51% don't pay taxes, also, the US taxes the "rich" more than other developed nations

[Parkbandit]

If the government would continue to provide rebates, why do you think your fair tax system would be less susceptible to fraud?

Long term.. it probably wouldn't be. Systems tends to break down over time and the opportunity for fraud grows.

[Rinualdo]

Systems tends to break down over time and the opportunity for fraud grows.

I've always loved entropy.

[TheEschaton]

It took you only 2 sentences in this post to contradict yourself.

I tell you what.. why don't you show us all how a Fair Tax system is bad for anyone making 50,000 a year.. great for people who make 100K... and fantastic for people making a million because they can force people making 50K a year to make them more comfortable.

It's like how Chris Rock talked about prenuptial agreements. He said everyone needs them - because if you have 10 million dollars, and she takes half, so what, you still have 5. But if you make 50,000, and she takes 25k, you might have to kill her.

If there was a 25% flat tax on everyone, a person making 10 million is affected less by living off 7.5, than a person who makes 100k living off 75k, who is affected less than a person who makes 50k living off 38.5k. Surely you can see how that works, right? You understand the concept of cost of living?

[Parkbandit]

It's like how Chris Rock talked about prenuptial agreements. He said everyone needs them - because if you have 10 million dollars, and she takes half, so what, you still have 5. But if you make 50,000, and she takes 25k, you might have to kill her.

If there was a 25% flat tax on everyone, a person making 10 million is affected less by living off 7.5, than a person who makes 100k living off 75k, who is affected less than a person who makes 50k living off 38.5k. Surely you can see how that works, right? You understand the concept of cost of living?

I thought Indians were supposed to be good at math?

You are also not taking into account the rebates that will inevitably be dealt back to the taxpayers... and that people have a far bigger influence on how they spend their money than they do their income.

Surely I didn't lose you, did I? You understand everything I just posted?

[TheEschaton]

37.5k, sorry. It still doesn't negate the point.

Idealogically, a "fair tax" with rebates is contradictory, if you're defining "fair" as "flat". Once it has rebates, it really becomes a progressive tax system, where the lower class who gets more rebates pays less taxes. What's to prevent a rebate system where the lowest 51% pay 0% taxes, as the title of the thread implies? Is that still a "fair tax" to you as long as they started at 25% and got rebated to 0%, instead of just starting at 0%?

Because to me, the "fair tax" as a single, flat tax always stinks to me of rich people wanting a lower tax rate, while raising the tax rate on middle, lower middle, and lower class people to support it.

[Keller]

37.5k, sorry. It still doesn't negate the point.

Idealogically, a "fair tax" with rebates is contradictory, if you're defining "fair" as "flat". Once it has rebates, it really becomes a progressive tax system, where the lower class who gets more rebates pays less taxes. What's to prevent a rebate system where the lowest 51% pay 0% taxes, as the title of the thread implies? Is that still a "fair tax" to you as long as they started at 25% and got rebated to 0%, instead of just starting at 0%?

Because to me, the "fair tax" as a single, flat tax always stinks to me of rich people wanting a lower tax rate, while raising the tax rate on middle, lower middle, and lower class people to support it.

Stop being so pejorative, Alok.

It's called broadening the base and it's good for the country because then everyone will have skin in the game. At least that's what crb parrots to me from the emails he receives.

[Parkbandit]

37.5k, sorry. It still doesn't negate the point.

Idealogically, a "fair tax" with rebates is contradictory, if you're defining "fair" as "flat". Once it has rebates, it really becomes a progressive tax system, where the lower class who gets more rebates pays less taxes. What's to prevent a rebate system where the lowest 51% pay 0% taxes, as the title of the thread implies? Is that still a "fair tax" to you as long as they started at 25% and got rebated to 0%, instead of just starting at 0%?

Because to me, the "fair tax" as a single, flat tax always stinks to me of rich people wanting a lower tax rate, while raising the tax rate on middle, lower middle, and lower class people to support it.

There hasn't been a single, legitimate candidate for office that is calling for a real flat tax.

Could we just stick to reality for once?

[TheEschaton]

So then please let me know what the difference is between the progressive tax system we have now and a system of rebates in a fair tax system that allows people to live sustainable lives by paying a smaller amount that the upper bracket?

Hint: The way you would do that (quantitatively, at least) is to show rebates would amount to less of an income tax refund to the lower, and lower middle classes than them being in a 0% income bracket would be. And I'd love for you to show me a rebate system that does that and is based on legitimate socio-economics on what the poor can live on. Qualitatively, the ideas are the same.

