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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.
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.
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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.
Eliminating spending will only get us part of the way there. We might reduce our spending deficit, but won't be making any headway on our debt.
There is no reason why a charitable donation should get you a tax credit...and there's no reason why NPOs and churches that act in a political fashion should get tax exempt status. Think of the billions of dollars that are being given up each year with these policies.
Eliminating spending will only get us part of the way there. We might reduce our spending deficit, but won't be making any headway on our debt.
Wrong.
Wikipedia
Estimated receipts for fiscal year 2010 are $2.381 trillion.
The President's budget for 2010 totals $3.55 trillion.
Cutting government spending in half would not only eliminate the deficit, but would reduce our debt by $606 billion.
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Eliminating spending will only get us part of the way there. We might reduce our spending deficit, but won't be making any headway on our debt.Wrong.
Wikipedia
Estimated receipts for fiscal year 2010 are $2.381 trillion.
The President's budget for 2010 totals $3.55 trillion.Cutting government spending in half would not only eliminate the deficit, but would reduce our debt by $606 billion.
Cutting spending by half would leave us with a surplus of $606 billion a year. Not counting for inflation and interest, it would still take us 20 years to pay off our $12 trillion debt. If we were to halve spending and increase revenue by closing the current charity/political non-profit loopholes, we would be looking at a much shorter time-frame and we would be able to save programs like SS and Medicare while still lowering taxes.
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Cutting government spending in half would not only eliminate the deficit, but would reduce our debt by $606 billion.Cutting spending by half would leave us with a surplus of $606 billion a year. Not counting for inflation and interest, it would still take us 20 years to pay off our $12 trillion debt.
I'm anything but an expert in this. But I'm trying to figure out your logic in all of this.
As near as I can tell -- especially from the government side of things...
The government spends a lot of money. I mean a lot of money. But where does that money go? I would guess that a lot of this money goes towards jobs. While a lot of these jobs may not be "necessary", they are getting into people's hands where they are taxed and so on. So what would really happen if the government spending were cut in half? Suddenly half the government jobs are gone. So now unemployment costs are increased and tax revenue is decreased. But now all those jobs that are eliminated affect all kinds of other businesses from cars to office supplies.
Or you can look at it a different way --
The budget in theory is $3.55 trillion. The government taxes this money. Often times many times (it's used to buy this which is turned around to buy that, and so on). But just from a straightforward model (which is pretty difficult with something as complex as this) let's say that the government ends up making 5% of the money it spends (which I feel is pretty conservative). That means that the government would get back with $3.55 Trillion a total of $177.5 billion from taxes. Cutting the budget in half would effectively cut the tax income from the same money in half to around $89 billion from the example.
My point is that it isn't exactly a direct correlation. If you cut spending, you should not be expecting to be getting the same tax income. Not even close.
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I was more responding to Mandor's hypothetical situation of halving the budget. I'm not an economist by any means, but it's obvious that we're spending more than we're taking in which means two things (if the gubmint was a business anyway): cut spending and increase revenue. Cutting spending would, as you have mentioned have the adverse affect of decreasing tax revenue along with the decreased expenses so an additional means of revenue would need to be generated. As I said previously, closing the loophole that allows people to circumvent paying their taxes by making charitable donations would be one way to increase revenue. Another would be do rescind tax-exempt status from any current non-profit organization that involves itself in politics. The roman-catholic church has denied communion to lawmakers whose policy votes aren't in line with the church's teachings...that to me is trading salvation for votes; the mormon church providing massive tax-exempt funds to campaign for prop 8 in cali, etc. Both of these are great examples of instances where that institution has become politically active and should no longer enjoy tax-exempt status thereby increasing revenue from taxing this previously unavailable segment of the market.
So you'll cut charity and keep the wars, eh?
I know ending the wars will be anything but easy. I know it's not realistic even. But if I must pick an oversimplified solution, I'd say "bring the troops home" ranks way above "stop rewarding charity".
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So you'll cut charity and keep the wars, eh?
I know ending the wars will be anything but easy. I know it's not realistic even. But if I must pick an oversimplified solution, I'd say "bring the troops home" ranks way above "stop rewarding charity".
Ok maybe I'm not making myself clear. I think that, regardless of what our deficit/surplus looks like, we should be end the practice of allowing people to skip out on taxes by donating money or items to charity. It doesn't help, and if anything, it hurts overally because the gov't has to raise taxes on the people who don't donate enought to cover their taxes. Imagine if every single person donated enough to where they covered all of their taxes...not only would gov't expenditures be near 100% deficit and taxes would have to be raised to compensate.
