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Learning, Sharing, and Teaching => Taxes => Topic started by: BTDretire on August 07, 2015, 01:36:28 PM

Title: FairTax-- Flat Tax Comments
Post by: BTDretire 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: EricP 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).
Title: Re: FairTax-- Flat Tax Comments
Post by: zephyr911 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 (http://www.npr.org/sections/itsallpolitics/2013/11/11/243973620/when-lobbyists-literally-write-the-bill) and passed by Congress. And there is the actual problem.
Title: Re: FairTax-- Flat Tax Comments
Post by: Jack 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:
Title: Re: FairTax-- Flat Tax Comments
Post by: bobechs on August 07, 2015, 04:24:51 PM
Faster-than-light drive.

Now that would make a difference.

Let's talk about that too.
Title: Re: FairTax-- Flat Tax Comments
Post by: forummm 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: KungfuRabbit on August 08, 2015, 10:47:53 AM
I'm voting trump.
Title: Re: FairTax-- Flat Tax Comments
Post by: Bucksandreds 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: Cranky on August 08, 2015, 04:01:55 PM
Of course, he *is* working hard to kill public education....
Title: Re: FairTax-- Flat Tax Comments
Post by: Telecaster 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.   
Title: Re: FairTax-- Flat Tax Comments
Post by: squeakywheel 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 (http://www.npr.org/sections/itsallpolitics/2013/11/11/243973620/when-lobbyists-literally-write-the-bill) and passed by Congress. And there is the actual problem.

+1

Zephyr911 for president!!
Title: Re: FairTax-- Flat Tax Comments
Post by: Travis 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: forummm 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).
Title: Re: FairTax-- Flat Tax Comments
Post by: Beridian 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: forummm 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: Travis 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: nobodyspecial 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.



Title: Re: FairTax-- Flat Tax Comments
Post by: music lover 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%.
Title: Re: FairTax-- Flat Tax Comments
Post by: Paul der Krake 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: Seppia 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%
Title: Re: FairTax-- Flat Tax Comments
Post by: forummm 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: music lover 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: Seppia on August 09, 2015, 02:55:21 PM
Duh
Where does the super rich's money come from usually?
 
Title: Re: FairTax-- Flat Tax Comments
Post by: Cressida 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: Jack 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: Schaefer Light 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: Iron Mike Sharpe 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: wienerdog 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. 
Title: Re: FairTax-- Flat Tax Comments
Post by: Huffy2k 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"...(http://www.picgifs.com/smileys/smileys-and-emoticons/beating-and-fighting/smileys-beating-and-fighting-263316.gif)
Title: Re: FairTax-- Flat Tax Comments
Post by: EricP 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: EricP 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)
Title: FairTax-- Flat Tax Comments
Post by: Seppia 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).
Title: Re: FairTax-- Flat Tax Comments
Post by: Midwest on August 10, 2015, 03:02:29 PM
Of course, he *is* working hard to kill public education....

Who?
Title: Re: FairTax-- Flat Tax Comments
Post by: BTDretire 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 :-)
Title: Re: FairTax-- Flat Tax Comments
Post by: MoonShadow 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: Seppia 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: BTDretire 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: MoonShadow 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".
Title: Re: FairTax-- Flat Tax Comments
Post by: Jack 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: Seppia 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: Seppia 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".
Title: Re: FairTax-- Flat Tax Comments
Post by: MoonShadow 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: MoonShadow 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.
Title: FairTax-- Flat Tax Comments
Post by: Seppia 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."
Title: Re: FairTax-- Flat Tax Comments
Post by: MoonShadow 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?
Title: Re: FairTax-- Flat Tax Comments
Post by: Seppia 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: Seppia 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: MoonShadow 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.

Title: Re: FairTax-- Flat Tax Comments
Post by: Seppia 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: MoonShadow 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.
Title: Re: FairTax-- Flat Tax Comments
Post by: Druid on August 10, 2015, 10:50:07 PM
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.

This is the gist of it. The real estate industry likes the mortgage deduction. The finance industry likes 401k deductions. Farmers love their subsidies. Charities rely on the charitable deductions of people. Old people don't mind the social security tax and Medicare. Poor people love the 15 percent bracket. People with a dozen kids love their exemptions.Dramatically Changing the tax code involves a balancing act between keeping the special interests happy enough to support you while not turning the minority poor against you. The flat tax is used by republicans to attract contributions from wealthy people.
Title: Re: FairTax-- Flat Tax Comments
Post by: Druid on August 10, 2015, 11:04:37 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%

While I hate to say it...the solution is to get rid of favorable capital gain rates. This change alone would clean up the tax code since many of the complexities involve classifying what property and investment transactions qualify for capital gains. Furthermore the top 1 percent will finally be paying the same rate as married couples making a couple hundred grand solely from wages. Some people may argue that investment will go down, but this affect can be offset by eliminating the double taxation structure of c corps that are public ally traded.
Title: FairTax-- Flat Tax Comments
Post by: Seppia on August 11, 2015, 05:07:31 AM
So what's your point?

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

We agree to disagree then.


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.

Disagree here also.
In the U.S. you pay very little taxes, I would be against paying less.
While it sounds sexy in theory, if you pay peanuts you get monkeys, and the main reason of some of the issues I see in the U.S. (for example: older infrastructure and insufficient public transport) come directly from the fact that your taxes are so low.
Taxes are/should be a way to redistribute wealth across the population, smoothening out the inequality.

My personal view is that taxes in the U.S. are already low enough, I would just start considering capital gains like ordinary income and keep the progressive taxation in place.
This way you would close the obscene loophole allowing the uber-wealthy to pay less taxes than you and I.
Title: Re: FairTax-- Flat Tax Comments
Post by: Jack on August 11, 2015, 05:27:07 AM
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

Note the "if:" I wasn't saying that it is the case now; I was saying that if we had a flat tax it would become the case.

