FairTax Plan

[Queasy]

Originally posted by: Brainonska511

Originally posted by: Queasy

Originally posted by: drinkmorejava
I didn't read any of the macroeconomic stuff on the site, but goods costing 20-30 percent more, even with higher incomes, is going to absolutely nuke consumer spending for a few years. Also, if they want to talk about loopholes, how about just buying everything outside the US. Hell, every large online retailer would just pickup and move to Canada; not to mention the impact it would have on domestic retailers. God forbid someone complain about drug prices too.

The idea is that goods will cost approximately the same because the cost of goods will be reduced with companies no longer having to spend countless amount of dollars on keeping up with Social Security, Medicare, etc plus complying with all the other bits of tax code regulation. The Fair Tax group estimates that a good 20-25% cost of goods is spent merely on the overhead of keeping up with federal law. That is actually how idea of the Fair Tax got started - a businessman realized how much time and moeny they wasted as a company complying with the myriad of federal tax laws.

Key word there. Everyone "estimates", but it is always on the extreme side that makes their proposal look better.

Seeing my current company, plus my mother-in-law's hair salon and restaurant, plus helping my wife get her small business going....that sounds like a good estimate to me. Consider the time that you spend doing your personal taxes each year. Dealing with federal business tax laws is infinitely a bigger PITA than that.

 

[Queasy]

Originally posted by: sandmanwake

Originally posted by: Queasy

Originally posted by: sandmanwake

Originally posted by: Queasy

Originally posted by: sandmanwake
I saw that. It does not address my question.

Currently, there is nothing in the Fair Tax to give a credit to those who invested in a Roth IRA or similar plans.

I believe there have been discussions about that but nothing has been decided on. Obviously, that is something the crafters of the Fair Tax will have to consider to get the support or current and future retirees. The AARP is already adamantly against the Fair Tax.

They should call it the "Fair as long as you don't have a Roth account tax" then. Seems like just a scheme to get more money from the young who have been encouraged to invest in a Roth accounts rather than traditional accounts.

Yes...they've spent hours...years planning, talking, writing books, and gaining congressional support just so they can get the people with Roth accounts. :roll: That was their plan all along.

The older generation screwing the younger generation? No planning needed. Just look at at the size of the US debt. When it comes time to collect, who's going to pay, those who did the spending or their children and grandchildren?

Newsflash - We're screwed right now...and probably worse...with our current tax system. The young especially. Social Security and Medicare taxes alone are horribly regressive.

 

[drinkmorejava]

Originally posted by: Queasy

Originally posted by: sandmanwake

Originally posted by: Queasy

Originally posted by: sandmanwake
I saw that. It does not address my question.

Currently, there is nothing in the Fair Tax to give a credit to those who invested in a Roth IRA or similar plans.

I believe there have been discussions about that but nothing has been decided on. Obviously, that is something the crafters of the Fair Tax will have to consider to get the support or current and future retirees. The AARP is already adamantly against the Fair Tax.

They should call it the "Fair as long as you don't have a Roth account tax" then. Seems like just a scheme to get more money from the young who have been encouraged to invest in a Roth accounts rather than traditional accounts.

Yes...they've spent hours...years planning, talking, writing books, and gaining congressional support just so they can get the people with Roth accounts. :roll: That was their plan all along.

It goes for any post income tax investment. Just as an example, say you're in the top bracket and 50% of your income goes to taxes, say you invest everything else for 5 years at 5 percent per year (I'd hope you'd be doing better than that though). Then, you take it out, you?re taxed on the gains as income again and have a 6% retail tax. Pretending your starting income was $1000, in the end, you'd be able to buy $535 of goods in a retail environment.

Now, say you had your $1000, lost 50% to income tax, invested it, fairtax was implemented, you took the money out, did not incur an income tax on the profits, and then had to pay 30% retail tax, you end up with $447.

Of course, maybe somehow it can be justified because goods are expected to become cheaper. I?d venture to guess that?d be a resounding no, but that?s just my opinion

There's very legitimate empirical and quantitative evidence to support cheaper goods, but I doubt the market is going to efficiently and realistically recoup all the possible savings. Furthermore, you have every single business in the country (beyond the smallest) downsizing entire departments (or no longer paying a third party to do their taxes), which would put a very large and noticeable portion of the workforce out of work. It could be expected that investment markets would boom and many of these workers should be able to easily transition to a different sector, but that's a lot of uncomfortable ifs and buts.

