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Post by Deleted on May 14, 2011 19:12:51 GMT -5
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henryclay
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Post by henryclay on May 14, 2011 21:56:00 GMT -5
I finally found it. It is something that came out of the Dick Armey 23% fair tax proposal. I thought it told the story pretty well. I had forgotten, but this brought it home. The Dick Armey proposal, (as stated in your link krickitt), is ONLY ON NEW PRODUCTS AND SERVICES.TAXES, LOOPHOLES and SECOND HAND GASOLINE by anonymous.
Some have said we Americans are a capitalistic society, thriving on capital assets, fueled by consumption, which is produced by labor and oiled by liquid assets.
Take a look at one of them. A semi-trailer truck. Who owns it is not important. It is a capital asset. The owner bought it with liquid assets, and deducted the price of it from his tax returns through depreciation. In effect, when he bought the truck all the people who had been involved in building and getting it to him were paid. Since the truck is bought and used by the owner in a business, the business of hauling things, (a capitalist enterprise), and since his buying it removes the manufacturer and seller from the picture, he can "write it off" on his tax returns through loopholes that permit such write-offs.
While transporting consumable goods and other capital assets to other capitalists the owner of the semi has operating costs. The other capitalists, in turn, either make those goods available to their costomers or add them to their own assets in individual efforts to make other goods available to those customers in exchange for the customer’s liquid assets.
Similar to writing off the initial cost of the truck, the owner pays for his operating needs out of his pocket and then writes them off on his tax returns. The end result is, if his truck brings in enough for him to have anything left after he pays for his operations, he has a profit and he pays income tax on that profit.
I use a semi-trailer truck as an example. But a short glance around us, no matter where we are, we'll see the same picture, just with different players. What we see are capital assets; buildings, cars, boats, ships, trains, taxicabs, telephone lines, cellphone towers, (lots of cellphone towers), pumps, airplanes, machinery, (oodles of machinery), company uniforms with logos on them, carpenter tools, steel worker's safety straps, and the list is mind bogglingly endless, , , we see assets, all being used to produce what we can be proud of, and call, a robust economy. In fact, even with all of its ups and downs it is still about the most robust economy in the world.
And every bit of it is paid for through depreciation or other write-offs on tax returns. Which means of course, to the tax professional at least, that the owners didn't have to pay anything for any of it. In fact, all those assets were obtained at absolutely no cost, as in zero dollars, because of one little bitty word. That word is dpreciation, which to many people is an undeserved loophole.
Not withstanding the loophole, it works pretty well, wouldn't you say? I mean we can walk into any little old out of the way place, or the busiest hallway in the biggest building in town, and find a fresh, clean supply of life's most important requirement, drinking water. All paid for through tax write-offs, loopholes, on somebody's tax return.
Now comes along an end to tax write-offs and loopholes.. No more semi-trailer trucks being depreciated on tax returns. In fact, by golly, let’s do away with tax returns, too. If somebody wants a stinking semi-trailer truck, let him, (or her), pay for it. Like they do in Mexico. You DO know about Mexican trucks don't you? (Thanks to NAFTA they’re all over American highways lately.) Same-same all the taxicabs, busses, cars, (whoops, mine too?), boats and airplanes they can turn out. No more free stuff. Nada. Zip. We have something better. It's called a "Fair Tax".
Under Fair Tax we won’t have to worry about tax write-offs because there won’t be any. There won’t even be any tax returns to write things off on. Instead we will just pay a 23% tax in the price of everything we buy that is new, and be done with taxes entirely. Old secondhand or used items won’t be taxed. So the semi-trailer truck owner will not only get no depreciation on his new asset, he will also be taxed on it at 30% of the purchase price. ..Oh, did somebody say "No! No!, No!", it's not 30%, Why can’t I convince you, it’s only 23%?
Let's look at that 23% a minute. Under the 23% Fair Tax a new $100,000 semi, plus 8% state sales tax, (which won’t be removed but may get increased), now costs $108,000, will then cost $140,400, of which 23%, or $32,400, is the new "Fair" tax. All well and good. Except the $108,000 truck will now have $32,400 tax included in the $140,400 price and that $32,400 is 30% of $108,000. ...ahem! Please explain that 23% tax to me again.
Then, in order for the owner to use the truck, the new rules will also include the same Fair Tax add-on to the price of gasoline, (and everything else the owner buys new). So, where gasoline now costs $3.00 a gallon, it will then cost $3.90 a gallon. As with the purchase price of the truck, no current taxes will be removed, but under Fair Tax that extra 90 cents is only a 23% tax" because 23% of that $3.90 gallon of gasoline puts the price back at $3.00. Never mind that 90 cents is 30% of the price of $3.00 gasoline. (Get it?) And while under the old rules the gasoline was deductible, through a loophole as an operating cost, under the new rules it is not. The truck owner either makes up the extra cost by raising his fees, or he can park the truck. . . Some choice.
And if he does succeed as a truck operator, but has to buy his trucks on a payment plan, he can expect to pay the (ahem), 23% tax on the interest on each payment, too. And if he has to have it worked on, or washed, he can just pay the 23% (), tax on those things too.
But wait. Did somebody say, "Wait a minute, the tax won't apply to the purchase of USED items. Not only used trucks, but used "anything and everything" will be exempt from the new "Fair" tax. If he buys a used truck none of it's cost will be taxed?" That's right, by golly. So, he'll be smart and buy a used truck next time. (Those people who build new trucks can go jump in the lake!)
So, what about that? How long will it be before there won't be any NEW trucks to buy. Or NEW anything else, like new HDTV’s, or other new inventions. What happens to Research and Development? Well, it can go right down the tubes just like everything else that is new.. Why would anything new get invented if everybody was buying up all the used stuff, because who wants to pay the tax on new stuff when they can make do on old stuff? So there goes the market for all the new things. Things like kid’s shoes and school books. (We’ll just recycle the old ones.) And what about new jobs, where people nake new things? Will there be any need for new things to be made at all?
And so it goes, with trucks, taxicabs, airplanes, boats, ships, , , and cellphone towers, , , until the undertaker that hauls you to the cemetery includes the same, (ahem), 23% tax, (??), onto his charge for burying you, too.
But, of course the survivors could order you a used coffin, and put you in a used hole. But, then, who wants to be put in a second hand hole just so their heirs can skimp on taxes?
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AgeOfEnlightenmentSCP
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Post by AgeOfEnlightenmentSCP on May 14, 2011 21:59:17 GMT -5
We already have one. FICA. Low. Flat. No deductions, loopholes, credits, or any of it.
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henryclay
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Post by henryclay on May 14, 2011 22:18:56 GMT -5
That's right paul, and your FICA tax is 1/3 lower this year because of a vote in the Congress. But your boss didn't get that 1/3 break. And the complaint is nationwide that social securoty is going broke, but nobody yelled about lowering the requirement to donate to keep it solvent.
It's an example of how easy it is for the government to play games with our taxes. All they have to do is vote. No extra hours. No missed meals. No explainiong to the bank the company cut their hours. They just vote and keep right on trucking.
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txbo
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Post by txbo on May 15, 2011 3:36:42 GMT -5
Henryclay, Thanks for posting the fair tax article. As a onetime owner of a small transportation business, this is exactly how it works. I was also a real-estate investor and it worked the same way. I would never open a business under a fair tax system. The reason most of us have or had small businesses is because at the end of the year we pay little or no taxes.
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