Angel!
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Post by Angel! on Jul 18, 2011 15:00:17 GMT -5
If I plead guilty to not spending as much time on Fairtax as some think I should, perhaps someone who has done so will help us out here. Let's start off with answering the question, "What will the Fairtax apply to, and who will be exempt from the Fairtax? Simply put, the proof of the pudding is in the recipe and that means the proof is in the details. So, what are some of the details? What will be taxed? Will Social Security be taxed? Will disability pay be taxed? Will the material and labor to reconfigure an assembly line be taxed? Will the interest on my municipal bonds be taxed? (they aren't now) Will businesses be able to deduct the cost of labor? Will my medical insurance reimbursement checks for my medicine and doctor bills be taxed? If I borrow money will I have to pay tax on it? Will I have to pay tax on the payments I make to pay the loan off? (Under the last proposal I would.) New goods & services would be taxed at the final point of consumption. Businesses would not be taxed on business purchases Almost nothing you listed would be taxed because you are looking at the income side & no income would be taxed. You get taxed on the spending side. I am not 100% certain, but I think pretty much all the stuff listed in your previous example of the truck driver would not be taxed. As he is running his own business, I would think all goods & services related to the running of the business would be tax-free. All of that is related to him being able provide his service to others. Although the fairtax website is a little vague on this details, so if someone knows otherwise, then please clarify.
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mwcpa
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Post by mwcpa on Jul 18, 2011 15:02:36 GMT -5
"please tell me what, if anything i just got wrong"
The consumption tax is paid by the end user... not the business... it has nothing to do with the cost of manufacturing....the fair tax as I understand it is a tax charged on goods and services for the end user.... so, if I am a manufacture and I buy steel to make widgets, the steel is not subject to any fair tax.... the person who buys the widget at the end of the line pays the tax....
So, Corporation X would pay the "fair tax" presumably on the office supplies it used (since they are the end user).... but there would be no federal income tax on the overall profits of the computers they sold...
The entire premise of the fair tax is that the federal payroll taxes and corporate level income taxes would translate into lower cost goods... and that the fair tax rate (whether it be the 23% or the 30% number thrown around) would bring the total price paid at retail to a similar price as today.....
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Angel!
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Post by Angel! on Jul 18, 2011 15:04:43 GMT -5
So, people would have to understand the somewhat more difficult to explain features like "revenue nuetral"-- which is a complete joke, btw. It would EXPLODE revenue to the treasury. The United States would become the number one place to work and do business overnight. Unemployment would be at 4% within a year. Revenue to the treasury would EXPLODE, and provided spending could be controlled- we'd have a balanced budget in 2 years, and in 10 years, we'd owe 50% of what we owe today. We would enter a period of mind-boggling, explosive economic growth. And it would be global in scope. What do you base any of this on? The US economy relies on consumption & now goods are going to be taxed at 30%, which if anything would reduce consumption. How is this revenue explosion & 4% unemployment going to happen? Additionally, part of the sales pitch on fairtax is that it will be revenue neutral (after all, who wants to switch to a system that will cost us more taxes). So, if tax revenue explodes, then doesn't that just mean that they set the tax rate far too high?
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Angel!
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Post by Angel! on Jul 18, 2011 15:11:03 GMT -5
The biggest flaw I see with fair tax is switching to the new tax code & the affect on all after-tax savings & assets. All after tax savings would immediately lose 23% of it's spending power because you are going to be taxes on that money again when you spend it. The same with any income gained from asset sales. If you sell you $400K house, that could potentially be a tax free sale & now you have $400K in spending power. But, should you sell that after fairtax, it wouldn't have an equal spending power because spending 400K means that you paid 92K in taxes. You just lost 92K in spending power with the transition.
Now if they were offering rebates on existing savings & assets, then I could see this working out. But, on the fairtax website, they only address this issue by saying it isn't a big deal. How is losing 92K in spending power not a big deal?
