Scrap the Tax Code; Revamp Tax Philosophy

Government programs require money, and we might argue all day over how much is appropriate, but how we raise that money needs to be fundamentally changed. Our current income tax code has evolved for over 90 years, but was based on the questionable premise that productivity should be taxed.

On the contrary - earnings and competitive profits should be encouraged; they are the lifeblood of a healthy economy. Saving and investment should be protected; they are the foundation of a stable middle class. Consumption should be taxed.

First, I can accept that a regressive tax is unfair. A system where those making less, pay more, only accelerates the disadvantages of being poor. But why do many accept without question that those who make more should pay proportionately more? How is it "fair" to penalize success? Do we advocate "to each according to his needs, from each according to his ability?" That's a fundamental tenet of communism. Redistribution of wealth should not be the goal of the tax code.

Taxation of income punishes success. Sane taxation philosophy shouldn't work to suppress earnings. We should repeal the income tax and create a system based on consumption taxes. We should encourage earning, savings, and investment while discouraging reckless consumption that is often accompanied by debt.

The Fair Tax proposed by "Americans for Fair Taxation" has continued to grow its list of congressional sponsors. We won't hear much about this under a Democratically-controlled Congress, but fiscal conservatives should insist that any candidate for federal office support this plan, or have a full fledged proposal of equal merit.

I won't reiterate all the details available on the FairTax.org website, but I believe their arguments are sound and thorough. The Fair Tax would improve fairness and simplicity, and would increase the competitiveness of American industries at home and internationally. Together with restrained federal budgets, dramatic tax reform is critical to our economic health in the 21st century.

Michael Smith, Republican Candidate for President

Posted by Michael Smith at November 29, 2006 11:27 PM
Comments
Comment #196989

Michael said: “Redistribution of wealth should not be the goal of the tax code.”

If redistribution of wealth is not accomplished by some means, the entire society is eventually deprived and starved save for a very fortunate few. Wealth redistribution is precisely one of the main goals of the tax code and rightly so, for the long term viability of the economy. Concentration of wealth into ever fewer hands cuts off consumption by the middle class. Henry Ford understood this concept which is why he “insanely” increased his workers wages voluntarily making consumers of his product by his workers an heretical idea in his day.

You want FAIR? The Fairest tax system is the flat tax with a cutoff income floor under which no taxes are paid to prevent burdening the temporarily poor or poverty stricken. Apply the flat tax to all legal entities, which includes corporate, since they enjoy citizen rights just as individuals do, and more, in many cases, such as the right to lobby our representatives in person on vacations and at golf courses and in exotic lands. Of course, the corporate rate should not necessarily be the same as for individual income.

Perhaps a sliding 3 tier scale, no tax on individual or small business under a certain annual profit to revenue ratio, another tax for solely American owned and operated companies, and the highest rate for international American corporations with the condition that our markets immediately become closed to them if they leave the American tax system. Which of course would be a huge boon to small and entrepreneurial startups to take their place.

Posted by: David R. Remer at November 30, 2006 1:10 AM
Comment #196998

I think this is a great topic. I’ve been a Fairtax supporter since I heard about it a few years ago.
I’m not a Republican, but the only reason why anyone would not support this tax as far as I can see would be to punish the rich.
Under the Fairtax plan the poor would pay no taxes, and everyone else could pretty much choose how much tax you pay based on your spending habits.
Probably one of the best features of the bill would be the elimination of the IRS as we know it, and not having to keep so damn many records.

Posted by: tomd at November 30, 2006 4:38 AM
Comment #196999

David,
I was raised and taught all thru my 58 years that the purpose of the tax system is to finance our government. Can you please reference when this changed?

Posted by: tomd at November 30, 2006 4:43 AM
Comment #197002

Flat tax logic simply makes taxes simply simple!

Dude A makes $1,000, pays 20%
Dude B makes $50,000, pays 20%
Dude C makes $1,000,000, pays 20%
Dude D makes $1,000,000,000, pays 20%

Please explain how ANY other system is more fair?

Why should any one person pay a different percentage of what they make? Wouldn’t that be tax racism?

-Dutch Expat

Posted by: Dutch_Expat at November 30, 2006 7:37 AM
Comment #197004

That sounds simple, Dutch, but the truth is that the American public won’t let a system like that pass. The poor would have to pay then and they won’t accept that. Also you would still have to deal with INCOME, DEDUCTIONS, LOOP HOLES, etc. In the end it wouldn’t be much different than what we have now. I think the best course is to tax consumption. Other than to tax me, why does the government need to know where I work or how much money I make.
The Fairtax plan is not truly a fair plan in that it still lets the poor go without paying taxes, but it’s about the closest we can get to a really fair plan. I don’t have a problem with the poor not paying taxes. That would be kind of like asking a 6 year old to buy the gas that takes him to school. If you can’t pay, you can’t pay.

I won’t try to explain the plan in any great detail here. Please go to Fairtax.org and check it out. If you look at it with an open mind I think you will like it.

Posted by: tomd at November 30, 2006 8:22 AM
Comment #197013

“Why should any one person pay a different percentage of what they make? Wouldn’t that be tax racism?”

Good one Dutch!
But if we did that, then class warfare, envy, starving poor and seniors eating petfood scare tactics wouldn’t be very useful in getting people to vote for one’s party.

Our tax code isn’t about being fair and treating everyone as equals, it’s about punishing success, pandering for votes and ensuring govt controls our personal lives.

Posted by: kctim at November 30, 2006 10:38 AM
Comment #197015

Michael,

I’m for fair taxation. My definition of fair taxation may be different from others though.

My idea of fair taxation is to determine first and foremost how much all governments should be taxing. The forefathers idea was of a government that was small, VERY LIMITED and fostered SELF GOVERNMENT and SELF RESPONSIBILITY. That has to be kept in mind.

The REAL problem today is that the government has decided to do most things for us and taken away our right to decide things for ourselves and to take care of ourselves.

They have decided that we don’t know how to educate our children and that they will do it for us. Which, of course they have FAILED miserably. Today’s youth is terribly educated and they know next to nothing about the constitution, the bill of rights or how our government works. I guarantee you that I could give a BASIC 100 question test on the constitution that asked questions THAT ALL high school students should be able to get at least 90% of the questions right on, in order to graduate from high school; and my guess is that 95% of them couldn’t get 25% of the questions right. In other words 95% of the students would not be allowed to graduate because the couldn’t even get remotely close passing that test. Sad considering that George Washington stated that learning about our government was thee most important part of an education.

They have decided that we don’t know how to save for our retirement so they have decied that they will do that for us. Again they have FAILED MISERABLY!

Get out of the health care business. Of which they have FAILED DRASTICALLY! Are you getting the drift of the a common theme here? If big govenment gets involved in something they al- most always fail at it

They have decided who we will give charity to. Aren’t there many people out there who are getting chartity who don’t deserve it? People who aren’t willing to help themselves or put very little effort into it. I know many people like this. I would much rather decide for myself who I give charitable contributions to. It is my right isn’t it? Also why in the world are we giving so much money to foreign govenments when we have to borrow so much money to run our own government? Now if I said that I’m going to give 5 familes on my block $5,000 a year for a variety of different reasons but I’m going to have to borrow $30,00 to pay my own bills you would say that I was crazy. I our government does that every year!

Does the government really have the right to say to me,” I’m taking money from you and I’m going to give it to people, foreign governments, businesses and government programs that I think you should give to and you really have no say about it. If you don’t agree with our decison on who we are going to give the money to it’s really too bad because we are going to take it from you regardless of how you feel about it. Of course if you don’t like it you can always vote us out but these programs are so ingrained that most people think of them as mandatory, so it doesn’t really matter who you vote in these programs are here to stay.” A whole new mindset has to be given to the American people so they can begin to see that government really has no business in doing many of the things that they do. There are many people who deserve more charity than they are getting.

Also charity is a one on one personal decison. If I want to give charity to a person it makes it personal and more meaningful to me and the person recieving it if I go to them personally and give it to them. It creates a feeling of caring and the person is grateful and touched to recieve when I sit down and talk to them and then share my gift with them. Now they get their charity in a cold, impersonal government check that they really feel no connection to and no gratitude for. They begin to feel intitled to it.

The way it is now the government takes from us and gives charity to small businesses, corporations, nations, individuals, local and state governments based on a political whim. Many times the nations, corporations and individuals don’t really appreciate and are not really grateful for it because there is no CONNECTION from the giver. Leaving all that aside if you will and consider that IT IS NOT THE GOVERNMENT’s responsibility to do all that. It is not the common good that the constitution was talking about.

So first and foremost the government has to shrink DRASTICALLY,stop getting involved in things that is really none of it’s business and then we can determine how much money they should be taking from us. That has to be done first!

Then I agree with the flat tax people. Regardless if you are a small business, a corporation, rich or poor individual everybody pays the same and there are no write offs. Of course if the governemnt shrinks drastically there will be no need for tax breaks and write offs because the tax burden would be very small. The government needs to get out of the helping corporation growing business, the samll business,special interest, and union favor returning business, the nation propping up and tearing down business, the charity business, the never ending regulation business, the health care etc., etc.,etc. Just provide a military, some good roads, and a judicial system and that should take care of most of the common good responsibilities. Get rid of 80% of the government and then taxation will be a minor problem. Of course the general answer to this is going to be, “Oh come on Allen that is not practical. Be prudent. Be realistic.” But you see how far we have drifted from our founders intentions? I think my ideas are right in line with what the founders intended and we need to start to take the long road back to where they wanted us to be. Back to individual responsibility and SELF government. I think our founders were pretty smart guys and kind of knew what they were talking about. Maybe we should listen again.

Posted by: allen at November 30, 2006 10:52 AM
Comment #197017

I think we need a consumption based tax with some tax credits.

A consumption tax is also progressive in the sense that the rich presumably consume more. If they are not consuming more, they are not living as rich folks and it really doesn’t make any difference how much they have. Their participation in society is based on what they consume.

It is also a good thing to encourage saving and investment. Our current tax code works against that, as you say.

Posted by: Jack at November 30, 2006 11:23 AM
Comment #197025

With this consumption based tax, how do corporations get taxed?

Jack: What tax credits are you referring to?

Posted by: womanmarine at November 30, 2006 11:49 AM
Comment #197027

Oh, and Allen:

While I agree with a lot of what you say, I would be against taking away the safety net for the folks in jeopardy, be it seniors or whatever. I think it needs changing, but I am against just doing away with it.

Posted by: womanmarine at November 30, 2006 11:52 AM
Comment #197042
Why should any one person pay a different percentage of what they make? Wouldn’t that be tax racism?

-Dutch Expat

Because it wouldn’t be punishing success. After all, only evil folks are successful.
You could call it tax racism.

