sil
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Post by sil on Feb 15, 2011 14:52:28 GMT -5
Interesting point, Kari. I'm often guilty of assuming that others use the same logic with personal finances as me, but that's not always the case.
I suppose I can understand how someone could look at their paycheck and see that they are making an extra $400 a month because no Fed taxes are withheld, and figure that they can now afford a $400/mo. car payment.
Whereas, I'd have a seriously hard time spending $400 a month for a car payment that would have cost me $300 a month before the Fair Tax was implemented. I'd hold on to my car for as long as possible because the repair vs. replace equation would give me more incentive to continually fix up my clunker (even though the parts would be more expensive too)
But I do think a 23% cost increase to buy a new home would be difficult for anyone to ignore. Prospective buyers would be much better off signing long term leases. Eventually rent would rise as new landlords need to recoup their tax spending, but it would be a slow climb because long term landlords could underbid for new tenants.
Yeah, the more I think about it, the more I think the Fair Tax would be a blessing to those who rent or repair, and a curse to those who sell or buy.
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Post by unrepentant_spendthrift on Feb 15, 2011 15:24:55 GMT -5
I'll take the extra refund as thanks for all those horrid months in the desert.... Phil, again you hit it right on the head. Its funny how you always make so much sense inspite of ideaological differences... keep up the goood work
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Mardi Gras Audrey
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Post by Mardi Gras Audrey on Feb 15, 2011 18:36:02 GMT -5
What we should do is go to a flat rate income tax (I don't know if it is called "Flat Tax" politically). Tax everyone 10%...no exemptions, no deductions, no EITC, no prebates. Just a flat 10% (or whatever percent we need). Include dividends, cap gains, and interest with income. That means that Bill Gates pays 10% of however many billions he gets each year and the guy that works at McDonalds pays 10% of his pay. Everyone has gets to use a 1040OhMyGodThisIsEasy and has their taxes done in about 10 minutes. You wouldn't need to mess with withholdings every year and it would be easy to figure out what every paycheck would look like.
Businesses could pay a flat tax as well, their amount would be based on profit amounts.
Using this, the rich pay more for living here (10% of a million is $100k) while the poor pay less but still pay something to contribute (10% of $30k is $3k). I would imagine that you wouldn't even need it as high as 10% if everyone was paying. I think it wouldn't have as much of an impact on consumer spending because the money was already taxed. States would be encouraged to do the same thing and get rid of/lower sales tax.
I think it would also reduce the disagreements between the various interest groups (people w/ dependents, students, homeowners, etc) who get pitted against each other because our govt uses the tax code to do social engineering.
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Angel!
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Post by Angel! on Feb 16, 2011 11:34:00 GMT -5
I think you need to do more research into how income tax currently works. The highest bracket is currently 35%, so rich with high incomes would pay much less. The capital gains tax is 15%, so this would be lowered in your system. Poor people generally pay less than 10% - something like 50% of the public pays 0%. I made 60K this year & am pretty sure my tax rate is 0% or negative, but haven't actually filed yet.
Your system would do the opposite of what you are saying - it would save the rich tons of money & cost the poor a lot of money.
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Plain Old Petunia
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Post by Plain Old Petunia on Feb 16, 2011 12:58:19 GMT -5
The Roth IRA problem could easily be solved with a rebate. You took $n from your Roth? Here is your rebate of $(n x fair tax rate).
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Plain Old Petunia
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Post by Plain Old Petunia on Feb 16, 2011 13:00:06 GMT -5
Angel, I believe that is the point. AudreyAlyce is saying the poor should pay something too.
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stats45
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Post by stats45 on Feb 16, 2011 13:14:11 GMT -5
A 10% flat income tax would not make up the revenues of the current tax system. Something around 16-18% with no exemptions might.
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Angel!
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Post by Angel! on Feb 16, 2011 13:16:56 GMT -5
Maybe I misinterpreted her statement. I thought she was saying the rich would pay more than today & the poor would pay less than today. Maybe she just meant the rich would pay more than the poor under that system, which would true. But, it is true under today's system as well.
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Mardi Gras Audrey
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Post by Mardi Gras Audrey on Feb 16, 2011 15:27:04 GMT -5
Petunia, that was my point. I think everyone should pay something. The rich and the poor all get the benefit of military protection, roads, healthy drinking water/food, etc. Maybe if everyone was paying something it would have an influence what/who they vote for (I know, I know... a girl can dream, can't she?). I would think that if the entire population had to bear the cost of the political decisions that are made, they would pay a little more attention. I think that this would reduce the amount of essentially buying people off by tinkering with the tax code.
The rich would still be paying more, on an actual dollar value amount. Why should they have to pay more percentage wise? They are already paying more in real dollars (Note my example where one guy pays $100k and another pays $3k). I am guessing that the guy making $1 million dollars a year isn't getting that much more usage out of the roads, education system, health system, etc than the one making $30k a year.
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Angel!
