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Re: Fair Tax Law...opinions?

Tosk — Wed, 24 Aug 2005 15:08:08 GMT

[quote]How does this consumer issue effect our growing retiring population as they are no longer going to be earning the income, but spending the nesteggs?[/quote]They get hosed again ... but heck they have been hosed by the current code and it's changes most of their lives so what's new.Actually they are going to pay taxes AGAIN on dollars that they have already paid on. BUT they will get numerous break's on the way they will be allowed to reinvest their current nest eggs. This does not mean that those who have saved nothing and expected the Govt to take care of them [u]MAY[/u] be in for a jolt. I hope not, but it could happen. Could be people will need to start giving family a hand, like in the old days ... But maybe that would actually be a good thing overall.

Re: Fair Tax Law...opinions?

Scotty — Wed, 24 Aug 2005 15:04:49 GMT

Who doesn't pay income taxes? Well children, the homeless and in 2000 38 million tax filers paid zero tax- [URL=http://opinionjournal.com/editorial/feature.html?id=110002938]Lucky Duckies[/URL]

Re: Fair Tax Law...opinions?

Aintmyprob — Wed, 24 Aug 2005 07:45:06 GMT

[QUOTE] 3) Most Americans do not pay income tax but darn near everyone that works pays FICA. At this time FICA is like 7.2% and matched by the employer (many illegals pay FICA and withholding- using a fake SS # but get nothing back) because they are afraid to file a tax return or apply for SS.)This FICA contribution nets out to almost 15%. Unless you are really low income this is a "flat tax"- except when you get above $80+ Grand at which point the FICA disappears. Talk about a hit on the working class!! [/QUOTE]Who doesn't pay income taxes? I want to move where they live!!! just because you don't send a check in at the end of the year doesn't mean your not paying. I had a thought, I work with several Philipinos (sp?) and they say that you can live quite well in their country on under $1500 a month... I'll work another ten to fifteen years, saving every dime I can in my 401k, and retire to there and not be a US consumer... How does this consumer issue effect our growing retiring population as they are no longer going to be earning the income, but spending the nesteggs?

Re: Fair Tax Law...opinions?

Scipio Africanus — Tue, 23 Aug 2005 21:55:42 GMT

[QUOTE] WOW !!!! What a neat idea ... we can implement the new tax over 10 years, only 4 states at a time in reverse order of admittance, then everyone gets it in year 11. [/QUOTE]Actually, I was talking with my wife about this tonight. In public health, or medicine, no way you'd "have a theory" or an idea of how to do something, and just try it out on a few thousand patients. You'd have to go through EXTREMELY rigorous and thorough steps to prove that the empirical model you are using to predict the outcome is reliable and valid. Even then, practices get changed when the way of doing things in the long-run proves to be less effective than initial evidence suggested. Strange that, people who tout economics as en empirical endeavour, don't show the same enthusiasm for such pilot testing when it comes to their pet economic intervention.If it would work, great! If it would not, who stands to lose if it is "tested?" Only those special interests who would gain at the expense of others if it were implemented whole-hog in one fell-swoop.

Re: Fair Tax Law...opinions?

Scotty — Tue, 23 Aug 2005 20:14:41 GMT

Fascinating thread. A few observations1) An early comment about getting less if you tax it, getting more if you don't- is a key concept. Taxing income- especially with rising marginal rates makes income less valuable and thus the effort to produce the income becomes less valuable.2) A huge number of rich people pay next to nothing in income taxes- if you have wealth you can buy state tax exempt bonds and essentially pay not tax- not even FICA!!!3) Most Americans do not pay income tax but darn near everyone that works pays FICA. At this time FICA is like 7.2% and matched by the employer (many illegals pay FICA and withholding- using a fake SS # but get nothing back) because they are afraid to file a tax return or apply for SS.)This FICA contribution nets out to almost 15%. Unless you are really low income this is a "flat tax"- except when you get above $80+ Grand at which point the FICA disappears. Talk about a hit on the working class!!4) The pundits are always complaining about America's poor saving rate and this would turn everything around. Likely saving would go up, consumption down and a recession would hit. Especially with the useless IRS and HR Block people on the street. The next problem is what to do with the money. The Japanese have a huge saving rate and without a big export surplus, Japan's economy goes in the toilet. What would happen in the US? If the increased savings were not channeled into investment, this switch would probably cause an economic hiccup. Incidentally, Milton Friedman pretty much proved that the Great Depression was a monetary phenomenon- that the money supply shrank precipitously from 1929 to 1936. The Federal Reserve Board did not now this because they were looking at the aggregate stock of money- which did go up. What they didn't realize was that the banking crisis scared people so much they hid their money in the mattress- while the stock of money increased, it's "velocity"- rate of circulation went down drastically. Federal Deposit insurance probably makes a Great Depression unlikely now.5) Ricardo really invented marginal analysis and probably overestimated human rationality- but Friedman has restated the rationality proposition to "at the margin, people are economically rational"- that is, we may buy BMW sports cars but will haggle about the trim package cost.I prefer the Forbes flat tax idea- I am of the opinion that the level of taxes is less important than the progressivity. I think the economy is hugely distorted by our progressive income tax- and it leads directly to "loop-hole" construction and tax evasion.6) It is impossible to maximize two dependant variables- what confounds us is that we use the Income tax to raise money and redistribute wealth. The more you do of the latter, the less you get of the former. This also happens in government procurement- there is a perpetual war between efficiency and equity.Anyhow, great subject.

Re: Fair Tax Law...opinions?

Tosk — Tue, 23 Aug 2005 17:33:27 GMT

[quote]Perhaps I'm wrong, but I prefer to test drive my vehicles before I buy them.[/quote]WOW !!!! What a neat idea ... we can implement the new tax over 10 years, only 4 states at a time in reverse order of admittance, then everyone gets it in year 11. Alaska, Arizona, Hawaii and New Mexico would be the first four the first year. You would get to test it on a high density state, 2 low density states and a retirement state. A bonus would be that two states have a huge illegal population.We could adjust each year before we moved on to the next group of states.For instance if we see the population of Arizona, drop by 50% as all the illegals head over to California, Nevada and Utah we can adjust.If we see the population of Alaska triple as New Englanders move to take advantage of the new law ... we can adjust.We can compare the taxes generated by these states, both pre and post, and make adjustments before the next four move to the new system.Now the question is will Sean wait 11 years before he is able to take advantage of the new plan??? :D:D:D

Re: Fair Tax Law...opinions?