Posted by: Ron Brown at November 30, 2006 12:40 PM
Comment #197047

allen said: “The forefathers idea was of a government that was small, VERY LIMITED and fostered SELF GOVERNMENT and SELF RESPONSIBILITY. “

I love folks whose premise is we need to return to an agricultural based economy with only a few million population and 13 states, in order to address to today’s problems. It is a hilarious postulation.

Our forefathers designed a government for their time and circumstance. WAKE UP! We aren’t going back to the 18th century context to make the Constitution work for its day.

Our forefathers designed a Constitution and government capable of adapting to changing and growing circumstances, and that is precisely what has taken place. You can’t manage a globally competitive super economy based on technology and 300 million people with the government designed for the original 13 colony states.

Posted by: David R. Remer at November 30, 2006 12:48 PM
Comment #197049

Jack said: “A consumption tax is also progressive in the sense that the rich presumably consume more.”

Only up to a point, beyond which, they cease to consume more, and instead, invest more, thereby concentrating both wealth and power and exercising such wealth and power in creating political currency and sway which advantages them over the nation and the rest of its people. That much is already self-evident, as the most expensive mid-term election in our history a few weeks ago evidences.

Did Hillary Clinton consume more? Or, did she just use her wealth to insure her power in government and over government? Methinks it was the latter.

Posted by: David R. Remer at November 30, 2006 12:55 PM
Comment #197053

tomd
Under the flat tax plan I would like to see there wouldn’t be any deductions. It would be as Dutch said.
DUDE A MAKES $100 PAYS $20
DUDE B MAKES $1,000 PAYS $200
DUDE C MAKES $10,000 PAYS $2,000
DUDE D MAKES $100,000 PAYS $20,000
DUDE E MAKES $1,000,000 PAYS $200,000
No deductions no loopholes. Just send in 20% of what you make.
While Dude A will have only $80 left and Dude E will have $800,000 left, if you were Dude A wouldn’t that make you more determined to become Dude E? And if everyone is doing this wouldn’t the government be collecting more tax money?
I’ve talked to folks that say they would like to get into business but they don’t want to end up working their butts off and paying more in taxes and keeping less of what they earned. This is the problem with the current tax code. And it’s not the rich that’s doing this. They can afford the tax shelters that small business folks can’t.
The rich could care less what the top tax bracket is. They just shift money into tax shelters and take the deductions that you and I can’t afford.

Posted by: Ron Brown at November 30, 2006 1:00 PM
Comment #197056
A consumption tax is also progressive in the sense that the rich presumably consume more.

Jack, this statement is disingenuous. Certainly the rich spend more than the poor, but as a percentage of income, a consumption tax would tax vitually all of the income of the poor and almost all of the income of the middle class. The very rich, if they are not foolish, do not spend most of their income. And once you’ve accumulated several million, it makes little sense to hold the kind of jobs most people in the middle class hold because investment income, even no-risk CD returns, is much, much greater than 99 percent of the jobs most people could ever expect to have.

This imbalance could be partially addressed by tax credits, of course, but the devil is in the details.

Posted by: Trent at November 30, 2006 1:08 PM
Comment #197058

Won’t the rich then just buy out of country?

Posted by: womanmarine at November 30, 2006 1:13 PM
Comment #197068

Most if not all of your questions about the Fairtax pan can be found at Fairtax.org.

If the purpose of taxation is to finance government like I think then the Fairtax will do just that with an awful lot of fringe benefits. First the tax is revenue netural, so no monies would be lost to the government. There would be no IRS as we know it today. No April 15th deadline for filing. The “prebate” would make sure that the needy didn’t pay any taxes.

“With this consumption based tax, how do corporations get taxed?” With this tax corporations don’t get taxed and since they don’t get taxed they don’t have that amount to pass along to their customers. Businesses will have to reduce prices by almost the amount of the tax to be competative. So instead of paying the tax, they reduce their price thus cutting out the middle man (Uncle Sam). Under this plan, there would be no loopholes for anyone to get a “tax break”. There would be no tax on corporations and so maybe it would start a mad rush to start and keep corporations here.

And since most lobbying efforts in Washington are seeking tax loopholes, think of how many high priced lawyer type lobbyists that would lose their jobs. As Martha would say “That is a good thing.”

Posted by: tomd at November 30, 2006 2:11 PM
Comment #197070

David,

In an early morning post you stated “Wealth redistribution is precisely one of the main goals of the tax code and rightly so”

I asked you for a reference to when the goal of taxation changed from financing a nation to redistributing the wealth.

Did you miss the question?

Posted by: tomd at November 30, 2006 2:19 PM
Comment #197072

Tomd - the answer to your question is obvious - Since the Great Depression of the early 1930’s, that fact should have been obvious to you if you were awake during American History class.

Posted by: David R. Remer at November 30, 2006 2:25 PM
Comment #197077

Michael:

“But why do many accept without question that those who make more should pay proportionately more? How is it “fair” to penalize success?”

They should pay more because they get more from the government. What does the average Joe who gets an average wage get from all the government agencies? Very little. What does a businessman get from the government? A great deal, and the bigger the business the more government services are available to him.

Success? Where does it come from? Do you believe that if you were born in the Sudan or some other God forsaken country you will have as much chance of reaching “success” that you have here in the U.S.?

You should be happy to pay for your “success” with relatively more taxes.

Posted by: Paul Siegel at November 30, 2006 2:42 PM
Comment #197078

Jack-

Wow. You finally decided to write about the consumption tax, something I’ve been repeatedly talking about for years with very little comments from you or anyone else. Have you felt this way for some time?

Consumption tax, while slightly progressive in theory, will certainly allow for much more free choice in regards to tax burden. Rich people do, in fact buy more stuff. And buying securities is no different than buying a house or car or shampoo.

This system also allows us to follow money as it travels through the economy. We are still left with a drug war and many other black markets where money can fall through the cracks, but its would still be much better than what we have now - tax shelters, exceptions to exceptions, etc. This must also be coupled with taxes on the extraction of finite resources. There are a lot of simple and effective ideas, but the first step is desire.

On a more practically applicable level, there should be a cap on the deductability of huge primary residences (ie tax shelters), restrictions on the ability of charitable remainder trusts to give money to charities in ways that clearly benefits the estate or its beneficiaries (usually they run the charity and take substantial chunks as salary), more credits for child care, education and health care expenses, continuation of the ESTATE tax which only applies to the richest people anyway, windfall profits taxes on revenues related to polution generating activities and the extraction of finite resources, and a butt-load of competent auditing.

I’m rather upset that this topic has to come up when I am too busy to comment in detail…hopefully it will be raised again. There are a great number of tangable ideas to debate in the area of taxes.

One last point. I read today that salaries, as reported to the IRS, have decreased since 2004. That can’t be good.

Posted by: Kevin23 at November 30, 2006 2:47 PM
Comment #197079

Michael Smith-

I’m amazed by how your posts continually strike a nerve with me…in a good way. I am in agreement with the vast majority of your posts. Keep up the good fight.

Posted by: Kevin23 at November 30, 2006 2:49 PM
Comment #197081

David – society dependent on redistribution of wealth? Perhaps, but it shouldn’t be an overt act of government. Let’s stimulate investment and jobs. Let’s increase the fluidity of wealth moving through the system by putting money into domestic industry, not overseas sweat shops. Let’s see government stimulate capitalism, then sit back and watch capital create value through invention and productivity. Government movement of capital does nothing to add value.

Allen, I’m sympathetic to your concerns, but today’s modern economy and our government commitments to retirement security, etc. can’t just be abandoned. I think we can be philosophically more consistent with the founding fathers’ vision, but face it, there’s no turning back the clock. We have a complex global economy with many “entities” that were not relevant in the 18th century. The challenge is to move toward more free markets where the “invisible hand” has influence, rather than the heavy hand of government.

Again, aside from arguments on how much government spends, the reality is that government requires funding and we need a better system. Check out the FairTax.org website for thorough details. They have done an excellent job of addressing the issues comprehensively.

Posted by: Michael Smith at November 30, 2006 2:59 PM
Comment #197096

Paul said: “They should pay more because they get more from the government.”

I would add to that, they have far more to lose if the government, the nation, and the people fail as a society. Ergo their ‘insurance premiums’ against such failure should be commensurately higher.

The odd thing is, this whole debate about taxing the rich is a middle class debate. The majority of the wealthy in this country don’t object to paying taxes. They only ask that the taxes they pay are spent and used wisely for the benefit of the nation as a whole. Only the non-wealthy take sides on whether the wealthy should be taxed at a higher rate or same rate or hardly at all.

A poll of the very wealthy in America back in 2000 showed the majority would not mind seeing their rates raised if it would effectively remedy the recession.

Posted by: David R. Remer at November 30, 2006 4:31 PM
Comment #197098
Michael Smith, Republican Candidate for President wrote: But why do many accept without question that those who make more should pay proportionately more? How is it “fair” to penalize success? … Redistribution of wealth should not be the goal of the tax code.
You are absolutely correct. The following flat 17% income tax rate plan is a fair tax system, with no tax on income below the poverty level, no deductions of any kind, NO tax loop holes, NO graduated tax rate tables, NO taxes on Social Security and Medicare, NO taxes on corporations. Under a flat rate tax system, the person that makes twice as much pays twice as much tax. What could be more fair? Equal proporations (But ONLY on income above the poverty level). But, some people believe the wealthy should pay even more (i.e. even larger percentages). They don’t think paying double the tax for double the income is fair? In my opinion, those that want more than the same proporation are simply disguising their envy and jealousy as demands for equality.
Michael Smith, Republican Candidate for President wrote: Taxation of income punishes success. Sane taxation philosophy shouldn’t work to suppress earnings. We should repeal the income tax and create a system based on consumption taxes.
No ! You just said above that the goal is to pay proportionately (i.e. equal proportionately such as percentage). If you put taxes on the consumption side, is is impossible to tax income proportionately.
Michael Smith, Republican Candidate for President wrote: We should encourage earning, savings, and investment while discouraging reckless consumption that is often accompanied by debt.
Yes. But a consumption tax won’t help all of that.
Michael Smith, Republican Candidate for President wrote: The Fair Tax proposed by “Americans for Fair Taxation” has continued to grow its list of congressional sponsors. We won’t hear much about this under a Democratically-controlled Congress, but fiscal conservatives should insist that any candidate for federal office support this plan, or have a full fledged proposal of equal merit.
Good. I hope this FairTax plan fades away. Initially, I thought it might be viable. After studying it closely, a national sales tax would be a huge mistake.
  • the FairTax.org recommends a 23% sales tax rate (23% inclusive, but actually, it is a 30% sales tax on the price of the item purchased). That is, if you buy a $100 item, your tax is $30, which is 30% of $100. So, it is a bit dishonest to call that a 23% sales tax, when most people understand sales tax to be a “percentage of the item purchased”. Fairtax.org calls it a 23% tax by calculating $30 on the sum of $130 from the cost of the item purchased and the tax on it ($30 / $130 = 23%). Either way, 23% or 30%, it is very high sales tax. Too high.
  • Such a high rate (23% inclusive, 30% exclusive) will almost guarantee blackmarkets and tax evasion.
  • There is less transparency of sales taxes collected, versus income tax (especially if you consider the number of sales to the number of people with income). Less transparency will breed more corruption.
  • There is insufficient proof to show that all will be taxed equally (based on income). Since most people insist that the objective is to tax income equally, (except the poorest below the poverty level), how does the fairtax plan prove that income will be taxed equally ? That is a very interesting point. If the main question about any tax system that is continually asked is “Will everyone (excluding the poor) pay their fair (or equal) percentage of tax related to income?”, then what does that tell you? It seems many people still want the end result of any tax system to be that everyone pays their fair (or equal) percentage of income (excluding those below the poverty level, which would pay zero tax). Therefore, if we are continually tasked with proving that any tax system, in the end, must fairly tax income the same percentage (excluding the poor who pay zero tax), then why not simply retain the income tax (but greatly simplified)?
In my opinion, the FairTax.org plan will let the wealthiest evade more taxes than ever before. If the goal is to tax income equally (as most people want), then why complicate it by trying to place the tax on sales (on the other end of the spectrum)? Also, we might end up with both a federal sales tax, and federal income taxes. All that is required is a simplification of the existing system. Make it a flat 17% rate income tax, eliminate all the tax loop holes, and don’t tax anyone until their income exceeds the established poverty level.

