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crashfourit
Old topic: *
Since the old topic was so popular, I've decided to post a newer one. mrsparkle.gif

Topic of debate:
Due to the intrusive nature and complexity of Income Tax and Coprerate Gains Tax,
should we pass the 'FairTax' (h.r. 25)??

(NOTE: please read about it before you place your vote.)


Information about it:
http://www.fairtaxvolunteer.org/smart/index.html
http://www.fairtax.org
http://www.fairtaxvolunteer.org/main.html
The Library of Congress: Thomas (search for hr 25)
Google
SWM28WDC
The best part of FairTax is the elimination of all the loopholes. However, there is no provision to keep them out, nor is there anything preventing us from eliminating them from the existing income tax.

The FairTax basically makes capital investment tax free, from cradle to grave. This is not neccessarily a good thing, as long as wages (labor) is indirectly taxed at the register. For one, suppressed consumer demand due to the consumer tax will decrease demand for goods & services, decreasing employment and wages and raising the need for government-provided social services. For another, relatively unfettered capital investment will drive the price of real estate even further beyond the reach of renters today.

The FairTax does make saving & investment easier for everyone, however, the vast majority of Americans can already invest all they can afford to in one of several tax-free investment programs. So, in actuality, the fraction of Americans who would benefit from unrestricted tax-free investments would be rather small. Furthermore, at least at this point in the economy, most producers aren't looking for additional capacity through investment, they're looking for more demand through consumption. Capital is already relatively plentiful and cheap. What they need is customers. A sales tax hurts that, especially a 30% one.

The FairTax removes corporate taxes on profits. The primary advantage here is the reduction in compliance costs. By definition, profits are what is left over from gross revenue after operations. Taxes on profits do not cause companies to become unprofitable - they merely take a portion of any positive profits. More importantly, in a free market, with perfect competition, there are no lasting profits: a competitor will enter and produce at a lower price, taking a profitable company's market share. However, we don't have perfect competition: profitable companies exploit market failures to create their profits, either through monopolistic competition, government regulation, or other artificial barriers to competition.

At one time I favored the FairTax, and still think it might have a potential use, if it's rate were limited to 10% or so.

As a more proximate evolution of our current tax structure, I'd prefer to see several other revenue sources developed:

1) elimination of corporate welfare by charging full market value for the government-granted licenses, titles and permissions. (Actually, depending on how you go about this, this may be enough to fund government).
2) Capturing economic externalities of pollution by taxing polluters. (this could fit in #1)
3) Eliminating the Payroll tax - this tax keeps people out of work and keeps working peoples wages lower than they'd otherwise be, exacerbating the need for government social programs.
4) Revising the corporate tax laws to separate Health Insurance from employment
5) Increasing the individual deduction for income tax, and streamlining the rest of the program.
Dale in GA
QUOTE(crashfourit @ Jun 14 2005, 01:37 AM)

Old topic: *
Since the old topic was so popular, I've decided to post a newer one.  mrsparkle.gif 

Topic of debate:
Due to the intrusive nature and complexity of Income Tax and Coprerate Gains Tax,
should we pass the 'FairTax' (h.r. 25)??


*



First of all, let me quibble about the question - what if I've got no problem with the intrusive nature and complexity of the current system, but I believe FairTax should be implemented anyway? Answering 'yes' to your question means not only do I agree with your solution, I agree with the reason you state for implementing it.

It's like a push poll disguised as a question.

Anyway, regardless of the intrusive nature and complexity of the current tax system, I believe the FairTax would have a catastrophic impact on the country.

I think it's a plan pushed by those who want to see "big government" eliminated, but realize they cannot hope to develop consensus on individual programs. Thus, IMHO, they want to starve the government and force it do shed programs like a maple tree in October without the opportunity to give serious consideration to what it's doing. I honestly think the people pushing FairTax (not its many supporters) want to bankrupt the government into shutting down the last remnants of the New Deal.

And of course, a plan like "FairTax" would be supported by high-income folks who see an opportunity to minimize their tax burden even more.

Posters (and I don't for a second doubt their sincerity or integrity) claim the 30% national sales tax will be revenue-neutral, eliminating all other taxes. This claim is based on the assumption that when corporate taxes are eliminated, corporations will stop building those taxes into the prices they charge for their goods.

I doubt that assumption. One historical example is credit card rates, which exceeded the prime rate by only a point or so until the inflation of the late '70s. When the inflation finally came under control and the prime rate came back to earth, credit card rates stayed high.

Likewise with labor costs - if the payroll tax is eliminated, does anyone really think that all employers will automatically add that 7.65%% to their employees' pay? Sure, some will (especially the unionized ones), but many will lie, cheat and steal their way out of it. Hell, even some labor unions in dealing with their own employees will try to avoid it. And no - I can't cite specific examples, but I've spent enough time in corporate America to know that what I'm saying is accurate. I mean - can you see Enron bestowing such a boon on its employees?

What I think is that prices may come down, but not in an amount anywhere near the amount currently built in to reflect taxation.

Another major problem is the idea that only new goods or services would be subject to the national sales tax (I agree with another poster - let's avoid the propagandizing titles), even the two biggest purchases an American makes - (new) house and (new) car. Here's the problem - sales of new goods won't be taxed if they're business-to-business. With that loophole, no tax will ever be paid on a new car or a new house. I'd buy a house as a company, rent it to my wife for a year, and then she'd buy it from me - and the entire transaction would have been tax-free.

