Debunking the Fair Tax myth

[brandonbull]

Originally posted by: blackangst1

Originally posted by: brandonbull

Originally posted by: blackangst1

Originally posted by: thraashman
My view is that the reason the rich are taxed higher is because it IS a fair tax. The fairness of it is that the rich are being taxed a higher percentage because it's the rich's exploitation of the lower and middle classes that make them rich! They're being taxed on their exploitation of the capitalistic society they live in. Even after taxes they still make a huge amount more per year than the lower class. Stop complaining! If you make 50 million and are taxed 25 million, that's still more money than I'll probably ever see in my lifetime.

You, sir, are a poster child of class envy.

Not everyone can be rich.

Nor should everyone be. Wealth often times, not always but certainly often, is linked directly to fruits of one's work. That's fair, and the basis of which our society breathes. Are you kidding me? Then there should be some very rich Mexican lawn mowers.

Lower income families do not use "tax shelters" because the small disposable income.

I'm not talking about low income, Im talking MIDDLE CLASS. like 30-50k/year. Nevertheless, low income pays so little income tax anyway, so they dont NEED shelters. Still not enough money to have tax attorneys

Give people more money each week in their paycheck and watch the spending increase.

Right. Give people a raise because they are crying. Please. This is America. If you want more money, go earn it. I didn't say a raise. Don't take income tax out of the paychecks and people have more money.

Billions could be saved each year by simplifying the current tax system.

/Agree. And dont forget billions BACK into the economy via the pocketbooks of the rich. How?

 

[extra]

This isn't a rich vs. poor or vs. middle class issue.

This is an omg the tax system can be very confusing and it doesn't need to be. There are loopholes that need closing, etc.

A nationwide sales tax instead of an income tax MIGHT lead to lower spending. I'm honestly not sure if this has been scientifically studied. The fact that your paycheck would look bigger might make you spend about the same. Or more. Or less. I don't believe we know for sure. If there is a study that has been done on this, someone please point us to it.

What I like about the sales tax is it empowers the people to decide how much they'd like to give the government this year. And I think that it would put more pressure on people to harass the government to lower spending as they'd be more often reminded about their money going away to the gov. Which could lead to good things.

 

[blackangst1]

Originally posted by: brandonbull

Originally posted by: blackangst1

Originally posted by: brandonbull

Originally posted by: blackangst1

Originally posted by: thraashman
My view is that the reason the rich are taxed higher is because it IS a fair tax. The fairness of it is that the rich are being taxed a higher percentage because it's the rich's exploitation of the lower and middle classes that make them rich! They're being taxed on their exploitation of the capitalistic society they live in. Even after taxes they still make a huge amount more per year than the lower class. Stop complaining! If you make 50 million and are taxed 25 million, that's still more money than I'll probably ever see in my lifetime.

You, sir, are a poster child of class envy.

Not everyone can be rich.

Nor should everyone be. Wealth often times, not always but certainly often, is linked directly to fruits of one's work. That's fair, and the basis of which our society breathes. Are you kidding me? Then there should be some very rich Mexican lawn mowers.

Lower income families do not use "tax shelters" because the small disposable income.

I'm not talking about low income, Im talking MIDDLE CLASS. like 30-50k/year. Nevertheless, low income pays so little income tax anyway, so they dont NEED shelters. Still not enough money to have tax attorneys

Give people more money each week in their paycheck and watch the spending increase.

Right. Give people a raise because they are crying. Please. This is America. If you want more money, go earn it. I didn't say a raise. Don't take income tax out of the paychecks and people have more money.

Billions could be saved each year by simplifying the current tax system.

/Agree. And dont forget billions BACK into the economy via the pocketbooks of the rich. How?

1. The idea behind working hard to be rewarded is to not only work hard, but provide a unique service. Afterall, if you dont have a service, you cant be paid. Is there a difference between the work a single mexican lawn mower does and a guy who owns a company with 25 employees? In terms of physical labor, no. The difference is the guy with the company was agressively marketing his business, and therefore it grew, therefore he had to employ others. Therefore he should make more, because he DID more. This is a crude example, but it fits.