[Bobmuhthol]

The Fair Tax proposed a monthly check of $208 delivered to all adults in the United States (before adding extra money per child). So a person's income is not taxed at all, and they have $208 of tax money to spend (which would mean purchasing $693 of goods in a month) courtesy the federal government. A person saving 20% of their income and spending 80% would need to earn $990 per month, or $11,880 per year, before effectively being taxed a non-zero amount. Any lower income levels would benefit from a negative tax rate.

The Fair Tax also consistently values a child at $71 or $72 per month in taxes, equivalent to an additional $240 per month, or $2,880 per year. A single parent of 5 children can thus earn $26,280 before being taxed, under the same 80/20 assumption. And, consider this: if that same person only spends 10% of their income, they can earn $227,200 before they start paying taxes!!!


Disclaimer: I am not really paying attention to these numbers but check out the cool points I made!

[Tgo01]

The Fair Tax proposed a monthly check of $208 delivered to all adults in the United States (before adding extra money per child). So a person's income is not taxed at all, and they have $208 of tax money to spend (which would mean purchasing $693 of goods in a month) courtesy the federal government. A person saving 20% of their income and spending 80% would need to earn $990 per month, or $11,880 per year, before effectively being taxed a non-zero amount. Any lower income levels would benefit from a negative tax rate.

The Fair Tax also consistently values a child at $71 or $72 per month in taxes, equivalent to an additional $240 per month, or $2,880 per year. A single parent of 5 children can thus earn $26,280 before being taxed, under the same 80/20 assumption. And, consider this: if that same person only spends 10% of their income, they can earn $227,200 before they start paying taxes!!!


Disclaimer: I am not really paying attention to these numbers but check out the cool points I made!

Is this a real tax proposal or is this an idea of your own? Either way I like it, rather than a complicated process to see if and how much money you are owed every year from taxes the IRS just gives everyone the same flat amount and everyone pays the same percentage of their income.

Problem is it's too simple, where is the red tape?

[Bobmuhthol]

This is a real proposal from years ago, and it is called the Fair Tax Act. It calls for a 30% federal sales tax instead of an income tax. Its entire purpose is to eliminate the complexities (and inefficiencies) of the existing Internal Revenue Code. I don't really find it appealing, but to each his own.

http://en.wikipedia.org/wiki/Fair_Tax

There is another element of the Fair Tax that is less well known: the tax rate in a given year is actually a function of the federal budget deficit of the previous year. More government spending means higher tax rates to compensate, and the opposite.

This is particularly telling, from the wikipedia article:

http://upload.wikimedia.org/wikipedia/en/d/df/NRST-percentile.png

[Tgo01]

This is a real proposal from years ago, and it is called the Fair Tax Act. It calls for a 30% federal sales tax instead of an income tax. Its entire purpose is to eliminate the complexities (and inefficiencies) of the existing Internal Revenue Code. I don't really find it appealing, but to each his own.

http://en.wikipedia.org/wiki/Fair_Tax

Well maybe not word for word but I like the idea of giving everyone the same refund every month/year/whathaveyou.

[Bobmuhthol]

I have a problem with any system that actually moves money around, especially government -> individual. Income tax refunds are bad enough paid once per year; imagine a system where every person, regardless of income, is mailed a check every month for some number of hundreds of dollars. Now imagine that same system being run by the federal government. I can't take seriously the argument that this would be run smoothly.

[Parkbandit]

So then please let me know what the difference is between the progressive tax system we have now and a system of rebates in a fair tax system that allows people to live sustainable lives by paying a smaller amount that the upper bracket?

Hint: The way you would do that (quantitatively, at least) is to show rebates would amount to less of an income tax refund to the lower, and lower middle classes than them being in a 0% income bracket would be. And I'd love for you to show me a rebate system that does that and is based on legitimate socio-economics on what the poor can live on. Qualitatively, the ideas are the same.

One is based upon income.. the other is based upon consumption.

[Rinualdo]

One is based upon income.. the other is based upon consumption.

So does not the Fair Tax system encourage people to spend less? Isn't that a bad thing for a consumer based economy?

[Bobmuhthol]

I agree with the criticism, Rinualdo, but income taxes also encourage people to spend less -- they have less money overall. Taxing consumption encourages saving, and there's nothing necessarily wrong with that until saving rates become inhibitive to growth. There are a lot of people who, for some reason, complain about the availability of credit and the ease of leveraging (I am not one of them); those people are likely the ones in support of the Fair Tax.

