[OAW]

I'm bringing this from the Liberals, Conservatives, & Therapy thread since that one is not intended for debate. The following is a quick synopsis of the FairTax plan. Follow the link for more details.

What is the FairTax plan?

The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue neutrality, and, through companion legislation, the repeal of the 16th Amendment.

The FairTax Act (HR 25, S 296) is nonpartisan legislation. It abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax administered primarily by existing state sales tax authorities.

The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.

The FairTax:

Enables workers to keep their entire paychecks
Enables retirees to keep their entire pensions
Refunds in advance the tax on purchases of basic necessities
Allows American products to compete fairly
Brings transparency and accountability to tax policy
Ensures Social Security and Medicare funding
Closes all loopholes and brings fairness to taxation
Abolishes the IRS

Good idea? Why or why not?

OAW

[turtle777]

Yes, good idea.

It will make most of the IRS superfluous.

-t

[OAW]

Originally Posted by turtle777 

Yes, good idea.

It will make most of the IRS superfluous.

-t

Just playing devil's advocate here ....

Would you still say it's a good idea if your tax burden increased under this proposal simply because the IRS would be abolished?

OAW

[Uncle Skeleton]

What are you going to do about all the after-tax money people have saved up? Tax them again?

[olePigeon]

You also have to look at the proportion of income that is spent on living expenses and entertainment in general. Most people in the lower middle to lower income bracket spend the majority of their income. People in the higher income bracket don't. People in the higher tier of things often don't even have jobs or jobs that have a meaningful pay cheque compared to any bonuses, dividends, and interested collected on investments.

This completely shifts the tax burden to the lower income brackets because higher income people usually (not always) acquire property through inheritance and gifts. People will use corporations as huge tax shelters, buying everything for them pre-taxed, then gifted to them.

I'd rather be for a national income tax relative to income, and get rid of sales tax. When under the age of 65, all sources of monies are categorized as income. There's no bullcrap like we have now where someone making $250,000 is spending 40% on taxes, but someone making $25 million in interest and dividends is only paying 12%.

[OAW]

Originally Posted by Uncle Skeleton 

What are you going to do about all the after-tax money people have saved up? Tax them again?

That's a good point. I imagine any transition to another tax system would have such issues. Specifically here I don't think there would be much that could be done about money saved up that has already been subject to the income tax. As the old saying goes .... "The money doesn't know where it came from". So that would surely apply at the retail level when collecting a sales tax because the retailer would have no way to know if that money was subject to income tax during the transition or not. Having said that, the portion of savings that was subject to income tax would not be subject to further capital gains taxes or taxes on interest income. So that might help a bit.

OAW

[turtle777]

Originally Posted by OAW 

Just playing devil's advocate here ....

In general, yes, if it were the case that I was paying too little taxes because I was a high income earner who had a full array of tax avoidance strategies at his disposal.

I would generally expect that for many people, the taxes would fall.
Only those who were able to use all kinds of loopholes in the past would see their taxes go up.

-t

[Uncle Skeleton]

Let's face it, the only appeal to the Fair Tax is simplicity. The income tax is long in the tooth, and has built up many arcane and obscure complications and loopholes over time. The key words here are "over time." The Fair Tax would accumulate just as many eccentricities over time, and we all know it. Plus there is the cost of the transition. If you really want simplicity, just make the income tax simple again. No matter what sort of tax reform we do, the complexities will creep back in over time, it's the nature of the beast. Given that the goal is simplicity, it doesn't make sense to discard the simplest solution (keep the income tax and the 16th amendment and just cut the tax code back to a flat percentage) in favor of a more complex one (create a new system from scratch, new amendment, repeal the old, along with a huge transition headache, and the unforeseen problems inherent in any new from-scratch system).

[Doofy]

Originally Posted by Uncle Skeleton 

What are you going to do about all the after-tax money people have saved up? Tax them again?

So, you currently roll up to the checkout and say "oh, I've already paid income tax on that money so there's no need for sales tax"?

[turtle777]

Originally Posted by Doofy 

So, you currently roll up to the checkout and say "oh, I've already paid income tax on that money so there's no need for sales tax"?

