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Re: The FairTax - gaining steam!
Old 08-11-2005, 07:40 AM   #81
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Re: The FairTax - gaining steam!

I'm with you SG, the money has to come from somewhere. And the proposals for a fair tax contemplate a rebate to everyone so you can at least spend up to the poverty level before being taxed. And it also contemplates no tax on "used" goods.

So based on your examples, Last year I would have made out like a bandit on the "fair" tax and you retired guys would have made up for it by paying more.
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Re: The FairTax - gaining steam!
Old 08-11-2005, 07:58 AM   #82
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Re: The FairTax - gaining steam!

Quote:
Originally Posted by MRGALT2U
Finally, this thread was boring when it began and has now outlived
any sort of reasonable time frame IMHO.
And yet you keep posting to this thread. That's weird. :
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Re: The FairTax - gaining steam!
Old 08-11-2005, 10:43 AM   #83
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Re: The FairTax - gaining steam!

Quote:
Originally Posted by Austin_Explorer
And yet you keep posting to this thread.* That's weird.* *:
Hey! I wondered if someone would notice this. The reason is that
one of you will get slightly off topic and then my fertile brain kicks in.

Weird? Could be

JG
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Re: The FairTax - gaining steam!
Old 08-11-2005, 11:56 AM   #84
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Re: The FairTax - gaining steam!

Quote:
Originally Posted by REWahoo!
"A government which robs Peter to pay Paul can always depend on the support of Paul."

George Bernard Shaw
Yes, and Paul has almost secured the majority of the voters.*
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Re: The FairTax - gaining steam!
Old 08-11-2005, 11:58 AM   #85
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Re: The FairTax - gaining steam!

Quote:
Originally Posted by Martha
I really think that a national sales tax replacing the income tax doesn't have a chance in heck of coming to pass.
Agreed. So how many pages have we wasted on this topic now?
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Re: The FairTax - gaining steam!
Old 08-11-2005, 12:04 PM   #86
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Re: The FairTax - gaining steam!

Quote:
Originally Posted by mikew
It is basically out of sight, out of mind.
And the beautiful thing about the sales tax is that it would be slapping you in the face every time you buy something, right there on your receipt.* Maybe, eventually, enough people will say, "I'm mad as hell and I'm not going to take it any more!"*
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Re: The FairTax - gaining steam!
Old 08-11-2005, 12:07 PM   #87
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Re: The FairTax - gaining steam!

Quote:
Originally Posted by Patrick
Yes, and Paul has almost secured the majority of the voters.*
In spite of the humor here, it is a serious issue. *Once you get enough
"Pauls" being paid off by what the government extorts from "Peter"..................Game over!

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Re: The FairTax - gaining steam!
Old 08-11-2005, 12:08 PM   #88
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Re: The FairTax - gaining steam!

Quote:
Originally Posted by Michael
Its a shame that we have politicians that insist on making health care so expensive through all of their regulations, monopolies, and taxes.
Gotta protect us from ourselves.* On the other hand, without those regulations there would be no COBRA . . .*
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Re: The FairTax - gaining steam!
Old 08-11-2005, 12:14 PM   #89
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Re: The FairTax - gaining steam!

Quote:
Originally Posted by ((^+^)) SG
In contrast, in 2004 my DW and I were mostly retired. *We each worked only about 200 hours at various temporary jobs that interested us and I did do a small amount of consulting. *Our income was $52,221. *We paid total federal tax of $4592.38. *We bought a new car that year so our annual expenditure was *$73,068.94. *Fair Tax would have been $13, 805.86 -- an additional tax burden of $9213.48.
You spent all of your income on taxable items?*
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Re: The FairTax - gaining steam!
Old 08-11-2005, 12:24 PM   #90
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Re: The FairTax - gaining steam!

Quote:
Originally Posted by ((^+^)) SG
Some more hypothetical numbers to evaluate the (un)Fair Tax:

So . . . The rich are paying far less tax under this system.* The middle class will pay slightly less while working, but* more once they retire.* The corporations have stopped paying tax at all under this plan.* And the proponents say it is tax neutral.* Who is left to pay the difference?*
Given your application of financial logic to a political situation, I'm astounded that the Fair Tax hasn't already been passed and implemented.

We'll have to see what happens when the rich & the corporations catch up with this thread. Luckily there's no chance of either demographic reading THIS board, although I'd be worried if their executives knew how to do a Google search...