Terminal_Civ-er — Tue, 23 Aug 2005 10:32:01 GMT

I guess I'm looking at "quantity" in direct relation to "quality". Perhaps I'm wrong, but I prefer to test drive my vehicles [i]before[/i] I buy them. Somehow ... a politician telling me it's going to be "better" for me just doesn't carry much weight (much less, belief) with me. Color me skeptical.

Re: Fair Tax Law...opinions?

Tosk — Tue, 23 Aug 2005 10:17:44 GMT

[quote]To your comment. It seems to me that middle America (to quote both sides in the past) will still be hit with a tax burden (in the sense that they aren't seeing any benefit/reduction). Maybe the best solution will be to reduce our income to below mid-income and let someone else shoulder the burden.[/quote]Or one could try to earn more and control their Federal taxes paid by changing their consumption patterns and saving more. Maybe it would be as simple as driving last years car till the new models come out and buying at yearend closeout instead of the cutting edge model at the beginning of the year. Maybe keeping a better eye on the amount of stuff one throws in the trash for the latest greatest model. The new tax plan is a pay as you spend model, as opposed to a pay as you earn model.Returning to the "retired in New Mexico" as an example: many are into tax free low interest investments to shelter their money. Assuming that they do not change their spending habits they can now switch some of their monies to higher interest investments, because now the higher interest does not get taxed down before they even see it, this boosts the economy overall.You mentioned you were an independent contractor? That was my shtick also, and the race to hide the money before tax time was always a concern. No longer (if the new law passes) now you are only taxed when you spend it, and the tax free investments will still be there. In addition the tax on hiring help goes down. Instead of paying them with already taxed dollars and getting it back at the end of the quarter, you pay them with untaxed dollars ... quite a savings overall.There will be a period of "shaking out" for everyone ... but the long run benefits will help us all I believe.

Re: Fair Tax Law...opinions?

Scipio Africanus — Tue, 23 Aug 2005 09:22:56 GMT

ADDIT: Specific comments on the BillI went back to the beginning of this thread to really try to understand this whole thing-a-ma-bob.Thanks for that link to the Lib of Congress site Tosk.Having just started to read the Bill, I can now see why it is controversial, having only read the first line :p Tom Delay, Linder, Flake . . . not sure about all these names, but I know that Tom Delay is considered by most left-wing Democrats as being the anti-christ.I received a note from one of my former profs about how Tom Delay must be removed for some thing he was doing . . . Pretty sure, I'll NEVER get hired by a department of anthropology for the simple reason I don't tow the party line with respect to democratic party zealotry. Sort of like the unions, except they don't actually DO any work, they just blather incessantly . . .Okay, if only for my juvenile desire to defy my dogmatic teachers, I like this bill already :pOkay, I understand the purpose I think, but in reading through the thing I'm still skeptical of whether or not it can achieve its purpose.The findings of Congress about the "effects" of the tax system are instructive, and mostly seem reasonable and salient. In particular, it strikes me that a central theme of this bill is the idea of taking away hidden tax, tax cascades, and to deploy a distinctly consumer psychologistic type of approach on citizens. If citizens are aware how much of their income is being lost, by making them lose it at the point of consumption, then presumably they will consume less, and save more. This is putatively a good thing in our current save-nothing, invest-little, and consume-willy-nilly society.People consume because they have desire, or need. I am skeptical that making them pay the tax right up front will actually alter their desire or need. Instead, I am afraid that what this Bill would do is to create a vast Black Market, or "Grey Market," in which consumers will simply fulfill their desires and needs in ways that are under the radar of the system.The Bill states that it is the responsibility of the consumer to insure that the sales tax is paid, just as it is currently the responsibility of the income maker to insure that the income tax is paid. Thus, given that cheating on income tax is identified in the problems as one of the main motives for this bill, it seems reasonable that the cheating will simply morph over to a new form, and the initial revenues of the system will not steadily increase in years two, three, etc. of the program, but will plateau, else decrease, as the black/grey market cultures spring up and begin to do lucrative business, in a vacuum of informant created by repealing the old system, and introducing an entirely new system. Thus, I find it hard to believe that this thing will actually reduce inefficiency, graft, administrative costs, etc. The issue of enforcement, and punishment for infraction will still exist, except that, instead of its being administered through all employers, it will have to be administered through all sellers, a much, much more difficult task, given that an employer of 100 may sell to a million in the span of a single year.Also, I can now see the special interest group whom this bill will benefit most directly, businesses who are forced to pay tax on the same dollar multiple times.[QUOTE] SEC. 102. INTERMEDIATE AND EXPORT SALES.`(a) In General- For purposes of this subtitle--`(1) BUSINESS AND EXPORT PURPOSES- No tax shall be imposed under section 101 on any taxable property or service purchased for--`(A) a business purpose in a trade or business, or`(B) export from the United States for use or consumption outside the United States, if, the purchaser provided the seller with a registration certificate, and the seller was a wholesale seller.`(2) INVESTMENT PURPOSE- No tax shall be imposed under section 101 on any taxable property or service purchased for an investment purpose and held exclusively for an investment purpose.`(3) STATE GOVERNMENT FUNCTIONS- No tax shall be imposed under section 101 on State government functions that do not constitute the final consumption of property or services.`(b) Business Purposes- For purposes of this section, the term `purchased for a business purpose in a trade or business' means purchased by a person engaged in a trade or business and used in that trade or business--`(1) for resale,`(2) to produce, provide, render, or sell taxable property or services, or`(3) in furtherance of other bona fide business purposes.`(c) Investment Purposes- For purposes of this section, the term `purchased for an investment purpose' means property purchased exclusively for purposes of appreciation or the production of income but not entailing more than minor personal efforts.[/QUOTE]My interpretation of this, is that, consumption for the purposes of business are exempt. This means that, businesses will be able to find tremendous loopholes by arguing that much of what they buy is for their business. The administrative costs of documenting, verifying, investigating, enforcing, and punishing this code would thus not seem to be much different than the income tax code, except that, businesses would gain more loopholes, and consumer would lose most of theirs. Note, I have not argued that this is necessarily a bad or good thing, simply pointing out these possibilities, which I'm suggesting are strong probable outcomes, and which fly in the face of the central purpose of the bill, to reduce administrative overhead, promote upward mobility, cheating, etc.Also, I still do not see in the table of contents, any obvious section that addresses meliorating the negative impact which the bill may have on philanthropy.There are some sections which seem to get at the issue of the disproportionate relative burden of consumption tax on person's of low-income (this issue of giving a $25K consumption write off). I'll give it the benefit of the doubt for now, and assume that this is properly set out, so that it might actually prevent the lower income from becoming an untouchable class. But even if this is the case, my other concerns about the loss of philanthropy, and the failure of the new system to actually achieve what it claims to set out to do would have to be addressed for me to be supportive of it. Maybe someone has already addressed these points, and my apologies if so, but perhaps you can refer me to the point in the thread or the Bill that addresses these concerns?