Sure, doesn't that work in the UK ?

-t

[Uncle Skeleton]

Originally Posted by Doofy 

So, you currently roll up to the checkout and say "oh, I've already paid income tax on that money so there's no need for sales tax"?

Sales tax is for the state. I don't say that because in my state we don't pay any income tax.

[SpaceMonkey]

It's a bad idea because it effectively results in tariff on all imported goods.

[Doofy]

Originally Posted by olePigeon 

I'd rather be for a national income tax relative to income

Percentage of tax relative to income or quantity of tax relative to income?

[SpaceMonkey]

Originally Posted by Uncle Skeleton 

Let's face it, the only appeal to the Fair Tax is simplicity. The income tax is long in the tooth, and has built up many arcane and obscure complications and loopholes over time. The key words here are "over time." The Fair Tax would accumulate just as many eccentricities over time, and we all know it. Plus there is the cost of the transition. If you really want simplicity, just make the income tax simple again. No matter what sort of tax reform we do, the complexities will creep back in over time, it's the nature of the beast. Given that the goal is simplicity, it doesn't make sense to discard the simplest solution (keep the income tax and the 16th amendment and just cut the tax code back to a flat percentage) in favor of a more complex one (create a new system from scratch, new amendment, repeal the old, along with a huge transition headache, and the unforeseen problems inherent in any new from-scratch system).

Bingo.

[Doofy]

Originally Posted by turtle777 

Sure, doesn't that work in the UK ?

I don't know. I'm not stupid enough to pay tax.

[OAW]

Originally Posted by olePigeon 

You also have to look at the proportion of income that is spent on living expenses and entertainment in general. Most people in the lower middle to lower income bracket spend the majority of their income. People in the higher income bracket don't. People in the higher tier of things often don't even have jobs or jobs that have a meaningful pay cheque compared to any bonuses, dividends, and interested collected on investments.

This completely shifts the tax burden to the lower income brackets because higher income people usually (not always) acquire property through inheritance and gifts. People will use corporations as huge tax shelters, buying everything for them pre-taxed, then gifted to them.

Valid concerns. However, per the FairTax FAQ ....

Since business purchases are not taxable, how does the FairTax keep individuals from pretending to have a business so they can buy things tax free?

The FairTax has several features that make it difficult and very risky for persons to have a scam business in order to purchase items tax free. First, in order for any person to purchase items tax free for business purposes, the business has to be a registered seller and possess a registered seller certificate issued by the state sales tax authority. Registered sellers are expected to file monthly or quarterly sales tax returns with the state (depending on sales volume). The certificate enables the business to purchase tax free from wholesale vendors, but the vendor must retain a copy of the registration certificate to justify not having collected tax on the sale. When a business purchases items for business use from a retail vendor, they have to pay the tax on the purchase and take a credit against the tax due on their monthly sales tax return. They must keep invoices/receipts to document what they purchased and the amount of the purchase. They might also make note of the purpose of the purchase on the invoice.

Also, as registered sellers, they are subject to the possibility of being audited by the state. During such an audit, they will have to produce the invoices for all the “business purchases” that they did not pay sales tax on and will have to be able to show that they were bona fide business expenses. If they cannot prove this, then they will have to pay the taxes that should have been paid when the items were purchased, plus interest and penalties. The probability of being audited will be much greater than it is under the current system with its over 140 million tax filers. Under the FairTax, there will be less than 20 million businesses that will be filing sales tax returns and thus subject to the possibility of being audited. Thus, the probability of tax cheats getting caught will be much greater than it is today, making tax evasion riskier than it is today. Additionally, while the FairTax has much stronger taxpayer rights than does the current tax system, the FairTax legislation provides for a number of fines and penalties for noncompliance. It also authorizes a mechanism for reporting tax cheats and obtaining a reward. An example would be 1-800-TAX-CHET.