As for cars, those who are used to getting new cars will simply have their employer buy them a new car periodically, and then buy it from their employer once it qualifies as "used."

It's the human condition - folks who wouldn't balk at paying a $30 tax on a $100 household appliance will go out of their way to avoid a $60,000 tax bill on a $200,000 new house.

And appeals to patriotism, or whatever, won't help. The current debate is currently driven by folks who balk at paying a marginal tax rate of just over a third, which forty years ago was over 70%. In the words of Leona Helmsley, "only the little people pay taxes."

And if no tax revenue can reasonably be expected to be generated by the sale of new houses or automobiles, how much will the tax rate need to be increased on everything else to compensate?

I acknowledge that the national sales tax proposal seems good, with its claim that the government's revenues will increase, while the (actual) tax burden borne by everyone who pays taxes will be reduced. The math (or logic) just doesn't work.

I think this would be a catastrophe because of the incredible effort it will take to change our system. If, after a year of the new system, it's clear that it's not working as planned, what will we do? Go to all the effort of trying to change back to a system that's admittedly cumbersome and unfair?

It may be that there's a tax system out there that's better than our current system of taxing income and profits, but I don't think a national sales tax is it. If the intrusive nature and complexity of our current system is really all that's driving this, then I suggest uncomplicating the current system.




taxmurderer
QUOTE(crashfourit @ Jun 13 2005, 10:37 PM)
Old topic: *
Since the old topic was so popular, I've decided to post a newer one.  mrsparkle.gif


Thank you! I have been looking for someplace to talk about this. I have a few opinions and some questions. Keep in mind I am not a trained economist, nor do I claim to be particularly knowledgable about politics and economics in general. I just need a place to vent a bit. And hopefully learn some things too.

QUOTE
Topic of debate:
Due to the intrusive nature and complexity of Income Tax and Coprerate Gains Tax,
should we pass the 'FairTax' (h.r. 25)??

(NOTE: please read about it before you place your vote.)


I did read up about it! (Boy did I ever! See below).

QUOTE
First of all, let me quibble about the question - what if I've got no problem with the intrusive nature and complexity of the current system, but I believe FairTax should be implemented anyway? Answering 'yes' to your question means not only do I agree with your solution, I agree with the reason you state for implementing it.

It's like a push poll disguised as a question.


The question is loaded, of course. I think it is referred to as the "complex question." But that is OK, because I agree with your assumptions anyway. After spending a couple of weeks surfing the web, reading the bill (HR 25/S 25), browsing thomas, and emailing my local fairtax.org person, I am starting to come to a conclusion: All of these taxation systems (current income tax, flat tax, VAT, FairTax, etc) hurt the poor to some degree or another. So, all other things being equal, why not pick the one that at least gives me back some autonomy, privacy, even anonymity?

I consider myself rather left leaning on most topics I can think of. And judging by the support this bill is getting -- in the public as well as amongst senators and congresspeople -- it looks as if it is being pushed primarily by conservatives (read: Republicans). But I am actually OK with this seeming inconsistency with my own usual values. Maybe parisanship is not needed in every case.

Thanks for your listening!

phoenixfire
This is a great idea because:

1. It will save American's and corporations a lot of wasted time and effort that could be put to more productive uses.
2. It will increase economic growth by attracting foreign investment, encouraging savings, and encouraging innovation and hard work.
3. It is better for the poor
4. It taxes the rich more appropriately by penalizing them for extravagent, frivolous purchases ($800 shoes, $50 million yachts,etc.) but rewarding them for saving, investing, and innovation.
5. It is simpler and will reduce tax evasion
6. If done properly, it shouldn't favor special interests like the current system does.

During tax season I heard on the news that Americans spent something like 3 BILLION hours doing their taxes this year. I personally spent almost every weekend in March working on my taxes which totally interrupted the plans I was making for my small business. So income taxes direclty slowed down my contribution to economic growth.

I have heard a lot of people say that this is not 'fair' to poor Americans. I really don't understand why they believe this given the rebate system, and the fact that poor people can basically choose their own tax rate under this system. To give another personal example, I live in California and my wife and I have decent jobs but barely make enough to pay the bills even though we are both very cost-consious. We would really like to save money to buy a house, but federal and state taxes take almost 25% of our income before we even see it. A sales tax would allow us more control over our finances because we could cut back spending to cut our taxes which would allow us to save more money.

I do see one potential problem as it relates to retirees? Won't they end up paying more taxes without getting much of a tax break?

The other problem is that if we don't completely eliminate the income tax forever we will will end up with both an income tax and a sales tax.

In addition to the fairtax, I would suggest a few additions to our tax system. First, I think it would be good to have a 90% or so inheritance tax on net worth above 200-500k (with farms and small businesses exempted). In general I am in favor of lower taxes because they encourage productivity, but I do not think that is as much the case with an inheritance tax. Inheritances just further the divide between rich and poor, and enable children of the wealthy to be non-productive members of societyas they don't need to work. I would further propose that the income from this tax would go into a fund that provides merit-based grants to poor people for education and first-time home purchases.

America should be a country where each person receives equal opportunity, and every person should have to work to get their reward. Education is key for equal opporunity (and the current educational system greatly favors those who can afford to live in better neighborhoods) and owning a home is key to long-term financial security.

