Greenspan Speaks on Consumption Tax

[Zeno]

Greenspan Touts Idea of a Consumption Tax

By JEANNINE AVERSA, AP Economics Writer
40 minutes ago

WASHINGTON - Federal Reserve Chairman Alan Greenspan on Thursday embraced the notion of overhauling the nation's tax system and said that some form of a consumption tax - such as a national sales tax - could spur greater economic growth.

The Fed chief made his comments in prepared remarks to the President's Advisory Panel on Federal Tax Reform. Revamping the complex tax code is an important goal of President Bush.

Greenspan pointed out the merits of a "consumption" tax, as well as the challenges of setting up such a tax.

Consumption taxes can take the form of national retail sales taxes or a value-added tax, imposed on the increased value of a good or service at each stage of manufacture and distribution and ultimately passed on to the consumer.

"As you know, many economists believe that a consumption tax would be best from the perspective of promoting economic growth - particularly if one were designing a tax system from scratch - because a consumption tax is likely to encourage saving and capital formation," Greenspan said.

"However, getting from the current tax system to a consumption tax raises a challenging set of transition issues," he added.

Bush's advisers have spoken favorably of the economic benefits that could be achieved by moving from a system that taxes income to one that taxes consumption. However, Democratic critics contend such a consumption tax would hit low-income Americans the hardest.

Bush's aides have pointed out that the current tax system is actually a combination of a system that taxes income and one that taxes consumption. They note the creation of individual retirement accounts and other tax-deferred savings accounts allows taxpayers to shelter some investment earnings from tax.

Greenspan also said the tax panel will have to decide what type of system to use such as "a comprehensive income tax, a consumption tax or some combination of the two, as is done in many other countries."

The tax panel is responsible for coming up with recommendations to make taxes fairer and simpler. In addition to revamping Social Security, Bush wants to overhaul the nation's tax system - two centerpieces of his second-term economic agenda. Achieving both will be difficult politically and economically, especially against the backdrop of swollen budget deficits, analysts say.

Greenspan didn't offer a specific approach for policy-makers to follow as they consider an overhaul of the tax code.

But he did say that changes should be aimed at making the tax code easier for Americans to navigate, be fair and should contain an element of predictability so that businesses and consumers alike can look into the future and have a good idea what their tax obligations are - allowing them to plan ahead.

"A simpler tax code would reduce the considerable resources devoted to complying with current tax laws, and the freed up resources could be used for more productive purposes," Greenspan said.

[Voltorb]

Nice post, Zeno. Having lived in Tennessee most of my life (10% sales tax and no income tax) and Arkansas for some of my life (6% sales tax and taxed my income at 2.5% while returning very little), I can say, with some experience on the issue, that I honestly prefer Tennesse's system. My main complaint with taxing income is the invasion of privacy it entails. I simply don't like the idea of the government being able to snoop into my personal finances if I were to ever be audited. In addition, the IRS places the burden of proof on the defendant in an audit, basically turning the regular judicial system upside down. The potentials for abuse through this government agency are too numerous to name, and I won't even try to argue about its constitutionality.

However, I do have socialists leanings and believe that a minimal redistibution of wealth via something similar to a graduated income tax is not inherently evil. I believe Texas is another state with no income tax, yet they do not require sales tax on food items (Tennessee does). A similar feature would be necessary so that a national sales tax did not put undue pressure on poor families. Some proposals I have read discussed government reimbursal of sales taxes up to a minimal living standard, and I think this idea has great potential.

If corporations and employers played along, everyone would see a big fat raise in their paycheck equal to twice the amount the government would normally withhold. Hopefully, this extra income would encourage enough consumption to offset the reduced consumption from higher prices and increased incentives to save. Most Americans need to reduce consumption and increase savings anyway, so this probably wouldn't be that bad of a consequence.

[MtSmalls]

I'm not terribly surprised at Greenspan's comments, but am confused as to just what this proposal is supposed to accomplish.

Consumption taxes, by their nature are regressive, that is affecting the bottom half of the population, by income, more than the top half. Even if you exclude food and clothing from this national sales tax, its still fairly regressive. And to get a rebate of your sales taxes paid up to some minimum standard of living amount, you have to keep receipts for every purchase for an entire year??? Just how high is this national sales tax going to have to be in order to be revenue neutral anyway?

Plus I've never understood the logic (and I have a Masters in Economics) as to just how this is supposed to increase savings? I can see it at the top 1% level, not having to pay an income tax would give that portion of the population more income to save, but how does it affect the family of four making $60K a year?

[jaxmike]

You have a masters in economics and you can't see why this would help? You should get your money back.

Further, lets not call this a regressive tax, lets call it what it is. Fair.

[EarlCat]

[ QUOTE ]
Consumption taxes, by their nature are regressive, that is affecting the bottom half of the population, by income, more than the top half. Even if you exclude food and clothing from this national sales tax, its still fairly regressive. And to get a rebate of your sales taxes paid up to some minimum standard of living amount, you have to keep receipts for every purchase for an entire year???

[/ QUOTE ]

No. Under the "FairTax" plan (the national retaul sales tax outlined in HR 25) the rebate (really a "prebate") would be based on the poverty level, which is set depending on household size. A family of 4 needs $x to be above the poverty level. The rebate would be in the amount of the tax they would pay on $x of spending.

Just to keep the numbers simple, say the poverty threshold for your family is $10,000 and the retail tax rate is 25%. Purchasing $10k of goods requires you to pay $2.5k more in sales tax. You would get $2500 (in monthly payments) from the government to cover that tax. In effect you pay no taxes on the necesities of life.

Currently, those living at or under the poverty level still pay a 6.2% federal tax on their income (Soc. Sec and Medicare). It's a dirty secret, but the current payroll tax is our only regressive federal tax.

Under the FairTax, they would pay NO federal taxes. In fact the FairTax, because of the prebate, is 100% progressive.

http://www.fairtaxvolunteer.org/pdf/EffectiveTaxRates.pdf

[ QUOTE ]
Just how high is this national sales tax going to have to be in order to be revenue neutral anyway?

[/ QUOTE ]

Harvard economists are estimating about 23%, although there has been recent talk of revising this downward.

[ QUOTE ]
Plus I've never understood the logic (and I have a Masters in Economics) as to just how this is supposed to increase savings?

[/ QUOTE ]

Because it eliminates all taxes on interest, dividends, and other disincentives to save and invest.

[ QUOTE ]
I can see it at the top 1% level, not having to pay an income tax would give that portion of the population more income to save, but how does it affect the family of four making $60K a year?

[/ QUOTE ]

Plenty. First they would take home more of that $60k because there would be no more witholding for the income tax and no payroll tax. Second, retail prices would fall because all the corporate taxes (currently passed-on to the consumer in the form of higher prices--this is estimated to be about 20% for most goods) would be elimated. Third, the first $18,850 (poverty level for a family of 4 in 2004) of their spending is not taxed at all. They would receive $4,335.50 from the government to cover those taxes.

Here's the research on how it would affect other people and industries:
http://www.fairtax.org/research.asp?pageid=21

[Dead]

Greenspan has no business speaking about taxation issues or Social Security for that matter.

His job is to control the flow of money to the banks and keep inflation under control.

He must think that he is Treasury Secretary or something.

It is clear that Greenspan is rapidly becoming more and more partisan in his job, and that is not a good quality for the chief of our central bank to have.

It's also important to note that Greenspan was a close associate of Ayn Rand, and that he gave many speeches advocating unregulated capitalism as the economic system that should be implemented in this country. He's also reported to be an Objectivist.

[EarlCat]

[ QUOTE ]
Greenspan has no business speaking about taxation issues or Social Security for that matter.

[/ QUOTE ]

What is this, Russia? He has just as much a right to speak about it as you do.

[Dead]

[ QUOTE ]
You have a masters in economics and you can't see why this would help? You should get your money back.

Further, lets not call this a regressive tax, lets call it what it is. Fair.

[/ QUOTE ]

Maybe he got his masters in economics from a reputable university, and not the Rush Limbaugh school of economics.

Get a clue, jaxmike. His comments are dead on balls accurate.

Do you deny that a national sales tax would be regressive? Poor people would end up paying a larger percentage of their income in taxes than rich poeple.

We need to move to a more progressive system, because our current "progressive" system is not really progressive at all. The poor pay roughly the same overall tax rate that the rich do.

Something like this would work(keep in mind that this is a rough estimate and doesn't include deductions):

Income under 30k should be exempt from federal taxation.

Marginal rate for uncome from 30k-60k should be ~20%.

Marginal rate for income from 60-100k should be ~23%.

Marginal rate for income from 100-200k should be ~33%.

Marginal rate for income from 200k-500k should be ~38%.

Marginal rate for income from 500k and up should be ~46%.

Keep most of the standard deductions and raise the dividend tax rate back up to where it was, matched with the marginal income tax rates. Make the capital gains rate 25% or so for everone, where it once was.

A family of 4 with income under 50k shouldn't have to pay any federal income tax. Once they make more money then they can start to pay in. Of course they would still pay social security and medicare contributions.

I can already hear JaxMike screaming about how unfair this would be to the rich. Well let me head off some of the criticism. The "rich" are privileged to live in this country, with our excellent infrastructure, our system of laws, and our rich natural resources. They should contribute accordingly.

If you think that this is "socialist", then that's fine. But it's not. I'm a business administration major. I may be somewhat liberal but I'm not advocating socialism.

