FairTax - Tilted Forum Project Discussion Community

r00t · 08-25-2004, 03:47 PM

This post might fit more appropriately in Politics, but I wanted to focus the discussion on the proposed *system*, hopefully keeping political figures out of it, which would make the discussion mainly about all levels of financial issues (world, U.S., personal). So, what that said:

Main site: http://www.fairtax.org/
Starting point for "facts": http://www.fairtaxvolunteer.org/smart/index.html
"Research": http://www.fairtaxvolunteer.org/smar...ry_impact.html

Brief summary: Get rid of *all* current federal taxes and impose a single 23% federal sales tax. The only real exception (supposedly) is for everyone: spend up to the poverty limit tax-free.

What do you think?

gar1976 · 08-25-2004, 06:50 PM

Oh, you run into some problems.

Starters: Per the WSJ, a 23% tax rate is waaay too low. They estimate a federal sales tax would need to be roughly 50% (!) on ALL sales (goods, services, as well as things like homes, etc.).

Second: a main basis in our tax system is that it's progressive, that is, the more you make, the more you have available as "consummable" income to be taxes, since you will bring home much more than you have available to live on. Think about it for a minute: do you think it's in the best interest of our nation to tax someone trying to support a family on 25,000 a year the same rate as someone making 3,000,000 a year? Who do you think could shoulder the tax burden better? Who needs more take home income just to survive? Remember, the poverty level for a family of four is around 17,000 IIRC. Not much.

Third: our tax system, while it has it's flaws, also is geared to "steer" the average american to certain options. One, like being able to deduct home mortgage interest - why would policy makers encourage this? The reason being that a family resisdence is the great wealth builder for middle income taxpayers, sort of a forced savings system that hopefully you will have paid off before you retire. Another tax incentive is the increasing amounts of taxable inome you can defer to later years through a retirement plan, which is in the best interest of the US government. The more you as a taxpayer can save by yourself, the less reliant you will be on social security when you retire (which, by the way, was NEVER meant to be a sole source of income for retirees).

Sorry, but a national flat sales tax will never fly IMHO - there's too much inertia behind the current system, and after you work with it for a while, even a twisted sense of logic tucked away in there.

gar1976 · 09-07-2004, 11:27 AM

Here's an article discussing this same topic. The column below is copied and pasted, the link will be below the text. From the Oregonian.

Tax code fix? Look before giant leap
Tuesday, September 07, 2004
ROBERT LANDAUER
Review for a moment some of our federal tax system's most aggravating problems.

The rules are as impenetrable as jungle growth. The Internal Revenue Code is more than 21 megabytes long, with some 2.8 million words. Printed 60 lines to the page, it would fill almost 6,000 letter-size pages.

Costs of obeying the complex rules are staggering. In 2002 individuals, businesses and non-profits spent 5.8 billion hours and more than $194 billion complying with the tax code, the Tax Foundation estimated. "This amounts to imposing a 20.4 cent tax-compliance surcharge for every dollar the income tax system collects."

It costs lower-income taxpayers far more to obey the rules (4.53 percent of adjusted gross income) than those who earn more (0.29 percent for those earning $200,000-plus).

The Byzantine code animates a wildly inefficient tax-shelter industry seen as favoring the rich. This increases enforcement problems throughout the system.

Others see flaws in the current system, too. Sen. Richard Lugar, R-Ind., a non-ideological conservative with credentials as a tax-cutting local official, has long favored a national sales tax to replace the income tax. Bill Clinton, a moderate-liberal and the only president in more than 30 years to produce a budget surplus, toyed briefly with a national sales tax as he studied ways to pay for a national health plan.

In 1998, the House of Representatives was so frustrated with the income tax code that it passed a bill to abolish it by 2003 -- if Congress replaced the tax system in the meantime. It didn't, so the system endures.

Speaking at a Florida campaign forum last month, President Bush expressed interest in a different kind of tax structure, too. "You know, I'm not exactly sure how big the national sales tax is going to have to be, but it's the kind of interesting idea that we ought to explore seriously."

There certainly are reasons to check out that terrain. A number of economic models see a national sales tax as increasing capital investment and, thus, gross domestic product, possibly with benefits for employment. Also, interest rates likely would be lower. That would reduce pressure on the national debt, free money for other obligations (Social Security and Medicare?) and aid industries such as construction and homebuilding that are sensitive to interest rates.

Before you get carried away, though, check the Institute on Taxation and Economic Policy's sobering new study of effects of a national sales tax (www.itepnet.org/sale0904.pdf).

Replacing personal and corporate income taxes, Social Security and Medicare taxes and estate taxes with a 30 percent national sales tax (as proposed in H.R. 25) in 2005 "would reduce the revenues those taxes currently provide by 41 percent in 2005, and by larger amounts in later years."

A 2005 national sales tax of 45 percent (more in later years) would be needed to match federal revenues, the study's author told me.

