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What nails a lot of mobsters who don't savvy laundering too well is that it's clear they're earning large amounts of money, but aren't paying taxes on those sums. Under the fair tax, there's no such clear record -- they pay taxes only on goods and services, so nothing to declare, and so no way to compare their tax returns with their obvious wealth.** spoiler omitted **
EDITED TO ADD: Employers will still be required to send in earnings reports of their employees, since Social Security is based on earnings. So, there will be a record of how much an individual earned.
This isn't the way money laundering works.
(The last thing I want to do is spell out money laundering techniques on the forums, so I will paint with a broad and general brush.)
Money laundering, by definition, is taking money gained through illegal enterprise and disguising the source of it so that it can be used to make legitimate purchases. Under the income tax system, illegally gained money cannot be declared as income, so drug dealers, pimps, thieves, and so on, have to find creative ways to declare an amount of income that reflects the wealth they have. If they get $100k in drug money and bury it in their yard, there's no problem, but if they live a $100k lifestyle without claiming any income, they would be inviting a federal investigation. And, like Al Capone, might be charged with tax evasion.
Money laundering creates fake income that a criminal can claim on their income taxes to justify the amount of money that they are spending.
If the federal government operates on a sales tax model, they can purchase freely, because no explanation of their income is required.
That said, one thing I'm curious about in the Fair Tax proposal is how the "prebates" work. In order to determine who gets a "prebate", income would have to be determined. In that case, people may have to file income statements with the IRS anyway.
It's also worth pointing out that Income Tax returns are only one piece of the puzzle in money laundering investigations. People who obtain money through illegal enterprises also have to deal with various financial reporting requirements that apply to banks and alert federal authorities to large or suspicious transactions involving cash, wire transfers, and monetary instruments that can be purchased with cash.
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Money laundering, by definition, is taking money gained through illegal enterprise and disguising the source of it so that it can be used to make legitimate purchases.
1. Open fake jewelry/clothing/laundromat/pizzeria/etc. store
2. Process Ill-gotten gains as income for said store3. ???
4. Fun and profit!
I think the issue you're having is surrounding witholdings from your paycheck.
No; that's not the issue. Right now I pay federal taxes in more than one place: on federal withholding from my paycheck (as you point out), on interest & dividends from investments (which you're ignoring), and in one or two other places. Let's leave state taxes out, as you've said. The taxes I pay on interest & dividends are >> 0, and I don't have that much invested. Someone about to retire will be paying more on I&D than they will on their paychecks.
Current: Tax rate x (income + I&D).
Your Model: New sales tax = old Tax rate x income.
If A, B, and C are numbers above zero, then C (A+B) > C (A).
In other words, the consumption tax would have to increase to cover the tax on interest & dividends already being collected. If not, the "fair tax" system does nothing but encourage people to hoard money and not work.
That said, one thing I'm curious about in the Fair Tax proposal is how the "prebates" work. In order to determine who gets a "prebate", income would have to be determined. In that case, people may have to file income statements with the IRS anyway.
No. Prebates are based on the size of your household, and the federal poverty level.
For a household of 4, the federal poverty level for 2009 was: $22,128.
Therefore, 23% of that is $5089.44. Divided by 12, that equals a prebate check of $424.12 per month.
It doesn't matter if you are a family of 4 living on $15k/year, or if you're a neurologist with a wife and 2 kids pulling in $1million/year. You get the same prebate check.
Current: Tax rate x (income + I&D).
Your Model: New sales tax = old Tax rate x income.If A, B, and C are numbers above zero, then C (A+B) > C (A).
In other words, the consumption tax would have to increase to cover the tax on interest & dividends already being collected. If not, the "fair tax" system does nothing but encourage people to hoard money and not work.
The 23% figure includes captial gains taxes and estate taxes.
There is no penalty on saving money. People don't "hoard" money. At some point, it gets spent. That's when the tax is paid, when the retiree buys that brand new boat to spend out the last of his days, or when he buys a casket to get buried in. And when he dies and passes his remaining fortune on to his children, they don't pay estate taxes. The children can spend the money, or invest the money, however they want. When the money is spent, it gets taxed.
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I think fundamentally there is a conflict of goals between what Kirth is saying and what Doug is saying. Kirth's point is that encouraging people not to spend money could hurt the economy and tax revenue would take a hit if it's sales tax based and people aren't spending. I think Doug's point is that saving should be encouraged, and a period of correction to get the US economy from consumption-based to production-based is needed. I suspect that is an argument that will never be resolved.
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Current: Tax rate x (income + I&D).