[Dead]

[ QUOTE ]
[ QUOTE ]
Greenspan has no business speaking about taxation issues or Social Security for that matter.

[/ QUOTE ]

What is this, Russia? He has just as much a right to speak about it as you do.

[/ QUOTE ]

I never said he didn't have a right buddy. Of course he does. But he is the chairman of the Federal Reserve, and the chairman of the Federal Reserve board should not be attempting to set or influence fiscal policy. Monetary policy and fiscal policy should be kept separate. That's why Greenspan can't be fired. It's to remove influence from the White House in his decision-making. Apparently it hasn't worked.

Remember in 1972 when the Fed Reserve Chairman took orders from Nixon and let the money flow freely? Sure we had a great economy going into the election, but it TANKED afterwards. We had huge amounts of inflation and high unemployment. This is a result of the Chairman and President working together.

We're seeing some of it now, sadly.

[EarlCat]

[ QUOTE ]
Do you deny that a national sales tax would be regressive? Poor people would end up paying a larger percentage of their income in taxes than rich poeple.

[/ QUOTE ]

y'all don't read real good do ya... let's try this again
===

Currently, those living at or under the poverty level still pay a 6.2% federal tax on their income (Soc. Sec and Medicare). It's a dirty secret, but the current payroll tax is our only regressive federal tax.

Under the FairTax, they would pay NO federal taxes. In fact the FairTax, because of the prebate, is 100% progressive.

http://www.fairtaxvolunteer.org/pdf/EffectiveTaxRates.pdf

[Dead]

I don't mean to be rude, but are you serious, EarlCat?

Do you actually believe that 23% or whatever the proposed rate is will actually be 23%? Of course not. Every special interest group in Washington is going to clamor for exemptions. First it will be for food. Then medicine. The list will go on.

Eventually the rate will have to be 40%.

[EarlCat]

[ QUOTE ]
I don't mean to be rude, but are you serious, EarlCat?

Do you actually believe that 23% or whatever the proposed rate is will actually be 23%? Of course not. Every special interest group in Washington is going to clamor for exemptions. First it will be for food. Then medicine. The list will go on.

Eventually the rate will have to be 40%.

[/ QUOTE ]

Let me get this straight... exemptions for food... exemptions for medicine... basically exemptions for the necessities that the poor would be spending all their income on resulting in higher taxes for those who earn more... what exactly are you complaining about?

Look. Your necessities are already exempt up to poverty level spending. Anything above that is beyond the bare minimum needed to survive. Medicare and Social Security benefits will still be paid out as they are now. The special interests have very little to stand on here, and the fact that just about EVERYBODY's taxes would go up (not just that of those elusive rich people) will tend to stir up just a tad bit more political resistance.

[Voltorb]

I do agree that a national sales tax would be regressive, i.e. that it would tax the poor more in proportion to their income than the rich. However, the only reason I support the graduated income tax is so that the poor would be able to afford basic neccessities. I believe that those who cannot afford basic necessities should have the bare minimum supplied by the insanely wealthy. As I see it, the graduated income tax is currently producing this effect. Ideally, under the national sales tax, the insanely wealthy would support those unable to afford basic neccessities by paying for government welfare programs through their vast consumption of goods and services. Of course, if they did not consume more than the average person, then they would not support the poor more than the average person. However, other good would still be accomplished by increased investment or even philanthropy.

Under the particular rebate system I looked into, you would not have to save receipts for an entire year. The government would simply employ groups of people in various regions of the country to determine on average how much each spent on basic necessities (food, clothes, rent, utilities, health care) each month, then the government would issue every man, woman, and child a check for this amount each month in advance for the sales tax they would essentially give back. Since, on average, most people overspend on basic neccessities, this is like money in the frugal person's pocket. In essence, the government awards frugality and savings, and punishes consumption and indulgence.

I think that the study quoted a sales tax of 25% to be revenue neutral if the income tax were abolished. However, they recommend that employees not only get to keep the income tax the IRS previously withheld, but also the income tax that the employer paid to the IRS for the employee as well. This would amount to a substantial raise for most people. Combined with the rebate on essential goods and services, a national sales tax should free up quite a bit of income for savings for the frugal person.

I think that if you are able to save any money under our current system of taxation, you would probably be able to save more money under a national sales tax. Hopefully, the system would work so the average taxpayer would be paying the same amount of tax he paid now, just in a different, less intrusive way. Of course, the extremely frugal person would pay less in taxes, while the over-indulgent consumer would pay more.

[Dead]

I have problems with the exemptions for the poor because they'd still end up paying more than they do now. Right now they play close to nothing in federal income tax, and that's the way it should be. They're poor. They don't have a lot of disposable income. We can tax them once they move up the income ladder.

But no, I definitely don't object to exempting food and medicine. Of course I hate the idea of a consumption tax.

[jaxmike]

[ QUOTE ]
Maybe he got his masters in economics from a reputable university, and not the Rush Limbaugh school of economics.

[/ QUOTE ]

Funny thing about Rush, hes right a lot of the time, and that kills people like you.

[ QUOTE ]

Get a clue, jaxmike. His comments are dead on balls accurate.

[/ QUOTE ]

I disagree.

[ QUOTE ]

Do you deny that a national sales tax would be regressive?


[/ QUOTE ]

I do, everyone pays the same rate.

[ QUOTE ]

Poor people would end up paying a larger percentage of their income in taxes than rich poeple.

[/ QUOTE ]

How do you know that? Can you tell how much they are going to spend? Either way, it doesn't matter. It's fair because they all pay the same rate.

[ QUOTE ]

We need to move to a more progressive system, because our current "progressive" system is not really progressive at all. The poor pay roughly the same overall tax rate that the rich do.


[/ QUOTE ]

This is nonsense. No one person should have to pay a higher tax rate than any other.

[ QUOTE ]

Something like this would work(keep in mind that this is a rough estimate and doesn't include deductions):

Income under 30k should be exempt from federal taxation.

Marginal rate for uncome from 30k-60k should be ~20%.

Marginal rate for income from 60-100k should be ~23%.

Marginal rate for income from 100-200k should be ~33%.

Marginal rate for income from 200k-500k should be ~38%.

Marginal rate for income from 500k and up should be ~46%.


[/ QUOTE ]

This is ABSOLUTELY not fair. Why should someone making 500k have to pay 46% of what they make in taxes and someone making 30k should have to pay 0%?

[ QUOTE ]

Keep most of the standard deductions and raise the dividend tax rate back up to where it was, matched with the marginal income tax rates. Make the capital gains rate 25% or so for everone, where it once was.


[/ QUOTE ]

This is obscene. I think there should be no additional capital gains tax at all.

[ QUOTE ]

I can already hear JaxMike screaming about how unfair this would be to the rich. Well let me head off some of the criticism. The "rich" are privileged to live in this country, with our excellent infrastructure, our system of laws, and our rich natural resources. They should contribute accordingly.

[/ QUOTE ]

The rich are not "privileged to live in this country any more than another else is. They should contribute accordingly, just the same as everyone else. You cannot justify to me taxing any one man a higher rate than another.

[If you think that this is "socialist", then that's fine. But it's not. I'm a business administration major. I may be somewhat liberal but I'm not advocating socialism.

[/ QUOTE ]

It might not be "socialist" but its sure close to it. It's redistribution of wealth, plain and simple. In supporting progressive taxes, you are advocating socialism by definition.

[Dead]

No, socialism is based on public ownership of the means of production and centralized planning. This is entirely different.

And everyone paying the same tax rate is NOT fair. Extreme example, but if I make $1 dollar a year and you make 1 million dollars a year, is it fair to tax us both at 30%? Of course not. That leaves me with only 70 cents, and you with $700k. No one reputable is saying that you should be taxed at 90% on your income over 500k, and that would discourage economic growth. But paying 46% on income OVER 500k is hardly ridiculous. The tax rate on income over that was 91% at one time.

And it's perfectly fair to raise the capital gains tax as well. Working people(firefighters, police, nurses) pay more taxes per dollar of earnings. than a retired investor sitting at home using E-Trade. Something is very wrong with this scenario.

[Voltorb]

That's the study I've been refering to. I think they made an excellent case for a national sales tax, just couldn't remember the specific name of the system or a link to it. Thanks EarlCat. Good post.

[Zeno]

[ QUOTE ]
Greenspan has no business speaking about taxation issues or Social Security for that matter.


[/ QUOTE ]


And neither do you.

[ QUOTE ]
It's also important to note that Greenspan was a close associate of Ayn Rand, and that he gave many speeches advocating unregulated capitalism as the economic system that should be implemented in this country. He's also reported to be an Objectivist.

[/ QUOTE ]

My, oh my. I have it on good authority that in his younger days Alan Greenspan was in love with Debra Paget and had numerous sexual encounters with this saucy high-class brunette. And I say, Bully for Alan.

-Zeno

[jaxmike]

[ QUOTE ]
No, socialism is based on public ownership of the means of production and centralized planning. This is entirely different.

[/ QUOTE ]

That's the direction taxes like you are advocating take us.

[ QUOTE ]

And everyone paying the same tax rate is NOT fair.


[/ QUOTE ]

I'm sorry, I don't see how. If I pay 15% and you pay 15% and he pays 15% how is that not fair?

[ QUOTE ]
Extreme example, but if I make $1 dollar a year and you make 1 million dollars a year, is it fair to tax us both at 30%? Of course not. That leaves me with only 70 cents, and you with $700k.