Lastly, does anyone think it would be good to try to phase in a sales tax over a period of years by slowly increasing the sales tax and decreasing income tax rates (if it could be guaranteed the income tax amendment would be repealed at that time)? Doing so might make it easier to pass and would be less risky as we could see how much money was being generated and the effect it was having on the economy.
skeeterses
QUOTE
The FairTax is a voluntary “consumption" tax: the more you buy, the more you pay in taxes, the less you buy, the less you pay in taxes.

That's a quote from the fairtax.org website.
This "FairTax" doesn't sound fair if it happens to be a consumption tax. The problem is that it assumes that a rich person is going to spend the same percentage of his income on consumption as a poor person. A typical poor person will spend between 1/3 and 1/2 of his income on housing. A very rich person on the other hand can purchase a nice house and still spend less than 1/10 of his income on housing.

Due to the intrusive nature and complexity of Income Tax and Corperate Gains Tax,
should we pass the 'FairTax' (h.r. 25)??

There's no question that the current tax system is a mess. What we need is a simpler tax system that is more fair. That of course is a question for another debate.

nemov
Eventually this type of tax will be passed. I'm not sure when, but when government officials realize how much more revenue would be produced with a tax like this they will not be able to stop themselves. There is really no such thing as a "fair tax."

In almost every scenarios someone is getting hosed. At least with this system (and rebate) the poor will be okay. The rich will not be able to "escape the system" due to loopholes and will have to pay tax on all good consumed. Which is more than the average middle class worker.

economically it makes sense, but politically it will take forever to get it passed.
Just Leave me Alone!
The idea seems simple enough, and at first glance is appealing. There are a few concerns that I have that would need to be addressed though if I were to support this idea.

The first requirement is that we must first repeal the Sixteenth Amendment to the Constitution, which allows Washington to impose the income tax. Otherwise we will end up with both an income tax and a sales tax.

The main question I have with this proposal deals with the fact that the price of goods and services purchased at retail would increase 30%. This discourages consumption. The efficiencies gained from mass production and bulk buying will be lost on the country as it becomes more and more appealing to ‘do it yourself’. For example: if the price of an oil change goes up 30%, more people will change their own oil. What assurances are there that the drop in consumption from this proposal will not hurt business to the point of costing us our jobs?

Another question that needs to be resolved with the national sales tax is that since business-to-business purchases would be exempt from taxation, what stops everyone from opening a website and calling their transactions ‘business’? At 30%, the appeal to pushing the envelop will be immense. If Wendy’s can buy frozen patties without a 30% tax, wouldn’t your small business have the same right?

The size of the tax is going to make it difficult to enforce. Assuming that we do not want a government agency that would need to be larger than the current IRS running around trying to enforce this, what would stop this proposal from becoming a Value Added Tax(VAT)? We see how this has worked out for Europe. If you don’t see the tax, it invariably rises for some reason.

And my final concern is that charitable giving will be hurt by this proposal. How do we ensure that giving to worthy causes is rewarded under this system?
Hobbes
QUOTE(Just Leave me Alone! @ Aug 23 2005, 08:01 AM)
The first requirement is that we must first repeal the Sixteenth Amendment to the Constitution, which allows Washington to impose the income tax. Otherwise we will end up with both an income tax and a sales tax. 


An excellent point...and agree wholeheartedly with your conclusion. Politicians NEVER pass up an opportunity to give themselves money.

QUOTE
The main question I have with this proposal deals with the fact that the price of goods and services purchased at retail would increase 30%.  This discourages consumption.  The efficiencies gained from mass production and bulk buying will be lost on the country as it becomes more and more appealling to ‘do it yourself’.  For example: if the price of an oil change goes up 30%, more people will change their own oil.  What assurances are there that the drop in consumption from this proposal will not hurt business to the point of costing us our jobs? 


I don't think this would be that pronounced, since you would still be paying that 30% tax on the raw materials, and only saving on the labor. Since the auto shop buys the oil in bulk, but you buy small quantitites, you would hardly save anything (which is why so many people don't change their own oil now to begin with). I think this would be the case in other such situations as well.

QUOTE
Another question that needs to be resolved with the national sales tax is that since business-to-business purchases would be exempt from taxation, what stops everyone from opening a website and calling their transactions ‘business’?  At 30%, the appeal to pushing the envelop will be immense.  If Wendy’s can buy frozen patties without a 30% tax, wouldn’t your small business have the same right? 


Another excellent point! This could be a real issue. The only way around it would be to essentially keep the IRS intact policing such issues, which eliminates one of the huge advantages of the fair tax.

QUOTE
And my final concern is that charitable giving will be hurt by this proposal.  How do we ensure that giving to worth causes is rewarded under this system?


Agree again. On principal, this is a good thing...people would contribute money purely out of charitable intent. The downside is that all those contributions for tax purposes would go away. My guess is that there would be short term chaos, but charities do server a wonderful purpose, and they would eventually reach an equilibrium where they would get the funds they needed.
SWM28WDC
The real pinch will occur where private citizens have to compete with 'investment' for the same resources: real estate, oil, power, water, etc. They get it tax free, we pay a tax, and increased demand isn't reflected by increased production, only increased prices.

The FairTax would be quite intrusive - each business would have to account for it's (tax free) purchases - as well as account for the disposal of those purchases if they are sold as tax free used items.

