Huckabee's Fair Tax
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ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
do a search on 'fairtax' and you will get lots of opinions.
My 2 cents: I think the basic idea has a lot of merit, two huge hurdles:
1) Except for tax deferred money, everything FIRED types have saved was taxed when we earned it, and it will be taxed again when we spend it. That ain't 'fair'. Now, if they could identify current savings and exempt it....
2) Anyone who thinks they can talk congress into giving up their power to tax to influence things they are for/against is either stupid, deluded, or would need to be world's greatest salesman. IMO. How do you think we ended up with the mess of taxes we have?
-ERD50
My 2 cents: I think the basic idea has a lot of merit, two huge hurdles:
1) Except for tax deferred money, everything FIRED types have saved was taxed when we earned it, and it will be taxed again when we spend it. That ain't 'fair'. Now, if they could identify current savings and exempt it....
2) Anyone who thinks they can talk congress into giving up their power to tax to influence things they are for/against is either stupid, deluded, or would need to be world's greatest salesman. IMO. How do you think we ended up with the mess of taxes we have?
-ERD50
The National Retail Sales Tax (the "Fair Tax" --ugghh!) would do a lot to increase US competitiveness in the world marketplace. In addition, look at the number of threads on this board where we agonize over the bizarre hoops and hurdles of the present US tax code. I'm ready to see that all go away in favor of a transparent system that everyone can understand. A "flat tax" won't get us that simplicity and transparency, since the whole issue of what qualifies as "income" will remain--and that's most of the complexity in our present tax code.
If H.R 25/S. 1025 were enacted, many of us in ER would pay taxes when we spend our tax-free or tax-deferred IRA/401K savings. That's true. On the other hand, every one of us would also get a monthly "prebate" ($391 for a couple, it goes up if there are kids in the household) which would take a lot of the sting out of this. Also, used goods are not subject to the tax, so there would be ways to reduce the taxes paid.
Also, when comparing how we might personally do under the fair tax, it is probably best to compare it to the likely future under our present taxation system--the one that will likely see an increase in tax rates on income, an increase in the cap gains rates, and (I would bet) some unfavorable revision of the tax treatment of Roths.
I think the tax as outlined in H.R 25 is a very good idea. Like ERD50, I also think it is very unlikely we'll ever see it come to pass. I'm glad Huckabee is giving it some press, and I wish more of the Republican candidates would do the same. There's a potential that Thompson might sign on, but I don't think he'll do it unless he really sees a need to differentiate himself from the other frontrunners.
If H.R 25/S. 1025 were enacted, many of us in ER would pay taxes when we spend our tax-free or tax-deferred IRA/401K savings. That's true. On the other hand, every one of us would also get a monthly "prebate" ($391 for a couple, it goes up if there are kids in the household) which would take a lot of the sting out of this. Also, used goods are not subject to the tax, so there would be ways to reduce the taxes paid.
Also, when comparing how we might personally do under the fair tax, it is probably best to compare it to the likely future under our present taxation system--the one that will likely see an increase in tax rates on income, an increase in the cap gains rates, and (I would bet) some unfavorable revision of the tax treatment of Roths.
I think the tax as outlined in H.R 25 is a very good idea. Like ERD50, I also think it is very unlikely we'll ever see it come to pass. I'm glad Huckabee is giving it some press, and I wish more of the Republican candidates would do the same. There's a potential that Thompson might sign on, but I don't think he'll do it unless he really sees a need to differentiate himself from the other frontrunners.
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retire@40
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Same old same old.
I would be more interested if someone started talking about a national property tax to replace our current tax system. It's the best tax system I can think of.
ERD50
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Interesting. The idea is to tax 'wealth' rather than 'spending'? They are normally related, but not necessarily. As wealth increases, the % of spend of that wealth probably increases more slowly - but again, not always.
A 'wealth tax' strikes me as a difficult tax to enact - much tougher than a NST:
A) Everyone would need to inventory their 'wealth' each year?. That seems burdensome, cumbersome, and open to minor and major fraud.
B) Does this mean that someone who is making $250,000 a year, but has not accumulated much wealth would pay little taxes? And a retiree with a 40 year nest egg will pay a lot of tax? Hmmmmm.
C) Doesn't this discourage saving?
Why is any of this better than an NST?
-ERD50
$391 a month isn't even touching the $2M I've paid in taxes over the last couple years.