Re: Fair Tax Law...opinions?

Terminal_Civ-er — Tue, 23 Aug 2005 08:26:07 GMT

Thanks for a response Tosk. Seems as if a lot of people have me on ignore ... I guess.To your comment. It seems to me that middle America (to quote both sides in the past) will still be hit with a tax burden (in the sense that they aren't seeing any benefit/reduction). Maybe the best solution will be to reduce our income to below mid-income and let someone else shoulder the burden.Helping to widen the rich-poor gap at the same time.

Re: Fair Tax Law...opinions?

Sean — Tue, 23 Aug 2005 02:51:49 GMT

[QUOTE] No, I meant what I said. And if the government makes it harder for the rich to avoid paying taxes, they should theoretically get poorer. [/QUOTE]Let's break this down to an ancient secret practice, practiced 'round the world since the beginning of time.Man A (man of political power): Hi there Man B, how are you today?Man B (very rich): Very good thank you! Hey, you know that Umpteen Trillion bucks I gave you that got you where you are?Man A: Ummm.. yeah?Man B: Well I need a favor...As long as there are crocked people in power (and I have no reason to believe there ever won't be) there will be deals that benefit the rich.[QUOTE] By this, I'm suggesting that the government now has 100% control over the tax revenues. With Charities, RRSP's, and other write-offs, the mass of people could control how much the government made in a year. Of course, people can always buy less, but that is the last thing the government and the citizens want. [/QUOTE]If the gov't "now" has 100% control, how can they gain "more" control with a FairTax system? Right now, it doesn't matter *how* much you spend -- you still pay taxes off how much you make. If you work harder, you're taxed more.Under the new system, you're allowed to spend or save however you want, without worrying about being taxed. Work harder and you can actually get ahead... as an economy major, I honestly cannot see what you don't like about that![QUOTE] Again, I'm not sure if your just skimming peoples posts Sean, or thoroughly reading them, but I'm not against this system, like I've said, I think its a good idea, it just needs allot of fine tuning. [/QUOTE]I've been reading each of them thoroughly, and I saw where you said you weren't against it -- then you said:[QUOTE] All in all, the more I think about the cons of the new system, the more I dislike it. If it passes, it will be very interesting to see how the economy fluctuates, and could give major insite into the tax system. [/QUOTE]and then you went on a rant with, what I feel, are completely bogus reasons why. Citing that the official site is biased is well... lame. Of course it is! They spent 17 million bucks researching what Americans want -- they're reporting on that. Americans want a simplier tax system -- I don't think you'll find *any* American that can argue that. Is this the solution? Perhaps not, but it *is* a lot better than what we currently have.Remember, we're the country that started a war over "Taxation without Representation" -- and we're so rife with it today (Taxaction without Representation) it's not funny. DC citizens even have official license plates stating this.I'm really not trying to come down on you, per-sey (persay? bah!). It's just everytime there is a true revolutionary idea, there are always the naysayers that try anything to shoot it down. Play devil's advocate, for sure -- but don't stiffle progression that is good for mankind. There are not nearly as many holes in the FairTax proposal as there are on one page of the American tax code. Simplify things, and then build from that -- but don't keep a system in place that causes 99% of Americans to have to get someone else to do their taxes.Big storm here -- posting this before I loose it.S

Re: Fair Tax Law...opinions?

Tosk — Tue, 23 Aug 2005 01:55:41 GMT

TC[quote]As I said above ... Who wins here? I don't see where any employee wins ... or did I miss something[/quote]If implemented properly then no one wins at the income level you are working with. At those income levels you win by working harder or investing smarter. The people who are meant to win are the under 30-40K bracket. At least this is how I read it.Unemployment insurance, Workman's comp, Disability, property tax ... all state taxes ... this bill deals only with federal taxes. It will be interesting to see how some of the really bad nanny states (CA for example) handle these problems ... and if a mass exodus to more reasonable states begins.New Mexico now has as nearly 10% of its population, retired Californians and Texans, with a smattering of Northeasterners, and its going up. Having made their nest egg they have decided that moving to a goods and services consumption tax state is preferable to the state system they were in.SA[quote]Well, if it is so simple to manipulate "the economy" ever since currency, then WHY do depressions ever happen at all?[/quote]Too easy, think about it, You get a progressive liberal government in place, then a bunch of 20 something grad students, and their liberal professors, come up with the ultimate new economic model that is going to make it better for everyone. Those in power gets swept up in the hoopla and in goes the new plan/law. Oops we forgot to read our history books ... every time before that the new plan has been tried a depression hit.Depressions are not as easily fixed as resessions are. It is easy to manipulate the economy if you catch the trend early, but humans being what they are, usually just can not admit that "their" plan is faulty until it is to late for the easy fix.The same as I suggested to Seared that all major boom times coincides with lowering taxes on those who created the jobs, the above model is also all written history. In the currency era what has worked has always worked, and what has failed has always failed. The new whiz bang model might be just the thing when we leave the currency era.

Re: Fair Tax Law...opinions?

Ness — Mon, 22 Aug 2005 23:20:14 GMT

[QUOTE] The rich don't get poorer, no matter the system. The rich *always* get richer, because the rich *always* greeze palms. That's in any country.Assuming you meant the poor get poorer and the rich get richer, [/QUOTE]No, I meant what I said. And if the government makes it harder for the rich to avoid paying taxes, they should theoretically get poorer. [QUOTE] 4: More government control over the country. [/QUOTE]By this, I'm suggesting that the government now has 100% control over the tax revenues. With Charities, RRSP's, and other write-offs, the mass of people could control how much the government made in a year. Of course, people can always buy less, but that is the last thing the government and the citizens want. Again, I'm not sure if your just skimming peoples posts Sean, or thoroughly reading them, but I'm not against this system, like I've said, I think its a good idea, it just needs allot of fine tuning.