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Re: The FairTax - gaining steam!
Old 08-11-2005, 12:44 PM   #91
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Re: The FairTax - gaining steam!

Quote:
Originally Posted by ((^+^)) SG

So there's the Fair Tax. *If you make over a quarter million, you will be rewarded with a $50,000 bonus from the fed. *If you earn just a little bit more than the national average income in retirement, you will be punished with an extra tax bill of over $9000.

Notice that this $9000 penalty is likely to occur each year for all of retirement. *As long as you spend, it doesn't go away. *Which means that retirees will need to add an extra $225,000 to their nest egg in order to retire safely.

I don't think I'll be supporting this legislation. *
SG

I agree that most ERs won't like the fairtax for the reason you mentioned. *That's why I stated that hopefully they would come up with some method to compensate for that situation. *How about the massive (I'm sure )IRA that you have for which you won't have to pay taxes anymore, income tax or estate tax. *

However, for the majority of Americans who have only minor amount of after tax savings, it wouldn't be an issue. *For someone just graduating from college and starting a career, what an opportunity that is, with the fairtax in place. *All the incentives to work hard and earn, while LBYM and I think one can achieve ER sooner. *Personally, *I might even postpone ER to earn extra taxfree income. *See, it encourages productivity and discourages spending sprees.

Regarding where the rest of the money will come from, it will be from the rich and the superrich. *Paris Hilton will be paying extra $300,000 everytime she spends a million bucks. *Do you think she'll buy used?* The super rich now have an army of lawyers and accountants for tax avoidance. *With fairtax, there won't be many loopholes to exploit (definitely fewer than now). *Plus, if they think spending is the status symbol, let them spend, and we'll have more revenues. *The super rich now pays not much income tax or estate tax, due to their tax planning. *Professionals such as you had to pay a much higher percentage (I heard somewhere that people in the income range of 150k to 1M have the highest tax burden in terms of percentage).

One more positive of the fairtax---it is highly visible; it's right there in your face everyday.* It'll be much harder for politicians to raise the tax rate.* If there's a true need to raise the rate, people will agree.* Look at the school funding initiatives at the local levels.*
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Re: The FairTax - gaining steam!
Old 08-11-2005, 12:56 PM   #92
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Re: The FairTax - gaining steam!

SG,

Let's take another look at your first example (couple making
$100,000 income):

Using your numbers, under current law, the couple would have
$71,333.60 to spend at pre fair tax prices after FICA, Income taxes
and savings. * *

If you assume no change in the base price of goods and services,
the couple would spend 30% more to buy the same basket of goods.

Thus the fair tax would raise 30% of $71,333 , or $21,400, instead
of the $13,406.73 you calculated. *Not a bargain, but not so fast....
The couple's take home pay is higher by $18666 plus the prebate of
$2868 per year ..... or $21,534 per year .....break even for the couple
but the gov makes out like a bandit. *

Now consider that the fair tax people calculate that a 22-25% tax is built into the cost of goods and services. *This is the cost of corporate income
taxes, FICA taxes and the compliance cost of paying taxes. *

It is not likely that prices would drop the full amount, but the desire to
gain market share would cause some reduction. *Let's assume 15%
for this example. *Thus the price of the $71,333 basket of goods
would drop to $60,633 and the couple would pay $18, 189 in fair
tax ........ pretty damn close to the $18,666 in federal taxes they
pay now. *

Now look at the net result for the couple. *They now have a tax free
income of $100,000 plus the "prebate" of $239/month or $2868
per year. *They pay $78,822 for the same basket of goods but their
take home pay is higher by $21,534 ($18,666 + $2868).

Seems like a pretty good deal for the couple and the gov breaks
even ..... what's not to like about that?

As for the retired couple, they get the same prebate of $2868 per
year plus the $9418 in fed tax (your number) or an increase of
$12,286 to pay for a basket of goods that has gone up in price
by $7489 ..... still a bargain for the couple. *

I hope my math was ok ...... hard for an old guy with occasional
brain pharts.

The whole thing depends on my assumption for the price reduction.
If you don't like my number, pick your own.

Cheers,

Charlie *
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Re: The FairTax - gaining steam!
Old 08-11-2005, 01:03 PM   #93
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Re: The FairTax - gaining steam!

