dagblog - Comments for "The Fair Tax game begins."

The Fair Tax plan is, in my

swfinch1277 — Thu, 09 Mar 2006 23:08:43 +0000

The Fair Tax plan is, in my opinion, much fairer than the current system. If a person doesn't earn much, then they don't spend much and they end up not paying much in taxes. If you earn a lot and live high on the hog, then you pay a lot of taxes. Yes, the wealthy can avoid taxes by saving more and spending less, but that option is available to everyone. If someone is willing to live at a poverty level, they pay nothing! Ha - that will show us!

The Fair Tax plan is created to put taxation in the limelight - what you are paying to the government is present on every receipt. If your tax rate changes, you know it. And everyone pays the same rate based on their consumption, with the two basic assumption that 1) people living at or below the poverty level pay nothing, and 2) the more you earn, the more you spend.

But here's the threat - if Congress changes the wording to introduce loopholes (an idea that appears nowhere in the current bill), then we're all doomed. And why wouldn't they? Their ability to introduce loopholes unbeknownst to us is one of the greatest powers they hold. They can currently make us pay the missing taxes of some favorite constituent (thereby cheating us all), and we are none the wiser. If the Fair Tax Plan goes into effect, they can no longer use that stick.

And that's why the Fair Tax is doomed from the start. It would take nothing short of the threat of a revolution to get rid of the current system.

If you are of the mind to hear the other side of the story, go to
http://www.fairtaxvolunteer.org/smart/faq.html

Correct. The earned income

BillRook — Thu, 09 Mar 2006 20:11:59 +0000

In reply to The Fair Tax game begins.

Correct. The earned income credit was created to offset the payroll taxes.

Also, the Family Consumption Allowance will give the poor money each month--even if they don't work. The poor will really come out ahead on this.

Twenty-three percent is the

BillRook — Thu, 09 Mar 2006 19:59:41 +0000

In reply to The Fair Tax game begins.

Twenty-three percent is the proposed rate. FairTax.org can do all the studies they want and could update the rate by a tenth of a percent or so every year, but that would not matter. The Ways & Means committee will run the proposed rate through the OMB to get the actual number that will go in to effect.

Do I think that after six years, the number should be recalculated? Yes. We should get an updated number. Lack of such updated numbers, however, does not erode the value of the legislation.

Your argument is also very near-sighted. State sales taxes stay the same year in and year out, even when they run a surplus or deficit.

H.R.25/S.25, `CHAPTER 1,

BillRook — Thu, 09 Mar 2006 19:51:18 +0000

In reply to The Fair Tax game begins.

H.R.25/S.25, `CHAPTER 1, `SEC. 101. IMPOSITION OF SALES TAX, paragraph `(1) states, “`(1) FOR 2007- In the calendar year 2007, the rate of tax is 23 percent of the gross payments for the taxable property or service.” In other words, a 23% inclusive tax rate.

23% inclusive = 29.87% exclusive. I hope you are not suggesting that the law be revised to read "..30 percent of the gross payments.."

Sales taxes approaching 40%! Wow! The Fair Tax is a replacement tax. It will collect the same total federal tax that we are paying today. So, what are you suppressed about? The fact that we have to pay 40% or the fact that you did not know that before.

To compare either inclusive or exclusive rates, take a look at: http://www.flfairtax.net/faqs/fair-tax-faqs/is-the-fair-tax-23-or-30.html

Use whichever rate you prefer -- just be consistent whey you compare the rates to current income tax rates. Also, don't forget about the FICA rates, Fair Tax eliminates all federal income based taxes.

The fact is, Mr. Jones, you

ChrisJ — Sun, 07 Aug 2005 22:27:57 +0000

In reply to The Fair Tax game begins.

The fact is, Mr. Jones, you have contributed nothing to this discussion other than a set of talking points you clearly do not understand.

I'm very sorry you feel this way. My own impression was that I was adding the other side to a conversation being held by people who honestly don't understand the tax being proposed. I don't pretend to be an economist, but I do understand enough about the proposed legislation to point out the misapprehensions of others.

You've taken my earlier comment out of context- my point was not that nobody's tax bill can change (that would not be accurate), but rather that the FairTax, once enacted, cannot target particular taxpayers- meaning that your concern(that the poor would be somehow forced to pay more or pay a higher rate) is impossible under the proposed legislation. It is specifically worded to be blind to the individual, and to tax behavior instead.
It is also designed to tax only consumption above the poverty index- meaning that unless you've got more than that to spend, it's literally impossible for you to pay tax.

