Author Topic: FairTax-- Flat Tax Comments  (Read 22775 times)

BTDretire

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FairTax-- Flat Tax Comments
« on: August 07, 2015, 01:36:28 PM »
  I've got concerns about changing the tax system, now that I'm nearing retirement.
Throw in some numbers just for example. $333,000 Taxed savings, $333,000 Capital gains $330,000 IRA tax defered.
Retirement for a couple.
Assume a $40,000 WR, Correct me if I'm wrong but with the current tax system I suspect 0% taxes. (may take some roth conversions during low income years)
$13,200 from Taxed savings, $13,200 Capital gains $13,200 IRA tax defered. Ya, 0% tax.

The (Rand Paul's) Flat tax seems to be the worst in that I will pay 14.5% on my already taxed savings and 14.5% on my capital
gains. The IRA tax defered, would pay 14.5%. Note this 14.5% is supposed to be high enough to also pay for SS. As it is now, I would not pay any SS on my Taxed savings, Capatal gains or IRA tax defered money.
Seems about $5,800 in taxes on $40,000.
 
The FairTax,  (a sales tax) , you get to spend $23,540 tax free then you are taxed at 23% on all purchases after that.
$40,000 - $23,540= $16,460 and 16,460 x 0.23% = $3,786
Therefore $3,786 in taxes on $40,000.

Any quibbles, different ideas or discussion is welcome.

EricP

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Re: FairTax-- Flat Tax Comments
« Reply #1 on: August 07, 2015, 01:46:04 PM »
I don't see any benefit in thinking about Tax Systems that candidates say they want unless there are actual proposals.  We can't predict what will happen with taxes in the future, but it's more likely that the system will stay similar than going to a "Fair"Tax or Flat Tax system.  All of these exclusions and deducations make a lot of people happy and removing them would piss off a whole lot of people (and these people are also more likely to be voters).

zephyr911

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Re: FairTax-- Flat Tax Comments
« Reply #2 on: August 07, 2015, 02:06:03 PM »
Gimmicks that aren't gonna happen. Flat tax would change the take-home pay of so many Americans overnight that widespread economic carnage would ensue. FairTax (a name I hate, because it's emotionally loaded and precludes rational discussion from the outset) is good in theory, being consumption-based and excluding enough for the basic needs of most families, but consumption-based taxes at such high rates have been tried elsewhere, and widespread evasion produces huge black markets in consumer goods because the incentive is so high.

The consensus is that the most functional approach, and least likely to be evaded, is to balance taxes evenly across income, property holdings and expenditures, with exemptions for most basic necessities on all three (or, with housing, at least a substantial homestead discount).

To simplify the tax code, just take money out of politics. All those loopholes and exotic deductions are bought and paid for by the industries they benefit. Think the IRS is the problem? The IRS just implements laws that are written by lobbyists and passed by Congress. And there is the actual problem.

Jack

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Re: FairTax-- Flat Tax Comments
« Reply #3 on: August 07, 2015, 02:34:46 PM »
FairTax (a name I hate, because it's emotionally loaded and precludes rational discussion from the outset) is good in theory, being consumption-based and excluding enough for the basic needs of most families

I dispute even that. I used to like the FairTax for exactly that reason -- that being consumption-based made it sound good in theory -- but I've more recently realized that it would be an absolute catastrophe, macroeconomically- and politically-speaking. Throughout history, the wealth distribution in society has been cyclical: a society starts off relatively egalitarian, inequality gradually and naturally increases as small advantages get exploited over time (the rich get richer at the expense of the poor -- i.e., in terms of percentage of wealth -- even when the poor are improving in absolute terms), and eventually the wealth gap becomes so large that the serfs revolt, kill the rich, redistribute the wealth, and start the cycle over again. Taxes must be progressive, and possibly even confiscatory to the most wealthy, in order to slow the cycle as much as possible.

For wealthy people to support regressive (or even flat) taxation, it implies one or more of the following:
  • Either they are ignorant of history and oblivious to the fact that sooner or later, their heads will be on the guillotine, or
  • They are sociopaths who have no moral problem enforcing and protecting their wealth and power through violence and oppression.

bobechs

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Re: FairTax-- Flat Tax Comments
« Reply #4 on: August 07, 2015, 04:24:51 PM »
Faster-than-light drive.

Now that would make a difference.

Let's talk about that too.

forummm

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Re: FairTax-- Flat Tax Comments
« Reply #5 on: August 07, 2015, 05:27:52 PM »
The "fair" and "flat" tax proposals are just different code words for dramatically cutting taxes on the rich and significantly increasing taxes on the poor and middle class. It's the same agenda but dressed up with different words.

KungfuRabbit

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Re: FairTax-- Flat Tax Comments
« Reply #6 on: August 08, 2015, 10:47:53 AM »
I'm voting trump.

Bucksandreds

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Re: FairTax-- Flat Tax Comments
« Reply #7 on: August 08, 2015, 03:54:30 PM »
The "fair" and "flat" tax proposals are just different code words for dramatically cutting taxes on the rich and significantly increasing taxes on the poor and middle class. It's the same agenda but dressed up with different words.

Ding, ding we have a winner. IMHO the only republican who has a legit shot to win the presidency is John Kasich due to the fact that he chaired the finance committee that balanced the budget under Clinton (works with opponents) and he accepted Medicaid expansion in Ohio (pragmatist) as well as took a $5 billion Ohio deficit and turned it into a $2 billion surplus while lowering taxes and lowering unemployment below the national average and raising median income. His record is pretty much as stellar as possible.

Cranky

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Re: FairTax-- Flat Tax Comments
« Reply #8 on: August 08, 2015, 04:01:55 PM »
Of course, he *is* working hard to kill public education....

Telecaster

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Re: FairTax-- Flat Tax Comments
« Reply #9 on: August 08, 2015, 04:03:27 PM »
The "fair" and "flat" tax proposals are just different code words for dramatically cutting taxes on the rich and significantly increasing taxes on the poor and middle class. It's the same agenda but dressed up with different words.

Cosigned. 