[Kithus]

So does not the Fair Tax system encourage people to spend less? Isn't that a bad thing for a consumer based economy?

Not necessarily. Without income tax they would also have more money in their pockets to spend.

[Rinualdo]

Not necessarily. Without income tax they would also have more money in their pockets to spend.

Right, but there is a psychological component to the system. If you have 80$ in your pocket vice 50$, that 8$ Big Mac is still less appealing then it was at 4.99$.

[Parkbandit]

So does not the Fair Tax system encourage people to spend less? Isn't that a bad thing for a consumer based economy?

I think at first, you are correct... people will have sticker shock on the price of items... but they will also be happy with the extra money they will get in their paychecks, so it will be a very short-lived problem.

[Bobmuhthol]

If you have 80$ in your pocket vice 50$, that 8$ Big Mac is still less appealing then it was at 4.99$.

There are many examples of why this isn't the case. The first that comes to mind is the prolific spending that occurred just prior to 2008. When people have more, they will spend more.

Unless, of course, your argument is that people will stop buying Big Macs. That's fine; they'll buy something else instead.

[Rinualdo]

There are many examples of why this isn't the case. The first that comes to mind is the prolific spending that occurred just prior to 2008. When people have more, they will spend more.

Unless, of course, your argument is that people will stop buying Big Macs. That's fine; they'll buy something else instead.

I'm not arguing, just theorizing.
Your example from 2008, however, isn't relevant. People had more in their pockets but consumer prices didn't rise with the rate of increase. To be sure, when given more money, people will always spend more money. Whether that is equal to the current system remains to be seen. I would suspect it would not.

[CrystalTears]

Right, but there is a psychological component to the system. If you have 80$ in your pocket vice 50$, that 8$ Big Mac is still less appealing then it was at 4.99$.
Geez what tax rate are you using?

[Rinualdo]

Geez what tax rate are you using?

Made up numbers. I was trying to show a simple ratio, not an exact scenario.

[Tgo01]

Why would people save money because income tax is done away with and instead there is a federal sales tax on goods and services? Has an increase in sales tax ever deterred people from purchasing goods to any relevant extent before?

I'm sure some people would save more money but I don't think it would be enough to cause a problem. I don't think someone living pay check to pay check who suddenly has an extra 80 dollars every week because there is no more income tax is going to say "Hey, I've always wanted to start a savings account, now seems like a good time."

Billionaires aren't going to suddenly want to stop buying yachts and personal jets because income tax is gone and sales tax is higher.

And what about the people who make their money through illegal means or evade paying income taxes? Unless those people stop buying things altogether they are now going to be forced to pay some sort of federal tax every time they buy something.

I'm sure there are many problems with a federal sales tax idea but I don't see Americans deciding they want to save money being one of them.

[Bobmuhthol]

Why would people save money because income tax is done away with and instead there is a federal sales tax on goods and services?

Income tax is an incentive not to work. It becomes less attractive to earn an additional dollar because you get less of it than before. There is also a decreasing marginal utility of dollars. Without income tax, people would reasonably work a lot more because they would get a lot more money for it.

Sales tax is an incentive to stop buying stuff. If you lose 30% of the value of your money when you buy a good at a certain price, you're going to buy less goods than if there were no sales tax at all. A fairly decent example is sales tax between states; I hardly purchase anything in Massachusetts when I can help it, because I can just go to New Hampshire and not pay sales tax, and that's pretty cool. If the sales tax on all goods were to be unilaterally increased, I would definitely spend less (non-tax) money.


Billionaires aren't going to suddenly want to stop buying yachts and personal jets because income tax is gone and sales tax is higher.

Really? You think a $200 million item will still sell as much as it did before when it costs $260 million instead?


And what about the people who make their money through illegal means or evade paying income taxes? Unless those people stop buying things altogether they are now going to be forced to pay some sort of federal tax every time they buy something.

This is one of the most widely used examples about how a sales tax is that much better than an income tax; my question to you is how income tax is so easy evade, and yet sales tax wouldn't be easy to evade for those same people?

[Warriorbird]

Really? You think a $200 million item will still sell as much as it did before when it costs $260 million instead?

Do you think the wealthy wouldn't dodge this? I'm sure you could spend quite some time thinking of ways.