It's an interesting idea... attempting to recoup government expenses by taxing a single point in the economic stream. Unfortunately, the tax wouldn't effectively tax the whole flow - there would be an 'open circuit' where wealth could beget wealth untaxed - further exacerbating the wealth divide. I have no problem with a meritocracy where productive people enjoy better lifestyles than unproductive - but when the means of wealth production are inherited from generation to generation - AND the means of wealth produciton are limited by the physical laws of the universe - the only future I can see is one where there are REALLY rich people, mostly on the basis of their inheritences, and then there's everyone else. Not much room for democracy there.

A similar interesting idea, taxing a single point in the economic stream, was very popular more than a century ago (and about a century before that). However, then, the proposed tax would have closed the circuit. The theory was to base all taxes the value of land as it would be valued in it's unimproved state - e.g. a property tax with an exemption for buildings and improvements. There are a few recent evolutions based on technology, but the modern principle remains the same: All wealth requires inputs from Land, Labor, and Capital. In broad terms, Land is natural resources; Labor is work by people, both brain-work and brawn-work; and Capital is man-made machinery & such. One of these things is not like the others - it is in fixed supply, and cannot be produced. The other two can and are reproduced. Taxes based on the other two (and they're almost all based on the other two) reduce the available supply of Labor and Capital, and therefore reduce the overall creation of Wealth. Taxes on the first, Land, do not.

A retail sales tax is a tax on the sale of Wealth, and as such, is an indirect tax on all three factors of production.

From Adam Smith:
"Both ground-rent and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land, are, therefore, perhaps, the species of revenue which can best bear a peculiar tax imposed upon them."

edited to add:
OH and as for the 'intrusive nature and complexity', a tax on ground rents is assessable based on maps and comparable sales / rents, and is incredibly simple.
Google
taxmurderer
QUOTE(Hobbes @ Aug 23 2005, 08:41 AM)
And my final concern is that charitable giving will be hurt by this proposal.  How do we ensure that giving to worth causes is rewarded under this system?
*



Why does "charitable giving" need an incentive? I thought the whole idea was to give without expecting anything in return. Besides, it's not like you get all of it back somehow under the current system; it's more like the tax break on mortgage interest.

Either people should give because it makes themselves feel better -- that's your incentive for giving right there -- as well as bettering the lives of those being helped, or the government needs to choke up some of their revenue (income tax, fairtax, etc, whatever) for helping those worst off in our economy. The phrase "promote the general welfare" comes to mind here.



Edited to fix quote box -J
taxmurderer
QUOTE(SWM28WDC @ Aug 24 2005, 03:05 PM)
All wealth requires inputs from Land, Labor, and Capital.  In broad terms, Land is natural resources; Labor is work by people, both brain-work and brawn-work; and Capital is man-made machinery & such.  One of these things is not like the others - it is in fixed supply, and cannot be produced.  The other two can and are reproduced.  Taxes based on [land and capital] ... reduce the available supply of Labor and Capital, and therefore reduce the overall creation of Wealth.  Taxes on ... Land, do not.

A retail sales tax is a tax on the sale of Wealth, and as such, is an indirect tax on all three factors of production.

From Adam Smith:
"Both ground-rent and the ordinary rent of land are a species of revenue which the owner, in many cases, enjoys without any care or attention of his own. Though a part of this revenue should be taken from him in order to defray the expenses of the state, no discouragement will thereby be given to any sort of industry. The annual produce of the land and labour of the society, the real wealth and revenue of the great body of the people, might be the same after such a tax as before. Ground-rents, and the ordinary rent of land, are, therefore, perhaps, the species of revenue which can best bear a peculiar tax imposed upon them."

edited to add:
OH and as for the 'intrusive nature and complexity', a tax on ground rents is assessable based on maps and comparable sales / rents, and is incredibly simple.
*



So, one might propose a tax on land only. This would eliminate the need for a prebate for the poorest people (which, BTW, will require a personal income statement to determine, which defeats the idea of getting away from tax forms), and also it would eliminate the issues (discussed in various posts herein) of ensuring accurate and complete tax collection.

This might be fair, and could probably work. We might find a legal justification (if one is needed) in some of the material I have been browsing on the web and in books on capitalism. Many authors and sources claim that there is no well-known legal basis for private ownership of land, which I find very ironic. (I think the Magna Carta may hold some clues here, but I have sorrily not read it.) But, assuming this is true, then a tax on land holdings seems like a fair way of reminding "capitalists" (land owners, in this case) of their privileged economic advantage. Would this (possible) system of taxation also be an incentive for them to invest?

Again, I am not an expert on any of this. I'm just seeking relief from taxation.
jaellon
Walter Williams, Professor of Economics at George Mason University, made this insightful observation:

QUOTE
There's no question that tax reform is needed, but tax reform is secondary to a much larger issue — federal spending. From 1787 to 1920, except during war, federal spending was a mere 3 percent of GDP, compared to today's 20 percent. If the federal government takes only 3 percent of the GDP, just about any tax system is relatively non-oppressive. However, if government were to take 50 percent, 60 percent or 70 percent of the GDP, you tell me what tax system would be non-oppressive.

Link

I tend to waver back and forth when it comes to the FairTax. In principle, it sounds pretty good. I've been able to successfully argue in favor of it to a number of people. But all my arguments assume that everyone will be honest. I forget that the incentive to find loopholes or even cheat increases proportionally with the tax rate. Already, several people have identified simple ways to easily game the system.
SWM28WDC
QUOTE(taxmurderer @ Aug 27 2005, 12:03 AM)

So, one might propose a tax on land only.  This would eliminate the need for a prebate for the poorest people (which, BTW, will require a personal income statement to determine, which defeats the idea of getting away from tax forms), and also it would eliminate the issues (discussed in various posts herein) of ensuring accurate and complete tax collection.

