Death and Taxes

[MichaelC]

You answered it as expected.  You didn't answer my question.

quote:Originally posted by cannon_fodder

Short version:

- It will be off set by elimination of income tax.

That's an assumption, pushed by those who are pro "fair tax".  My question had nothing to do with the how the "end product" would or would not equal the amount of current income taxes.  Let's put it another way.

You're going to remove a certain amount, 23% is their number, from the economy.  That number is substantially more than a large number of people currently pay into the system through payroll deductions.  The assumption being made is that "the price of goods and services" will stay the same because the difference between Sales vs Payroll will be offset by Sales vs Corporate Tax elimination.  In other words, while the price of goods on the consumer end goes up, and while a large number of people would have less money day to day, there would be a reduction on the corporate end that would cover the complete sales tax.

My question is what if it doesn't?  After all the numbers change, what if prices don't stay relatively (Income vs Cost) the same?

Also:

quote:
Am I to understand that your true dislike of the FairTax stems from a simple desire to avoid change? It seems the common thread in your quips, that you don't want a new system because without regard to the current systems flaws it doesn't bother you. That is my current understanding. If you oppose it for some other reason let me know - proposing 'short answers' to economics questions whose answer is outlined in the very document you quote:

How about not characterizing my opposition?  How does that sound?  Either you can answer the questions, or you can't.

[bokworker]

I think what MichaelC is trying to say is that the devil he knows is better than the devil he doesn't know..... not that I am trying to put words in his mouth.

[Conan71]

quote:Originally posted by MichaelC

You're going to remove a certain amount, 23% is their number, from the economy.  That number is substantially more than a large number of people currently pay into the system through payroll deductions.  

Not true.  Lowest segment of the working class (other than entry level minimum wage jobs) pays just over 22.5%.  Hardly a substantial difference.

From irs.gov:

"The new law extended the 10 percent rate to cover the first $7,000 of taxable income for single persons, $14,000 for married couples. It also lowered the tax rates above 15 percent to 25, 28, 33 and 35 percent. This is a drop of two percentage points for each rate except the top one, which went down 3.6 points.

The new law also raised the standard deduction for married couples to $9,500 and extended their 15 percent tax rate to $56,800 of taxable income. Each figure is double the number for single taxpayers. The changes reduce the "marriage penalty" – the difference between the tax couples pay and the amount they would have paid as two single persons."

Add 6.2% for social security, 1.45% FICA (employee share) to 15% and it comes to 22.65%.  

The primary group of people who are paying less are illegal aliens who claim 9 exemptions on their W-4, even when they are single, and they don't settle up at the end of the year.

[MichaelC]

quote:Originally posted by Conan71

Not true.

Link please.

[cannon_fodder]

In my defense, your question was vague.  I answered to the best of my abilities.  

quote:Explain how a 30% sales tax has no effect on services[?]

That is what I did.  As well as attempting to answer your additional questions of the effects of a parallel income tax and other snippets implied.

My answer WAS NOT an assumption.  If you take away the tax when you EARN the money and substitute a tax when you spend the money - the result is the same.  To ensure that the tax is progressive the rebate refunds a certain amount of money - ensuring many poor pay no taxes.  Instead of an assumption, it is a reasoned economic fact.  

Your state assumption is wrong.

quote:The assumption being made is that "the price of goods and services" will stay the same because the difference between Sales vs Payroll will be offset by Sales vs Corporate Tax elimination. In other words, while the price of goods on the consumer end goes up, and while a large number of people would have less money day to day, there would be a reduction on the corporate end that would cover the complete sales tax.

The price of goods on the consumer end is expected to go DOWN in the long run.  Corporations will save more than 30% under the new scheme because there will be the elimination of the corporate income tax AS WELL as associated compliance costs.  The price of goods on a gross basis will certainly go down and it is expected that in the long run the price will go down even considering the net tax effect.