Your Model: New sales tax = old Tax rate x income.If A, B, and C are numbers above zero, then C (A+B) > C (A).
In other words, the consumption tax would have to increase to cover the tax on interest & dividends already being collected. If not, the "fair tax" system does nothing but encourage people to hoard money and not work.
I don't know what the actual rate would have to be now to remain revenue neutral, but at the time of the publishing of the FairTax book, the percent required for the FairTax to be revenue neutral on consumption vs all current federal revenue was 23% when calculated as part of price where the price includes the tax, or 29.9% when calculated as state and local sales taxes are usually calculated.
The only way to hoard money and have it not increase economic activity and thus consumption and tax revenue is to store it in your mattress. Some people do this. Most deposit it in banks - which makes it available for loans to people and corporations - or invest it in other ways.
Bob owns a small shop. When he pays employees, he removes their federal witholding, 7.5% of gross for social security, the medicaid/medicare taxes from his employees' check to pay to the government. He also pays 7.5% of his employees' income on top of that for social security. The government receives 15% of his employee Alice's gross income in social security tax - but half of that comes from Bob without ever being considered part of Alice's gross income. If Alice make $24,000 / year, the actual base cost to Bob to employ Alice (without considering benefits) is $25,800. Social security gets $3600 of that total. Let's say the fair tax is instituted. There are a few options on how it will play out for Alice and Bob with regard to employee salaries..
1. Bob could decide to give Alice the same take home pay she currently recieves. Let's assume Alice is taxed about 15% total - her salary would drop from the nomial 24,000 she recieves now to 20,400 - but she would have the same amount of spending money, because she's no longer taxed on her income. Bob will save $5400 a year on Alice's employment costs.
2. Bob could decide to leave Alice's salary where it is. Alice now has an additional $3600/year to spend. Bob gets to save $1800 a year in outlay for her employment as well, because he's not paying that extra 7.5%.
3. Bob could decide to pay Alice the true cost of her employment. In this case her salary would rise to $25,800, giving her a net cash gain of $5400 on take home pay.
With options 1 and 2, the business has lower overhead. This will lead to some combination of:
a. Lower Sales prices (undercut / catch up to competition)
b. Greater Profits (take the money to the bank!)
c. Reinvestment in the business in some manner (expansion)
I expect that intially salaries will remain the same, people will have more take home money, and prices will jump as the sale prices on products will not shift much and the tax is added on top. The prebate will help a bit, but this will be a painful period, espeically for those that are on the low side of the income scale, because they pay few taxes now, and will only see the prebate savings, not the tax savings to keep their purchasing power where it was.
Someone will use the lower cost of employment and the removal of current corporate tax structures that affect spending to lower prices. Once that starts, others will have to follow or lose market share. Expectations of the economists that worked on the FairTax book I read were that salaries would remain steady, not rise or fall, prices would settle around 20% lower than they are now - indicating that prices would end up around 5% higher than they are now.
After things settle at a new equilibrium, the biggest losers are probably retirees. They paid into the income tax system their whole life, and now their retirement income is taxed at the same rate unexpectedly. The prebate should help with this, but they will see the least benefit from the FairTax system, I think.
I think the FairTax will be very difficult to push through. It removes power from Congress, it will make the true cost of government immediately obvious to every consumer, and it will be raise prices of all goods and services in the country quite sharply, initially.
I also think removing embedded taxes from American products and services will help America compete overseas, forcing the tax rate to be immediately obvious to every consumer will impede Congress in raising tax revenue for frivolous purposes, as they could no longer increase taxes on X small or unpopular group to pay for bridges to nowhere, and removing the complicated tax structure should help people and businesses make decisions for business reasons rather than tax reasons. I like that it doesn't tax production anymore. I like that enforcement will be at points of sale rather than each individual household.
I don't know what the actual rate would have to be now to remain revenue neutral, but at the time of the publishing of the FairTax book, the percent required for the FairTax to be revenue neutral on consumption vs all current federal revenue was 23% when calculated as part of price where the price includes the tax, or 29.9% when calculated as state and local sales taxes are usually calculated.
I expect that intially salaries will remain the same, people will have more take home money, and prices will jump as the sale prices on products will not shift much and the tax is added on top.
Exactly! These numbers are higher than the current sales taxes, which means that the prices of goods (after taxes) would go up unless all merchants universally decided to lower prices. So when people repeat "stuff will cost the same!", I don't understand how a $100 item with 23% sales tax costs the same as a $100 item with 15% sales tax.
$123 > $115, in my math -- and obviously in yours as well -- but somehow not in Doug's.
And that assumes 23% is enough, which I also question -- see below.