Re: Fair Tax Law...opinions?

Seared — Mon, 22 Aug 2005 18:06:21 GMT

[QUOTE] The biggest benefit I see to all of this in the recognition of Americans seeing just how much they pay in taxes.....Things won't be as "invisible" as they are now. [/QUOTE]Opening up your eyes and holding your government accountable. Wow, this thread is making me giddy.

Re: Fair Tax Law...opinions?

Sean — Mon, 22 Aug 2005 17:54:12 GMT

[QUOTE] GST when it began was a bit of a nitemare where you just smiled and paid what the receipt read. The goal was to maek family spending non taxable and personal spending taxable. The fine black line between the 2 quickly bcame a thick grey stripe [/QUOTE]Oh I have zero doubts that a system like this will become grey over time. American politicians love tinkering with things to support one group, while hurting another.The biggest benefit I see to all of this in the recognition of Americans seeing just how much they pay in taxes. So much of our money today is taken in taxes (*much* more than the amount we see deducted) that by giving Americans the ability to see have those dollars in their pocket and then see them dissapear, they will begin to demand the gov't be a bit more tight with our tax dollars and stop spending them on everything under the sun. We Americans tend to stick our heads in the sand and don't look at "the big picture" -- our money is deducted before we ever get it, and then it's hit again with hidden taxes. Our tax system has gotten so complex, that it is easy for the same dollar to be taxed multiple times... and most don't even realize it!A system like this would put the brass tacks to the wall. You would be given $100 in payment and then you would see just how fast that $100 would dissapear due to taxes. The system *must* generate at least as much in taxes as we do now, and hopefully a bit more, but at the same time, with that awareness of the population, a demand for better gov't spending will come about.Things won't be as "invisible" as they are now.S

Re: Fair Tax Law...opinions?

Sean — Mon, 22 Aug 2005 17:46:49 GMT

One more note and I'll shuddup a bit.If it looks like "everyone will be paying lower taxes and how is the gov't going to work with LESS money?" then you have to think in bigger terms. If people have more money, it is true they will save more, but they will also spend more. My understanding of the system is after the first year, the amount will be looked at, and if it's too high, a decision will be made on how better to spend the money or lower the rate -- and if it's too low, an adjustment up would be made.It is also estimated that presently over 1 trillion (yes, trillion) tax dollars are lost each year from illegal monies. Factor that with the 3.4 trillion or so paid in taxes last year.S

Re: Fair Tax Law...opinions?

Seared — Mon, 22 Aug 2005 17:29:34 GMT

Just on the grocery tax bit... The GST here got very confusing and I'm hoping the same doesn't afflict the US. 1 doughnut - taxable6 pack dougnuts - not taxable1 loaf of bread - taxable3 pack loaf of bread - not taxable.GST when it began was a bit of a nitemare where you just smiled and paid what the receipt read. The goal was to maek family spending non taxable and personal spending taxable. The fine black line between the 2 quickly bcame a thick grey stripe

Re: Fair Tax Law...opinions?

Sean — Mon, 22 Aug 2005 17:12:15 GMT

BTW, [URL=http://www.pafairtax.org/calc.php]here's a link[/URL] to a calculator that allows you to plug in your 2004 income and see your current taxes and what you'd pay under the "FairTax" system.SAddited: BTW, it looks as if I stand corrected on groceries. You would be taxed on groceries (and medicine). However, with the hidden taxes figured into the prices of goods (corporate taxes, income taxes for employees of corporations, gas taxes, etc) the estimation is an across the board drop of 20-25% of all goods sold in America as the direct result of lowered taxes across the board.In other words, that same $2 loaf of bread would not be $2.46 -- it would be $1.85 (with the gov't sales tax and minus the current hidden taxes).That same $50 bottle of drugs would not be $61.50 -- it would be $46.13.

Re: Fair Tax Law...opinions?

Sean — Mon, 22 Aug 2005 17:04:07 GMT

[QUOTE] Sean, I'll repeat what I've said several times in this thread already!, postsecondary and Grad students dont pay a cent in income tax with the current system. The only tax I pay is the small goods and service tax when I buy stuff (food is not taxes), and I get a 150 dollar cheque every three months to cover the GST tax. So essentially, Post Secondary and Grad Students pay zero total tax. Please explain how paying zero tax now is worse then paying a 27% consumption tax under the peoposed system. [/QUOTE]First you say [I]"I pay is the small goods and service tax when I buy stuff [...] and I get a 150 dollar cheque every three months to cover the GST tax"[/I]then you say [I]"So essentially, Post Secondary and Grad Students pay zero total tax."[/I]This system is setup *exactly* like that. Low income families receive a monthly check that offsets the taxes spent each month. Assumptions are made at various income levels (at low income levels, like yours currently, it is assumed you spend 100% of your money and save 0% whereas my income being higher at the moment, I get no such help -- however, I *do* get to save, invest or give away money without the burden of taxes).[QUOTE] What are you talking about? I work a full time job to pay for school (honestly, how many parents help their kids with University? thats right, only the rich). [/QUOTE]I can tell you I put myself 100% through school. I grew up in an orphanage, and declined their help when I went to college. I lived on pell grants and student loans, and I had to pay taxes on that income. Then, to pay off the student loans, I had to make interest payments with POST-tax dollars. For the same bloody dollar, I was taxed TWICE -- and had to pay interest to boot!This system helps kids whether they're rich or poor... or anywhere in between.I'd still love to hear how this plan causes the following:[quote] 4: More government control over the country. [/quote]This one just has me completely baffled. At the moment, you must go line by line and tell the gov't what you've spent your money on. With this new system, if you make a huge purchase with cash, noone but you and the seller know about it. How is that *more* control?[quote] 5: The poor get poorer, and the rich get poorer.[/quote]The rich don't get poorer, no matter the system. The rich *always* get richer, because the rich *always* greeze palms. That's in any country.Assuming you meant the poor get poorer and the rich get richer, that's completely crazy. Under the current system, tax shelters and other loopholes are available to the rich. Under the new system, there's no writeoff for buying a BMW or Hummer for your "business". Likewise, there is no detriment to lower income families that prevent them from saving to purchase a home, a new car, etc. This new system makes it *much* easier for people to rise through the income levels to achieve a higher personal level of income. And brother, lemme tell you -- republicans are *all* for self-made people.And BTW -- here in the US, a lot of states don't charge sales tax on groceries. I can only imagine the feds wouldn't either. Even with the kickbacks to the lower income families, something just doesn't seem right about charging a sales tax on basic groceries.S

Re: Fair Tax Law...opinions?