2. and 3. Come on now get real. Most Americans dont have the discipline to save enough money to pay their taxes, therefore it gets taken out of their check. And as far as tax shelters go, the two most common dont require an attorney. 401k (lowers taxable income, and tax deferred savings = tax shelter) and IRA (tax deductable on a 1040EZ and tax deferred = tax shelter). No excuse.

4. OK lets examine this. If a guy has more money he spends more. Simple fact. If he buys a new car, someone makes a commision, therefore money gets into the economy. If someone has more money they invest in communities more. It is well known Bill Gates is the worlds largest philanthropist. Estimates are between 40-50% of his disposable income goes to charity. How is this bad? Ask ANYONE what they would do if they won the lottery. They will basically give 3 answers: Buy (insert something here), give some away, and save. Same thing the rich already do. Buying things and giving to charity directly impacts society with cash flow.

Is that clear enough?

 

[wetech]

I stopped reading it after he said that a 23% tax is really a 30% tax. He'd fail 6th grade algebra.

Although consumers would pay the government 23 dollars on every one-hundred dollar spent ($23 in tax/$100 leaving my wallet = 23% tax-inclusive rate), you would actually be paying the government 23 dollars for a 77 dollar pre-tax good or service, for a total transactional value of 100 dollars ($23 in tax/$77 good = 29.8% tax-exclusive rate)

You would not be paying $23 of tax for every $100 spent, you'd be paying $18.70:

x + .23x = 100
1.23x = 100
x = 100/1.23
x = 81.30


So you'd be paying $18.70 on an $81.30 item. A 23% tax is a 23% tax.

 

[shira]

Originally posted by: Whoozyerdaddy
Anyway... Like I said at the end, at this point I'd support anything that simplified our current system.

Really? So you'd support a simple system that tripled your current tax burden?

Riiiiiigggghhhhht.

 

[dmcowen674]

Originally posted by: blackangst1

Originally posted by: thraashman
My view is that the reason the rich are taxed higher is because it IS a fair tax. The fairness of it is that the rich are being taxed a higher percentage because it's the rich's exploitation of the lower and middle classes that make them rich! They're being taxed on their exploitation of the capitalistic society they live in. Even after taxes they still make a huge amount more per year than the lower class. Stop complaining! If you make 50 million and are taxed 25 million, that's still more money than I'll probably ever see in my lifetime.

You, sir, are a poster child of class envy.

and you not seeing the problem with the rich exploiting the lower classes is the poster child of why America is falling fast.

 

[shira]

Originally posted by: wetech
I stopped reading it after he said that a 23% tax is really a 30% tax. He'd fail 6th grade algebra.

Although consumers would pay the government 23 dollars on every one-hundred dollar spent ($23 in tax/$100 leaving my wallet = 23% tax-inclusive rate), you would actually be paying the government 23 dollars for a 77 dollar pre-tax good or service, for a total transactional value of 100 dollars ($23 in tax/$77 good = 29.8% tax-exclusive rate)

You would not be paying $23 of tax for every $100 spent, you'd be paying $18.70:

x + .23x = 100
1.23x = 100
x = 100/1.23
x = 81.30


So you'd be paying $18.70 on an $81.30 item. A 23% tax is a 23% tax.

To quote from Wikipedia (bolding is mine):

Traditional sales tax laws impose taxes on a tax base equal to the pre-tax portion of a good's price. Unlike income taxes, sales taxes do not include actual taxes owed as part of the base. A good priced at $77 with a 30% sales tax rate yields $23 in taxes owed. Since a sales tax is added "on the top", the individual pays $23 of tax on $77 of pre-tax goods.
.
.

The FairTax rate, unlike most sales taxes, would be calculated on a tax base that includes the amount of FairTax paid. In this manner, the FairTax more closely resembles an income tax instead of a sales tax. A final price of $100 includes $23 of taxes. Like the income tax example above, the taxes to be paid would be included in the base on which the FairTax is imposed. The FairTax is presented as a 23% tax rate for easy comparison to income tax rates. If you are in a 25% income tax bracket, you will pay $25 in federal income taxes out every $100 you earn. With the 23% FairTax, you would pay $23 in taxes out of every $100 you spend.

