The FairTax - gaining steam!

[Martha]

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Originally Posted by retire@40 I think you are making up the facts and then you are believing them.

What a great line!

[work4beer]

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Originally Posted by Patrick : What is the budget for the IRS?

$11 Billion, out of a $2.4 Trillion budget. 0.4 %.

Doesn't include all the private compliance costs, but those estimates are all over the place. $2000 per household? Come on!

I have yet to see anyone state here:
what percentage of their current federal taxes they would personally pay under Fair Tax of 30%
what the FairTax rate would be in order to be revenue neutral for them personally.

That's all the math you need to do to see that it's hooey.

[sgeeeee]

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Originally Posted by Patrick : Really?* Well my pension is all before-tax $$, so I would have to pay income tax on that.* Ditto with my Deferred Comp $$.* In fact, I can't think of any income I'll have when retired that won't be subject to the income tax under the current system.*

You apparently are not very familiar with the graduated income tax system and basic deductions. Very few retirees end up paying as much tax after retirement as they did before. This is common knowledge and discussed in most retirement planning articles and books. It has been discussed on this board a number of times. In fact, many retirees on this board have commented on what a pleasant surprise their reduced income tax bill in retirement was. Some have even mentioned that they have been able to avoid all income tax after retirement. There may be some exceptions, but I don't know of any personally.

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Originally Posted by Patrick At least with the sales tax I'll get to decide when/if I'm going to pay it.* *

Your control of when to pay sales tax does not seem much improved over your control of when to pay income tax. If you don't buy anything, you can avoid sales tax. If you don't earn anything you can avoid income tax. Neither option is reasonable.

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Originally Posted by Patrick And the system is already in place in most states to collect sales taxes. What is the budget for the IRS?*

But this is a federal tax, not a state tax. There is no federal sales tax system. And looking at the budget of the IRS without looking at the income is nonsensical. What is the ratio of taxes collected to cost?

[Patrick]

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Originally Posted by ((^+^)) SG You apparently are not very familiar with the graduated income tax system and basic deductions.* *Very few retirees end up paying as much tax after retirement as they did before.* This is common knowledge and discussed in most retirement planning articles and books.* It has been discussed on this board a number of times.* In fact, many retirees on this board have commented on what a pleasant surprise their reduced income tax bill in retirement was.* Some have even mentioned that they have been able to avoid all income tax after retirement.* There may be some exceptions, but I don't know of any personally.

Wrong! I am very familiar with it.* And I guess I am the exception, because my income tax will not be lower when I retire.

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Your control of when to pay sales tax does not seem much improved over your control of when to pay income tax.* If you don't buy anything, you can avoid sales tax.* If you don't earn anything you can avoid income tax.* Neither option is reasonable.

What a nonsensical statement! Of course it is very much improved. Now I have ZERO choice.* With sales tax I can choose to buy or not, the decision is 100% mine.* *

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But this is a federal tax, not a state tax.* There is no federal sales tax system.

Simply piggyback on the current state systems.* The same people collect the cash and send it to the Feds. Got to be cheaper than the IRS!

[unclemick]

5% fed tax rate in 2004 - 11th year into ER.

Get the flat tax down to that rate - and maybe we can talk turkey.

BTY - 10% sales tax in New Orleans.

Heh, heh, heh - I'm sure some number crunching studies will be coming - if the book keeps selling. Like hula hoops and the tech bubble - these things have a life of their own.

? - How are the Russian's doing with their flat tax - anybody heard

[retire@40]

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Originally Posted by Patrick Simply piggyback on the current state systems.* The same people collect the cash and send it to the Feds. Got to be cheaper than the IRS!

I don't believe the federal government can force the states to collect federal taxes.

[Patrick]

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Originally Posted by retire@40 I don't believe the federal government can force the states to collect federal taxes.

I believe the feds can force the states to do just about anything they want.* Just look at highway funds.

[Texas Proud]

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Originally Posted by retire@40 I don't believe the federal government can force the states to collect federal taxes.

Let me be a bit more specific than Patrick.. no, the Feds can not MAKE the state collect taxes and in fact they probably do not need to do it as mostly it is deposited in the banks anyhow....

But, to you post... The Feds can vote to withhold any funds to a state if they do not abide by their 'request' and most states do not want to get off this dole... remember when all the states (except one) decided that the 55 MPH speed limit was a good thing even though most did not... the only thing they withheld was highway funds and it got all states in line.

[WanderALot]

I was reading about a similar debate elsewhere and someone made a good point. A big appeal of the flat tax is simplicity, because our current tax code is way more complicated than it should be. Critics of the flat tax think that a reasonable flat tax either won't generate enough revenue or that it's too regressive.

So, why don't have a progressive flat tax without all the millions of deductions? In other words, why does the term "flat tax" have to imply a SINGLE rate? Why not have 4 or 5 rates like we do now (obviously lower rates than now) but just eliminate all the different deductions so that we can actually simplify the system!
We can still generate a decent amount of revenue, reduce tax compliance costs and also the transition to this system will be a LOT easier than a national sales tax.