If you remember back to the time before Turbotax (cough, wheeze), you'd spend hours figuring out your taxable income, and then the very last step was looking up the amount you pay on your taxbooklet.    Well, shoot.  That was by far the easiest part of the whole process.  Tax brackets don't make the tax process complicated.  Defining income is what makes the tax process complicated.   Most corporate taxes are flat, by the way.  Are they simple or fair?  Hell to the no.   

squeakywheel

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Re: FairTax-- Flat Tax Comments
« Reply #10 on: August 08, 2015, 04:31:10 PM »
Gimmicks that aren't gonna happen. Flat tax would change the take-home pay of so many Americans overnight that widespread economic carnage would ensue. FairTax (a name I hate, because it's emotionally loaded and precludes rational discussion from the outset) is good in theory, being consumption-based and excluding enough for the basic needs of most families, but consumption-based taxes at such high rates have been tried elsewhere, and widespread evasion produces huge black markets in consumer goods because the incentive is so high.

The consensus is that the most functional approach, and least likely to be evaded, is to balance taxes evenly across income, property holdings and expenditures, with exemptions for most basic necessities on all three (or, with housing, at least a substantial homestead discount).

To simplify the tax code, just take money out of politics. All those loopholes and exotic deductions are bought and paid for by the industries they benefit. Think the IRS is the problem? The IRS just implements laws that are written by lobbyists and passed by Congress. And there is the actual problem.

+1

Zephyr911 for president!!

Travis

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Re: FairTax-- Flat Tax Comments
« Reply #11 on: August 08, 2015, 10:48:09 PM »
Quote
but consumption-based taxes at such high rates have been tried elsewhere, and widespread evasion produces huge black markets in consumer goods because the incentive is so high.

Were those examples the Value Added Tax?  In those cases it caused a mess because it was in addition to all the other taxes already in the system.  The idea behind the FairTax is that all other taxes would be eliminated so the consumption tax is the only thing on the books.  That in itself is a hail-mary to get through our government, so I wouldn't count on it happening any time soon.  The theory is that with the FairTax being the only tax burden on the system the cost of everything goes down to make the tax structure produce the same revenue or better than what is currently brought in.  We debated this quite a bit a year or so ago on here.  Our main sticking point was whether or not such a system could make up for the revenue that would be lost from income taxes.  The proponents believe the added influx of all the billions being tax-sheltered offshore would come pouring back in, foreign investment would skyrocket due to no business taxes other than on raw materials purchased, tax receipts would go up since everyone resident or not becomes a taxpayer, and domestic business would expand since there would be no payroll, income, or capital gains taxes to interfere.  The authors swear they've done their homework, but it's a murky area to predict with hard numbers.  We also quibbled quite a bit on whether a system that taxes you only on what you buy is regressive or progressive depending on your income bracket.

forummm

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Re: FairTax-- Flat Tax Comments
« Reply #12 on: August 09, 2015, 06:32:27 AM »
Quote
but consumption-based taxes at such high rates have been tried elsewhere, and widespread evasion produces huge black markets in consumer goods because the incentive is so high.

Were those examples the Value Added Tax?  In those cases it caused a mess because it was in addition to all the other taxes already in the system.  The idea behind the FairTax is that all other taxes would be eliminated so the consumption tax is the only thing on the books.  That in itself is a hail-mary to get through our government, so I wouldn't count on it happening any time soon.  The theory is that with the FairTax being the only tax burden on the system the cost of everything goes down to make the tax structure produce the same revenue or better than what is currently brought in.  We debated this quite a bit a year or so ago on here.  Our main sticking point was whether or not such a system could make up for the revenue that would be lost from income taxes.  The proponents believe the added influx of all the billions being tax-sheltered offshore would come pouring back in, foreign investment would skyrocket due to no business taxes other than on raw materials purchased, tax receipts would go up since everyone resident or not becomes a taxpayer, and domestic business would expand since there would be no payroll, income, or capital gains taxes to interfere.  The authors swear they've done their homework, but it's a murky area to predict with hard numbers.  We also quibbled quite a bit on whether a system that taxes you only on what you buy is regressive or progressive depending on your income bracket.

I'm not sure who the "we" is you keep referring to. The "cost of everything" would not "go down". It would go up--due to the tax involved. You could argue that taxes on labor are part of the cost of everything, and eliminating those would cause that portion of the cost to go down. But the problem is that the so-called "Fair"Tax is that it shifts taxes from the rich to the poor. So in order to bring in the same revenue, you need to tax goods much more than the equivalent taxes on labor (since the labor is how non-rich people get taxed) to make up for the taxes on wealth that are eliminated. The billions being tax-sheltered offshore are actually sitting in banks in NY, invested in US assets. They are just "offshore" for accounting purposes. Having a business would still have paperwork involved. Instead of having to deduct payroll taxes they'd have to process taxes on everything they produced. I don't know why you think foreign investment would increase--there's a VAT already in most other industrialized nations (like Europe).

Beridian

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Re: FairTax-- Flat Tax Comments
« Reply #13 on: August 09, 2015, 09:58:04 AM »
Tax reform - not gonna happen.   The current congress has been in republican control for some time now, how many tax reform bills have they passed and submitted to the president?

We will see angels flying out of congressmen's asses before we see any meaningful tax reform.  The monied interests that control this nation are heavily vested in the status-quo.  With the current grid lock in national politics I doubt you could get congress to agree on a proclamation approving of mothers day, let alone a political no-win ox-goring issue like tax reform (someone will pay more and they will howl like scalded dogs).

Look for tax reform after the revolution.

forummm

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Re: FairTax-- Flat Tax Comments
« Reply #14 on: August 09, 2015, 10:28:02 AM »
We will see angels flying out of congressmen's asses before we see any meaningful tax reform. 

Many congressmen have assured me they have an entire heavenly host lodged firmly in their posterior.

The monied interests that control this nation are heavily vested in the status-quo. 

With the exception that they want taxes on the rich decreased further. They've gotten them down from 90% to 39%. But they still want them lower. And estate taxes have an exemption for the first $11 million a couple passes on to their kids. But they want that eliminated entirely.