Most people would have MORE money day to day as the government will not be taking you're money before it is due (ie. withholding).  For those that do not have any withholding currently they will STILL come out ahead thanks to the prebate - which is paid at the START of the month.

so:  Cost of Goods Down, Money in Peoples Pockets UP.  The economic data supports the opposite of your conclusions.  I take it you just skimmed the website to find things to snipe at without reading the information?

quote:My question is what if it doesn't? After all the numbers change, what if prices don't stay relatively (Income vs Cost) the same?

At any one moment, economics is a zero sum game.  There is only a certain amount of money in the economy at any time.  Other the long run, wealth can be generated or lost.  Every indication is that the elimination of an income tax will allow the economy to generate wealth FASTER than its current levels. The net cost of goods is not supposed to stay the same, it is anticipated it will go down.

If it doesn't, the system will have to be tweaked.  If for some reason competition does not lower prices at the realization of tax savings and prices rise and no new market competitors enter to under cut the field, then government will have a glut of tax revenue and the tax rate would be cut.  If prices do not fall, the 30% tax rate would exceed needed revenues.  The rate would be cut until the excess was reduced - lowering the net cost of goods.

quote:How about not characterizing my opposition? How does that sound?

Like my conversation with IP over abortion, I feel the need to characterize your position. If a party in debate will not characterize their own position, one must define the argument so as to proceed.  Otherwise, a party will raise point after point with no pattern or purpose other than with an intent to frustrate the one with a stated position.  That serves no logical purpose as it does not foster the debate nor advance either parties understanding of the issue.

Therefor, not characterizing your position does not sound good to me.  I would be happy to abstain if you would clearly state the basis for your opposition so that I might better understand it.  My views are not set, it is possible that I have not thought of something that would be detrimental to implementation of the fairtax or that you have an underlying belief that would prohibit you from ever accepting the FairTax (ie. religous belief in abortion debate).

quote:Either you can answer the questions, or you can't.

I can, and I have.

[MichaelC]

quote:Originally posted by cannon_fodder

Your state assumption is wrong.

quote:The assumption being made is that "the price of goods and services" will stay the same because the difference between Sales vs Payroll will be offset by Sales vs Corporate Tax elimination. In other words, while the price of goods on the consumer end goes up, and while a large number of people would have less money day to day, there would be a reduction on the corporate end that would cover the complete sales tax.

The price of goods on the consumer end is expected to go DOWN in the long run.

I granted that.  Read it again.

I'll give you a third chance to answer my question.

[iplaw]

This is going nowhere.  No matter what you put in your response, he's just going to say you haven't answered his question...it's like Groundhog Day.

[cannon_fodder]

Your question:

quote:My question is what if it doesn't? After all the numbers change, what if prices don't stay relatively (Income vs Cost) the same?

My answer:

quote:If [the cost of goods does not fall], the system will have to be tweaked. If for some reason competition does not lower prices at the realization of tax savings and prices rise and no new market competitors enter to under cut the field, then government will have a glut of tax revenue and the tax rate would be cut. If prices do not fall, the 30% tax rate would exceed needed revenues. The rate would be cut until the excess was reduced - lowering the net cost of goods.

SUPER SHORT ANSWER:
If price stay high, tax get cut.  


How did that fail to provide an answer to the question you posed less than 30 minutes prior?  What happens if prices end up going higher - the government gets more tax revenue since its all based on sales.  With more revenue than it anticipated it can cut the tax rate, which would result in exponentially lower prices (industry cost to make the goods goes down, consumer added cost to buy the goods goes down).

That simplified answer even IGNORES the the implication of a higher net income.  Since withholding will no longer be an issue realized earnings will automatically go up, causing the actual relative cost to be less than the stated net cost.  We don't need to worry about such complexities to answer the "what if" question.

What if we do not change anything and the tax code continues to grow more complicated every year and compliance costs continue to grow as a percent of GDP and special interest gain more loopholes?  (of course, that question is more of a WHAT WHEN than an IF question, since it has happened every year since the end of WWII)

Comfort with something bad is a poor excuse to oppose something new.

[Conan71]

quote:Originally posted by MichaelC

quote:Originally posted by Conan71

Not true.