OBJECTIVE: design a tax plan where all pay the same percentage of income ( except the poor, which pay nothing ), and satisfy the following:
(01) has a sufficient probability of actually taxing income equally;
(02) retains Social Security and accounting for it (currently 12.4% on first $90K gross income);
(03) retains Medicare and accounting for it (currently 1.9% on gross income;
(04) defines the tax collection methods;
(05) has a sufficient probability of compliance;
(06) does not increase tax evasion;
(07) does not increase black markets;
(08) does not driveup the cost of all products and exports;
(09) does not tax the poor and truly needy;
(10) resolves question of whether corporations should be taxed?
(11) adequately integrates and/or replaces old systems with new systems;
(12) does not double tax: for example, with the fairtax plan, the vastly wealthy get double taxed, since they already paid income tax on much of their money? That will go over like a lead balloon.

The obvious question, is this: Since the objective is to tax income fairly and that for many seems to be a flat rate income tax (with a poverty level exemption for the poorest below the poverty level), how does the fairtax plan prove that income will be taxed equally ?

One question about any tax system that is continually asked is:


Will everyone (excluding the poor) pay their fair (or equal) percentage of tax related to income ?

Therefore, it seems many people still believe and want the end result of any tax system to be that everyone pays their fair (or equal) percentage of income (excluding those below the poverty level, which would pay zero tax).

So, if we’re continually tasked with proving that any tax system, in the end, must fairly tax income the same percentage (excluding the poor who pay zero tax), then why not simply retain the income tax, except make it a flat tax rate of 17%, eliminate ALL tax loop-holes, deductions, subsidies, which will also mean little or no changes for Social Security tax, and Medicare tax, and vast simplifications for accounting for Income.

One thing is for certain. it is not easy for everyone to live at the expense of everyone else. And, when people try to do that, these systems become perverted, abused, and unfair (like our current tax code). Over-complication is used to pave the way for abuses.

But, like many badly needed, common-sense, no-brainer reforms, it is all futile until a fundamental change is made first to eliminate irresponsible, corrupt, bought-and-paid-for, look-the-other-way incumbent politicians, and make government responsible, transparent, and accountable too! That is, Stop re-electing irresponsible incumbent polticians.

Michael Smith, Republican Candidate for President wrote: I won’t reiterate all the details available on the FairTax.org website, but I believe their arguments are sound and thorough.
You’d better study it a lot closer. Prove that income is taxed proportionately. Not consumption.
Michael Smith, Republican Candidate for President wrote: The Fair Tax would improve fairness and simplicity, and would increase the competitiveness of American industries at home and internationally.
No. It isn’t fair and a 30% sales tax would create black markets.
Michael Smith, Republican Candidate for President wrote: Together with restrained federal budgets, dramatic tax reform is critical to our economic health in the 21st century.
Tax Reform is important, but not the most important issue. The most important issue is the root problem that is at the root of all our other many pressing problems.
  • Posted by: d.a.n at November 30, 2006 4:50 PM
    Comment #197099

    Geeze Dan, you sure know how to hijack a thread.

    Posted by: womanmarine at November 30, 2006 4:54 PM
    Comment #197102

    As a result of all the tax loop holes, the graduated tax system doesn’t work anyway.
    The current tax scale varies from 0% upto 35%.
    However, due to that ridiculous number of tax loop holes, tax shelters, and over-complication, the wealthy don’t really pay on their entire gross income. Many wealthy are paying lower percentages than the national average of 21% due to all the tax dodges.

    If everyone paid their 17%, the government would have more than enough.

    Tax reform is important, but not the most important of all our problems.

    The worst problem is the cause of ALL these problems.

    But, with regard to taxes, there is another hidden tax that is being foisted upon us every day: Inflation.

    The Fed and government are printing too much money, causing destabilizing inflation.

    To make matters worse, they are also borrowing, spending, and creating massive debt, which creates even more pressure to print even more money.

    So, if the Fed and government are going to do this and print all the money they want, why tax at all ?

    Posted by: d.a.n at November 30, 2006 5:08 PM
    Comment #197103
    womanmarine wrote: Geeze Dan, you sure know how to hijack a thread.
    Sorry. It was on topic (i.e. taxes, economics, morality of different tax systems, etc.)

    I just try to be thorough. : )

    Please continue.

    Posted by: d.a.n at November 30, 2006 5:11 PM
    Comment #197105

    Why do we insist on taxing income if the goal is not to tax the rich?

    Posted by: tomd at November 30, 2006 5:32 PM
    Comment #197106

    If we go to a flat tax system or a fair tax system, and all deductions truly are done away with, what happens to the charities who depend on people and corporations who need to write off some cash and get some publicity?

    I don’t like the current system. I am in the upper end of income, and though I do not like the system, it is the one I have to work in. So I take full advantage of the legal deductions I can, and give heavily to local charities/organizations.

    I agree simplicity is normally good, but in this case, I am not sure how we can simplify in the way being batted around here without hurting others in a major way.

    If we go to a flat tax, there would have to be a floor dependent on household members under which there would be no tax at all. Then, if you make anything over the floor, you pay tax on only that amount of money. Isn’t that tantamount to a deduction?

    Be careful in wishing for super simplification. You may just get it.

    Posted by: Chi Chi at November 30, 2006 5:37 PM
    Comment #197109

    d.a.n.

    Did you actually read the fairtax plan, or just by the b.s. that someone else spewed. The 23% tax is an imputed tax. It is stated that way because that is how we explain income taxes. If you make $100 and are in a 10% tax bracket you pay $10. Same thing with the fair tax.

    “Prove that income is taxed proportionately.”

    What part of consumption tax didn’t you get?

    wkw

    Posted by: wkw at November 30, 2006 5:46 PM
    Comment #197123

    d.a.n, if corporations are exempt from the flat tax, how do you stop corporations from funding the lifestyles of the rich and famous tax free?

    Posted by: David R. Remer at November 30, 2006 6:50 PM
    Comment #197134

    Dan - I don’t suggest that the FairTax treats income fairly; it doesn’t treat income at all. And yes, a flat tax does treat income fairly, but why should income be the only viable measure by which we tax an individual?

    We should encourage earnings. We should do all we can to reward productivity, ingenuity, investment, and plain old labor. We should provide incentives to frugality.

    We ought to be concerned a philosophy that subtly dissuades hard work in an environment where rampant consumption is underwritten by huge debt. If we can even slightly provide impetus to increased earning, and increased savings and investment, while creating the notion that one can control their tax burden by putting their wallet away - we should do it. Fairness is inherent by having some control over your taxable choices.

    Black Markets? A red herring - the impact of garage sales, smuggled t-shirts, or homegrown vegetables would be miniscule compared to the rackets our accounting industry dreams up for tax avoidance, let alone the tax evasion that is present today.

    I imagine Wall Street would go into shock over a slowing consumer economy, but a slow economy with better savings and investment would be fundamentally healthier than the facade we currently encounter built on debt.

    Posted by: Michael Smith at November 30, 2006 7:10 PM
    Comment #197135
    David R. Remer wrote: d.a.n, if corporations are exempt from the flat tax, how do you stop corporations from funding the lifestyles of the rich and famous tax free?
    Well, that’s probably already a problem, anyway. But, those things given to employees should be viewed as income to the employee. When a corporation gives its employee a paycheck, that is clearly income. When a corporation gives its employee a bonus check, that is clearly income. When a corporation gives its employee stock options, that must also be treated as income when it is sold (that’s the current law). When a corporation gives its employee stock, that must also be treated as income (based on the current price) when it is received. When a corporation gives its employee a free car as a bonus, that must also be treated as income. When a corporation pays for its employee’s living expenses, that must also be treated as income. When a corporation pays for travel, it must be business related, or it is treated as income. There is a monumental amount of accounting for this stuff already for tax deductions. Either way, some things are wide open to abuse, no matter what.

    Many of these laws are already in place.
    Most observe them.
    Law enforcement is another issue.
    Taxing corporations 30% as a result of non-compliance with other laws is probably not a good way to get money out of corporations.
    A problem with corporate taxes is the lack of retained profits to re-invest into the company, because those profits are taxed 30% (15% for small corporations). Therefore, most corporations, already, don’t pay much in the way of corporate taxes.

    wkw wrote: d.a.n. Did you actually read the fairtax plan, or just by the b.s. that someone else spewed.
    Yes I read it many times. I even liked it at first. Even contributed to FairTax.org once. But, when I studied it closer, there were several things (above) that bothered me.

    The problem is that it will most likely put the biggest tax burden on the middle income group, because a 30% sales tax (23% inclusive) on consumption will be a larger percentage of income for the middle income group.

    It is requires more change from the way things are done now. Also, the accounting could become vastly more complicated. Compliance could become vastly more difficult. It may be more susceptible to abuse than income tax evasion.

    A 30% sales tax (23% inclusive) is way too high. That will almost guarantee black markets. It’s not just how it might conceivably all even out; a 30% sales tax is much too high.

    Also, the accounting becomes a nightmare.
    There are far fewer incomes per year than the total sales transactions.

    The system I recommended would be far simpler to implement. All deductions would be eliminated. No one would pay tax on income below the poverty level. Everyone else pays the same flat 17% income tax. The calculation becomes much easier. The accounting becomes much easier.