Quote:
Originally Posted by ((^+^)) SG
Some more hypothetical numbers to evaluate the (un)Fair Tax:

Consider a working couple (no kids) in 2005 earning a total of $250,000.* They make $6000 IRA contribution and invest another $10,000 (to reach 10%) after tax.* No other deductions.* Usinging www.dinkytown.net 2005 income tax calculator, adding 6.2% social security tax (up to the $90K cap) and 1.45% medicare tax, this couple has a total federal tax burden of $65,064.62.* Assuming they spent the remainder of their earnings ($168,935.38) they would have paid only $35,855.14 in Fair Tax.* This represents a $29,209.48 bonus over current tax law.

Consider the same couple retired.* In order to maintain the $168,900 annual spending rate, they would need only $215,000 income. (I've assumed no ss tax, no medicare tax, no IRA and no investment).* Their total tax burden under current law is $46,130.00.* But the Fair Tax remains the same as before, more than $35,800.* So couples that are affluent engough keep getting Fair Tax benefits even in retirement.

So . . . The rich are paying far less tax under this system.* The middle class will pay slightly less while working, but* more once they retire.* The corporations have stopped paying tax at all under this plan.* And the proponents say it is tax neutral.* Who is left to pay the difference?*
SG

You weren't correct about the fair tax assumption you used.* Fair tax rate is 30% of the amount you spend; it's 23% of the amount that includes the tax, i.e., 23% of 130.* The reason they use 23% figure is that it's how the current income tax burden is calculated.* Example: your income is 100000, and your effective tax rate is 23%, and you will have 77000 to buy things.* With the fairtax, if you spend 77000, you'll pay 23000 in tax, which is 30%.* It's just to make us compare apples to apples.
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Re: The FairTax - gaining steam!
Old 08-11-2005, 01:10 PM   #94
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Re: The FairTax - gaining steam!

Patrick, you are right about the sales tax slapping you in the face
each time you buy something. *That is one of the pluses about
the tax ...... it is very transparent. *All other forms of tax are
built into the price of goods already and the gov can manipulate
federal taxes behind the curtain like the wizard of oz .

If you get mad enough about it maybe you would insist on a reduction
in gov spending. *At least you would get a clearer picture where
your congressman stands when it comes time to raise of lower
the sales tax.


Cheers,

Charlie
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Re: The FairTax - gaining steam!
Old 08-11-2005, 02:17 PM   #95
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Re: The FairTax - gaining steam!

For those of you who are strongly opposed to the FairTax, I beg you to read through their web site, especially the rebuttals.

http://www.fairtaxvolunteer.org/smart/rebuttals.html

I realize there is a strong opposition to it.* The sheer number of special interest lobbyists alone will be a huge barrier, not to mention the power-addicted politicians themselves, the IRS, the tax compliance and planning industry, the retirees and so on.

However, I believe that once you have fully seen the other side of the arguments,* your heart may change.*
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Re: The FairTax - gaining steam!
Old 08-11-2005, 02:43 PM   #96
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Re: The FairTax - gaining steam!

Quote:
Originally Posted by mikew
Actually, I like Japan's tax system. My company does everything automatically. I don’t even know how much I pay. They just give me my take home pay. They even give me my refund automatically. Everything is documented but not worth looking at. It is basically out of sight, out of mind. If you have special circumstances, you can file with the tax office yourself but usually there is no need.
Something about this bothers me. Sure everything is documented, but I think it's useful to make it obvious to the citzenry how much government is costing them. That's what always bothered me about the VAT in certain countries. You pay $5 for something, but it's not directly obvious how much of that goes to tax. Let's say tommorow that item costs $6, does that mean that market forces caused the price to go up, or did you taxes go up or was it a combination of the two. "Out of sight, out of mind" is dangerous when it comes to dealing with any large entity or government.
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Re: The FairTax - gaining steam!
Old 08-11-2005, 02:45 PM   #97
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Re: The FairTax - gaining steam!

It seems like a pretty evil scheme to start Roth 401ks next year then switch to this kind of tax. Tricking more people into having to pay twice. (Not that I think it will pass, if anything they will have both types of taxes like Great Britain and Australia)
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Re: The FairTax - gaining steam!
Old 08-11-2005, 02:51 PM   #98
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Re: The FairTax - gaining steam!