[/ QUOTE ]

So, I get punished for being succesful? BS? Same rate is same rate is same rate. That's by DEFINITION fair.

[ QUOTE ]

No one reputable is saying that you should be taxed at 90% on your income over 500k, and that would discourage economic growth. But paying 46% on income OVER 500k is hardly ridiculous.

[/ QUOTE ]

So, almost half of the money that they make is taken from them by force? When others who make less get to keep 2/3 of their money? That's not fair.

[ QUOTE ]

The tax rate on income over that was 91% at one time.


[/ QUOTE ]

obscene.

[ QUOTE ]

And it's perfectly fair to raise the capital gains tax as well.


[/ QUOTE ]

I disagree, I think its a bad tax that hurts investment.

[ QUOTE ]

Working people(firefighters, police, nurses) pay more taxes per dollar of earnings. than a retired investor sitting at home using E-Trade. Something is very wrong with this scenario.

[/ QUOTE ]

they pay the same rate. can't argue that everyone paying the same rate is not fair when by definition it is.

[Dead]

[ QUOTE ]
And neither do you.

[/ QUOTE ]

What a ridiculous statement. I'm not employed by the very entity that sets monetary policy in this country. I also have taken a few classes in finance and am a business student so I feel qualified to speak about these issues.

These concepts are not hard to understand, but apparently they are for some people.

[ QUOTE ]
My, oh my. I have it on good authority that in his younger days Alan Greenspan was in love with Debra Paget and had numerous sexual encounters with this saucy high-class brunette. And I say, Bully for Alan.

-Zeno

[/ QUOTE ]

Objectivism is generally seen as an extremist philosophy. Argue with that all you want, but I'd wager that fewer than 1% of Americans subscribe to this philosophy.

I can sum up objectivism in one sentence:

I've got mine, [censored] everyone else.

[jaxmike]

and hes about a billion % more qualified.

[Dead]

[ QUOTE ]
they pay the same rate. can't argue that everyone paying the same rate is not fair when by definition it is.

[/ QUOTE ]

That's bull. They used to pay close to the same rate, but not anymore. The capital gains tax has been cut to 15% and the dividend tax is now at a maximum of 15% or 20%. I can't remember which.

Meanwhile, the average American is still paying part of their income at a 25% income tax rate, and some middle class people pay it at 28% or higher.

So a rich retired investor sitting by the pool gets to pay a maximum of 15 or 20% on 90% of his income, while a hardworking firefighter may have to pay up to 28% on some of his. Yeah, real fair.

[EarlCat]

[ QUOTE ]
I do agree that a national sales tax would be regressive, i.e. that it would tax the poor more in proportion to their income than the rich. However, the only reason I support the graduated income tax is so that the poor would be able to afford basic neccessities.

[/ QUOTE ]

Today, the poor's income is taxed from the very first dollar. Under HR 25's prebate, they would not be taxed one penny until they crossed the poverty threshold.

[ QUOTE ]
Of course, if they did not consume more than the average person, then they would not support the poor more than the average person. However, other good would still be accomplished by increased investment or even philanthropy.

[/ QUOTE ]

Even if they don't consume, their investments end up as loans or operating capital that gets spent (and generates sales tax) just the same. Rich people don't stuff their money in matresses.

[ QUOTE ]
Under the particular rebate system I looked into, you would not have to save receipts for an entire year. The government would simply employ groups of people in various regions of the country to determine on average how much each spent on basic necessities (food, clothes, rent, utilities, health care) each month

[/ QUOTE ]

They already do. It's called the Department of Health and Human Services.

[ QUOTE ]
Since, on average, most people overspend on basic neccessities, this is like money in the frugal person's pocket. In essence, the government awards frugality and savings, and punishes consumption and indulgence.

[/ QUOTE ]

That's good, no?

[ QUOTE ]
I think that the study quoted a sales tax of 25% to be revenue neutral if the income tax were abolished. However, they recommend that employees not only get to keep the income tax the IRS previously withheld, but also the income tax that the employer paid to the IRS for the employee as well. This would amount to a substantial raise for most people.

[/ QUOTE ]

You nailed it.

[Zeno]

That's better.

MMMMMM is correct.

-Zeno

[Dead]

About?

[EarlCat]

[ QUOTE ]
I have problems with the exemptions for the poor because they'd still end up paying more than they do now.

[/ QUOTE ]

How is paying $0 in taxes paying more?

[ QUOTE ]
Right now they play close to nothing in federal income tax, and that's the way it should be. They're poor. They don't have a lot of disposable income. We can tax them once they move up the income ladder.

[/ QUOTE ]

That's exactly what the FairTax does. There are NO TAXES until you get out of poverty. NONE. ZERO. ZIP. In fact, if you don't earn above the poverty level you get FREE MONEY.

How is this bad???

Yes, you're absolutely right, the poor currently pay no federal income taxes. They DO however pay taxes on their income for Social Security and Medicare, and THAT is where they're getting screwed. If you make $1 a year you pay 6.2 cents in payroll taxes. Under the FairTax if you make $1 a year, you get a check!

If you really were an advocate for the poor you'd be all about this.

[jaxmike]

The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital . . . the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy.

--President John F. Kennedy, 1963

[Zeno]

Excellent series of posts Earlcat.

On a side note the social security tax is in reality more than just the 6.2 % as employers 'pay an additional half' but this is just factored into the overall pay scale, so in a certain sense the employee pays 'all', just like a self-employed person does. I was self-employed for awhile and found the > 15% 'social security and etc' tax very regressive.

-Zeno

[Dead]

That's not 15%. Social Security is 12.4% total, with half being paid by the employer. Medicare and other stuff is the rest of the service taxes.

What makes you assume that the employer would pay you their 6.2% of they didn't pay it to SSA?

[Dead]

[ QUOTE ]
[ QUOTE ]
I have problems with the exemptions for the poor because they'd still end up paying more than they do now.

[/ QUOTE ]

How is paying $0 in taxes paying more?

[ QUOTE ]
Right now they play close to nothing in federal income tax, and that's the way it should be. They're poor. They don't have a lot of disposable income. We can tax them once they move up the income ladder.

[/ QUOTE ]

That's exactly what the FairTax does. There are NO TAXES until you get out of poverty. NONE. ZERO. ZIP. In fact, if you don't earn above the poverty level you get FREE MONEY.

How is this bad???

Yes, you're absolutely right, the poor currently pay no federal income taxes. They DO however pay taxes on their income for Social Security and Medicare, and THAT is where they're getting screwed. If you make $1 a year you pay 6.2 cents in payroll taxes. Under the FairTax if you make $1 a year, you get a check!

If you really were an advocate for the poor you'd be all about this.

[/ QUOTE ]

The poverty level is not adequate for me. Like I said, a family of 4 making 50k should be exempt from taxation. The poverty level for a family of 4 is $18,400. Can a family of four really live on $18,400? Not very easy. That's what I assume the FairTax would go by, and that's why I think it's crap.

[jaxmike]

so the rich are supposed to support everyone. thats sure fair.

[Dead]

[ QUOTE ]
so the rich are supposed to support everyone. thats sure fair.

[/ QUOTE ]

Wow JaxMike I'm very impressed by your hyperbolic one-sentence posts that have nothing at all to do with the topic at hand.

Very impressed indeed.

I never said that the "rich" should support everyone, rather that we should have a progressive system where the middle class pays a higher percentage of their income than the lower class, and where the upper class pays a higher percentage of their income than the middle class.

Bush wants the poor to pay more while the rich pay less, so by cutting taxes for the rich he is making property taxes and service fees go up nationwide.

If you really want to help the poor(and I doubt that you do), we can have a payroll tax holiday. I'm not opposed to tax cuts at all. Tax rebates and cuts can have positive economic effects, but some can also devastate the poor.

Giving a payroll tax holiday would help everyone, but especially the poor. Exempt pay from the SS and Medicare taxes for a period of 2-3 months or so.

But the Republicans would never go for this, since it helps the poor far more than the rich.

[jaxmike]

[ QUOTE ]

Wow JaxMike I'm very impressed by your hyperbolic one-sentence posts that have nothing at all to do with the topic at hand.

Very impressed indeed.

[/ QUOTE ]

Whatever, thats the point, or the result of what you are getting at.

[ QUOTE ]

I never said that the "rich" should support everyone, rather that we should have a progressive system where the middle class pays a higher percentage of their income than the lower class, and where the upper class pays a higher percentage of their income than the middle class.


[/ QUOTE ]

which i say is unfair. everyone should pay the same rate.

[ QUOTE ]

Bush wants the poor to pay more while the rich pay less, so by cutting taxes for the rich he is making property taxes and service fees go up nationwide.


[/ QUOTE ]

That is an out and out lie. he wants everyone to pay less in taxes.

[ QUOTE ]

If you really want to help the poor(and I doubt that you do)


[/ QUOTE ]

funny, but depends on what you mean. i do support helping the poor, so long as they help themselves too. i do not support unlimited handouts. people need to be responsible for their own lives.

[ QUOTE ]

, we can have a payroll tax holiday. I'm not opposed to tax cuts at all. Tax rebates and cuts can have positive economic effects, but some can also devastate the poor.


[/ QUOTE ]

no tax cut can devastate the poor.