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fairlycrazy23
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Post by fairlycrazy23 on Jul 18, 2011 15:28:29 GMT -5
The biggest flaw I see with fair tax is switching to the new tax code & the affect on all after-tax savings & assets. All after tax savings would immediately lose 23% of it's spending power because you are going to be taxes on that money again when you spend it. The same with any income gained from asset sales. If you sell you $400K house, that could potentially be a tax free sale & now you have $400K in spending power. But, should you sell that after fairtax, it wouldn't have an equal spending power because spending 400K means that you paid 92K in taxes. You just lost 92K in spending power with the transition. Now if they were offering rebates on existing savings & assets, then I could see this working out. But, on the fairtax website, they only address this issue by saying it isn't a big deal. How is losing 92K in spending power not a big deal? The fairtax is supposed to be revenue neutral , but it would be extremely beneficial to businesses; so, hopefully the economy would grow much faster under the fairtax increasing revenue to the government in the process as a side effect. But I agree that post taxed savings and assets are one of the, if not the, biggest issue with the Fairtax. This of course would typically effect 'the rich' more than the poor who generally don't have large cash savings or physical assets that they can sell.
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fairlycrazy23
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Post by fairlycrazy23 on Jul 18, 2011 15:33:46 GMT -5
The entire premise of the fair tax is that the federal payroll taxes and corporate level income taxes would translate into lower cost goods... and that the fair tax rate (whether it be the 23% or the 30% number thrown around) would bring the total price paid at retail to a similar price as today..... This is mostly true, however, products manufactured offshore would actually cost more, assuming that whatever jurisdiction they where manufactured charged some kind of tax on the business that manufactured them. This is actually an overall benefit since that would make manufacturing products domestically would be cheaper, not cheap enough to offset higher labor costs in all cases, but in many
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djAdvocate
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Post by djAdvocate on Jul 18, 2011 16:03:14 GMT -5
"please tell me what, if anything i just got wrong" The consumption tax is paid by the end user... not the business... it has nothing to do with the cost of manufacturing....the fair tax as I understand it is a tax charged on goods and services for the end user.... so, if I am a manufacture and I buy steel to make widgets, the steel is not subject to any fair tax.... the person who buys the widget at the end of the line pays the tax.... So, Corporation X would pay the "fair tax" presumably on the office supplies it used (since they are the end user).... but there would be no federal income tax on the overall profits of the computers they sold... The entire premise of the fair tax is that the federal payroll taxes and corporate level income taxes would translate into lower cost goods... and that the fair tax rate (whether it be the 23% or the 30% number thrown around) would bring the total price paid at retail to a similar price as today..... okey dokey.
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djAdvocate
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Post by djAdvocate on Jul 18, 2011 16:04:56 GMT -5
The biggest flaw I see with fair tax is switching to the new tax code & the affect on all after-tax savings & assets. All after tax savings would immediately lose 23% of it's spending power because you are going to be taxes on that money again when you spend it. The same with any income gained from asset sales. If you sell you $400K house, that could potentially be a tax free sale & now you have $400K in spending power. But, should you sell that after fairtax, it wouldn't have an equal spending power because spending 400K means that you paid 92K in taxes. You just lost 92K in spending power with the transition. Now if they were offering rebates on existing savings & assets, then I could see this working out. But, on the fairtax website, they only address this issue by saying it isn't a big deal. How is losing 92K in spending power not a big deal? The fairtax is supposed to be revenue neutral , but it would be extremely beneficial to businesses; so, hopefully the economy would grow much faster under the fairtax increasing revenue to the government in the process as a side effect. But I agree that post taxed savings and assets are one of the, if not the, biggest issue with the Fairtax. This of course would typically effect 'the rich' more than the poor who generally don't have large cash savings or physical assets that they can sell. Henry- would people pay a consumption tax when they purchase a home?
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fairlycrazy23
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Post by fairlycrazy23 on Jul 18, 2011 16:09:28 GMT -5
The fairtax is supposed to be revenue neutral , but it would be extremely beneficial to businesses; so, hopefully the economy would grow much faster under the fairtax increasing revenue to the government in the process as a side effect. But I agree that post taxed savings and assets are one of the, if not the, biggest issue with the Fairtax. This of course would typically effect 'the rich' more than the poor who generally don't have large cash savings or physical assets that they can sell. Henry- would people pay a consumption tax when they purchase a home? I can answer that, yes on new homes. www.fairtax.org/PDF/TheFairTaxTreatmentOfHousing.pdf
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Angel!