 

[smack Down]

Originally posted by: Queasy

Originally posted by: Brainonska511

Originally posted by: Queasy

Originally posted by: drinkmorejava
I didn't read any of the macroeconomic stuff on the site, but goods costing 20-30 percent more, even with higher incomes, is going to absolutely nuke consumer spending for a few years. Also, if they want to talk about loopholes, how about just buying everything outside the US. Hell, every large online retailer would just pickup and move to Canada; not to mention the impact it would have on domestic retailers. God forbid someone complain about drug prices too.

The idea is that goods will cost approximately the same because the cost of goods will be reduced with companies no longer having to spend countless amount of dollars on keeping up with Social Security, Medicare, etc plus complying with all the other bits of tax code regulation. The Fair Tax group estimates that a good 20-25% cost of goods is spent merely on the overhead of keeping up with federal law. That is actually how idea of the Fair Tax got started - a businessman realized how much time and moeny they wasted as a company complying with the myriad of federal tax laws.

Key word there. Everyone "estimates", but it is always on the extreme side that makes their proposal look better.

Seeing my current company, plus my mother-in-law's hair salon and restaurant, plus helping my wife get her small business going....that sounds like a good estimate to me. Consider the time that you spend doing your personal taxes each year. Dealing with federal business tax laws is infinitely a bigger PITA than that.

You think that sucks, just wait until you have to deal with paying 30% tax on your building, your tools, and every other capital expense or good used. Or do you plan on making to so business don't have to pay sales tax on items they use.

The fair tax is a joke and would kill the economy, but I'm sure the rich would love to pass all the tax burden on to the middle class.

 

[sandmanwake]

Originally posted by: Queasy


Newsflash - We're screwed right now...and probably worse...with our current tax system. The young especially. Social Security and Medicare taxes alone are horribly regressive.

The problem isn't with the tax system. It's with the excessive spending. Everyone wants their bread and circuses. Until the spending is controlled, it's pointless to try to address the tax system. Anything that replaces the current tax system is more likely to take more money from us than be "fair". Even if we switch to a different tax system, social security, medicare, and who knows how many other types of government provided bread and circuses will still have to be paid for. More likely than not, I think if we switch to the fairtax system, we'd find ourselves with a national sales tax and what we have now or some other extra taxes to make up for "unforseen" shortfalls.

 

[smack Down]

Originally posted by: Sunrise089
The plan is wonderful. People jump on it though without understanding the details...but what can you expect in this partisan age?

One thing to always ask Fairtax critics: they nearly always through out this "It helps the rich and is regressive" argument. Go ahead and ask them how a plan that MAKES THE POOR PAY ZERO NET TAXES is somehow "anti-poor".

The prebate in the Fairtax was genius, or would be in a rational world. Unfortunately there is nothing guaranteeing political opponents of the Fairtax act like rational human beings, so they've decided to take a "ignore and lie" strategy.

The poor already pay zero income taxes and counting the earned income credit I think they have a negitive tax rate.

 

[RU482]

sounds like a good way to tank the economy

 

[Engineer]

FairTax = screwing of the Roth plans unless there is a break given when using Roth money.

Edit: Seems that this has already been discussed on the 2nd page. My apologies.

 

[Engineer]

Originally posted by: sandmanwake

Originally posted by: Queasy

Originally posted by: sandmanwake

Originally posted by: Queasy

Originally posted by: sandmanwake
I saw that. It does not address my question.

Currently, there is nothing in the Fair Tax to give a credit to those who invested in a Roth IRA or similar plans.

I believe there have been discussions about that but nothing has been decided on. Obviously, that is something the crafters of the Fair Tax will have to consider to get the support or current and future retirees. The AARP is already adamantly against the Fair Tax.

They should call it the "Fair as long as you don't have a Roth account tax" then. Seems like just a scheme to get more money from the young who have been encouraged to invest in a Roth accounts rather than traditional accounts.