[ QUOTE ]

Giving a payroll tax holiday would help everyone, but especially the poor. Exempt pay from the SS and Medicare taxes for a period of 2-3 months or so.


[/ QUOTE ]

why should they be exempt?

[ QUOTE ]

But the Republicans would never go for this, since it helps the poor far more than the rich.

[/ QUOTE ]

not the point. i dont mind helping people, but people need to help themselves more than the government (at least federal) helps them. its not a matter of rich and poor to me. EVERYONE should be paying the same rate. I am not rich, but I don't like the fact that Bill Gates has to pay a higher rate than I do, its not fair to him.

[Dead]

Bill Gates doesn't give a crap about paying 35% on some of his income. He still has billions. Do you realize how ridiculous you sound?

You are mad about someone paying a 35% marginal rate on income above like 300k?

And yes, a tax cut can devastate the poor. We're seeing it now, with cuts in Medicaid, the primary health care provider for the poor. If we hadn't implemented those 2001 and 2003 tax cuts, and if we hadn't gone to war in Iraq(we went to Iraq for the benefit of some rich people), we'd have plenty of money for the poor.

[EarlCat]

[ QUOTE ]
What makes you assume that the employer would pay you their 6.2% of they didn't pay it to SSA?

[/ QUOTE ]

That's why I left it out of my complaint that the poorest of the poor still have to pay 6.2%

[lehighguy]

I am confused. If a person making $100,000 a year pays 30% of income they pay $30,000. If a person making $50,000 a year pays say 40% they pay $20,000. The rich person is still paying more, how can that be considered regressive....

From what I understand, 50% of the federal tax revenue comes from 1% of the populations. Sounds kinduv unfair to them huh. It's not like they use more government services then anyone else.

I know your gonna say: well they can afford it. I would counter with two points.
1) I can afford to donate $1,000 to somebody on the street right now. That doesn't necessarily mean I want to or should do it.
2) A lot of people in many parts of the country can't afford it. I live in NYC. Despite making $65,000 a year right out of college, I can just scrimp by. Rent is 2,000 and month (for a shitty apartment), NYC taxes are sky high, food is expensive, utilities, insurance, student loans, etc. A professional worker can barely get ahead these days in the northeast.

As for a consumption tax, I think it's obvious why it would increase savings. Consumption would be more expensive, so people would do less of it. Instead, they would invest thier money. Also, I have not taken jobs before because I decided pay-taxes wasn't worth it. Get rid of the taxes and work becomes more profitable.

[lehighguy]

I am confused. If a person making $100,000 a year pays 30% of income they pay $30,000. If a person making $50,000 a year pays say 40% they pay $20,000. The rich person is still paying more, how can that be considered regressive....

From what I understand, 50% of the federal tax revenue comes from 1% of the populations. Sounds kinduv unfair to them huh. It's not like they use more government services then anyone else.

I know your gonna say: well they can afford it. I would counter with two points.
1) I can afford to donate $1,000 to somebody on the street right now. That doesn't necessarily mean I want to or should do it.
2) A lot of people in many parts of the country can't afford it. I live in NYC. Despite making $65,000 a year right out of college, I can just scrimp by. Rent is 2,000 and month (for a shitty apartment), NYC taxes are sky high, food is expensive, utilities, insurance, student loans, etc. A professional worker can barely get ahead these days in the northeast.

As for a consumption tax, I think it's obvious why it would increase savings. Consumption would be more expensive, so people would do less of it. Instead, they would invest thier money. Also, I have not taken jobs before because I decided pay-taxes wasn't worth it. Get rid of the taxes and work becomes more profitable.

[Dead]

You can't afford to donate $1000 to someone as easily as someone making 5 million dollars a year a can. It's undoubtedly a larger chunk of your income.

That's why I favor a progressive tax structure, with steady increases in tax rates on higher incomes.

[jaxmike]

[ QUOTE ]
Bill Gates doesn't give a crap about paying 35% on some of his income. He still has billions. Do you realize how ridiculous you sound?

You are mad about someone paying a 35% marginal rate on income above like 300k?
[\qoute]

I am mad that anyone pays a higher rate than anyone else. Its not right or fair.

[ QUOTE ]

And yes, a tax cut can devastate the poor. We're seeing it now, with cuts in Medicaid, the primary health care provider for the poor.
[ QUOTE ]


That's not the fault of tax cuts. There shouldn't even be a national Medicaid system.

[ QUOTE ]

If we hadn't implemented those 2001 and 2003 tax cuts, and if we hadn't gone to war in Iraq(we went to Iraq for the benefit of some rich people), we'd have plenty of money for the poor.

[/ QUOTE ]

Ugh. Your ideas are misguided at best here. I would say we went to war for our security.

Why are the poor poor?

[jaxmike]

IE punish the rich for making money by making them give to the poor. No, thats not fair.

[Dead]

It's not punishment.

The rich do a lot for our society. No one is disputing that. They provide the capital for low interest home loans to low income people, for example.

Why do you consider it punishment? Making someone do something because of their status is not punishment. They should consider it a privilege.

[EarlCat]

[ QUOTE ]
I never said that the "rich" should support everyone, rather that we should have a progressive system where the middle class pays a higher percentage of their income than the lower class, and where the upper class pays a higher percentage of their income than the middle class.

[/ QUOTE ]

What exactly are you calling middle class? Average household income in this country is $40K.

By the way, if you're advocating that a 50K family pay no income tax, why are you defending the current system? Under the FairTax, a $50K family of 4 pays an effective TOTAL tax rate of less than 15%. That is much lower than than they pay now and a step closer to the structure you are advocating.

[ QUOTE ]
Bush wants the poor to pay more while the rich pay less, so by cutting taxes for the rich he is making property taxes and service fees go up nationwide.

[/ QUOTE ]

To hell with what Bush wants to do. Making this a partisan issue isn't gonna help anything. Look at the numbers.

[ QUOTE ]
Giving a payroll tax holiday would help everyone, but especially the poor. Exempt pay from the SS and Medicare taxes for a period of 2-3 months or so.

[/ QUOTE ]

Why in the world would you want to start taxing the poor again after 3 months?? Eliminate their payroll tax burden entirely.

[Dead]

[ QUOTE ]
Why in the world would you want to start taxing the poor again after 3 months?? Eliminate their payroll tax burden entirely.

[/ QUOTE ]

Even if a consumption tax is implemeneted, I don't think that the payroll tax burden should go entirely.

The poor should pay less taxes than the rich, sure, but SS is different. Calling the Social Security contribution a tax is disingenuous, because a tax implies that the money is gone forever. It's not. Social Security has been paying out for 70 years and most lower income people get back far more than they have paid into the system.

That's why I don't supporting unlocking the Social Security contribution from Social Security benefits.

But I do think that the system is stable enough to allow for a payroll tax holiday.

[andyfox]

The income tax is not a regressive tax. But the idea of a tax being regressive has not to do with the absolute amount paid, but rather the rate paid.

BTW, an income tax "rate" of 30% or 40% is usually talked about as the marginal rate. That is, everyone pays the same amount up to the point where the rate changes. That is on the first x dollars of income, we all pay the same rate. It is on the portion above x that the marginal rate comes into play.

The payroll tax is an example of a tax that is regressive. A person making $1,000,000 a year pays 1/10 the amount, as a percentage of his income, as a person making $100,000 (and the same absolute dollar amount.

In 2002 the average tax rate paid by the wealthiest 1 percent declined was 27.25 percent. The top-earning 25 percent of taxpayers earned 64 percent of the nation's income and paid more than four out every five dollars collected by the federal income tax (83.9 percent).

But this considers only the federal income tax. When the impact of all other taxes are considered, the wealthy pay almost the same percentage of their income in taxes as the non-wealthy.

One thing I agree with the President Bush on is that the tax system is a mess.

Of course a wealthy person can afford to pay a greater percentage of his income in taxes than a middle-income person (or a poor person). And they use more governments services, when you consider the special benefits the tax codes grants them and their access to influence. The tax code was written by and for the wealthy and the government is operated, to a large extent, on their behalf.

[jaxmike]

[ QUOTE ]
It's not punishment.

[/ QUOTE ]

You are taking THEIR money from them.

[ QUOTE ]
The rich do a lot for our society. No one is disputing that. They provide the capital for low interest home loans to low income people, for example.

[/ QUOTE ]

Without the rich the nation falls apart.

[ QUOTE ]
Why do you consider it punishment? Making someone do something because of their status is not punishment. They should consider it a privilege.

[/ QUOTE ]

This is my favorite. So, because someone makes a lot of money, they should be honored to have a disgustingly large percentage of their money taken from them and given to others. I can't follow this logic.

[EarlCat]

[ QUOTE ]
Even if a consumption tax is implemeneted, I don't think that the payroll tax burden should go entirely.

The poor should pay less taxes than the rich, sure, but SS is different. Calling the Social Security contribution a tax is disingenuous, because a tax implies that the money is gone forever. It's not. Social Security has been paying out for 70 years and most lower income people get back far more than they have paid into the system.

[/ QUOTE ]

It seems like you've changed sides. Earlier the poor couldn't even afford the basic necessities of life, let alone save and invest. Now they can somehow afford to contribute a % of their income earned from the first dollar for retirement. What gives?

Under the FairTax, the poor still receive their social security payments as if they continued to pay into the system. They would still get out far more than they put in (although the ROI is still laughable). The national sales tax funds social security and medicare without even requiring a payroll "contribution."