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Post by Angel! on Jul 18, 2011 17:18:46 GMT -5
The entire premise of the fair tax is that the federal payroll taxes and corporate level income taxes would translate into lower cost goods... and that the fair tax rate (whether it be the 23% or the 30% number thrown around) would bring the total price paid at retail to a similar price as today..... If everyone does lower their prices, then wages will also be lowered, I would think especially within companies that primarily provide labor. How is a plumber going to keep his prices the same when adding a 30% tax without decreasing what he charges for labor & as a result, decreasing his income. I think it is worth mentioning that rents are taxed. A landlord that makes very little profit is not going to be able to reduce rents enough that the after-tax rent remains unchanged. After all, their biggest expense is generally the mortgage on the property & that isn't going to be lowered.
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henryclay
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Post by henryclay on Jul 18, 2011 17:53:31 GMT -5
dj, the answer, "yes" is correct. But there is so much banter ahead of it that, to me at least, it is lost in the background music. After dancing for a couple of pages they finally get to this gem. Perhaps you can understand it: . . . . the imposition of the FairTax on new homes, coupled with the non-taxation of existing homes causes the relative prices to remain essentially the same. I think they are saying that what people have tied up in existing homes includes all the old "hidden taxes" and that new construction would not include those "hidden taxes", and to get there one has to think the "hidden taxes of old" would be equal to or greater than the FaiTax that is imposed on the new home. I can't think of it as meaning anything else. I also don't buy the "23% inclusive tax" simply because it is not a 23% tax. Someoine will have to do a better selling job in order to convince me that if I buy an item today for a dollar, and if I would have to pay $1.30 for it under the FairTax that I have paid a 23% tax. And that is what the "inclusive" reference means. It means that 23% of what you pay for an item is tax and 23% of $1.30 is $ .30. It is not just homes, it is everything. Everything NEW, that is. And again, I seriously question that EVERYTHING new can be sold at a 30% discount over whatever it is supposed to compete with as an existing item. For emphasis, I wonder what NEW items on the shelves of stores will suddenly be reduced in price so that the new 23% inclusive tax, (which is actually a 30% tax), will make it competitive. . . . .Think automobiles, furnoture, refrigerators , , , consumer goods other than food. . . Like the article I posted says, the market for anything new would dry up overnight. I imagine the current 9.2% unemployment will seem like Utopia by comparison.
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fairlycrazy23
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Post by fairlycrazy23 on Jul 18, 2011 18:03:14 GMT -5
dj, the answer, "yes" is correct. But there is so much banter ahead of it that, to me at least, it is lost in the background music. After dancing for a couple of pages they finally get to this gem. Perhaps you can understand it: . . . . the imposition of the FairTax on new homes, coupled with the non-taxation of existing homes causes the relative prices to remain essentially the same. I think they are saying that what people have tied up in existing homes includes all the old "hidden taxes" and that new construction would not include those "hidden taxes", and to get there one has to think the "hidden taxes of old" would be equal to or greater than the FaiTax that is imposed on the new home. I can't think of it as meaning anything else. I also don't buy the "23% inclusive tax" simply because it is not a 23% tax. Someoine will have to do a better selling job in order to convince me that if I buy an item today for a dollar, and if I would have to pay $1.30 for it under the FairTax that I have paid a 23% tax. And that is what the "inclusive" reference means. It means that 23% of what you pay for an item is tax and 23% of $1.30 is $ .30. It is not just homes, it is everything. Everything NEW, that is. And again, I seriously question that EVERYTHING new can be sold at a 30% discount over whatever it is supposed to compete with as an existing item. For emphasis, I wonder what NEW items on the shelves of stores will suddenly be reduced in price so that the new 23% inclusive tax, (which is actually a 30% tax), will make it competitive. . . . .Think automobiles, furnoture, refrigerators , , , consumer goods other than food. . . Like the article I posted says, the market for anything new would dry up overnight. I imagine the current 9.2% unemployment will seem like Utopia by comparison. So the by this same logic, in any area that has sales tax (state/local), I assume nobody sales anything new right?
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2kids10horses
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Post by 2kids10horses on Jul 18, 2011 18:17:19 GMT -5
Corporations are in business to make a profit for their owners, the shareholders. So, when they create products for sale, they set prices at a point to maximize their profits after taking into account all their expenses. Expenses include payroll taxes (Social Security and Medicare tax) and Income taxes. Under the Fair Tax, corporations will no longer have to pay these "embedded" taxes. Their costs will go down.