What this means is that if/when there is no more income tax, the choice of what to do with your money becomes truly yours. It sounds like you're so against allowing the wealthy to have this choice that you'll argue against letting the poor and middle class have the same option, and I can respect that (even if I disagree). As someone who started out poor, I have a different view. I think I understand your perspective: SOMEBODY has to be compelled to pay, and unless the wealthy are compelled to pay a higher rate than all the rest, others will be forced to. I disagree with your conclusion, however, because I don't see the premise as being supportable. It's not like consumer demand of the wealthy will suddenly be diminished. If anything, the spending habits of the wealthy just might increase if they suddenly have more of their paychecks to work with.

As a fundamental value, I am disturbed by the practice of voting on who gets to keep the money another earned, or how much of it- and on some level, that's what this conversation seems to really be about. I hold the view that the more we put this power in the hands of each individual, the more free we all become.

btw: my name isn't jones. :-) What I've contributed is my view, in honest good faith.

If one sentence demonstrates

Colore Oscuro — Sat, 06 Aug 2005 18:52:42 +0000

In reply to The Fair Tax game begins.

If one sentence demonstrates how little you understand the "fair" tax it is:

The FairTax contains no provision by which to transfer tax burden to anyone.

This is utter baloney. Any revenue-neutral change to the fiscal code MUST alter the payment pattern. Those with an ABILITY to save benefit from the fair tax because income that would have been taxed under an income tax will now go untaxed. Revenue neutrality demands that someone pay the tax that they will no longer pay and that will primarily be those who are unable, not unwilling, to save. You confuse a theoretical ability to save of ordinary working Americans struggling to make ends meet in jobs that haven't had a pay raise in five years with the practical ability to save of wealthy Americans. It is far easier to save 90% of your income if you earn $1M than if you earn $100,000.

The fact is, Mr. Jones, you have contributed nothing to this discussion other than a set of talking points you clearly do not understand. I will end the discussion here and would encourage you to do your "fair" tax trolling elsewhere. All of us here hope for more from a thread than a bunch of half-baked talking points for a thoroughly undercooked idea.

The rich will buy their nice

ChrisJ — Sat, 06 Aug 2005 12:15:53 +0000

In reply to The Fair Tax game begins.

The rich will buy their nice homes, etc but they will still be able to save significant quantities of money.

That would be a tragedy. Look at what happens when we allow the wealthy to keep their money: they do terrible things like employ tens of thousands of people and form philanthropic foundations that do such irresponsible things as cure disease and fund education. We should put a stop to this.

Seriously, the idea that allowing the wealthy to save money is in any way bad is... well, silly- and for several reasons:
First of all, what people like Bill Gates do with their money is invest it in activities that create TONS of taxable consumption. He employs literally tens of thousands of conspicuous consumers, in addition to being one himself.
Second, the notion that taxing the wealthy more heavily benefits the poor is just plain shortsighted- it's literally like killing the goose who lays the golden eggs. We WANT the folks who are effective with money and business to have money in their hands- they expand the economy, generate more taxable activity in the economy, create more opportunities, and employ more people. We do the poor no favors by taxing high productivity disproportionately.
Third, saved money doesn't sit under a mattress- it's invested and turns into other peoples' paychecks.

Since the change to a "fair" tax is supposedly revenue neutral the cost of these "savings" would be transferred to others

This is an imaginative, but inaccurate assumption. The FairTax contains no provision by which to transfer tax burden to anyone. The only people paying this tax will be the people consuming, and they'll be paying the tax proportionally to their level of consumption. Consumption levels have always been a more stable and predictable index than income, and thus they make a superior basis for taxation.
It might be confusing if you're conditioned to thinking in terms of class warfare, but this tax has no way to discriminate based on class. It works simply based on how much consumption occurs in the economy, not by targeting this set of people or that.

and, in particular, to those who are unable to avoid the tax because they do not earn enough to save.

Those who do not earn enough to save will pay no tax in the first place, so this argument is misplaced. :-) Those that earn enough to pay tax will be able to save money- the prebate un-taxes subsistence-level consumption, and varies according to family size. to the extent that all spending above subsistence level is elective, no american will be stuck without the ability to save because of taxation.

If we are to believe the

Colore Oscuro — Sat, 06 Aug 2005 09:59:48 +0000

In reply to The Fair Tax game begins.

If we are to believe the "fair" tax advocates the (inclusive) tax rate of 23% has been carefully calculated to be revenue neutral. But how careful can this calculation be when the same rate has been used in bills presented to Congress during the last four congressional sessions even as the budget has swung from surplus to deficit.

H.R.2525 - Fair Tax Act of 1999

In the calendar year 2001, the rate of tax is 23 percent of the gross payments for the taxable property or service.

H.R.2525 - Fair Tax Act of 2001

In the calendar year 2003, the rate of tax is 23 percent of the gross payments for the taxable property or service.

H.R. 25 - Fair Tax Act of 2003

In the calendar year 2005, the rate of tax is 23 percent of the gross payments for the taxable property or service.