Yes...they've spent hours...years planning, talking, writing books, and gaining congressional support just so they can get the people with Roth accounts. :roll: That was their plan all along.

The older generation screwing the younger generation? No planning needed. Just look at at the size of the US debt. When it comes time to collect, who's going to pay, those who did the spending or their children and grandchildren?

As long as they can roll over the debt with new debt and slightly larger payments, nobody will ever pay the debt. In theory, as long as the economy grows and therefore, revenues from taxes increase, the debt doesn't much matter. Now if debt grows faster than the economy for a lone period of time, a different tune might be sung.

 

[silverpig]

Originally posted by: redly1
sounds like a good way to tank the economy

That's what it seems like to me too.

Say a family makes $40k. They're better off with no income taxes, and can buy what they need without tax, and then get taxed heavily on the "extras". As people like the extras, they'll probably spend their extra cash on them, keeping the economy up.

Now picture a business owner worth $10 mil. He's smart and reinvests his money tax free and just gets richer. Because he can invest tax free and because buying a Corvette is now 30% more expensive, he'll be smart and invest rather than spend.

What's more, when this guy decides to buy that summer house with the convertible, he'll buy the place in another country at a 30% discount. I'm sure there'd be duty charges to get it into the US, but why couldn't he buy, register, and "keep" it in Canada?

 

[sandmanwake]

Originally posted by: Engineer

As long as they can roll over the debt with new debt and slightly larger payments, nobody will ever pay the debt. In theory, as long as the economy grows and therefore, revenues from taxes increase, the debt doesn't much matter. Now if debt grows faster than the economy for a lone period of time, a different tune might be sung.

Sounds like playing Russian roulette.

 

[Engineer]

Originally posted by: sandmanwake

Originally posted by: Engineer

As long as they can roll over the debt with new debt and slightly larger payments, nobody will ever pay the debt. In theory, as long as the economy grows and therefore, revenues from taxes increase, the debt doesn't much matter. Now if debt grows faster than the economy for a lone period of time, a different tune might be sung.

Sounds like playing Russian roulette.

Not really. If your income goes up, you can afford more debt. Take a look at WalMart's debt to income ratio. WalMart does indeed have a rising debt, but their income rises at least at the same pace negating the ability to NOT pay the debt.

Again, if the economy or growth stagnates for along period of time (decades), all bets are off.

Anyway, this thread is about the FairTax plan (or lack of fairness depending on your point of view). We now take it back on topic.

 

[Queasy]

Originally posted by: smack Down
You think that sucks, just wait until you have to deal with paying 30% tax on your building, your tools, and every other capital expense or good used. Or do you plan on making to so business don't have to pay sales tax on items they use.

The fair tax is a joke and would kill the economy, but I'm sure the rich would love to pass all the tax burden on to the middle class.

Originally posted by: silverpig
Now picture a business owner worth $10 mil. He's smart and reinvests his money tax free and just gets richer. Because he can invest tax free and because buying a Corvette is now 30% more expensive, he'll be smart and invest rather than spend.

AGAIN - the price of goods will stay approximately the same because the cost of goods will drop. Companies will see a savings of ~20-25% in producing goods because they no longer have to worry about spending time and money complying with federal tax laws. Also, the Fair Tax only applies to new goods. Used goods are exempt because they were already taxed once.

Now imagine you are a business owner and you hear that there is a place where you don't have to worry about tax laws and can concentrate on making your product. Where do you think you'd like to set up shop? Country A with thousands of nigh indecipherable tax laws or Country B with none?

 

[sandmanwake]

Originally posted by: Queasy

Now imagine you are a business owner and you hear that there is a place where you don't have to worry about tax laws and can concentrate on making your product. Where do you think you'd like to set up shop? Country A with thousands of nigh indecipherable tax laws or Country B with none?

As a business owner, I hire a tax accountant, so rather than set up shop in either the country with no tax laws or complex tax laws, I'd set it up where I'd get the most benefits--my accountant should hopefully be able to help me figure that out.

Edit: 20-25% of cost is associated with complying with tax laws? Why does that seem excessive? You're also assuming that businesses will pass the savings down to the consumers. Exxon found ways to cut costs which resulted in record profits not too long ago. How much savings was passed onto the consumers?