So, sure! you say, a windfall for the corporations! True, initally, you might see corporate profits soar. But, wait! There's competition... Let's use Coke and Pepsi as competitors. Right now, their products are similiar, and many consumers are price sensitive, so, Coke may decide they could lower their profit a little, and sell Cokes a little cheaper to gain market share. Well, Pepsi would do the same thing. Eventually, Coke and Pepsi would lower their prices (to stay competitive) to the point to where they would be as profitable as they were before the FairTax windfall. Thus, the price of the goods to the consumer would fall by an amount equal to the cost savings realized by the elimination of the previously embedded taxes! So, if there are 20 cents of embedded taxes in the price of a Coke or Pepsi, the price would drop by those 20 cents.
The corporation would still be "just as profitable" as before, but the real cost of production would be lowered. The FairTax would then be added onto the price, and it is designed to be about the same as the amount of embedded taxes, so the cost at the retail level would remain the same.
About this 23 percent vs 30 percent. It all depends upon the denominator and numerator. Let's say there's a 20 cent tax, and the price, including tax is 1 dollar. Is that a 20% tax (20/100) or a 25% tax (20/80)?
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fairlycrazy23
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Post by fairlycrazy23 on Jul 18, 2011 18:26:37 GMT -5
Corporations are in business to make a profit for their owners, the shareholders. So, when they create products for sale, they set prices at a point to maximize their profits after taking into account all their expenses. Expenses include payroll taxes (Social Security and Medicare tax) and Income taxes. Under the Fair Tax, corporations will no longer have to pay these "embedded" taxes. Their costs will go down. So, sure! you say, a windfall for the corporations! True, initally, you might see corporate profits soar. But, wait! There's competition... Let's use Coke and Pepsi as competitors. Right now, their products are similiar, and many consumers are price sensitive, so, Coke may decide they could lower their profit a little, and sell Cokes a little cheaper to gain market share. Well, Pepsi would do the same thing. Eventually, Coke and Pepsi would lower their prices (to stay competitive) to the point to where they would be as profitable as they were before the FairTax windfall. Thus, the price of the goods to the consumer would fall by an amount equal to the cost savings realized by the elimination of the previously embedded taxes! So, if there are 20 cents of embedded taxes in the price of a Coke or Pepsi, the price would drop by those 20 cents. The corporation would still be "just as profitable" as before, but the real cost of production would be lowered. The FairTax would then be added onto the price, and it is designed to be about the same as the amount of embedded taxes, so the cost at the retail level would remain the same. About this 23 percent vs 30 percent. It all depends upon the denominator and numerator. Let's say there's a 20 cent tax, and the price, including tax is 1 dollar. Is that a 20% tax (20/100) or a 25% tax (20/80)? This was actually demonstrated in I think a 'fee/tax' related to airlines that was removed, some airlines tried to reap the extra profit keeping prices the same, while other dropped prices, soon all other airlines dropped prices to match, I'll see If I can find the example.
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henryclay
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Post by henryclay on Jul 18, 2011 18:49:49 GMT -5
2kids10horses,
I believe your Coke/Pepsi example is a good one to demonstrate that Corporate taxes today should be eliminated. In which case all the corporate taxes on whatever they buy would also be eliminated. The combined effect, (lower consumer costs), should be enough to bring "some" manufacturing back to the US.
But I question whether the same analogy you applied to Coke and Pepsi can be applied to capital products where new items have to compete with existing items. A hammer will last a long time. So will a farmer's tractor and a tugboat. And there are lots of those items already out there to compete with newly constructed potential replacements. I believe there would be an increased demand for making the existing families of those things last longer.
And I also believe that the tax rate would have to increase because of the lack of demand for new production. That would cause a tax to be added to everything that changes hands.
It all makes for an interesting discussion, but I'd like to see some models that are now in existence before I accept all the basic selling points.
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AgeOfEnlightenmentSCP
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Post by AgeOfEnlightenmentSCP on Jul 18, 2011 21:08:36 GMT -5
I think corporate taxes should be eliminated because ultimately paying taxes is the duty of individual citizens- and only individuals should be taxed. This principle keeps taxes and taxation transparent. Everyone knows what they pay because only individuals are taxed.
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2kids10horses
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Post by 2kids10horses on Jul 18, 2011 21:39:54 GMT -5
henry,
I agree that corporate income taxes should be eliminated! So should capital gains taxes.