That being said, I am a big proponent of ending the unnecessary wars in the sandbox. But I also think that measures like this need to be taken as well.
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Both of these are great examples of instances where that institution has become politically active and should no longer enjoy tax-exempt status thereby increasing revenue from taxing this previously unavailable segment of the market.
I understand what you are saying, but there are still (at least) some issues associated with it. "Politically active" isn't terribly well defined. A tax-exempt institution should be able to politically petition some things. I mean, if a proposal were introduced that would directly affect them (like revoking their tax-exempt status) I feel that they should be allowed to present their piece. Also, if you do that, many tax-exempt institutions would fail and that well takes you back to my point earlier.
And how much money would actually be made if they took away the tax-exempt status? 1) Donations would go WAY down because there wouldn't be as much of an incentive and 2) while the corporations aren't taxed, the individuals within the corporations are. And if the corporation can't afford the employees, then there are fewer tax dollars and so on.
I'm actually a prime example. I work for a credit union. Credit unions are tax-exempt. As a result, we have a lot of restrictions put on us (credit unions can only lend out as much as they have on deposit -- banks can lend out four times what they have on deposit). Also, most credit unions transfer the savings of being tax-exempt back to its members by offering lower loan rates or higher savings rates, etc. Credit unions also VERY MUCH have a vested interest in what is happening on capitol hill. What with the "mortgage crisis" among other things, we really need to be there and have a voice in decisions that are being made as to what we can and can't do. Yet (believe me), I am very much taxed.
In the end, donations are pretty much what the federal government is doing in the first place -- creating jobs. The only real difference is that we get to determine (at least a little bit) what jobs are being created. And probably even more jobs since most people that work for tax-exempt companies make considerably less and have less waste than the government spending $1,000 for an ash-tray or whatever.
How about this: instead of cutting charity to non-profits that are trying to help people or preserve our culture, let's cut the charity to corporations. The US has one of the highest tax rates in the world for corporations, but two-thirds of US corporations pay NOTHING in taxes because of deductions and loopholes.
I have worked at non-profits both as an employee and a volunteer, and I know a lot of people who are the highest donors. Some would give without the tax break; that's just the kind of people they are. Many are very particular about getting their receipts to make sure they can take advantage for taxes. Most of these organizations are incredibly lean already and are suffering in the current economy. Further disincentive for charity is certainly not needed.
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So you'll cut charity and keep the wars, eh?
I know ending the wars will be anything but easy. I know it's not realistic even. But if I must pick an oversimplified solution, I'd say "bring the troops home" ranks way above "stop rewarding charity".
Ok maybe I'm not making myself clear. I think that, regardless of what our deficit/surplus looks like, we should be end the practice of allowing people to skip out on taxes by donating money or items to charity. It doesn't help, and if anything, it hurts overally because the gov't has to raise taxes on the people who don't donate enought to cover their taxes. Imagine if every single person donated enough to where they covered all of their taxes...not only would gov't expenditures be near 100% deficit and taxes would have to be raised to compensate.
That being said, I am a big proponent of ending the unnecessary wars in the sandbox. But I also think that measures like this need to be taken as well.
Emphasis mine. I think you are misunderstanding the tax code. If you make $50,000 in a year and donate $5,000 of it, you have not lowered your tax liability by $5,000, you have instead lowered your taxable wage base to $45,000. That's the way deductions work. So if your tax rate in the above scenario was 20%, instead of paying $10,000 in taxes, you would pay $9,000 (20% of $45,000).
Of course, that's simplified significantly, since it does not account for progressive taxation, and the fact that the lower amount of taxable income might put you in a different tax bracket percentage-wise. That's actually why people tailor their charitable donations around tax time to certain amounts: if they can lower their taxable income below various thresholds, they may wind up with a net savings.
The point I am making is, the only way to reduce your tax liability to $0 is theoretically to donate so much of your income that what you have left is in the 0% tax bracket (which would be below poverty for single people, although people who own houses and have children could keep a fair bit more without paying taxes).
That doesn't mean anything one way or the other about the validity of your proposal, I just wanted to clarify the way tax-exempt donations work.
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.
I take exception to your statement that "Churches are granted tax-exempt status for being apolitical...as soon as they step into the political fray that status should be yanked. "
Churches are granted tax exempt status, in part due to the first amendment, ...
Amendment I
Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.
