sob

The bottom 50% of the income scale in this country already pays no income tax!

How many people should the "rich" be saddled with supporting? And while we're at it, what's today's definition of "rich?"

sob

Because so many jealous people want it.


You've come to the wrong place. My estimation is that 75% of the people here think they're entitled to the money of anyone who makes more than they do. There's no shortage of comments in this "Politics" area of the desires for, and plans for, other people's money.


"The state is that great fiction by which everyone tries to live at the expense of everyone else."
-Frederic Bastiat

He died in 1850, but a lot of people today still don't understand that concept.

sob

Although I won't swear it isn't an urban legend, I once heard of a company that got so pissed that it began paying its employees in cash.

They would line up, receive their cash, and as they moved down the line, they would have to put their taxes into different boxes (Federal, State, Local, Unemployment, Disability, Social Security, Medicare, etc.).

As the story goes, the employees raised such an uproar that the IRS demanded that the company knock it off.

If it didn't happen, it should have.

sob

I already mentioned that in another thread. The answer I got was that "things are different now."

Haven't you heard? A couple of years back, they directed us to make the checks out to "US Treasury." I assume it was because the IRS was exposed in all its glory during the abuses hearing.

sob

That's exactly what happened under Reagan. Unfortunately, we were unable to limit spending increases to 5% a year, so the deficit went up.

sob

That's where we differ. "Gain" is inaccurate when it means I get to keep more of MY money. "Who gets to lose less?" would be accurate.



As far as the "No thanks" comment. May I assume that you're declining anything that means less of other people's money winds up in your pocket?

sob

I am impressed with the homework you've done. I'm also certain that no one who receives other people's money is going to listen to anything that might eliminate their free ride.

Here's something that backs up a lot of your points:

http://www.townhall.com/columnists/j...20040809.shtml

JACK KEMP COPLEY NEWS SERVICE
It's time to scrap the U.S. tax code

August 11, 2004

In the last few weeks, talk of President Bush's soon-to-be unveiled second term economic agenda has shifted, for the first time in a long time, to a discussion about fundamental tax reform.

First there was the release of House Speaker Dennis Hastert's new book in which the Illinois Republican explains that taxes account for 23 percent to 27 percent of the cost of our goods and services, putting our corporations at a competitive disadvantage with our trading partners. Thus, he argues, "For us to return capital and jobs to the United States, we're going to have to change our present tax system and adopt a flat tax, a national sales tax, an ad valorem tax, or VAT." I agree we need to fundamentally reform the tax code, however, I have always worried that a VAT is too easy to increase, which we have witnessed in Europe.

Later in the week, Sen. Sam Brownback, R-Kans., said that President Bush is committed to a growth platform, and that "you'll start hearing him talk about a flat tax, really getting the tax code out of so much impact over peoples' lives."

Alan Murray wrote in The Wall Street Journal that the Bush administration is taking another page from the Gipper's playbook – tax cuts in the first term, tax reform in the second.

If fundamental tax reform becomes the issue, and I believe it to be a huge issue, it is important that we clearly articulate what exactly that means. By 1986, Ronald Reagan succeeded in bringing the top marginal tax rate down from 50 percent to 28 percent. But, the mistake made was increasing the capital gains tax rate to 28 percent and treating capital gains as identical to ordinary income. The result: capital gains tax revenue, which was greater than $165 billion in 1985 dropped precipitously to $116 billion in 1992.

In 1996, the last time fundamental tax reform received a concerted public hearing was when I chaired the National Commission on Economic Growth and Tax Reform – the Kemp Commission. We ultimately decided the income tax system was "impossibly complex, outrageously expensive, overly intrusive, economically destructive and manifestly unfair" – in short, we concluded the best course of action was to scrap the code altogether and tax all income, but tax it only once – this would radically simplify taxation and create the conditions for long-term robust economic growth.

