absolutely not what I said.  I said those "pools of wealth" (which, incidentally is not my phrase as the quotes would suggest) are eventually disbursed.  That view is based on the notion that the purpose of wealth is to acquire its purchasing power.  If not the current, future generations of wealth holders will spend that resource and it will be taxed.

If, for some odd reason, they chose not to spend any money then it sits as an investment and contributes to the economy as a whole.  Win-Win.  However, I do not know of a single rich person is history who has not seen their wealth spent within a couple of generations. Even as we speak the two richest men in the world (Gates and Buffett) have plans to disperse all of their wealth within 100 years.  If they spend all their billions, who do you think will not?

quote:
you believe "poor are a drain"

(again, I never used the phrase "poor are a drain," that is your phrase)

In the context that the poor in this country take more money from the treasury than they pay in, yes, that is a correct statement.  As described above, they contribute to the economic success of our economy and the wealth of nations... but are a drain on the treasury for the purposes of discussing NET taxation.  It should be pointed out that this was brought up to illustrate why the poor are not an excuse to withhold support of the National Sales Tax as presented in House Bill 25 draft 1 or Senate Committee draft 1025.

quote:
you believe "the wealthy have been punished"

Again, a phrase I never used.  Quotes are to delineate a statement previously made verbatim.  Not to reference a concept previously eluded to.

The closest to this statement I made was that many people think the rich should be punished for earning wealth.  That is the very essence of a progressive tax system.  The more money you make, the higher % of income you surrender on a progressively increasing scale.

Certainly that has to be viewed as a punishment?  Are they being rewarded with higher taxes?  No, fines and the loss of money are generally viewed as punishment.  You assault someone, you run a red light, or you file your taxes late they take money away as a punishment.  Loss of wealth is a punishment.

Thus, a progressive tax system punishes the wealthy.

quote:
you believe "it can work".

never made the statement... nor even implied that.

If I were to make a similar statement, it would be that "I believe will work better than the current system."  That goes without saying since that was the essence of my post.

quote:
Let's just call it a "Faith-Based Tax", sounds fairer.

I thought we agreed to call it the National Sales Tax as presented in House Bill 25 draft 1 or Senate Committee draft 1025.  The tax has nothing to do with "faith."  One is not taxed on or receive rebates for ones faith.  The tax is of no relation, let alone based on faith.  That would be a horrible name.
---

Now shall I make up a bunch of quotes and attribute them to you as your stated beliefs?

[MichaelC]

quote:Originally posted by cannon_fodder

First, it should be noted that you did not take issue with a single aspect of the Fair Tax.

Nor will I.  The onus is on you.  I don't care if you get a tax break.  Don't care if I get a tax break.  This isn't a "tweek", this is a demolition of the Progressive System for no apparent reason.  You have no idea if a "Fair Tax" will work, you have no idea what the effects will be.  All you have is a bunch of belief, which is all Faith is.  So yes, it is Faith-Based because you don't have a f***ing clue if it will work or what it will do.  Don't know what the word "faith" means?  Look it up.

The quotes are me summarizing.  Rant and cry all you want about it.  I don't care.

[iplaw]

[}:)]MichaelC, if you weren't so funny you be just pathetic.  Thanks for the laughs.  You're trying too hard to be a crank...[}:)]

CF:  You're just wasting your time.  He's just being a wanker for the fun of it.

[cannon_fodder]

quote:Originally posted by MichaelC
Nor will I.  The onus is on you.  I don't care if you get a tax break.  Don't care if I get a tax break.

If you are happy with the current tax system you are in the minority.  For every tax dollar sent to Uncle Sam there is 16 cents spent in compliance costs.  That's horrible!  If we could streamline the system the government could collect and extra $400,000,000,000.00 in taxes without costing employers or individuals any money.

The system is prone to open attacks by lobbyist. It requires an expert to navigate. And its prone to outright abuse because it is so complex the government doesnt really know what is required of taxpayers.

That's a system that works?

AGAIN - the only way that it is defined as WORKING is in that it bring money in.  Under that definition ANY TAX SYSTEM WILL WORK. Sending out soldiers to take property is a tax system that would work.

quote:This isn't a "tweek", this is a demolition of the Progressive System for no apparent reason.

It is the demolition of our current system BECAUSE IT IS HORRIBLE.  For the reasons described above the apparent reason is that it's broken.  We would be replacing one progressive tax with another - so all the socialist and everyone else will have their progressive tax system in place.

quote:
 You have no idea if a "Fair Tax" will work, you have no idea what the effects will be.  All you have is a bunch of belief, which is all Faith is.  
[/quote[

Faith is an supported belief.  National Sales Tax as presented in House Bill 25 draft 1 or Senate Committee draft 1025 has evidence supporting its usefulness from similar constructs at the state level as well as other nations.  Not to mention many noted economists.

This is not an unsupported belief.  I'm not asking you believe that there is an invisible man that lives in the cloud and wants you to eat the flesh of his sacrificed son ever 1/52 of the solar year or he will cast you into a pit of fire.  I'm asking you to use reason, logic, experience, and economics to try and understand why this would be a change for the better.

quote:
So yes, it is Faith-Based because you don't have a f***ing clue if it will work or what it will do.

Per above, yes, yes we do.  Sales tax works very well at the state level in most states.  Some to the exclusion of other fund raising methods.  Economists believe it will work.  As do members of the US Congress.

Perhaps you do not have a fncking clue because you have not studied the proposal and instead refuse to listen to any points on the issue.  A fine way to inform yourself and make sound judgments.  Clearly you do not WANT to be persuaded and refuse to acknowledge any arguments - since the ostrich has its head in the sand everything must be OK on the surface.

quote:
 Don't know what the word "faith" means?  Look it up.

As you command:

Main Entry:
   1faith Listen to the pronunciation of 1faith
Pronunciation:
   \#712;f#257;th\
Function:
   noun
Inflected Form(s):
   plural faiths Listen to the pronunciation of faiths \#712;f#257;ths, sometimes #712;f#257;thz\
Etymology:
   Middle English feith, from Anglo-French feid, fei, from Latin fides; akin to Latin fidere to trust — more at bide
Date:
   13th century

1 a: allegiance to duty or a person : loyalty b (1): fidelity to one's promises (2): sincerity of intentions2 a (1): belief and trust in and loyalty to God (2): belief in the traditional doctrines of a religion b (1): firm belief in something for which there is no proof (2): complete trust3: something that is believed especially with strong conviction; especially : a system of religious beliefs <the Protestant faith>

1) It is not a matter of duty or loyalty
2) It is not a trust in god nor religous doctrine
3) nor, as I pointed out above, is it a matter of belief for which there is no proof.

I would say I have a good handle on the definition and it does not apply.  I presume you are attempting to argue that it is a matter of the third preferenced definition, but as I stated before:  when one choses to ignore evidence he cannot claim evidence does not exist.

The quotes are me summarizing.  Rant and cry all you want about it.  I don't care.

If you did not care, you would not have mentioned it.  For that matter, I am proud to point out that I did not indeed rant - I merely pointed out the fact of the matter.  Also, as a matter of fact, I have yet to shed a single tear over this situation.  Though your dedication to ignorance on this matter might be said to drive a man to tears.