Another potential scam would be to have a “fake” family business in order to buy things for family members tax free. The FairTax has a specific provision to prevent this. Although it does not prohibit businesses from providing taxable property or services as gifts, prizes, rewards, or as remuneration for employment, the gift, reward, etc. is considered to be the conversion of property or services from business use to personal use and is therefore taxable. Likewise, there is a similar provision to prevent abuse of employee discounts. Under the FairTax, employer-provided employee discounts over 20 percent are taxable. The term “employee discount” means an employer’s offer of taxable property or services for sale to its employees or their families for less than the offer of such taxable property or services to the general public. If the employee discount amount exceeds 20 percent of the price to the general public, then the sale of such taxable property or services by the employer to the employee is considered the conversion of property or services to personal use and is subject to tax. The taxable amount is the amount by which the discount exceeds 20 percent of the price to the general public.

Like any system it won't be perfect ... but does this allay some of your concerns in this area? Also, the wealthy tend to SPEND a lot of money. Not all of it of course. They wouldn't be wealthy for very long if they did that. But many tend to live off of investment income. This proposal would tax those purchases at the same rate as everyone else which addresses your next point.

Originally Posted by olePigeon

I'd rather be for a national income tax relative to income, and get rid of sales tax. When under the age of 65, all sources of monies are categorized as income. There's no bullcrap like we have now where someone making $250,000 is spending 40% on taxes, but someone making $25 million in interest and dividends is only paying 12%.

I agree that I think it's unfair to tax WAGE income at a higher rate that INVESTMENT income. This proposal eliminates that. With the PREBATES ... refunds in advance ... all income up to the poverty line is essentially tax free. So that's a very progressive feature of the proposal. And a national sales tax would generate revenue from the underground economy ... where people who make money illegally or in primarily cash-based businesses or are paid in cash "off the books" are taxed as they spend those funds. Whereas the present income tax based system misses most, if not all, of their income.

OAW

[turtle777]

Originally Posted by Doofy 

I don't know. I'm not stupid enough to pay tax.

Oh, I forgot a minor detail: the gun

-t

[OAW]

Originally Posted by SpaceMonkey 

It's a bad idea because it effectively results in tariff on all imported goods.

Indeed. The cost of all purchases goes up. Imported or domestic. However, you get to spend your gross income. Not the net after taxes. So you have more to spend to cover that additional cost.

OAW

[OAW]

Originally Posted by Uncle Skeleton 

Let's face it, the only appeal to the Fair Tax is simplicity. The income tax is long in the tooth, and has built up many arcane and obscure complications and loopholes over time. The key words here are "over time." The Fair Tax would accumulate just as many eccentricities over time, and we all know it. Plus there is the cost of the transition. If you really want simplicity, just make the income tax simple again. No matter what sort of tax reform we do, the complexities will creep back in over time, it's the nature of the beast. Given that the goal is simplicity, it doesn't make sense to discard the simplest solution (keep the income tax and the 16th amendment and just cut the tax code back to a flat percentage) in favor of a more complex one (create a new system from scratch, new amendment, repeal the old, along with a huge transition headache, and the unforeseen problems inherent in any new from-scratch system).

So you would favor the flat tax (a la Steve Forbes) over this proposal then?

OAW

[Doofy]

Or you could go for no tax at all and the government prints the money it needs to operate (so, inflation becomes tax and nobody is bothered by tax collectors).

[Uncle Skeleton]

Originally Posted by OAW 

With the PREBATES ... refunds in advance ... all income up to the poverty line is essentially tax free. So that's a very progressive feature of the proposal.

No, this would never work. Poor people are generally not good with finances, that's why they're poor. If you give them 40% of their yearly revenue in January, they're not going to save it for supplementing their grocery bill and rent all the way to December. They're going to spend it all (or more) at tax-refund sales in January, just like they do today when they get their tax refunds of their own money they already paid but somehow they think of it as income.

And a national sales tax would generate revenue from the underground economy ... where people who make money illegally or in primarily cash-based businesses or are paid in cash "off the books" are taxed as they spend those funds. Whereas the present income tax based system misses most, if not all, of their income.

No, this would also never work. Drug dealers and others who skirt the income tax are not simply going to give up the ghost if there was a sales tax instead. The same effort they now put into skirting the income tax would be just as effective at skirting the sales tax. You think that a black-market income is easier to implement than a black-market marketplace? Why do you think they call it a "market?"