You're not gonna let a heartless libertarian like me become a bigger advocate for the poor are you?

[EarlCat]

[ QUOTE ]
...a tax implies that the money is gone forever. It's not. Social Security has been paying out for 70 years and most lower income people get back far more than they have paid into the system.

[/ QUOTE ]

That's another problem. Despite the track-record, there is no legal guarantee that SS will continue to pay. Current debate in Congress about benefit cuts should illustrate that. It would take only a brief moment of collective insanity (a la the Patriot Act) for congress to eliminate the benefits entirely.

[Dead]

Congress would never dare eliminate SS benefits. They know that if this happened, all 535 of them would be thrown out the next election. The Republicans might try to means test it, however, as they've done in the past. I am opposed to this. The rich deserve their SS just as much as the poor. They paid in.

[Dead]

[ QUOTE ]
[ QUOTE ]
Even if a consumption tax is implemeneted, I don't think that the payroll tax burden should go entirely.

The poor should pay less taxes than the rich, sure, but SS is different. Calling the Social Security contribution a tax is disingenuous, because a tax implies that the money is gone forever. It's not. Social Security has been paying out for 70 years and most lower income people get back far more than they have paid into the system.

[/ QUOTE ]

It seems like you've changed sides. Earlier the poor couldn't even afford the basic necessities of life, let alone save and invest. Now they can somehow afford to contribute a % of their income earned from the first dollar for retirement. What gives?

Under the FairTax, the poor still receive their social security payments as if they continued to pay into the system. They would still get out far more than they put in (although the ROI is still laughable). The national sales tax funds social security and medicare without even requiring a payroll "contribution."

You're not gonna let a heartless libertarian like me become a bigger advocate for the poor are you?

[/ QUOTE ]

I don't think you could be a bigger advocate for the poor than me, at least on this message board. /images/graemlins/crazy.gif It's hard to say that you advocate for the poor when your party(the Libertarian Party) basically says F the poor.

But decoupling Social Security benefits from the SS contribution is just a bad idea in my opinion, for the reasons listed above. It shouldn't come out of the general fund.

[EarlCat]

[ QUOTE ]
Congress would never dare eliminate SS benefits. They know that if this happened, all 535 of them would be thrown out the next election.

[/ QUOTE ]

They done a good job hampering free speech, free press, freedom from unreasonable search and seisure, right to an attorney, speedy public trial, right to privacy, etc. etc. etc. What makes you so sure they won't cut SS benefits?

Personlly I'd rather put it somewhere that I can at least sue to get it back, but that's a whole 'nuther debate.

[Dead]

Yes Republicans have done a great job doing all of the things that you listed above. I agree.

I just don't think that they'd take that risk. Social Security is still the third rail of American politics.

[andyfox]

They also have tax shelters and pay a lower portion of their income in other taxes. A a lower portion of their overall income is earned income (as opposed to capital gains, for example).

They don't have a disgustingly large percentage of their money taken from them (compared to others). When the impact of all taxes are considered (not just the federal income tax), they pay about the same percentage in taxes as the non-rich. The progressive income tax serves to even things up.

[Voltorb]

Pardon the interruption EarlCat, but seeing that you understand some of the things that the Bush administration has accomplished to undermine freedoms preserved in the constitution, I was wondering how you felt about their attitude toward economic disparity.

As you have probably garnered from my previous posts, I believe the Fair Tax planned outlined in the link you gave would be an excellent way to rid the country of the IRS and institute a fair and less intrusive way for the federal government to collect revenue. My worry is that, should the Bush administration and the Republican controlled congress put a national sales tax into effect, the result would be a mutated and twisted version of the Fair Tax plan that would be biased in favor of the rich.

Seeing as how this nation is already dangerously close to being an oligarchy, and that the Republicans are notorious for being the party for the wealthy, do you think this fear is unjustified? Erosion of the middle class is the first step to creating an oligarchy. Do think the Fair Tax plan could turn out to be a wolf in sheep's clothing, meant to destroy the middle class at the benefit of the wealthy?

[lehighguy]

I guess what I'm saying is, isn't the fact that it is a percentage of thier income enough. I still can't get over the fact that if I get a $10,000 raise at work why I'm only getting $5,000 to bring home. I mean what is the point of trying to get a raise.

I grew up working class. Many of my piers didn't bother with college or career (we all went to the same school so don't give me that crap). They make alot less. I don't see why I have to "contribute"(gross dollars) 3 or 4 times as much to society just cause thier lazy bastards.

[EarlCat]

[ QUOTE ]
I don't think you could be a bigger advocate for the poor than me, at least on this message board. /images/graemlins/crazy.gif

[/ QUOTE ]

I dunno...I'm the one trying to let them keep more of their hard earned money.

[ QUOTE ]
It's hard to say that you advocate for the poor when your party(the Libertarian Party) basically says F the poor.

[/ QUOTE ]

I'm not a member of the party (I use the little L). And I don't say F the poor. I do say F anyone who thinks they're entitled to what I earn, but that could just as easily be a rich AmericanAirlines exec as a poor person.

I completely believe in helping the poor get out of poverty. I'm even working towards becoming a financial counselor. I believe we need a tax code that eliminates the barriers to survival and more importantly the barriers to saving, investing, and wealthbuilding for the poor (and frankly for everyone). The more upwardly mobile we can make our nation, the better. Too much of the so-called help our government dishes out just lets these people just tread water til they die. We can do better.

This is not an us-vs-them rich-vs-poor thing. It's not red-vs-blue or Bush-country-vs-Bush-bashers. It's an American thing. I fully believe eliminating any and all taxes on income is best for everyone rich or poor (except, of course, IRS agents, and those people can just go F themselves).

[Dead]

So I assume that you're opposed to the Iraq War? I mean Bush isn't entitled to your tax dollars to spend on the war then, right?

And I can't stand the IRS either. They scare the poor by knocking on their doors and harassing them. This happens even more so now with Bush telling the IRS to step up investigations of low income people's tax situations.

[andyfox]

"I still can't get over the fact that if I get a $10,000 raise at work why I'm only getting $5,000 to bring home. I mean what is the point of trying to get a raise."

Uh, $5,000? If your lazy friends, because they're lazy, only get a $5,000 raise, and get to keep $3,000, you're $2,000 better off than they are for your industriousness. I know a lot of lazy people who make a lot of money and a lot of hardworking people who don't make as much.

The overall tax burden on the middle-class sucks, I agree.

[MtSmalls]

How does this supposed FAIR TAX, eliminate the social security and Medicare tax??

How do you calculate EXACTLY what a family under the poverty line would be taxed?? Or do you just make an estimate, and if its too low, well to bad? Or do you have to file to get an increase in your "prebate"?

[MtSmalls]

No, Jax, everyone does not pay the same rate. Everyone pays the same rate on what they spend, but they don't pay the same rate on what they MAKE> which is the definition of a regressive tax.

A family of four making $60K a year will spend nearly everything they make. They pay 25% of that in a consumption tax, they pay 22-23% of their income in taxes, assuming they have some modest 401K savings or some such.

A family of four making $200K spends maybe half of what they make, call it $120K, or twice as much as the previous family. They pay 12% of their income instead of 20%....

this spells REGRESSIVE TAX.

Your capital gains arguement is another in a long line of arguments by the conservatives that is simply trying to reward an investor/wealthy lifestyle rather than a work for a living lifestyle.

[Dead]

[ QUOTE ]
Your capital gains arguement is another in a long line of arguments by the conservatives that is simply trying to reward an investor/wealthy lifestyle rather than a work for a living lifestyle.

[/ QUOTE ]

Bingo. I think I said that earlier but it is very true.

[natedogg]

What astonishes me is that "revenue neutral" is accepted by all as a laudable goal. I would oppose a consumption tax that was revenue neutral.

Now, if we had a consumption tax set at a level that reduced revenues by 50%, I'd be all for it.

natedogg

[Dead]

I hope that includes a 50% cut in the Pentagon budget. Somehow I doubt it.

[EarlCat]

[ QUOTE ]
Pardon the interruption EarlCat, but seeing that you understand some of the things that the Bush administration has accomplished to undermine freedoms preserved in the constitution, I was wondering how you felt about their attitude toward economic disparity.

[/ QUOTE ]

The Bush administration, as far as individual freedom goes, makes me sick. I'm not sure exactly what you're referring to as an illustration of their additude toward economic disparity. Example?

[ QUOTE ]
As you have probably garnered from my previous posts, I believe the Fair Tax planned outlined in the link you gave would be an excellent way to rid the country of the IRS and institute a fair and less intrusive way for the federal government to collect revenue.

[/ QUOTE ]

And I'm so glad to see someone who is not conservative/libertarian say that. If there's ever been a mutually beneficial piece of legislation, its this.

[ QUOTE ]
My worry is that, should the Bush administration and the Republican controlled congress put a national sales tax into effect, the result would be a mutated and twisted version of the Fair Tax plan that would be biased in favor of the rich.

[/ QUOTE ]

Well, I don't necessarily believe the Republicans are in favor of helping the rich at the expense of the poor. It's not a zero-sum game. If they are really the party of the rich, they stand to benefit when more people can become rich. But I digress. /images/graemlins/tongue.gif

Either way, I don't think the GOP majority is big enough (nor ballsy enough) to pull something like that off. The Dems, even as a slim minority, are very good at standing in their way. If anything is going to screw the FairTax up at the expense of the poor, I think it will be leaving the current payroll taxes in place.