Paying taxes on already taxed money is a BIG hurdle to this type of tax system.
MasterBlaster
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Well, besides problems with valuation and the mechanics of that proposed taxation method, it is generally considered that capital is mobile. If you start taxing capital you will be guaranteed to have less of it around in the future.
If you want and need growth then taxing capital is contrary to your desired objectives.
MasterBlaster
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Regarding the "Fair Tax"...
If the tax system is to be revenue neutral then get ready for the middle class to pay a lot more. Right now upper income individuals pay the lions share of income taxes. If we then re-distribute the burden based on consumption then by necessity most of us will have to pay more.
Fair - yes you could make that case.
However, I personally don't want to pay more than I already am. So the fair tax system will just remain a pipe dream.
It makes a good sound bite though.
If the tax system is to be revenue neutral then get ready for the middle class to pay a lot more. Right now upper income individuals pay the lions share of income taxes. If we then re-distribute the burden based on consumption then by necessity most of us will have to pay more.
Fair - yes you could make that case.
However, I personally don't want to pay more than I already am. So the fair tax system will just remain a pipe dream.
It makes a good sound bite though.
lets-retire
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As I understand it $391 is the bottom. The developers of the system believe this is the minimum needed to purchase items that would normally be taxed. In effect this would allow those making the least amount of money to still not have to pay anything. If you are pay 2mil in taxes you do not fall into that category, but the minimum to survive still remains the same so you still receive the prebate.
I agree with MasterBlaster the Fair Tax is a pipe dream, as is any meaningful change to the taxing non-system we currently have. In order to make any changes someone will have to hold onto the dirty end of the stick and nobody is willing to do that. Not to mention if the politicians change the system to make it better the end product would have to be something they would not be able to easily change, thus reducing their power.
Texas Proud
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The problem that most people don't address with this so called 'fair tax' is that as far as I know... NOBODY is doing it. So how do you know it will make us more competitive?
If you look at the European contries, they have a VAT, but also an income tax... and I bet if we got a VAT or NST or whatever, we still would have an income tax.
And the example was that our products have a tax included in the price.. well, so does the product from England and Germany.. again, they pay income taxes at a higher rate than we do which is included in the price.
It sounds good that we get rid of 'unfair' taxes and the IRS etc... but you have to have something to make sure it is being paid by the people collecting.. and what about the increase in the underground economy
So, show me where it is working.
If you look at the European contries, they have a VAT, but also an income tax... and I bet if we got a VAT or NST or whatever, we still would have an income tax.
And the example was that our products have a tax included in the price.. well, so does the product from England and Germany.. again, they pay income taxes at a higher rate than we do which is included in the price.
It sounds good that we get rid of 'unfair' taxes and the IRS etc... but you have to have something to make sure it is being paid by the people collecting.. and what about the increase in the underground economy
So, show me where it is working.
What It Is, Man
Mike Huckabee is an adroit public speaker. He communicates his message in life-like, cogent terms, with compelling examples like the story he told (at the Ames Straw Poll) of what his then-11-yo daughter entered into the "Comments" section of a Visitors Book after visiting the Yad Vashem holocaust museum: “Why didn't somebody do something?” Very effective.
Huckabee is all about calling his listeners to "do something," to awaken them to their own empowerment, and summon them to action in order that "Main Street," and not "Wall Street," will prevail in guarding the values and beliefs upon which the Republic was founded.
Huckabee puts his listeners at ease, and reassures them, articulating clear concepts in a natural, easy style (no doubt something well-cultivated as a pastor). He’s not angry or demanding, like a Ron Paul, nor is he as “rigidly-scripted” as Romney, and his large brown eyes peer through a humble demeanor, drawing a striking contrast to a somewhat mechanical-squinty Brownback. One can easily imagine sitting comfortably with this man over a cup of coffee at the Main Street Cafe.
Most importantly, perhaps, Huckabee convinces many that he is ONE with the FairTax grassroots movement. While many - like Romney, and others, who are invested in the current income tax system - seek to demagog the well-researched FairTax plan, its acceptance in the professional / academic community continues to grow. Renown economist Laurence Kotlikoff believes that failure to enact the FairTax - choosing instead to try to "flatten" what he deems to be a non-flattenable income tax system - will eventuate into an irrevocable economic meltdown because of the hidden aspects of the current system that make political accountability impossible.