Ness — Mon, 22 Aug 2005 15:58:30 GMT

Sean, I'll repeat what I've said several times in this thread already!, postsecondary and Grad students dont pay a cent in income tax with the current system. The only tax I pay is the small goods and service tax when I buy stuff (food is not taxes), and I get a 150 dollar cheque every three months to cover the GST tax. So essentially, Post Secondary and Grad Students pay zero total tax. Please explain how paying zero tax now is worse then paying a 27% consumption tax under the peoposed system.[QUOTE] (parents pay you with post-tax dollars and you pay taxes on the money when you receive it). [/QUOTE]What are you talking about? I work a full time job to pay for school (honestly, how many parents help their kids with University? thats right, only the rich).

Re: Fair Tax Law...opinions?

rayfree — Mon, 22 Aug 2005 14:57:19 GMT

Steve Forbes has long been promoting a flat tax vs. a national sales tax. Here is a link to a recent article by him in the Wall Street Journal. It is mostly touting his idea, but there is some discussion at the end on the Sales tax idea.[URL=http://integritypages.zftp.com/users/axis2400/Forbes%20article.html]Forbes Article[/URL]

Re: Fair Tax Law...opinions?

Aintmyprob — Mon, 22 Aug 2005 13:25:58 GMT

Sean, thanks for the table there... that will help (if its accurate.) I still say it looks like the poorer workers will pay a higher percentage of income, which will be a smaller amount of cash, but more to them. The lasting effects of bottom lines changing at the local wally world will hurt the minimum wage earner the most too... But at least they should be able to figure out any tax forms...

Re: Fair Tax Law...opinions?

Sean — Mon, 22 Aug 2005 12:40:51 GMT

[QUOTE] 1. Higher cost of living for low income individuals and families.2. Higher cost of living for post secondary and grad students. 3. Loss of tax break incentive (charities, schools, rrsp's) 4. More government control over the country. 5. The poor get poorer, and the rich get poorer [/QUOTE]I'm sorry, but this is just scare-mongering. There is *nothing* that indicates any of this is true, and 4/5 are nothing more than opinions, with zero fact to back them up.1: [IMG]http://www.1bigcommunity.com/fairtax1.gif[/IMG]2: What on earth do you have to back this statement up? Without having to pay taxes on income, post-grads should see it *much* easier to pay back school loans, etc. Not only that, but no longer does that $2k a month from your parents get double taxed (parents pay you with post-tax dollars and you pay taxes on the money when you receive it).3: Completely untrue. As stated NUMEROUS times, charitable donations are STILL deducatable.[QUOTE] Charitable contributions depend on one factor more than any other: The health of the economy (not tax benefits). As a wide range of economists agree on the economic expansion the FairTax delivers, charitable contributions benefit also.For all of the money that pours into churches every Sunday and into a broad range of charities every day, only the 30 percent who itemize get any tax benefit. The other 70 percent have given and keep giving with no tax benefit whatsoever. The FairTax allows people to make charitable contributions out of pre-tax dollars. Thus those generally less affluent taxpayers who do not itemize see their cost of charitable giving go down under the FairTax. Finally, the wealthy make decisions on charitable giving based on the cause. Once they have determined the cause is worthy, their contribution is structured to maximize the gift and minimize the tax. But the intention to give comes first; taxes simply determine the structure – rarely the amount – of the gift. [/QUOTE][URL=http://www.fairtaxvolunteer.org/smart/faq-main.html#22]http://www.fairtaxvolunteer.org/smart/faq-main.html#22[/URL][QUOTE] The only problem Winner, is that the link your giving us if from a site called, "People For The Fair Tax System", not, "The People For Complete Information". Sure they give you these fantastic figures, and tell you everything is going to be alright. But where is the meat and bones calculations and economic models they used to generate these numbers? [/QUOTE]I posted some raw numbers above. The question is, where are *your* facts and figures instead of hearsay and opinion.If you look at who is for the FairTax (many, many people) and who is against it (mostly retail organizations, as they fear it would affect their bottom line initially -- and it would), it's not very difficult to see this is a system with a lot of public support.Here's a link to the google search term "compare fairtax" -- I suggest everyone read the pro's and con's of the system.[URL=http://www.google.com/search?hl=en&lr=&safe=off&q=compare+fairtax]http://www.google.com/search?hl=en&lr=&safe=off&q=compare+fairtax[/URL]Imagine no more double (triple) taxation. Imagine no more death tax. No more marriage penelty. No more taxes on investment gains.It's easy if you try.S

Re: Fair Tax Law...opinions?

Scipio Africanus — Mon, 22 Aug 2005 10:59:56 GMT

[QUOTE] There is no big mystery here or data required, just keep doing what has been working since the invention of currency. (should be around 1000bc, or earlier if you are doing well in the game) [/QUOTE]Well, if it is so simple to manipulate "the economy" ever since currency, then WHY do depressions ever happen at all?I don't know the details, but I've read that Herbert Hoover is credited as helping to kick off the Great Depression with his economic efforts.Winner, one of your links still is not working. The one from Ness seems to be working, and I'm going to read it later when work slows down. However at present, I'm still skeptical that this is a good thing for the common good, and not simply a good thing for the upper third or quarter of the income hierarchy.

Re: Fair Tax Law...opinions?