Travis

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Re: FairTax-- Flat Tax Comments
« Reply #15 on: August 09, 2015, 11:41:53 AM »
Quote
but consumption-based taxes at such high rates have been tried elsewhere, and widespread evasion produces huge black markets in consumer goods because the incentive is so high.

Were those examples the Value Added Tax?  In those cases it caused a mess because it was in addition to all the other taxes already in the system.  The idea behind the FairTax is that all other taxes would be eliminated so the consumption tax is the only thing on the books.  That in itself is a hail-mary to get through our government, so I wouldn't count on it happening any time soon.  The theory is that with the FairTax being the only tax burden on the system the cost of everything goes down to make the tax structure produce the same revenue or better than what is currently brought in.  We debated this quite a bit a year or so ago on here.  Our main sticking point was whether or not such a system could make up for the revenue that would be lost from income taxes.  The proponents believe the added influx of all the billions being tax-sheltered offshore would come pouring back in, foreign investment would skyrocket due to no business taxes other than on raw materials purchased, tax receipts would go up since everyone resident or not becomes a taxpayer, and domestic business would expand since there would be no payroll, income, or capital gains taxes to interfere.  The authors swear they've done their homework, but it's a murky area to predict with hard numbers.  We also quibbled quite a bit on whether a system that taxes you only on what you buy is regressive or progressive depending on your income bracket.

I'm not sure who the "we" is you keep referring to. The "cost of everything" would not "go down". It would go up--due to the tax involved. You could argue that taxes on labor are part of the cost of everything, and eliminating those would cause that portion of the cost to go down. But the problem is that the so-called "Fair"Tax is that it shifts taxes from the rich to the poor. So in order to bring in the same revenue, you need to tax goods much more than the equivalent taxes on labor (since the labor is how non-rich people get taxed) to make up for the taxes on wealth that are eliminated. The billions being tax-sheltered offshore are actually sitting in banks in NY, invested in US assets. They are just "offshore" for accounting purposes. Having a business would still have paperwork involved. Instead of having to deduct payroll taxes they'd have to process taxes on everything they produced. I don't know why you think foreign investment would increase--there's a VAT already in most other industrialized nations (like Europe).

"We" was me and a few others who went back and forth on the Fairtax last year in this forum.  I honestly can't remember who else participated.  I like the concept, but their models require a lot more real-world numbers for solid debate.  Their answer to the rich/poor burden was a rebate up to the cost of essential goods (basically the poverty line) to those taxpayers so the tax doesn't take such a big chunk out of their disposable income.  They claim the cost of this is roughly equal to what most folks get in tax refunds anyways.  Their claim is that social security, medicare, payroll taxes, and corporate income taxes equal 23% of the price of most goods.  The tax point of the Fairtax is set to make it equal to current federal revenue.  The tax paperwork the business would have to process is basically the same as they do for sales taxes since that is when the tax is added.  The elimination of income and payroll taxes on individuals and businesses would also reduce annual compliance costs by billions (and making the IRS almost obsolete).  The "offshore" may not be literal in all cases, but that is money held back from the current tax system that could be invested or spent more effectively.  The authors claim foreign investment would increase because of the lack of corporate income taxes being attractive for new businesses. 

You're right that the rich would keep more of their money.  The proposed rebate would supposedly level the field for the poor so they can buy what they need without more that usual coming out of pocket.  A common argument come election time in the US is a class warfare issue on who should pay more in taxes in real dollars or percentage of income.  If the system could be designed so that the poor are no more burdened than they are now, why would it matter (other than to be upset at rich people for being rich)?  If you're only paying taxes on what you buy (assuming essential needs excluded) doesn't that make participating in the system voluntary?  It sounds like it would drive people towards Mustachianism.  If their model holds up everyone would have more money in their pocket to save and invest, and investment would be more attractive with no taxes on it.

nobodyspecial

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Re: FairTax-- Flat Tax Comments
« Reply #16 on: August 09, 2015, 11:59:35 AM »
Has anyone thought of just abolishing tax returns for everyone?
Then only numbers the government needs to campaign on are the tax rates and the levels that they kick in at.

In europe your employer deducts tax and social security on your salary, your bank deducts tax on your savings and investments and adds tax rebates onto your retirement plan. There are almost no deductions for normal people and only self-employed or people with rental income or odd offshore investments file a tax return - and they are prefilled with all the information from your payroll.

The rich get to loophole out of most taxes anyway - but it saves millions of people having to fill in a form to get a rebate every year.




music lover

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Re: FairTax-- Flat Tax Comments
« Reply #17 on: August 09, 2015, 12:01:55 PM »
With the exception that they want taxes on the rich decreased further. They've gotten them down from 90% to 39%. But they still want them lower. And estate taxes have an exemption for the first $11 million a couple passes on to their kids. But they want that eliminated entirely.

There is nothing fair about taxing people at 90%.

Paul der Krake

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Re: FairTax-- Flat Tax Comments
« Reply #18 on: August 09, 2015, 12:16:01 PM »
With the exception that they want taxes on the rich decreased further. They've gotten them down from 90% to 39%. But they still want them lower. And estate taxes have an exemption for the first $11 million a couple passes on to their kids. But they want that eliminated entirely.

There is nothing fair about taxing people at 90%.
And nobody has ever paid 90% in taxes. There were large exemptions in what constituted income. This myth needs to die.

Seppia

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Re: FairTax-- Flat Tax Comments
« Reply #19 on: August 09, 2015, 12:21:12 PM »

They've gotten them down from 90% to 39%. But they still want them lower. And estate taxes have an exemption for the first $11 million a couple passes on to their kids. But they want that eliminated entirely.

I would go even further. Taxes to the super rich are already significantly lower than what you and I pay.
Last year my wife and I paid a total of approximately 36% (we live in Manhattan), while I'm pretty sure the 0.1 percenters are more around 12-15%

forummm

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Re: FairTax-- Flat Tax Comments
« Reply #20 on: August 09, 2015, 12:48:17 PM »
Quote
but consumption-based taxes at such high rates have been tried elsewhere, and widespread evasion produces huge black markets in consumer goods because the incentive is so high.