Romney's recent WEAK response to FairTax questioning on “This Week with Geo. Stephanopoulos” drew a sharper contrast between Huckabee and all other presidential front-runners who will not embrace it. Huckabee understands that what's wrong with the income tax can't be fixed with "a tap of the hammer, nor a twist of the screwdriver." That his opponents cling to the destructive Tax Code, the IRS, preserving political power of granting tax favors at continued cost to - and misery of - American families, invigorates his campaign's raison d'etre.
Of the FairTax, Huckabee asserts that it's...
• SIMPLE, easy to understand
• EFFICIENT, inexpensive to comply with and doesn't cause less-than-optimal business decisions for tax minimization purposes
• FAIR, FLAT, and FAMILY FRIENDLY, loophole-free, and everyone pays their share
• LOW TAX RATE is achieved by broad base with no exclusions
• PREDICTABLE, doesn't change, so financial planning is possible
• UNINTRUSIVE, doesn't intrude into our personal affairs or limit our liberty
• VISIBLE, not hidden from the public in tax-inflated prices or otherwise
• PRODUCTIVE, rewards - rather than penalizes - work and productivity
A detailed benefits analysis of the plan (from The FairTax Book) explains Huckabee's ardent advocacy:
For individuals:
• No more tax on income - make as much as you wish
• You receive your full paycheck - no more deductions
• You pay the tax when you buy "at retail" - not "used"
• No more double taxation (e.g. like on current Capital Gains)
• Reduction of "pre-FairTaxed" retail prices by 20%-30%
• Adding back 29.9% FairTax maintains current price levels
• FairTax would constitute 23% portion of new prices
• Every household receives a monthly check, or "pre-bate"
• "Prebate" is "advance tax payback" for monthly consumption to poverty level
• FairTax's "prebate" ensures progressivity, poverty protection
• Finally, citizens are knowledgeable of what their tax IS
• Elimination of "parasitic" Income Tax industry
• NO MORE IRS. NO MORE FILING OF TAX RETURNS by individuals
• Those possessing illicit forms of income will ALSO pay the FairTax
• Households have more disposable income to purchase goods
• Savings is bolstered with reduction of interest rates
For businesses:
• Corporate income and payroll taxes revoked under FairTax
• Business compensated for collecting tax at "cash register"
• No more tax-related lawyers, lobbyists on company payrolls
• No more embedded (hidden) income/payroll taxes in prices
• Reduced costs. Competition - not tax policy - drives prices
• Off-shore "tax haven" headquarters can now return to U.S
• No more "favors" from politicians at expense of taxpayers
• Resources go to R&D and study of competition - not taxes
• Marketplace distortions eliminated for fair competition
• US exports increase their share of foreign markets
For the country:
• 7% - 13% economic growth projected in the first year of the FairTax
• Jobs return to the U.S.
• Foreign corporations "set up shop" in the U.S.
• Tax system trends are corrected to "enlarge the pie"
• Larger economic "pie," means thinner tax rate "slices"
• Initial 23% portion of price is pressured downward as "pie" increases
• No more "closed door" tax deals by politicians and business
• FairTax sets new global standard. Other countries will follow
Passionately supporting FairTax, Huckabee understands that, if elected President, Congress will have to present the bill for his signature. His call to action goes beyond his candidacy: Main Street will have to demand that their legislators deliver the bill.
Mike Huckabee is an adroit public speaker. He communicates his message in life-like, cogent terms, with compelling examples like the story he told (at the Ames Straw Poll) of what his then-11-yo daughter entered into the "Comments" section of a Visitors Book after visiting the Yad Vashem holocaust museum: “Why didn't somebody do something?” Very effective.
Huckabee is all about calling his listeners to "do something," to awaken them to their own empowerment, and summon them to action in order that "Main Street," and not "Wall Street," will prevail in guarding the values and beliefs upon which the Republic was founded.
Huckabee puts his listeners at ease, and reassures them, articulating clear concepts in a natural, easy style (no doubt something well-cultivated as a pastor). He’s not angry or demanding, like a Ron Paul, nor is he as “rigidly-scripted” as Romney, and his large brown eyes peer through a humble demeanor, drawing a striking contrast to a somewhat mechanical-squinty Brownback. One can easily imagine sitting comfortably with this man over a cup of coffee at the Main Street Cafe.