[Parkbandit]

Billionaires aren't going to suddenly want to stop buying yachts and personal jets because income tax is gone and sales tax is higher.


That's what they thought when they passed the Luxury tax back in the 90's... they had to repeal it years later when the yacht industry was going tits up and people were getting laid off.

[Parkbandit]

Do you think the wealthy wouldn't dodge this? I'm sure you could spend quite some time thinking of ways.

Well, Kerry dodged the state taxes for his yacht when he docked it in another state that didn't have the same type of tax liability.

You mean, like that?

[Warriorbird]

Well, Kerry dodged the state taxes for his yacht when he docked it in another state that didn't have the same type of tax liability.

You mean, like that?

Like Kerry and every other rich person with good accountants and lawyers.

In spite of your reach back to 2004 (we're drifting back in time, what's next, Dukakis?), it's what rich people do.

[Bobmuhthol]

Do you think the wealthy wouldn't dodge this? I'm sure you could spend quite some time thinking of ways.

So that person didn't pay taxes on the income to get him in a position to buy a $200 million item, and then he didn't pay taxes on the $200 million spent to purchase it. There's one person not paying $60 million in taxes under the Fair Tax system, which is great because I'm arguing against it.

[Parkbandit]

Like Kerry and every other rich person with good accountants and lawyers.

In spite of your reach back to 2004 (we're drifting back in time, what's next, Dukakis?), it's what rich people do.

Actually, the Kerry debacle was from either 2009 or 2010.. not 2004.

It was a perfect example of a piece of shit politician who votes for raising taxes and saying "We need to share the burden".. but when it comes to actually pulling his "fair share", he never does.

[Stanley Burrell]

This isn't like me, but, let's say we magically sealed every and all corporate loophole that provided a net gain without any tax on "Big Business" and at the same time, provided a stone tablet-etched tax system that each and every individual and organization would adhere to:

Would this actually help us? Again, I know some microeconomics but zero macroeconomics, would this hurt us in making artificial moneys to trade with via foreign lending/invesment. And back to my first paragraph, would this work? Don't we need shady/needed-not-by-the-book dealings as a mechanism for commerce?

[TheEschaton]

I don't know who you think rich people are, Tgo1, but they don't just spend their money willy-nilly. If there was a 25% consumption tax, they'd buy less stuff, and play the stock market more.

Most rich people I know like their BMWs, but, if they worked for it in the first place, are more than willing to drive a Camry if it means saving their well-earned cash.

Your ideas on unaffected yacht spending applies to rappers and people like Paris Hilton.

[Tgo01]

Really? You think a $200 million item will still sell as much as it did before when it costs $260 million instead?

When the people buying the item have millions of extra dollars laying around from not paying federal income taxes?

Let's take a look at an item I actually have enough money to buy one of. A PS3 goes for around 300 dollars, if tomorrow they raised the sales tax on it by 30% yes I might think twice before shelling out an extra 90 dollars on it. However if my paycheck was 100 dollars more every week because of no federal income tax the extra 90 dollars probably wouldn't phase me.


This is one of the most widely used examples about how a sales tax is that much better than an income tax; my question to you is how income tax is so easy evade, and yet sales tax wouldn't be easy to evade for those same people?

Like a black market? Someone on the inside not charging them the 30% sales tax? Stealing the items?


I don't know who you think rich people are, Tgo1, but they don't just spend their money willy-nilly. If there was a 25% consumption tax, they'd buy less stuff, and play the stock market more.

Most rich people I know like their BMWs, but, if they worked for it in the first place, are more than willing to drive a Camry if it means saving their well-earned cash.

Your ideas on unaffected yacht spending applies to rappers and people like Paris Hilton.

So who then buys yachts, limos, 30,000 square feet mansions and private jets? Wouldn't a rich person forgo a yacht, limo, private jet and buy a nice modest 1500 square foot home today if they wanted to tie up all of their extra money in the stock market? Do these industries and products only exist because of rappers?

[Warriorbird]

So who then buys yachts, limos, 30,000 square feet mansions and private jets? Wouldn't a rich person forgo a yacht, limo, private jet and buy a nice modest 1500 square foot home today if they wanted to tie up all of their extra money in the stock market? Do these industries and products only exist because of rappers?

Some of them do. There's been a whole lot of issues with the economic downturn. I think Baby (Lil Wayne's "daddy") pretty much was all of Bugatti's sales for one year.