Were those examples the Value Added Tax?  In those cases it caused a mess because it was in addition to all the other taxes already in the system.  The idea behind the FairTax is that all other taxes would be eliminated so the consumption tax is the only thing on the books.  That in itself is a hail-mary to get through our government, so I wouldn't count on it happening any time soon.  The theory is that with the FairTax being the only tax burden on the system the cost of everything goes down to make the tax structure produce the same revenue or better than what is currently brought in.  We debated this quite a bit a year or so ago on here.  Our main sticking point was whether or not such a system could make up for the revenue that would be lost from income taxes.  The proponents believe the added influx of all the billions being tax-sheltered offshore would come pouring back in, foreign investment would skyrocket due to no business taxes other than on raw materials purchased, tax receipts would go up since everyone resident or not becomes a taxpayer, and domestic business would expand since there would be no payroll, income, or capital gains taxes to interfere.  The authors swear they've done their homework, but it's a murky area to predict with hard numbers.  We also quibbled quite a bit on whether a system that taxes you only on what you buy is regressive or progressive depending on your income bracket.

I'm not sure who the "we" is you keep referring to. The "cost of everything" would not "go down". It would go up--due to the tax involved. You could argue that taxes on labor are part of the cost of everything, and eliminating those would cause that portion of the cost to go down. But the problem is that the so-called "Fair"Tax is that it shifts taxes from the rich to the poor. So in order to bring in the same revenue, you need to tax goods much more than the equivalent taxes on labor (since the labor is how non-rich people get taxed) to make up for the taxes on wealth that are eliminated. The billions being tax-sheltered offshore are actually sitting in banks in NY, invested in US assets. They are just "offshore" for accounting purposes. Having a business would still have paperwork involved. Instead of having to deduct payroll taxes they'd have to process taxes on everything they produced. I don't know why you think foreign investment would increase--there's a VAT already in most other industrialized nations (like Europe).

"We" was me and a few others who went back and forth on the Fairtax last year in this forum.  I honestly can't remember who else participated.  I like the concept, but their models require a lot more real-world numbers for solid debate.  Their answer to the rich/poor burden was a rebate up to the cost of essential goods (basically the poverty line) to those taxpayers so the tax doesn't take such a big chunk out of their disposable income.  They claim the cost of this is roughly equal to what most folks get in tax refunds anyways.  Their claim is that social security, medicare, payroll taxes, and corporate income taxes equal 23% of the price of most goods.  The tax point of the Fairtax is set to make it equal to current federal revenue.  The tax paperwork the business would have to process is basically the same as they do for sales taxes since that is when the tax is added.  The elimination of income and payroll taxes on individuals and businesses would also reduce annual compliance costs by billions (and making the IRS almost obsolete).  The "offshore" may not be literal in all cases, but that is money held back from the current tax system that could be invested or spent more effectively.  The authors claim foreign investment would increase because of the lack of corporate income taxes being attractive for new businesses. 

You're right that the rich would keep more of their money.  The proposed rebate would supposedly level the field for the poor so they can buy what they need without more that usual coming out of pocket.  A common argument come election time in the US is a class warfare issue on who should pay more in taxes in real dollars or percentage of income.  If the system could be designed so that the poor are no more burdened than they are now, why would it matter (other than to be upset at rich people for being rich)?  If you're only paying taxes on what you buy (assuming essential needs excluded) doesn't that make participating in the system voluntary?  It sounds like it would drive people towards Mustachianism.  If their model holds up everyone would have more money in their pocket to save and invest, and investment would be more attractive with no taxes on it.

If the rich pay less, the not-rich pay more. Simple math. There isn't that much compliance cost. And you'd still have to have some kind of IRS to take care of things. They would have to be processing and auditing things from business if not as many individuals. There's no magic here. And even if you could eliminate the entire IRS, it would only save a few hundredths of a percent of GDP--that's not even noticeable. Corporate tax rates are already effectively low here. The stated marginal rate is somewhat high, but the actual average rate paid is much lower because of all the exemptions. It's similar to those in Europe.

The point is this isn't some magic panacea. It's just a different way of collecting revenue. And it's designed to lower the burden on the rich and pass that along to the non-rich. And it will have it's own costs and benefits. One of the big costs is that it encourages people to not buy things. But consumption is around 2/3 of GDP. What will that do to growth? If people suddenly decide to stop buying stuff because it's the way to avoid taxes and goods are also more expensive now, will that kill the economy? Who knows.

music lover

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Re: FairTax-- Flat Tax Comments
« Reply #21 on: August 09, 2015, 01:56:24 PM »

They've gotten them down from 90% to 39%. But they still want them lower. And estate taxes have an exemption for the first $11 million a couple passes on to their kids. But they want that eliminated entirely.

I would go even further. Taxes to the super rich are already significantly lower than what you and I pay.
Last year my wife and I paid a total of approximately 36% (we live in Manhattan), while I'm pretty sure the 0.1 percenters are more around 12-15%

Taxes on the rich are not lower...there are simply different tax rates for different sources of income. Someone earning $800k in wages will always pay a higher percentage of tax than someone earning $40k. Dividend income may be only taxed at 15%, but if the company recorded a profit, then that profit was also taxed, and then taxed again at the recipient level.

Seppia

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Re: FairTax-- Flat Tax Comments
« Reply #22 on: August 09, 2015, 02:55:21 PM »
Duh
Where does the super rich's money come from usually?
 

Cressida

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Re: FairTax-- Flat Tax Comments
« Reply #23 on: August 09, 2015, 03:18:25 PM »
If you remember back to the time before Turbotax (cough, wheeze), you'd spend hours figuring out your taxable income, and then the very last step was looking up the amount you pay on your taxbooklet.    Well, shoot.  That was by far the easiest part of the whole process.  Tax brackets don't make the tax process complicated.  Defining income is what makes the tax process complicated.

+10. That whole "flat tax" ==> "file your taxes on a postcard" is so fucking disingenuous.