The plan's opponents call this deceptive - Laurence Vance of the Ludwig von Mises Institute goes so far as to call it a "lie". According to Vance, "Boortz's 'mathematical equivalent of a game of semantics' still results in a FairTax rate of 30 percent.

You are reading "23%" and being fooled, just as the authors of the "Fair Tax" system intend. Forget "23%". The amount of tax paid equals $23 of out of every $100 spent. That is, if you spend $100, $23 goes to the government and $77 goes to the seller. Using everyday sales tax math, that's a sales tax rate of 23/77 = 30%.

Think about it: If a state's sales tax is 5%, that means you pay five cents of tax on every $1 of goods purchased. The tax is 5/100 = 5%. Advocates of the "Fair Tax" would have you believe that a sales tax of 5 cents on every $1 of goods is actually 5/105 = 4.76%. That's BS!

 

[Jamie571]

I could see how the "rich" could greatly benefit from the fair tax system.

They didn't get rich buying new cars and spending money; they got rich investing and being financially smarter than the next guy.

Remember most millionaires are first generation millionaires and are extremely good savers.

 

[wetech]

Originally posted by: shira

To quote from Wikipedia (bolding is mine):

Traditional sales tax laws impose taxes on a tax base equal to the pre-tax portion of a good's price. Unlike income taxes, sales taxes do not include actual taxes owed as part of the base. A good priced at $77 with a 30% sales tax rate yields $23 in taxes owed. Since a sales tax is added "on the top", the individual pays $23 of tax on $77 of pre-tax goods.
.
.

The FairTax rate, unlike most sales taxes, would be calculated on a tax base that includes the amount of FairTax paid. In this manner, the FairTax more closely resembles an income tax instead of a sales tax. A final price of $100 includes $23 of taxes. Like the income tax example above, the taxes to be paid would be included in the base on which the FairTax is imposed. The FairTax is presented as a 23% tax rate for easy comparison to income tax rates. If you are in a 25% income tax bracket, you will pay $25 in federal income taxes out every $100 you earn. With the 23% FairTax, you would pay $23 in taxes out of every $100 you spend.

The plan's opponents call this deceptive - Laurence Vance of the Ludwig von Mises Institute goes so far as to call it a "lie". According to Vance, "Boortz's 'mathematical equivalent of a game of semantics' still results in a FairTax rate of 30 percent.

You are reading "23%" and being fooled, just as the authors of the "Fair Tax" system intend. Forget "23%". The amount of tax paid equals $23 of out of every $100 spent. That is, if you spend $100, $23 goes to the government and $77 goes to the seller. Using everyday sales tax math, that's a sales tax rate of 23/77 = 30%.

Think about it: If a state's sales tax is 5%, that means you pay five cents of tax on every $1 of goods purchased. The tax is 5/100 = 5%. Advocates of the "Fair Tax" would have you believe that a sales tax of 5 cents on every $1 of goods is actually 5/105 = 4.76%. That's BS!

touche

 

[Craig234]

"Why should mortgage interest payments be deducted? Should there also be deductions for interest paid on car loans? Cars are just as essential as houses are. "

Because it's a way of balancing the taxes in society to give preference to the American dream of home ownesrship, over other things people buy.

Why not cars? Cars pale in comparison to houses in their cost. For most below the most wealthy, houses are the most expensive thing they pay for by far.

The effect is to help most Americans own a home and to shift the tax burdens a bit for that purpose. It's a good thing.

 

[LunarRay]

Eliminate all taxation of any kind whatsoever and install a VAT tax for the Feds and one for the State with appropriate exclusions for food med and the like and phase in on items like cars etc.. maybe exclusions on target items.. and VAT some items on a scale like homes and the like..
I'd buy into that..
In essence the poor would pay no tax at all cuz they normally don't buy what would be VAT taxed although they may.. The Rich would pay a bit more than now.. and the middle class well they'd pay about the same .. but could make a choice to purchase in a less taxing manner..