Right now you have taxed income being spent on untaxed drugs, and with the Fair Tax you would have un-taxed income being spent on taxed drugs? No, you would recover some of the tax as the drug-dealer spends it on legit purchases (if any), and you would lose all of the tax on legit earners who buy the drugs. I suspect it would be a net loss, but if you're lucky you would break even compared to the income tax.

[turtle777]

Originally Posted by Uncle Skeleton 

Let's face it, the only appeal to the Fair Tax is simplicity. [...] If you really want simplicity, just make the income tax simple again..

Uhm, yeah, I thought that was the whole IDEA of the fair tax.

With the small detail that starting at INCOME level makes it so much easier to cheat when reporting income.
IMO, income is a bad way to base taxation on.

Originally Posted by Uncle Skeleton 

No matter what sort of tax reform we do, the complexities will creep back in over time, it's the nature of the beast. .

That's a very cynic view.
Do you have any evidence of this ?

-t

[Doofy]

Originally Posted by Uncle Skeleton 

No, this would never work. Poor people are generally not good with finances, that's why they're poor. If you give them 40% of their yearly revenue in January, they're not going to save it for supplementing their grocery bill and rent all the way to December. They're going to spend it all (or more) at tax-refund sales in January, just like they do today when they get their tax refunds of their own money they already paid but somehow they think of it as income.

So just make it a monthly payment instead of yearly.

[Uncle Skeleton]

Originally Posted by OAW 

So you would favor the flat tax (a la Steve Forbes) over this proposal then?

OAW

Over this? Yes, absolutely. I'm not convinced that the costs of the current system outweigh the benefits, but the costs of the Fair Tax clearly outweigh the costs of Forbes' flat tax.

[turtle777]

Originally Posted by Uncle Skeleton 

Right now you have taxed income being spent on untaxed drugs, and with the Fair Tax you would have un-taxed income being spent on taxed drugs? No, you would recover some of the tax as the drug-dealer spends it on legit purchases (if any), and you would lose all of the tax on legit earners who buy the drugs. I suspect it would be a net loss, but if you're lucky you would break even compared to the income tax.

Obviously, there's always going to be somebody trying to cheat the system.

We need to recognize this as a fact, but not let it become too big to see other advantages of a change.

-t

[olePigeon]

Originally Posted by OAW 

Valid concerns. However, per the FairTax FAQ ....

Who said anything about pretending to have a company? That might be a problem for people who don't already have money, but I'm talking about people who already have money and run a legitimate business. They'd use the business as a tax shelter. So it has a chance of being audited. Big deal. Like Microsoft, it'd be well worth any penalties or fines to break the law because any future benefits outweigh the penalties. If you have the money to afford the risk, they're going to risk it. Plain and simple. So if there's a 25% chance of being audited, that just means 75% of the large businesses out there aren't getting caught.

Once the lobbying starts, it can only go downhill.

The FairTax also incorporates a section for people to rat out other people who are cheating on their taxes. Didn't Obama just recently get attacked endlessly over a similar proposal? Every Conservative talk show was talking about how Obama wanted Americans to spy on each other. Now they propose a nearly identical system.

Originally Posted by OAW 

Like any system it won't be perfect ... but does this allay some of your concerns in this area?

No.

Originally Posted by OAW 

And a national sales tax would generate revenue from the underground economy ... where people who make money illegally or in primarily cash-based businesses or are paid in cash "off the books" are taxed as they spend those funds.

You don't buy drugs and stolen laptops from a store and pay tax on it.

Originally Posted by OAW 

Whereas the present income tax based system misses most, if not all, of their income.

FairTax misses 99% of their income instead of only 85%. Like I said, you have to look at the proportion of money spent compared to money earned. It's the working class that are going to get completely screwed by this tax system. The moment all the bribery, err- I mean lobbying, sets in with politicians, it's just going to get even worse. FairTax sets up a simple platform for complete exploitation of the working class. Simple as that.