Jack

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Re: FairTax-- Flat Tax Comments
« Reply #24 on: August 09, 2015, 09:33:37 PM »
With the exception that they want taxes on the rich decreased further. They've gotten them down from 90% to 39%. But they still want them lower. And estate taxes have an exemption for the first $11 million a couple passes on to their kids. But they want that eliminated entirely.

There is nothing fair about taxing people at 90%.

So what? There's nothing fair about being thousands or millions of times more wealthy than the median person either!

Life isn't fair, and any argument that the rich are being treated "unfairly" in comparison to the poor is prima-facie absurd.

Schaefer Light

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Re: FairTax-- Flat Tax Comments
« Reply #25 on: August 10, 2015, 07:53:54 AM »
If we eliminated all the loopholes and deductions, then I don't see how anyone could say a flat tax was unfair.  Everyone paying the same rate is as fair as it gets, IMO.

Iron Mike Sharpe

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Re: FairTax-- Flat Tax Comments
« Reply #26 on: August 10, 2015, 08:39:55 AM »
Unfortunately the Fair Tax (and even Flat Tax) will never come to be.

How do politicians get most of their money?  From lobbyists trying to get new exemptions, deductions, and credits enacted.  Take away the complexity of the tax code, and you take away the main revenue stream of Washington.  Too many people get paid by the current system for it to ever go away w/o violent revolution.

wienerdog

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Re: FairTax-- Flat Tax Comments
« Reply #27 on: August 10, 2015, 09:57:43 AM »
Unfortunately the Fair Tax (and even Flat Tax) will never come to be.


Just eliminating the IRS will be a big no no for big government as that is how they control their enemies right now.  Not sure if this has been mentioned but many plans I have seen have a "credit" for a family of 4 making something like $50,000 or less where they won't pay taxes under fair or flat tax plans.

I think the biggest plus as Iron Mike mentions is eliminating all the loopholes but that is what big government is going to fight against as that is what their cronies use. Trump called Washington stupid the other night during the debate.  They are far from stupid.  They are corrupt. 

Huffy2k

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Re: FairTax-- Flat Tax Comments
« Reply #28 on: August 10, 2015, 10:39:58 AM »
I just love the tax policy threads that pop up occasionally here on MMM.  It's good to see the name calling has already begun with a progressive poster already labeling anybody that questions the fairness of the current tax scructure as "sociopaths"...

EricP

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Re: FairTax-- Flat Tax Comments
« Reply #29 on: August 10, 2015, 10:53:10 AM »
If we eliminated all the loopholes and deductions, then I don't see how anyone could say a flat tax was unfair.  Everyone paying the same rate is as fair as it gets, IMO.

How do you think "loopholes" and deductions came into being?  People thought that it was "unfair" that a single person paid the same amount of taxes as a married couple with three kids or that it would be "fair" that we gave an exemption for mortgage interest to promote home ownership or that it would be "fair" if we let charity be untaxed and the list goes on and on.

So, yeah, they would say it was unfair because they did that's how we got to where we are.

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Re: FairTax-- Flat Tax Comments
« Reply #30 on: August 10, 2015, 11:23:12 AM »
FairTax (a name I hate, because it's emotionally loaded and precludes rational discussion from the outset) is good in theory, being consumption-based and excluding enough for the basic needs of most families

I dispute even that. I used to like the FairTax for exactly that reason -- that being consumption-based made it sound good in theory -- but I've more recently realized that it would be an absolute catastrophe, macroeconomically- and politically-speaking. Throughout history, the wealth distribution in society has been cyclical: a society starts off relatively egalitarian, inequality gradually and naturally increases as small advantages get exploited over time (the rich get richer at the expense of the poor -- i.e., in terms of percentage of wealth -- even when the poor are improving in absolute terms), and eventually the wealth gap becomes so large that the serfs revolt, kill the rich, redistribute the wealth, and start the cycle over again. Taxes must be progressive, and possibly even confiscatory to the most wealthy, in order to slow the cycle as much as possible.

For wealthy people to support regressive (or even flat) taxation, it implies one or more of the following:
  • Either they are ignorant of history and oblivious to the fact that sooner or later, their heads will be on the guillotine, or
  • They are sociopaths who have no moral problem enforcing and protecting their wealth and power through violence and oppression.

Or that they believe that anyone has a chance to become a wealthy person and that they aren't wealthy just because of small advantages built up over time.  There's plenty of self made MegaMillionaires and Billionaires in this country who don't see their wealth as a culmination of centuries of advantages being built up.  Honestly, I think there's more self made Billionaires than any other time and that ability to get into the ".1%" is easier than ever before.  It's just moving between quintiles that is hard.  The ultra rich are still made up of people who's parents were just normal people rich and middle class (and even some poor)

Seppia

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FairTax-- Flat Tax Comments
« Reply #31 on: August 10, 2015, 02:58:27 PM »
I don't see the connection between having the opportunity to become a millionaire being as open as ever (still very debatable though, Stiglitz in his book The Cost Of Inequality brings data showing that upwards mobility has been significantly reduced since the '50s) with a flat tax.

People have the opportunity to become millionaires because the U.S. is the greatest country in the world (even if a lot of Americans like to complain, I am from Italy and trust me you shouldn't).
I would be in favor of an eventual flat tax at say 25%, but it has to be on everything though.
I am pretty sure though that what certain politicians and certain super rich want is a flat tax on everything EXCEPT capital gains, where obviously the rate should be kept at the low, low 15% that is today.
Guess where the super rich money comes from?

So in essence they don't want a flat tax, they just want to pay even less taxes than they do today.

Buffett himself was saying that it's pretty ridiculous that his tax rate is around HALF what his secretary's is (or something similar).

Midwest

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Re: FairTax-- Flat Tax Comments
« Reply #32 on: August 10, 2015, 03:02:29 PM »
Of course, he *is* working hard to kill public education....

Who?

BTDretire

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Re: FairTax-- Flat Tax Comments
« Reply #33 on: August 10, 2015, 03:39:46 PM »



There is nothing fair about taxing people at 90%.