 

[HombrePequeno]

Originally posted by: Craig234
"Why should mortgage interest payments be deducted? Should there also be deductions for interest paid on car loans? Cars are just as essential as houses are. "

Because it's a way of balancing the taxes in society to give preference to the American dream of home ownesrship, over other things people buy.

Why not cars? Cars pale in comparison to houses in their cost. For most below the most wealthy, houses are the most expensive thing they pay for by far.

The effect is to help most Americans own a home and to shift the tax burdens a bit for that purpose. It's a good thing.

Why should we be promoting home ownership as the American dream? There's no REAL reason we should be allowing deductions for mortgage interest. All it's doing is inflating the prices of homes while costing the government money. It's a hand out that people think they're entitled to for some reason.

A broader, lower tax is the most efficient one whereas one that is high but with lots of deductions is horribly inefficient. We can save everyone money by having a simple tax code but of course we can't have that because special interests will always bitch that their taxes will be going up.

 

[Craig234]

"Why should we be promoting home ownership as the American dream?"

Because home ownership is in the general public interest. It's a financial and quality of life issue of broad benefit to Americans.

"There's no REAL reason we should be allowing deductions for mortgage interest. All it's doing is inflating the prices of homes while costing the government money. It's a hand out that people think they're entitled to for some reason."

There's a very real reason, the benefits of home ownership for many Americans.

It deserves preferential treatment compared to other things money are spent on.

The inflationary effect is less than the benefit to Americans, and the increase in wealth in homes is a way to broaden the distribution of wealth to more Americans.

"A broader, lower tax is the most efficient one whereas one that is high but with lots of deductions is horribly inefficient."

That sounds like pure ideology - you say nothing to back it up.

Of course, when taken to an extreme where the deductions are for specific companies who donate to campaigns, it's harmful.

Broad deductions for charity or homes or other good pursposes are beneficial to society.

 

[Whoozyerdaddy]

Originally posted by: shira

Originally posted by: Whoozyerdaddy
Anyway... Like I said at the end, at this point I'd support anything that simplified our current system.

Really? So you'd support a simple system that tripled your current tax burden?

Riiiiiigggghhhhht.

Umm... Thanks for taking the "idiot's guide to taxtion" position on the matter.

 

[HombrePequeno]

Originally posted by: Craig234
"Why should we be promoting home ownership as the American dream?"

Because home ownership is in the general public interest. It's a financial and quality of life issue of broad benefit to Americans.

"There's no REAL reason we should be allowing deductions for mortgage interest. All it's doing is inflating the prices of homes while costing the government money. It's a hand out that people think they're entitled to for some reason."

There's a very real reason, the benefits of home ownership for many Americans.

It deserves preferential treatment compared to other things money are spent on.

The inflationary effect is less than the benefit to Americans, and the increase in wealth in homes is a way to broaden the distribution of wealth to more Americans.

"A broader, lower tax is the most efficient one whereas one that is high but with lots of deductions is horribly inefficient."

That sounds like pure ideology - you say nothing to back it up.

Of course, when taken to an extreme where the deductions are for specific companies who donate to campaigns, it's harmful.

Broad deductions for charity or homes or other good pursposes are beneficial to society.

What benefits? You speak of home ownership being in the general public interest but don't give any real reason why it is. If you can show me the actual (economics-wise) benefits outweigh the drawbacks (inflated home prices and higher inefficiency in taxation), that would be nice.

And no broader, lower taxation being more efficient isn't pure ideology, it's a fact. If you want me to draw a diagram explaining it to you, I can. You might want to read up on some basic economics...

 

[Jhhnn]

It's a strange world we live in, that's for sure.

And the one other thing to be sure of is that any Republican scheme of tax "reform" will shift the relative burden from those at the extreme upper end down onto the rest of us- that's the historical norm. And by extreme upper end, I mean those whose income lands in the vertical part of the income curve, about the top .3%. The higher one lands in that section of the curve, the greater the benefit. They don't care if the burden lands on the rest of the top 5% or the bottom 40%, just so long as they don't pay it...