For those of you wondering how Fair Tax is going to cover the expenses and hence revenue neutral at 23%, here is the beginng of the explanation. *From pp 17-18 of

http://www.fairtaxvolunteer.org/smar...nsrebuttal.pdf





Perhaps the most glaring example of the staff’s errors in describing the FairTax
plan is their misrepresentation of the FairTax rate. First, the staff asserts that the budgetneutral rate for the FairTax would have to be 50 percent. The idea that a national sales tax would have to have a rate anywhere near 50 percent is just a fabrication, pure and simple. The staff cannot defeat the idea of a national sales tax by arbitrarily assigning it a higher rate that it believes the American people will not support. Noted researchers would refute the staff’s biased analysis. Dale Jorgenson (Harvard) found that the FairTax plan was revenue neutral at 22.9 percent.8

______________
Postscript
8 The Economic Impact of the National Retail Sales Tax, Dale W. Jorgenson
______________

Jim Poterba (MIT) found that the FairTax plan was revenue neutral at 23.1 percent.9 Laurence Kotlikoff (Boston University) found that the revenue-neutral tax rate was 24 percent.10
But so would simple common sense analysis. The FairTax repeals the individual
and corporate income tax, payroll taxes, and the estate and gift tax. The FairTax would
tax all consumption, without exception. In fiscal year 2003, these taxes accounted for
about $1.67 trillion.11 The economy in 2003 produced goods and services valued at 10.4
trillion.12 Consumption in the U.S. economy is a little under 7/8 of economic output or
$8.6 trillion. If we take the taxes replaced and divide by total consumption in the U.S.-
$1.67 trillion (the taxes replaced) divided by $8.6 trillion (all consumption) we find the
rate at 19.4 percent. This is the starting point for thinking about the sales tax rate. There
is simply no way that replacing taxes equal to 19.4 percent of consumption with a tax –
the FairTax – that taxes all consumption is going to have to be imposed at a rate of 50
percent.
Looked at another way, there is no way that the FairTax with a base much broader
than the income tax, would be at a rate greater than the income tax. In 2001 (the latest
year available), total adjusted gross income (i.e., income before personal and dependent
exemptions, itemized deductions, and the like) was $6.17 trillion.13 Total consumption in
that same year was $8.54 trillion or 38 percent larger. Thus, the basic building block of
the FairTax base – total consumption – is 38 percent larger than the current tax system’s
starting point – adjusted gross income. Taxable income under the current system was
only $4.22 trillion in 2001, only 49 percent of total consumption. Or, stated differently,
total consumption is more than twice the taxable income under the current system.
The reason the FairTax can lower marginal tax rates is that the tax base of the
FairTax is broader than the current tax system. The reason the FairTax base is broader is
that the FairTax has no loopholes and no exclusions, whereas the current tax system is
full of loopholes, exceptions, and exclusions.



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Re: The FairTax - gaining steam!
Old 08-11-2005, 03:02 PM   #99
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Re: The FairTax - gaining steam!

Wonder what the FairTax would be on the purchase price of a kayak. Academy has a back to school sale on your choice of three colors. Better hurry...sale ends Saturday.

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Re: The FairTax - gaining steam!
Old 08-11-2005, 03:23 PM   #100
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Re: The FairTax - gaining steam!

The problem with reading the rebuttals is that they don't print the writings that they are criticizing. So I can't properly evaluate the rebuttals. Also, the rebuttals tended to be filled with conclusory statements.

Several of the rebuttals talked about how the rebate will cover necessities of life and "how much tax you pay is entirely based on how you chose to live your life." Different people have different necessities and it is not necessarily equivalent to poverty level income. The number I saw for the rebate based on necessities of life was $9310, based on the DHHS "estimate of poverty level, a basket of medical care, food, clothing, shelter, transportation and entertainment, etc." for one person.

Come on, not even close. So those with greater needs, not just wants, will pay more tax.

I can see the cheating now. I'll pay cash. Buy goods from overseas. Retailers selling "refurbished" goods (no tax on used goods). . .

Oh, I have represented businesses in sales tax audits. Just as bad if not worse than income tax audits. (Prove your sales were not that high . . .)

I am totally mystified as to why I am blabbering so much about this topic. I am sure DH will tell me what is wrong with me when I go home today.

I'll take the kayak hint, sort of, and promise not to post on this any more.


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