The FairTax - gaining steam!

[amt]

Quote:

Originally Posted by MRGALT2U Yawn................sound of soft snoring............. JG

I wish you had something more informative or constructive to say.* I've also noticed your complaints about politicians and at the same time your proud statements that you never vote.* I wish you value, even if slightly,* the freedom and democracy you enjoy because some people in some corners of the globe are literally dying to achieve that right to vote, which I have firsthand knowledge by the way.

[Martha]

Quote:

Originally Posted by amt 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.

True enough, but the "middle" dollars are taxed more, in part because of FICA and in part because of phase out of exemptions and AMT (is that why you call yourself amt?). So it is hard to compare the apples to the oranges.

Quote:

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.

So those who are unhealthy and unemployed, without retiree health insurance, will pay the highest taxes? Doesn't seem more fair than a progessive income tax.

[MRGALT2U]

Quote:

Originally Posted by 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

My best friend is a farmer. The farming rarely turns a profit and would never
be in the black without government subsidies. He loves farming, but makes
his money on investments and Ebay selling. He is my age and no retirement plans that I know of.

Like farmerEd, I just love being (partly) out of the system. No job,
no federal income or SS taxes, etc.

JG

[amt]

Quote:

Originally Posted by Martha So those who are unhealthy and unemployed, without retiree health insurance, will pay the highest taxes?* Doesn't seem* more fair than a progessive income tax.

In practice, the uninsured, unemployed (just as now) will not be paying much out of pocket, and so won't be taxed.* Most of the tax in healthcare sector will have to come from employers in the form of tax on insurance premiums.

[MRGALT2U]

Quote:

Originally Posted by amt I wish you had something more informative or constructive to say.* I've also noticed your complaints about politicians and at the same time your proud statements that you never vote.* I wish you value, even if slightly,* the freedom and democracy you enjoy because some people in some corners of the globe are literally dying to achieve that right to vote, which I have firsthand knowledge by the way.

I value all of that, very much. *And I also appreciate the sacrifices
being made. *That said, I also reserve the right to complain, criticize
and pontificate.......and yes, even not to vote. *If I ever find a politician
who inspires trust and confidence I will register. *Don't expect this to
happen in my lifetime.

Finally, this thread was boring when it began and has now outlived
any sort of reasonable time frame IMHO.

JG

[greg]

Quote:

Originally Posted by razztazz 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?

I always thought "trickle up" theory would would work best: Double the minimum wage. Get the money from the rich with a one time tax. Then tell the rich to have it, 'you folks now know where the money is/went.' The rich are competent, smart, innovative, resourceful, hard working . . . etc. They will get it all back. Then repeat when the rich get slothful, lazy, and deceitful again. Just fine tune the tax system a bit to help the middle class because they basically catch some of what's going on in between the two extremes.

--Greg

[Martha]

Quote:

Originally Posted by amt In practice, the uninsured, unemployed (just as now) will not be paying much out of pocket, and so won't be taxed. Most of the tax in healthcare sector will have to come from employers in the form of tax on insurance premiums.

Well the ER uninsured can pay plenty out of pocket. And the ERs without retiree health insurance so they have to buy their own, will pay plenty out of pocket. COBRA for my family is nearly $1100 a month. And then there is the deductible and copays.

There are plenty of people who are uninsured and have to pay out of pocket for their medical costs. And more employers are moving the burden of health care costs to their employees.

[REWahoo]

"A government which robs Peter to pay Paul can always depend on the support of Paul."

George Bernard Shaw

[sgeeeee]

Quote:

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

In this case, I think we have a few Peters that are willing to support it.

Peter isn't always very discerning or analytical.

[Martha]

I really think that a national sales tax replacing the income tax doesn't have a chance in heck of coming to pass.

People always want a simple solution. Treating everyone the same or equal has the illusion of fairness, but equal isn't necessarily fair.

We can't save money as a whole through a national sales tax unless spending is reduced. So either everyone ends up paying about the same in taxes OR some people pay more and some less. To assume whether you pay more or less is a matter of choice will only be true for the affluent. Have a lot of kids? Pay more taxes. Need a handicapped accessible van and a wheelchair? Pay more taxes. Going to college? Pay more taxes. Going to the dentist? Pay more taxes. Need to heat your house in Alaska? Pay more taxes. It isn't all about a decision whether to buy a new or used car or a new television.

Complexity will arise to deal with issues of fairness and practicality. Ever read a state's sales/use tax statutes and regulations? I have. Lots of exemptions. Some actually make sense. A business invests in capital equipment. It often gets a sales tax exemption as well as the right to depreciate the equipment. Occasional sales usually are exempt. For example, JG sells a typewriter he doesn't have to collect sales tax.