Your attempt at a rebuttal (to an argument I didn't actually make) is not evidence that a flat tax would work okay; it's actually evidence that our progressive taxation system is working!

And even then, it's only barely doing so, given that the other results mentioned in that section of the article showed even less mobility than the statement you quoted. Also, that study is for the 1996-2005 time period; I wonder what the percentages were for other time periods (such as 1946-1955).

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.

Title: Re: FairTax-- Flat Tax Comments
Post by: MoonShadow on August 11, 2015, 08:48:11 AM
So what's your point?

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

We agree to disagree then.


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.

Disagree here also.
In the U.S. you pay very little taxes, I would be against paying less.
While it sounds sexy in theory, if you pay peanuts you get monkeys, and the main reason of some of the issues I see in the U.S. (for example: older infrastructure and insufficient public transport) come directly from the fact that your taxes are so low.
Taxes are/should be a way to redistribute wealth across the population, smoothening out the inequality.

My personal view is that taxes in the U.S. are already low enough, I would just start considering capital gains like ordinary income and keep the progressive taxation in place.
This way you would close the obscene loophole allowing the uber-wealthy to pay less taxes than you and I.

I don't think you are paying attention to what I've been saying. There is nothing that could be done to make the 'progressive' tax system in the US worse than it is now, because the rich already don't pay hardly anything.  And it is not really possible for them to pay less than I do.  That was my point.  I've set up my finances in such a way, that I, personally, pay zero income taxes to the federal government.  And I do so quite legally, by taking advantage of the numerous exemptions and deductions that both parties have carved out for their special interests.  I pay nothing beyond my FICA taxes, which is less than what Rand Paul's Fair&Flat plan would cost me.  It's not material if the top tax rate is 38% or 90%, if even the wealthiest of people can avoid those rates with massive exceptions and deductions.  There are entire sections of this forum dedicated to the concept of paying zero taxes in retirement!  No, that's not fair; but it is so.
Title: Re: FairTax-- Flat Tax Comments
Post by: BTDretire on August 11, 2015, 08:48:56 AM

My personal view is that taxes in the U.S. are already low enough, I would just start considering capital gains like ordinary income and keep the progressive taxation in place.
This way you would close the obscene loophole allowing the uber-wealthy to pay less taxes than you and I.

  I think the capital gains tax treatment enables the middleclass to build wealth,
if that is what they put effort into. Most Americans spend all they get.
Title: Re: FairTax-- Flat Tax Comments
Post by: BTDretire on August 11, 2015, 09:10:09 AM

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.

 Yes, I thought someone would throw SS into the tax basket.
In my case, assuming I live a full life, I will get back more than I paid into the SS system.
My numbers need updating and are somewhat generous, But, I've paid about $100k to SS.(including employers)
At retirement I'll receive $21k per year, so in 5 years I will get back all the money I paid in.
 I do understand if I had kept the money I would have earned interest over those many years,
and would have much more money. I also have a disability policy lumped into my SS payments and
payments to my kids if I die early.
 I place SS payments into a different position than Federal income taxes.
 Not that I like the system, but it has helped many, many people who would have been destitute without it.
(My parents)
  Your same argument is used to say the poor pay high payroll taxes, no, the pay for a disability policy and a retirement policy.
Then many get money back as the earned income tax credit.
Title: FairTax-- Flat Tax Comments
Post by: Seppia on August 11, 2015, 09:14:37 AM
I don't think you are paying attention to what I've been saying. There is nothing that could be done to make the 'progressive' tax system in the US worse than it is now, because the rich already don't pay hardly anything.  And it is not really possible for them to pay less than I do.  That was my point.  I've set up my finances in such a way, that I, personally, pay zero income taxes to the federal government.  And I do so quite legally, by taking advantage of the numerous exemptions and deductions that both parties have carved out for their special interests.  I pay nothing beyond my FICA taxes, which is less than what Rand Paul's Fair&Flat plan would cost me.  It's not material if the top tax rate is 38% or 90%, if even the wealthiest of people can avoid those rates with massive exceptions and deductions.  There are entire sections of this forum dedicated to the concept of paying zero taxes in retirement!  No, that's not fair; but it is so.

Then you and I have a different idea of math.
I personally do not care what the name of the tax is, just the total % of income.
If I recall correctly in a previous post of yours you were stating that your income tax is 2.6% and the other (such as SS) accounted for 15% and change.
Total: 18% of what you make goes in taxes.
The super rich pay less than that, because SS taxes are capped to an amount that is trivial to them (not to you).
Saying that you pay "nothing" and conveniently forgetting the 15% and change is... Uh... Strange?
Plus: I am happy you manage to do that but most employees (like me) pay significantly more than the "nothing" you pay, rendering the comparison with the uber wealthy (who ALL pay much lower %) even more obscene.

We agree on the fact that today's system is unfairly rigged (to favor the very rich), I would just avoid any new system that would further lower their % of taxation.

If the flat tax proposal is to treat capital gains like income then count me in, that would mean a significant increase in taxation for the super rich.
I don't know why but I'm not super confident that's the proposal.
Title: Re: FairTax-- Flat Tax Comments
Post by: MoonShadow on August 11, 2015, 11:53:46 AM
I don't think you are paying attention to what I've been saying. There is nothing that could be done to make the 'progressive' tax system in the US worse than it is now, because the rich already don't pay hardly anything.  And it is not really possible for them to pay less than I do.  That was my point.  I've set up my finances in such a way, that I, personally, pay zero income taxes to the federal government.  And I do so quite legally, by taking advantage of the numerous exemptions and deductions that both parties have carved out for their special interests.  I pay nothing beyond my FICA taxes, which is less than what Rand Paul's Fair&Flat plan would cost me.  It's not material if the top tax rate is 38% or 90%, if even the wealthiest of people can avoid those rates with massive exceptions and deductions.  There are entire sections of this forum dedicated to the concept of paying zero taxes in retirement!  No, that's not fair; but it is so.