And that's because of the way that the Republican message is formulated and financed- America's 18 wealthiest families, for example, have spearheaded the campaign to eliminate inheritance tax. And that's because it's of great benefit to them, and of no benefit whatsoever to 98% of Americans. That 98% merely dreams it will help them, which is what they've been taught to dream, to believe...

America's extremely wealthy also finance the various rightwing thinktanks and foundations promulgating their message- honing it to appeal to average Americans, even though it's intended to facilitate the greatest transfer of wealth and power to the fewest people ever in the history of the world...

Families with incomes tens or hundreds of times greater than average don't "consume" at a rate commesurate with their incomes, at least not in terms of what's taxable under this "fair tax" proposal. There's no tax on nannies, gardeners, personal assistants, investment advisors and stockbrokers... nor is there any tax on real estate or financial instruments like stocks, bonds, paid up life insurance... no tax on Ivy League tuition or lodging... no tax on what the truly wealthy actually spend their money to obtain...

And, BTW, there's no tax advantage to "home ownership", at all, only to "mortgage holdership"... but, please, don't let anything like that interfere with the soothing action of doublespeak. Faith conquers All, and that's never been more true than with modern middle class adherents to elitist economic ideology...

 

[ayabe]

Originally posted by: Genx87

Originally posted by: brandonbull

Originally posted by: Genx87
My problem with a national sales tax is perception is reality for many people. Sure they take home more bucks but when they come upto the cash register and see a whopping 30% tax on whatever they are buying they may not bother buying many things and it slows our economy.

The current system is a mess but people have been so brainwashed into believing the money is gone and out of sight they happily spend away even if the effective tax rates end up the same in the end.

So what you are saying is that with historically low levels of savings plus more money in the pocket Americans will cut back on spending?

It wont surprise me if people cut back on non-essential spending as they decide the tax rate is very high for items.

Yes that is most definitely going to happen or it's going to give rise to a black market for highly taxed, non-essential consumer items. Which in turn will introduce a criminal element.

This sort of stuff is going on in Iraq right now, there is a flourishing black market for gasoline and tons of other goods, much of which is stolen in one way or another, and the profits go to financing these terrorist groups.

I'm not saying it would get that bad here, but I think we could see a resurgence of organized crime similar to what we had with prohibition.

 

[ayabe]

Originally posted by: HombrePequeno

Originally posted by: Whoozyerdaddy

Originally posted by: ayabe

Originally posted by: Whoozyerdaddy
Almost every objection brought up in that Daily Koz piece was addressed in the Fair Tax book.

His assertion that the tax is really a 30% tax is all a matter of how you choose to do the accounting. The Fair Tax people have been very clear in their statements that the tax would be a component of the total price you pay for an item. There is no deception there. And, in fact, they frame their argument by saying that, right now, 23% of the retail price you pay every day is federal tax. The idea is to replace the hidden tax component of the retail price with a plain-as-day tax that shows up as a line item expense on your receipt. By the author's logic, the 23% tax component that currently exists in the retail price of every item is really a 30% tax. Either way, whether it's hidden in the price or shows up as a line item at the bottom of the reciept, the tax remains the same.

And for every expert study he cites there are others that claim the opposite and support the FT.

It's an interesting opinion piece but he doesn't raise any new issues that haven't been addressed already. Pretty much the same arguments that arise from the anti-FT camp over and over.

I'm a proponant of the FT. But I'd also settle for a flat tax. ANYTHING but what we have right now. My tax return for last year was 15 pages long and so complicated that Turbo Tax F'ed it up and put income in the wrong slot. (A minor nightmare I'm dealing with now) Listening to my tax guy try to explain to me about line 21 and schedule C and pub 525 page 30 blah blah blah blah... made me want to cry. Rube Goldberg would be proud.

Ehh let's not turn this into a Global Warming debacle, we are dealing with hard numbers here and unless someone wants to argue that mathematics is just a "theory" there's not much to discuss.

When the President's own Advisory Panel for Federal Tax Reform claims that this will increase taxes on the middle class, all things considered, I have to take that as a fact.

That same panel also considered eliminating the home mortgage deduction. Not a great group to quote.

Anyway... Like I said at the end, at this point I'd support anything that simplified our current system.