This might be fair, and could probably work.  We might find a legal justification (if one is needed) in some of the material I have been browsing on the web and in books on capitalism.  Many authors and sources claim that there is no well-known legal basis for private ownership of land, which I find very ironic.  (I think the Magna Carta may hold some clues here, but I have sorrily not read it.)  But, assuming this is true, then a tax on land holdings seems like a fair way of reminding "capitalists" (land owners, in this case) of their privileged economic advantage.  Would this (possible) system of taxation also be an incentive for them to invest?

Again, I am not an expert on any of this. I'm just seeking relief from taxation.
*


Well, while I can't support FairTax at 30%, the prebate doesn't require an income statement. The only information required per household is # of adults and # of dependents.

I wouldn't disregard the private ownership in land - at least not in countries with a well established land ownership system - the spirit is similar. Practically, a land value tax would be a fixed percentage of an assessment, much like property taxes are now. The assessment could be of sale value or rental value, but the process would be the same.

This would be (and has been) an incentive to invest in productive activities . If you must pay the same tax for land whether or not you use it effectively, an economically minded person would certainly build upon his property, and use it to highest and best use - which would generate more revenue, create more jobs, and pay better wages than keeping the land idle.

Another way to look at it is this: we currently pay a tax to obtain rights to land. That tax is almost completely collected by the previous owner. The supply of land is fixed, it's demand varies. It's price is set entirely by demand. Any tax against a land value merely shifts the portion paid from the previous owner to the taxing government. There's no way around this. Pay it to him, or pay it to the government. This is where the idea that there is no moral or historical justification for the private absolute ownership of land - go back far enough, and the land was stolen from someone else, or otherwise taken by force.

When we tax land, we can also untax things like businesses, machines, buildings, jobs, wages, transactions, dividends, etc. Without a tax to drag on these beneficial things, we get more of them: more machines, more factories, more farms, more jobs, higher wages, more sales, etc. With higher wages, we need less money for social support programs.

When there is a significant tax on land, speculators gain nothing by merely owning a valuable lot. Those who wish to start a business, or build an apartment building, or otherwise participate in the economy, will find it easier to acquire a suitable location. Urban areas will be densely built, reducing the need to relocate farther afield. Landowners would only occupy as much land as they needed for their purpose - anymore would be a waste.

Significantly this theory applies to many natural resources - anything not created by man: oil, water, and air come to mind. With an appropriate tax on those things, no productivity is hindered, however, the natural value of these things is used for the common good, while the overall use of these things is limited to what is economical. A tax on the consumption (pollution) of limited resources provides an economic reason for the conservation of these resources.

In reality, such taxes wouldn't be taxes at all, but rather market-rate user fees for the recognition of property rights.

I've seen theoretical estimates that place the amount raised by full market rate user fee collection in the US at around $5 Trillion.

I've done calculations for MD, VA & DC that completely fund their state & local governments, with a surplus of $2000-$6000 per capita, depending on jurisdiction and assumptions.
taxmurderer
QUOTE(SWM28WDC @ Sep 9 2005, 01:03 AM)

... the prebate doesn't require an income statement.  The only information required per household is # of adults and # of dependents.

Actually, not true as the law is written, sorry. The law, as currently drafted, calls for a prebate for only families/persons living on sub-poverty income.

And this was one of my complaints about the law as currently proposed: Why not just pay everyone the prebate amount and circumvent the need for more paperwork, since that was part of the goal of reducing complexity in paying and collecting taxes.

So, if they would (kindly?) modify the portions of the proposed law dealing with the prebate to apply to everyone regardless of income, it would be more fair, less intrusive, and streamlined. So what if millionaires get a little extra cash each month? The amount is small, of course, and they only constitute a very small portion of the population. (And then the dirty filthy rich can't whine that some people are getting special treatment, a favorite refrain for them...) For the sake of simplification, I am willing to let them have this ...

And then you, SWM28WDC, would be right and the info required would be greatly simplified.
QUOTE(SWM28WDC @ Sep 9 2005, 01:03 AM)

This would be (and has been) an incentive to invest in productive activities .  If you must pay the same tax for land whether or not you use it effectively, an economically minded person would certainly build upon his property, and use it to highest and best use - which would generate more revenue, create more jobs, and pay better wages than keeping the land idle.

So it would, in fact, generate an incentive to be more productive, create jobs, etc. I like that aspect a lot.
QUOTE(SWM28WDC @ Sep 9 2005, 01:03 AM)

... This is where the idea that there is no moral or historical justification for the private absolute ownership of land - go back far enough, and the land was stolen from someone else, or otherwise taken by force.

So you agree with me on this point, that there is no known legal basis for private ownership of land?
QUOTE(SWM28WDC @ Sep 9 2005, 01:03 AM)

When we tax land, we can also untax things like businesses, machines, buildings, jobs, wages, transactions, dividends, etc.  Without a tax to drag on these beneficial things, we get more of them:  more machines, more factories, more farms, more jobs, higher wages, more sales, etc.  With higher wages, we need less money for social support programs.