Then you and I have a different idea of math.
I personally do not care what the name of the tax is, just the total % of income.
If I recall correctly in a previous post of yours you were stating that your income tax is 2.6% and the other (such as SS) accounted for 15% and change.
Total: 18% of what you make goes in taxes.


Actually, my net tax rate, including everything that goes to the federal government, is just over 7%.  That includes FICA as well as state income taxes, but does not include my property taxes, which are substantial, honestly.

Quote
The super rich pay less than that, because SS taxes are capped to an amount that is trivial to them (not to you).

The Fair&Flat tax would effectively remove that cap as well.

Quote
Saying that you pay "nothing" and conveniently forgetting the 15% and change is... Uh... Strange?
Plus: I am happy you manage to do that but most employees (like me) pay significantly more than the "nothing" you pay, rendering the comparison with the uber wealthy (who ALL pay much lower %) even more obscene.


And that is exactly my point.  As a net total tax rate, the average wealthy person pays less than the FICA rate.  I know this because I use many of the same tricks to do the same thing.  I can't say with any certainty that the wealthy will pay more on net or not, but they won't pay less.

Quote

We agree on the fact that today's system is unfairly rigged (to favor the very rich), I would just avoid any new system that would further lower their % of taxation.


It also favors the very (income) poor, which is one reason it so favors the early retiree.  Agree with it or not, it's basicly the middle class that pays for everything that matters, from infrastructure to education.

Quote
If the flat tax proposal is to treat capital gains like income then count me in, that would mean a significant increase in taxation for the super rich.
I don't know why but I'm not super confident that's the proposal.

I am.  It's right there in the press release.  The Fair and Flat tax is exactly what you are looking for, and that is what I've been trying to tell you....

"I devised a 21st-century tax code that would establish a 14.5% flat-rate tax applied equally to all personal income, including wages, salaries, dividends, capital gains, rents and interest. All deductions except for a mortgage and charities would be eliminated. The first $50,000 of income for a family of four would not be taxed. For low-income working families, the plan would retain the earned-income tax credit."

https://randpaul.com/news/rand-pauls-fair-and-flat-tax

This would effectively double my net tax rate.
Title: Re: FairTax-- Flat Tax Comments
Post by: EricP on August 11, 2015, 12:10:20 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

Note the "if:" I wasn't saying that it is the case now; I was saying that if we had a flat tax it would become the case.

Your attempt at a rebuttal (to an argument I didn't actually make) is not evidence that a flat tax would work okay; it's actually evidence that our progressive taxation system is working!

And even then, it's only barely doing so, given that the other results mentioned in that section of the article showed even less mobility than the statement you quoted. Also, that study is for the 1996-2005 time period; I wonder what the percentages were for other time periods (such as 1946-1955).

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.

  • Fall of Rome
  • French Revolution
  • Soviet Revolution
  • Feudalism in general (as an example of the mode where the rich sociopaths maintain their power through violence and oppression)

And were the French and Soviet revolutions the exception, not the norm?  Every other country moved from feudal monarchy to a democratic country with a lot fewer heads on spikes, sure you had the 1848 revolutions and such, but those are hardly "societal collapse" and "dystopia."   Yes there were some big wars in there that facilitated a change by an outside party, but I'm still sticking with my proposition that as long as the masses are moving up in absolute terms, then it's irrelevant what the wealth disparity is doing, because America today is one of the most inequal places that has ever existed and yet we're still a long way from heads being on spikes.  And it's primarily because QoL is still going up for the majority of the population.
Title: Re: FairTax-- Flat Tax Comments
Post by: nobodyspecial on August 11, 2015, 12:32:57 PM
Quote
"I devised a 21st-century tax code that would establish a 14.5% flat-rate tax applied equally to all personal income, including wages, salaries, dividends, capital gains, rents and interest. All deductions except for a mortgage and charities would be eliminated.
The problem is that you have to make it global or the really rich don't pay anything.

I simply renounce my  US citizenship, visit my US home for 182 days each year and have all my income paid into my Swiss bank.

Or I have only $50K income but my $MM home is owned by my Swiss corporation who employs me as a corporate ambassador so that everything I do and everywhere I go is a marketing activity and they pick up the tab.



Title: Re: FairTax-- Flat Tax Comments
Post by: MoonShadow on August 11, 2015, 01:14:04 PM
Quote
"I devised a 21st-century tax code that would establish a 14.5% flat-rate tax applied equally to all personal income, including wages, salaries, dividends, capital gains, rents and interest. All deductions except for a mortgage and charities would be eliminated.
The problem is that you have to make it global or the really rich don't pay anything.


If said rich are US citizens, it's already global.  US tax law doesn't give a rat's ass where the money exists, or what nation also claims it. Even renoucing doesn't work, because there is a huge exit tax.
Title: Re: FairTax-- Flat Tax Comments
Post by: nobodyspecial on August 11, 2015, 02:09:57 PM
Even renoucing doesn't work, because there is a huge exit tax.
Presumably the IRS should watch out for anybody looking like Charlton Heston and carrying stone tablets - "Let my people go"
Although parting the Caribbean on their way to an offshore tax haven would be cool.
Title: Re: FairTax-- Flat Tax Comments
Post by: birdman2003 on August 12, 2015, 09:35:59 PM
For those of you in favor of "poor" people (are there really poor people in the USA compared to other countries?) getting more money, instead of favoring a government that takes it by force from those with money; why not just work extra hard and then give your extra money directly to them?  Why do you need a government involved to transfer money to "poor" people?

Oh that's right.  It's not your money you want to give to them, you want to give them other people's ("rich" people's) money.