Why should mortgage interest payments be deducted? Should there also be deductions for interest paid on car loans? Cars are just as essential as houses are. That's the problem with all of these deductions; there will always be people arguing that they are needed. That's what makes tax reform so bloody hard. And the Tax Reform Panel is actually a good group to quote because believe it or not, they are fairly intelligent people and they did come up with a few good ideas in their tax reform plan.

As for this "fair" tax...I think a national sales tax is stupid. It would retard spending and thus slow economic growth. It would also make it much more beneficial for internet based companies like Amazon to move out of the country. Here in WA, the state government is having problems getting more revenue because more and more people are buying online and the majority of those companies are based outside of the state. A national sales tax also has the problem of being regressive because lower income quintiles spend a higher percentage of their income on goods. The rebate seemingly helps this but there is a problem with it. That's essentially free money and it would actually promote working fewer hours (you're "making" more for the same hours worked and the same amount of effort).

I've heard they are trying to get rid of the mortgage interest deduction, but this will only slow down the economy further. I hate to be a doomsdayer but WHEN the housing market collapses(when not if) we're going to be in real trouble. Right now American consumers are treating their houses like ATM's and getting home equity loans to pay off their ridiculous credit card debt. Problem is I think most peoples houses are severely over-valued, so if the market collapses, they could end up owing more on their house than its worth.

 

[BaliBabyDoc]

Originally posted by: LunarRay
Eliminate all taxation of any kind whatsoever and install a VAT tax for the Feds and one for the State with appropriate exclusions for food med and the like and phase in on items like cars etc.. maybe exclusions on target items.. and VAT some items on a scale like homes and the like..
I'd buy into that..
In essence the poor would pay no tax at all cuz they normally don't buy what would be VAT taxed although they may.. The Rich would pay a bit more than now.. and the middle class well they'd pay about the same .. but could make a choice to purchase in a less taxing manner..

That's too reasonable to be adopted as US policy.

Look at the 'tax reform' over the past 6 years:
1) huge tax cuts for the wealthy in marginal tax rates
2) huge cuts in the rates for 'unearned' income
3) tinkering at the edges of tax rates for the bottom 90% of taxpayers
4) absolutely NOTHING for FICA . . . except complain that it's bankrupting America . . . despite the fact SS runs a $200B+ annual surplus

Our current track is indeed unsustainable but there's no way the current crop of politicians will fix the problem as long as most of their campaign contributions come from the people benefitting from #1 and #2.

I'm in the 30% camp. The "Fair Tax" people keep arguing the tax is part of the good but that's just plain stupid. The tax is the governments charge for allowing the seller to profit and the buyer to purchase.

As long as the wealthy (and generally just well-off) cannot hide from a VAT . . . by buying goods overseas, web, bartering, etc, I agree with LunarRay. End all other taxation . . . capital gains, dividends, etc . . . except maybe the estate tax.

It gets kinda iffy when you start talking about stuff like schools, police, fire, etc. Those are primarily and often exclusively locally funded. So I assume the Feds/State wouldn't pre-empt a localities ability to collect their own VAT or property tax?

 

[LunarRay]

BBD,
I see a State VAT based on the needs of the various States with redistribution to County and City based on the needs of that locale. I'd presume that the revenue from the cities would be about equal to the needs.
The FED VAT would be such that it would eliminate any and all tax or FICA.. in essence there would be NO IRS.. All VAT would be collected upon the purchase of the service or item... IRS would be diverted to that effort..
Tariff duties and the like used to control importation would be replaced by the VAT but in this case when the goods are landed in the USA or assumed to be purchased by the importer of the goods.. assuming they are not among the excluded items.
The idea of targeting VAT exclusion on say ... a clean air vehicle would serve to significantly reduce the cost to the consumer... But cars would have a phase in VAT rate so that full VAT occurred on all SUV and autos over 35,000$.
In our wisdom we could control every aspect of the consumption side of our economy cuz everyone would be just that. The tricky bit is the rates... Our Congress might want to make much lower rates on the items normally purchased by the rich and offset onto the middle class so even a VAT scheme can and probably would be argued in the typical rich/poor manner.. I'd install by law an independent body much like the Federal Reserve Board is to set the rates even the rates on Congressionally targeted law... Congress would only be able to advise but not establish the rates..
The membership to this board would require approval of Congress with a super majority vote.. say 75%... That then is the people talking.. imo..

