GolfHos

I've got one eye, and one ear on some sort of (I'm guessing GOP) debate.  I'm not "watching" it intently, just pause for a couple of minutes as I pass through the kitchen.

They just threw up a graphic, and one dude was talking about it.
The Fair Tax.

Discontinue:  Individual income tax, estate tax, etc.  and everyone in 'Merka pays a flat 23% sales tax.

My initial take:  Brilliant!  I have always been the middle class that gets killed in Income tax, and have always lived in a state where I have to pay another tax on all the *feces* I buy.  We gotta build stadiums.

Seems to me that this fair tax, would hold everyone responsible to pay their share*.

*I think that's the beauty.  Your share is what you make it.  Don't wanna pay the gubmint?  Make your own sig'retts.  Wanna support the National Defense?  Go buy a couple o' cases of Mich. Golden.

What do you guys think?

I'm sure is a big piece(s) that I don't see.

to begin with, that was a disingenuous representation, the current proposal is for a 30% tax, they use marketing to make it look like a 23% tax



that said, yes...
current system is in need of repair, no doubt.




however, the fair tax isn't the answer to my eyes either, certainly regressive for more than 1/2 the population

if your current tax burden (fed income etc ) is > 30% of your aggregate spendings on goods,services,etc  it's for you.  (aka, you're rich and don't spend anything close to all you earn)

and how do state and local taxes fall in with this system? to eradicate all taxes you currently pay, that number would be closer to 40%. ie fuel taxes, cigarette taxes, entertainment taxes and so on.

by the way, it'll never happen.  ;)

I think if you called it what it is, a National Sales Tax, it wouldn't get off the ground.

It's a regressive system, and just more 'Keep Your Hands Off Of My Piece Of The Pie' so-called 'Conservatism' that we've been treated to for the last 25 years.

just imagine the feds, states, and locals all fighting over their share of the same pie.  :watchingyou:

stroh is ar15 ?  [sm_devil]

Hell, they already do, which is why I can honestly say that in a place that ALREADY has 9 pct local sales tax, adding another 20 or 25 pct isn't working for me.

Here's how I understand it:

My 25 pct total Federal withholding would  drop by half, while my tax on all purchases made would increase by 20 pct. Every dollar I spend would have 30 cents added on, so when I buy a pack of gum for 1.00, I'm going to end up paying 1.30.

Yeah, that's going to work out for me really, really well.

NOT!


I wondered about that too...

LOL  No.  I don't know who that is.  It's just me.. Plain ol stroh.

I haven't done any of the math, and I was just asking.  Is this a good thing, or a bad thing.

I just feel over taxed. :sad3:  I would like to see it evened out, and fair.

I'm an evil ten percenter.  My opinion matters not.  Come to think of it, probably most of you are too.  So shut the *fudge* up already.   ;)

I would like to see stroh's tax burden reduced though.  I'd hate to see him snap. 

(http://news.bbc.co.uk/olmedia/405000/images/_407750_shooting300.jpg)

I think Aske is right  [sm_shock] ;) - its effectively a 30% sales tax.

It will never get anywhere, and its not really a good idea anyway.

1)  It CAN be regressive.  Not to the amounts some claim because there are basic right-offs, but regressive is something it could turn out to be.  Or at a minimum, not progressive enough for those that teeter towards socialism (also the 'problem' with a pure flat tax).

2)  I think it would noticeably affect purchasing, which would lead to a slightly diminished retail market.  When retail suffers the economy suffers, and so on and so forth.  The guy pushing this idea erroneously believes that the prices of goods and services would not increase under this system (less business tax, etc.), but thats highly (foolishly?) optimistic.

Sales tax would be higher, but wouldn't everybody's take-home pay be higher since there wouldn't be a need for income tax witholding on each paycheck?

If my take home income goes up 15 pct, and my outgo goes up 30 pct, that's still a net loss, yes or no?

So, I take home $1.15 for every dollar I get now, but I spend $1.30 for every dollar I spend now.

This is a 'Fair' tax?

It's only 'Fair' if you're putting more than 15 pct of your income in savings, and I'm guessing MOST Americans aren't doing that, and those that are aren't in any kind of dire need.

Penalizes the lower third, whilst letting the upper third and above 'Keep Their Piece Of The Pie' and make it bigger.

More Conservatism run amok.

 :bricks:

Well to be a little more fair than the 'conservatism run amok' bunch, I'll play devil's advocate for a moment.