Since the Kemp Commission, capital gains tax rates have been reduced twice, in 1997, and again with the 2003 tax rate reductions, thanks to President Bush. Individual income tax rates have also declined as a result of the Bush tax cuts, but the current top rate of 35 percent is still well above the 1986 level of 28 percent. What's worse, the pro-growth elements of the 2003 tax cuts are set to expire, with some provisions expiring at the end of this year.
Moreover, we still have a tax code that begins with an overly broad definition of taxable income. As a result, we have been forced to create a number of deductions, credits, exemptions – what John Kerry would deride as loopholes – to try to ameliorate some of the perverse disincentives from such an ill-conceived cradle-to-grave, redistributionist, social-engineering-focused tax system.

The system is still impossibly complex, outrageously expensive, overly intrusive, economically destructive and manifestly unfair, and we should still scrap the code.

If we cannot scrap the code outright, then we should, at a minimum, make permanent the 2001 and 2003 tax rate reductions; we should continue to reduce the double and triple taxation of savings and investment; we should reform the increasingly destructive alternative minimum tax; we should bring down the individual income tax rates to at least 1986 levels; we should reduce our level of corporate taxation to become competitive internationally; and we should enact National Enterprise Zone legislation to demonstrate the powerful economic impact of fundamental tax reform.

Surely the first objections of deficit hawks in both parties will be that we can ill-afford another round of tax cuts. To them I would say, listen to the sound advise of John F. Kennedy who argued in 1960, "It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget, just as it will never produce enough jobs or enough profits. Surely the lesson of the last decade is that budget deficits are not caused by wild-eyed spenders but by slow economic growth and periodic recessions, and any new recession would break all deficit records."

My question is why isn't John F. Kerry listening to or at least reading John F. Kennedy?

sob

Once again, KMA-628, my compliments on a well-thought out post, which generated a great deal of discussion.

However, I only had to read the title to think "You'll talk a dog off a meat wagon faster than you'll get our redistributionists to agree to keep their hands off other people's money."

As Abraham LIncoln said, “You can never build a man up by tearing another man down.”

KMA-628

to everybody, thanks for the input, I took a few days off for the holiday (with another break coming up for my son's b-day on Sun.)

I have not had a chance to check out any of the links posted, but I will as soon as I can.

Smooth -

I read your post, but haven't had time to draft an appropriate response.

Sob -

Thanks.


A couple of quick things:

1) I had a talk with an old "friend" who is an economist in the academic sense. I don't really talk too much to the guy because we differ on many different aspects of the economy. Anyway, I asked for his opinion regarding the "regressive" idea of a consumption tax. His answer, and he is a decidedly liberal economist, is that regardless of how it looks, the low income riders make the plan progressive. The theory behind it is that most affluent people will always pay a higher proportion of their taxes because of the free ride that the lower incomes would get. A half of a percent would still be higher, propoertionally, to zero percent.

I kind of look at it this way: if it looks like a duck, walks like a duck, quacks like a duck, it must be a penguin.

2) As is obvious, I am in favor of taking strong looks at any proposal that involves replacing our current system. The evidence is just too vast against giving our system another "chance". At the onset of my research, I would have to say that I leaned towards the consumption tax as opposed to the "flat tax". I think my biggest reason had to do with the potential of the IRS to be abolished; that made any proposal look good in my mind.

That being said, after several discussions over the holiday with some extremely bright, but very liberal family members, I think that the "flat tax" needs to be looked at closely as well. I am wondering if it would be an easier transition as compared to a consumption-based system.

Anyways, it is better to be openly discussing the options rather than to be silently accepting a system that is flawed down to its very core.

Also, I found a couple of studies related to potential economic benefits. The numbers looked very good and I will post the study info when I have more time. The only problem I had with the studies is that they were not very current (i.e. pre-recession and pre-9/11).

Oh yeah, one more thing:

Smooth -

I only keep receipts related to my taxes, nothing else. The (what seems like) daily trips to Wal-Mart get discarded once I see that nothing needs to be returned.