 

[Queasy]

Originally posted by: sandmanwake

Originally posted by: Queasy

Now imagine you are a business owner and you hear that there is a place where you don't have to worry about tax laws and can concentrate on making your product. Where do you think you'd like to set up shop? Country A with thousands of nigh indecipherable tax laws or Country B with none?

As a business owner, I hire a tax accountant, so rather than set up shop in either the country with no tax laws or complex tax laws, I'd set it up where I'd get the most benefits--my accountant should hopefully be able to help me figure that out.

I would fire your tax accountant if he didn't suggest setting up shop in the country with no business taxes and you don't have to worry about taking care of employee payroll taxes.

Edit: 20-25% of cost is associated with complying with tax laws? Why does that seem excessive? You're also assuming that businesses will pass the savings down to the consumers. Exxon found ways to cut costs which resulted in record profits not too long ago. How much savings was passed onto the consumers?

Go read the studies by the Fair Tax group and decide for yourself.

If the Fair Tax were passed, companies would be forced to lower their prices accordingly to stay competitive AND because the public would be aware that these companies are seeing cost savings. All it would take is one company to drop their prices and the rest would follow.

 

[b0mbrman]

Originally posted by: sandmanwake
I don't trust plans that employ propaganda as part of their name. "Fairtax". "Patriot Act".

Um...so, basically, you don't trust plans then...

 

[HombrePequeno]

I'm fine with a VAT sort of tax being implemented. It would promote savings which this country needs. However, relying purely on a VAT is a horrible idea. It's essentially shifting the tax burden from the rich to the poorer classes. The upper classes spend a smaller percentage of their income on purchases. You can get around that by providing income subsidies for the poor but you would need a higher consumption tax which would further encourage the upper classes to save their income rather than spend it.

I do believe our tax code needs to be simplified but going for a pure consumption tax is not the way to go. I say we should eliminate most of the deductions on tax forms and possibly raise the tax on gasoline.

 

[Rabidwerewolf]

Originally posted by: sandmanwake

Originally posted by: ch33zw1z
Wouldn't make sense to reimburse everyone for past tax practices.

Exactly. So the "fairtax" isn't really fair to those who chose to have Roth accounts as opposed to deductible accounts since if implemented, those who have deductible accounts would only pay federal tax once in the form of a national sales tax whereas those with Roth had paid once already before putting money into the account and then once more when they buy stuff and have to pay the national sales tax.

Propaganda naming.

Edit:
Oh, didn't we get reimbursed recently (or at least somewhat) because the government continued to tax us for years afterwards for a phone tax that was supposed to have only been used to raise money to fight the Spanish-American war?

Yeah, but it was only for the last 3 years so if you've been paying that tax for more than 3 years, you won't see that money.

I'm all about "fair" taxation, but the problem isn't the taxes. It is the current spending of government. Congress, doesn't matter if its the Republican or Democratic party in control, seem to can't say "no" when it comes to spending "our" money. I'm all for giving them less money just to curtail the bloated spending. Just having a national sales tax won't fix that. Nor will it fix social security or medicare.

 

[Queasy]

Originally posted by: HombrePequeno
I'm fine with a VAT sort of tax being implemented. It would promote savings which this country needs. However, relying purely on a VAT is a horrible idea. It's essentially shifting the tax burden from the rich to the poorer classes. The upper classes spend a smaller percentage of their income on purchases. You can get around that by providing income subsidies for the poor but you would need a higher consumption tax which would further encourage the upper classes to save their income rather than spend it.

I do believe our tax code needs to be simplified but going for a pure consumption tax is not the way to go. I say we should eliminate most of the deductions on tax forms and possibly raise the tax on gasoline.

We got about as simple as you can get with the last Reagan tax cuts. It flattened the income tax to two brackets and had very few deductions. Look where we are two decades later...

The Fair Tax provides a monthly 'prebate' to households to cover the cost of the basic necessities. This is all covered at the Fair Tax site so go there if you are interested in knowing more about it.

 

[Queasy]

Originally posted by: Rabidwerewolf

Originally posted by: sandmanwake

Originally posted by: ch33zw1z
Wouldn't make sense to reimburse everyone for past tax practices.