The other thing I worry about is passing the FairTax, but not repealing the 16th Amendment, leaving open the door for us in the future to be stuck with both a sales tax AND an income tax.

[ QUOTE ]
Seeing as how this nation is already dangerously close to being an oligarchy, and that the Republicans are notorious for being the party for the wealthy, do you think this fear is unjustified? Erosion of the middle class is the first step to creating an oligarchy. Do think the Fair Tax plan could turn out to be a wolf in sheep's clothing, meant to destroy the middle class at the benefit of the wealthy?

[/ QUOTE ]

No. First, like I said before, I don't agree with the premise that the GOP is the party of the welthy. The party of nosey prudes, homophobes, liars, and spineless, irresponsible politicians, yes, but not the wealthy. At the risk of starting a flame war, campaign contributions from the richest of the rich tend to go to Democrats. Not that it matters.

I believe the FairTax offers so much more opportunity to save and invest (to actually build wealth!) that the poor and middle class would find themselves much more upwardly mobile than they are now.

For instance, right now you can only invest $4k/yr in a Roth IRA to grow tax free. Under the fair tax, you could invest all you wanted tax free. Right now, when you cash out your 401k, you will be taxed. Under the fair tax, you wouldn't. I think this benefits the middle class more than anyone because it could litterally make the difference between financial independence and relying on a supplement from social security.

I don't fear the rich. I'm not wealthy yet, but I don't believe anyone stepped on me to get there. I won't have to step on anyone to either. I've seen enough people elevate themselves to a comfortable level of wealth that I believe just about anyone willing to put their heart and soul into it can do the same--and we're all better off when they do. I say get Uncle Sam the hell out of the way and let them.

[natedogg]

You know nothing. You reveal this with each new post you make. But you ARE a valuable partisan bulldog. I respect your dogmatism. Wait, no I don't.

Libertarian Socialist. What a load of nonsense.

Yes, I would cut the Pentagon budget by 50%. You know nothing.

natedogg

[EarlCat]

[ QUOTE ]
How does this supposed FAIR TAX, eliminate the social security and Medicare tax??

[/ QUOTE ]

It stops the collection of payroll taxes and instead funds medicare and soc sec payments out of the general fund (kinda like how the social security tax helps fund other programs now).

[ QUOTE ]
How do you calculate EXACTLY what a family under the poverty line would be taxed?? Or do you just make an estimate, and if its too low, well to bad?

[/ QUOTE ]

They're taxed at the same rate everyone else is. 23% on consumer goods and services. The prebate is based on the poverty level set by the Department of Health and Human Services (the same standard used now for general welfare, food stamps, etc). If the poverty level is $18,000, the government sens you the amount of tax you'd have to pay on $18,000 of spending ($4,140).

[ QUOTE ]
Or do you have to file to get an increase in your "prebate"?

[/ QUOTE ]

The prebate only changes depending on the size of your household. A family of 4 gets this. A family of 6 gets that. If you had a family of 4 and then had another child, your payment would go up accordingly.

Whether you'd have to mail a form or call a number or use a Web site to tell them I'm not sure. Probably not much different than how you'd collect other government benefits.

[MMMMMM]

If this tax becomes a reality and replaces the income tax (as I believe it ought), we may hopefully see a resurgence in the application of time-tested wisdoms in our everyday lives (it would certainly encourage me to be thrifty, at least).

We may also see more common sense taking root and developing in the common people and privileged few alike. This cannot be but good.

For the very Essence of Wisdom, in few Nutshells, we may turn once again to the esteemed words of one of the most renowned patriarchs of our country. Indeed, I humbly suggest that the following words might bear more Wisdom, and perhaps ought to be accorded more Weight, than the entire Sum of all Western Philosophy from Socrates to Dewey, as described in Russell's magnificent tome, A History Of Western Philosophy.

At any rate, if the Fair Tax comes into being, it will be a step in the direction of Wisdom; and without Wisdom, it is but a short time, 'til even the Learned are Lost.

If the Fair Tax comes into being, the downtrodden yet diligent shall quickly rise economically; the rich shall get richer still: but only if they listen to Reason. Personally speaking, if such things come to pass, I shall no doubt become more diligent and frugal as well; just what does that say of my present character?

Therefore, without further ado, here is the LINK, which shall describe for the Reader the road to Fortune; and be not fooled, dear Reader: the author of this short piece is probably wiser than even the most highly esteemed Ray Zee--which is saying a great deal more than any of the newcomers here, as well as most of the oldcomers (myself included), might in fact be able to guess.

http://usa.usembassy.de/etexts/funddocs/loa/bf1758.htm

[Zeno]

[ QUOTE ]
Now, if we had a consumption tax set at a level that reduced revenues by 50%, I'd be all for it.

[/ QUOTE ]

That coupled with the repeal of the 16th amendment.

Now that is progress.

-Zeno

[Voltorb]

I honestly didn't have any examples of the Republicans attitude toward economic disparity, which is why I neglected to characterize it. I think that the Republicans would tend to be more apathetic towards the poor than Democrats, but this is pure speculation.

You may be correct in saying that the Republicans are not the party of the rich; I honestly don't know if there is any basis to this assertion, although they are often accused of it.

Your point about the wealthiest people in America often making campaign contributions to the Democratic party leads into my next point. Most all the money that flows into both parties comes from very wealthy individuals and corporations. In my mind, allowing this to continue can only lead to the creation of an effective oligarchy, which is why I fear that such legislation may simply be another law that seems good on the surface (like the Patriot Act) but is rotten at the core. Anyway, I'm very wary of government, and my suspiciousness here is just a reflection of my overzealous pessimism.

You made an excellent point of the legislation being a non-zero sum situation. The fact that it would be mutually beneficial may be enough to deter the powers from toying with an excellent plan. However, by giving the poor a true leg up, they would be relinquishing some of their own power, which I assume the rich are loathe to do. I sincerely hope your optimism is not unfounded. I think this legislation would be worth a go, I just hope that it won't be altered much.

They must repeal the income tax for it to be worth anything, in my opinion.

[EarlCat]

[ QUOTE ]
So I assume that you're opposed to the Iraq War? I mean Bush isn't entitled to your tax dollars to spend on the war then, right?

[/ QUOTE ]

He's not entitled to my tax dollars for anything. As for the war, Bush didn't have the authority to declare war. That's Congress' job, and they skirked their responsibility. That being said, I think Saddam was a threat wating to happen and it was in our own self interest to remove him. If he wasn't a threat, I wouldn't support the war (I don't believe in "humanitarian" wars or "spreading democracy") Anyhoo, I know you disagree, but national defense is one of the few legitimate functions of government. I'd rather it had been paid for with Iraqi oil. You can flame me in another thread.

[ QUOTE ]
And I can't stand the IRS either. They scare the poor by knocking on their doors and harassing them. This happens even more so now with Bush telling the IRS to step up investigations of low income people's tax situations.

[/ QUOTE ]

Disgusting isn't it.

[EarlCat]

[ QUOTE ]
I honestly didn't have any examples of the Republicans attitude toward economic disparity, which is why I neglected to characterize it. I think that the Republicans would tend to be more apathetic towards the poor than Democrats, but this is pure speculation.

[/ QUOTE ]

I can see where the stereotype comes from, but I believe the Republicans are more apt to believe the poor are capable of making it on their own. Does a mother bird toss her babies out of the nest because she's cruel?

[ QUOTE ]
However, by giving the poor a true leg up, they would be relinquishing some of their own power, which I assume the rich are loathe to do.

[/ QUOTE ]

I don't think the rich fear the poor either. The rich are painted as greedy and horrible (as we watch Enron execs bilk investors for billions), but I don't think that's the norm. 80% of America's millionaires are 1st generation. They were once poor or middle class. They're not out to step on us...they make us TVs and computers and cars and toasterovens. Don't they sell more if we poor and middle class people have more to spend?

[ QUOTE ]
I think this legislation would be worth a go, I just hope that it won't be altered much.

[/ QUOTE ]

You and me both.

[ QUOTE ]
They must repeal the income tax for it to be worth anything, in my opinion.

[/ QUOTE ]

Amen.

[BCPVP]

[ QUOTE ]
I honestly didn't have any examples of the Republicans attitude toward economic disparity, which is why I neglected to characterize it. I think that the Republicans would tend to be more apathetic towards the poor than Democrats, but this is pure speculation.

[/ QUOTE ]
Instead of turning this into a flame war between Dems and Reps, let's just leave it as both support the poor, but have different ideas about how to do it. I believe the classic arguement is who should help the poor, gov't or private citizens?

[Dead]

[ QUOTE ]
You know nothing. You reveal this with each new post you make. But you ARE a valuable partisan bulldog. I respect your dogmatism. Wait, no I don't.

Libertarianism. What a load of nonsense.

[/ QUOTE ]

[jaxmike]

i am in no way saying i support the current system. i think everyone should have to pay the exact same rate, thats it. there is nothing unfair about that.

[Voltorb]

Jaxmike, I shall attempt to show you why everyone paying the same rate is indeed, not fair. Assume a nation that has an average cost of living of ten thousand dollars per year. The country has an income tax of 99%. This is extremely high, but physicists and mathematicians will often look at the extremes of variables to determine how a system behaves, so bear with me. Under this tax system, everyone pays the same rate. There are no refunds, and there is little to no state welfare (use your imagination if you need to know where the money goes). The average income in this country is two hundred thousand dollars per year, with approximately ten percent of the country making over one million dollars per year (this is a very industrious nation). Now, you are telling me that this situation is fair. The average income for most people in this nation after taxes is two hundred dollars, roughly two percent of the average cost of living. Only ten percent of the population can even maintain a decent standard of living after taxes.