 There is nothing fair about collecting a pot full of money,
then letting people who didn't put any money into the pot,
vote for representatives that offer to distribute the money to them.
 That should stir things up :-)

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Re: FairTax-- Flat Tax Comments
« Reply #34 on: August 10, 2015, 03:48:52 PM »
Duh
Where does the super rich's money come from usually?
 

Typically the same place that our early retirement funds come from.  Dividends.

Seppia

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Re: FairTax-- Flat Tax Comments
« Reply #35 on: August 10, 2015, 03:59:02 PM »

Duh
Where does the super rich's money come from usually?
 

Typically the same place that our early retirement funds come from.  Dividends.

Yesssss
Because of course Seppia paying 35% taxes and stashing away investments (max 720000 of today's dollars in 40 years in 401k, rest in after tax monies) to get $20.000 per year in dividends and uber rich guy making $1000.000 per year in salary AND 15M in stock options are the same!

Still, it doesn't answer the question:
Is it fair that on average the 0.1% richest people in the U.S. pay a % amount of taxes that is SIGNIFICANTLY lower (less than half) than what a family making $150.000-$200.000 in New York City pays?

My answer is still no.

BTDretire

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Re: FairTax-- Flat Tax Comments
« Reply #36 on: August 10, 2015, 04:10:34 PM »

They've gotten them down from 90% to 39%. But they still want them lower. And estate taxes have an exemption for the first $11 million a couple passes on to their kids. But they want that eliminated entirely.

I would go even further. Taxes to the super rich are already significantly lower than what you and I pay.
Last year my wife and I paid a total of approximately 36% (we live in Manhattan), while I'm pretty sure the 0.1 percenters are more around 12-15%

"I'm pretty sure the 0.1 percenters are more around 12-15%"
If that's true because they live on dividends, please don't change anything, That's what I want
to do in retirement.

 Let's talk about just Federal income taxes. gross income/fed tax paid= are you sure it's 36%?
 I think I had one year I paid less than 2%. If I get some time tonight I'll pull some 1040's and check.
If you figure deductions (this year), Standard -$12.6k,  4-exemptions $16k, 2-SEP's $15k, HSA $7.5k,
this totals $51.2k.  Then I had some deductible college expenses, and  capital losses. That's all subtracted
from gross income. if I grossed 70k, the tax would be $1845. Or 2.6%.
 My big nut is SS and Medicare tax, 15.2%* of the gross, couple of little adjustments but not much.
 Things will be worse this year, two of my exemptions are gone and no college expenses.
*I'm self employed.

MoonShadow

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Re: FairTax-- Flat Tax Comments
« Reply #37 on: August 10, 2015, 04:12:41 PM »

Duh
Where does the super rich's money come from usually?
 

Typically the same place that our early retirement funds come from.  Dividends.

Yesssss
Because of course Seppia paying 35% taxes and stashing away investments (max 720000 of today's dollars in 40 years in 401k, rest in after tax monies) to get $20.000 per year in dividends and uber rich guy making $1000.000 per year in salary AND 15M in stock options are the same!

Still, it doesn't answer the question:
Is it fair that on average the 0.1% richest people in the U.S. pay a % amount of taxes that is SIGNIFICANTLY lower (less than half) than what a family making $150.000-$200.000 in New York City pays?

My answer is still no.

Fairness is a subjective notion that never has, and never will, have any real effect on law, taxes or otherwise.  I don't think it's fair that I make $100K+ per year, and am tax exempt; but I am and I am not shy about keeping it all.  The Dems advocate as many exceptions to taxes as the Repubs do, they just benefit different classes of society.  I think it's a bit delusional to believe that any polticos really give a damn about what their constituents really think is "fair".

Jack

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Re: FairTax-- Flat Tax Comments
« Reply #38 on: August 10, 2015, 05:46:57 PM »
I just love the tax policy threads that pop up occasionally here on MMM.  It's good to see the name calling has already begun with a progressive poster already labeling anybody that questions the fairness of the current tax scructure as "sociopaths"...

Excuse me, but questioning the fairness of the "current tax scructure[sic]" and questioning the fairness of progressive taxation as a concept are very different things, and I'd thank you not to put words in my mouth.

The current tax structure is very unfair, but the fact that it's progressive is not the cause of the unfairness.

FairTax (a name I hate, because it's emotionally loaded and precludes rational discussion from the outset) is good in theory, being consumption-based and excluding enough for the basic needs of most families

I dispute even that. I used to like the FairTax for exactly that reason -- that being consumption-based made it sound good in theory -- but I've more recently realized that it would be an absolute catastrophe, macroeconomically- and politically-speaking. Throughout history, the wealth distribution in society has been cyclical: a society starts off relatively egalitarian, inequality gradually and naturally increases as small advantages get exploited over time (the rich get richer at the expense of the poor -- i.e., in terms of percentage of wealth -- even when the poor are improving in absolute terms), and eventually the wealth gap becomes so large that the serfs revolt, kill the rich, redistribute the wealth, and start the cycle over again. Taxes must be progressive, and possibly even confiscatory to the most wealthy, in order to slow the cycle as much as possible.

For wealthy people to support regressive (or even flat) taxation, it implies one or more of the following:
  • Either they are ignorant of history and oblivious to the fact that sooner or later, their heads will be on the guillotine, or
  • They are sociopaths who have no moral problem enforcing and protecting their wealth and power through violence and oppression.

Or that they believe that anyone has a chance to become a wealthy person and that they aren't wealthy just because of small advantages built up over time.  There's plenty of self made MegaMillionaires and Billionaires in this country who don't see their wealth as a culmination of centuries of advantages being built up.  Honestly, I think there's more self made Billionaires than any other time and that ability to get into the ".1%" is easier than ever before.  It's just moving between quintiles that is hard.  The ultra rich are still made up of people who's parents were just normal people rich and middle class (and even some poor)

If it's harder for poor people to move up in quintile than it is for rich people to avoid moving down in quintile, then wealth will become increasingly concentrated and society will eventually collapse. Even if most of the wealthy people are moral enough to avoid parlaying their wealth into political power, enough of them would do so that dystopia would be inevitable.