H.R.25 - Fair Tax Act of 2005

In the calendar year 2007, the rate of tax is 23 percent of the gross payments for the taxable property or service.

This twaddle by chrisJ shows

Colore Oscuro — Sat, 06 Aug 2005 01:31:10 +0000

In reply to The Fair Tax game begins.

This twaddle by chrisJ shows just how out of touch the "fair" tax people are:

The wealthy will buy their nice homes, expensive clothes/services/etc. because unless they spend it, they're paupers with a pile of worthless paper.

The rich will buy their nice homes, etc but they will still be able to save significant quantities of money. Bill Gates is not a pauper even though he owns $40B of "worthless paper." The fact is that the "fair" tax privileges one group of Americans - those with an ability to save. An American earning $1M a year could easily live off 10% of his income while saving the rest- a feat totally impossible for someone earning minimum wage. In fact, someone on minimum wage is unlikely to be able to save anything.

An easy way to quantify the benefit to wealthy people of the "fair" tax is to compare it with a flat income tax rather than a progressive income tax. Compare the fortunes of an individual earning $1M under a 20% flat tax and a 20% "fair" tax (on an inclusive basis). Assume that the savings ratio increases linearly from 0% on the first dollar to 50% of the last dollar. Under a flat tax this individual would have a tax burden of $200,000 while under the "fair" tax the tax burden would be only $150,000. Since the change to a "fair" tax is supposedly revenue neutral the cost of these "savings" would be transferred to others and, in particular, to those who are unable to avoid the tax because they do not earn enough to save.

The primary beneficiaries of the "fair" tax are those Americans with the ability to save money - i.e. high net-worth or high income Americans. The losers are ordinary working Americans whose insufficient earnings mean that they will see little benefit from the savings effect. The truth of this latter statement can be seen in the low uptake of 401(K) and other tax-beneficial savings schemes. Wealthy Americans, of course, have the ability to max out all of these tax-beneficial savings scheme and would love to be able to make all their investments on a tax-free basis. This is, of course, the primary intent of the "fair" tax - it has absolutely nothing to do with any concept of fairness as ordinary Americans understand the term.

The "fair" tax is essentially a flat tax with an unlimited investment deduction. Although it may appear fair and simple on a superficial level the comparison above demonstrates that it compares unfavorably with a flat tax and, in consequence, with a progressive income tax.

Ironic, that a post

ChrisJ — Sat, 06 Aug 2005 01:02:00 +0000

In reply to The Fair Tax game begins.

Ironic, that a post which dismisses so much as spin, is largely made up of counterspin. ;-) We'll have to disagree on the subject of what's the appropriate way to present the rate- inclusive or exclusive. The difference is ultimately semantic, and the only reason you're excited about it is that you think it's evidence of malfeasance. ...and if you can't see the circular logic at play there, you'll want to look again.

The current tax system undoubtedly has flaws, many of which could be fixed were there political will.

Moot argument. We've been fixing the current system for 91 years, with plenty of political will on both sides, and we've got what we've got. It's nice that you're hopeful and all about fixing it, but I don't share your hope. I support a radical change in tax implementation to mitigate problems that are inherent to income-based taxation.

Moving to a consumption-based tax will undoubtedly increase the fiscal burden of ordinary Americans and decrease that of wealthy Americans.

Can you support this with evidence or research? I'm clear that you have no doubts in the matter, but they also didn't doubt that the world was flat, or that the earth was the center of the universe, either. I'm clear from my own experience that my own doubts in the matter often don't correlate accurately to reality; I invite you to consider the same, or at least, to back your statements with data. or studies.

That, of course, is the desired intent of those who advocate the consumption tax.

This is a long reach, and is probably the basis of your prior conclusion, considering the impossibility of knowing another's intentions. As an advocate of the consumption tax, I've done my research, looked at what I spend annually, looked at what I pay today in income tax (I'm middle class, btw) and in the end the FairTax won't change my tax burden substantively. For me, this doesn't have anything to do with shifting burdens or class warfare.
For me this is about simplicity, transparency, and efficiency.
What it will mean for me is that I won't pay an accountant to do my family's taxes, nor will I need to spend 40+ hours to prepare for that each year (this is average, btw).
The United States as a whole won't spend >$250B annually just to comply with tax regulations (an additional 29% on top of what we pay as tax).
It means that the taxes I'll pay will be transparent, instead of being rolled, invisible, into the price of everything I buy. It will mean that the federal government doesn't need to intrude into my household to the extent that it now does, and that anybody will be able to clearly see how much tax they really pay.
It will mean that I have access to all the same tax-reduction strategies as the very wealthy do. It will mean that the tax-dodging strategies now available only to the wealthy will disappear.

You can call that spin all you want, but until you provide data to back your assertions up, all you've got is an opinion (and spin of your own :-).