In Oregon and Washington, respectively, the increased federal tax burden at the 45 percent level for the bottom 20 percent of income earners would be $3,782 and $4,663; for the next 20 percent, $4,078 and $3,730; for the middle 20 percent, $3,619 and $3,551; and for the fourth 20 percent, $2,283 and $2,712. Oregonians in the next 15 percent would pay $393 less, Washingtonians $2,129 more.

Oregon income earners in the next 4 percent would pay $10,237 less, those in Washington $11,196 less. The top 1 percent in both states would pay huge amounts less than they do now.

Average federal tax burdens for the bottom 80 percent would rise by $3,440 in Oregon and $3,664 in Washington. For Oregon's top 5 percent, it would fall by an average of $40,880 and by $74,737 in Washington.

Could this be fixed to factor in ability-to-pay and to promote socially useful activities? Possibly yes, with credits and deductions, but then we're back to a complex system.

If you're fixated on getting rid of the IRS, replacing the income tax with a national sales tax or a value-added tax won't help you realize your fantasy. Both need enforcement mechanisms.

Also, changing the tax structure won't end budget deficits, which are largely the result of undisciplined congressional spending practices.

http://www.oregonlive.com/news/orego...9639270760.xml

Glava · 09-20-2004, 07:32 AM

Fair? Yes. Practical, no. I very much agree with this in theory, but in practice, the poverty rate will increase and the budget deficit, being already very high, will skyrockt.

gar1976 · 09-20-2004, 07:56 AM

Quote:

Originally Posted by Glava

Fair? Yes. Practical, no. I very much agree with this in theory, but in practice, the poverty rate will increase and the budget deficit, being already very high, will skyrockt.

Actually, the same amount of tax will be collected either way (it will be "revenue nuetral"). It would just shift who was paying the burden of the tax from the wealthy to all of us equally.

Glava · 09-20-2004, 10:36 AM

Quote:

Originally Posted by gar1976

Actually, the same amount of tax will be collected either way (it will be "revenue nuetral"). It would just shift who was paying the burden of the tax from the wealthy to all of us equally.

Thus increasing poverty rates.

gar1976 · 09-20-2004, 01:25 PM

Quote:

Originally Posted by Glava

Thus increasing poverty rates.

It all depends on what school of macroeconomics you subscribe to, supply or demand side. Truth is, noone will know until we try it.

SecretMethod70 · 09-20-2004, 06:59 PM

I would support a flat tax, with 0 tax for those in poverty, so long as the poverty lines were redrawn. The current poverty limits are rediculously low. In 2000, the average poverty threshold for 1 person was $8,794. You can't tell me that someone can live off of $9,000 a YEAR, especially in a city like Chicago where the cost of living is so high. The average poverty threshold for 4 people was $17,603. So, tell me how a family with two kids is supposed to feed everyone nutritiously and get good educations for their children on $18,000 a YEAR. Raise the poverty thresholds and I'd definitely support the idea of a flat tax.

08-25-2004, 03:47 PM	#1 (permalink)
r00t Upright	FairTax This post might fit more appropriately in Politics, but I wanted to focus the discussion on the proposed system, hopefully keeping political figures out of it, which would make the discussion mainly about all levels of financial issues (world, U.S., personal). So, what that said: Main site: http://www.fairtax.org/ Starting point for "facts": http://www.fairtaxvolunteer.org/smart/index.html "Research": http://www.fairtaxvolunteer.org/smar...ry_impact.html Brief summary: Get rid of all current federal taxes and impose a single 23% federal sales tax. The only real exception (supposedly) is for everyone: spend up to the poverty limit tax-free. What do you think?

09-20-2004, 06:59 PM	#8 (permalink)
SecretMethod70 Human Administrator Location: Chicago	I would support a flat tax, with 0 tax for those in poverty, so long as the poverty lines were redrawn. The current poverty limits are rediculously low. In 2000, the average poverty threshold for 1 person was $8,794. You can't tell me that someone can live off of $9,000 a YEAR, especially in a city like Chicago where the cost of living is so high. The average poverty threshold for 4 people was $17,603. So, tell me how a family with two kids is supposed to feed everyone nutritiously and get good educations for their children on $18,000 a YEAR. Raise the poverty thresholds and I'd definitely support the idea of a flat tax. __________________ Le temps détruit tout "Musicians are the carriers and communicators of spirit in the most immediate sense." - Kurt Elling