I agree, but something tells me that Big Money will still cry foul, claiming that taxes -- of any kind -- somehow interferes with their ability to be productive, create jobs, yada yada yada. (Do you agree with me on this? After all, capitalists are whining constantly about taxes.) I suppose I should just ignore their whining and never ending pleas for subsidy and corporate welfare. Now, onward with this taxation idea ...
QUOTE(SWM28WDC @ Sep 9 2005, 01:03 AM)

When there is a significant tax on land, speculators gain nothing by merely owning a valuable lot.  Those who wish to start a business, or build an apartment building, or otherwise participate in the economy, will find it easier to acquire a suitable location.  Urban areas will be densely built, reducing the need to relocate farther afield.  Landowners would only occupy as much land as they needed for their purpose - anymore would be a waste.

Sounds right. Less waste of land, pollution, etc. All good.

But there is one other factor you need to consider here, SWM28WDC. Cities and towns often end up paying for system development charges (SDC's) for new developments, to pay for extending sewer and water lines, paving new county roads, and other infrastructure. Allegedly, the developers are supposed to pass SDC's on to the buyers in the form of higher home prices The intention of SDC's are, of course, to make buyers think twice about that lovely oversized home on an oversized lot way out in East Jabib.

The reality is, though, that many times the developers manage to pass the SDC's back to the homeowners who already live in the area, under the pretext that growth is good for the community and therefore, the existing residents should subsidize this new growth. This is actually accomplished in various ways, some too ugly to speak of here. mad.gif Developers (and prospective wealthy homeowners) may discover schemes to circumvent even your disincentive by allowing for abatements to help sell these new homes, in order to promote all that wonderful growth that is so good for the community ... dry.gif

I do agree with you that your argument is basically sound, but until we find a way to stop developers from being subsidized to tear up new land, your land tax concept might not accomplish the otherwise excellent results you conclude.
QUOTE(SWM28WDC @ Sep 9 2005, 01:03 AM)

Significantly this theory applies to many natural resources - anything not created by man:  oil, water, and air come to mind. 

Breathing and drinking also comes to mind ... laugh.gif Make sure your theory is very specific about these.
QUOTE(SWM28WDC @ Sep 9 2005, 01:03 AM)

I've seen theoretical estimates that place the amount raised by full market rate user fee collection in the US at around $5 Trillion.

I've done calculations for MD, VA & DC that completely fund their state & local governments, with a surplus of $2000-$6000 per capita, depending on jurisdiction and assumptions.
*


I forsee Big Money complaining that they would be paying the majority of the taxes since they own the most land, and they will certainly throw a tantrum (if there is any reason for these people to cry about taxes, you can predict that they will). And the neo-cons will not have anything to do with excess government revenue. I think this type of tax system would have to be implemented during a period of political and social compassion for human beings, not just wealthy one or two percent.

But I am really fascinated by this simple and easy system of taxation.
Superfly
I agree with your assessment on the burden a 23%-30% rate would have on consumption, and while the FairTax Prebate helps this situation, it's really putting a band aid on a flawed notion of creating an ideal tax around maintaining some of the problems with our existing system. The FairTax concept is sound, except that the legislation contains too many concessions and compromises in it that are driven by political forces rather than economic ones. Uninhibited spending by Congress has been a major problem for a long time; the funding and creation of social programs that (don't fall within the Constitutional responsibilities of our government) require increased spending is another.

HR25 currently allocates a 14.91% rate of the 23% just to maintain existing government spending for all government functions, and the other 8% goes toward funding social security and medicare. If we were to simply eliminate or privatize social security and medicare, look how much less in taxation the rate would be! If we eliminate more unessential government functions, that rate could realistically reach 10%, and still afford plenty of government income to maintain our Military, Treasury, State Department, Legislature, and FBI. The CIA may need to be reorganized to deal with the current global focus, but much of that could easily be maintained. I read in a 1040 once that of all existing government revenue, "essential" government spending was somewhere in the 6% range and military was 30%--where is the other 64% going?

A new system of taxation (one that is constitutional) is way overdue! The repeal of the 16th Amendment and elimination of all socialist government departments and programs is critical! Reduction of government spending, encouragement of government savings and payoff of all international debt is critical!

Let's pressure our representatives to knock down these walls, and reinvigorate our Constitution!

QUOTE(SWM28WDC @ Jul 24 2005, 02:12 AM)
The best part of FairTax is the elimination of all the loopholes.  However, there is no provision to keep them out, nor is there anything preventing us from eliminating them from the existing income tax.

The FairTax basically makes capital investment tax free, from cradle to grave.  This is not neccessarily a good thing, as long as wages (labor) is indirectly taxed at the register.  For one, suppressed consumer demand due to the consumer tax will decrease demand for goods & services, decreasing employment and wages and raising the need for government-provided social services.  For another, relatively unfettered capital investment will drive the price of real estate even further beyond the reach of renters today.

The FairTax does make saving & investment easier for everyone, however, the vast majority of Americans can already invest all they can afford to in one of several tax-free investment programs.  So, in actuality, the fraction of Americans who would benefit from unrestricted tax-free investments would be rather small.  Furthermore, at least at this point in the economy, most producers aren't looking for additional capacity through investment, they're looking for more demand through consumption.  Capital is already relatively plentiful and cheap.  What they need is customers.  A sales tax hurts that, especially a 30% one.

