FairTax

[kapkomet]

OK now hold on a second here. I personally believe that you can get rid of the income tax, and reduce the IRS down to a small fraction its size, and still have a "fair" tax for all income brackets. I like to think I also have a conscience.

You're not rich, are you?

[NorthSideSox72]

You're not rich, are you?

Um... no.

 

Here is what I am saying. You remove the income taxes. You keep everything else. The tax on income gets distributed as sales taxes. The sales taxes are broken down into, say, half a dozen categories. The lowest categories for necessities are not taxed, or taxed very low. On up the line, to the top category, which would be sin items or luxury items, taxed the highest. You can do that and not have it be a regressive tax.

 

The argument about high income people only spending a little ignores the fact that high income people invest a lot more - cap gains and interest taxation come into play. You can do this and still not penalize people for spending on necessities, thus allowing low income people to continue to live at little or no taxation if they choose.

 

Another benefit to consider of moving taxes from income to sales (in addition to reducing IRS and other overhead, and encouraging investment, thus further increasing tax revenue via cap gains) is that it encourages people with fixed budgets (meaning 90% of the country who aren't uber-rich) to not spend as much on things that tend to get them into financial trouble - luxury items, expensive cars, etc.

 

[southsider2k5]

OK now hold on a second here. I personally believe that you can get rid of the income tax, and reduce the IRS down to a small fraction its size, and still have a "fair" tax for all income brackets. I like to think I also have a conscience.

 

I have yet to see a proposal that looked anywhere near as "fair" as the system we have now. I have followed these things to the eyeteeth back to the Steve Forbes flat tax FWIW.

[NorthSideSox72]

I have yet to see a proposal that looked anywhere near as "fair" as the system we have now. I have followed these things to the eyeteeth back to the Steve Forbes flat tax FWIW.

I guess it depends who you read. I read a few books, years back, that made a pretty good case.

 

[southsider2k5]

I guess it depends who you read. I read a few books, years back, that made a pretty good case.

 

I read me

 

In all seriousness, kap and I had lots of the same profs in college. The two main econ guys where we went to school were on opposite ends of the specturn. One actually was a labor negotiator for a couple of the steel unions back in the day. The other was a right wing guy, who was very much a supply sider. Between those two and our finance prof who was self-proclaimed "to the right of Rush" we got a pretty good exposure to economic theory. You can make a good case for just about any of these things depending on how you want to interpret the facts. My understanding of economic theory, and real world experience is that things like sales taxes and value added taxes are super-regressive based on income brackets. As I see it, the efforts it would take to level out the regressiveness would complicate the system to the point it wouldn't be much different than the one we see now, not to mention the unintended consequences of things like blackmarkets emerging to avoid these taxes.

[NorthSideSox72]

I read me

 

In all seriousness, kap and I had lots of the same profs in college. The two main econ guys where we went to school were on opposite ends of the specturn. One actually was a labor negotiator for a couple of the steel unions back in the day. The other was a right wing guy, who was very much a supply sider. Between those two and our finance prof who was self-proclaimed "to the right of Rush" we got a pretty good exposure to economic theory. You can make a good case for just about any of these things depending on how you want to interpret the facts. My understanding of economic theory, and real world experience is that things like sales taxes and value added taxes are super-regressive based on income brackets. As I see it, the efforts it would take to level out the regressiveness would complicate the system to the point it wouldn't be much different than the one we see now, not to mention the unintended consequences of things like blackmarkets emerging to avoid these taxes.

Emergence of alternative markets is certainly an issue. But then, you have income tax evasion of all sorts now as well.

 

One other thing on this - I think that the current system OR a sales-tax based system could benefit from more emphasis on Use Taxes. That is to say, less highway funding from the federal government, and more tolls. Less federal funding of national parks (already happening anyway), and more entrance fees. Things of that nature. I think those types of moves help encourage smarter spending, and allow more local control of things - not to mention promote efficiencies by creating more competition in certain market areas.

 

[southsider2k5]

Emergence of alternative markets is certainly an issue. But then, you have income tax evasion of all sorts now as well.

 

One other thing on this - I think that the current system OR a sales-tax based system could benefit from more emphasis on Use Taxes. That is to say, less highway funding from the federal government, and more tolls. Less federal funding of national parks (already happening anyway), and more entrance fees. Things of that nature. I think those types of moves help encourage smarter spending, and allow more local control of things - not to mention promote efficiencies by creating more competition in certain market areas.

 

Highways are already primarily funded by gasoline taxes.

[santo=dorf]

How about we cut our spending before screwing with more taxes?

 

I paid close to $23K in taxes last year, I better get some back come April.

Edited January 12, 2008 by santo=dorf

[NorthSideSox72]

Highways are already primarily funded by gasoline taxes.

Well, state funds are often diverted that way - are federal? I honestly don't know. And that is better than regular income tax, but, its still not a real use tax. In some ways its better though, because it sort of covers all driving on all roads.

 

[southsider2k5]

Well, state funds are often diverted that way - are federal? I honestly don't know. And that is better than regular income tax, but, its still not a real use tax. In some ways its better though, because it sort of covers all driving on all roads.

 

This is from wiki

 

The head of the U.S. Dept. of Transportation stated on 15 August 2007 that about 60% of federal gas taxes are used for highway and bridge construction. The remaining 40% goes to other, unrelated uses.[6] However, revenues from other taxes is also used in federal transportation programs.