Also good to remember that wealth is not a zero-sum game.
Title: Re: FairTax-- Flat Tax Comments
Post by: Druid on August 12, 2015, 09:41:31 PM

My personal view is that taxes in the U.S. are already low enough, I would just start considering capital gains like ordinary income and keep the progressive taxation in place.
This way you would close the obscene loophole allowing the uber-wealthy to pay less taxes than you and I.

  I think the capital gains tax treatment enables the middleclass to build wealth,
if that is what they put effort into. Most Americans spend all they get.

99 percent of the middle class cannot afford to invest more than the $18500 and $5500 allowed for retirement accounts. The capital gain rates help very little middle class people. Early retirees represent 0.000001 percent of the middle class population(yes I pulled that number from my ass). The average middle class person works pay check to pay check. Capital gain rates mainly help the rich.
Title: Re: FairTax-- Flat Tax Comments
Post by: Runge on August 12, 2015, 10:01:03 PM

My personal view is that taxes in the U.S. are already low enough, I would just start considering capital gains like ordinary income and keep the progressive taxation in place.
This way you would close the obscene loophole allowing the uber-wealthy to pay less taxes than you and I.

  I think the capital gains tax treatment enables the middleclass to build wealth,
if that is what they put effort into. Most Americans spend all they get.

99 percent of the middle class cannot afford to invest more than the $18500 and $5500 allowed for retirement accounts. The capital gain rates help very little middle class people. Early retirees represent 0.000001 percent of the middle class population(yes I pulled that number from my ass). The average middle class person works pay check to pay check. Capital gain rates mainly help the rich.

Can the "99%" not afford it because of "the system" or is it because of their own personal choices in life? I'd have to say primarily the latter for the vast majority of cases.
Title: Re: FairTax-- Flat Tax Comments
Post by: Seppia on August 12, 2015, 10:03:05 PM

For those of you in favor of "poor" people (are there really poor people in the USA compared to other countries?) getting more money,

Yes there are poor people in the U.S. , which planet do you live on?

instead of favoring a government that takes it by force from those with money; why not just work extra hard and then give your extra money directly to them? 

Who tells you some don't do this already?

Why do you need a government involved to transfer money to "poor" people?

Because of people like you
Title: Re: FairTax-- Flat Tax Comments
Post by: Seppia on August 12, 2015, 10:06:05 PM


My personal view is that taxes in the U.S. are already low enough, I would just start considering capital gains like ordinary income and keep the progressive taxation in place.
This way you would close the obscene loophole allowing the uber-wealthy to pay less taxes than you and I.

  I think the capital gains tax treatment enables the middleclass to build wealth,
if that is what they put effort into. Most Americans spend all they get.

99 percent of the middle class cannot afford to invest more than the $18500 and $5500 allowed for retirement accounts. The capital gain rates help very little middle class people. Early retirees represent 0.000001 percent of the middle class population(yes I pulled that number from my ass). The average middle class person works pay check to pay check. Capital gain rates mainly help the rich.

Can the "99%" not afford it because of "the system" or is it because of their own personal choices in life? I'd have to say primarily the latter for the vast majority of cases.

Seems like a dangerous way to go about it.
We could tax capital gains above $100000 per year 90% and then say "hey they could get by anyways, do they really need the mega mansion in the hamptons?"
Title: Re: FairTax-- Flat Tax Comments
Post by: Runge on August 12, 2015, 10:30:20 PM


My personal view is that taxes in the U.S. are already low enough, I would just start considering capital gains like ordinary income and keep the progressive taxation in place.
This way you would close the obscene loophole allowing the uber-wealthy to pay less taxes than you and I.

  I think the capital gains tax treatment enables the middleclass to build wealth,
if that is what they put effort into. Most Americans spend all they get.

99 percent of the middle class cannot afford to invest more than the $18500 and $5500 allowed for retirement accounts. The capital gain rates help very little middle class people. Early retirees represent 0.000001 percent of the middle class population(yes I pulled that number from my ass). The average middle class person works pay check to pay check. Capital gain rates mainly help the rich.

Can the "99%" not afford it because of "the system" or is it because of their own personal choices in life? I'd have to say primarily the latter for the vast majority of cases.

Seems like a dangerous way to go about it.
We could tax capital gains above $100000 per year 90% and then say "hey they could get by anyways, do they really need the mega mansion in the hamptons?"

Yeah, that's not at all what I'm saying. Current tax code rewards those who invest long term, but large amounts of people would rather spend $1500+ a month on food, gas, coffee, tv, and overly large vehicles.
Title: Re: FairTax-- Flat Tax Comments
Post by: Cathy on August 12, 2015, 10:46:57 PM
...Even renoucing doesn't work, because there is a huge exit tax.

The expatriation tax is widely misunderstood. It essentially requires you to "settle up" with the US by paying tax on unrealised capital gains and deferred tax items. Subject to conditions, part or all of the tax can be deferred until the income is actually realised. There is also a generous deduction that you can take against the amounts subject to the expatriation tax ($680,000 for 2014). See 26 USC § 877A.

...I simply renounce my  US citizenship, visit my US home for 182 days each year...

(Emphasis added.)

Watch out for the following:

There are also other potential issues, not discussed here, to consider with the proposed plan.
Title: Re: FairTax-- Flat Tax Comments
Post by: birdman2003 on August 12, 2015, 11:08:25 PM

For those of you in favor of "poor" people (are there really poor people in the USA compared to other countries?) getting more money,

Yes there are poor people in the U.S. , which planet do you live on?

instead of favoring a government that takes it by force from those with money; why not just work extra hard and then give your extra money directly to them? 


Who tells you some don't do this already?

Why do you need a government involved to transfer money to "poor" people?