Exactly. So the "fairtax" isn't really fair to those who chose to have Roth accounts as opposed to deductible accounts since if implemented, those who have deductible accounts would only pay federal tax once in the form of a national sales tax whereas those with Roth had paid once already before putting money into the account and then once more when they buy stuff and have to pay the national sales tax.

Propaganda naming.

Edit:
Oh, didn't we get reimbursed recently (or at least somewhat) because the government continued to tax us for years afterwards for a phone tax that was supposed to have only been used to raise money to fight the Spanish-American war?

Yeah, but it was only for the last 3 years so if you've been paying that tax for more than 3 years, you won't see that money.

I'm all about "fair" taxation, but the problem isn't the taxes. It is the current spending of government. Congress, doesn't matter if its the Republican or Democratic party in control, seem to can't say "no" when it comes to spending "our" money. I'm all for giving them less money just to curtail the bloated spending. Just having a national sales tax won't fix that. Nor will it fix social security or medicare.

AGAIN - the Fair Tax isn't about solving spending, Medicare, or Social Security. It is about coming up with a better way to collect taxes at the Federal level. Completely separate issues.

 

[silverpig]

Originally posted by: Queasy
Now imagine you are a business owner and you hear that there is a place where you don't have to worry about tax laws and can concentrate on making your product. Where do you think you'd like to set up shop? Country A with thousands of nigh indecipherable tax laws or Country B with none?

Simple tax laws huh? Look what good that did to Hong Kong. They got taken over by China.

 

[sandmanwake]

Originally posted by: b0mbrman

Originally posted by: sandmanwake
I don't trust plans that employ propaganda as part of their name. "Fairtax". "Patriot Act".

Um...so, basically, you don't trust plans then...

I trust plans, just not any plan that has to employ good sounding names to help sell the content of the plan. There's too many idiots in the world who'd vote for a plan without reading reading up on it just because it sounds good--"Patriot Act" anyone? Ideally, I'd like all plans to just be referred to by sets of randomly generated numbers. Probably avoid 666 just because of the connotation some Christians would have with that number.

AGAIN - the Fair Tax isn't about solving spending, Medicare, or Social Security. It is about coming up with a better way to collect taxes at the Federal level. Completely separate issues.

I'd rather we find a way to get spending under control before trying to figure out better ways for the government to rob us.

 

[drinkmorejava]

Lest we not forget that the prices of many goods are also set by market supply and demand, not production costs. That $.99 bag of candy doesn't cost anywhere near that to produce and transport, the market just supports its price point. Granted, new companies will eventually form that will bother to lower their price which increases competition and the market price lowers, but that's a process that will take multiple years, leaving the economy to get absolutely pounded until that happens. And for goods with strong brand images, forget about, they'll have very little reason to lower their price.

In terms of savings vs. capital investment, everyone's savings are wiped out as I discussed earlier, and capital investment will decrease because capital costs will increase 20-30% over the short run and no one will have realized, either financially or psychologically, their income increases yet. That's something I see as being an absolute disaster. However, while current savings would be hurt, a large increase in future savings should be expected, which might help.

 

[DrPizza]

Originally posted by: Queasy
AGAIN - the price of goods will stay approximately the same because the cost of goods will drop. Companies will see a savings of ~20-25% in producing goods because they no longer have to worry about spending time and money complying with federal tax laws. Also, the Fair Tax only applies to new goods. Used goods are exempt because they were already taxed once.

Now imagine you are a business owner and you hear that there is a place where you don't have to worry about tax laws and can concentrate on making your product. Where do you think you'd like to set up shop? Country A with thousands of nigh indecipherable tax laws or Country B with none?

That 20 - 25% figure is one of the biggest exaggerations I've seen. Are you suggesting that 1/5 of the workforce at a company is involved in complying with federal tax laws?? In fact, it'd have to be more than 20%, because a companies costs also include raw materials for whatever product they're making. Are there major costs other than accountants (and a lot of paper and a few computer programs) to comply with tax laws?

edit: I'd believe 2.0 to 2.5%
Maybe there's a decimal missing?

 

[mugs]

How would the FairTax plan handle someone who has a lot of money in savings? Seems like I'd be paying a huge sales tax on top of the huge income tax I already paid on that money.