Most importantly, perhaps, Huckabee convinces many that he is ONE with the FairTax grassroots movement. While many - like Romney, and others, who are invested in the current income tax system - seek to demagog the well-researched FairTax plan, its acceptance in the professional / academic community continues to grow. Renown economist Laurence Kotlikoff believes that failure to enact the FairTax - choosing instead to try to "flatten" what he deems to be a non-flattenable income tax system - will eventuate into an irrevocable economic meltdown because of the hidden aspects of the current system that make political accountability impossible.
Romney's recent WEAK response to FairTax questioning on “This Week with Geo. Stephanopoulos” drew a sharper contrast between Huckabee and all other presidential front-runners who will not embrace it. Huckabee understands that what's wrong with the income tax can't be fixed with "a tap of the hammer, nor a twist of the screwdriver." That his opponents cling to the destructive Tax Code, the IRS, preserving political power of granting tax favors at continued cost to - and misery of - American families, invigorates his campaign's raison d'etre.
Of the FairTax, Huckabee asserts that it's...
• SIMPLE, easy to understand
• EFFICIENT, inexpensive to comply with and doesn't cause less-than-optimal business decisions for tax minimization purposes
• FAIR, FLAT, and FAMILY FRIENDLY, loophole-free, and everyone pays their share
• LOW TAX RATE is achieved by broad base with no exclusions
• PREDICTABLE, doesn't change, so financial planning is possible
• UNINTRUSIVE, doesn't intrude into our personal affairs or limit our liberty
• VISIBLE, not hidden from the public in tax-inflated prices or otherwise
• PRODUCTIVE, rewards - rather than penalizes - work and productivity
A detailed benefits analysis of the plan (from The FairTax Book) explains Huckabee's ardent advocacy:
For individuals:
• No more tax on income - make as much as you wish
• You receive your full paycheck - no more deductions
• You pay the tax when you buy "at retail" - not "used"
• No more double taxation (e.g. like on current Capital Gains)
• Reduction of "pre-FairTaxed" retail prices by 20%-30%
• Adding back 29.9% FairTax maintains current price levels
• FairTax would constitute 23% portion of new prices
• Every household receives a monthly check, or "pre-bate"
• "Prebate" is "advance tax payback" for monthly consumption to poverty level
• FairTax's "prebate" ensures progressivity, poverty protection
• Finally, citizens are knowledgeable of what their tax IS
• Elimination of "parasitic" Income Tax industry
• NO MORE IRS. NO MORE FILING OF TAX RETURNS by individuals
• Those possessing illicit forms of income will ALSO pay the FairTax
• Households have more disposable income to purchase goods
• Savings is bolstered with reduction of interest rates
For businesses:
• Corporate income and payroll taxes revoked under FairTax
• Business compensated for collecting tax at "cash register"
• No more tax-related lawyers, lobbyists on company payrolls
• No more embedded (hidden) income/payroll taxes in prices
• Reduced costs. Competition - not tax policy - drives prices
• Off-shore "tax haven" headquarters can now return to U.S
• No more "favors" from politicians at expense of taxpayers
• Resources go to R&D and study of competition - not taxes
• Marketplace distortions eliminated for fair competition
• US exports increase their share of foreign markets
For the country:
• 7% - 13% economic growth projected in the first year of the FairTax
• Jobs return to the U.S.
• Foreign corporations "set up shop" in the U.S.
• Tax system trends are corrected to "enlarge the pie"
• Larger economic "pie," means thinner tax rate "slices"
• Initial 23% portion of price is pressured downward as "pie" increases
• No more "closed door" tax deals by politicians and business
• FairTax sets new global standard. Other countries will follow
Passionately supporting FairTax, Huckabee understands that, if elected President, Congress will have to present the bill for his signature. His call to action goes beyond his candidacy: Main Street will have to demand that their legislators deliver the bill.
FairTax for Equitable Change
There is no reasonable equity of distribution under the current INCOME tax system. What's more, the Tax Code has become a "tinkerer's paradise" for 53% of the lobbyists who game it in Washington DC. It's a lucrative business, and the U.S. taxpayer pays for all of it in higher prices (i.e., a hidden tax which is incomprehensible to the average working person).