... and the fact that they are nominally non-profit organizations which do considerable charitable work. Admittedly that can be debated at times. The key question is who is going to determine whether a Church is good enough
Regarding tax credits for charity, depending on your tax bracket you get back maybe a third of what you gave. And, based on personal experience, religious and private charities are more effective than government programs at actually helping people.
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thanks for the clarification CH, I was not aware that's how it worked.
@Moff - do people make charitable donations to credit unions?
@markofbane - coroporate loopholes DEFINITELY need to be closed. as to charity, why should donating to a charity allow people to reduce their tax wage base (and as CH has said) enough to move them into a lower tax bracket? Charity should be about philanthropy, not selfish ways to lower your taxes. If charities suffer b/c of a change like this then oh well...their cause must not have been memorable or good enough to justify out of pocket, non-beneficial donations.
What about religious tax exemptions being removed....?
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Also, churches DO lose their tax exempt status if they "devote a substantial part of their activities to attempting to influence legislation" or "participate in, or intervene in, any political campaign on behalf of (or in opposition to) any candidate for public office". A lot of churches have lost their status over this. I recommend that if you think the IRS has overlooked any individual churches, you should write them a letter, but they've been pretty aggressive about it in some cases.
IRS guidelines. See page 5 and following in particular.
Bear in mind that the tax exempt status applies to an individual congregation, not an entire denomination. So an individual Catholic church that campaigns for a political candidate could lose their tax exempt status, but the Catholic Church as a whole would not be impacted.
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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).
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Also, churches DO lose their tax exempt status if they "devote a substantial part of their activities to attempting to influence legislation" or "participate in, or intervene in, any political campaign on behalf of (or in opposition to) any candidate for public office". A lot of churches have lost their status over this. I recommend that if you think the IRS has overlooked any individual churches, you should write them a letter, but they've been pretty aggressive about it in some cases.
IRS guidelines. See page 5 and following in particular.
Bear in mind that the tax exempt status applies to an individual congregation, not an entire denomination. So an individual Catholic church that campaigns for a political candidate could lose their tax exempt status, but the Catholic Church as a whole would not be impacted.
Well, let's see, the mormon church in utah should have it pulled due to their lobbying for prop 8. The boston archdioces should have it pulled for denying Rep. Kennedy communion b/c his voting record didn't mesh with church doctrine. I would certainly hope that westoboro no longer has tax exempt status, etc.
I think we all agree the tax code should be simplified for private citizens and for corporations through the closure of the Byzantine system of tax credits and loopholes that currently exist.
I would argue that most charitable giving does not "selfishly lower your taxes" for the reasons stated by Celestial Healer above.
If you remove the exemption for donations, do you propose that the federal government try to replace the services which charities will be forced to cut?
How would you feel about a flat-tax, or exemption-less progressive tax system?
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).
From the position as an atheist as well, I agree with this.
I would certainly hope that westoboro no longer has tax exempt status, etc.
You know, I have half a mind to protest Freddy's funeral when he bites the dust.
How would you feel about a flat-tax, or exemption-less progressive tax system?
Been on board with the 15% flat tax that Steve Forbes was pushing awhile back when he was debating to be a Presidental candidate.
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I think we all agree the tax code should be simplified for private citizens and for corporations through the closure of the Byzantine system of tax credits and loopholes that currently exist.
I would argue that most charitable giving does not "selfishly lower your taxes" for the reasons stated by Celestial Healer above.
If you remove the exemption for donations, do you propose that the federal government try to replace the services which charities will be forced to cut?
I argue that a majority of the systems are already being covered by the government to some extent and yes, they are cost prohibitive. I am arguing though, that alot of money that could be used for these programs is being given to charities that can be much more strict with how they give out their money due to them being private institutions.
Why are people so up in arms over charity? Charity is supposed to be supported by people who want to give just to be giving, not so they can get a tax break.
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@Moff - do people make charitable donations to credit unions?
No. At least not to my knowledge. I guess that our member's deposits are a type of "donation" -- they are allowing us access to their money to do good things -- but people can't claim their deposits on their taxes as a "donation". So no.
But my point then largely becomes a game to try and determine which non-profit organizations get what benefits with what restrictions, etc. Ugly to say the least.