What I mean by the imprortance of investment income is this -- say I'm a millionaire right now (ha!). No matter how much I spend, I still pay a boatload of money (money I'm not personally using) in taxes -- I might have $2M in income a year from my assets, and whether I spend $20,000/year on stuff or $1,000,000/year on stuff, Uncle Sam is still getting roughly $700,000 a year from me.
Under the Fair Tax, if I spend that same $20,000/year, Uncle Sam is getting $4600 a year from me in taxes. The net loss in federal revenue is $695,400. Even if I spend $1M a year, U.S. loses $470,000/year in revenue from me alone.
On the flip end, from lower-income people, the prebates vs. the social programs are hopefully going to break even.
So the remaining revenue gap HAS to come from the middle class -- the rich are paying DRAMATICALLY lower taxes in all cases due to lack of scaling tax rates, and the poor are still getting paid out of federal dollars -- the rest of the money has to come from somewhere.
It seems to me that the Fair Tax would have the ultimate result of being the best thing ever to happen for people in the upper brackets, and for people below the poverty line. For people like me, it would massively suck, because Uncle Sam isn't going to cut his budget anytime soon -- so that 23% they calculate now might well end up being adjusted up to 200% at the end of the day when they count the revenue.
When all is said and done, you can cut the numbers any way you want, but the total amount of revenue has to break even. If the poor aren't paying more, and the rich all all paying orders of magnitude less (no matter how much they spend), then the middle class will bear the brunt of the burden.
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I don't know what the actual rate would have to be now to remain revenue neutral, but at the time of the publishing of the FairTax book, the percent required for the FairTax to be revenue neutral on consumption vs all current federal revenue was 23% when calculated as part of price where the price includes the tax, or 29.9% when calculated as state and local sales taxes are usually calculated.
I expect that intially salaries will remain the same, people will have more take home money, and prices will jump as the sale prices on products will not shift much and the tax is added on top.
Exactly! These numbers are higher than the current sales taxes, which means that the prices of goods (after taxes) would go up unless all merchants universally decided to lower prices. So when people repeat "stuff will cost the same!", I don't understand how a $100 item with 23% sales tax costs the same as a $100 item with 15% sales tax.
$123 > $115, in my math -- and obviously in yours as well -- but somehow not in Doug's.
And that assumes 23% is enough, which I also question -- see below.
OK, what doug's saying is that when you buy a good that costs $100, $23 or 23% of that $100 price tag are the costs of doing business, the medicare/SS taxes an employer pays, etc. By eliminating those and moving to a straight tax, those costs are lower than they normally would be. (that's the way i read it anyway)
OK, what doug's saying is that when you buy a good that costs $100, $23 or 23% of that $100 price tag are the costs of doing business, the medicare/SS taxes an employer pays, etc. By eliminating those and moving to a straight tax, those costs are lower than they normally would be. (that's the way i read it anyway)
Right. And Jess came back with the (in my opinion more realistic) premise that all merchants won't immediately lower prices far enough to compensate -- they'll elect to keep higher profits instead. That's human nature, fantasies of a free market magically self-regulating the world to utopia notwithstanding.
And the sheer magnitude of the loss of income from the upper brackets is still very troubling, because I don't want to cover it myself.
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I think Kirth has a point - that wealthy people may wind up paying less taxes by not spending their money. Some hybrid model may be the answer to this.
Where I disagree with his posts is that costs would go up. His assumption is that businesses would not pass the savings (of not having to pay payroll taxes anymore) to their customers. I think that overlooks the fact that many retail business operate on thin profit margins in order to be competitive. If they can afford to slash prices, undersell their competitors, and still make a profit, I think they will do so.
His assumption is that businesses would not pass the savings (of not having to pay payroll taxes anymore) to their customers.
Some of those savings? Sure, just enough to try and undersell. All of them? No chance -- not unless forced to.
I think Kirth has a point - that wealthy people may wind up paying less taxes by not spending their money.
Not "may." The correct answer is "have to" -- and that happens no matter how much they spend -- even if they spend all their income! It's just a lot more pronounced if they spend less than "all."
If I make $1M a year, U.S. now gets $350,000/year.
If I make $1M a year under Fair Tax and spend every last penny of it, U.S. would get $230,000/year.
The extra $120,000+ needs to come from somewhere.
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What I mean by he imprortance of investment income is this -- say I'm a millionaire right now (ha!). No matter how much I spend, I still pay a boatload of money (money I'm not personally using) in taxes -- I might have $2M in income a year from my assets, and whether I spend $20,000/year on stuff or $1,000,000/year on stuff, Uncle Sam is still getting roughly $700,000 a year from me.