Above all, this wouldn't penalize me when I get into the ER stage of my life!

You're right, Wander, that the idea of a simple tax has become linked together with a single rate.* They don't have to go together, but they do.

Some of the deductions are necessary.* For example, if I made $100,000 but I had $90,000 in expenses, I'd sure want to be able to deduct those expenses.

Other deductions are there to influence our behavior.* *Want people to save more or become farmers?* Give a deduction for that.

Finally, humans apparently have some innate need to make things complicated.* The concept of "design by committee" probably is to blame.* Cell phone plans, health insurance, anything.* Here is an example, from the California fishing regulations.

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8.00 . Low-Flow Restrictions. (a) Eel River, Mad River, Mattole River, Redwood Creek, Smith River and Van Duzen River. Stream closures: Special Low Flow Conditions. From October 1 through January 31, any of the stream reaches listed in subsection (1) through (7) below shall be closed to all angling on Tuesday and Wednesday when the department determines that the flow on the previous Monday at any of the designated gauging stations is less than the minimum flows set forth in subsections (1) through (7); any of the stream reaches listed in subsections (1) through (7) below shall be closed to all angling on Thursday and Friday when the department determines that the flow on the previous Wednesday at any of the designated gauging stations is less than the minimum flows set forth in subsections (1) though (7); any of the stream reaches listed in subsections (1) through (7) below shall be closed to all angling from Saturday through Monday when the department determines that the flow on the previous Friday at any of the designated gauging stations is less than the minimum flows set forth in subsections (1) through (7). Notwithstanding this provision, the department may close or keep a stream reach closed to fishing when the minimum flow is exceeded on the scheduled flow determination day if the department is reasonably assured that the stream flow is likely to decrease below the minimum flow as specified in subsections (a)(1)-(7) of Section 8.00 before the next flow-determination date. In addition, the department may reopen a stream at any time during a closed period if the minimum flow as specified in subsections (a)(1)-(7) of Section 8.00 is exceeded and the department is reasonably assured that it will remain above the minimum flow until the next scheduled Monday, Wednesday, or Friday flow determination. The department shall make information available to the public by a telephone recorded message updated, as necessary, no later than 1:00 p.m. each Monday, Wednesday, and Friday as to whether any stream will be open or closed to fishing. It shall be the responsibility of the angler to use the telephone number designated in the sport fishing regulations booklet to obtain information on the status of any stream.

[MRGALT2U]

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Originally Posted by TromboneAl You're right, Wander, that the idea of a simple tax has become linked together with a single rate.* They don't have to go together, but they do. Some of the deductions are necessary.* For example, if I made $100,000 but I had $90,000 in expenses, I'd sure want to be able to deduct those expenses. Other deductions are there to influence our behavior.* *Want people to save more or become farmers?* Give a deduction for that. Finally, humans apparently have some innate need to make things complicated.* The concept of "design by committee" probably is to blame.* Cell phone plans, health insurance, anything.* Here is an example, from the California fishing regulations.*

I am pretty surprised we have spent so much time on this. It is a total non- issue in my view. We only must be ready to react. All else is out of our control.

JG

[Patrick]

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Originally Posted by WanderALot So,* why don't have a progressive flat tax without all the millions of deductions?* In other words, why does the term "flat tax" have to imply a SINGLE rate?*

Because that's what a flat rate is - the same for everyone.* "Progressive flat tax" is an oxymoron.

[unclemick]

Did a little Google - flat tax - Russia wise.

Somehow - I don't think 'the flat tax gap' will catch on likethe 'missile gap' and 'race to the moon.'

But - then again - you never know. It's early in the game.

[Texas Proud]

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Originally Posted by WanderALot I was reading about a similar debate elsewhere and someone made a good point.* *A big appeal of the flat tax is simplicity, because our current tax code is way more complicated than it should be.* Critics of the flat tax think that a reasonable flat tax either won't generate enough revenue or that it's too regressive. So,* why don't have a progressive flat tax without all the millions of deductions?* In other words, why does the term "flat tax" have to imply a SINGLE rate?* Why not have 4 or 5 rates like we do now (obviously lower rates than now) but just eliminate all the different deductions so that we can actually simplify the system! We can still generate a decent amount of revenue, reduce tax compliance costs and also the transition to this system will be a LOT easier than a national sales tax. Above all, this wouldn't penalize me when I get into the ER stage of my life!* *

You forget why we have so many deductions... it is POWER.. It is Congress' way of passing out favors to people and businesses... with a 'flat tax' in whichever way it is, your congressman no longer has this power...

Now, you tell me how often a politician willfully give up power?

[farmerEd]

My tax rate last year was a negative 9.4%* . One of the things I truly enjoy most about not working, is being "out of the system". Having a refundable tax credit for a lot of kids helped alot...plus that darn farm of mine still isn't turning a profit

[farmerEd]

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Originally Posted by WanderALot So,* why don't have a progressive flat tax without all the millions of deductions?*

...because everyone of those "millions of deductions" has millions of special interest groups behind each...which is why the system won't change.