Rich people are not likely to go 1500 square foot but they might not go 30,000. George Bush's new home is actually pretty small. He could afford much larger.

PB's silly Kerry example is exactly the sort of thing I'm talking about. There's other simple and highly convoluted things that would run around the "Fair Tax" very easily.

[Tgo01]

Some of them do. There's been a whole lot of issues with the economic downturn. I think Baby (Lil Wayne's "daddy") pretty much was all of Bugatti's sales for one year.

This economic downturn is all sorts of crazy though.


PB's silly Kerry example is exactly the sort of thing I'm talking about. There's other simple and highly convoluted things that would run around the "Fair Tax" very easily.

I don't know the specifics of the Kerry issue but it sounds like he was trying to cheat the system by avoiding state taxes, it's similar to what Bob was talking about earlier how people living near the border of a state with lower sales tax will go across the border to buy things. However if it's a national sales tax you would have no such loophole (unless of course you're going to Canada or Mexico to buy your cigarettes.)

I'm not saying a national sales tax wouldn't have loopholes, I'm not even saying it's a good alternative to what we're using now, I would just like to hear examples of loopholes and don't think a national sales tax would discourage consumers to the point of it being a problem.

EDIT: Actually thinking about it I guess for major purchases people would just buy shit from overseas on the internet. It's time for a world government, amirite?

[crb]

I don't know who you think rich people are, Tgo1, but they don't just spend their money willy-nilly. If there was a 25% consumption tax, they'd buy less stuff, and play the stock market more.

Most rich people I know like their BMWs, but, if they worked for it in the first place, are more than willing to drive a Camry if it means saving their well-earned cash.

Your ideas on unaffected yacht spending applies to rappers and people like Paris Hilton.

The board's second biggest liberal finally admitting if you tax something you get less of it.

If you tax carbon, you get less carbon.
If you tax gas, people drive less.
And yes, if you tax consumption, people save more.
But if you tax production (income) people are less productive.
and if you tax investments, people invest less.

All taxes influence behavior. Thanks to Obamacare there are certain notches in the tax code where the marginal tax rate on incremental income can exceed 100%, which means you will work more for less pay. So... you won't work more, you'll work less, on purpose.

[TheEschaton]

Firstly, taxing income is not a one-to-one of taxing production, since, last I checked, most of the richest people in this country are hedge fund managers and other silly shit like that, and produce no products. Furthermore, it strikes me as a specious argument to say that (higher) income tax is an automatic disincentive to work (more). I know lots of lawyers, and the super-successful ones which this would apply to, actually like to work 80-100 hours a week. My father still works 80 hour weeks at 55, not because he needs to, but because he likes to. Edited to add: Maybe you're just lazy, and don't want to work more. Interesting ad hominem attack, imo.

Secondly, you've yet to make the point that our taxes inhibit our businesses and business people to an unacceptable level, without making comparisons to third world countries who pay slave wages and can thus be more "competitive" with American workers.

Thirdly, who the fuck is the biggest liberal on this board if it isn't me?!?

[Bobmuhthol]

My father still works 80 hour weeks at 55, not because he needs to, but because he likes to.

This is evidence that your father has a very low MRS between work and leisure, and it is strictly not evidence that income taxes are not an incentive not to work.

Not.

[crb]

Firstly, taxing income is not a one-to-one of taxing production, since, last I checked, most of the richest people in this country are hedge fund managers and other silly shit like that, and produce no products. Furthermore, it strikes me as a specious argument to say that (higher) income tax is an automatic disincentive to work (more). I know lots of lawyers, and the super-successful ones which this would apply to, actually like to work 80-100 hours a week. My father still works 80 hour weeks at 55, not because he needs to, but because he likes to. Edited to add: Maybe you're just lazy, and don't want to work more. Interesting ad hominem attack, imo.

Secondly, you've yet to make the point that our taxes inhibit our businesses and business people to an unacceptable level, without making comparisons to third world countries who pay slave wages and can thus be more "competitive" with American workers.

Thirdly, who the fuck is the biggest liberal on this board if it isn't me?!?

I don't think I need to get in an argument with you about an accepted fact, like income taxes being a disincentive to work more, especially as they increase. Oh, but you have an anecdote about your dad, so it erases all the work economists have done showing otherwise.

and its Tsa'ahanah.

[Rinualdo]

http://i188.photobucket.com/albums/z152/UCLABruinKid/ClassWarfare-piechart.jpg