Under the Fair Tax, if I spend that same $20,000/year, Uncle Sam is getting $4600 a year from me in taxes. The net loss in federal revenue is $695,400. Even if I spend $1M a year, U.S. loses $470,000/year in revenue from me alone.
It is possible to do that, yes. But how many people earning that kind of money spend less than the poverty level in money each year? Also, the economy isn't so one dimensional. That money you're not spending is either occupying the largest mattress in the world, or it's invested somewhere. That invested money is then used to purchase items or services - which will be taxed.
The average savings rate from 2009 - 2010 is averaging at about 4.1 % (Source). I lost the link, but during this research I found the average saving rate of the top quitile (top 20% of wageearners) was about 8.5% in 1993, and about -2.1% in 2000. It seems fair to assume that even a 10% savings rate is liberal. Assuming a 98% savings rate is pretty out there.
Exactly! These numbers are higher than the current sales taxes, which means that the prices of goods (after taxes) would go up unless all merchants universally decided to lower prices. So when people repeat "stuff will cost the same!", I don't understand how a $100 item with 23% sales tax costs the same as a $100 item with 15% sales tax.
$123 > $115, in my math -- and obviously in yours as well -- but somehow not in Doug's.
I'm really not sure what your saying here.
where's the 15% sales tax coming from?
Here's some number crunching:
Info:
Poverty level for a single person: $10,830
Yearly Prebate: $2,491
Assumptions:
Social Security: 7.5% of employee income from employee pay, 7.5% of employee income from employer.
Taxes are from 2009 tax brackets.
Pre FairTax:
Gross Income: $10,000
Net Income: $9,250
Cost of Employment: $10,750
Revenue to Gov't from Employee: 0% tax + 7.5%SocSec: $750
Total Revenue to Gov't: $1500
Post FairTax
Assume unchanging salaries:
Gross Income: $10,000 % change 0 %
Net Income: $12,491 % change +35.04%
Pre FairTax:
Gross Income: $24,000
Net Income: $18,600
Cost of Employment: $25,800
Revenue to Gov't from Employee: 15% tax + 7.5%SocSec: $5,400
Total Revenue to Gov't: $6,200
Post FairTax
Assume unchanging salaries:
Gross Income: $24,000 % change 0 %
Net Income: $26,491 % change +42.42%
Pre FairTax
Gross Income: $80,000
Net Income: $60,000
Cost of Employment: $86,000
Revenue to Gov't from Employee: 25% + 7.5%SocSec = $26,000
Total Revenue to Gov't: $32,000
Post FairTax
Assume unchanging salaries:
Gross Income: $80,000 % change 0 %
Net Income: $82,491 % change +37.5%%
Also, yes, prices will fall - if we still have a market even partially driven by market forces. Some will try to keep profits rather than lowering prices - but they will either have to cut costs another way to get their prices in line with the competition or lose market share - or depend upon having stupid customers. It works for some businesses for a short period of time, but it won't work for them long term. The pain of the initial price hike will be felt, no doubt, but it's estimated that prices will settle at about 18-21% less. With the 23% sales tax, this is a net rise in costs of approximately 2-5% with an approximate rise in income due to either the prebate or taxes that should easily offset that much.
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I think Kirth has a point - that wealthy people may wind up paying less taxes by not spending their money.Not "may." The correct answer is "have to" -- and that happens no matter how much they spend -- even if they spend all their income! It's just a lot more pronounced if they spend less than "all."
If I make $1M a year, U.S. now gets $350,000/year.
If I make $1M a year under Fair Tax and spend every last penny of it, U.S. would get $230,000/year.The extra $120,000+ needs to come from somewhere.
I"m not an economic expert, but if you're interested further, here's the FairTax.org's FAQ page with your exact question asked, and links to research. :)
Thanks for the link! Still reading. So far, I love this one:
"The FairTax will not be revenue neutral (i.e. bring in the same revenue as the current system) at 23%"
The truth: The FairTax rate of 23% (when calculated inclusively like income tax rates) has been thoroughly researched to provide all the revenues now collected under both the income tax system and through FICA payroll taxes. Reports otherwise are largely based on the President's Advisory Panel on Tax Reform which declared the rate would have to be much higher. What the Panel failed to make clear in an amazingly shameless sleight-of-hand is that they never studied the FairTax legislation as it exists in pending legislation. They ignored $22 million of FairTax research and, instead, quietly devised their own national consumption tax
In other words: Accept our numbers! Don't calculate it for yourself! Thinking for yourself is shameless slight of hand!