[Doofy]

Originally Posted by olePigeon 

It's the working class that are going to get completely screwed by this tax system.

Don't worry. I doubt most of them will look up from their Facebook accounts and America Idol repeats for long enough to even notice.

[Uncle Skeleton]

Originally Posted by turtle777 

Uhm, yeah, I thought that was the whole IDEA of the fair tax.

With the small detail that starting at INCOME level makes it so much easier to cheat when reporting income.
IMO, income is a bad way to base taxation on.

Give me an example. Who cheats on income who wouldn't also cheat on sales?

edit: I'm not saying income is a better way in theory, I'm saying that the fact that income is the current way is a HUGE advantage: it's already the law, and passing new laws is a burden and costs money; we have experience with it and already know its weaknesses; and our savings are not going to be double-taxed.

That's a very cynic view.
Do you have any evidence of this ?

-t

Do you have any real-life exceptions to the rule?

But even if it's not true, a simple income tax has all the advantages of a simple sales tax (namely: simplicity), and none of the disadvantages (novelty, transitional friction, drag on the retail economy, needing two-thirds of states to pass it, etc)

[Uncle Skeleton]

Originally Posted by Doofy 

So just make it a monthly payment instead of yearly.

Kind of like a welfare check?

[Doofy]

Originally Posted by Uncle Skeleton 

Kind of like a welfare check?

Well, if they're going to act like tools then they should be treated like tools.

[OAW]

Originally Posted by Uncle Skeleton 

No, this would never work. Poor people are generally not good with finances, that's why they're poor. If you give them 40% of their yearly revenue in January, they're not going to save it for supplementing their grocery bill and rent all the way to December. They're going to spend it all (or more) at tax-refund sales in January, just like they do today when they get their tax refunds of their own money they already paid but somehow they think of it as income.

So it sounds like your argument is that the poor would be no better off under this proposal than the current system? Ok. But you haven't shown that they would be worse off though. Also, just as a point of correction .... under this proposal the PREBATE wouldn't be a lump sum up front. It would be paid throughout the year in monthly installments. So would that alleviate some of your concerns regarding "tax-refund sales"?

Originally Posted by Uncle Skeleton

No, this would also never work. Drug dealers and others who skirt the income tax are not simply going to give up the ghost if there was a sales tax instead. The same effort they now put into skirting the income tax would be just as effective at skirting the sales tax. You think that a black-market income is easier to implement than a black-market marketplace? Why do you think they call it a "market?"

Right now you have taxed income being spent on untaxed drugs, and with the Fair Tax you would have un-taxed income being spent on taxed drugs? No, you would recover some of the tax as the drug-dealer spends it on legit purchases (if any), and you would lose all of the tax on legit earners who buy the drugs. I suspect it would be a net loss, but if you're lucky you would break even compared to the income tax.

Well of course there would be no sales tax collected on drug purchases or even retail drug sales. I suppose that goes without saying. But let's keep it real here. Even though there's a line on the 1040 income tax return for "Illegal Income" how many people do you think actually fill it in? So a drug dealer doesn't pay any income tax at all. But they do spend money on things. Day to day expenses. Food. Clothing. Shelter. Cars. Jewelry. Entertainment. Etc. And under this proposal those legitimate transactions would be taxed. So that's a net gain any way you slice it. The same way hairdressers, barbers, and day laborers who are paid in cash spend money on things ... all those purchases would be taxed. Whereas it is common practice in such professions to underreport income to the IRS. Even tourists spending money in the US would become taxpayers under this proposal.

The only way to avoid a sales tax is to save/invest money ... which is a good thing to encourage right?

OAW

[olePigeon]

Originally Posted by Doofy 

Percentage of tax relative to income or quantity of tax relative to income?

Percentage of tax relative to all sources of income, however, no higher than 30%. I think a lot of the disparity comes from people who live off investment income that are not retired. That's why the top 10% control 85% of the nation's wealth, yet only pay 50% of the taxes.

It's not fair that someone who works for a living making $250,000 has nearly half of it go to taxes, while someone who lives off investment income only loses 1/10th of it. It's ridiculous.