But ok then, let's look at exactly what you are looking at -- Focus on the Family is right here in town. And if there was ever a more political, religious, tax-exempt organization, you'd be pretty hard-pressed to find it. They employ hundreds (thousands?) of people. Each one of those people pay taxes. Because donations have gone way down recently, they have had to lay off a lot of people. Now those people have to find jobs or pay considerably less in taxes -- decreasing the income of the government. What are they going to do here in town? Probably find a job that is funded through government spending (arguably the largest employer here). So either the government loses out on a little bit of money through donations to help employ hundreds (or thousands?) of people here thus decreasing their spending dramatically by not paying for unemployment or for more jobs or the government gains a little bit of money through taxing these donations and has to spend even more money trying to employ these people because their jobs have vanished.
It really feels to me like your point is much more "get religious entities out of the affairs of the government" rather than "help save the government money by taxing donations or getting rid of tax-exempt status".
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How would you feel about a flat-tax, or exemption-less progressive tax system?Been on board with the 15% flat tax that Steve Forbes was pushing awhile back when he was debating to be a Presidental candidate.
A flat rate, VAT structure would be superb in most ways. People would be taxed on what they spend, and they would keep all of their paycheck. Of course that would mean that internet purchases would have to be taxed now, but i can live with that. I believe that people who make alot of money and wish to save it should be able to do so without much penalty, but when people are exploiting loopholes to not pay taxes and then go out and buy yachts and leerjets, it doesn't sit well with me.
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@Moff - do people make charitable donations to credit unions?No. At least not to my knowledge. I guess that our member's deposits are a type of "donation" -- they are allowing us access to their money to do good things -- but people can't claim their deposits on their taxes as a "donation". So no.
But my point then largely becomes a game to try and determine which non-profit organizations get what benefits with what restrictions, etc. Ugly to say the least.
But ok then, let's look at exactly what you are looking at -- Focus on the Family is right here in town. And if there was ever a more political, religious, tax-exempt organization, you'd be pretty hard-pressed to find it. They employ hundreds (thousands?) of people. Each one of those people pay taxes. Because donations have gone way down recently, they have had to lay off a lot of people. Now those people have to find jobs or pay considerably less in taxes -- decreasing the income of the government. What are they going to do here in town? Probably find a job that is funded through government spending (arguably the largest employer here). So either the government loses out on a little bit of money through donations to help employ hundreds (or thousands?) of people here thus decreasing their spending dramatically by not paying for unemployment or for more jobs or the government gains a little bit of money through taxing these donations and has to spend even more money trying to employ these people because their jobs have vanished.
It really feels to me like your point is much more "get religious entities out of the affairs of the government" rather than "help save the government money by taxing donations or getting rid of tax-exempt status".
Personally i hope that every single hateful person employed by that outfit loses their job (but that's just me). while there is some merit to the argument, people will find jobs elsewhere, or maybe get a legitimate job and VOLUNTEER their time to non-profits.
A flat rate, VAT structure would be superb in most ways. People would be taxed on what they spend, and they would keep all of their paycheck. Of course that would mean that internet purchases would have to be taxed now, but i can live with that. I believe that people who make alot of money and wish to save it should be able to do so without much penalty, but when people are exploiting loopholes to not pay taxes and then go out and buy yachts and leerjets, it doesn't sit well with me.
Agreed.
Some places are putting taxable purchases in place on the Internet. Just noticed it for the first time via Barnes & Noble the other day when I pre-ordered a book. No complaints as they gave me free shipping, so I can live with that.
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Well, let's see, the mormon church in utah should have it pulled due to their lobbying for prop 8. The boston archdioces should have it pulled for denying Rep. Kennedy communion b/c his voting record didn't mesh with church doctrine. I would certainly hope that westoboro no longer has tax exempt status, etc.Also, churches DO lose their tax exempt status if they "devote a substantial part of their activities to attempting to influence legislation" or "participate in, or intervene in, any political campaign on behalf of (or in opposition to) any candidate for public office". A lot of churches have lost their status over this. I recommend that if you think the IRS has overlooked any individual churches, you should write them a letter, but they've been pretty aggressive about it in some cases.
IRS guidelines. See page 5 and following in particular.
Bear in mind that the tax exempt status applies to an individual congregation, not an entire denomination. So an individual Catholic church that campaigns for a political candidate could lose their tax exempt status, but the Catholic Church as a whole would not be impacted.
Mormon Church: There is a petition out there for it, but it's doubtful to get anywhere. Lobbying would have to be shown to be a "substantial part" of their activities. With such a large organization, that's a difficult claim to make. In terms of their actual expenditures, the donations were made by individuals, not the organization itself.
Catholic churches in Boston: Fails by an even larger measure to be a "substantial part" of what they do.