On that note, I would like to look into maybe getting a research grant to do a long-term, in-depth study of the idea. I would like to have a cross-sampling of people who's finances would be scrutinized (over, maybe, five years) to see how they would be affected by (a) the current system, (b) a consumption-based system and (c) a flat tax.

KMA-628

I did want to respond to this one directly.

This may sound harsh, but it doesn't really matter, unless the screamers make for a significant majority.

I look at it this way:

Nobody likes taxes or the theory of taxation, but most understand that some means of taxation must exist.

There isn't any proposal that I could make or someone else could make that would be accepted by everybody. Regardless of the plan, somebody is going to have a problem with it.

When our country moved from mainly excise taxes bringing in the revenue to the beginnings of the system we have to day, there were people that screamed, kicked, moaned, griped, etc. about it.

smooth

Just to reiterate so we aren't talking past one another:
Your initial source was claiming that flat taxes weren't inherently regressive. They are, however, and that's why patches need to be implemented to make them resemble a progressive tax structure.

Once those patches are in place, even liberal economists (and perhaps some of us other social scientists )can be mollified. But the riders make it so, not the structure itself. So a couple of things:

a) I agreed that if we were to implement this new kind of structure, I would compromise in the following way--by making sure our measurement of low income people was accurate. That is, a self-sufficiency standard rather than our current outdated poverty threshhold.

b) we need to be watchful that those riders are swept out from the bill in its last implementation and/or taken out in the future when the public isn't paying attention and the code can be changed. Because the tax is regressive, but the riders correct it.

You may not have all your receipts, but the article I posted from the Progressive Institute claimed that even $75K families would benefit. If you're married and making dual income or something, you probably fit around there somewhere.

I would be concerned if I made between 18K (current poverty threshold for family of 4), 38K (self-sufficiency standard for my area), and 75K. My guess is a lot of people fall in the $30K to $75K income bracket, but I haven't looked it up on the census data.

__________________
"The theory of a free press is that truth will emerge from free discussion, not that it will be presented perfectly and instantly in any one account." -- Walter Lippmann

"You measure democracy by the freedom it gives its dissidents, not the freedom it gives its assimilated conformists." -- Abbie Hoffman

AVoiceOfReason

I thought I'd bring this one back up, since the book by talk show host Neil Boortz and Congressman John Linder is now out and selling pretty well.

I've read it, and while I was already inclined to believe that replacement of the current tax on income with a tax on consumption was a fairer way to raise money (so long as there were rebates to insure the poor were not hardest hit), I'm even more in favor of it now. Many of the objections raised by critics are addressed, and I'll touch on a few here.

1. The rich won't pay as much is cited as an objection. Well, if they spend, they will, but let's say they save and invest instead of eating more than at the poverty level. The saved money will be available to be lent to someone that IS spending, buying machinery or equipment and paying the tax on the purchase. Or maybe it will be invested in adding help, thus creating more jobs and thus more wager earners to spend the money.

2. The problem with the home mortgage and chartiable deductions disappearing is really no problem at all for anyone that has thought it through. Those deductions, as well as virtually all others, are deductions or credits against INCOME, lowering the amount of INCOME tax being paid. Since there is NO income tax, there is nothing to deduct against.

3. It will drive up prices is a fallacy. Yes, there will be a 23% tax on goods sold at the retail level, but there already IS an embedded tax on everything we buy in the store anyway. Take chicken soup, for example. The grower of the bird is taxed on his income when the bird is sold. The maker of the can and label is taxed. The soup maker is taxed when it is sold to the supermarket, and the supermarket is taxed as income when the can is sold. All those taxes along the chain drive up the cost of the goods by about the same 23% we'd be paying under a national sales tax. Remove the taxes from every step in the production chain and the prices go down at the retail level.

4. The idea that some will cheat a new system is advanced but is laughable, given the lengths that folks go to now to avoid and evade paying taxes. A national retail sales tax will be more efficient, since Target and Best Buy are already collecting a sales tax in most states, and they aren't going to collude with a taxpayer--a customer--to cheat, since they get a small percentage of what they bring in for collecting it.