Prices after FairTax passage would look similar to prices before FairTax - not "30% higher" as opponents contend - competition would see to it. So, the FairTax rate (figured as an income-tax-rate-non-comparative, sales tax) on new items would be 29.85% (on the new, reduced cost of items because business isn't taxed under FairTax - thus lowering retail prices by 20% to 30%), or 23% of the "tax inclusive" price tag - this is the way INCOME TAX is figured (parts of the total dollar).
The effective tax rate percentages, that different income groups would pay under the FairTax, are calculated by crediting the monthly "prebate" (advance rebate of projected tax on necessities) against total monthly spending of citizen families (1 member and greater, Dept. of HHS poverty-level data; a single person receiving ~$200/mo, a family of four, ~$500/mo, in addition to working earners receiving paychecks with no Federal deductions) Prof.'s Kotlikoff and Rapson (10/06) concluded,
"...the FairTax imposes much lower average taxes on working-age households than does the current system. The FairTax broadens the tax base from what is now primarily a system of labor income taxation to a system that taxes, albeit indirectly, both labor income and existing wealth. By including existing wealth in the effective tax base, much of which is owned by rich and middle-class elderly households, the FairTax is able to tax labor income at a lower effective rate and, thereby, lower the average lifetime tax rates facing working-age Americans.
"Consider, as an example, a single household age 30 earning $50,000. The household’s average tax rate under the current system is 21.1 percent. It’s 13.5 percent under the FairTax. Since the FairTax would preserve the purchasing power of Social Security benefits and also provide a tax rebate, older low-income workers who will live primarily or exclusively on Social Security would be better off. As an example, the average remaining lifetime tax rate for an age 60 married couple with $20,000 of earnings falls from its current value of 7.2 percent to -11.0 percent under the FairTax. As another example, compare the current 24.0 percent remaining lifetime average tax rate of a married age 45 couple with $100,000 in earnings to the 14.7 percent rate that arises under the FairTax."
Further, per Jokischa and Kotlikoff (circa 2006?) ...
"...once one moves to generations postdating the baby boomers there are positive welfare gains for all income groups in each cohort. Under a 23 percent FairTax policy, the poorest members of the generation born in 1990 enjoy a 13.5 percent welfare gain. Their middle-class and rich contemporaries experience 5 and 2 percent welfare gains, respectively. The welfare gains are largest for future generations. Take the cohort born in 2030. The poorest members of this cohort enjoy a huge 26 percent improvement in their well-being. For middle class members of this birth group, there's a 12 percent welfare gain. And for the richest members of the group, the gain is 5 percent."
There is no reasonable equity of distribution under the current INCOME tax system. What's more, the Tax Code has become a "tinkerer's paradise" for 53% of the lobbyists who game it in Washington DC. It's a lucrative business, and the U.S. taxpayer pays for all of it in higher prices (i.e., a hidden tax which is incomprehensible to the average working person).
Prices after FairTax passage would look similar to prices before FairTax - not "30% higher" as opponents contend - competition would see to it. So, the FairTax rate (figured as an income-tax-rate-non-comparative, sales tax) on new items would be 29.85% (on the new, reduced cost of items because business isn't taxed under FairTax - thus lowering retail prices by 20% to 30%), or 23% of the "tax inclusive" price tag - this is the way INCOME TAX is figured (parts of the total dollar).
The effective tax rate percentages, that different income groups would pay under the FairTax, are calculated by crediting the monthly "prebate" (advance rebate of projected tax on necessities) against total monthly spending of citizen families (1 member and greater, Dept. of HHS poverty-level data; a single person receiving ~$200/mo, a family of four, ~$500/mo, in addition to working earners receiving paychecks with no Federal deductions) Prof.'s Kotlikoff and Rapson (10/06) concluded,
"...the FairTax imposes much lower average taxes on working-age households than does the current system. The FairTax broadens the tax base from what is now primarily a system of labor income taxation to a system that taxes, albeit indirectly, both labor income and existing wealth. By including existing wealth in the effective tax base, much of which is owned by rich and middle-class elderly households, the FairTax is able to tax labor income at a lower effective rate and, thereby, lower the average lifetime tax rates facing working-age Americans.