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Thanks for the link! Still reading. So far, I love this one:
"The FairTax will not be revenue neutral (i.e. bring in the same revenue as the current system) at 23%"
The truth: The FairTax rate of 23% (when calculated inclusively like income tax rates) has been thoroughly researched to provide all the revenues now collected under both the income tax system and through FICA payroll taxes. Reports otherwise are largely based on the President's Advisory Panel on Tax Reform which declared the rate would have to be much higher. What the Panel failed to make clear in an amazingly shameless sleight-of-hand is that they never studied the FairTax legislation as it exists in pending legislation. They ignored $22 million of FairTax research and, instead, quietly devised their own national consumption tax
In other words: Accept our numbers! Don't calculate it for yourself! Thinking for yourself is shameless slight of hand!
The blurb doesn't get into the math. The papers linked directly below do. Acting as if they're not there is disingenuous.
OK, here's the math, then:
These fortunate few are invested primarily in equities on which they pay taxes at a 15 percent rate, whether their income comes in the form of capital gains or dividends.
The problem is that this statement ignores the sunset provisions on the '03 qualified dividend laws, which were to expire in '08, and were extended to 2010. As of 2011, the tax rate on dividends for people in the 35% tax bracket will revert to 39.6% -- far higher than the 23% from fair tax -- and again, we're assuming the rich are spending every last cent of their income. The "rich will pay more" statement that the whole web site hinges on is counting on the 15% rate for qualified dividends being permanent, which it is not, and wasn't meant to be.
To see this algebraically, note that C = R, which is the household’s budget constraint. Thus, taxing consumption at rate theta; generates the same lifetime taxes (theta*C), measured in present value, as one would collect in present value by taxing resources directly at rate theta; i.e., theta*C = theta*R. Thus, under a consumption tax, whether you tax a household’s spending or tax what the household uses to finance its spending (its wealth plus its current and future labor earnings) doesn’t matter to what the household ultimately pays. (6)
So, here, the base assuption is indeed that, over time, not only all income, but all assets as well will be spent -- none will be passed down, donated to charity, or anything else.
What I'm seeing is that the Fair Tax math hinges on (a) permanent low taxes on qualified dividends, with the assumption that (b) everyone spends 100% of their resources before they die. Re-calculating the needed consumption tax of 23.8% on (a) the real taxes on dividends starting next year, and (b) an assumption that not all resources are spent, would yield a MUCH higher consumption tax needed.
But that's beside the main issue that, under the Fair Tax, the wealthy receive an enormous tax break compared to the actual situation before 2003 and after 2001 -- they pay more taxes only compared to the current low tax on qualified dividends -- and only then if they spend all of their money. Otherwise, the Fair Tax shifts that burden not to the poor -- a strawman there -- but squarely onto the middle class.
A much better way - cut government spending in half. Eliminate everything that isn't vital to our country. For instance, subsidies for ethanol and money for public radio/television.
Out of a budget of $3 trillion for 2008- $200 billion was spent on agricultural subsidies and $400 million was spent on the Corporation for Public Broadcasting. By my numbers that's roughly... 6.7% of the federal budget. Only 43.3% of the budget left to go. :-)
I took a look at a budget breakdown for 2008. In order to do what you're proposing, it looks like we would need to eliminate nearly all spending for at least two of the following programs:
-Defense and Security
-Social Security
-Medicare, Medicaid, and CHIP
Where do you want to start?
A much better way - cut government spending in half. Eliminate everything that isn't vital to our country. For instance, subsidies for ethanol and money for public radio/television.Out of a budget of $3 trillion for 2008- $200 billion was spent on agricultural subsidies and $400 million was spent on the Corporation for Public Broadcasting. By my numbers that's roughly... 0.014% of the federal budget. Only 49.986% of the budget left to go.
I calculate 6.7% ... But the catch is that the war spending isn't covered in the budget; it's "extra" -- even though that money still needs to come from somewhere (namely loans from our friends like China and Japan). That's money we'll need to recoup as well somehow.
But the catch is that the war spending isn't covered in the budget; it's "extra" -- even though that money still needs to come from somewhere (namely loans from our friends like China and Japan). That's money we'll need to recoup as well somehow.
I don't know that it's so much a catch, as it is an excellent point. However, for the sake of this thought experiment, I think it's helpful if we assume that the government isn't lying to us about its budget.
I calculate 6.7% ... But the catch is that the war spending isn't covered in the budget; it's "extra" -- even though that money still needs to come from somewhere (namely loans from our friends like China and Japan). That's money we'll need to recoup as well somehow.
Huh. That's weird. I must have had too many zeroes in there somewhere. Fixed.