Seppia

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Re: FairTax-- Flat Tax Comments
« Reply #39 on: August 10, 2015, 06:33:11 PM »

Let's talk about just Federal income taxes. gross income/fed tax paid= are you sure it's 36%?
 I think I had one year I paid less than 2%. If I get some time tonight I'll pull some 1040's and check.
If you figure deductions (this year), Standard -$12.6k,  4-exemptions $16k, 2-SEP's $15k, HSA $7.5k,
this totals $51.2k.  Then I had some deductible college expenses, and  capital losses. That's all subtracted
from gross income. if I grossed 70k, the tax would be $1845. Or 2.6%.
 My big nut is SS and Medicare tax, 15.2%* of the gross, couple of little adjustments but not much.
 Things will be worse this year, two of my exemptions are gone and no college expenses.
*I'm self employed.

Sorry but I am a simple man and still do math the simple way.
So for me tax % = total amount of taxes I pay / my income.
So if you pay $1850 + SS and Medicare you are not paying 2.6%, you are paying around 18%.
If it seems fair to you that while making $70 k per year you pay slightly more  compared to the 0.1% (not sure about their numbers, but I assume they make at least 30 times what you do) then good for you.

I still consider the math to be slightly weird.

Seppia

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Re: FairTax-- Flat Tax Comments
« Reply #40 on: August 10, 2015, 06:36:23 PM »

Yesssss
Because of course Seppia paying 35% taxes and stashing away investments (max 720000 of today's dollars in 40 years in 401k, rest in after tax monies) to get $20.000 per year in dividends and uber rich guy making $1000.000 per year in salary AND 15M in stock options are the same!

Still, it doesn't answer the question:
Is it fair that on average the 0.1% richest people in the U.S. pay a % amount of taxes that is SIGNIFICANTLY lower (less than half) than what a family making $150.000-$200.000 in New York City pays?

My answer is still no.

Fairness is a subjective notion that never has, and never will, have any real effect on law, taxes or otherwise.  I don't think it's fair that I make $100K+ per year, and am tax exempt; but I am and I am not shy about keeping it all.  The Dems advocate as many exceptions to taxes as the Repubs do, they just benefit different classes of society.  I think it's a bit delusional to believe that any polticos really give a damn about what their constituents really think is "fair".

I disagree.
Fairness means, to me, that if I am doing way better than you then I should be paying equal or more than you in taxes.
What you are talking about is egoism, maximizing my personal wealth.
If that is one's agenda then I am fine, I am really open to any opinion, just don't call it "fair".

MoonShadow

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Re: FairTax-- Flat Tax Comments
« Reply #41 on: August 10, 2015, 06:46:20 PM »

If it's harder for poor people to move up in quintile than it is for rich people to avoid moving down in quintile,


Statistics about the mobility in the US, across generations, suggest that this is not the case...

"According to a 2012 Pew Economic Mobility Project study[14] 43% of children born into the bottom quintile remain in that bottom quintile as adults. Correspondingly, 40% of children raised in the top quintile will remain there as adults."

https://en.wikipedia.org/wiki/Socio-economic_mobility_in_the_United_States#Intragenerational_mobility

But even if it were true...


Quote
then wealth will become increasingly concentrated and society will eventually collapse.

Your conclusion does not follow your assumptions.  The condition that you suggest was the norm in Western Europe for centuries, yet society typically did not collapse as an obvious or direct result.  Now, that may have been a contributing factor in the actual social breakdowns that did occur, but I wouldn't assume that, and you didn't offer any evidence to support your opinion.  You simply stated it as a given.

MoonShadow

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Re: FairTax-- Flat Tax Comments
« Reply #42 on: August 10, 2015, 06:49:40 PM »

Yesssss
Because of course Seppia paying 35% taxes and stashing away investments (max 720000 of today's dollars in 40 years in 401k, rest in after tax monies) to get $20.000 per year in dividends and uber rich guy making $1000.000 per year in salary AND 15M in stock options are the same!

Still, it doesn't answer the question:
Is it fair that on average the 0.1% richest people in the U.S. pay a % amount of taxes that is SIGNIFICANTLY lower (less than half) than what a family making $150.000-$200.000 in New York City pays?

My answer is still no.

Fairness is a subjective notion that never has, and never will, have any real effect on law, taxes or otherwise.  I don't think it's fair that I make $100K+ per year, and am tax exempt; but I am and I am not shy about keeping it all.  The Dems advocate as many exceptions to taxes as the Repubs do, they just benefit different classes of society.  I think it's a bit delusional to believe that any polticos really give a damn about what their constituents really think is "fair".

I disagree.
Fairness means, to me, that if I am doing way better than you then I should be paying equal or more than you in taxes.
What you are talking about is egoism, maximizing my personal wealth.
If that is one's agenda then I am fine, I am really open to any opinion, just don't call it "fair".

Please re-read my post.  I never said it was fair, I stated the exact opposite.  I, however, did state that what is fair is not relevant to the law.  My tax burden is what it is, in part, because of special tax breaks that both Democrats & Republicans have advocated and passed.

Seppia

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FairTax-- Flat Tax Comments
« Reply #43 on: August 10, 2015, 06:50:19 PM »
LOL
From your very link
https://en.m.wikipedia.org/wiki/Socio-economic_mobility_in_the_United_States
"Several large studies of mobility in developed countries in recent years have found the US among the lowest in mobility."
« Last Edit: August 10, 2015, 06:52:14 PM by Seppia »

MoonShadow

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Re: FairTax-- Flat Tax Comments
« Reply #44 on: August 10, 2015, 06:52:08 PM »
LOL
From your very link
"Several large studies of mobility in developed countries in recent years have found the US among the lowest in mobility."

So your assumption would be even more incorrect in other nations.  And that helps your argument how exactly?

Seppia

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Re: FairTax-- Flat Tax Comments
« Reply #45 on: August 10, 2015, 06:56:17 PM »

LOL
From your very link
"Several large studies of mobility in developed countries in recent years have found the US among the lowest in mobility."

So your assumption would be even more incorrect in other nations.  And that helps your argument how exactly?