There is a basic monthly "prebate" (distributed by the SSA) to account for basic goods (poverty level spending) that rolls out like this:

(http://upload.wikimedia.org/wikipedia/en/7/7a/FTRebate.png)

This is the plan to make the tax progressive.

Also, since the Fair Tax takes on FICA and Medicare as well, your take home pay likely goes up more than 15%.  More money to spend on what you want.

Eliminating the IRS, filings, and associated CPA overhead is also a tremendous savings to all; more tax money to spend on SS, Med, etc.

















But it still sucks  ;).  Taxing spending directly will likely have an affect on spending.  Spending makes the economy go round.  When the economy slows everyone loses.  For instance, you get more money out of your paycheck but now are looking at 30%+ tax on all your purchases.  So, in terms we can all understand - that new driver that used to cost $400 + ~7% tax ($428), is now $400 + 37% tax ($548).  More money in your pocket or not, that extra cost may give you pause.  If not that, then a new car at $25,000 + 37% tax ($34,250) surely would.

Now, the argument is that without business taxes, consumer prices will drop.  Yes, perhaps some - but I'm not holding out hope for a difference that will not make people think an extra moment before making a large purchase because of taxes.  With just one out of a hundred choosing not to spend the 'extra', that does have a retail affect.

Sure, we are still paying today via income and payroll taxes - but once that is paid there is minimal 'penalty' (additional taxes - local, state, etc.) on new purchases.  We do all sorts of things to avoid taxes (keep your money) - what makes Boortz think we'll suddenly stop, I don't know.

Stroh,

The FairTax proposal includes a "basic living" sort of subsidy.  Essentially, the government writes YOU a check for some amount that's supposed to cover the 30% sales tax on the crap that your family is expected to purchase to cover basic living expenses (clothes, food, whatnot).  You pay your 30% sales tax on everything, and hopefully the poor don't get totally hosed by having to buy more than the subsidy protected them from.

Unless there's some repeal of the Sixteenth Amendment, there's absolutely nothing to prevent the federal government from subsequently levying an income tax again.  In addition to the FairTax.

I have no idea what, if anything, would be exempt.  I'd expect, though, that it would apply to almost everything, and it could apply to your utilities, an automobile purchase, potentially a home purchase, college tuition -- even beer!

Speaking for myself, it wouldn't affect my purchase decision for a latte.  But I'd have serious second thoughts about any sort of pricey purchase, and I'd obviously be looking used on such things.  (Until the used market rockets out of reach because of that demand, that is.)


Ultimately, the US is a consumer economy.  I believe that any radical proposal that has the change to majorly *fudge* with that is not worth implementing.

I've never understood why people make that assumption.  There'd have to be a huge administrative agency to deal with all the prebates, and the feds still need to police collections of the sale tax at points of sale.  IRS focus would merely shift from individuals to businesses ... but there's still be a need to collect, count, assess, police and prosecute a very, very large pool of players.


One problem I have with the "marketing" is the constant assurance that it wouldn't make much difference to the average family.  If it doesn't give me appreciable tax relief, then why in the hell would I want to overhaul the entire system?  TurboTax isn't that expensive.

Ok.  Thanks for the explanations.  I know there is always something else.......

 :P

2 person family spends 20k$ ??   lmao. 
i guess those jokers didnt hear of rent/mortgage/utilities/etc.

Well, sure - you can't look at it as a wholesale abandonment of all services/costs.  But it is the elimination of a 13,000+ tax code, filing review, policing, CPA costs, etc., with the following two questions:  Ya married?  How many young-uns ya got?

Sure, there are checks to distribute, policing to do (counting young-uns), but it is extremely simplistic compared to what we're paying for now.  Yes, Turbo Tax is cheap - but thats only for regular folk like us; businesses spend millions/billions a year complying with the tax code, filing taxes, accounting/lawyer costs, etc.  That cost is certainly not eaten by the government, its passed on.

Its not meant to be anything more than a poverty level allotment.

Is the operational cost of the IRS keeping the US budget in the red?  That bitch has to be a drop in the annual federal expenditure bucket.

The average guy does not have a difficult tax return.  H&R Block is cheap.  Any tax "solution" sold to me based on how much better my life is going to be when I don't have to prepare a tax return is immediately suspect.

It is obvious that the current tax system was designed to *fudge* the "employee" in the ass.  But I doubt the Fair Tax is the answer to make it "fair". 