But the catch is that the war spending isn't covered in the budget; it's "extra" -- even though that money still needs to come from somewhere (namely loans from our friends like China and Japan). That's money we'll need to recoup as well somehow.I don't know that it's so much a catch, as it is an excellent point. However, for the sake of this thought experiment, I think it's helpful if we assume that the government isn't lying to us about its budget.
I thought that the current administration promised to fix that accounting practice.
What about religious tax exemptions being removed....?I, being an atheist, would personally like to see them go, but that is unlikely to happen...ever... I think it comes down to how the establishment clause has been interpreted. I think it would be just as "fair" to tax 'em all as it is to not tax any of em.
What is more reasonable is to simply remove the tax-exempt status of religions that use their pulpit to try and sway legislation or legislators (see above).
May have been brought up before -
why stop at religions? A lot of 'general' charities use their 'pulpits' to sway.
But that's beside the main issue that, under the Fair Tax, the wealthy receive an enormous tax break compared to the actual situation before 2003 and after 2001 -- they pay more taxes only compared to the current low tax on qualified dividends -- and only then if they spend all of their money. Otherwise, the Fair Tax shifts that burden not to the poor -- a strawman there -- but squarely onto the middle class.
Kirth, under the Fair Tax, everyone who consumes more than the poverty level pays taxes. Under the current system, at least 50% of the population doesn't pay Federal income taxes.
The "evil" rich people still pay taxes, and a lot of taxes, because they are the ones who are buying lots of stuff.
The Fair Tax burden shifts to the consumers. If you consume more, you pay more tax. If you don't consume, you don't pay taxes.
Please, if you're gonna have the argument, at least read the fairtax.org website first. Perhaps you can email the experts and get the feedback you require.
As for me, I'm off to consume seafood and sunscreen, not thanks to a government bailout or to a tax break from Congress, but because my wife and I were smart enough to not spend money for a good long while, saving it so we could afford to zip off to Orlando with our son for a week of poolside frolicking. Hopefully a trip to Cape Canaveral is on the itinerary as well.
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What about religious tax exemptions being removed....?I, being an atheist, would personally like to see them go, but that is unlikely to happen...ever... I think it comes down to how the establishment clause has been interpreted. I think it would be just as "fair" to tax 'em all as it is to not tax any of em.
What is more reasonable is to simply remove the tax-exempt status of religions that use their pulpit to try and sway legislation or legislators (see above).
May have been brought up before -
why stop at religions? A lot of 'general' charities use their 'pulpits' to sway.
It shouldn't stop at churches...all charities should be subject to having their tax exempt status yanked if they use their position for political gain.
Please, if you're gonna have the argument, at least read the fairtax.org website first.
Read it and understood it -- that's why I provided the math to back up my assertions, and described what assumptions THEIR math used that I didn't agree with.
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Remove tax credits for charitable donations. Simple enough, right? The government is allowed to levy taxes, why should some people be able to get out of it by donating their money to charity? If people want to make philanthropic donations, let them do so after they have paid their taxes, not in lieu of paying their taxes.
Also, remove the tax exempt status from any religious institution that lobbies for or against legislation or an elected official. Churches are granted tax-exempt status for being apolitical...as soon as they step into the political fray that status should be yanked.
Absolutely. And as the Government Uses those taxes to achieve improvements for all - equally, let us do away with charity groups all together. Not only will yo tax dodgers pay your taxes, and tithes, you will f...ing well like it. No longer will you set up a charity and pay to it thereby avoiding tax on income going to you.
Nyah! Nyah! Nyah! :P
Doug's Workshop:
Thanks for the info and links. I've got to do some number crunching
Here's a question for you. What are the sales tax rates of foreign countries? Obviously under the FairTax proposal there will be a huge incentive (for the wealthy in particular) to move spending offshore if foreign sales tax rates are lower. Or does FairTax include adjustment to import duties?
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I like this little nugget of wisdom.
Just because it is a rock, doesnt meant the other six billion t!@%s dont believe its a god. The real survival trait is to not get sacrificed to the rock by one of the six billion stupid people.
Right up to the point when you get sacrified to a rock named Bob the All Seeing.
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Right up to the point when you get sacrified to a rock named Bob the All Seeing.I like this little nugget of wisdom.
Just because it is a rock, doesnt meant the other six billion t!@%s dont believe its a god. The real survival trait is to not get sacrificed to the rock by one of the six billion stupid people.
Always look on the briiiiggght side of life... (whistles)
I thought that the current administration promised to fix that accounting practice.
When did President Obama get inaugurated? :-)
Please, if you're gonna have the argument, at least read the fairtax.org website first. Perhaps you can email the experts and get the feedback you require.