[Texsox]

One of the issues I have with any of the proposals is it makes individual businesses the tax collectors, in an even bigger way.

 

The differences in what we can spend, is based, to the greatest degree, on what we earn. Taxing earnings is the simplest and fairest process. Perhaps we could focus attention on making that system fairer. We could reduce the size of the IRS by reducing deductions.

 

I would be interested in the pros and cons of going the other way. Stop all use and sales taxes and just tax income. I dislike all the hidden little taxes that are included in everything. For example, an extra tax on hotel rooms and rental cars to fund a town's promotion department.

[Balta1701]

One other little wrinkle in this plan I learned about yesterday is that it completely screws over the elderly, and the longer you've been working, the more you're screwed by it.

 

Think of it this way...you've been working 45 years, paying your taxes at say 30% (pick a rate, whatever). You're 65. Looking forwards to a retirement. Maybe buy a yacht or something. Then suddenly, the government switches to a sales tax instead of the income taxes you've been paying for your whole life. Suddenly, all that income you've earned that was taxed at that 30% rate is going to wind up being taxed again when you go out purchasing anything. The only things that aren't taxed are whatever monies you were able to put away into tax-free accounts; any money you saved that you've already paid the taxes on will get taxed 2x, once when it's earned during your 40 years of working before the switch, and once when you spend it after the switch when the price of everything goes up 40%.

[Texsox]

great point.

[YASNY]

One other little wrinkle in this plan I learned about yesterday is that it completely screws over the elderly, and the longer you've been working, the more you're screwed by it.

 

Think of it this way...you've been working 45 years, paying your taxes at say 30% (pick a rate, whatever). You're 65. Looking forwards to a retirement. Maybe buy a yacht or something. Then suddenly, the government switches to a sales tax instead of the income taxes you've been paying for your whole life. Suddenly, all that income you've earned that was taxed at that 30% rate is going to wind up being taxed again when you go out purchasing anything. The only things that aren't taxed are whatever monies you were able to put away into tax-free accounts; any money you saved that you've already paid the taxes on will get taxed 2x, once when it's earned during your 40 years of working before the switch, and once when you spend it after the switch when the price of everything goes up 40%.

 

... Which can be interpretted in two ways. First, this will never happen because the baby boomers still have a very large voting block and they won't stand for it. Or, it will happen because that's where the money is, and gov't will always go that route.

 

I'm betting on the latter.

[kapkomet]

... Which can be interpretted in two ways. First, this will never happen because the baby boomers still have a very large voting block and they won't stand for it. Or, it will happen because that's where the money is, and gov't will always go that route.

 

I'm betting on the latter.

I sure hope not. It will be one of the biggest mistakes we can make.

[YASNY]

I sure hope not. It will be one of the biggest mistakes we can make.

 

100% agreed.

[southsider2k5]

One other little wrinkle in this plan I learned about yesterday is that it completely screws over the elderly, and the longer you've been working, the more you're screwed by it.

 

Think of it this way...you've been working 45 years, paying your taxes at say 30% (pick a rate, whatever). You're 65. Looking forwards to a retirement. Maybe buy a yacht or something. Then suddenly, the government switches to a sales tax instead of the income taxes you've been paying for your whole life. Suddenly, all that income you've earned that was taxed at that 30% rate is going to wind up being taxed again when you go out purchasing anything. The only things that aren't taxed are whatever monies you were able to put away into tax-free accounts; any money you saved that you've already paid the taxes on will get taxed 2x, once when it's earned during your 40 years of working before the switch, and once when you spend it after the switch when the price of everything goes up 40%.

 

Then again, it was their generations massive underfunding of medicade, social security, and all of the other entitlement programs that is going to bankrupt this country in the first place.

[YASNY]

Then again, it was their generations massive underfunding of medicade, social security, and all of the other entitlement programs that is going to bankrupt this country in the first place.

 

Or, it could be the implementation or expansion of these entitlement programs that bankrupt the nation.

[Texsox]

Or remembering people starving to death in the United States during the depression.

[southsider2k5]

Or, it could be the implementation or expansion of these entitlement programs that bankrupt the nation.

 

I wouldn't argue with that either. I guess you could call it spending money that you don't have.

[YASNY]

Or remembering people starving to death in the United States during the depression.

 

The best thing the occured to put food in peoples mouths was programs like the CCC. It put people to work. Of course a world war didn't hurt the ecomony either. But that's another issue.

[Texsox]

The best thing the occured to put food in peoples mouths was programs like the CCC. It put people to work. Of course a world war didn't hurt the ecomony either. But that's another issue.

 

We've created a huge problem with some of these programs. A helping hand is one thing, a lifetime is another. Which is one reason I have respect for anyone who wants to come here and take any job, work hard at it, save some money, and even buy a house. Some may mock that, but that to me is the American dream, and important.

[YASNY]

We've created a huge problem with some of these programs. A helping hand is one thing, a lifetime is another. Which is one reason I have respect for anyone who wants to come here and take any job, work hard at it, save some money, and even buy a house. Some may mock that, but that to me is the American dream, and important.

 

Work hard, obey the laws, do your best. I welcome people to this country that will do these things.

[kapkomet]

Work hard, obey the laws, do your best. I welcome people to this country that will do these things.

DING! but some will mock that.

[Texsox]

DING! but some will mock that.

 

Everyday speeding on the expressway