IMO the inequity lies here:

$15,650 $63,700 $1,565.00 plus 15% of the amount over 15,650
$63,700 $128,500 $8,772.50 plus 25% of the amount over 63,700
$128,500 $195,850 $24,972.50 plus 28% of the amount over 128,500
$195,850 $349,700 $43,830.50 plus 33% of the amount over 195,850

So if my family is in the 25% bracket like many citizens I have the same % of tax burden as a family pulling in almost twice what mine makes if I'm at the low end and they are at the high end.  Then you have families making almost 200K a year in a bracket 3% higher.  I know that the % is not the percent on all of your income but still. 

Now who makes these high salaries?  Sure we have CEO's and such but also professionals like Dr.s etc.  They are allowed to set-up S corps to lower their tax burden. 

The lowly employee can't shelter his tax burden without going to jail.  When you have many corporations including mine making millions of dollars that have a tax rate similar to lower middle income families something is seriously *fudge*ed up. 

But hey I can save money out of my ever decreasing paycheck and get hit on capital gains tax if my investments pan out, yeah. ::)

I'm guessing that there are comically few doctors and lawyers who've set up corporations and let those companies provide them with "free" housing, board, etc. -- all things that currently are considered taxable income anyway.  And their S-corporations would also have to pay business income tax.  On top of that, under a FairTax scenario where businesses DO NOT PAY FairTax, there would be an even greater incentive to set up any sheltering business you could and channel expenses through it.

hmmmmm

Just think. You could write off the purchase of your Samsung HDTV as necessary equipment for your NFL play-by-play transcription service.

Really?  I know a few optomotrists for example they are incorporated.  Not sure which type but I can't see why any Dr/Lawyer self employed wouldn't.  Of course I'm generalizing in that many work for corporations etc.  But if they have their own practice why not?  Pay themselves just enough to pay personal expenses and stay out of the 25% tax bracket.  Reinvest profits into the corporation and let the pharmacutical companies pay for their personal vacations. ;)  BTW I totally agree with your last sentence as I think Fair Tax is stupid too.  Maybe I'm talking out my ass completely but I can't see why a self-employed professional wouldn't incorporate if he could.  And I bet every other self-employed person be it Painter, plumber, or any type of business is incorporated.  That is all I'm saying.  We employees don't have that luxury. 

YES!
hail boortz!

I've been that route Walfredo.

* 7.x% self employment tax.
* Dividends taxed at income rate thus bumping the bracket (leaving it all in the company is no help, it has to come home at some point... or what's the point).
* IRS looking VERY hard at shaky exemptions and business expenses.  If you write-off that home office it had better not be able to sleep guests.
* Health insurance ~$1,000 monthly.  Now that I'm an employee I have way better coverage for $171.
* Cost of a feckin' CPA to keep it all straight.
* Inconsistent income.  Those demanding customers aren't always as eager to send you their money as they are to take your time/effort.

I know these aren't all tax issues but it adds up.  I'm now working for the man, making less and I'm probably better off financially.  More net disposable income than before.

Maybe the mega-rich have ways to compartmentalize their money and reduce their tax burden but I seriously doubt it.  The IRS isn't stupid nor are they a tool of the uber-wealthy.  They get theirs one way or another.  Income taxes, corporate taxes, estate taxes, property taxes, luxury taxes, take your pick.  It's just that 50% of $10 million annually still leaves you with a few coins in your pocket.  No reason to complain... at least not one that would find sympathetic ears.

We tend to think the other side of the fence is always greener.  I did/do.  The reality is that you trade one set of issues for another.  The very poor aren't beat up because of taxes.  They're beat up because they're very poor. 

Sorry, I misinterpreted you.  I thought you meant setting up a corporation to sugar-daddy the individual and dodge personal income taxes.  Most professional practices are set up as companies of some stripe for liability reasons more than tax reasons.  In a partnership (old-school model for medical and law practices), someone suing successfully can reach directly to the individual practitioners' personal assets in satisfaction of judgment.  With a company shield (e.g. a professional corporation or limited-liability company entity), the practitioners are protected: only the company's assets can be attacked.  (Absent the corporation being a sham, of course.)

As Whiskey said, though, at some point the money has to come from the corporation to the individual in order that individual to get its benefit.  So the sugar-daddy corps don't work out well for their hassle.

I would think an innovative employer could find all sorts of ways to channel compensation that traditionally is taxable through itself (FairTax-free!).  Lower base wage, but free dry-cleaning, accounts with grocery stores (for example, prepaid cards given to employees with the bills going directly to employer), ...  And the more prosperous individuals will always have the means and the incentive to find ways to shield themselves from taxation.  Maybe new rules, but same game, same goal.