After taking a look at the website, I think my biggest problem with the Fair Tax plan is that it places a regressive tax burden on the middle class. That's not to say that I'm entirely against the idea. However, I think they need to lessen the tax burden on the middle class, and provide rebates to both the lower and middle classes by some other means other than tax refunds.
Personally, if I were going to institute a system like this, what I'd like to see is one where citizens carry around some sort of ID card that indicates how much they should be charged in sales tax. That way, the very rich still get charged more than the lower and middle classes. Anyone who doesn't have or carry one of these cards gets charged the highest sales tax rate instead.
In order to prevent fraud, the government would send us a statement at the end of the year showing us how much we spent on goods, how much we paid in taxes, and how much we should have paid. If the amount we paid in taxes is more than what we should have paid, then we get a tax refund. If it's less, then we send a check to Uncle Sam.
The one problem I see with my system is that there isn't a whole lot currently in place that prevents someone in a higher tax bracket from saying to someone in a lower tax bracket, "Hey! Here's $40,000. Go buy me a new car," or "put a down payment on a new house." That said, I wonder if there isn't a way to put some sort of system in place that tracks fishy purchases and exchanges like this. For example, I remember when I bought a refrigerator once, someone from my credit card company called and asked me if I actually made the purchase. I thought that was pretty cool, and I can't imagine that a similar system couldn't be put in place by the government.
Anyway, those are just some of my ideas. Take them for what they're worth.
Maybe instead of a flat consumption tax, if there was a progressive sales tax based on necessity vs. luxury items. Groceries might be 0% (saving on prebate necessity), whereas a Big Mac and a Super Gulp of Coke (full of fat and sugar, leading you to be a burden on the health care system) might have a 50% tax. A simple wristwatch might be 23%, whereas a solid gold Rolex might be 100% instead. Etc.
In this manner, millionaire rappers wanting to flash a lot of bling and drink Cristal would be funneling money into the system, whereas people more careful about their diet would be paying a lot less. As long as the scaling taxes could be adjusted to break even, you could have a consumpion-tax based system that places a greater burden on irresponsible/luxury spending, and a lesser burden on the middle class.
I'd support that.
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Maybe instead of a flat consumption tax, if there was a progressive sales tax based on necessity vs. luxury items. Groceries might be 0% (saving on prebate necessity), whereas a Big Mac and a Super Gulp of Coke (full of fat and sugar, leading you to be a burden on the health care system) might have a 50% tax. A simple wristwatch might be 23%, whereas a solid gold Rolex might be 100% instead. Etc.
In this manner, millionaire rappers wanting to flash a lot of bling and drink Cristal would be funneling money into the system, whereas people more careful about their diet would be paying a lot less. As long as the scaling taxes could be adjusted to break even, you could have a consumpion-tax based system that places a greater burden on irresponsible/luxury spending, and a lesser burden on the middle class.
I'd support that.
And that's one of the big reasons I don't want government run health care or government subsidized health care. I don't think it's the government's job to decide what I should and shouldn't eat and charge taxes accordingly - but government subsidies on health care makes it their business.
I don't think it's the government's job to decide what I should and shouldn't eat and charge taxes accordingly.
Well then I hate to break your heart, dear, but... :-P
If a person chooses to smoke, knowing that he will be a greater impact on the health care system (thus driving up costs), and that person agrees to pay the difference, I see no problem. I disagree that that person should smoke away, happy and content in his knowledge that everyone else will pay for him instead.
Likewise, if 25-Cent or whoever wants to live on Twinkies and Courvoisier under a consumption-tax system, I see no reason why he can't be considered responsible enough to pay according to his own lifestyle choices. When I'm drinking, I'd happily pay much higher liquor taxes and think it perfectly reasonable, and more fair than otherwise. At some point, personal responsibility should come into play.
No one NEEDS a limousine, a yacht, or a bottle of Scotch. If a person wants one, I see no reason the tax rate should be the same as for someone making a more responsible choice.
And if we're after a consumption-tax system that does not shift a disproportionate load from the wealthy to the middle class, then a steep luxury tax is the only way I see to do that.
I think the question is, where do you draw the line for luxury items? Is a house considered a luxury item? What about a car? If they are considered luxury items, should lower and middle class citizens pay the same tax rate as those in the upper class?
I'm not saying that your idea is necessarily a bad one. However, I think we would need to be very careful about what we define as luxury items. Otherwise, we might make it more difficult for people in the lower and middle classes to afford a decent standard of living.
I think the question is, where do you draw the line for luxury items?