hehehehheh.. I'd no doubt collect VAT on all INTERNET purchases etc.. heheh

This has one drawback.. that I readily see... a term 'Foxing' is used in Ireland and is basically a barter system.. I fix your car and you cut my hair.. goes on alot in Ireland and would become part of the American culture as well.. so long as you can trust the folks but .. being a very legal people we'd not engage in that activity cuz we know the IRS would be on every corner looking ... heheheh

 

[Genx87]

Originally posted by: ayabe

Originally posted by: Genx87

Originally posted by: brandonbull

Originally posted by: Genx87
My problem with a national sales tax is perception is reality for many people. Sure they take home more bucks but when they come upto the cash register and see a whopping 30% tax on whatever they are buying they may not bother buying many things and it slows our economy.

The current system is a mess but people have been so brainwashed into believing the money is gone and out of sight they happily spend away even if the effective tax rates end up the same in the end.

So what you are saying is that with historically low levels of savings plus more money in the pocket Americans will cut back on spending?

It wont surprise me if people cut back on non-essential spending as they decide the tax rate is very high for items.

Yes that is most definitely going to happen or it's going to give rise to a black market for highly taxed, non-essential consumer items. Which in turn will introduce a criminal element.

This sort of stuff is going on in Iraq right now, there is a flourishing black market for gasoline and tons of other goods, much of which is stolen in one way or another, and the profits go to financing these terrorist groups.

I'm not saying it would get that bad here, but I think we could see a resurgence of organized crime similar to what we had with prohibition.

I can see that, afterall right now people do their best to hide their income from the govt because of excessive taxation through black market deals or offshore accounts.

I think the motto is, the higher the taxation, the more likely people are to cheat to get around it.

 

[Craig234]

What benefits? You speak of home ownership being in the general public interest but don't give any real reason why it is. If you can show me the actual (economics-wise) benefits outweigh the drawbacks (inflated home prices and higher inefficiency in taxation), that would be nice.

http://www.jchs.harvard.edu/publications/homeownership/liho01-12.pdf
http://www.freddiemac.com/corporate/buyown/english/preparing
http://www.fanniemae.com/initiatives/pdf/adc/full2003.pdf
http://education.incharge.org/_assets/
http://www.abanet.org/publiced/practical/books/home_ownership
http://www.whitehouse.gov/infocus/homeownership/
http://www.homeownershipalliance.com/documents/
http://www.fanniemaefoundation.org/programs/jhr/pdf/
http://www.jchs.harvard.edu/publications/homeownership/liho01-14.pdf
http://www.chicagofed.org/publications/workingpapers/papers
http://www.fanniemaefoundation.org/programs/hpd/pdf
http://www.habitatnyc.org/pdf/Toolkit/homewonership.pdf
http://www.freddiemac.com/news/archives/rates/2005/1qhpi05.html


As for the 'complexity' of the mortgage interest deduction being an issue, why don't you offer any evidece about the terrible effects of that 'complexity' which are not about the complexity of the tax system as it is now with all the other millions of deductions for special interests.

And no broader, lower taxation being more efficient isn't pure ideology, it's a fact. If you want me to draw a diagram explaining it to you, I can. You might want to read up on some basic economics... [q/]

Um, you change it from equivalent net taxes with a lower rate and fewer deductions, to ""lower taxation", something completely different.

If your unqualified statement that lower taxes are more efficient is true, let's go to a zero tax rate. How well will that work?

No, the issue is more complicated and your unqualified praise for "efficiency" reflects a shallow ideological worship of one small piece of the picture of a healthy society.

You're the one who can use the basic economics. The the chapter "The Network" in Greg Palast's latest book for some nice info on the real effects on these issues on society.