Westboro: They've had their scraps with the IRS. Some of their activities are not tax exempt. However, as much as I hate them, their activities are not intended to directly influence legislation or political candidates. They're all about "getting the word out", as vile as that word may be. They're campaigning a set of (bigoted) ideas, not a piece of legislation.
That said, you could make a case if you wanted to that the definition used to strip churches of their tax exempt status should be broadened. Under the current law, though, the churches above don't meet that definition.
Anecdote: My church has letter-writing campaigns, petitions, and marches in favor of gay rights, fair wages, and a woman's right to choose, so if you broadened the law, we would be first in line to lose our tax-exempt status :)
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Personally i hope that every single hateful person employed by that outfit loses their job (but that's just me). while there is some merit to the argument, people will find jobs elsewhere, or maybe get a legitimate job and VOLUNTEER their time to non-profits.
Personal feelings aside, your point is that it would help the government. I don't see that. And actually from a strictly monetary standpoint I think it would make things worse.
I would certainly hope that westoboro no longer has tax exempt status, etc.You know, I have half a mind to protest Freddy's funeral when he bites the dust.
Some people would say that in doing this you would be no better than he is, and that you shouldn't lower yourself to his level.
I however, am not one of these people, and will be right there with you... With a can of gasoline... and a paintball gun... and a firehose... and a D100.
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A flat rate, VAT structure would be superb in most ways. People would be taxed on what they spend, and they would keep all of their paycheck. Of course that would mean that internet purchases would have to be taxed now, but i can live with that. I believe that people who make alot of money and wish to save it should be able to do so without much penalty, but when people are exploiting loopholes to not pay taxes and then go out and buy yachts and leerjets, it doesn't sit well with me.How would you feel about a flat-tax, or exemption-less progressive tax system?Been on board with the 15% flat tax that Steve Forbes was pushing awhile back when he was debating to be a Presidental candidate.
Without those lear jets, I don't have a job. Congress and the current White House administration's politicization of car company execs using corporate jets to fly to the Congressional hearings really hurt our business as private / corporate jet refueling / repair / maintenance.
Every action has a reaction. Any changes should be well thought through.
I would prefer a sales tax at the point of sale, rather than a Value Added Tax - mostly because I believe this would make production in the US and export to other countries much more profitable, which would bring a lot of the formerly American companies home to the USA - and bring us jobs, and maybe let us get back into the business of production, rather than consumption. It seems more sustainable to me.
I only want such a thing, however, if all other taxes are removed. I want corporations and people making financial decisions because it's economically better for them - not because they need to follow some arcane tax rules to avoid a huge tax outlay that their competitors are avoiding. It'd be a nasty high tax - because the gov't is a big giant chunk of our national economy at this point - but it would have the added benefit of not letting congress fund pet projects by raising taxes on small groups of people that won't affect their election chances. If they want to fund that earmark, they're going to have to raise sales taxes across the country for everyone - I think that would help cut down on some of the waste in the gov't budgeting process.
Well said, Jess!
My objection to a truly flat income tax is that it hurts the bottom of the economic spectrum the most. To the poor schlep making 30,000 a year that 15% could be the difference between getting the car fixed, buying medicine for the sick kid, or paying the mortgage. To someone making 10 times that, its the difference between the beamer or the caddy. The same goes for sales taxes or value added taxes, but VATs hide it better.
That's why I like a progressive income tax in conjunction with sales taxes. Income taxes to distribute the burden more fairly; sales taxes to deter rampant consumption.
I also like some special purpose taxes.
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I'm so frustrated about politics and politicians of all stripes. You have to sell so much of your soul to even get into national politics that the differences between politicians of either party are almost simply which team they're rooting for. It's gotten to the point where I don't have a party anymore - I just have some basic finance goals I want to fight for.
I must say, I am happy to see that so many people that weren't involved in politics are now. It's mostly out of anger and frustration rather than a feeling of civil responsibility, but without a responsive, active and informed electorate, no "reform" in government is going to go past saying the right words in front of a camera.
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My objection to a truly flat income tax is that it hurts the bottom of the economic spectrum the most. To the poor schlep making 30,000 a year that 15% could be the difference between getting the car fixed, buying medicine for the sick kid, or paying the mortgage. To someone making 10 times that, its the difference between the beamer or the caddy. The same goes for sales taxes or value added taxes, but VATs hide it better.