I always hated the system that we had while I was paying taxes...doesn't bother me so much anymore....

[WanderALot]

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Originally Posted by farmerEd ...because everyone of those "millions of deductions" has millions of special interest groups behind each...which is why the system won't change.

Agreed, but I still have to complain about it.

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Originally Posted by Patrick Because that's what a flat rate is - the same for everyone. "Progressive flat tax" is an oxymoron.

Yeah, you're right, maybe "graduated tax rate system with very limited deductions" would be a better term. See, I'm already complicating my simplified taxation system!

[amt]

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Originally Posted by Martha Don't forget the tax would have to cover services too.* Think what a big sales tax would do to your health care costs.* I just can't see how a national sales tax could raise enough money.* Plus it is too darn regressive.

The reason it will be enough is that healthcare, books and food will be taxed, which are usually exempt under state sales taxes.*

As for healthcare, however, one will have to pay tax on the insurance premium and their copays and coinsurance; but the insurance co's payment to providers won't be taxed.* The net effect on the average worker would be dampened by the fact that most employers hopefully will* be paying the premium and the sales tax on it; they shouldn't complain because they won't have to pay income taxes and payroll taxes anymore.* Plus, doctors and hospitals should charge less (under competitive pressure), because of elimination of income/payroll taxes.

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We significant* income taxes last year and were in the highest bracket.* I don't have a problem with that.* It doesn't seem unfair to me.* We were fortunate to be in that position.

If you think your top marginal rate of 35% plus 2.9% Medicare tax is high but you're sacrificing out of sympathy for the poor, let's look at a family who earns $50,000. *Your final dollar is taxed at 35% plus 2.9% Medicare. *That family's final dollar is taxed at 15% plus 15.3% FICA+Medicare. *Now, the difference is only 7.6%, which is not that much. *

You see, the problem with the current system is the politicians' "DIVIDE AND RULE" approach. *They make everything so complicated and try to convince every special interest group and voter that they are doing a big favor to them. *Kinda like the approach of a good prostitute to her clients. *The ?unintended? (I'm not so sure, maybe intentional) side effect is that we have so much waste of resources spent to comply with this convoluted scheme (IRS, tax/estate attorneys, accountants). *That's why this proposed fairtax is much better.

To those of you already retired folks who think they will be double taxed, I think some mechanism to compensate for that situation would be good. *Even if that's not possible, you have options; you all are frugal LBYM types, and I don't think your effective sales tax rate will be that high. *You can be creative and vacation more in foreign countries, which you might already be doing anyway. *Or retire overseas.

[razztazz]

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To those of you already retired folks who think they will be double taxed, I think some mechanism to compensate for that situation would be good. Even if that's not possible, you have options; you all are frugal LBYM types, and I don't think your effective sales tax rate will be that high. You can be creative and vacation more in foreign countries, which you might already be doing anyway. Or retire overseas

This gets nowhere. You've just singled out at least one special interest group that requires it's own "fix"... and anyway why is it that somebody always thinks it's OK to force other people to reorient their lives because he decided to change the rules?

It's OK and we shouldnt mind too much because we are already frugal and "LBYM"? Insyead of some Rube Goldberg system why not just tax the rich more? After all it won't hurt them any...they're rich. They're good at coming up with extra money. See how it works?

[MRGALT2U]

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Originally Posted by amt The reason it will be enough is that healthcare, books and food will be taxed, which are usually exempt under state sales taxes.* As for healthcare, however, one will have to pay tax on the insurance premium and their copays and coinsurance; but the insurance co's payment to providers won't be taxed.* The net effect on the average worker would be dampened by the fact that most employers hopefully will* be paying the premium and the sales tax on it; they shouldn't complain because they won't have to pay income taxes and payroll taxes anymore.* Plus, doctors and hospitals should charge less (under competitive pressure), because of elimination of income/payroll taxes. If you think your top marginal rate of 35% plus 2.9% Medicare tax is high but you're sacrificing out of sympathy for the poor, let's look at a family who earns $50,000. *Your final dollar is taxed at 35% plus 2.9% Medicare. *That family's final dollar is taxed at 15% plus 15.3% FICA+Medicare. *Now, the difference is only 7.6%, which is not that much. * You see, the problem with the current system is the politicians' "DIVIDE AND RULE" approach. *They make everything so complicated and try to convince every special interest group and voter that they are doing a big favor to them. *Kinda like the approach of a good prostitute to her clients. *The ?unintended? (I'm not so sure, maybe intentional) side effect is that we have so much waste of resources spent to comply with this convoluted scheme (IRS, tax/estate attorneys, accountants). *That's why this proposed fairtax is much better. To those of you already retired folks who think they will be double taxed, I think some mechanism to compensate for that situation would be good. *Even if that's not possible, you have options; you all are frugal LBYM types, and I don't think your effective sales tax rate will be that high. *You can be creative and vacation more in foreign countries, which you might already be doing anyway. *Or retire overseas.

Yawn................sound of soft snoring.............

JG