Because of people like you

I noticed that you did not respond at all to my concluding points that

1. What you really want is for other people's money to be given to the "poor"

and

2. Wealth is not a zero-sum game
Title: FairTax-- Flat Tax Comments
Post by: Seppia on August 13, 2015, 05:49:04 AM
1 yes of course I do. Not only "other people's" though. I live in the U.S. and I paid 37% total taxes last year.
I would just like those that make $10 millions per year (a little more than 50 times what my wife and I make combined) to pay something similar to what I pay and not 1/3
Being rich takes skill and persistence but also a certain amount of luck (being born in the right Country, or from the right parents, or other stuff).
Similarly, being poor is not only the result of laziness.
I bet if I were born in the projects from a couple of drug addict parents the odds of me doing what I do for a living would be significantly lower.
So yes, as I said in an earlier post, taxes should definitely be a mean to redistribute wealth across society.

2- transferring 1000$ from a person who would keep them in a bank account and giving them to someone who would immediately spend them to meet basic needs would actually help the economy.
On The Price Of Inequality, Stiglitz argues that a very unbalanced distribution of wealth within a Country is actually harmful for the economy, mainly because 1- the same money if kept by someone who doesn't need it at all would not be spent and thus reintroduced in the economy and 2- the hidden costs of poverty (health, police, etc).

I've always said this, the day I pay 5 million dollars in taxes I will be a very happy man.
Title: Re: FairTax-- Flat Tax Comments
Post by: Druid on August 13, 2015, 08:08:14 AM

My personal view is that taxes in the U.S. are already low enough, I would just start considering capital gains like ordinary income and keep the progressive taxation in place.
This way you would close the obscene loophole allowing the uber-wealthy to pay less taxes than you and I.

  I think the capital gains tax treatment enables the middleclass to build wealth,
if that is what they put effort into. Most Americans spend all they get.

99 percent of the middle class cannot afford to invest more than the $18500 and $5500 allowed for retirement accounts. The capital gain rates help very little middle class people. Early retirees represent 0.000001 percent of the middle class population(yes I pulled that number from my ass). The average middle class person works pay check to pay check. Capital gain rates mainly help the rich.

Can the "99%" not afford it because of "the system" or is it because of their own personal choices in life? I'd have to say primarily the latter for the vast majority of cases.
.

I would say that a lot of middle class cannot afford to put away much more than that. That would be close to a 50 percent saving rate for a couple making 100k and a 33 percent saving rate for a couple making $150000 k a year .People who make more than that may be able to save more,but I think when you get to the $150,000 k range your considered wealthy. I don't think we should design a tax system based on everyone following the frugal life style.

The point I was trying to make was that  the 401k and Ira benefits alone provide enough opportunities for the middle class to save for a lavish retirement. Capital gains will not impact the TYPICAL middle class retiree who is drawing income from Roth and traditional retirement plans. I would say that favorable capital gain rates do not help the middle class to an extent that helps them climb out of poverty or to a level that affects their quality of life(early retirees aside). The major exception being a home owner selling a home here and there.

When you have salaries taxed at a higher rate then investments there is inequality. Moreover income is a arbitrary thing to tax. The fairest tax system would tax wealthy people who generate their wealth from investments at a rate that is at least as high as the income tax of a middle class family. The 1 percent are not taxed fairly because they are only taxed on a the income component of their wealth generation, which is often the smallest component of their wealth building tools. In the meantime billions of dollars are sitting in investments compounding. At some point the heirs of these people  will be able to buy and own most everything.
Title: Re: FairTax-- Flat Tax Comments
Post by: tjalexander on August 13, 2015, 08:17:46 AM
.
I bet if I were born in the projects from a couple of drug addict parents the odds of me doing what I do for a living would be significantly lower.
So yes, as I said in an earlier post, taxes should definitely be a mean to redistribute wealth across society.

2- transferring 1000$ from a person who would keep them in a bank account and giving them to someone who would immediately spend them to meet basic needs would actually help the economy.
On The Price Of Inequality, Stiglitz argues that a very unbalanced distribution of wealth within a Country is actually harmful for the economy, mainly because 1- the same money if kept by someone who doesn't need it at all would not be spent and thus reintroduced in the economy and 2- the hidden costs of poverty (health, police, etc).
Great, I just gave you $1000 and now you will do drugs with it (since you were born to drug addict parents).
Title: Re: FairTax-- Flat Tax Comments
Post by: Seppia on August 13, 2015, 08:56:20 AM

.
I bet if I were born in the projects from a couple of drug addict parents the odds of me doing what I do for a living would be significantly lower.
So yes, as I said in an earlier post, taxes should definitely be a mean to redistribute wealth across society.

2- transferring 1000$ from a person who would keep them in a bank account and giving them to someone who would immediately spend them to meet basic needs would actually help the economy.
On The Price Of Inequality, Stiglitz argues that a very unbalanced distribution of wealth within a Country is actually harmful for the economy, mainly because 1- the same money if kept by someone who doesn't need it at all would not be spent and thus reintroduced in the economy and 2- the hidden costs of poverty (health, police, etc).
Great, I just gave you $1000 and now you will do drugs with it (since you were born to drug addict parents).

This is probably one of the stupidest comments I have read in my life.
The $1000 in taxes serve (for example) the purpose of paying schools, so that the kid of drug addict parents gets an education and hopefully escapes the negative spiral.
Title: Re: FairTax-- Flat Tax Comments
Post by: Jeremy E. on August 13, 2015, 01:24:14 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.
$8 billion Ohio deficit***
Title: Re: FairTax-- Flat Tax Comments
Post by: wienerdog on August 13, 2015, 07:28:24 PM

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

Remember this was done for nothing more than politics and this was hardly true. Don't fall for politics as they never speak the truth.  They only want to to get people to act on emotion.  If a politician is showing you numbers... they are only showing you the numbers they want you to see.  Why didn't he include the $1.6 billion he paid in taxes as 34% stake holder in Berkshire?  If you want to take it a step farther he also paid ~$400 million for his employee share of FICA that he as company owner has to match.   In reality he pays 10 to 15 percentage points more of his income in taxes than his employees or secretary.