 

[fallensight]

The giant hole the proponents of the 'fair tax' or national sales tax dont want to mention is that the poor and middle class spend all of thier income. That upper 1% that the gop catters to do not spend but a fraction of thier income. Add that with the removal of the child tax credits, morgage deductions and you are looking at a very bleak outook for the majority of americans who live in the paycheck-to-paycheck situation. Yeah, fair indeed.

 

[TheAdvocate]

What benefits? You speak of home ownership being in the general public interest but don't give any real reason why it is.

No feudalism. I'm not kidding.

Originally posted by: LunarRay
Eliminate all taxation of any kind whatsoever and install a VAT tax for the Feds and one for the State with appropriate exclusions for food med and the like and phase in on items like cars etc.. maybe exclusions on target items.. and VAT some items on a scale like homes and the like..
I'd buy into that..
In essence the poor would pay no tax at all cuz they normally don't buy what would be VAT taxed although they may.. The Rich would pay a bit more than now.. and the middle class well they'd pay about the same .. but could make a choice to purchase in a less taxing manner..

Way, way too much sense. No way it will ever happen. Damnit. I absolutely love the part I bolded. That's some freedom for you.

It's a strange world we live in, that's for sure.

And the one other thing to be sure of is that any Republican scheme of tax "reform" will shift the relative burden from those at the extreme upper end down onto the rest of us- that's the historical norm. And by extreme upper end, I mean those whose income lands in the vertical part of the income curve, about the top .3%. The higher one lands in that section of the curve, the greater the benefit. They don't care if the burden lands on the rest of the top 5% or the bottom 40%, just so long as they don't pay it...

And that's because of the way that the Republican message is formulated and financed- America's 18 wealthiest families, for example, have spearheaded the campaign to eliminate inheritance tax. And that's because it's of great benefit to them, and of no benefit whatsoever to 98% of Americans. That 98% merely dreams it will help them, which is what they've been taught to dream, to believe...

America's extremely wealthy also finance the various rightwing thinktanks and foundations promulgating their message- honing it to appeal to average Americans, even though it's intended to facilitate the greatest transfer of wealth and power to the fewest people ever in the history of the world...

Families with incomes tens or hundreds of times greater than average don't "consume" at a rate commesurate with their incomes, at least not in terms of what's taxable under this "fair tax" proposal. There's no tax on nannies, gardeners, personal assistants, investment advisors and stockbrokers... nor is there any tax on real estate or financial instruments like stocks, bonds, paid up life insurance... no tax on Ivy League tuition or lodging... no tax on what the truly wealthy actually spend their money to obtain...

And, BTW, there's no tax advantage to "home ownership", at all, only to "mortgage holdership"... but, please, don't let anything like that interfere with the soothing action of doublespeak. Faith conquers All, and that's never been more true than with modern middle class adherents to elitist economic ideology...

Fantastic post. The last bit is true but probably a little harsh. I'm not willing to overlook the beneficial service the mortgage industry provides which allows us to accomplish the goal of individual ownership, but I understand your point. Your cynicism could perhaps be mitigated by how thinly priced that product is. It's a cheap commodity. the real problem is speculators driving up housing costs needlessly, and thereby pricing out owner-occupiers, or forcing them to take on jumbo mortgages.

But the rest -> absolutely dead on.

 

[Genx87]

Originally posted by: fallensight
The giant hole the proponents of the 'fair tax' or national sales tax dont want to mention is that the poor and middle class spend all of thier income. That upper 1% that the gop catters to do not spend but a fraction of thier income. Add that with the removal of the child tax credits, morgage deductions and you are looking at a very bleak outook for the majority of americans who live in the paycheck-to-paycheck situation. Yeah, fair indeed.

I dont know if I totally buy that. I know people from all income brackets, from slightly above poverty to making several hundred thousand a year which puts them into the top 5%. Some of them are already millionaires.

What they all share is their ability to spend according to scale. My friends who dont have cash get used cars or very low end vehicles, live in apartments or rent rooms in houses, and when they eat out, they eat at lower end places.

My friends who are making a killing drive high end cars, own bigger homes, and when they eat out, eat at nice restaurants.

I would say the only people who dont spend the same % of their incomes are the insane rich, because even they cant spend the millions they make a year fast enough, not because they dont want to.