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Post by Angel! on Feb 16, 2011 18:42:52 GMT -5
Because our society needs them to in order to continue functioning. The rich have more money leftover after the essentials, the poor have barely any money left & can't afford to lose another 10%. What you are proposing would essentially kill the poor & lower middle classes, unless you want to increase the welfare they recieve to counter the increased taxes they now have to pay.
It is probably worth noting that most of flat tax ideas that have been proposed include some sort of standard deduction, which would alleviate the pain towards the lower classes. But, you would need something more like 15-20% to make this work.
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Deleted
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Post by Deleted on Feb 16, 2011 20:37:35 GMT -5
Why should they have to pay more percentage wise?
Because they benefit from the system to a greater percentage wise?... It always amazes me how people think that if you are not making 60K+, then you aren't working... lots of people put in just as many hours and just as much hard work... and just do not get paid as well... and they don't have the benefits and luxeries... and those who are benefited by the system to a greater degree... who can afford essentials, and luxeries even while paying a higher percentage... need to do so in order to sustain the system...
A democratic republic is not sustainable with split upper/lower caste system... it requires a middle class and potential for growth.
This is not to say that i like the EIC... i do not like the nature of it at all, and feel it breeds entitlement mentality. I'm not inherently against assisting the populations it helps (although i think there should be some greater limitations), but mostly i don't like the way it currently works...
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stats45
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Post by stats45 on Feb 16, 2011 20:45:43 GMT -5
Tough makes a fair point about the fact that we don't hear a lot about the companies that benefit from this system and make wage and benefit decisions based on the existing programs.
It reminds me a little of the food stamp programs. Many people want the food stamp system to be more like a 'voucher' system for particular items, but some of the strongest proponents of a system that allows people to buy soda and candy with their food stamps are food conglomerates who would lose dollars spent on packaged snacks or whatever.
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formerexpat
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Post by formerexpat on Feb 16, 2011 20:50:14 GMT -5
Most plans have roughly a 17-19% with a $40k exemption for a family of 4 for revenue neutral. I guess that means it needs to be about 40% the way our government spends. The reason I'd most want a flat sales tax system is to eliminate every other tax, corporate taxes included. It will also tax a huge black and underground market that escapes taxation now [under the table income, drugs, etc]. National sales tax and state sales tax - that's it. Some people know there are taxes on gasoline or other products but don't know how much...how many people know the federal tax on gasoline is 18.4cpg? How many people know their state's tax per gallon? How many people know the embedded taxes included on just about every item they purchase since businesses pass all taxes onto the consumer? How many people know the taxes on their utilities? As financially minded as most of us are here; how many of us know the exact amount we've paid in taxes - ALL IN?? I'd suspect zero, unless you go back through all of the companies that you buy your goods from, calculate their effective tax rate and account for the tax impact included in the cost of goods you've purchased. If using the UK as a benchmark and their VAT [presumably what the flat national sales tax would be modeled], they have a discounted VAT on utilities of 5%. Other things like most food is exempt completely from VAT. Therefore, it is an inherently progressive system in the sense that those with little income that use most of it to purchase necessities will not pay the full VAT on those necessities. Meanwhile, the portion of the population that is well off and spends a lot of their income on discretionary items will pay the higher rate of VAT, currently 20%. www.hmrc.gov.uk/vat/forms-rates/rates/goods-services.htmAnd it's not administered as Crone had suggested. It's cost of x, vat of 20% off of x. Our percentage might be different but I suspect in the long run, EVERYONE'S taxes would go down due to the simple fact that you'd actually know and could calculate how much you've paid. As for VAT on a home; this is France: www.parisvoice.com/practical-paris/548-buying-a-home-in-france-prices-and-fees[/size]
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stats45
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Post by stats45 on Feb 16, 2011 21:07:40 GMT -5
About the percentage expat, that is nice to know! I'm glad I was somewhere near the mark. I just did a back of a napkin calculation with GDP, current government revenues, and the wage/GDP ratio.
There are some positive things about consumption taxes, and the economics undergrad in me likes the incentives they set up. That said, countries that have them often don't have conservative (small government) programs. People are usually surprised to learn that some of the countries with the most extensive social programs (like France or Sweden) collect a large amount of their revenues through regressive taxation. The United States actually has one of the most progressive tax systems of Western, industrialized countries.
Some people even think that large-scale, regressive taxes can help contribute to government growth. If everyone pays in at the same rate and gets near universal services, support for programs is higher than if people pay widely varying rates and receive widely varying types of services. You don't have the same broad coalitions that help to build and support large social programs. I don't know how much I think this could explain national differences in social services, but it is interesting.
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Deleted
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Post by Deleted on Feb 16, 2011 21:14:30 GMT -5
the companies that benefit from this system and make wage and benefit decisions based on the existing programs.
Yeah, i don't know how i missed that Walmart documentary (High cost of low prices? i think) ... but i finally watched it and was thinking... yeah, if your employees are on medicaid and getting an EIC, then it really must help your bottom line...
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