08-25-2004, 06:50 PM	#2 (permalink)
gar1976 Custom User Title Location: Lurking. Under the desk.	Oh, you run into some problems. Starters: Per the WSJ, a 23% tax rate is waaay too low. They estimate a federal sales tax would need to be roughly 50% (!) on ALL sales (goods, services, as well as things like homes, etc.). Second: a main basis in our tax system is that it's progressive, that is, the more you make, the more you have available as "consummable" income to be taxes, since you will bring home much more than you have available to live on. Think about it for a minute: do you think it's in the best interest of our nation to tax someone trying to support a family on 25,000 a year the same rate as someone making 3,000,000 a year? Who do you think could shoulder the tax burden better? Who needs more take home income just to survive? Remember, the poverty level for a family of four is around 17,000 IIRC. Not much. Third: our tax system, while it has it's flaws, also is geared to "steer" the average american to certain options. One, like being able to deduct home mortgage interest - why would policy makers encourage this? The reason being that a family resisdence is the great wealth builder for middle income taxpayers, sort of a forced savings system that hopefully you will have paid off before you retire. Another tax incentive is the increasing amounts of taxable inome you can defer to later years through a retirement plan, which is in the best interest of the US government. The more you as a taxpayer can save by yourself, the less reliant you will be on social security when you retire (which, by the way, was NEVER meant to be a sole source of income for retirees). Sorry, but a national flat sales tax will never fly IMHO - there's too much inertia behind the current system, and after you work with it for a while, even a twisted sense of logic tucked away in there.

09-07-2004, 11:27 AM	#3 (permalink)
gar1976 Custom User Title Location: Lurking. Under the desk.	Here's an article discussing this same topic. The column below is copied and pasted, the link will be below the text. From the Oregonian. Tax code fix? Look before giant leap Tuesday, September 07, 2004 ROBERT LANDAUER Review for a moment some of our federal tax system's most aggravating problems. The rules are as impenetrable as jungle growth. The Internal Revenue Code is more than 21 megabytes long, with some 2.8 million words. Printed 60 lines to the page, it would fill almost 6,000 letter-size pages. Costs of obeying the complex rules are staggering. In 2002 individuals, businesses and non-profits spent 5.8 billion hours and more than $194 billion complying with the tax code, the Tax Foundation estimated. "This amounts to imposing a 20.4 cent tax-compliance surcharge for every dollar the income tax system collects." It costs lower-income taxpayers far more to obey the rules (4.53 percent of adjusted gross income) than those who earn more (0.29 percent for those earning $200,000-plus). The Byzantine code animates a wildly inefficient tax-shelter industry seen as favoring the rich. This increases enforcement problems throughout the system. Others see flaws in the current system, too. Sen. Richard Lugar, R-Ind., a non-ideological conservative with credentials as a tax-cutting local official, has long favored a national sales tax to replace the income tax. Bill Clinton, a moderate-liberal and the only president in more than 30 years to produce a budget surplus, toyed briefly with a national sales tax as he studied ways to pay for a national health plan. In 1998, the House of Representatives was so frustrated with the income tax code that it passed a bill to abolish it by 2003 -- if Congress replaced the tax system in the meantime. It didn't, so the system endures. Speaking at a Florida campaign forum last month, President Bush expressed interest in a different kind of tax structure, too. "You know, I'm not exactly sure how big the national sales tax is going to have to be, but it's the kind of interesting idea that we ought to explore seriously." There certainly are reasons to check out that terrain. A number of economic models see a national sales tax as increasing capital investment and, thus, gross domestic product, possibly with benefits for employment. Also, interest rates likely would be lower. That would reduce pressure on the national debt, free money for other obligations (Social Security and Medicare?) and aid industries such as construction and homebuilding that are sensitive to interest rates. Before you get carried away, though, check the Institute on Taxation and Economic Policy's sobering new study of effects of a national sales tax (www.itepnet.org/sale0904.pdf). Replacing personal and corporate income taxes, Social Security and Medicare taxes and estate taxes with a 30 percent national sales tax (as proposed in H.R. 25) in 2005 "would reduce the revenues those taxes currently provide by 41 percent in 2005, and by larger amounts in later years." A 2005 national sales tax of 45 percent (more in later years) would be needed to match federal revenues, the study's author told me. In Oregon and Washington, respectively, the increased federal tax burden at the 45 percent level for the bottom 20 percent of income earners would be $3,782 and $4,663; for the next 20 percent, $4,078 and $3,730; for the middle 20 percent, $3,619 and $3,551; and for the fourth 20 percent, $2,283 and $2,712. Oregonians in the next 15 percent would pay $393 less, Washingtonians $2,129 more. Oregon income earners in the next 4 percent would pay $10,237 less, those in Washington $11,196 less. The top 1 percent in both states would pay huge amounts less than they do now. Average federal tax burdens for the bottom 80 percent would rise by $3,440 in Oregon and $3,664 in Washington. For Oregon's top 5 percent, it would fall by an average of $40,880 and by $74,737 in Washington. Could this be fixed to factor in ability-to-pay and to promote socially useful activities? Possibly yes, with credits and deductions, but then we're back to a complex system. If you're fixated on getting rid of the IRS, replacing the income tax with a national sales tax or a value-added tax won't help you realize your fantasy. Both need enforcement mechanisms. Also, changing the tax structure won't end budget deficits, which are largely the result of undisciplined congressional spending practices. http://www.oregonlive.com/news/orego...9639270760.xml

09-20-2004, 07:32 AM	#4 (permalink)
Glava Betitled	Fair? Yes. Practical, no. I very much agree with this in theory, but in practice, the poverty rate will increase and the budget deficit, being already very high, will skyrockt.