[olePigeon]

Originally Posted by Doofy 

Don't worry. I doubt most of them will look up from their Facebook accounts and America Idol repeats for long enough to even notice.

I'm sure the proposers of FairTax are counting on it.

[Chongo]

Originally Posted by Doofy 

So just make it a monthly payment instead of yearly.

It is a monthly payment.

Americans For Fair Taxation: Frequently Asked Questions
as to prices
Americans For Fair Taxation: Frequently Asked Questions Answers

# How does the FairTax affect wages and prices?

Americans who produce goods and earn wages must pay significant tax and compliance costs under the current federal income tax. These taxes and costs both reduce after-tax wages and profits and are then passed on to the consumers of those goods and services in the form of price increases. When the FairTax removes income, capital gains, payroll, and estate and gift taxes, the pre-FairTax prices of these goods and services will fall. The removal of these hidden taxes may also allow wages to rise. Exactly how much prices will fall and wages will rise depends on market forces. For example, in a profession with many jobs and too few to fill them, wages will likely increase more than in fields where there are too many employees and not enough jobs.

Back to FAQ Index

[Doofy]

Originally Posted by olePigeon 

Percentage of tax relative to all sources of income, however, no higher than 30%. I think a lot of the disparity comes from people who live off investment income that are not retired. That's why the top 10% control 85% of the nation's wealth, yet only pay 50% of the taxes.

Shouldn't the top 10% pay 10% of the taxes? How is 10% of the people funding 50% of the burden in any way fair? You want those 10% to pay 85%, while the other 90% of you dodge your responsibilities and pay only 15% towards the upkeep of the place?

[kido331]

The FairTax is a great idea. As many have pointed out it captures a lot more money from the shadow economy, thereby reducing taxes for everyone by distributing the tax burden among all of us. In addition, it can be used much more responsively during an economic crisis as the tax rate can be adjusted and the effect goes into place immediately, not just every April 15th.

If I were to make an adjustment I would add a luxury tax component for a discrete set of high end items (cars over $100,000, houses over $5mil, jewelry over $20K, etc.). I think it would make the proposal more politically acceptable.

[Uncle Skeleton]

Originally Posted by OAW 

So it sounds like your argument is that the poor would be no better off under this proposal than the current system? Ok. But you haven't shown that they would be worse off though. Also, just as a point of correction .... under this proposal the PREBATE wouldn't be a lump sum up front. It would be paid throughout the year in monthly installments. So would that alleviate some of your concerns regarding "tax-refund sales"?

Yes. Maybe. Do welfare families deal wisely with their welfare checks?

Well of course there would be no sales tax collected on drug purchases or even retail drug sales. I suppose that goes without saying. But let's keep it real here. Even though there's a line on the 1040 income tax return for "Illegal Income" how many people do you think actually fill it in? So a drug dealer doesn't pay any income tax at all. But they do spend money on things. Day to day expenses. Food. Clothing. Shelter. Cars. Jewelry. Entertainment. Etc. And under this proposal those legitimate transactions would be taxed. So that's a net gain any way you slice it.

No, not a net gain at all. You're ignoring the fact that the "illegal income" dollars were taxed way back when they were the customers' legal income dollars. You lose that. It's a wash at best (best case: black market merchants don't save any of their earnings, if they save it it's gone). Legit income spent on the black market is a loss (income tax would have caught it), and black market income spent on the legit market is a gain (sales tax would have caught it). How can there be more gain than loss? Only if there is more money coming out of the black market than going in. How would that ever happen? While on the other side, if less money comes out of the black market than goes into it (like if the black-marketers save some of their income and don't spend it), then it's a net loss.

The same way hairdressers, barbers, and day laborers who are paid in cash spend money on things ... all those purchases would be taxed. Whereas it is common practice in such professions to underreport income to the IRS. Even tourists spending money in the US would become taxpayers under this proposal.

What about the flip side? Cash sales at barbers wouldn't be taxed, how is that better? US tourists would be paying less taxes in the US, how is that better?

The only way to avoid a sales tax is to save/invest money ... which is a good thing to encourage right?