Terminal_Civ-er — Mon, 22 Aug 2005 09:49:56 GMT

Two things (if I read them correctly):[QUOTE] `(17) WAGES AND SALARY- The terms `wage' and `salary' mean all compensation paid for employment service including cash compensation, employee benefits, disability insurance, or wage replacement insurance payments, unemployment compensation insurance, workers' compensation insurance, and the fair market value of any other consideration paid by an employer to an employee in consideration for employment services rendered. [/QUOTE]This is still a tax on income ... beit real money and/or compensation. How will this impact pre-tax payroll deduction systems, if at all? Also, as a contractor, I just became even more valuable and the "permanent" employee just became poorer. Why? Because what I get, I get in money. Insurance? I buy it. Vacations? I don't get paid for them and I pay for them. (No work, no pay plus dishing out the money for the vacation itself.) Benefits: none. Disability: if I don't put back for it, I ain't got it. Long/short term disability: I buy it or don't have it. Unemployment: If I'm 1099 or B-to-B ... I don't get it. If I'm W2 through an agency ... I get it and would have to "pay tax on my unemployment insurance". Workman's comp: Don't get it. I'd have to sue to get it. Would I then be taxed on it? Profit sharing: Nope.On the other hand, is the "permanent" employee really making out on this? Now, they are being taxed on not only their gross income, but all of the fair market value of each type of compensation. In rought terms, businesses typically figure an employee costs them 50% more than their gross pay for their benefits (compensation, not including profit sharing). So let's put just these into numbers.We'll keep it simple:An employee makes $66,666.67 / year. If we assume the 50% over number used above, that would put them at $100,000/year so they will pay ($100,000 * .23) = 23,000 in taxes, leaving them ($66,666.67 - 23,000) = $33,666.67 after taxes. Under the current method, the 2004 tax rate schedule (for single) is (for a income of $66,666.67: [QUOTE]$29,050 - $70,350: $4,000.00 plus 25% of the amount over 29,050 [/QUOTE]. Someone check my math on this, but that would be $4000 + (37616.67 x .25) = $13,404.17 in taxes leaving an after tax income of ($66,666.67 - 13,404.17) = 53,262.5. So where do they make out?Now, if I make the same amount of $100,000/year, I get taxed the same $23,000 leaving a $77,000 (after tax income). If I buy insurance at $500/month, that puts me at $71,000 dollars. Putting away a generous $1000/month for everything else leaves me at $59,000 adjusted.Under 2004 tax rate (for single), it's: [QUOTE] $14,325.00 plus 28% of the amount over 70,350 [/QUOTE] or (14,325 + (29,650 * .28) = $14593.80 leaving an after tax income of 85,406.20. If I put away the same ($1500/month for everything as mentioned above), that leaves me at $68,000 (adjusted). So which way makes out better? Who (or what) makes out better under the new rate?Now ... in reality, if that person is making $67,000/year (for rounding purposes), I might make about 2x that at least. So, yeah ... this hurts the permanent employee and (ultimately) helps big business. More employees become ICs (Independant Contractors) which reduces the amount a company has to pay out for benefits (if they do at all). It takes a big burden off of big business. Fewer "permanent" employees will eventually reduce the Labor Union ranks (unless they can figure out how to get ICs to unionize) due to the extra burden on the Union workers having to pay for all of these "perks" they got plus their union dues, etc. Now the Companies don't have to offer insurance or benefits ORRR, if they offer expensive insurance/benefits the employee is burdened with the additional cost of taxes forcing them into the IC world.As I said above ... [b]Who[/b] wins here? I don't see where [i]any[/i] employee wins ... or did I miss something?If you own a house, the tax "break" is you don't have to pay taxes for owning it ... but you are still going to pay (local/city) taxes on it. If I rent ... do I have to "pay a tax"? If I own rental property, do I pay tax on that? If so, how is that going to impact the "quality" of my rental property?Disclaimer: The figures above are only used as an example of equally qualified people working the same job in a respective field and non-married. The figures will vary depending on the field of expertise/work.

Re: Fair Tax Law...opinions?

Tosk — Mon, 22 Aug 2005 07:39:42 GMT

[quote]and enjoy my time relaxing, hanging out with my friends, doing some multi-player civin, and hanging out at 1bc and various other forums.[/quote]Sounds like a plan, enjoy.You will have a long time to explore the joys of your selected profession, youth is the time for learning and fun, make the most of it.[quote]You can't financially ruin anyone,[/quote]LOL, You don't understand the U.S. system very well do you?There have been several times, in my lifetime, when they did just that very thing with some of their brilliant laws. ;)

Re: Fair Tax Law...opinions?

Ness — Mon, 22 Aug 2005 01:33:59 GMT

Though I do have the next 3 weeks off school, and have plenty of time to do some major research into the issue, I'm going to opt out of that idea, and enjoy my time relaxing, hanging out with my friends, doing some multi-player civin, and hanging out at 1bc and various other forums. With the limited research I have done, I predict a similar system to the "Fair Tax" proposal to get implemented in America in the future. I think some of the ideas in this new system are practical, yet the actual proposal is in too rudimentary of a stage to be fully implemented without huge headaches in the economy. It most likely will start with a mixed system. A new tax (like the GST in Canada) and less income tax. Slowly the income tax will be removed, and it will be 100% consumption tax. In the long run, it would probably save a ton of money and resources to go the cold turkey route, and just switch it all, fixing the system as it goes. But it’s not always about what you’re going to save. You can't financially ruin anyone, and therefore, every aspect has to be thought out completely. One thing I will say, after reading more into it, it sounds like a positive plan, if only the black market, subsidy, and distribution of rebates can be looked at closer, and planned out more thoroughly, I think it might work. Just a word of caution though, Canada went through a huge recession when we implemented our GST, in the long run though, it was not that bad of an idea.

Re: Fair Tax Law...opinions?

Tosk — Mon, 22 Aug 2005 00:57:05 GMT

Thanks Ness for taking the time to answer. I fear that all the way down to "A major recession could develope from this plan." I understood very little ... "Predicting the economy is like predicting the weather." ... I understood, I guess that is why when the weather report comes on I change the channel, and on the trading floor, when the latest economists reports roll we all go for coffee."What will the government do if unanticipated inflation arises," ... I understand this also, the same thing they have always done, raise prime to slow down the economy. There is no big mystery here or data required, just keep doing what has been working since the invention of currency. (should be around 1000bc, or earlier if you are doing well in the game)I wish to be very clear here that I am not attempting to be sarcastic, But I do not need a whole lot of data nor any models at all to predict that we will get:1) inflation2) recession3) no changeBut I do thank you for the attempt to explain economists method of reporting.Sean reminded me of the friendly local neighborhood pusher, under this new plan he now gets to pay income tax on his ill gotten gains every time he gets new bling. Under the current system he pays nothing. It more and more appears that with all the illegal activity monies that will now end up being taxed that the initial boom could be quite large.I believe that I will begin keeping a close eye on this one.