Now, about your fear that durable goods would be priced out of the market... We've already figured out that the retail price of goods for sale would be about the same under the FairTax system as today's, right? So, the price of a hammer today at Home Depot, say... $20 will still be $20 after the FairTax is in place. If HD can sell hammers today for $20, I don't see why they won't be able to sell them for the same price after the FairTax goes into effect! I suppose, today, I can go to a pawn shop or a garage sale, and find one for $5, maybe after the FairTax is in place used goods would have a higher perceived value, and I'll have to pay $10 for a used hammer at a garage sale.
Do you really think that's going to have any significant effect on the economy? Or peoples buying habits?
Now, remember, retail prices are about the same. But, people's TAKE HOME PAY is up! No payroll deductions! (For Federal Income Taxes or FICA.) State income tax deductions would remain the same. We're talking the Federal stuff here. People would have more money in their pockets to spend.
Lessee... let's put this all together.... prices about the same, and more disposable income.... hmmmm....gee, I don't know, but I think maybe people might just go out and spend more! What do you think? So, let's work this out.... people spend more, that means that 23% of that spending on new stuff is revenue for the government, that means that the government collects more taxes! Whoa! Meanwhile, people spending more buying more stuff means that the economy grows because people are spending their money, creating more jobs to make more stuff... WHOA! More jobs, more government revenues!
Maybe now you can see how the FairTax can help grow the economy, pay for government services while not punishing anyone?
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fairlycrazy23
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Post by fairlycrazy23 on Jul 18, 2011 22:43:53 GMT -5
I don't really see people flocking to used items, as already mentioned they are currently cheaper and yet somehow new items continue to sell. It would have the benefit of letting people who truly want to save money the best opportunity, they could turn to used items to save a lot of money, but somehow I suspect that most of the the people that would do that already are.
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djAdvocate
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Post by djAdvocate on Jul 19, 2011 0:15:56 GMT -5
I think corporate taxes should be eliminated because ultimately paying taxes is the duty of individual citizens- and only individuals should be taxed. This principle keeps taxes and taxation transparent. Everyone knows what they pay because only individuals are taxed. that is largely how S Corps work, and absolutely how sole proprieterships work. C Corps are the kinda lame exception, but the structure is useful if you need to soak the public for big projects or shelter personal assets in an apparently third party fashion.
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Post by bubblyandblue on Jul 19, 2011 9:35:54 GMT -5
Increase the tax on speculation, special interest -- anything that does not create wealth through the employment of labor and capital to produce a product that someone will use. Playing with capital by using capital does not create wealth - Tax it to extremes. Hedge fund managers should be taxed at 90% - only income that is derived in actual position (serves an actual function) should be excluded. A tax on purchases is the most regressive tax available today. We should tax the crap out of things we know are detrimental to our economy ..the reason we are where we are today. Suggest a 2% transaction tax on stock trades - 0% on capital investement in actual company - start up or ownership. Most trades on the market confer stock ownership for a few minutes (not real economy investement) tax it to death - Tax CDOs tax derivatives and derivatives squared, any naked short or put. Tax speculation. repeal special privalege. The only power tax has is to destroy employ it to destroy what has nearly destroyed the US. In spite of the ingenious methods devised by statesmen and financiers to get more revenue from large fortunes, and regardless of whether the maximum sur tax remains at 25% or is raised or lowered, it is still true that it would be better to stop the speculative incomes at the source, rather than attempt to recover them after they have passed into the hands of profiteers. If a man earns his income by producing wealth, nothing should be done to hamper him. For has he not given employment to labor, and has he not produced goods for our consumption? To cripple or burden such a man means that he is necessarily forced to employ fewer men, and to make less goods, which tends to decrease wages, employment, and increased cost of living. If, however, a man’s income is not made in producing wealth and employing labor, but is due to speculation, the case is altogether different. The speculator as a speculator, whether his holdings be mineral lands, forests, power sites, agricultural lands, or city lots, employs no labor and produces no wealth. He adds nothing to the riches of the country, but merely takes toll from those who do employ labor and produce wealth. If part of the speculator’s income – no matter how large a part – be taken in taxation, it will not decrease employment or lessen the production of wealth. Whereas, if the producer’s income be taxed it will tend to limit employment and stop the production of wealth. Our lawmakers will do well, therefore, to pay less attention to the rate on incomes, and more to the source from whence they are drawn.