That's why I like a progressive income tax in conjunction with sales taxes. Income taxes to distribute the burden more fairly; sales taxes to deter rampant consumption.
I also like some special purpose taxes.
I like the FairTax's solution for this problem.
Here it is as I understand it:
Assume for ease of numbers, that the national sales tax will be 25% (this 25% means that 25% of the total price will be sales tax. Using the method state and local sales taxes are computed outside the full price, this equals a 33% sales tax on the initial price).
Let's also assume for ease of calculation that the poverty level of income for a particular family is $24,000 / year, or $2000 / month.
At the beginning of each month, the government would sent out a "prebate". This would equal the amount of money a family at the poverty level would spend on sales tax if they spent their entire income.
For our sample, this would mean that if the family earning $2000/mo spent all their money, $500 of it would be in federal taxes. Therefore every family would get a $500 check at the beginning of the month - to cover the taxes of a poor family's spending for the month.
This way those below the poverty level still pay no taxes to buy basic necessities.
There are some problems with the fair tax -- none that are unsolvable, but most of them people don't even acknowledge. Some of the main ones I see are:
1. Creation of Bureaucracy: Or, more specifically, conversion. The IRS gets out of the business of auditing tax evaders and into the business of auditing prebate scams and scams regarding direct-purchasing of overseas goods, etc. (scams of which there will be an infinite variety, limited only by the imagination). And what about businesses that have locations overseas, and purchase all their stuff there (where the tax doesn't apply), and then bring the stuff back here? Someone needs to keep track of that, too. So the much-touted "advantage" of eliminating bureaucracy isn't real -- the bureaucracy just shifts focus and jobs.
2. And of course we'd need a whole new FBI devoted solely to investigating and closing down the enormous black markets for goods that would inevitably form. Cigarettes in NY carry a huge sales tax -- about 90% of the cigarettes smoked in NY are now estimated to be bootleg, purchased off the black market.
3. Corporate and religious spending loopholes would have to be closed, obviously, or else everyone will purchase goods (and especially real estate) through their business or church instead of as an individual. If a business purchases 5 copy machines, they'd have to pay full tax on all five, with no deductions for "non-reimbursable business expenses." This means that the business is paying those taxes at the time of purchase, rather than at the end of the year -- thus losing that much liquid operating capital.
4. Spike in petty theft. If a laptop costs $1,500 instead of $500, and you can fence one for $1,000 instead of $250, petty theft becomes orders of magnitude more lucrative.
5. Services would of course have to be subject to the same flat tax as goods, which means that low-end service jobs would get fewer customers, which means a lot of that job market is wiped out. A family can get a maid service now to clean their house for $200, which is small compared to the amount of overtime wages a professional person can get for working the same number of hours it would take. If all revenue became taxes on goods and services, that same cleaning might cost $400, and it becomes a lot less likely that people will go ahead and let someone else do it -- because the hourly rate cost starts to approach their own hourly earning at work more closely.
6. One thing I like is that families with lots of kids pay MUCH higher taxes under this system, because they end up buying like 2-3 times as many goods as a childless couple. This is good because schools are funded by taxes, and all those kids are benefitting from the schools whereas the childless people are not.
7. Elimination of a useful law enforcement tool: remember Capone?
I like the FairTax's solution for this problem.
Agreed.
And every time someone purchased a game supplement, a car, groceries, the portion of money paid to the feds would be listed, so people could immediately see what they're paying for. Instead, we have a system that allows people to think they're getting a "tax refund" each year.
stuff
Kirth, some answers to your concerns.
1) The IRS does what it always does - Enforce tax law.
1a) Prices don't increase in the US, so there'd be no difference in the price you paid today versus the price under the Fair Tax. Therefore, if someone bought a computer from overseas, there's no additional benefit that what currently exists.
2) These black markets currently exist, so there's no change since they would still likely exist under the Fair Tax.
2a) Prices don't change, so I don't know why you think there'd be a huge spike in illegal activity. Remember, the suppliers selling this stuff still have to record that it was sold via direct consumer sale or at wholesale, so it's still easy to track.
3) Most businesses currently have to pay estimated quarterly taxes, so using your example, they pay the tax now instead of in three months . . . not a big deal for businesses. If the business is run so poorly that they can't do this, perhaps they shouldn't be in business to begin with . . . .