    I understand perfectly what the deal is with the 23% inclusive tax is really a 30% sales tax.
    After all, I just explained it above.
    So why do you feel the need to re-exlain it?
    At any rate, when the subject of a sales tax comes up, some people think of most (if not all) sales taxes as a tax on the price of the item.
    With the FairTax, that is 30%. Not 23%. That is worth noting, so what’s your beef? Just don’t want it to look so bad?

    wkw wrote: What part of consumption tax didn’t you get?
    Which is precisely the problem I am pointing out. Why is taxing consumption fairer than taxing income? I get it just fine. Do you? Do you really understand the ramifications? I doubt it.

    Also, what the FairTax fails to point out is that prices (overall) can only fall if employers can cut their employees wages. It has to come from somewhere. Say your salary is $50K a year today, but you take home $40K after income taxes. Under the FairTax system, there would supposedly be a savings of $10K, and must be able to lower its prices accordingly, but ONLY by reducing your salary by $10K to $40K. Theoretically, your take-home pay is the same as before, since you now keep 100% of your income.

    One advantage of the FairTax plan is that the wealthy would no longer be protected by the Social Security cap.
    But, also, the flat 17% income tax system would have no caps on Social Security and Medicare. It’s a flat 17% on all income above the poverty level.

    This is a serious issue, and I don’t accept the FairTax system until it proves that taxation is not heaped upon the middleclass mostly. 30% sales tax on food for a person that makes $40K is a much larger percentage of his income that 30% tax on food for a person whose income is $1 million per year. The common/popular argument that the wealthy will spend sufficiently so that an near equal percentage of their income goes to taxes has not been proven out.

    And if that is not the case, it is a system I will never support.

    At any rate, this is a serious issue, and it is incumbent upon the FairTax.org to prove that it is a fair system. If the middle income group ends up payin most of the taxes, it is NOT fair. Thus, the FairTax.org plan must prove that it is highly likely that all groups are likely to pay an equal percentage of income to taxes. Those that make less should NOT be burdened with a larger percentage of their income going to taxes.

    Anyone that thinks that is fair is full of crap.

    wkw wrote: What part of consumption tax didn’t you get?
    wkw, If that is what you are promoting, then that applies to you too.

    Still, this problem (actually a symptom of a larger problem), along with our other many pressing problems are all futile as long as we fail to recognize the root problem. It’s like a ballon that you squeeze on one end, and the other end grows, so you squeeze the other end, and the middle grows, etc., etc., etc.


  • Posted by: d.a.n at November 30, 2006 7:15 PM
    Comment #197136

    David, The corporate boogey man? Class envy? Do you really suppose any corporation has ever let an income tax affect their bottom line? Consumers pay corporate taxes, and with a markup.

    Posted by: Michael Smith at November 30, 2006 7:15 PM
    Comment #197139

    Michael, I agree with your sentiments even if I don’t, necessarily, agree with your approach. We should save more, etc. But we are a consumerist society — Americans are bombarded from all angles with the consumerist ideology. Our very economy depends upon it. What would happen to the economy if we all started being prudent with our money? Remember that in the days after 9/11, our government encouraged us to spend, spend, spend to keep the economy going.

    Anyone know of any analyst who has studied the likely effects if suddenly Americans started spending less?

    Posted by: Trent at November 30, 2006 7:18 PM
    Comment #197140
    Michael Smith wrote: d.a.n, I don’t suggest that the FairTax treats income fairly; it doesn’t treat income at all. And yes, a flat tax does treat income fairly, but why should income be the only viable measure by which we tax an individual?

    Any tax system that places the majority of the tax burden on one group more than another is unfair.

    Taxing consumption may do exactly that.

    30% sales tax on food for a person that makes $40K is a much larger percentage of his income than 30% tax on food for a person whose income is $1 million per year. The common/popular argument that the wealthy will spend sufficiently so that a near equal percentage of their large income goes to taxes has not been proven.

    I don’t think it can be proven.

    You already said some should not pay proportionally higher taxes than others.

    So, prove to me that the FairTax system doesn’t do that very thing you say should not happen.

    Posted by: d.a.n at November 30, 2006 7:21 PM
    Comment #197141

    Michael,

    Do you worry about the power of multinational corporations? Many generate more wealth than a lot of counties. The good thing about a democracy is that they people can influence their government. But we can’t vote out the board of a megacorporation. Couple that with the fact that many corporations now police or attempt to police the private behavior of their employees.

    As with most things, it comes down to power.

    Posted by: Trent at November 30, 2006 7:25 PM
    Comment #197148
    Trent wrote: As with most things, it comes down to power.

    Yes, but there are things to balance power.

    • Responsibility = Power + Conscience + Education + Transparency + Accountability

    • Corruption = Power - Conscience - Education - Transparency - Accountability

    But, it won’t happen repeatedly re-electing, rewarding, and empowering Irresponsible, Bought-and-Paid-for, look-the-other-way, Incumbent Politicians !

    Education is needed to understand the fundamental problem, and the solution.

    Posted by: d.a.n at November 30, 2006 7:42 PM
    Comment #197152

    Let me say this.

    I was initially hopeful about the FairTax plan.

    Now I am V_E_R_Y suspicious of the FairTax plan.

    The Flat 17% Income Tax Plan seems like a much safer and more fair system.

    This is an important issue.
    It deserves more research.
    How about a detailed list of PROs and CONs ?

    Posted by: d.a.n at November 30, 2006 7:54 PM
    Comment #197156

    Dan, You’re right to be concerned about the regressive nature of a straight consumption tax, and some would propose that food and basic necessities be tax-exempt for that reason. The FairTax includes a rebate system that compensates for the taxes paid on basic necessities and offsets the regressive burden of those who must spend most of their income on fundamentals.

    Trent, I do worry about multinationals. I also worry about unions and any collective source of political interest. Are you suggesting that they deserve to be taxed because otherwise they will abuse their power? I actually wonder if the corporate income tax were removed if they might have a lessened interest in political activities.

    Regarding a shift in our consumer economy; I’m not economically savvy enough to have a comprehensive answer on that, but I doubt that the shift would be dramatic or sudden. We took years to wind this economy up to the voracious appetite it currently exhibits. I imagine that the negative factors of a slower consumption rates would be well offset by reductions in debt and more capital available for productive investment.

    Posted by: Michael Smith at November 30, 2006 8:21 PM
    Comment #197158

    Michael,

    I’m not economically savvy enough either; economics is way, way outside what I formally studied.

    Re: taxing corporations — well, they have many of the rights of individuals and also serve to limit liability and risk of the individuals running them. Corporations are quasi-people, legally speaking. I guess my base assumption is that they should be taxed, and yeah, I know the costs are passed to consumers. I don’t remember offhand what percent of government revenue comes from corporations. I admit I need to educate myself further before having any firm opinion.

    Posted by: Trent at November 30, 2006 8:28 PM
    Comment #197159

    David

    If you never spend your money, are you rich? Eventually you have to spend money or else it is not much use to you. If you are willing to keep your money in investments w/o using it, you are doing your society a favor by producing wealth and unselfishly not taking so much for yourself. Why do you want to tax this guy?

    Kevin

    I did not write this. I only commented.

    Re getting at illegal income, that is the good thing about consumption tax. A drug dealer still wants to buy his fancy car and nice threads. He is unlikely to file an income tax.


    Woman

    I was thinking of earned income credits. It would have to work differently if you had a consumption tax. It is hard for me to figure this out. I admit that I had really not thought it through.

    BTW - I think you could exempt all food (a person can eat only so much) and clothes up to a certain level.

    Posted by: Jack at November 30, 2006 8:35 PM
    Comment #197161

    Before any change in the tax plan is employed, it is absolutely necessary to reduce spending.

    One of the first ways to reduce spending is to reduce the agencies, commissions, etc. that should not be part of the federal government. For instance housing. The federal government should give up this agency to state control. There are many, many ways to employ this reduction of excessive government. Once the agencies are eliminated or turned over to state control, the need of federal dollars would be vastly reduced. Of course the state level would rise but not like the federal level. The other advantage would be that my AZ taxes don’t get sent to another state.

    Once the federal size of government takes place, then the arguments could take place about how to tax federally. Likewise the type of tax at local levels could be implemented to the best advantage.

    Posted by: tomh at November 30, 2006 8:45 PM
    Comment #197172

    Jack, consumption tax only expands underground and black markets.

    Posted by: David R. Remer at November 30, 2006 9:55 PM
    Comment #197174

    Jack, consumption tax will encourage overseas purchasing by the wealthy seeking better tax treatment. Why own an American made plane when a Chinese made plane at 1/10th the tax is available and produced by a cheaper labor force?

    Posted by: David R. Remer at November 30, 2006 9:59 PM
    Comment #197176

    Michael, and what is to stop corporate folks from having their lifestyles underwritten by the corporation at zero tax while the cost is passed on to the consumer?

    Many already do this, some get caught, and under our current system, when they get caught living off the corporate books, they get prosecuted.

    Not so under a consumption tax which exempts corporations. It’s a wash as far as I am concerned. Besides, corporate tax policy gives the people some control over the misdeeds of corporations.

    Posted by: David R. Remer at November 30, 2006 10:03 PM
    Comment #197181

    David Remer-

    I completely disagree that a consumption tax would create black markets. Blanket prohibitions and restrictions create black markets. If we’ve learned anything by watching the consumer trends in America over the last few centuries, which I’d argue are among the most sophisticated and specialized in the world, we have learned that they crave legitimate and easily recognizable, yet distinctive and unique labels.

    There is a market for cheap, low quality knock off goods, but they are purchased almost exclusively by the poorest people. And I favor a policy that makes enforcement a low priority that literally takes clothes off people’s backs by putting their peddlars out of business. Why let the peddlar exploit illegal activity? Because it hurts no one (how many of those 14th Street shoppers were realistically going to buy Versace in the absence of a much cheaper knock off?) and because he inevitably puts it right back into the economy by buying “stuff”. It’s not a big concern.

    And Jack is right. The criminals throw it back into the legitimate economy at a rate generally unseen among the law-abiding population. They are the biggest “label-whores” of them all. If you need any convincing at all, go to a local strip club or watch a Hip Hop video on MTV. And I know for a fact that what is on MTV has been in LA schools for at least a few years, and it is coming to smalltown, USA very soon.

    Want to know how you spot a cayote in Baja? They drive Escalades and wear labels clothes. Want to know how to spot an insurgent in Iraq’s baron deserts? Look for the guy talking on a shiny new satalite phone. Even in Japan, the criminals drive big American cars to show their lack of respect for the modesty of the average Japan resident.

    Worried about it going overseas? Then monitor wire transfers to foreign entities. That alone wouldn’t stifle banking as we know it.

    I don’t find this basic structure to be giving a distinct advantage to anyone except a good marketing firm.