That's enough for now. I don't think the FairTax is a perfect system, and probably can't defend all objections to it, but I will be willing to see if a specific objection is covered in the book and try to address it here.

__________________
AVOR

A Voice Of Reason, not necessarily the ONLY one.

Yakk

How in the world do you plan on tracking this?

Strangely, all of my large-budget shopping will consist of me giving a Gift to someone, who happens to give a Gift back that is roughly equivilent in value.

Oh look, I just avoided taxes! *gasp*

Secondly, Estate Taxes are an attempt to make the people with large amounts of financial power in the USA be those who earned it in their lifetime, as opposed to people who inherited it. Unlimited inherited power is a cancer on society.

I propose replacing the current income tax with a flat 1% income tax! Look, the number is small, only 1%!

=p~

Making up a bogus low number does not make your proposal more viable.

Thus, in order to pay for the current Federal government, you need to tax 29% of the current economy.

Demonstrating what the massive tax upheval would do would be tricky, and not something you have gotten anywhere close to.

Right now, the Federal Government takes in roughly as much as it spends. It takes this money in in taxes.

Numbers which, as far as I can tell, have no basis in reality.

I do not believe you. There is every reason to believe that if you increase the portion of taxes that the poor and middle class pay, they will be hurt more by the plan. Consumption of goods/services tends to be higher, as a portion of their income, in the poor and middle class.

You might want the poor and middle class to carry more of the tax burden. That is fine. But claiming that making the tax burden regressive won't hurt them at all seems dishonest.

Secondly, income disparity itself causes harm to a society. It doesn't take a genius to notice the correlation between income disparity and crime.

Honestly? I'd suspect the democratic party would find another niche. And there would be bloody revolution in the streets.

The US has been close to bloody revolution in the past. Machine guns where used by the government on people who protested the distribution of wealth.

There is a name for a society in which the power and wealth are monopolized by a handful of families. It is called feudalism.

So, from what I can tell, your plan is:
1> Implement your system
2> Expect HUGE AND MASSIVE MIRACLE ECONOMIC GROWTH!!!!!!
3> Pay for your system

Just so we can be clear? In other words, without step 2, your system does not work?

I do not understand. Do you expect a drug dealer to pay taxes on the drug sales he makes? A theif to pay taxes on the goods he steals?

There are two transactions.

1> The worker in the illegal industry earns money (illegally)
2> The worker in the illegal industry spends money (legally)

The transaction <1> is not taxed often, because the illegal worker does not declair his income. (note that some criminals pay their income taxes, in order to avoid tax evasion charges)

The transaction <2> is often taxed, because the reciever pays income tax and sales tax on the goods.

I do not see how your system changes any of this.

I'm assuming your consumption tax is rebateable if you later resell the good?

__________________
Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.

Stompy

I'd be all for consumption based tax.

I rarely spend my money. I'd love to save save save and dump it all into Roth IRA.

God that'd be amazing...

Doubt it will happen though.

__________________
I love lamp.

kutulu

You're kidding, right? Please tell me you don't really believe that.

Let's make it simple. The govt gets X dollars in taxes each year. Y comes from people directly through income, estate, etc. and Z is the hidden taxes. The price you pay for goods is equal to the cost (A) plus the 'hidden taxes' (Z).

The fair tax isn't some magical system whereby the people pay a sales tax and suddenly the hidden taxes aren't needed anymore. They aren't getting it from business, so it falls to the people. Therefore, even though the prices look lower, they still cost you just as much.

Of course that also assumes that when business costs fall by the amount Z that they pass ALL of that savings over to their customers and do nothing to hook up their investors. In reality they will take a portion of Z and add it to A to make them happier. Good news, now the people pay more taxes (unless you are one of the few that don't live paycheck to paycheck) and the cost savings are partially offset by increased investor income.

Great system. Only the truly dense can love the fair tax.