That's an excellent question. Personally, I'd start with things that either cost everyone else more, or else are blatantly non-utile, or both. Alcohol, cigarettes, gold, diamonds, tickets to rock concerts, pedicures, etc. -- I'd put all these into the highest "bracket." Things that are harmful, but so much a part of our lives that a revolution would occur if they became unaffordable -- TVs, saturated fats, non-fructose corn syrup -- would be in a middle "bracket." Harmless everyday essentials/staples like vegetables and building materials would carry the lowest taxes.
We've unfortunately set up most cities (and almost all of the surrounding countryside) so that cars are essential items when it comes to getting to work. That makes them a special case; I'd probably put them in the lowest bracket, but stop government-subsidizing gasoline. Or if a vehicle is blatantly non-utile in nature (e.g., a limousine, or a Humvee for civilian rather than military use), that could maybe be bumped up into a higher "bracket."
That's far from perfect, and there would inevitably be a lot of arguing back and forth (which isn't always a bad thing), but at least you'd have the framework for a workable consumption-tax system.
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If a person chooses to smoke, knowing that he will be a greater impact on the health care system (thus driving up costs), and that person agrees to pay the difference, I see no problem. I disagree that that person should smoke away, happy and content in his knowledge that everyone else will pay for him instead.
This is incorrect. Smokers do not cost the health system more. Smokers on average have a life expectancy 10 years shorter than a non-smoker. Given that EOL care will generally account for a large portion of a person's lifetime health expenses, when you average out the lifetime healthcare cost of a non-smoker vs. a smoker, the non-smoker is more expensive. Explained in this NEJM article. I hate when people spout that "smoking costs more!!!!" line without knowing what they're talking about.
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If a person chooses to smoke, knowing that he will be a greater impact on the health care system (thus driving up costs), and that person agrees to pay the difference, I see no problem. I disagree that that person should smoke away, happy and content in his knowledge that everyone else will pay for him instead.This is incorrect. Smokers do not cost the health system more. Smokers on average have a life expectancy 10 years shorter than a non-smoker. Given that EOL care will generally account for a large portion of a person's lifetime health expenses, when you average out the lifetime healthcare cost of a non-smoker vs. a smoker, the non-smoker is more expensive. Explained in this NEJM article. I hate when people spout that "smoking costs more!!!!" line without knowing what they're talking about.
How about: Smokers poison everyone around them and should therefore be charged with assault every time they light up? Bertter? You can kill yourself if you like but hands off my lungs.
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How about: Smokers poison everyone around them and should therefore be charged with assault every time they light up? Bertter? You can kill yourself if you like but hands off my lungs.If a person chooses to smoke, knowing that he will be a greater impact on the health care system (thus driving up costs), and that person agrees to pay the difference, I see no problem. I disagree that that person should smoke away, happy and content in his knowledge that everyone else will pay for him instead.This is incorrect. Smokers do not cost the health system more. Smokers on average have a life expectancy 10 years shorter than a non-smoker. Given that EOL care will generally account for a large portion of a person's lifetime health expenses, when you average out the lifetime healthcare cost of a non-smoker vs. a smoker, the non-smoker is more expensive. Explained in this NEJM article. I hate when people spout that "smoking costs more!!!!" line without knowing what they're talking about.
Or how bout you quit invading my space? Goes both ways... You are exposed to more toxins when a car or city bus drives past you...you gonna say that all drivers need to be charged with assault?
This is incorrect. I hate when people spout that "smoking costs more!!!!" line without knowing what they're talking about.The article is nowhere near as one-sided as you present:
In the long term, complete smoking cessation* would produce a net increase in health care costs, but it could still be seen as economically favorable under reasonable assumptions of discount rate and evaluation period.
* This is NOT what I'd advocated, btw.
But still, on the balance, I'd agree that if we save on long-term care by having them die early enough to recoup their earlier costs, then by all means let's let 'em smoke cheap.
By the same token, suicide would be legalized, and pulling the plug on persistent vegetative cases would be mandatory, right? I mean, since you're only looking at a total dollar perspective and assuming binary conditions.
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This is incorrect. I hate when people spout that "smoking costs more!!!!" line without knowing what they're talking about.The article is nowhere near as one-sided as you present:In the long term, complete smoking cessation* would produce a net increase in health care costs, but it could still be seen as economically favorable under reasonable assumptions of discount rate and evaluation period.* This is NOT what I'd advocated, btw.
But still, on the balance, I'd agree that if we save on long-term care by having them die early enough to recoup their earlier costs, then by all means let's let 'em smoke cheap.
Or we can simply put a cap on how long someone can live. That would save HUGE amounts of health care costs.[/snarky post]