    Posted by: Kevin23 at November 30, 2006 10:31 PM
    Comment #197182

    David, What is to keep a corporation from just paying key people outrageous salaries? It’s terrible, I’m envious, but why should government care?

    There are a ton of specific answers at the FAQ section of FairTax.org.

    Posted by: Michael Smith at November 30, 2006 10:34 PM
    Comment #197219
    Michael Smith wrote: But why do many accept without question that those who make more should pay proportionately more? How is it “fair” to penalize success?

    Michael Smith,
    You said (above) it isn’t fair that those that make more should pay prorportionately more.

    Does that mean people should pay equal percentages?
    Or does that mean people should pay equal amounts?

    The problem with the FairTax system is that it will the middle income group the hardest.

    Why?

    Becasuse a 30% sales tax (23% inclusive) for food, fuel, medical, housing, rent, automobile, etc. is a MUCH larger percentage of the $50K income than it will be for the person with $1 million (or larger) income.

    That isn’t fair.

    The middle income class (which is already shrinking) will get hammered.

    Please prove otherwise if you can.

    Some people say:

      But, the wealthy spend more.

    So? That proves nothing. The question is, will they spend a sufficient amount so that they share an equal proportion (percentage) of income toward taxes?

    Many of the FairTax plan proponents don’t want to answer that question, and if they do, their answer is the following snotty response:

      What part of consumption tax don’t you understand?

    That merely proves their hidden agenda.
    They are no better than those that support a graduated income tax scale that imposes a greater percentage of tax.

    The only difference between those that support the FairTax and the existing Graduated-Increasing-Percentage-Income-Tax plan is this:

    • (a) The FairTax plan has NO intention at all of distributing the tax burden fairly. It completely avoids the subject. It can NOT prove that all income groups will pay a equal tax burden relative to income. It is a ruse. The proponents of this plan want you to believe it is fair. That depends on what you think is fair.

    • (b) The proponents of a Graduated-Increasing-Percentage-Income-Tax plan feel like the wealthy should pay proportionally MORE because they are wealthy. The more you make, the higher percentage of income that should be taxed. That is just as dishonest as the consumption tax. These people try to disguise their envy and jealousy as demands for equality.

    The best tax system is one that is fair, isn’t onerous to one group, and can stand up to close inspection. A flat 17% income tax rate, with NO deductions, NO caps, NO tax loop holes, NO over-complications, NO double-taxation, and NO tax on income below the poverty level, and NO over-complications (for charity, welfare, and various incentives) is fair and can stand up to close inspection. Charity, welfare, and various incentives are not the purpose of the tax system. Don’t mix the tax and welfare systems. That merely paves the way for over-complication which always breeds corruption.

    A fair tax plan should NOT make one group pay the largest burden of taxes relative to their income.

    The FairTax proposes a rebate/fund to those with income under the poverty level.

    Why? Didn’t they just say it’s a “consumption tax stupid” ? Why make exceptions for the poor?

    That’s because they don’t care about the poor. There’s no money to be made there anyway.

    __L_O_O_K______O_U_T__ tax-payers !

    The FairTax may not be as fair as some want to portray it. It may not be as wonderful as they want you to believe. There’s a lot of smoke and mirrors, but there is NO proof that the tax burden will be spread fairly (relative to income) … because it’s a consumption tax, stupid! It’s not supposed to be fair. It’s supposed to hammer the middle income group and let the wealthy pay even less taxes.

    Watch your wallets people.

    If you support the FairTax plan, you are going to get pick-pocketed every time you buy something. A 30% sales tax (23% inclusive)?
    That’s a lot.
    Oh, but prices on everything will fall?
    Your salary too, eh?

    So, all of you FairTax plan supporters out there … please prove (if you can) that the FairTax is fair (relative to income).

    If your answer is merely:

      “it’s a consumption tax”

    … then you have just proved the main point … it is NOT intended to be fair.

    That only proves the truly insidious nature of the FairTax plan.

    The FairTax FAQ # 12 states:

    • Is the FairTax fair?

    • Yes, the FairTax is fair, and in fact, much fairer than the income tax. Wealthy people spend more money than other individuals. They buy expensive cars, big houses, and yachts. They buy filet mignon instead of hamburger, fine wine instead of beer, designer dresses, and expensive jewelry. The FairTax taxes them on these purchases. If, however, they use their money to build job-creating factories, finance research and development to create new products, or fund charitable activities (all of which help improve the standard of living of others), then those activities are not taxed.

    That isn’t proof.
    Prove that the wealthy will pay an equal or higher percentage of income to taxes.
    Prove that, and I will become a FairTax advocate (again) and even send them another donation.

    If that can’t be proven, then is it fair? No, it isn’t.

    One more thing. People have already paid income tax on the money they have saved now (which took many years). With the switch-over to the FairTax, when they spend it, they are going to get taxed again. Now they will end up paying BOTH (income tax and sales tax). What’s so wonderful about that?

    Posted by: d.a.n at December 1, 2006 9:43 AM
    Comment #197234
    David R. Remer wrote: Michael, and what is to stop corporate folks from having their lifestyles underwritten by the corporation at zero tax while the cost is passed on to the consumer? Many already do this, some get caught, and under our current system, when they get caught living off the corporate books, they get prosecuted.

    David,
    Yes, there is that potential for abuse.
    Some may try to hide income.
    But, that already exists (regardless of the system).

    But, a corporation is not a person.
    Any tax on a corporation actually comes out of some persons’ pockets.
    It is merely passed on to consumers, and over-complicates things.

    And tax policy is not the proper tool to use to give “the people some control over the misdeeds of corporations” or deal with violations.

    Mixing systems leads to over-complication, which leads to more abuse and corruption.
    We already have a mixing of the system that makes it ridiculously over-complicated (with thousands of deductions, tax loop holes, incentives, subsidies, etc., etc., etc.). The tax code should not have welfare, charity, business, and other numerous purposes combined into it, because all of those over-complications merely make it ripe for abuse.

    Regardless of the tax system, enforcement of the law is required.
    That job will be much easier if the tax is as fair as possible.
    As for law enforcement, which is easier to monitor and enforce?

    • (a) a FairTax system with billions of sales transactions (annually) to track ?

    • (b) Or an income tax with far fewer incomes amounts to track (annually)

    There is abuse of both, but which is more susceptible to abuse?
    Especially with a 30% sales tax (23% inclusive)?

    Posted by: d.a.n at December 1, 2006 11:35 AM
    Comment #197238

    David
    Why own an American made plane when a Chinese made plane at 1/10th the tax is available and produced by a cheaper labor force?

    Because it will fall apart in flight?

    Posted by: Ron Brown at December 1, 2006 12:19 PM
    Comment #197240
    Because it will fall apart in flight?
    That is a valid concern. What I don’t understand is why the Chinese are NOT making automobiles?

    BTW, is it my imagination, or did the quality of many things noticably decline since they started being manufactured overseas?

    Sure, prices have fallen on many things, but many things don’t last very long anymore.

    Used to be, a number of things (e.g. printers, computers, VCRs, DVD players, TVs, dish washers, air conditioners, etc.) used to last a long time.
    Not anymore.
    Sometimes, it’s hard to find something of high quality even when you would be willing to spend more.

    Posted by: d.a.n at December 1, 2006 12:32 PM
    Comment #197245

    D.A.N.-

    How can you say that a consumption tax forces people in the middle to pay more? They only pay more if they buy more. Rich people do not let their money sit in bank accounts. They buy securities. They invest the money in tangable things like property and other equity interests. Those things shouls be included as well. I’ll bet that your average billionaire has a much lower percentage of his income in liquid form than your average middle class American.

    Furthermore, I do not feel one bit sorry for someone who makes bad choices, and thus puts themselves in a higher than normal tax bracket. STOP CONSUMING and START SAVING! Period. THAT, my income-tax-suporting friend, is freedom of choice. It even allows one to take into account budgetary fluctuations and other real world concerns…need extra money in December? Consume less during November. Simple.

    And most importantly, since the revenue stream for Washington will be tied to the economy directly, there will be more incentive to foster it in truly comprehensive and thoughtful ways. Instead of debates over how to best stimulate the economy through targetted loopholes, it will be clear where what sectors of the economy are expanding or shrinking. It also allows for more efficient regulation of products that pose some sort of risk for others or the environment. They can simply be taxed higher to offset add’l costs. It takes much of the guesswork out of fiscal policy. That can only be a good thing.

    DAN, I see where you were going with the idea that middle class people are the most leveraged consumers at the moment and would seeminlgy bear the biggest burden under a consumption tax system. But they are currently paying the most anyway because rich people shelter their money. And they get no choice in the matter. If you stop viewing the situation through in the context of the current system, which almost forced people like me to be leveraged simply for the tax deduction benefits, and view it in its own context, then it is hard to find it worst than an income tax system, even a “fair” one.

    Posted by: Kevin23 at December 1, 2006 12:57 PM
    Comment #197248

    DAN-

    “Sometimes, it’s hard to find something of high quality even when you would be willing to spend more.”

    I must respectfully yet wholeheartedly disagree. “bad” product sales are almost invariably linked directly to the sales of their “good” counterparts. There is no market for a less expensive version of something unless there is already demand for the real thing.

    Posted by: Kevin23 at December 1, 2006 1:02 PM
    Comment #197256
    Kevin23 wrote: D.A.N., How can you say that a consumption tax forces people in the middle to pay more? They only pay more if they buy more.
    Not pay more. Pay a larger percentage relative to income. Nobody has been able to prove that the FairTax will evenly spread the tax burden relative to income. As a result, my assertion is that a FairTax will hit the middle-income group hardest because a 30% tax (23% inclusive) on food, shelter, transporation, medical, medicine, insurance, etc. will be a greater percentage of their income than the percentage of the income for those with more income. So far, the response to this has been “What part of consumption tax don’t you understand?” or “So?”. FairTax says alleges the wealthy will spend sufficiently more to make the tax burden fair, but I have seen NO proof of it yet.
    Kevin23 wrote: Rich people do not let their money sit in bank accounts. They buy securities. They invest the money in tangable things like property and other equity interests. Those things shouls be included as well. I’ll bet that your average billionaire has a much lower percentage of his income in liquid form than your average middle class American.
    Well, I still have not seen proof of that, nor proof that it would continue with such a high 30% (23% inclusive) sales tax.
    Kevin23 wrote: Furthermore, I do not feel one bit sorry for someone who makes bad choices, and thus puts themselves in a higher than normal tax bracket. STOP CONSUMING and START SAVING! Period. THAT, my income-tax-suporting friend, is freedom of choice. It even allows one to take into account budgetary fluctuations and other real world concerns…need extra money in December? Consume less during November. Simple.
    Agreed. But that’s not my concern. Mine is one of fairness, and to me, a fair tax system would tax all personal income above the poverty level a flat 17% . I don’t think the FairTax will accomplish that. I think the FairTax will put most of the tax burden on the middle-income group.