Link please.

http://www.irs.gov/newsroom/article/0,,id=109817,00.html

Here's the '07 tax table to see what the difference would be on this year's earnings when filing next year:

http://www.irs.gov/formspubs/article/0,,id=164272,00.html

Keep in mind, the actual net tax rate at the 15% federal tax level (families earning betw. $15K and $77K) actually works out to just over 30%, taking into account employer contribution for FICA and SSI.  

Most employees don't think about the 7.65% payroll tax their employers contribute since it does not show up on their pay stub.  Essentially, this is money which could otherwise be paid as direct compensation to the employee, instead of paying hidden taxes on their behalf, if a company so chooses.  

If you are self-employed, the SE tax paid by the individual is 15.3% up to $94K on top of their federal tax rate.

[MichaelC]

quote:Originally posted by cannon_fodder

Comfort with something bad is a poor excuse to oppose something new.

Agreed.  Shall we move on now?

quote:SUPER SHORT ANSWER:
If price stay high, tax get cut.

Interesting.  If the sales tax + cost versus income, is greater than the relative rate of Cost vs Income:  the assumed perfect rate (30% sales tax to cover the Income Tax) gets cut.  What happens next?

[Conan71]

quote:Originally posted by Chicken Little
The rich can afford to pay more for things.  They don't need us to subsidize them.

Pretty much O/T,

This is an interesting dichotomy:  The U.S. is one of the wealthiest nations.  We pay more for prescription meds than other countries.  Why? we help subsidize lower priced meds for poorer nations.  Yet Dems are all about lowering drug costs.

Just interesting when we are talking about where we are willing to give and take on subsidizing others.

[cannon_fodder]

quote:Originally posted by MichaelC
If the sales tax + cost versus income, is greater than the relative rate of Cost vs Income:  the assumed perfect rate (30% sales tax to cover the Income Tax) gets cut.  What happens next?

if ((Sales Tax + Cost)/Income) > ((rate*Cost)/Income), then what?

revised:

Net Cost/Income > rate of change in cost/income

Revised:

Net Cost > Rate of change in cost.

No idea what you are even asking.  I tried to formulate it into some manner of sense, but it remains very unclear.  
Tax + Cost = Net Cost
Both sides are "versus income" - so that would cancel out of the equation.

So it seems to reduce to "if gross cost > Rate of change of cost, then what?"  But you can not compare the gross cost to the rate, it would be a % v. a real number and be > every time.  It doesnt make sense.

Perhaps you misunderstood something.  Previously, you ask what happens if prices stay high.  To which, I replied high prices will result in greater tax collections.  Greater tax collections would allow the tax rate to decrease and still result in the same funding.  A lower sales tax would reduce the net cost of goods.

This relationship has nothing to do with income.  The federal government does not look at peoples income before setting their revenue goals.  They look at how much money they will need an set rates accordingly.  If they collect excesses of money, they should cut the tax rate to match their budgeted receipts.

I am convinced you have no interest in this topic and only wish to waste my time.

[iplaw]

quote:I am convinced you have no interest in this topic and only wish to waste my time.

ding ding ding... we have a winner.

[MichaelC]

quote:Originally posted by Conan71

http://www.irs.gov/newsroom/article/0,,id=109817,00.html

Thanks.  Barring a certifiable miracle, I'll have to get back to you on this one.

[MichaelC]

quote:Originally posted by cannon_fodder

This relationship has nothing to do with income.

quote:That simplified answer even IGNORES the the implication of a higher net income.

Of course the relationship has to do with income.  You're asserting that net income will be higher under a sales tax.  I grant that.  It will absolutely relate to GDP, which is where I began.  You can look at it as a mathmatical equation, but Income X is not equal to Income Y.  By default.

So...

quote:SUPER SHORT ANSWER:
If price stay high, tax get cut.

If the sales tax + cost versus income, is greater than the relative rate of Cost vs Income: the assumed perfect rate (30% sales tax to cover the Income Tax) gets cut. What happens next?