Just wondering why you think the government can do better with all that money he pays in taxes than Warren can himself?  I would rather see him inject that capital into the real economy that is going to create jobs with something like Precision Castparts.  People like Warren create jobs with their money not the government that takes the money.  In 2010 he also donated $1.9 billion to charities. 

“The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of Socialism is the equal sharing of miseries.”  Winston Churchill
Title: Re: FairTax-- Flat Tax Comments
Post by: matchewed on August 13, 2015, 07:33:48 PM

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

Remember this was done for nothing more than politics and this was hardly true. Don't fall for politics as they never speak the truth.  They only want to to get people to act on emotion.  If a politician is showing you numbers... they are only showing you the numbers they want you to see.  Why didn't he include the $1.6 billion he paid in taxes as 34% stake holder in Berkshire?  If you want to take it a step farther he also paid ~$400 million for his employee share of FICA that he as company owner has to match.   In reality he pays 10 to 15 percentage points more of his income in taxes than his employees or secretary.

Just wondering why you think the government can do better with all that money he pays in taxes than Warren can himself?  I would rather see him inject that capital into the real economy that is going to create jobs with something like Precision Castparts.  People like Warren create jobs with their money not the government that takes the money.  In 2010 he also donated $1.9 billion to charities. 

“The inherent vice of capitalism is the unequal sharing of blessings. The inherent virtue of Socialism is the equal sharing of miseries.”  Winston Churchill

Because Buffett is not the same entity as Berkshire Hathaway...
Title: Re: FairTax-- Flat Tax Comments
Post by: Telecaster on August 13, 2015, 11:20:01 PM
Just wondering why you think the government can do better with all that money he pays in taxes than Warren can himself?  I would rather see him inject that capital into the real economy that is going to create jobs with something like Precision Castparts.  People like Warren create jobs with their money not the government that takes the money.  In 2010 he also donated $1.9 billion to charities. 

And note that the guy who is creating jobs and donating to charities disagrees with you. 
Title: Re: FairTax-- Flat Tax Comments
Post by: Seppia on August 13, 2015, 11:35:57 PM
Additional point: if everybody were like Buffet I would indeed lower taxes.
The guy is out there to create real value (not speculate) and has pledged to give back something around 99% of his net worth when he dies.
He will eventually redistribute much more than the most punitive tax system would ever do.
Issue is: there's very few people like him, on every possible level.
Title: Re: FairTax-- Flat Tax Comments
Post by: wienerdog on August 14, 2015, 08:57:13 AM

And note that the guy who is creating jobs and donating to charities disagrees with you.

You should study American politics a little more.  They all do scratch my back and I'll scratch yours.  Buffet buying buying Burlington Northern for $34 billion at the time he did was no fluke.
Title: Re: FairTax-- Flat Tax Comments
Post by: BTDretire on August 14, 2015, 09:55:19 AM
Seems like a dangerous way to go about it.
We could tax capital gains above $100000 per year 90% and then say "hey they could get by anyways, do they really need the mega mansion in the hamptons?"

 Hey, my daddy and his coworkers built that house in the Hamptons!
 You want to take away my daddy's middleclass income?
Title: FairTax-- Flat Tax Comments
Post by: Seppia on August 14, 2015, 11:52:36 AM
Seems like a dangerous way to go about it.
We could tax capital gains above $100000 per year 90% and then say "hey they could get by anyways, do they really need the mega mansion in the hamptons?"

 Hey, my daddy and his coworkers built that house in the Hamptons!
 You want to take away my daddy's middleclass income?

Mine was clearly a hyperbole.
As already pointed out in other threads though, the argument "taxes de-incentivize consumption and/or additional worked hours" is pretty obvious, but it's clearly the wrong way to look at it.
OBVIOUSLY people would spend more if they paid zero taxes.
Thing is, taxes are needed for stuff that's kind of fundamental for many things, including a flourishing economy (example: we all pay zero taxes but since the government has no money they do not build roads, so we can't transport the goods farther than 20 miles from production site), a safe Country (police, which by the way is kinda needed also for a good economy, ask people in mafia states like Kosovo how they're doing) etc.

So again "hey if we lifted taxes people would have more to spend" isn't really a compelling argument per se
Title: Re: FairTax-- Flat Tax Comments
Post by: Jeremy E. on August 14, 2015, 12:00:33 PM
Seems like a dangerous way to go about it.
We could tax capital gains above $100000 per year 90% and then say "hey they could get by anyways, do they really need the mega mansion in the hamptons?"

 Hey, my daddy and his coworkers built that house in the Hamptons!
 You want to take away my daddy's middleclass income?

Mine was clearly a hyperbole.
As already pointed out in other threads though, the argument "taxes de-incentivize consumption and/or additional worked hours" is pretty obvious, but it's clearly the wrong way to look at it.
OBVIOUSLY people would spend more if they paid zero taxes.
Thing is, taxes are needed for stuff that's kind of fundamental for many things, including a flourishing economy (example: we all pay zero taxes but since the government has no money they do not build roads, so we can't transport the goods farther than 20 miles from production site), a safe Country (police, which by the way is kinda needed also for a good economy, ask people in mafia states like Kosovo how they're doing) etc.