    But, please, anybody … prove me wrong.

    Kevin23 wrote: And most importantly, since the revenue stream for Washington will be tied to the economy directly, there will be more incentive to foster it in truly comprehensive and thoughtful ways. Instead of debates over how to best stimulate the economy through targetted loopholes, it will be clear where what sectors of the economy are expanding or shrinking.
    Hmmmmmm m m m … not certain about that, since a huge revenue stream for our Do-Nothing CONGERSS is massive borrowing and money-printing. Incentive to foster it [economy] in truly comprehensive and thoughtful ways coming from CONGRESS hasn’t and doesn’t seem likely. More likely, we still somehow struggle to swim upstream without drowning, despite the anvil (CONGRESS) hanging around our neck.
    Kevin23 wrote: It also allows for more efficient regulation of products that pose some sort of risk for others or the environment. They can simply be taxed higher to offset add’l costs. It takes much of the guesswork out of fiscal policy. That can only be a good thing.
    Hmmmmmm … I’m not sure the tax system should be used that way. It is another over-complication. Over-complications lead to abuse and corruption. And who decides what should be taxed a higher or lesser percentage?
    Kevin23 wrote: d.a.n, I see where you were going with the idea that middle class people are the most leveraged consumers at the moment and would seeminlgy bear the biggest burden under a consumption tax system. But they are currently paying the most anyway because rich people shelter their money.
    Yes, and that could be remedied by simply eliminating ALL tax deductions and tax loopholes, remove ALL caps (i.e. the upper-caps on Social Security and Medicare), eliminate tax on corporations (they aren’t people; and if they were taxed, it should still be at the same 17% as everyone else), eliminate taxes on Social Security and Medicare benefits received (it was a tax itself that created it), and set a limit on Social Security and Medicare benefit payments that are equal to everyone. Those changes would be far easier and less disruptive changes. Those are simplifications of the existing system.

    Hence, here are some PROs and CONs:

    • A Flat Income Tax Percentage Rate would be far easier to monitor far fewer (in number) incomes than billions of sales transactions in a FairTax system.

    • A Flat Income Tax Percentage Rate would be fairer than a FairTax system, because no sales tax system can prove that the tax burden will be evenly distributed (relative to income), and the middle-income-group may quite likely end up bearing most of the tax burden. After all, while some say the wealthy spend more, it has not been proven that the wealthy spend enough to ensure that they bear a fair portion of the tax burden (relative to income).

    • A Flat Income Tax Percentage Rate would would not require vast changes. One serious problem with a switch-over to a FairTax system is that many people have savings and retirements that they have already paid income tax on, and they would now have to also pay a new consumption sales tax when they spend it, which means they will be taxed twice.

    • A Flat Income Tax Percentage Rate would not require a reduction in salaries and incomes, which is essentially what would have to occur in a FairTax system, because the theory behind the consumption sales tax system is that everything would cost less. That is, the employers must cut employees wages, because no income taxes are being withheld, and the money has to come from somewhere. So, if your salary is $50K a year today, but you take home $40K after income taxes, there should be a savings of $10K, and it must come from reducing your salary by $10K to $40K. Theoretically, your take-home pay is the same as before, since you now keep 100% of your income.

    • Also, here’s a very interesting point.  One question about any tax system that is continually asked is:
      Will everyone (excluding the poor) pay their fair (or equal) percentage of tax related to income ?
      Interesting isn’t it? What does that tell you? It seems many people still want the end result of any tax system to be that everyone pays their fair (or equal) percentage of income (excluding those below the poverty level, which would pay zero tax).
      So, if we are continually tasked with proving that any tax system, in the end, must fairly tax income the same percentage (excluding the poor who pay zero tax), then why not simply retain the income tax, except make it a flat tax rate of 17%, eliminate all loop-holes, deductions, subsidies, which will also mean little or no changes for accounting for Income tax, Social Security tax, and Medicare tax.

    Kevin23 wrote:
    d.a.n wrote: “Sometimes, it’s hard to find something of high quality even when you would be willing to spend more.”
    I must respectfully yet wholeheartedly disagree. “bad” product sales are almost invariably linked directly to the sales of their “good” counterparts. There is no market for a less expensive version of something unless there is already demand for the real thing.
    Hmmmm … perhaps. Perhaps the problem is merely distinguishing between good and bad quality? Maybe the flood of cheap stuff makes that more difficult?
  • Posted by: d.a.n at December 1, 2006 1:44 PM
    Comment #197268

    D.A.N.-

    “Well, I still have not seen proof of that, nor proof that it would continue with such a high 30% (23% inclusive) sales tax.”

    You really don’t think people would buy investments? Paying 30% now to produce ever growing gains later on will not be a problem. Short term investors/flippers will be stifled, but who needs them anyway. Long term investing is the prefered method among reputable and honest investors anyway. And there is plenty of proof that rich people do not keep their money liquid. You of all people should know exactly where to find it. I have full faith in your abilities.

    “I think the FairTax will put most of the tax burden on the middle-income group.”

    Is this an assumption made as the result of looking at it in context of the current system? I’d like a good reason for believing that middle class people would be negatively impacted for anything other than bad choices.

    “…not certain about that, since a huge revenue stream for our Do-Nothing CONGERSS is massive borrowing and money-printing. Incentive to foster it [economy] in truly comprehensive and thoughtful ways coming from CONGRESS hasn’t and doesn’t seem likely.”

    Isn’t that because there is no consensus on what the economic indicators mean? This system would take much of that need for interpretation away.

    “It is another over-complication. Over-complications lead to abuse and corruption. And who decides what should be taxed a higher or lesser percentage?”

    Over complication? no, it is simple. X product or service causes Y amount of damage. Therefore, it must be taxed higher to offset those costs. Nothing complicated about it. Especially as compared to what we have now.

    “A Flat Income Tax Percentage Rate would be far easier to monitor far fewer (in number) incomes than billions of sales transactions in a FairTax system.”

    But those sales transactions are not hard to moniter. There is a set rate, a calculation done at the time of sale, and a receipt showing the same. Income tax calculations are done by the very individuals who stand to lose by being honest. Thus they are much more difficult to effectively audit.

    “One serious problem with a switch-over to a FairTax system is that many people have savings and retirements that they have already paid income tax on, and they would now have to also pay a new consumption sales tax when they spend it, which means they will be taxed twice.”

    Very true. Maybe offset this burden through temperary annual credits. They keep their reciepts, they get the tax back. Again, when the system is as easy as a sales tax calculation at the time of sale, it is very easy to follow the buck. You could do all kinds of things to ease the transition.

    “A Flat Income Tax Percentage Rate would not require a reduction in salaries and incomes, which is essentially what would have to occur in a FairTax system, because the theory behind the consumption sales tax system is that everything would cost less. That is, the employers must cut employees wages, because no income taxes are being withheld, and the money has to come from somewhere.”

    Why would that have to occur? The theory doesn’t revolve around things costing less, it revolves around people having more to spend. Goods will cost more, but buying them is a choice, not a requirement.

    “Will everyone (excluding the poor) pay their fair (or equal) percentage of tax related to income ?”

    I say when the tax burden is directly related to free choice and consumerism, it IS fair. Each person decides for themselves.

    “Perhaps the problem is merely distinguishing between good and bad quality? Maybe the flood of cheap stuff makes that more difficult?”

    I rare cases of imitation goods, yes. But that is a nominal concern. Anyone who wants an Ipod knows where and how to get a real one. The educated consumer will be better off than the one who puts blind trust in a venor, but isn’t that the case in life in general? We should not reward stupidity at the detriment of everyone else. If you want to be a slave to a label, then you’d better know why. And people are generally very smart about knowing where the risky purchases are. Reputation is everything in a consumer society.

    I still fail to see any inherent lack of fairness in the consumption tax.

    Posted by: Kevin23 at December 1, 2006 2:40 PM
    Comment #197272

    Dan,
    If my income is around $50k and my tax burden is around $4k under the current system and under the Fairtax system my tax burden drops to $3k, are you telling me that it’s not fair because the rich man down the street is not paying as high of a percentage of his income as me? To start with I would be tickled pink to see that reduction. It’s none of my business or the government’s business how much my neighbors or I make. Our tax would be based on what we spend and not on what we make. Basing fairness on the percentage of income is unfair when the bases of the tax is consumption.