"Consider, as an example, a single household age 30 earning $50,000. The household’s average tax rate under the current system is 21.1 percent. It’s 13.5 percent under the FairTax. Since the FairTax would preserve the purchasing power of Social Security benefits and also provide a tax rebate, older low-income workers who will live primarily or exclusively on Social Security would be better off. As an example, the average remaining lifetime tax rate for an age 60 married couple with $20,000 of earnings falls from its current value of 7.2 percent to -11.0 percent under the FairTax. As another example, compare the current 24.0 percent remaining lifetime average tax rate of a married age 45 couple with $100,000 in earnings to the 14.7 percent rate that arises under the FairTax."
Further, per Jokischa and Kotlikoff (circa 2006?) ...
"...once one moves to generations postdating the baby boomers there are positive welfare gains for all income groups in each cohort. Under a 23 percent FairTax policy, the poorest members of the generation born in 1990 enjoy a 13.5 percent welfare gain. Their middle-class and rich contemporaries experience 5 and 2 percent welfare gains, respectively. The welfare gains are largest for future generations. Take the cohort born in 2030. The poorest members of this cohort enjoy a huge 26 percent improvement in their well-being. For middle class members of this birth group, there's a 12 percent welfare gain. And for the richest members of the group, the gain is 5 percent."
Rustic23
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"national property tax to replace our current tax system. It's the best tax system I can think of."
WoW! Now there is an idea I hope never catches on!
WoW! Now there is an idea I hope never catches on!
retire@40
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I mentioned this in another post a few months ago, but I should have been more specific in this thread and said "real estate tax" meaning a tax on land and property built on the land. There would be no taxes on any other assets besides real estate. Cities and towns are already doing this, so it would be easy for the federal government to use those same assessed values to implement the federal real estate tax.
retire@40
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It's an idea I never heard any politician ever mention, and as far as I know there is no group out there pushing this tax system. Just a tax system I thought of that would be fair and transparent. Maybe we can call it the "Fairest Tax" to self-promote it like the "fair tax" people do.
MasterBlaster
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So some guy who makes a couple million a year and who lives in the Waldorf Astoria Suite pays no tax. He would effectively be a burden on the rest of us.
Yet a retired someone living on a budget who bought their house in 1960 for $30k but do to rampant speculation their house is now worth a million or more pays through the nose. So retirees like this get run out of their house.
I beleive we need to reconsider this plan. It doesn't quite pass the fairness test.
retire@40
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You haven't thought it through.
Since the Waldorf Astoria would pay the real estate tax, it would need to raise the rents accordingly, so all renters would also indirectly pay the tax.
Rich people tend to live in (meaning own or rent) more expensive home, thus paying more tax.
A progressive real estate tax could easily be created so that, for example, real estate valued under $250K would pay 0.50%, $250K to $500K would pay 1.50%, etc.
Fairest and most transparent tax system I can think of.
maddythebeagle
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It probably is him
Looks like he figured out this "internets" thing that dubya was talking about...
MasterBlaster
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Retire@40:
Is that really how you want to tax people, based on the current markets valuation of their residence ?
What about long time residents whose homes are relatively suddenly bid sky high. That has certainly happened in my neighborhood. Are you going to tax people regardless of their ability to pay ? Are you going to run them out of their long occupied home ?
I vote no on your tax system.
Is that really how you want to tax people, based on the current markets valuation of their residence ?
What about long time residents whose homes are relatively suddenly bid sky high. That has certainly happened in my neighborhood. Are you going to tax people regardless of their ability to pay ? Are you going to run them out of their long occupied home ?
I vote no on your tax system.
Rustic23
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The problem with a real estate tax is it taxes unrealised gains. Your house or other real estate is worth say 5m but in order to pay the tax you have to either borrow on the property, have cash, or sell the asset.
retire@40
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Everyone would know what everyone else is paying (that's the transparent part) and there would be no possible way to cheat (that's the fair part).
I don't know where you live, but this is how the local tax system already works in my state and there doesn't appear to be a problem with it. I'm just taking this local system of taxation and making it a federal and even a state one.
Of course, these taxes could be complemented with taxes on fuel, tobacco, and alcohol just as it is being done now, but there would be no more income tax, no fear of personal audits, no paperwork to prepare once a year, and no need to keep receipts for deductible expenses over 3 to 6 years.
Fair, transparent, and now I will add "simple" to the name making it the "FTS Tax."
I don't know where you live, but this is how the local tax system already works in my state and there doesn't appear to be a problem with it. I'm just taking this local system of taxation and making it a federal and even a state one.