At the expense of retail. And it erodes the spending power of anything you already saved. The lesson to people who already saved is that savers get screwed. It also encourages you to buy things on the black market.

[Doofy]

Originally Posted by kido331 

If I were to make an adjustment I would add a luxury tax component for a discrete set of high end items (cars over $100,000, houses over $5mil, jewelry over $20K, etc.). I think it would make the proposal more politically acceptable.

I don't get it. Where does this "soak the rich" attitude that some of you have come from? Are you all pissed off that you're not driving Bentleys and want to punish those who do?

Simple fact: A car sold for $300k will generate ten times the sales tax that a car sold for $30k will generate, at the same tax rate.

Isn't that enough? Why do you always want more?

[Doofy]

Originally Posted by Uncle Skeleton 

Yes. Maybe. Do welfare families deal wisely with their welfare checks?

How is this any different than the poor and stupid going out and blowing their pre-taxed pay cheque at the bookies on pay day?

You can't legislate against stupidity. So don't even try.

[OAW]

Originally Posted by olePigeon 

Percentage of tax relative to all sources of income, however, no higher than 30%. I think a lot of the disparity comes from people who live off investment income that are not retired. That's why the top 10% control 85% of the nation's wealth, yet only pay 50% of the taxes.

It's not fair that someone who works for a living making $250,000 has nearly half of it go to taxes, while someone who lives off investment income only loses 1/10th of it. It's ridiculous.

I agree. Even in the current system I think it is unfair to tax WAGE income at a higher rate that INVESTMENT income. That's BS all day everyday. But at the same time, I think people get caught up on the percentages and lose sight of the amount paid. Under the FairTax proposal the tax rate is the same (though the poor and working class get subsidies which effectively reduces their tax rate). But the starting point is the same for everybody. And you are also correct when you say that the wealthy spend less of their income on a percentage basis than the working and middle class. However, the amount can be substantially higher. A simple example with a national tax rate of 30%.

Let's say we have Joe SixPack who makes 60K and spends approx. 50K. He'll pay approx. 11K in taxes on 39K in purchases.

And then we have Joe FatCat who makes 10M and spends approx. 1M. A much smaller percentage of his income without question. But he'll pay approx. 230K in taxes on 770K in purchases.

So Joe FatCat pays approx. 20 times more tax than Joe SixPack in this scenario because he spent approx. 20 times more money.

OAW

[Doofy]

Originally Posted by OAW 

I agree. Even in the current system I think it is unfair to tax WAGE income at a higher rate that INVESTMENT income. That's BS all day everyday.

No it ain't. You want to encourage those who can live off investment income to do nothing but live off their investment income. If there's no encouragement to be "idle rich", then they might be inclined to take a job - which would mean less jobs available for those who need their salaries to live.

[Uncle Skeleton]

Originally Posted by Doofy 

How is this any different than the poor and stupid going out and blowing their pre-taxed pay cheque at the bookies on pay day?

You can't legislate against stupidity. So don't even try.

I'm not trying to legislate against stupidity, I'm simply opposing legislation that adds a dependence on the lack of stupidity. The pre-bate brings government into the situation, whereas the plain-old paycheck doesn't. I thought you were a "minarchist," so why are you arguing in support of the pre-bate?

[OAW]

Originally Posted by Uncle Skeleton 

No, not a net gain at all. You're ignoring the fact that the "illegal income" dollars were taxed way back when they were the customers' legal income dollars. You lose that. It's a wash at best (best case: black market merchants don't save any of their earnings, if they save it it's gone). Legit income spent on the black market is a loss (income tax would have caught it), and black market income spent on the legit market is a gain (sales tax would have caught it). How can there be more gain than loss? Only if there is more money coming out of the black market than going in. How would that ever happen? While on the other side, if less money comes out of the black market than goes into it (like if the black-marketers save some of their income and don't spend it), then it's a net loss.

Ok ... I see what you are saying. But I would surmise that there would be more dollars spent by people who earn illegally and spend a lot of their money on legitimate purchases than there would be for those that earn legally but spend some of their money buying bootleg DVDs from Pookie on a street corner.