4) Prices don't change. A $1000 laptop (pre-Fair Tax) still costs $1000 afterwards. All goods and services currently have an imbedded tax that the manufacturer and retailer must cover (employee wage taxes, SS taxes, income taxes, etc). The Fair Tax simply replaces this myriad of taxes with one number that is paid out of the price of the item at the time of purchase. If you buy a laptop today for $1000, you drop that money and walk away with the laptop. Post-Fair Tax, you buy a $1000 laptop, slap $1000 down on the counter and walk away with the laptop. No change, thus (again) not a spike in petty theft.
5) Services would pay the tax, but that tax is currently being paid in the form of higher prices due to income tax, SS and Medicare taxes, etc. A $10 haircut still costs $10, but now the stylist sends a check for $2.30 to the government instead of hiring an accountant to figure out how much income was made, how much social security must be paid, etc.
6) Families with lots of kids also would qualify for higher prebates, since the poverty level for a family of 8 ($39,498)is higher than the poverty level for a family of 4 ($22,128). Plus, schools are usually funded with local property taxes, which aren't changing under the Fair Tax.
7) Um, how? Not paying the tax is still illegal. Capone was brought down because of tax evasion. Evading the Fair Tax would still be illegal. I know one way opponents always cite is "But you can stare a business and then buy groceries for your business! You'd be able to eat without paying taxes!." Yeah, that'll fly just as well with the IRS under the Fair Tax as it does now: You can't do that, because unless your business is a grocery, that purchase had nothing to do with your business.
Remember, the Fair Tax replaces all the taxes that consumers already pay when they purchase something. Paizo has to charge $50 for their campaign book because they must cover the social security withholding, the income tax for their employees, corporate taxes, etc. Under the Fair Tax, they would just have to total up total money received in a given period, multiply that number by 0.23, and send a check off to Uncle Sam. They'd save a lot of money on accountants and tax lawyers. And when an AP subscriber purchased that campaign supplement for $42.50 thanks to the discount, Paizo would send [42.50 x 0.23 =] $9.76 off to the government. There is no tax added on top of whatever the product sells for.
Prices don't change
You keep saying this, and if every vendor acted as you claim, they might not -- but in the world I've lived in up until now, those vendors will say, "ooh, never mind withholdings... I need to give the government money on sales, so I'll just increase prices to cover that." It only works the way you claim if everyone agrees to play nice -- and how often does that happen?
Also, your math seems a bit off. Tax on federal witholding for all employees of business << tax on income for all employees of business plus share of earnings for all customers. To break even, taxes on goods would HAVE to go up.
Um, how? Not paying the tax is still illegal. Capone was brought down because of tax evasion. Evading the Fair Tax would still be illegal.
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.
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.
So, Money Laundering Business receives 500 laptops, records the sale of 500 laptops, and only sends in $32 in Fair Tax money . . . something doesn't add up.
Or, that front company receives 100 laptops and says it sold 500 laptops . . . something doesn't add up.
Tax is paid by the consumer at the time the exchange is made. If a company (or a front company) fails to pay the tax, it's actually a lot easier to determine if fraud is being committed, since there's not as much paperwork to hide behind.
Now, let's say Al Capone sold a whole bunch of liquor without sending the government the tax. Al can sit all day and spend whatever money he wants, because that money does get taxed when he spends it. But, he will also be under indictment for failing to pay taxes on the liquor he sold.
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.
You keep saying this, and if every vendor acted as you claim, they might not -- but in the world I've lived in up until now, those vendors will say, "ooh, never mind withholdings... I need to give the government money on sales, so I'll just increase prices to cover that." It only works the way you claim if everyone agrees to play nice -- and how often does that happen?
Also, your math seems a bit off. Tax on federal witholding for all employees of business << tax on income for all employees of business plus share of earnings for all customers. To break even, taxes on goods would HAVE to go up.
A $100 DVD player has about $23 in imbedded taxes. These taxes include:
From the manufacturer:Money to pay for employees income taxes.
Money to pay for employees social security taxes.
Money to pay for corporate income tax.
From the retailer:
The same taxes.
From the shipping company to get that DVD player to the retailer:
The same taxes
From all the component supplies (boxes, cables, styrafoam, etc):
The same taxes.
The cost of the DVD must (let me reiterate, MUST) include these taxes, otherwise the retailer operates at a loss.
So, instead of having all those taxes calculated through complicated witholdings and 10,000 pages of tax law, the law is changed:
The retailer collects 23% of the cost of the item and sends it off to the government.
So, instead of having that long list of taxes, everything has been simplfied.
Now, let's say Worst Buy just wants to gouge consumers. "That $100 DVD player will now cost $130! Ha! I'm gonna make double profit!" That's the gist of your argument, right?