Of course, these taxes could be complemented with taxes on fuel, tobacco, and alcohol just as it is being done now, but there would be no more income tax, no fear of personal audits, no paperwork to prepare once a year, and no need to keep receipts for deductible expenses over 3 to 6 years.
Fair, transparent, and now I will add "simple" to the name making it the "FTS Tax."
retire@40
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Any tax system will have a social effect, including this one.
For those that can't pay their real estate tax now, they are already subject to foreclosure or at least slapped with a tax lien at the local level. What would make it any different for them if this were done on a federal level? People are always moving based on where they can afford to live, even with the current tax system we have today.
In special cases (I can think of elderly on a fixed income as an example), there could be a deferment of taxes until the house is sold or transferred.
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Rustic23
Thinks s/he gets paid by the post
Retire,
I live in Texas. The property tax on a $300,000 house is about $9,000 a year. In parts of Texas property values have been going up at a rate of 10% per year. Actually it went up all at once in most communities but the tax is limited to a 10% increase per year. That means in 7 years you property tax would double.
So how do you handle the situation of a person that purchases a home for $100,000 and 14 years later it is worth $400,000 and their tax has gone from $3k to $12K. They live on a fixed income and have no way to pay that sort of increase or their salaries did not keep up this with this type of inflation. This is the vary reason the property tax has to be rigged for older people. i.e. over 65 homestead, tax deferment and such. People were being taxed out of their homes, and in fact those that are not eligible for the over 65 benefits have had to move.
By the way, while there is a homestead and over 65 homestead, and disability exemptions and several others, there is no such exemptions for commercial property. i.e. apartments. So once again renters take it in the ear.
Once more could you take the doubling of your federal income tax in say two years with no increase in income?
States that are not 'high property tax' states do not have the problems because the tax does not make up that much of a persons living expense. Once more Texas with no income tax the property tax pays for county, city, ports, school districts, community college districts, special economic zones and on and on. It makes up a large portion of the states taxes.
I live in Texas. The property tax on a $300,000 house is about $9,000 a year. In parts of Texas property values have been going up at a rate of 10% per year. Actually it went up all at once in most communities but the tax is limited to a 10% increase per year. That means in 7 years you property tax would double.
So how do you handle the situation of a person that purchases a home for $100,000 and 14 years later it is worth $400,000 and their tax has gone from $3k to $12K. They live on a fixed income and have no way to pay that sort of increase or their salaries did not keep up this with this type of inflation. This is the vary reason the property tax has to be rigged for older people. i.e. over 65 homestead, tax deferment and such. People were being taxed out of their homes, and in fact those that are not eligible for the over 65 benefits have had to move.
By the way, while there is a homestead and over 65 homestead, and disability exemptions and several others, there is no such exemptions for commercial property. i.e. apartments. So once again renters take it in the ear.
Once more could you take the doubling of your federal income tax in say two years with no increase in income?
States that are not 'high property tax' states do not have the problems because the tax does not make up that much of a persons living expense. Once more Texas with no income tax the property tax pays for county, city, ports, school districts, community college districts, special economic zones and on and on. It makes up a large portion of the states taxes.
retire@40
Thinks s/he gets paid by the post
- Joined
- Feb 16, 2004
- Messages
- 2,670
You answered part of your own question by saying there is a cap on the amount of annual tax increase you would have.
You are also taking a correct premise to the wrong conclusion. You are incorrectly assuming that real estate tax rates will always be a constant rate. Just because the value of your real estate quadruples does not necessarily mean that your taxes would also quadruple under my tax plan. The federal government would make annual adjustments to the real estate tax rate. So if in year 1, your property assessed at $100,000 is being taxed at say 1.00% or $1,000. 14 years later when it is worth $400,000, I would assume generally ALL real estate values went up dramatically in value (not just your property), so the federal government would adjust the tax rate to say 0.35% making your tax $1,400 which would be about the same tax in inflation-adjusted dollars as it was 14 years prior.
Once again, it is all transparent and one rule with no loopholes would apply to everyone in the country. Fair, simple, easy to understand, no forms to fill out, no receipts to keep, nobody has to ever fear an audit again, nobody escapes being taxed, nobody can cheat, and everyone can make all the money they want tax-free and keep it in the USA since they will not need to "hide" cash overseas. There can be no better system!