IOW, most people with money in their pocket (legally or illegally) are going to spend the majority of that money in legitimate businesses. All the guys selling bootleg DVDs on street corners put together are a drop in the bucket compared to Best Buy. Know what I'm saying?

OAW

[hyteckit]

Originally Posted by Doofy 

Shouldn't the top 10% pay 10% of the taxes? How is 10% of the people funding 50% of the burden in any way fair? You want those 10% to pay 85%, while the other 90% of you dodge your responsibilities and pay only 15% towards the upkeep of the place?

Top 10% should pay 10% of the taxes?

WTF?

So everyone should pay the same amount in taxes dollar-wise?

Someone making $20,000 a year should pay $20,000 in taxes just as
someone making $20,000,000 a year should pay $20,000 in taxes?

[Doofy]

Originally Posted by Uncle Skeleton 

I thought you were a "minarchist," so why are you arguing in support of the pre-bate?

I'm not. I'd support a "FairTax" with no prebate. Of course, all the morons will whine that "the poor will suffer", but they don't really understand how the lower end of the market would modulate itself to suit.

[Uncle Skeleton]

Originally Posted by OAW 

Ok ... I see what you are saying. But I would surmise that there would be more dollars spent by people who earn illegally and spend a lot of their money on legitimate purchases than there would be for those that earn legally but spend some of their money buying bootleg DVDs from Pookie on a street corner.

IOW, most people with money in their pocket (legally or illegally) are going to spend the majority of that money in legitimate businesses. All the guys selling bootleg DVDs on street corners put together are a drop in the bucket compared to Best Buy. Know what I'm saying?

OAW

No, you're still not getting it. The small picture is that every single dollar made on the black market is also a dollar spent on the black market. You're imagining high-rolling drug dealers creating money out of thin air that can now be taxed, but you're turning a blind eye to all the currently-taxed money that constitutes their income.

So just ignore the small picture completely and look at the big picture: the black market is a "black box." We don't collect taxes on anything that happens within the box (obviously). We currently collect taxes on things that go into the box but not out, and the Fair Tax would collect taxes on things that come out of the box but not in. Does more money go into the box than out, or does more come out than goes in, or is it balanced? You tell me.

[Doofy]

Originally Posted by hyteckit 

Top 10% should pay 10% of the taxes?

WTF?

So everyone should pay the same amount in taxes dollar-wise?

Someone making $20,000 a year should pay $20,000 in taxes just as
someone making $20,000,000 a year should pay $20,000 in taxes?

Makes as much sense as half the shite you peeps are coming out with.

[hyteckit]

Originally Posted by Doofy 

Makes as much sense as half the shite you peeps are coming out with.

Must be fun to live in Doofy-land. It's like tripping on acid and jumping down the rabbit hole and see how far it goes.

In Doofy-land:

A single person with no dependents make $20,000,000 pays $20,000 in taxes.

A single parent with 3 kids, making $20,000 pays $20,000 in taxes. If the 3 kids work part-time, each kids is liable for $20,000 in taxes as well. So total tax liability is $80,000 in taxes for a family of 4 making under $30,000.

[Uncle Skeleton]

Originally Posted by hyteckit 

If the 3 kids work part-time, each kids is liable for $20,000 in taxes as well. So total tax liability is $80,000 in taxes for a family of 4 making under $30,000.

Slow down there, Chairman Mao. Those kids don't get to shirk on their taxes just because they're not working.

[The Final Dakar]

Originally Posted by hyteckit 

Must be fun to live in Doofy-land. It's like tripping on acid and jumping down the rabbit hole and see how far it goes.

In Doofy-land:

A single person with no dependents make $20,000,000 pays $20,000 in taxes.

A single parent with 3 kids, making $20,000 pays $20,000 in taxes. If the 3 kids work part-time, each kids is liable for $20,000 in taxes as well. So total tax liability is $80,000 in taxes for a family of 4 making under $30,000.

Must be fun to live hyteckit-land.

In hyteckit-land you make obscene pointless arguments and really add nothing to the thread.

ROLLSEYES