Rant over
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Post by bubblyandblue on Jul 19, 2011 10:07:31 GMT -5
Bring back money as a utility. A use which is a store a value to meet future needs - I sell something I made, you give me money for it, I use money to purchase something I want. I borrow money to start a business, I make goods or provide service and earn money to pay back loan and make a profit for items I wish to procure. When a company issues stock in the first place they recieve a loan (in effect) but the purchaser now gets to toss around the stock to someone else that does not benifit the origional company - except maybe the owners paycheck through stock ownership - not much getting to the company itself. When a company starts a buyback plan - they are not contributing to the production of goods - they are only reducing the stock on the market which drives the cost up - not really contributing to production. Liquidity in markets is good in facilitating transactions or the trade in products but, when that liquidity is not related to the companies bottom line or the real market, it only siphons off the future profits of a company into the hands of non-wealth producers. Currently, all consumers of an end product pay all taxes, graft, PACs, etc. involved in the production cost of a widget. Since most consumers are also producers, they pay again in personal income taxes. Since taxes have only one power (to destroy) then, of course we have the destruction of consumers, laborers and production or more clearly, wealth creation. Tax the crap out of speculation, monopolistic entities, non-wealth creating sources of income, special privalege repeals in our tax code. Slowly shift the burden from wealth creators to the wealth destroyers.
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floridayankee
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Post by floridayankee on Jul 19, 2011 10:22:57 GMT -5
lots of folks wouldn't want to see the mortgage interest deduction go away Why not? Only a fool would would think it's a good idea to pay $12k/year in interest just so they can save $1k on their taxes.
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Post by maui1 on Jul 19, 2011 10:33:43 GMT -5
I think a fed sales tax on consumption will be hard to sell also.
a consumption tax can be sold to the public as a way to reduce consumption in all areas of our lives. oil, food, energy, vehicles,..........everything....which would be the green idea of all green ideas.
i know one thing for sure..........our tax system broken, and beyond repair. it needs to be replaced, and the easiest, most simple, fairest, is the consumption tax, as stated.
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Angel!
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Post by Angel! on Jul 19, 2011 11:25:21 GMT -5
Now, remember, retail prices are about the same. But, people's TAKE HOME PAY is up! No payroll deductions! (For Federal Income Taxes or FICA.) State income tax deductions would remain the same. We're talking the Federal stuff here. People would have more money in their pockets to spend. Take home pay isn't up. That is what the fairtax folks would like you to believe, but it isn't true. For HD to be able to cut their prices 23%, they have to reduce pay. A large part of the hidden taxes in products in the payroll and labor taxes. To cut out those hidden taxes means we take a pay cut. Essentially there are two extremes of what will happen, but most likely something in the middle will occur 1 - Everyone starts taking home their entire check & prices will stay about the same before tax & we see a 30% increase in pricing after tax. 2 - Everyone's take home remains the same & companies are able to reduce their prices enough to keep after tax pricing about the same as today. Obviously the result will be somewhere between the 2, but it is absolute baloney that prices won't change & we will start taking home our entire gross pay. If you look at federal revenue, the split between corporate taxes & individual taxes is about 25/75. 75% of the hidden taxing in items is from employee's income & doesn't come out of the corporations pocket (they pay us & we pay the taxes). So for them to cut prices 23% means that most of that cut in prices is going to be passed on directly to the employees in the form of lower wages.
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Angel!
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Post by Angel! on Jul 19, 2011 11:50:14 GMT -5
I also want to point out that the overall impact of this will for the most part lower taxes on the top 20% of earners, while increasing taxes of lower/middle class with children. The current effective rate for the top 20 percent of earner is 26%, with the fairtax the absolute most they will pay is 23%.
As far as increasing taxes on lower/middle class with kids - Take a family of 4, under the old system they weren't taxed on the first 26K of income (11,400 standard deduction + 14,600 in exemptions). After that they are taxed 10% on the next ~8K in income, 15% between 8K - 34K. Under the new system they aren't taxed on the first 29K of spending (through prebates) & have a 23% tax rate after that. Pretty much the same amount not taxed, but a much higher tax rate after that point. Then you have lost the child tax credit worth 1K/kid & lost the daycare credit. So not only do they have a higher tax rate, but they have lost 3.2K in tax credits.