Re: Fair Tax Law...opinions?

Ness — Mon, 22 Aug 2005 00:19:36 GMT

here is a better link for people interested in the "Fair Tax" to look at. Its less biased, and has many good links for and against it. :[URL=http://en.wikipedia.org/wiki/FairTax#Legislative_overview]FairTax[/URL]

Re: Fair Tax Law...opinions?

psweetman1590 — Sun, 21 Aug 2005 23:45:50 GMT

[QUOTE]Quote:-------------------------------------------------------------------------------- 1. Higher cost of living for low income individuals and families.2. Higher cost of living for post secondary and grad students. -------------------------------------------------------------------------------- It isn't a higher cost of living unless you spend over a certain amount. Every person recieves the same tax return and if you spend less than $20,000 - $25,000 a year you will actually be making money from the tax return. [/QUOTE]Winner, I think what Ness is saying is not that the absolut cost of living is higher, but that the amount of money they spend [I]compared to their paycheck[/I] is higher.Ex. - a college student might make some 10,000 a year while studying.His tuition costs some 7000 a year.then he has to pay for food, utilities, ect, so he'll usually end up paying almost all of what he makes, if not more, and he'll be taxed on everything.by contrast, a wealthier person might make 100,000 a year, but only have to spend 70,000. he is only taxed on the 70,000 he spends, and gets to keep the rest with no tax.Thus, percentage-wise, lower-class people [I]would[/I] get taxed more.Having said that (and being one who is of the age to become a low-class secondary schooler) I'm still in favor of this bill.

Re: Fair Tax Law...opinions?

Ness — Sun, 21 Aug 2005 23:43:17 GMT

I listed reasons Tosk, 5 pros and 5 cons. Honestly, I know very little about the tax structure in the USA. I have to compare what would happen if a similar reform were implemented in Canada. [QUOTE] Correct me if I'm wrong, but I was led to believe that an economist’s prime function was to set up models, using past data to project the impact of changes on the system. [/QUOTE]The models are already made, using theory and practical information from both past models, and current conditions. The economist uses these models to predict what an outcome will be. There are several models I can use to tell you what will happen, however, like every economist student knows, there are several models to use for a tax change, and all can give conflicting data. Predicting the economy is like predicting the weather. There are few of us who can do it well, but every generation gets a little better at it. So you want some solid predictions I can give you Tosk? Well I'm at work right now, and for me to do an accurate job of it I would need several months to collect data, apply it to all the models, use my intuition, and come out with both Short Run outcomes, and Long Run outcomes. Both will be quite different. And you can judge what is more important (the long run impact or the short run). When I say I need numbers, this is what I need. How much is the consumption tax going to be, 10%, 20%, 30%. What are the current income tax brackets in the USA, how much does each bracket pay, and how many people are in each bracket. What kind of tax rebates are they going to give (all of the different ones), how many people are going to receive each tax rebate? How close is the government going to monitor people’s wages to assure people are eligible for rebates Ect. Without this data, I can hardly make an educated opinion. And that’s all your going to get, is an educated opinion. The best I could do with my 2 years of university, is tell you what I think will happen, with all the given data, and give a probability of 80%. My grades are averaging just over 90%, much higher then I would give as a probability of me being correct on this issue. For a quick educated guess, I think the short run could experience stagflation, and the long run should reach a new equilibrium with a higher price level, and the same income as before the reform. Some more questions, does the government plan on using monetary expansion to curtail stagflation and accommodate the higher price levels? What will the government do if unanticipated inflation arises, sure there is going to be some, but what if it’s higher than expected? A major recession could develope from this plan. However, depending on the data you collect for me Tosk ;), if the extra wages from not having an income tax, are greater then the rise in overall prices due to the consumption tax, Aggregate demand will rise, increasing Americas real GDP, increasing prices, and you'd experience a major economic boom. Everyone would have a job, and everyone would be getting raises, pushing prices up further, but reaching a new equilibrium where America is richer overall. If the new tax exactly offsets the old system (which would be near impossible to predict) then nothing of substance will happen. All in all, I hope America goes through an economic boom, mainly because that means Canada will probably boom as well. However, at the same time, I would hate to see a major recession, because Canada would probably follow suit, probably not to the same degree though. That’s why I’m interested, and think Americans should give this a lot of thought.

Re: Fair Tax Law...opinions?

Tosk — Sun, 21 Aug 2005 22:37:32 GMT

[quote]before I can make an educated opinion.[/quote]HUH??? ... you mean that you use other peoples data to make your decisions??Correct me if I'm wrong, but I was led to believe that an economists prime function was to set up models, using past data to project the impact of changes on the system.If this is not the case then just what good is an economist, if they just parrot other peoples data?I suppose I'm being a bit sarcastic here ... but at the same time I am attempting to seek information on a trade/science that I know very little about.Sean stated that he was into economics, and he listed reasons on how he thought things would be affected. As a layman I need reasons (why), not parroted data, I can look up data for myself. This does not mean I want opinions ... opinions are a dime a dozen, and seldom worth the time it takes to read them ... I want reasons.

Re: Fair Tax Law...opinions?

Ness — Sun, 21 Aug 2005 21:53:41 GMT

The only problem Winner, is that the link your giving us if from a site called, "People For The Fair Tax System", not, "The People For Complete Information". Sure they give you these fantastic figures, and tell you everything is going to be alright. But where is the meat and bones calculations and economic models they used to generate these numbers? I'm not saying that I'm against this proposed system. I just need to be given the all the numbers and modles from several sources (for it, against it, and neutral) before I can make an educated opinion.

Re: Fair Tax Law...opinions?