The FairTax removes corporate taxes on profits.  The primary advantage here is the reduction in compliance costs.  By definition, profits are what is left over from gross revenue after operations.  Taxes on profits do not cause companies to become unprofitable - they merely take a portion of any positive profits.  More importantly, in a free market, with perfect competition, there are no lasting profits:  a competitor will enter and produce at a lower price, taking a profitable company's market share.  However, we don't have perfect competition:  profitable companies exploit market failures to create their profits, either through monopolistic competition, government regulation, or other artificial barriers to competition.

At one time I favored the FairTax, and still think it might have a potential use, if it's rate were limited to 10% or so.

As a more proximate evolution of our current tax structure, I'd prefer to see several other revenue sources developed:

1) elimination of corporate welfare by charging full market value for the government-granted licenses, titles and permissions.  (Actually, depending on how you go about this, this may be enough to fund government).
2) Capturing economic externalities of pollution by taxing polluters.  (this could fit in #1)
3) Eliminating the Payroll tax - this tax keeps people out of work and keeps working peoples wages lower than they'd otherwise be, exacerbating the need for government social programs.
4) Revising the corporate tax laws to separate Health Insurance from employment
5) Increasing the individual deduction for income tax, and streamlining the rest of the program.
*


taxmurderer
QUOTE(Superfly @ Sep 11 2005, 07:00 AM)


A new system of taxation (one that is constitutional) is way overdue! The repeal of the 16th Amendment and elimination of all socialist government departments and programs is critical! Reduction of government spending, encouragement of government savings and payoff of all international debt is critical!

Let's pressure our representatives to knock down these walls, and reinvigorate our Constitution!



This post had me up to a point. I also favor some kind of tax reform, but not yet one more system of welfare for the wealthy, such as this poster alludes to.

Instead of eliminating "all socialist governmental departments and programs," why not simply ask the 1-2% of our population who are constantly complaining about the tiny proporation of their wealth they are being asked to pay in taxes to just simply leave the country? Since only a small fraction of the population is persistently groaning and whining, the rest of us could then live in peace. I'm not kidding.

Maybe someone has some ideas on where to send these folks so they could be much, much happier? I suggest Saudi or China or other countries where they reap most of their profit anyway. Then, the 98% of the rest of us would not have to continue subsidizing their incompetence and greed. The wealthy could live like royalty somewhere else (or maybe even be part of the actual royalty) and forever mooch off the sweat of the poor workers in those countries who have few if any workers rights.

Hey, it's just an alternative. (Albeit, it is argumentum ad populum, but that shouldn't bother neocons). If anyone labels me as being rash or drastic, I'll just point out how cruel they sound. Right, let's take away the remaining shreds of the social safety net. I hope thinkers of this sort are not agitating for a civil war ...
Superfly
We could also create the UnFairTax for the Willing and apply the crazy excise tax on all wages, but only on the Democrats that want to keep funding their pet social programs--any "benefit" from those programs would only apply to those that keep them, the rest of us can live in peace knowing that we have the choice on where our money is going, primarily to help save for our futures and fund our family needs.

We could also move all those same Democrats to their own little socialist state...perhaps we can rename and redesignate the "People's Republic of Massachusets or Vermont, and ship them there. Another option and recent opportunity would be New Orleans. tongue.gif

QUOTE(taxmurderer @ Sep 11 2005, 03:11 PM)
QUOTE(Superfly @ Sep 11 2005, 07:00 AM)


A new system of taxation (one that is constitutional) is way overdue! The repeal of the 16th Amendment and elimination of all socialist government departments and programs is critical! Reduction of government spending, encouragement of government savings and payoff of all international debt is critical!

Let's pressure our representatives to knock down these walls, and reinvigorate our Constitution!



This post had me up to a point. I also favor some kind of tax reform, but not yet one more system of welfare for the wealthy, such as this poster alludes to.

Instead of eliminating "all socialist governmental departments and programs," why not simply ask the 1-2% of our population who are constantly complaining about the tiny proporation of their wealth they are being asked to pay in taxes to just simply leave the country? Since only a small fraction of the population is persistently groaning and whining, the rest of us could then live in peace. I'm not kidding.

Maybe someone has some ideas on where to send these folks so they could be much, much happier? I suggest Saudi or China or other countries where they reap most of their profit anyway. Then, the 98% of the rest of us would not have to continue subsidizing their incompetence and greed. The wealthy could live like royalty somewhere else (or maybe even be part of the actual royalty) and forever mooch off the sweat of the poor workers in those countries who have few if any workers rights.

Hey, it's just an alternative. (Albeit, it is argumentum ad populum, but that shouldn't bother neocons). If anyone labels me as being rash or drastic, I'll just point out how cruel they sound. Right, let's take away the remaining shreds of the social safety net. I hope thinkers of this sort are not agitating for a civil war ...
*


Jaime
Superfly, please be constructive in your responses and avoid ad hominem attacks.

TOPICS:
Due to the intrusive nature and complexity of Income Tax and Coprerate Gains Tax, should we pass the 'FairTax' (h.r. 25)?


jaellon
QUOTE(taxmurderer @ Sep 11 2005, 01:27 AM)
QUOTE(SWM28WDC @ Sep 9 2005, 01:03 AM)

... the prebate doesn't require an income statement.  The only information required per household is # of adults and # of dependents.

Actually, not true as the law is written, sorry. The law, as currently drafted, calls for a prebate for only families/persons living on sub-poverty income.