So again "hey if we lifted taxes people would have more to spend" isn't really a compelling argument per se
Yes roads, schools, military (not as big as what we have), police, libraries, etc. are necessary. But Social Security (of course you can't stop it immediately, but you can phase it out over time), Obamacare, a HUGE military, subsidizing companies, bailouts, most government workers (we do need a few) and many other things are not. We could decrease are taxes while also spending so much less that the government could have a balanced budget and stop going into debt. States can then have their own entitlements if they choose, that way if someone wants to be a socialist they can move to california and have the state charge the crap out of you, or you can move to a capitalist state and have the bare minimum covered and pay for everything yourself.
Title: Re: FairTax-- Flat Tax Comments
Post by: Seppia on August 14, 2015, 12:04:07 PM
I'll just point out that the U.S. is one of the civilized Countries with the lowest amount of taxes around.
Title: Re: FairTax-- Flat Tax Comments
Post by: Jeremy E. on August 14, 2015, 12:14:51 PM
I'll just point out that the U.S. is one of the civilized Countries with the lowest amount of taxes around.
Yep, I think that's the exact reason MMM came here, less taxes = more money in his pocket, and he can provide for himself the socialist crap that the government of canada supplies for him for cheaper than the taxes. Same with most entitlements in the US for most people I'd say.
Title: Re: FairTax-- Flat Tax Comments
Post by: Seppia on August 14, 2015, 12:41:28 PM
?
It's exactly what I was saying.
I wouldn't complain about the tax level in the U.S., it's already super low.
I'm not the one complaining about how high taxes are here, because they are obviously not
Title: Re: FairTax-- Flat Tax Comments
Post by: MoonShadow on August 14, 2015, 01:21:58 PM

Yes roads, schools, military (not as big as what we have)

As far as actual numbers of people, our active military is about as small as it has ever been since WW2.  Still the second largest standing army on Earth, but still...
Title: Re: FairTax-- Flat Tax Comments
Post by: Jeremy E. on August 14, 2015, 01:38:07 PM

Yes roads, schools, military (not as big as what we have)

As far as actual numbers of people, our active military is about as small as it has ever been since WW2.  Still the second largest standing army on Earth, but still...
Okay? Regardless, in my opinion, are budget is bigger than it should be.
Title: Re: FairTax-- Flat Tax Comments
Post by: MoonShadow on August 14, 2015, 02:02:24 PM

Yes roads, schools, military (not as big as what we have)

As far as actual numbers of people, our active military is about as small as it has ever been since WW2.  Still the second largest standing army on Earth, but still...
Okay? Regardless, in my opinion, are budget is bigger than it should be.

Oh, I agree with that.
Title: Re: FairTax-- Flat Tax Comments
Post by: wienerdog on August 14, 2015, 03:24:56 PM

I wouldn't complain about the tax level in the U.S., it's already super low.


Not corporate before all the deductions.  That is why GE employs 1000 "specialist" (read former government IRS employees) to work on their tax bill to make it competitive with the rest of the free world.  It takes lobbyists to get deductions and specialist to weed through the US tax code.

http://www.reuters.com/article/2015/08/14/us-usa-tax-c-corp-idUSKCN0QI2LK20150814

Edit: employees to employs
Title: Re: FairTax-- Flat Tax Comments
Post by: Cathy on August 14, 2015, 10:13:14 PM
...Yep, I think that's the exact reason MMM came here, less taxes = more money in his pocket, and he can provide for himself the socialist crap that the government of canada supplies for him for cheaper than the taxes. ...

This was true when MMM left Canada, but shortly after, the federal government and every province reformed their various tax laws. For most of the last decade, assuming one's income is sufficiently high, the total tax burden in the province of Alberta has been lower than anywhere in the US, even states with no income tax. Most other provinces are competitive with the US, and some are lower at various income levels.

A big part of the reason that healthcare is relatively cheap in Canada is that every province has established a regime of price controls for medical services within that province. In Alberta, every physician is deemed to opt into a collective bargaining price scheme, unless they act to opt out within strict timelines. Alberta Health Care Insurance Act, RSA 2000, c A-20 ("AHCIA"), § 8(1). Physicians who have opted in cannot charge more than the government-prescribed prices. AHCIA § 9(1). For emergency services, a physician can only charge the government-negotiated prices even if the physician has otherwise opted out of the plan. AHCIA § 10. Physicians who have opted out must advise prospective patients, prior to providing any services, that the services will not be covered by insurance and that the patient must pay out of pocket. AHCIA § 15(1). A private insurance company cannot offer coverage that would cover costs at a physician who has opted out of the government-negotiated prices. AHCIA § 26(2).

I think it's fair to call the above scheme "socialist", but the key observation is that it works by keeping prices down through a regime of government intervention. As such, the actual cost of the system is low, and it does not require high taxes to sustain. As mentioned, Alberta has had lower taxes than anywhere in the US for the last decade, for people whose income exceeds a certain threshold.

That all said, the US is still arguably a better place to accumulate money than Canada because tax rates are not the only relevant variable.
Title: Re: FairTax-- Flat Tax Comments
Post by: BTDretire on August 15, 2015, 12:35:28 PM
Seems like a dangerous way to go about it.
We could tax capital gains above $100000 per year 90% and then say "hey they could get by anyways, do they really need the mega mansion in the hamptons?"

 Hey, my daddy and his coworkers built that house in the Hamptons!
 You want to take away my daddy's middleclass income?

Mine was clearly a hyperbole.

OK, my daddy didn't really build the mansion either, so mine also was hyperbole.
But he was a carpenter!
Title: Re: FairTax-- Flat Tax Comments
Post by: clarkevii on August 16, 2015, 07:35:20 PM
I for one LOVE the tax code in this country. My wife and I will make +110k this year. We will pay about 3.5% in taxes. We both contribute heavily to a 403b and 457. We do not even have to contribute to social security and no state income taxes either!

Our tax code rewards middle class savers and punishes consumers. IMOP that is exactly how it should be. You basically choose your tax rate. How can it get any better than this?
Title: Re: FairTax-- Flat Tax Comments
Post by: nobodyspecial on August 16, 2015, 08:32:29 PM
OK, my daddy didn't really build the mansion either,
But he was a carpenter!
It thought it was the father's house that had many mansions - the son was a carpenter.

