FairTax-- Flat Tax Comments

[wenchsenior]

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).

[zephyr911]

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.

[WYOGO]

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.