This is why our government has gone through great pains in an attempt to make tax exemptions for those who can barely afford to pay taxes, for those who really need the extra money. In my opinion, this is more fair, as it allows everyone a fair chance at maintaining a decent standard of living. A progressive income tax is simply an extension of this basic principle.

Taxes are inherently unfair. To say that legalized theft is fair in any form is ridiculous. But if we applied the same principle to all income levels, we would inadvertently tax the poor to a point bordering on sadism.

In your opinion, even the Fair Tax plan is unfair.

[adios]

[ QUOTE ]
And yes, a tax cut can devastate the poor. We're seeing it now, with cuts in Medicaid, the primary health care provider for the poor.

[/ QUOTE ]

Ah an excercise in disinformation. Care to support this with actual data? I can refute it easily btw. This statement is plain wrong.

[ QUOTE ]
If we hadn't implemented those 2001 and 2003 tax cuts, and if we hadn't gone to war in Iraq(we went to Iraq for the benefit of some rich people), we'd have plenty of money for the poor.

[/ QUOTE ]

First you'd have to define what "plenty of money" for the poor is. Second of all you'd actually have to support your argument with credible data.

A progressive tax system is all about redistributing income. Until you and your ilk can provide me with concrete numbers on how you want income redistributed I'll support no politician that wants to raise taxes. When you and your ilk provide me with the concrete numbers on how you'd like to see income redistributed then we might debate those numbers. Without those concrete numbers I have no use for pleas on changing the current distribution except to redistribute less.

[jaxmike]

[ QUOTE ]
Jaxmike, I shall attempt to show you why everyone paying the same rate is indeed, not fair. Assume a nation that has an average cost of living of ten thousand dollars per year. The country has an income tax of 99%. This is extremely high, but physicists and mathematicians will often look at the extremes of variables to determine how a system behaves, so bear with me. Under this tax system, everyone pays the same rate. There are no refunds, and there is little to no state welfare (use your imagination if you need to know where the money goes). The average income in this country is two hundred thousand dollars per year, with approximately ten percent of the country making over one million dollars per year (this is a very industrious nation). Now, you are telling me that this situation is fair. The average income for most people in this nation after taxes is two hundred dollars, roughly two percent of the average cost of living. Only ten percent of the population can even maintain a decent standard of living after taxes.

[/ QUOTE ]

Here is where you are wrong. If, like us, this nation is a representative democracy, then this is indeed fair. Reason, because the people consented to it and everyone is being treated the same.

[ QUOTE ]
This is why our government has gone through great pains in an attempt to make tax exemptions for those who can barely afford to pay taxes, for those who really need the extra money. In my opinion, this is more fair, as it allows everyone a fair chance at maintaining a decent standard of living. A progressive income tax is simply an extension of this basic principle.

[/ QUOTE ]

I honestly do not mind if people are exempted from any taxes up to the poverty level. However, taxing one person a higher rate than another is unfair. Progressive tax systems are unfair, people are not treated equally.

[ QUOTE ]
Taxes are inherently unfair. To say that legalized theft is fair in any form is ridiculous. But if we applied the same principle to all income levels, we would inadvertently tax the poor to a point bordering on sadism.

In your opinion, even the Fair Tax plan is unfair.

[/ QUOTE ]

I disagree. People consent to taxes through the government. There has always been an ability for the government of this nation to tax its citizens under the constitution. I think that taxing one man/woman at a higher rate than another man/woman is unfair. Simply, I think that in any scenario where one person is taxed at a higher rate than another then this does approach legalized theft. I disagree with it.

In the end. Any system that taxes one person at a higher rate than another person is unfair to me.

[MtSmalls]

I think a prime example of economic disparity is sitting in front of the Senate as I write this, that is the Bankruptcy bill that is being considered. In essence it makes it virtually impossible for people to declare bankruptcy under Chapter 7 (full liquidation of assets to pay debts, unsatisfied debts, except those owed the government, are wiped out) and forces them to use Chapter 13 (liquidation of assets to pay debts, unpaid debts are then paid over 3-5 years). Several amendments were proposed to this bill, including a homestead provision (leaving the equity of your home safe from liquidation), a provision to exempt the elderly, military personnel whose bankruptcy is directly related to their overseas service, people whose bankruptcy is a direct result of medical catastrophe or identity theft. Every single amendment was shot down, every single Republican in the Senate voted against every single amendment.

Somehow, amazingly, Chapter 11 protection for corporations was not included in the bill. Oh and the amendment to include assets in trust accounts was shot down as well.

[Voltorb]

Okay, suppose that the hypothetical nation is a representative democracy. Then further suppose that the representatives refuse to change the tax system because they receive an annual salary of ten million dollars per year, even after they complete their service. The only incentive to change is to serve their constituents, but change means that this salary will be reduced to nothing. A sizable portion of representatives see the good in change, but because they do not want to end up as paupers, any proposal recommending a tax change is continually shot down. Is this system still fair?

You do realize, that exempting those up to the poverty level would create a progressive tax system. Although it is quantifiably at the low end of all progressive systems, it is progressive nonetheless. Are you saying that this would still be an unfair system, only necessarily unfair?

There has not always existed the power for our government to directly tax its citizens. Article 1, Section 9, Clause 4 of the U.S. Constitution specifically prohibits this. It was not until ratification of the sixteenth amendment on February 13, 1939, that the U.S. government gained the power to directly tax its own citizens.

[ QUOTE ]
I disagree. People consent to taxes through the government.

[/ QUOTE ]
What do you mean by this? I hope you are not suggesting that whenever the U.S. government does X, then the people have consented to X because the U.S. government, a constitutional republic, always represents the will of the people. Unless you are shockingly naive, you should know by now that the U.S. government does not always represent the will of the majority of its citizens.

At any rate, I do not consent to taxes through the government. I consent to taxes by the action of paying them. But I only pay them because if I do not, I will be punished. Therefore, the federal government is taking my money through the use (threat) of force. This action is robbery. Because it is legal, it is legalized robbery. (I use the word robbery instead of theft now because theft or the act of stealing does not necessarily involve force. My mistake.)

Now if I were satisfied with the direction the current federal government was taking this nation, I would happily pay taxes. Due to my disatisfaction, I unwillingly consent to pay taxes. I only willingly consent to paying for services that I desire, and I honestly don't desire many of the services the federal government is currently providing.

[andyfox]

I disagree in everyone paying the same rate, because it's much more of a burden on the less well-off. But, irrespective of my feelings about it, everybody does pay about the same rate now, when one considers all taxes, not just the federal income tax.

[Dead]

Check out my post from 3:53 pm yesterday. I lay out a possible tax structure in it.

[adios]

I saw it but that doesn't address the distribution of income that you seek. Put another way what is the resulting distribution of income that results? To me it looks like you pulled a bunch of numbers out of your ass. I also noticed that you sidestepped you disinformation about medicaid when I called you on it.

[jaxmike]

First. Article I, Section 2 of the US Constitution.

[ QUOTE ]
Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons.

[/ QUOTE ]

Article 1 Section 9 Clause 4 says this

[ QUOTE ]
No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.

[/ QUOTE ]

Notice how it said "unless in Proportion to the Census or Enumeration" that part authorizes Congress to tax also, but not a direct income tax on its citizens.

This is where that took place. Amendment XVI of the US Constitution.

[ QUOTE ]
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

[/ QUOTE ]

This authorized Congress to ignore teh census or enumeration. Thus allowing a direct income tax on the citizen.

You are out of your element Donnie.

Now, you do consent to taxes whether you want to admit it or not. You do so in being a citizen of the nation or working in the nation.

Now, finally, when I said that all taxes up to the poverty line should be returned, I believe that should be the case for ALL people, thus, its still fair to all.

One more note, in being a citizen, you agree to follow the laws laid forth by the government. You have every right to vote out those who you do not like. Thus, you do consent, like it or not.

[EarlCat]

[ QUOTE ]
Assume a nation that has an average cost of living of ten thousand dollars per year. The country has an income tax of 99%. This is extremely high, but physicists and mathematicians will often look at the extremes of variables to determine how a system behaves, so bear with me. Under this tax system, everyone pays the same rate. There are no refunds, and there is little to no state welfare (use your imagination if you need to know where the money goes). The average income in this country is two hundred thousand dollars per year, with approximately ten percent of the country making over one million dollars per year (this is a very industrious nation).

[/ QUOTE ]

The idea that that poor would be dis-porportionately hurt by this 99% flat tax structure doesn't hold water. With a 99% income tax, virtually nobody would generate any income whatsoever. You have eliminated 99% of the reason people work and earn in the first place! Everybody gets screwed. Economists call this the laffer curve. As the tax rate approaches 100%, the taxes collected (along with taxpayers' incomes) approach $0. Under your example, the people would probably resort to a barter system or even the black market.

I only support a progressive tax system in so much as people should be able to earn and spend enough to survive without being burdened by taxes. Beyond that, we should all play by the same rules. Someone who works two $10/hr jobs shouldn't be taxed at a higher rate than someone who only works one.