See I didn't sleep through every sunday.
Title: Re: FairTax-- Flat Tax Comments
Post by: okonumiyaki on August 16, 2015, 11:01:45 PM
I live & work in HK, that has a very simple flat tax rate (and no tax on dividends or capital gains)

But - it is a city, not a country, and there is massive subsididy for anyone below median income (50% of HK population live in govt housing, and by law the maximum rent is 10% of median family income, so about 200 USD a month)  Even then, we are starting to see real cracks in society (the occupy movement)  For the first generation immigrants, yes, everyone started with zero.  But after couple of generations, a few mega rich families now have the city sewn up, and are pulling up the ladder behind them.
Title: Re: FairTax-- Flat Tax Comments
Post by: MoonShadow on August 17, 2015, 12:30:28 PM
I live & work in HK, that has a very simple flat tax rate (and no tax on dividends or capital gains)

But - it is a city, not a country, and there is massive subsididy for anyone below median income (50% of HK population live in govt housing, and by law the maximum rent is 10% of median family income, so about 200 USD a month) Even then, we are starting to see real cracks in society (the occupy movement)  For the first generation immigrants, yes, everyone started with zero.  But after couple of generations, a few mega rich families now have the city sewn up, and are pulling up the ladder behind them.

Do dividends or capital gains count at income for the subsidy?   Or can a rich HK resident who has only dividends and/or capital gains get that subsidy also?
Title: Re: FairTax-- Flat Tax Comments
Post by: Jack on August 17, 2015, 12:39:15 PM
I for one LOVE the tax code in this country. My wife and I will make +110k this year. We will pay about 3.5% in taxes. We both contribute heavily to a 403b and 457. We do not even have to contribute to social security and no state income taxes either!

Our tax code rewards middle class savers and punishes consumers. IMOP that is exactly how it should be. You basically choose your tax rate. How can it get any better than this?

First of all, at $110K household income you are above the 80th percentile and thus not actually "middle class." (I think a lot of people on this site fail to realize just how poor the real American middle class actually is: the 20th percentile -- the dividing line between middle class and "the poor" -- is just barely above $25K.)

Second, you can't assume everyone even at your income level is as lucky as you when it comes to taxes. My wife and I might end up making a similar amount of money this year (it's too uncertain to tell yet), but while you have two reasonably-good jobs with excellent benefits (allowing you to defer $83000), our income comes from one good job (mine) and a patchwork of relatively crap jobs (hers) and only I get benefits. That means we're only eligible to defer one 401K, one HSA, and our IRAs for a best-case total of $35650. That's a difference of several thousand dollars in taxes on the same gross income.
Title: Re: FairTax-- Flat Tax Comments
Post by: nobodyspecial on August 17, 2015, 03:27:33 PM
If middle class in America is $25K - who are the working class?
Title: Re: FairTax-- Flat Tax Comments
Post by: MoonShadow on August 17, 2015, 03:49:17 PM
If middle class in America is $25K - who are the working class?

The "working class" is the three middle quintiles.
Title: Re: FairTax-- Flat Tax Comments
Post by: wenchsenior on August 18, 2015, 09:22:33 AM
I for one LOVE the tax code in this country. My wife and I will make +110k this year. We will pay about 3.5% in taxes. We both contribute heavily to a 403b and 457. We do not even have to contribute to social security and no state income taxes either!

Our tax code rewards middle class savers and punishes consumers. IMOP that is exactly how it should be. You basically choose your tax rate. How can it get any better than this?

First of all, at $110K household income you are above the 80th percentile and thus not actually "middle class." (I think a lot of people on this site fail to realize just how poor the real American middle class actually is: the 20th percentile -- the dividing line between middle class and "the poor" -- is just barely above $25K.)



I think this is a common confusion. I think anything above triple digit net income and you are into uppermost 20% of American households. I think because we hang out mostly with others in a similar income bracket, people lose perspective on what is average (I've several times heard my father call himself middle class with a net worth of 2.5 million. I assume this is because he didn't grow up around actual middle class people, but upper middle to upper, and he doesn't know what median actually is like).
Title: Re: FairTax-- Flat Tax Comments
Post by: zephyr911 on August 31, 2015, 11:55:58 AM
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.
I'm with you, though.
What's crazy is that when people try to educate others about that history, they're accused of making threats.
Title: Re: FairTax-- Flat Tax Comments
Post by: WYOGO on September 03, 2015, 11:09:38 AM
I for one LOVE the tax code in this country. My wife and I will make +110k this year. We will pay about 3.5% in taxes. We both contribute heavily to a 403b and 457. We do not even have to contribute to social security and no state income taxes either!

Our tax code rewards middle class savers and punishes consumers. IMOP that is exactly how it should be. You basically choose your tax rate. How can it get any better than this?

First of all, at $110K household income you are above the 80th percentile and thus not actually "middle class." (I think a lot of people on this site fail to realize just how poor the real American middle class actually is: the 20th percentile -- the dividing line between middle class and "the poor" -- is just barely above $25K.)

Second, you can't assume everyone even at your income level is as lucky as you when it comes to taxes. My wife and I might end up making a similar amount of money this year (it's too uncertain to tell yet), but while you have two reasonably-good jobs with excellent benefits (allowing you to defer $83000), our income comes from one good job (mine) and a patchwork of relatively crap jobs (hers) and only I get benefits. That means we're only eligible to defer one 401K, one HSA, and our IRAs for a best-case total of $35650. That's a difference of several thousand dollars in taxes on the same gross income.

He has a valid point though, we have options in the US. We can tailor both our lifestyles and locations to shift the heavy tax burden away. Optimization of taxes is HUGE. It is amazing the difference between the low burden/high burden states.

 AK, SD, WY, TX vs NJ, WI, NY, CONN

There is a substantial difference.