I was responding to this



If it's harder for poor people to move up in quintile than it is for rich people to avoid moving down in quintile,


Statistics about the mobility in the US, across generations, suggest that this is not the case...

"According to a 2012 Pew Economic Mobility Project study[14] 43% of children born into the bottom quintile remain in that bottom quintile as adults. Correspondingly, 40% of children raised in the top quintile will remain there as adults."

https://en.wikipedia.org/wiki/Socio-economic_mobility_in_the_United_States#Intragenerational_mobility

So no, in the U.S. it is harder to have mobility vs elsewhere.

Seppia

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Re: FairTax-- Flat Tax Comments
« Reply #46 on: August 10, 2015, 07:00:41 PM »


Yesssss
Because of course Seppia paying 35% taxes and stashing away investments (max 720000 of today's dollars in 40 years in 401k, rest in after tax monies) to get $20.000 per year in dividends and uber rich guy making $1000.000 per year in salary AND 15M in stock options are the same!

Still, it doesn't answer the question:
Is it fair that on average the 0.1% richest people in the U.S. pay a % amount of taxes that is SIGNIFICANTLY lower (less than half) than what a family making $150.000-$200.000 in New York City pays?

My answer is still no.

Fairness is a subjective notion that never has, and never will, have any real effect on law, taxes or otherwise.  I don't think it's fair that I make $100K+ per year, and am tax exempt; but I am and I am not shy about keeping it all.  The Dems advocate as many exceptions to taxes as the Repubs do, they just benefit different classes of society.  I think it's a bit delusional to believe that any polticos really give a damn about what their constituents really think is "fair".

I disagree.
Fairness means, to me, that if I am doing way better than you then I should be paying equal or more than you in taxes.
What you are talking about is egoism, maximizing my personal wealth.
If that is one's agenda then I am fine, I am really open to any opinion, just don't call it "fair".

Please re-read my post.  I never said it was fair, I stated the exact opposite.  I, however, did state that what is fair is not relevant to the law.  My tax burden is what it is, in part, because of special tax breaks that both Democrats & Republicans have advocated and passed.

So what's your point?
Mine is: today it's unfair, I'm fine with not changing it but if we do have to change it, let's make sure it's not to make it even more unfair.

MoonShadow

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Re: FairTax-- Flat Tax Comments
« Reply #47 on: August 10, 2015, 07:03:13 PM »

So no, in the U.S. it is harder to have mobility vs elsewhere.

But I wasn't arguing against that.  I was responding to the claim of Jack's that it's harder for a person in the bottom quintile to rise up than a person in the top quintile to stay up.  And it is, by about 3%; which isn't much IMHO.  If you are going to segway into comparing the US to other nations, do so, but be explicit about it.  I'm unlikely to engage you in that conversation, since we have been talking about tax law in the US in this thread.


Seppia

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Re: FairTax-- Flat Tax Comments
« Reply #48 on: August 10, 2015, 07:11:12 PM »


But I wasn't arguing against that.  I was responding to the claim of Jack's that it's harder for a person in the bottom quintile to rise up than a person in the top quintile to stay up.  And it is, by about 3%; which isn't much IMHO.  If you are going to segway into comparing the US to other nations, do so, but be explicit about it.  I'm unlikely to engage you in that conversation, since we have been talking about tax law in the US in this thread.
You are right, sorry. , jacks statement wasn't correct.

MoonShadow

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Re: FairTax-- Flat Tax Comments
« Reply #49 on: August 10, 2015, 07:13:58 PM »


Yesssss
Because of course Seppia paying 35% taxes and stashing away investments (max 720000 of today's dollars in 40 years in 401k, rest in after tax monies) to get $20.000 per year in dividends and uber rich guy making $1000.000 per year in salary AND 15M in stock options are the same!

Still, it doesn't answer the question:
Is it fair that on average the 0.1% richest people in the U.S. pay a % amount of taxes that is SIGNIFICANTLY lower (less than half) than what a family making $150.000-$200.000 in New York City pays?

My answer is still no.

Fairness is a subjective notion that never has, and never will, have any real effect on law, taxes or otherwise.  I don't think it's fair that I make $100K+ per year, and am tax exempt; but I am and I am not shy about keeping it all.  The Dems advocate as many exceptions to taxes as the Repubs do, they just benefit different classes of society.  I think it's a bit delusional to believe that any polticos really give a damn about what their constituents really think is "fair".

I disagree.
Fairness means, to me, that if I am doing way better than you then I should be paying equal or more than you in taxes.
What you are talking about is egoism, maximizing my personal wealth.
If that is one's agenda then I am fine, I am really open to any opinion, just don't call it "fair".

Please re-read my post.  I never said it was fair, I stated the exact opposite.  I, however, did state that what is fair is not relevant to the law.  My tax burden is what it is, in part, because of special tax breaks that both Democrats & Republicans have advocated and passed.

So what's your point?


That fairness is a subjective value that is not relevant to laws in the United States.

Quote
Mine is: today it's unfair, I'm fine with not changing it but if we do have to change it, let's make sure it's not to make it even more unfair.

I'm not even sure how that would be possible, the massive tax code as it is has been hugely unfair to middle class people for decades.  Just the complexity alone makes it unfair for those who can't afford a tax professional to find those special breaks for them.  I couldn't have done it without mine, he's worth every penny I pay him.

Coming back around to Rand Paul's Fair & Flat tax plan again (where this thread started), you did know that his starting exemption would be higher than it is now right?  Taking the standard deduction from just under $10K per person right now to above $40K for a married couple.  So while the official tax rate on the wealthy would be lower, I'd give it even odds that the actual tax rate would be lower, since the rich can afford to pay a tax professional to find all of their exemptions.  As a reminder, I made over $100K last year, and paid nothing to the federal government (beyond my FICA).  Rand's tax plan would destroy my greatest exemptions and result in my taxes being higher, if not by much considering my FICA would also cease to exist.  Despite the fact that it's obviously against my own interests, I'd still support the Fair & Flat tax plan (as I understand it) because it would suddenly bring the tax code back to a reasonable size and complexity.
« Last Edit: August 10, 2015, 07:19:28 PM by MoonShadow »