Blah, blah, blah. I'll shut up now.

[MRGALT2U]

Quote:

Originally Posted by Martha * Occasional sales usually are exempt.* For example, JG sells a typewriter he doesn't have to collect sales tax.* Blah, blah, blah.* I'll shut up now.

I sold 2 over the weekend.....$20 each. I had $5.00 invested, total.
The ad was free. Do the math.

JG

[Michael]

Quote:

COBRA for my family is nearly $1100 a month.

Its a shame that we have politicians that insist on making health care so expensive through all of their regulations, monopolies, and taxes.

[MRGALT2U]

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.

It is a shame. But, do not look to politicians to help you, but rather expect
them to harm and steal. $1100 per month is ridiculous. However,
don't whine and blame others. Just deal with it!

JG

[mikew]

I agree the only thing you can do is react. However, some stability would be nice.

The flat tax, sales tax, the income tax system we have now. They all seem equally taxitive. (Although, I would prefer the sales tax since I don't buy anything in the US* ). I just wish they wouldn’t change the rules every year. It makes it impossible to plan and there is a real cost to it. These Bush tax cuts, every year taxes go down and then all the sudden they pop back up. Will I have a tax advantage on dividends in five years or will I need to sell out my dividend diving portfolio? Will I need to switch to some other tax minimizing strategy? Will other people react the same way and cut share prices?

I think they are playing games for political gain and because they can’t get their own house in order. This is not just a republican problem.

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.

[sgeeeee]

Just to put some real numbers on how the (un)Fair Tax would work, I just looked up my 2003 and 2004 tax returns. *2003 was the last time I worked full time (as an exec for a large corporation). *I worked 3 months before semi-retiring and consulted part time for about a month or two. *My DW was already retired, but she did work 30 or 40 hours on some temporary jobs. *We earned $229,042 that year and paid a total federal tax burden (income, social security and medicare) of $61,057.92. *We spent $60,926.59 (the rest went into investments)that year so at a Fair tax rate of 23% minus the $3000 pre-bate, we would have paid only $11,013.12 in Fair Tax. *This represents a windfall of over $50,000 for us. *We would really have benefited from the fair tax.

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.

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. *

[bpp]

Mikew writes:

Quote:

Actually, I like Japan's tax system. My company does everything automatically. I don’t even know how much I pay. [...] 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.

I am sure you are already aware of this, but something about the wording above suggests that it might not be a bad idea to mention just in case: if you want to take the mortgage tax deduction, you need to file your own taxes (kakutei shinkoku) for the first year that you bought your house/apt. This deduction is quite substantial -- it will almost wipe out my entire tax bill for a few years -- so make sure you don't miss out on it.

Bpp

[sgeeeee]

Some hypothetical numbers to evaluate the (un)Fair Tax:

Consider a working couple (no kids) in 2005 earning a total of $100,000. *They make $6000 IRA contribution and invest another $4000 (to reach 10%) after tax. *No other deductions. *Usinging www.dinkytown.net 2005 income tax calculator, adding 6.2% social security tax and 1.45% medicare tax, this couple has a total federal tax burden of $18,666.40. *Assuming they spent the remainder of their earnings ($71,333.60) they would have paid only $13,406.73 in Fair Tax. *This represents a $5,259.67 bonus over current tax law.

Consider the same couple retired. *In order to maintain the $71,300 annual spending rate, they would need only $80,750 income. (I've assumed no ss tax, no medicare tax, not IRA and no investment). *Their total tax burden under current law is only $9418. *But the Fair Tax remains the same as before -- a loss of about $4000. *That $4000 occurs each and every year.

[sgeeeee]

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?

[Michael]

Quote:

But,* do not look to politicians to help you, but rather expect them to harm and steal.

I don't have much hope that they will help John.* Human nature is corrupt, and the best that we can hope for is that our Constitution keeps the politicians from hacking us to death with machetes like the Rwandan politicians did to 1 million of their people.* There is apparently no hope that our Constitution will protect us from a high cost of living caused by political corruption.

[mikew]

Quote:

Originally Posted by bpp I am sure you are already aware of this, but something about the wording above suggests that it might not be a bad idea to mention just in case:* if you want to take the mortgage tax deduction, you need to file your own taxes (kakutei shinkoku) for the first year that you bought your house/apt.* This deduction is quite substantial -- it will almost wipe out my entire tax bill for a few years -- so make sure you don't miss out on it. Bpp

Bpp
Thanks for the post. Our apt is 26 years old so unfortunately it didn't qualify for the deduction. I guess that is something I don't like about the Japanese tax system.

Mike