Around the corner, Workshop Electronics decides that it can survive just fine with the profit it was making before, so keeps the price of the DVD player at $100. What do you think is gonna happen to Worst Buy's prices?
Why wouldn't everyone want to play nice? No doubt there's some companies that would choose to try to gouge consumers, but last time I checked, those companies go out of business pretty quick, because people become aware of the gouging practices and stop doing business with the evil companies.
A $100 DVD player has about $23 in imbedded taxes. These taxes include:
From the manufacturer:
Money to pay for employees income taxes.
Money to pay for employees social security taxes.
Money to pay for corporate income tax.From the retailer:
The same taxes.From the shipping company to get that DVD player to the retailer:
The same taxesFrom all the component supplies (boxes, cables, styrafoam, etc):
The same taxes.The cost of the DVD must (let me reiterate, MUST) include these taxes, otherwise the retailer operates at a loss.
So, instead of having all those taxes calculated through complicated witholdings and 10,000 pages of tax law, the law is changed:
The retailer collects 23% of the cost of the item and sends it off to the government.
Something still doesn't add up.
Currently, the governement gets all the taxes you listed, PLUS income tax as well (tax on interest & dividends, etc). And states get property taxes besides. Under your Fair Tax, the Feds & state get the same amount from goods -- but no income taxes. And the state gets zip for property taxes.
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Something still doesn't add up.
Currently, the governement gets all the taxes you listed, PLUS income tax as well (tax on interest & dividends, etc). And states get property taxes besides. Under your Fair Tax, the Feds & state get the same amount from goods -- but no income taxes. And the state gets zip for property taxes.
FairTax changes nothing on the state or local level. It only applies to federal taxes.
The goal is shift all taxes to a point of sale tax rather than taxes for corporations, income taxes, medicare, medicaid and social security witholdings, etc. The goal is to make it revenue neutral - make no assumptions that gov't will need less revenue, just change the method of collection.
Taking the taxes out of production and streamlining the tax codes should increase business by allowing businesses and people to make financial decisions for financial rather that tax reasons.
Wow.
American government accounting.
Just... wow.
Something still doesn't add up.
Currently, the governement gets all the taxes you listed, PLUS income tax as well (tax on interest & dividends, etc). And states get property taxes besides. Under your Fair Tax, the Feds & state get the same amount from goods -- but no income taxes. And the state gets zip for property taxes.
FairTax changes nothing on the state or local level. It only applies to federal taxes.
The goal is shift all taxes to a point of sale tax rather than taxes for corporations, income taxes, medicare, medicaid and social security witholdings, etc. The goal is to make it revenue neutral - make no assumptions that gov't will need less revenue, just change the method of collection.
Taking the taxes out of production and streamlining the tax codes should increase business by allowing businesses and people to make financial decisions for financial rather that tax reasons.
Hopefully a consumption tax (not a VAT!) would benefit US manufacturing and encourage savings and investment too. Our savings habits stink in the US.
Wow.
American government accounting.
Just... wow.
...but wait there's more!
(....and they said Hero system's math was complex.)
Something still doesn't add up.
As Jess said, there's nothing about state taxes/property taxes.
I think the issue you're having is surrounding witholdings from your paycheck.
If you currently "earn" $10/hour, you're actually take home closer to $8.50, right? Instead of $400/week, you take home closer to $340. Because our loving Federal Government made sure you didn't have to do all that hard math.
Your take home pay wouldn't change; you'd still take home $340/week. Just like you are currently taking home.
Your employer couldn't continue to pay you that $10/hour without increasing the cost of his product, because the tax still has to be paid by the consumer (as all taxes ultimately are).
Does that make more sense?
Remember:
1) Your take home pay doesn't change.
2) You would receive a monthly pre-bate check, based upon your household's size and the poverty level.
Hopefully a consumption tax (not a VAT!) would benefit US manufacturing and encourage savings and investment too. Our savings habits stink in the US.
Given the way we eat ourselves into obesity, with a consumption tax we'll wipe out the national debt in no time. Excuse me while I step out to get my triple baconator at Wendy's. :P
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Hopefully a consumption tax (not a VAT!) would benefit US manufacturing and encourage savings and investment too. Our savings habits stink in the US.Given the way we eat ourselves into obesity, with a consumption tax we'll wipe out the national debt in no time. Excuse me while I step out to get my triple baconator at Wendy's. :P
mmmm...triple baconator...*drool*