Winner — Sun, 21 Aug 2005 21:33:26 GMT

[quote]1. Higher cost of living for low income individuals and families.2. Higher cost of living for post secondary and grad students. [/quote]It isn't a higher cost of living unless you spend over a certain amount. Every person recieves the same tax return and if you spend less than $20,000 - $25,000 a year you will actually be making money from the tax return.[quote]Loss of tax break incentive (charities, schools, rrsp's) [/quote]I don't buy it but here is their explanation.[URL=http://www.fairtaxvolunteer.org/smart/faq-main.html#22]Link[/URL][quote]4. More government control over the country.[/quote]Actually the government would have less control because now the people can decide how much to spend instead of getting a set amount taken out of their pay automatically. Technically a person could spend nothing and pay no taxes at all.[quote]The poor get poorer, and the rich get poorer[/quote]Maybe I didn't do a good job of pointing out that this will actually help the poor more than the current tax system.Here is a sublink from the site I gave previously. It compares the current system to the proposed system.[URL=http://www.fairtax.org/tax_returns_single.html]Link[/URL]

Re: Fair Tax Law...opinions?

Ness — Sun, 21 Aug 2005 19:14:17 GMT

Some Cons:1. Higher cost of living for low income individuals and families.2. Higher cost of living for post secondary and grad students. 3. Loss of tax break incentive (charities, schools, rrsp's) 4. More government control over the country. 5. The poor get poorer, and the rich get poorerPros:1. Even tax burden on the population. 2. The middle class gets richer. 3. People have some more free time because they don't have to file there taxes. 4. Good chance of a huge reduction in corruption. (don't kid yourself, people will still find ways of cheating the system, there should just be less of it) 5. Good chance of a higher tax yeild for the government, and maybe they can halt there buget deficit, the Republics sure like to spend.

Re: Fair Tax Law...opinions?

Sean — Sun, 21 Aug 2005 18:19:09 GMT

I'm all for this, and seriously hope we can get it passed this year. Perhaps one of the greatest benefits to it would be the fact that it would tax the billions of dollars in illegal money, putting a nice chunk of change back into the system.[QUOTE] A consumption tax... and abolishing income tax, corporate tax, death tax...will that effectively transfer money from the poor to the rich? [/QUOTE]The way I've read it (in the past) is low income workers would actually receive a rebate at the end of the year, or would receive a card that qualified them for a "tax free" status on certain purposes.The rich spend more money, and will pay a higher tax. The only *fair* tax would be one that charged everyone, rich or poor, the exact same amount. Even I'm not conservative enough to think that is possible, but I'm also tired of the argument that we tax the poor too much.In most businesses, 10% of the employees do 90% of the work -- if 10% of Americans are doing 90% of the labor, then I'm sorry, but I have little sympathy for those who don't care to better themselves and lead more productive lives. There are many, many Americans working 2-3 shifts and getting taxed for all that extra work, while others sit on their arses and complain about why they can't get ahead.[quote]If this new tax code eliminates the motivation for rich folks to give away their money, because otherwise they'll lose it as income tax, then I am definitely opposed to it.[/quote]Again, my understanding (and understand it's been a couple of years since I went over the finer points) is that we would still have deductions -- we just wouldn't have a complicated tax system. There wouldn't be the deductions there are today, but you can bet your last dollar, republicans love individuals giving away money and wouldn't try to stiffle that.To me, (as an Econ/Accounting major), the system has a lot of plusses, and few negatives. It will put more money into the economy, and would allow for unparelled growth in America. To put into Civ terms, I believe it could trigger a "Golden Age." If people aren't having to pay taxes on investment returns, they will be MUCH MUCH more likely to reinvest those returns -- and even into more risky investments. Like or hate rich people, they *are* the fuel of our economy, and if they have more money, they will be investing more of it -- creating more jobs and more wealth for others.The reasons the democrats will be against this is simple. Right now they have a strangle-hold on the poor in America. They believe in taxing and then giving away to the poor, making themselves look good to the majority of the voters. Americans, more than any other country, believe in getting as much as possible for doing as little as possible -- and as long as our current tax system is in place, we will continue to be a nation divided by income lines. If the poor and middle income in America become more responsible for their incomes, we as a nation become stronger and more able to ward off storms.S

Re: Fair Tax Law...opinions?

Tosk — Sun, 21 Aug 2005 14:39:53 GMT

Well darn Ness, your the economics major.List some of the cons and your concerns so we can discuss them.Heck it's not like we are going to make policy, or reveal any state secrets. ;)In fact it does not appear that we will even get a vote. It just will or will not happen. The more we discuss, the more we know, and the better prepared we can be if it does happens.

Re: Fair Tax Law...opinions?

Ness — Sun, 21 Aug 2005 14:20:37 GMT

This situation is rather complicated. The classical view of the economy states that a tax increase always lowers demand, and a tax beark always increases demand. This reform has both, so we should see some areas boom, and others stagnate? It could take many years before the American economy reaches its new equilibrium. However, the Richardian view assumes people are intelligent and will not spend any more due to the tax break, and wont spend much less due to the tax cut (according to a Richardian economist, people are already saving for the impending tax hike, so they can keep their current level of consumption). All in all, the more I think about the cons of the new system, the more I dislike it. If it passes, it will be very interesting to see how the economy fluctuates, and could give major insite into the tax system.

Re: Fair Tax Law...opinions?

Tosk — Sun, 21 Aug 2005 11:42:45 GMT

I definitely hear what you are saying rayfree ... but is this necessary a bad thing?
I mean would it not be beneficial, in the long run, to have some savings take president over mass consumerism?

Americans, This is a broad generality, there are certainly more than few exceptions, "spend it all" and depend on credit to overcome any emergency that may arise.

I "hear" Americans whine all the time about not having anything left over to save. But, in 99 out of 100 cases, I "see" these same whiners discarding last years perfectly serviceable model Darrel Walthrop t-shirt for the latest and greatest (only $29.95) model. Then *** about putting the $25.00 co pay on the credit card when the kid has the flu, and just has to go to the Dr. Instead of just buying a bottle of "Flu Be Gone" (which is what the Dr. is going to give a prescription for anyway) and having done with it.

I guess the greater question is, will this convince Americans that saving something might not be such a bad idea?

I don't know just food for thought.

Re: Fair Tax Law...opinions?

rayfree — Sun, 21 Aug 2005 10:50:01 GMT

I remember an old saw:"If you tax something, you'll get less of it. If you subsidize something, you'll get more of it."The current system taxes income, so we are thus getting less income than we would otherwise. That is, those who can shift compensation so that they don't pay the tax. (Padding expense accounts, stock options, etc etc.)The proposed system taxes consumption, so there would be less consumption if it is enacted. More emphasis on barter as mentioned earlier.