Now I know taxing spending vs. income is different. But, lets face it, most lower/middle class spend all their income, so the amount being taxed is very similar. A family of 4 making 40K could easily pay over 5K more in taxes each year.
Now I don't know if this is bad or good, but definitely worth noting.
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Post by bubblyandblue on Jul 19, 2011 11:57:13 GMT -5
Consumption taxes are the most regressive around because lower income people spend most of earnings to get by - whereas the rich spend less on consumption proportionaly and have other investements/income that would escape the consumption tax.
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djAdvocate
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Post by djAdvocate on Jul 19, 2011 12:19:39 GMT -5
Consumption taxes are the most regressive around because lower income people spend most of earnings to get by - whereas the rich spend less on consumption proportionaly and have other investements/income that would escape the consumption tax. precisely correct. it is the opposite of progressive taxation. it will likely lead to huge wealth inequalities. you know, the kind you get in Feudal societies.
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floridayankee
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Post by floridayankee on Jul 19, 2011 12:46:10 GMT -5
Consumption taxes are the most regressive around because lower income people spend most of earnings to get by - whereas the rich spend less on consumption proportionaly and have other investements/income that would escape the consumption tax. I'd imagine the "rich" spend a lot more than the "poor". I knew a guy that lived paycheck to paycheck at $100k+/year income just as he did at $40k. He simply spent his increased income on more expensive toys.
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djAdvocate
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Post by djAdvocate on Jul 19, 2011 12:50:28 GMT -5
Consumption taxes are the most regressive around because lower income people spend most of earnings to get by - whereas the rich spend less on consumption proportionaly and have other investements/income that would escape the consumption tax. I'd imagine the "rich" spend a lot more than the "poor". I knew a guy that lived paycheck to paycheck at $100k+/year income just as he did at $40k. He simply spent his increased income on more expensive toys. i think that, proportionate to what they make, that is not correct. even at my modest CEO salary, a sizeable portion of my income goes to investment, not spending. if i made more, even more of it would go there.
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Post by bubblyandblue on Jul 19, 2011 13:15:36 GMT -5
100K+ a year is not what I am saying is rich. Push it up over 250K, 500K, 1,000K maybe - If the income is gained by speculation (outside the real economy Labor+capital=wealth) then tax it to whatever level because it does not employ labor and would not hurt employment. A few additions to the below artical and the picture will be clear. Money is a commodity, invented to help people by facilitating transactions. It is not wealth in itself. Wealth is natural resources, water, food, land, education, skill, spirit, ingenuity, art. Credit is seen as necessary; but what of credit derivatives, the financial sector’s arcane “small print”? How intrinsic are financial gambles on collateralized debt obligations (CDOs, “weapons of mass financial destruction” in Warren Buffett’s terminology) – not retail banking or even business banking and insurance, but financial bets on the economy’s zigzagging measures. Without casino capitalism, could industrial capitalism survive?
Laborers knowing that science and invention have increased enormously the power of labor, cannot understand why they do not receive more of the increased product, and accuse capital of withholding it. The employer, finding it increasingly difficult to make both ends meet, accuses labor of shirking. Thus suspicion is aroused, distrust follows, and soon both are angry and struggling for mastery. It is not the man who gives employment to labor that does harm. The mischief comes from the man who does not give employment. Every factory, every store, every building, every bit of wealth in any shape requires labor in its creation. The more wealth created the more labor employed, the higher wages and lower prices. But while some men employ labor and produce wealth, others speculate in lands and resources required for production, and without employing labor or producing wealth they secure a large part of the wealth others produce. What they get without producing, labor and capital produce without getting. That is why labor and capital quarrel. But the quarrel should not be between labor and capital, but between the non-producing speculator on the one hand and labor and capital on the other. Co-operation between employer and employee will lead to more friendly relations and a better understanding, and will hasten the day when they will see that their interests are mutual. As long as they stand apart and permit the non-producing, non-employing exploiter to make each think the other is his enemy, the speculator will prey upon both. Co-operating friends, when they fully realize the source of their troubles will find at hand a simple and effective cure: The removal of taxes from industry, and the taxing of privilege and monopoly. Remove the heavy burdens of government from those who employ labor and produce wealth, and lay them upon those who enrich themselves without employing labor or producing wealth.
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