    Posted by: tomd at December 1, 2006 3:15 PM
    Comment #197295
    D.A.N. wrote: Well, I still have not seen proof of that, nor proof that it would continue with such a high 30% (23% inclusive) sales tax.
    Kevin23 wrote: You really don’t think people would buy investments? Paying 30% now to produce ever growing gains later on will not be a problem. Short term investors/flippers will be stifled, but who needs them anyway. Long term investing is the prefered method among reputable and honest investors anyway. And there is plenty of proof that rich people do not keep their money liquid. You of all people should know exactly where to find it. I have full faith in your abilities.
    Not if their is a 30% (23% inclusive) tax on it. Even then, I’m not sure the tax burden would even out on all income groups. Yes, I have a very strong suspicion it would hit the middle-income-group the hardest.
    Kevin23 wrote: Is this an assumption made as the result of looking at it in context of the current system? I’d like a good reason for believing that middle class people would be negatively impacted for anything other than bad choices.
    They will be negatively impacted if they have to carry a majority of the tax burden (relative to income).
    Kevin23 wrote:
    d.a.n wrote: …not certain about that, since a huge revenue stream for our Do-Nothing CONGERSS is from massive borrowing and money-printing. Incentive to foster it [economy] in truly comprehensive and thoughtful ways coming from CONGRESS hasn’t and doesn’t seem likely.
    Kevin23 wrote: Isn’t that because there is no consensus on what the economic indicators mean? This system would take much of that need for interpretation away.
    No, the economic indicators are well understood. The inability of CONGRESS to do what is right and what is needed is because they are simply FOR-SALE, irresponsible, and like to borrow, spend, and print moneyborrow, spend, and print money like crazy. The government is increasingly elitist and inflationist.
    d.a.n wrote: It is another over-complication. Over-complications lead to abuse and corruption. And who decides what should be taxed a higher or lesser percentage?
    Kevin23 wrote: Over complication? no, it is simple. X product or service causes Y amount of damage. Therefore, it must be taxed higher to offset those costs. Nothing complicated about it. Especially as compared to what we have now.
    Sorry, but I do not believe the government should have the right to choose what products should be taxed more than others. It already does that, and I don’t like it. Even though smoking and drinking are bad for people, it is not the place of the government to make those choices, because they ultimately abuse it.
    d.a.n wrote: A Flat Income Tax Percentage Rate would be far easier to monitor due to far fewer (in number) incomes than billions of sales transactions in a FairTax system.”
    Kevin23 wrote: But those sales transactions are not hard to moniter. There is a set rate, a calculation done at the time of sale, and a receipt showing the same. Income tax calculations are done by the very individuals who stand to lose by being honest. Thus they are much more difficult to effectively audit.
    There are harder to track because there millions more transactions to track.
    Kevin23 wrote: Income tax calculations are done by the very individuals who stand to lose by being honest. Thus they are much more difficult to effectively audit.
    I don’t agree that employers are more willing to cheat or harder to audit. For one thing, both parties are easier to audit in an income transaction, but many sales are transacted without knowing the identity of both parties. There are millions of more sales transactions than incomes. Both are open to abuse, and sales tax is not less susceptible to abuse.
    d.a.n wrote: “One serious problem with a switch-over to a FairTax system is that many people have savings and retirements that they have already paid income tax on, and they would now have to also pay a new consumption sales tax when they spend it, which means they will be taxed twice.”
    Kevin23 wrote: Very true. Maybe offset this burden through temperary annual credits. They keep their reciepts, they get the tax back. Again, when the system is as easy as a sales tax calculation at the time of sale, it is very easy to follow the buck. You could do all kinds of things to ease the transition.
    Better yet, simplify the existing system by eliminating ALL tax loopholes, ALL deductions, ALL caps, paperwork, and make it a simple flat 17% income tax on income above the poverty level. And, instead of the rebate run-around, simply don’t tax income below the poverty level. The government already tracks income withheld.
    d.a.n wrote: A Flat Income Tax Percentage Rate would not require a reduction in salaries and incomes, which is essentially what would have to occur in a FairTax system, because the theory behind the consumption sales tax system is that everything would cost less. That is, the employers must cut employees wages, because no income taxes are being withheld, and the money has to come from somewhere.
    Kevin23 wrote: Why would that have to occur? The theory doesn’t revolve around things costing less, it revolves around people having more to spend. Goods will cost more, but buying them is a choice, not a requirement.
    Kevin, The money has to come from somewhere. Even proponents of the FairTax plan acknowledge this, but don’t like to talk about it.
      What The FairTax Book fails to mention is that prices can only fall this sharply if companies cut wages. I asked Jorgenson about this, and he agreed. Say your salary is $100,000 a year today, but you take home $80,000 after taxes. Your company is still paying that extra $20,000. In a FairTax world, it will save that money, and be able to lower its prices accordingly, only if it can reduce your salary to $80,000. In other words, your take-home pay is the same as before. Sure, you’d get to “keep 100 percent of your paycheck,” as Boortz and Linder repeatedly write, but it would be a smaller paycheck. That’s kind of a big thing to leave out.
    d.a.n wrote: “Will everyone (excluding the poor) pay their fair (or equal) percentage of tax related to income ?”
    Kevin23 wrote: I say when the tax burden is directly related to free choice and consumerism, it IS fair. Each person decides for themselves. … I still fail to see any inherent lack of fairness in the consumption tax.
    To me, the FairTax plan can only be fair if the tax burden is somewhat proportionately even (relative to gross income). I believe the FairTax will place most of the tax burden on the middle-income-group, and that is why I am deeply suspicious of it. I did not arrive at that opinion overnight, and used to support the FairTax myself, but abandoned it when there was no sufficient evidence or credible models that show that the tax burden would be somewhat proportionately distributed (relative to gross income).
    tomd wrote: d.a.n, If my income is around $50k and my tax burden is around $4k under the current system and under the Fairtax system my tax burden drops to $3k, are you telling me that it’s not fair because the rich man down the street is not paying as high of a percentage of his income as me? To start with I would be tickled pink to see that reduction. It’s none of my business or the government’s business how much my neighbors or I make. Our tax would be based on what we spend and not on what we make. Basing fairness on the percentage of income is unfair when the bases of the tax is consumption.
    Sorry, but I disagree. The tax system shouldn’t fall mostly on the middle-class.
  • Posted by: d.a.n at December 1, 2006 5:21 PM
    Comment #197305

    D.A.N.-

    I have to disagree with you on almost all your points. I really wish I had time to give a detailed account of why, but I am swamped here at work. Maybe someone else will pick up where I am forced to leave off. Or maybe I can get back to this later.

    Until then…

    Posted by: Kevin23 at December 1, 2006 6:23 PM
    Comment #197310

    Kevin23,
    That’s OK.
    I understand.
    Thank you for the discussion.

    Posted by: d.a.n at December 1, 2006 7:04 PM
    Comment #197313

    Sorry tomd, to answer your questions in more detail.

    tomd wrote: d.a.n, If my income is around $50k and my tax burden is around $4k under the current system and under the Fairtax system my tax burden drops to $3k, are you telling me that it’s not fair because the rich man down the street is not paying as high of a percentage of his income as me?
    Yes, it’s not fair. After all, if everyone carries a fair proportion, your tax may fall even lower $4K to $3K (perhaps to $2K).
    tomd wrote: To start with I would be tickled pink to see that reduction.
    True. And you would be more tickled if it was reduced even more than previously expected.
    tomd wrote: It’s none of my business or the government’s business how much my neighbors or I make.
    It is if you have a tax system that strives to make sure no one an unfair proportion of income to taxes.

    BTW, I argued all of these very same points years ago (in favor of the FairTax) before changing my mind about it. The major reason I abandoned the FairTax is because it is very likely that the middle-income group will pay the majority of the tax burden (relative to income).

    tomd wrote: Our tax would be based on what we spend and not on what we make.
    True, and there lies the problem.

    THREE TAX SYSTEMS:

    • (a) Some people like the current graduated tax system in which the more you make, the higher percentage of income you pay to income tax.

    • (b) Some people like a national consumption tax.

    • (c) Some people want a flat income percentage rate.

  • I do not like (a) because no one (excluding those below the poverty level) should pay a disproportion percentage of income to taxes, and believe that those that support this system are trying to disguise their envy and jealousy as demands for equality.

  • I do not like (b) because no one (excluding those below the poverty level) should pay a disproportion percentage of income to taxes, and the FairTax can not prove that the tax burden would be spread proportionately (based on income) since it comes from the wrong side of the system, and believe this system is very suspicious, and will worsen the existing trend to burden the middle-income group with an increasing tax burden that can not be easily measured or traced.

  • I can only support (c) because it is the only moral and fair system that strives to tax ALL income (excluding those below the poverty level) at the same percentage rate. To me, it is the best because:
    • (01) it is the most fair;

    • (02) has a sufficient probability of actually taxing income equally;

    • (03) retains Social Security funding and accounting;

    • (04) retains Medicare funding and accounting;

    • (05) adequately integrates and/or replaces old systems with new systems;

    • (06) defines the tax collection methods;

    • (07) has a sufficient probability of compliance;

    • (08) does not increase tax evasion;

    • (09) does not increase black markets;

    • (10) does not drive up the cost of all products and exports;

    • (11) does not tax the poor and truly needy;

    • (12) does not tax any income groups proportionally more/less than another;

    • (13) resolves the question of whether corporations should be taxed?

    • (14) allows for a smooth transition;

    • (15) does not double tax: for example, with a national consumption sales tax plan, money that has already been taxed would get taxed again when it is spent.

  • … more …

    Posted by: d.a.n at December 1, 2006 7:38 PM
    Comment #197323

    Dan,

    At least we agree that option “a” is a bad one. I can’t support option “c” As long as taxes are based on income, there is always the temptation to give “tax incentives” to corporations for their support. How long before homestead exemptions would returned? You can see on these blogs how much a lot of liberals want to “soak the rich”, which always has a way of costing us in the middle class. I don’t think it would take long and the flat tax would become very wavy. I’m in the middle class and have calculated what my taxes would have been using the fairtax for the last 3 years and all three showed a considerable tax savings.

    We could banter back and forth all night comparing your list and if I thought taxes should be based on income we could agree with most of them.

    That being said, It is a bit disingenious of you to call the fairtax plan unfair basing it on a percentage of income when the purpose of the plan is to get away from income based taxation. You also don’t usually mention the prebate that everyone will get, not just the poor that will offset the taxes on necessities. Nor do you mention the appx 23% embedded taxes that we pay on items we buy now that won’t be there under the fairtax.

    The bottom line is the fairtax and the flat tax that you propose will both help me financially about the same. I see the fairtax as being mort transparent and thus more fair.

    Posted by: tomd at December 1, 2006 8:36 PM
    Comment #197335
    tomd wrote: d.a.n, At least we agree that option (a) is a bad one.
    That’s good to know. Those that support that system are more disturbing than those that support the other two systems.
    tomd wrote: I can’t support option “c” As long as taxes are based on income, there is always the temptation to give “tax incentives” to corporations for their support. How long before homestead exemptions would returned?
    There is potential abuse in all of these systems. Hence, the auditability becomes important.
    tomd wrote: You can see on these blogs how much a lot of liberals want to “soak the rich”, which always has a way of costing us in the middle class.
    Agreed. I abhor those that think the rich should pay more proportionately (i.e. a larger percentage of income).
    tomd wrote: I don’t think it would take long and the flat tax would become very wavy.
    With the FOR-SALE, bought-and-paid-for, Look-the-Other-Way, What’s-In-It-For-Me, irresponsible Do-Nothing CONGRESS, anything is possible.
    tomd wrote: I’m in the middle class and have calculated what my taxes would have been using the fairtax for the last 3 years and all three showed a considerable tax savings.
    That’s good, but should not be the only factor in choosing the most fair and tenable tax system.
    tomd wrote: We could banter back and forth all night comparing your list and if I thought taxes should be based on income we could agree with most of them.
    Perhaps. All that matters is which is truly the best system. I would support a national consumption tax if someone could prove that the tax burden will NOT fall on the middle-income group. So far, no one can prove that.
    tomd wrote: That being said, It is a bit disingenious of you to call the fairtax plan unfair basing it on a percentage of income when the purpose of the plan is to get away from income based taxation.
    Not at all. In an honest comparison, that fact can not be avoided.
    tomd wrote: You also don’t usually mention the prebate that everyone will get, not just the poor that will offset the taxes on necessities.
    Not true. I did mention that very thing above in COMMENT # 197219:
    The FairTax proposes a rebate/fund to those with income under the poverty level.
    tomd wrote: Nor do you mention the appx 23% embedded taxes that we pay on items we buy now that won’t be there under the fairtax.
    That is because that is not proven.
    tomd wrote: The bottom line is the fairtax and the flat tax that you propose will both help me financially about the same.
    That’s good, but should not be the major reason. There are over a dozen major factors to consider in picking the best tax system (see above).
    tomd wrote: I see the fairtax as being mort transparent and thus more fair.
    Respectfully, I disagree. There is insufficient proof to me that it would be most fair. However, I will readily admit I am wrong if someone can prove that the majority of the tax burden does NOT fall upon the middle-income group.