It is, in fact true, based on the actual wording of the bill (if I've found an older version of this bill please correct me, but I believe this is the most current):

(sorry there is no direct link; follow this link - HR 25 - type in "HR 25", click search, and click on the link for Fair Tax Act of 2005)

QUOTE(Chapter 3--Family Consumption Allowance @ Sec 302 (d))
`(d) Annual Registration- In order to receive the family consumption allowance provided by section 301, a qualified family must register with the sales tax administering authority in a form prescribed by the Secretary. The annual registration form shall provide--

`(1) the name of each family member who shared the qualified family's residence on the family determination date,

`(2) the Social Security number of each family member on the family determination date who shared the qualified family's residence on the family determination date,

`(3) the family member or family members to whom the family consumption allowance should be paid,

`(4) a certification that all listed family members are lawful residents of the United States,

`(5) a certification that all family members sharing the common residence are listed,

`(6) a certification that no family members were incarcerated on the family determination date (within the meaning of subsection (l)), and

`(7) the address of the qualified family.


QUOTE(Section 304( a @ b ))
`(a) General Rule- The Social Security Administration shall provide a monthly sales tax rebate to duly registered qualified families in an amount determined in accordance with section 301.

`(b ) Persons Receiving Rebate- The payments shall be made to the persons designated by the qualifying family in the annual or revised registration for each qualified family in effect with respect to the month for which payment is being made. Payments may only be made to persons 18 years or older. If more than 1 person is designated in a registration to receive the rebate, then the rebate payment shall be divided evenly between or among those persons designated.

<snip>


As you can see, there is no provision for providing an family's annual income level.

It appears that the (p)rebate will be provided for ALL registered households, and the only requirement for registering is to provide a minimum of information that is needed to determine how much the rebate should be.

I think where the confusion comes in is that those whose annual expenses fall below the poverty level will find themselves completely untaxed (and better off, financially, for that matter). Those who are above the poverty level will be partially untaxed. And the extremely rich like Bill Gates and Warren Buffet, while they will still receive the prebate, assuming they bother to apply for it, will find that it is only a fraction of a percent of their annual expenses.
taxmurderer
QUOTE(jaellon @ Sep 20 2005, 07:58 AM)
QUOTE(taxmurderer @ Sep 11 2005, 01:27 AM)
QUOTE(SWM28WDC @ Sep 9 2005, 01:03 AM)

... the prebate doesn't require an income statement.  The only information required per household is # of adults and # of dependents.

Actually, not true as the law is written, sorry. The law, as currently drafted, calls for a prebate for only families/persons living on sub-poverty income.


It is, in fact true, based on the actual wording of the bill (if I've found an older version of this bill please correct me, but I believe this is the most current):

*



I stand corrected. Thank you for pointing this out to me. It was the intrusion that I was concerned with, and, now, re-reading the bill, I see that it is doing precisely what I would hope. This will streamline the whole deal very nicely.

In addition to repealing the 16th amendment, maybe we could add a section that stipulates that Congress must pass a balanced budget, with the only exception being for expenses related to an invasion or attack (such as 9/11) or natural disaster (such as George W Bush) (I mean New Orleans).

With regards to replacing income tax with a sales tax, as a general principal, some people continue to hem about the seemingly "high" sales tax rate. There are cities in this country where sales tax is upwards of 10% or maybe more, including county, city, and state sales taxes. For instance, in one of the cities here the sales tax comes to (I think) 9.25%. So what? Percentages are only a number; it is the amount of revenue raised that is at issue. Some people cringe at sales tax of, say, 30%, but I do not. Since I would no longer have an income tax, and since I can always control non-essential expenses (beyond the taxes covered by the FairTax prebate), 30% seems like a bargain to me.

But, I still like the idea of a property tax even better than FairTax ... smile.gif Maybe we could have a new thread to play with that concept a bit more?
jaellon
while I have many reservations about the FairTax, the 30% sticker price isn't one of them. It may sound high, but when you do the math, you have to say, oh, I guess that's not too bad.

Here's a little method I use to compare the two. You will have to put in your own numbers, it's somewhat simplistic, and your mileage may vary, but it shows the FairTax rate to not actually be as bad as it sounds.

My apologies for all the tedious math sour.gif

-----------------------------------------------------------------------------

First, compute your taxes using the current method:
FICA/Medicare Tax = Salary * 7.65%
Income Tax = Salary - $9700 (Standard Deduction) - ($3100 * number of family members) <adjusted by> TaxComputation (Tax Rates) - Child Tax Credit ($1000 / child)

Second, compute your taxes using the FairTax method
FairTax = Salary * 80% (you won't spend the entire salary on taxable items) * 23% (inclusive rate of the FairTax **)
- (p)rebate (Rebate Schedule)

-----------------------------------------------------------------------------

So for example, if you earn $40000/year and have a family of four, you can guess that you are roughly paying
$40000 * 7.65% = $3060
plus
$40000 - $9700 - ($3100 * 4) = $19600 --> $2225 - $2000 = $225

for a total CURRENT TAX of $3285

With the FairTax, you would pay
$40000 * 80% * 23% - $5902 = -$382 (a net gain)

-----------------------------------------------------------------------------

** if I buy something with a sticker price of $77, I will spend $23 in tax for a total of $100
30% is the exclusive rate, comparable to the current state sales taxes: 23/77 = 30%
23% is the inclusive rate, comparable to our current federal income and FICA taxes: 23/100 = 23%

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