[Voltorb]

That is exactly the point I was making there, jaxmike. The Constitution did not allow the federal government to directly tax a U.S. citizen until ratification of the sixteenth admendment.

If you carefully review my post, nowhere did I make the statement that I did not consent to pay taxes. My only argument was the manner in which I consented. In fact, I even stated twice that I unwillingly consented to paying taxes. Your reading comprehension needs improvement.

Your math skills aren't so good either. Let's assume a nation that taxes a citizen 15% of his income after 10,000 dollars. You can easily work out an equation to determine what percentage of his total income is being taxed. Let X equal the citizen's total income. Then the percentage of the total, call it P, is given by P = 15(X-10000)/X. For a worker making X = 20000 dollars, P = 7.5%. For a worker making X = 100000 dollars, P = 13.5%. If you were to plot this curve, you would find that, as X increases, P increases monotonically to an asymptote at P = 15%. As the worker's income increases, the percentage of his income taxed by the government also increases. In effect, this system is progressive. Is this system still fair?

If you wanted to get real fancy, you could include the tax rate and the amount of income that is not taxed as variables. Then you would just take the partial derivative of P with respect to X, which yields something proportional to the inverse of X squared. The inverse of X squared is positive for all values of X, which means that P is increasing over the entire domain of X. This is true no matter what you eventually decide for the tax rate and the amount of income not to be taxed, assuming these values are always positive of course.

[jaxmike]

no, the only fair tax is taxing everyone at the same percentage rate. i understand the math behind it, and you should understand the math and logic behind what i am saying.

logic

person A pays 15% = person B pays 15%
person A pays 20% > person B pays 15%
person A pays 15% < person B pays 20%

which of these is equal hence fair?

[EarlCat]

[ QUOTE ]
no, the only fair tax is taxing everyone at the same percentage rate. i understand the math behind it, and you should understand the math and logic behind what i am saying.


[/ QUOTE ]

I think you're both saying the same thing. If the first $10k is exempt, then a flat % kicks in, two things are true:

1) The rich and middle class are taxed at the same rate--x% dollar for dollar after the 10k exemption. It is generally agreed that this is "fair."

2) Because of the exemption, the rich pay higher % of their total income as their income increases, making the "flat" rate still progressive.

These two statements are true for both the FairTax and the Flat Tax, and both are preferable to the graduated system.

There are three reasons I wholeheartedly oppose any taxes on income, even the Flat Tax. First, taxes on income are necessarily intrusive because the government has to find out your income is before they can tax it. Second, they discourage saving and investing, hindering the poor and middle class' ability to build wealth. Third, the completely unfair graduated tax structure we have now IS the flat tax--that is, the flat tax after almost 100 years of incremental increases made in the name of the "good of society." When it was originally created, it was flat. If we pass the Flat Tax, it won't belong before we get the Newer Deal and the Greater Society and end up right back in the mess we're in now.

[jaxmike]

I dont mind the rich paying more, for they make more. I do mind them paying a higher % of their income though. further, i think any income tax is bad because of privacy issues.

[EarlCat]

[ QUOTE ]
I dont mind the rich paying more, for they make more. I do mind them paying a higher % of their income though. further, i think any income tax is bad because of privacy issues.

[/ QUOTE ]

If I really had it my way, we'd all pay the same dollar amount--like membership in a club or a magazine subscription. And if I had it my way, it would cost about as much as a magazine subscription. /images/graemlins/laugh.gif

[Voltorb]

This is what I meant with your arguments being non sequitur. You have totally shirked the points I brought up in the last post, and brought out a totally new line of argument.

I'll indulge you a little, but honestly jaxmike, I really can't discern your assumptions from your conclusions. If you call this logic, you have a poor understanding of this subject as well. Please clearly state your assumptions, and then show how your conclusions follow from them. It's okay if you want to assume I know all the rules and proceed with a less rigorous dialogue, but at least give me a place to start,

[ QUOTE ]
logic

person A pays 15% = person B pays 15%
person A pays 20% > person B pays 15%
person A pays 15% < person B pays 20%


[/ QUOTE ]
I will assume that these are your assumptions. I will agree with these assumptions, if that is indeed what they are. The desire is to draw the conclusion that option one is equal, and hence fair. But with your final statement you have simply begged the question. In no way have you shown me that equal is equivalent in meaning to fair. Furthermore, if equal does mean fair, I can show you that option one can be unequal in certain aspects (namely the total amount paid), and hence unfair.

Now I think you have contradicted yourself.

[ QUOTE ]
Now, finally, when I said that all taxes up to the poverty line should be returned, I believe that should be the case for ALL people, thus, its still fair to all.


[/ QUOTE ]
I have clearly proven that returning all taxes up to the poverty line, even when these taxes are returned to all taxpayers, results in those with higher incomes being taxed at higher percentage rates.

[ QUOTE ]
no, the only fair tax is taxing everyone at the same percentage rate.


[/ QUOTE ]
So which is it jaxmike. Can a progressive tax system like the one mentioned in the second quote be fair, or can a tax system only be fair if everyone pays the same percentage rate.

[jaxmike]

ugh. ok, everyone is taxed at the same rate. everyone is given the same amount back. just because one person made more money is irrelevant so long as the rates and the amount given back, if even paid in is the same, its fair to me. are the wealthy paying more in this case, yes, but there are no artificial things used, other than the poverty level which is applied to all and applied evenly, to alter the amount paid. so yes, its fair, as the same rules apply to all.

[andyfox]

"Someone who works two $10/hr jobs shouldn't be taxed at a higher rate than someone who only works one."

If one guy works 40 hours/week, and the other 60 (40 at job A and 20 at job B), they are taxed at the same rate for the first 40 hours. If the income from the second guy's second job puts him over the threshold where the marginal rate changes, he's taxed at a higher rate for the additional income that is over the threshold. And they both pay the same payroll tax rate on all income. At $10/hour, the payroll tax is probably a bigger bite out of their income than the income tax.

[James Boston]

[ QUOTE ]
Bill Gates doesn't give a crap about paying 35% on some of his income. He still has billions. Do you realize how ridiculous you sound?

[/ QUOTE ]

A little off topic, but you do realize that Bill Gates doesn't pay anywhere close to 35% don't you? I don't know which of these 2 systems I like better, but one thing about the national sales tax that appeals to me is that it can't be avoided through tax shelters, at least not as easily. That's the problem with a "progressive" tax system. The "super-freakin-rich" are techinically taxed at a fair rate, but aren't paying taxes.

[Dead]

Of course you can avoid that, but you'd still create a huge underground economy for food and medical supplies. Who is going to pay ~20% extra on all their purchases?

And I wasn't saying Gates paid 35%. I was just using the maximum marginal tax rate that could be applied to his income, but you are right about tax shelters.

[James Boston]

I failed to mention that if a national sales tax were implemented, food, medicine, housing, and probably a few other things, shouldn't be taxed. It would create an underground economy, and mainly it's just not right to tax things that people really need. Another good thing I can see coming from a national sales tax is this: everyone says it will tax the poor more, but don't rich people generally spend alot more? The sales tax on a Honda Civic and on a Bentley are going to be very different. Here's another idea: impose the sales tax for certain types a purchases once the purchase surpases a set amount. For instance, everyone needs a place to stay, so I don't think sales tax should be applied to rent, or the purchase of a home. But, if the purchase enters the realm of luxury rather than necessity, why not tax it? Homes under $200,000= no tax. $200,001+ = 1% on the value over that number, hypothetically.

[Dead]

If you exempt stuff then otherswill clamor for exemptions and the effective rate will end up being 40%? Who's going to pay that.

Look at England and their VAT system. It sucks.

[EarlCat]

[ QUOTE ]
Of course you can avoid that, but you'd still create a huge underground economy for food and medical supplies. Who is going to pay ~20% extra on all their purchases?

[/ QUOTE ]

Nobody would be paying that much extra on all their purchases. First, take-home pay goes up because of no withholding and no payroll tax. Second, prices go down because imbedded corporate taxes (which are always passed on to the consumer) would be eliminated--this is approx 20% of the price of all consumer goods.

Let's say you withold 13% of your earnings (about $15 for every $100 you take home). Take your $1000 paycheck, raise it to $1150 (with no witholding), and buy $100 of groceries (which are now only $80 since imbedded taxes are eliminated) and add a 23% sales tax.

Income Tax system: $1000 paycheck - $100 food = $900 left over.
FairTax: ($1000 + $150) paycheck - ($80 food x 1.23 tax) = $1051.60 left over.

This is like getting your food for free, and that's not even counting the prebate!

[EarlCat]

[ QUOTE ]
If one guy works 40 hours/week, and the other 60 (40 at job A and 20 at job B), they are taxed at the same rate for the first 40 hours. If the income from the second guy's second job puts him over the threshold where the marginal rate changes, he's taxed at a higher rate for the additional income that is over the threshold.

[/ QUOTE ]

Why should someone who works longer than another person have to pay a higher % in taxes? It's not like the other guy is less fortunate. He just goes home sooner.

Say you work in a widget factory and make $10 an hour. Then you go work at night as a janitor for another $10 an hour. Say I stay home watching Ricki Lake all day, and then work with you at night cleaning toilets. Certainly you're the one contributing more to our great nation by working longer hours and thus paying more taxes. Is it fair to tax you at an even higher rate for doing so?

How wealthy would our nation be if we were taxed at a higher rate the less we worked?