    The middle-income group is already under assault by an increasingly elitist, FOR-SALE, and irresponsible government.
    Since year 1980, the U.S. population that had 80% of all wealth in 1980 has shrunk to 60% in 2006.

    The last time that happened was the Great Depression of 1929.

    Posted by: d.a.n at December 1, 2006 9:26 PM
    Comment #197366

    Okay, I give up.

    What is a PREBATE and how does it work?

    Posted by: womanmarine at December 2, 2006 12:58 AM
    Comment #197378

    Rob Brown said: “Because it will fall apart in flight?”

    Man, that is one uninformed comment. Have you checked the labels on machinery in American manufacturing recently? Made in China.

    I have an excellent wood jointer which I built my house with. Got it for 60% of a comparable American made machine, through Northern. Made in China. I will actually be able to sell it for more than I paid for it, given the inflation in steel and machinery costs.

    There is a reason Chinese exports are flooding the world’s markets, and it isn’t because they fall apart. China is maturing as a producer and has been rapidly adopting the quality standards necessary to grow their exports.

    Posted by: David R. Remer at December 2, 2006 3:11 AM
    Comment #197381

    Womanmarine,
    A prebate is basicly a rebate given in advance.
    To keep the poor from having a hardship, the designers of the plan wrote in the provision of the prebate to “pre pay” the taxes for essential expenses each month.
    Go to fairtax.org and check it out.
    Hope that helps.

    Posted by: tomd at December 2, 2006 3:36 AM
    Comment #197395

    Under this flat 17% income tax plan, no one would pay tax on any income below the poverty level. That avoids having to pay a prebate. The government already tracks incomes, so taxes are withheld only AFTER income exceeds the poverty level. The poverty level is adjusted for number of dependents and may vary by state.

    The FairTax plan is attractive to many.
    That is probably because it lends to the belief that you can control your taxes by controlling your consumption.
    That’s true to some extent.
    However:

    • There are the necessities of life (food, shelter, medical, transporation, etc.).

    • The poor spend all of their income

    • The lower-middle-income groups spend all of their income

    • The middle-income groups spend most of their income

    • The poor and increasing number of middle-income groups can’t afford medical insurance, so a 30% (23% inclusive tax) on medical expenses would exacerbate that disaster.

    • The wealthy don’t spend all of their income; a large part may be re-invested, but large sums of cash and money-market funds would still exsit; interest earned on that cash would not be taxed.

    • The hyper wealthy can’t possibly spend all their income; a large part may be re-invested, but large sums of cash and money-market funds would still exsit; earning tax-free interest. This could also has other economic ramifications to the money-supply.

    The FairTax does not explicitly state that the total tax burden will be proportionately distributed on tax payers (relativce to income based on percentage), but the FairTax FAQ # 12 states:

    • Is the FairTax fair?

    • Yes, the FairTax is fair, and in fact, much fairer than the income tax. Wealthy people spend more money than other individuals. They buy expensive cars, big houses, and yachts. They buy filet mignon instead of hamburger, fine wine instead of beer, designer dresses, and expensive jewelry. The FairTax taxes them on these purchases. If, however, they use their money to build job-creating factories, finance research and development to create new products, or fund charitable activities (all of which help improve the standard of living of others), then those activities are not taxed.

    True, the wealthy may spend more, but the real question is, will they share a proportional share of the tax burden?

    Some don’t think that should be an issue, and that’s fine. We simply disagree on a fundamental premise.

    For those (like myself) that believe that the tax burden should be an equal percentage of income, then the FairTax plan can not accomplish that unless everyone spends enough so that their total sales tax paid equals the equivalent percentage of their gross income. That can’t be controlled.

    In the FairTax plan, some are not concerned and/or theorize that the wealthy will spend enough (or more) so that their total sales tax equals or exceeds what an income tax percentage rate would accomplish. However, that is NOT proven. One obvious question is with regard to untaxed interest and capital gains. What if cash from interest and capital gains can grow faster than inflation and the income is not taxed? Is there an incentive to spend or save and earn tax-free interest? That could be just the recipe for a lop-sided tax burden and tax evastion. After all, remember that most people must spend most of their income to get by, pay for food, shelter, medical, etc. The wealthy don’t have to spend but a tiny portion of their income, and may have an incentive to not spend it if it can earn tax-free interest and capital gains.

    If you believe that everyone should pay an equal proportion (percentage) of income, then that merely requires a simplification of the existing system. Eliminate all the tax loop holes, deductions, subsidies, corporate tax, tax on tax (e.g. on Social Security and Medicare benefits), remove all caps (e.g. tax caps on Social Security and Medicare), and make it a flat 17% on income ONLY above the poverty level, and set a poverty level cap on the amount of Social Security and Medicare benefits. That has the highest probability of taxing income proportionately, requires the least complicated transition, still deals with Social Security and Medicare, eliminates the massive over-complication which will reduce tax evastion, and eliminates the massive paperwork due to countless tax loopholes, deductions, and pervesion of the tax system, and provides a more predictable means of raising needed federal revenues (since a person does not merely raise or lower their income at will as can be easily accomplished by merely spending more or less).

    Some government is needed.
    That government can not accomplish anything without funding.
    We need a national defense.
    We need law enforcement.
    We want to care for the truly needy.
    That requires money.
    That requires taxation since all people will not volunteer their fair share.
    Thus, a tax system is needed.
    The best tax system is one that is most fair, raises the revenues required, is the least susceptible to abuse, and still accounts for existing requirements (e.g. Social Security and Medicare), is as simple as possible, and allows the smoothest transition.

    However, this problem, only one of many symptoms of a more fundamental problem, are unlikely to ever be resolved without recognizing the root problem, and by continually rewarding and empowering irresponsible incumbent politicians by repeatedly re-electing them.

    Posted by: d.a.n at December 2, 2006 10:59 AM
    Comment #197416

    Rob Brown said: “Because it will fall apart in flight?”

    Just being a smart ass David.
    But why buy a product from China? Aren’t y’all hollering about the child labor over there? And how they aint unionized? And how wages are at slave labor prices?
    Seems to me buying their products supports these practices.

    Posted by: Ron Brown at December 2, 2006 1:43 PM
    Comment #197457

    No, Rob, that would be Republicans yelling about all that going on in China. Democrats say their labor practices are not acceptable by our standards, but, there is nothing we can do about it. It’s conservatives who are out to save the world’s people from their governments with military force, not liberals.

    Posted by: David R. Remer at December 2, 2006 8:05 PM
    Comment #197485

    David
    Then why is it every time I hear someone hollering about the conditions in China it’s some liberal Hollywood type? Besides I thought liberals think that conservatives want slave labor wages and child labor over here so the evil corporations can make even more money. At least that’s what I get from listening to them. If that’s the case why would they condemn China?
    I personally don’t really care what China does with it’s labor force. That’s their business not mine. Like you said, there’s nothing we can do about it.
    If folks don’t like how the Chinese work force is treated, then they should stop buying Chinese products.

    Posted by: Ron Brown at December 2, 2006 11:55 PM
    Comment #197627
    Ron Brown wrote: If folks don’t like how the Chinese work force is treated, then they should stop buying Chinese products.
    Ron Brown, That’s true. But, it would be very hard to do, since SO much is made there. And even things made elsewhere may contain parts made in China.

    Take Wal-mart for instance.
    They admit they know such abuses happen at their suppliers in China, but Wal-mart says “it’s out of our control”.

    But, perhaps Wal-mart could do the same?
    That is, stop buying from that supplier?

    BTW, China has a minimum wage, believe it or not.
    However, it is not enforced (much like our own laws regarding illegal immigration that are selectivel ignored by the government).

    Laws and such ain’t worth the paper they’re written on if they aren’t enforced.

    Perhaps that’s why there’s been a recent up-tick in the crime rates in the U.S. ?
    That is, no respect for the law ?

    As for a Chinese-made airplane, I wouldn’t want to ride in one any time soon, since they don’t have any experience making them. Yikes!

    But, when I was a kid, “Made-In Japan” meant it was cheap (poor quality).
    Now look at Japan.
    They make some of the best automobiles and products in the world.

    No doubt, China can become one of the major manufacturers in the world.

    That’s good since the U.S. doesn’t manufacture much anymore. Greed among unions and corporation owners are seeing to that. The U.S. now has more jobs within government than all manufacturing jobs.
    The U.S. is too busy selling itself out and growing its bloated government and ridiculous do-nothing bureaucracies ever larger and larger, to nightmare proportions.

    Posted by: d.a.n at December 4, 2006 9:23 AM
    Comment #198136

    Regarding the prebate:

    So the government decides how much the poor need to buy of necessities and pays them before they buy?

    That’s flat stupid.

    Posted by: womanmarine at December 7, 2006 9:43 AM
    Comment #213624

    Republicans fail to understnad that democracy isn’t free. No doubt there’s too much waste and we have to improve oversight to eliminate republican “bridges to nowhere”, but taxes have also paid for a highway system that’s the envy of the world and key to our economic success, as well as, the most powerful military on earth. We cannot starve government and expect to maintain and improve our country’s infrastructure, laws and security.

    While it’s true that the upper classes pay a greater percentage of their earnings in income taxes, it is not true for taxes, fees and other government revenue generators. Sales taxes, registration fees, tolls, speeding tickets etc all take a greater percentage of lower income people’s earnings. Even property taxes effect the poor disproportionately, who pay these taxes through rent, without any benefits of propertiy ownership.

    If you’re in favor of a flat tax, shouldn’t all taxes be based on a percentage of your income? While the “right” whines, bitches and moans about the Federal Income Tax taking a greater percentage of their earnings, they seem oddly silent on the higher percentage of taxes paid relative to income on a vast array of other taxes and fees.

    Republicans cutting taxes for the top 1-5% of earners is simply pandering to the people that fund their campaigns, it’s not what’s best for the economy. This money is far less likely to make its way into the marketplace than dollars pumped into the lower or middle classes. It’s hard to imagine a janitor investing in foreign companies or spending additional money abroad.

    Bushies and Reagonites love to talk about how their tax cuts stimulate the economy. Even if all growth during these time is attributable to tax cuts for the wealthy, they’re only truly beneficial if they generate enough revenue to cover the bills. If not, it’s like borrowing a million dollars and blowing it: you really improved your standard of living….until the bill came due. Reagan borrowed more money than all other presidents before him combined, and that’s with adjusting for inflation. GW has followed that path and been the first president ever to cut taxes during wartime. With the Chinese doing the lending, Bush and the Republicans have effectively sold our country to China.

    By 2008 20% of our tax dollars will be going to pay the national debt….somewhere Mao is smiling.

    Posted by: Jason S at March 25, 2007 12:22 PM
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