As for the tax thing, I think the current system is better than that proposed one.
Currently, tax varies from state to state, but is approximately 7-8%, rarely more than 10%, if ever.
For Social Security and Medicare to be paid for (as the site says), tax would have to be raised by (I don't have a check nearby, but I think it's about 10%. Let's assume this.)
So now the tax rate is at about 20% on consumer goods, for social, medicare and state funding (essentially). Assume that foreign policy is shelling out, say, $200B a year. That's $100 per person. For the Gov't to function properly with this, people would have to spend $500 above the poverty line, or they would simply raise the tax rate to say 25% and only need $400 to run.
It raises questions: Would food be taxed? Do we keep property taxes, or is it just income taxes?
Now let's look at incentives. There is incentive to spend at or below the poverty line. There is incentive to save money instead of spending it. There is incentive to purchase less.
This last one is the big one. Companies will go out of business, because they can't make enough profit now that people aren't buying their product.
Eventually, yes, the market will stabilize, but the price will be higher, and when wages have to increase to compensate for the rise in prices, more companies will go out of business.
Say that after a while, people get used to the idea and don't mind paying the 20% tax anymore. People will still think twice about buying expensive luxury goods, since they now cost 120% of what they did previously. The very rich will not necessarily notice this. The somewhat rich though...
Currently, there is about %50 tax on the highest income bracket. This is regardless of if they spend that much or no. To get this cash back, people in the high brackets would have to spend more than twice what they earn!
That's the fatal flaw to the plan. The country would have to severely reduce spending to compensate for such a plan. The budget would be balanced, but at the cost of our world power being removed.
Or, say the tax rate increases so that problem doesn't happen. Now people are even less inclined to buy things, less money is going to the government, and they either raise taxes or fail the people.
Actually you've forgotten that the price of goods has the providing company's tax included in the wholesale proce to the store, which then adds it's markup which also included the store's tax.
Let's say that you are Company A, you understand that a certain percentage of your money will go to the government for taxes. so to compensate you raise the price of your basketballs from $20 to $30 to compansate.
now, the fair tax plan,
There is no longer the NEED to raise the prices of your goods to be profitable. that $20 basketball can stay there.
Now 20% of $20 is a tax of $4 dollars. not much.
You didn't read all of that website either, it mentions all of this as well as taxing food (and the monthly checks back from the government to offset the food taxes)
Also, consider this...
The current income tax rate is right around 33%. (unless you make 150,000/y in which case it jumps to the 50% range)
So right now the average Joe is paying 33% of his total income in tax. (with property tax it can be much much higher) A Plan is being offered that will lower that to 20... shoot, let's say 25% but only on what he buys (meaning his money in savings is still in savings and not taxed)
I see a total CUT of 8% there.
So now knowing that the cost of goods would be lower since the cost of doing business would be lower and the price an employer pays the government per employee will be lower, they have PLENTY of room to lower costs to compensate for this.
I know there's a lot of political rhetoric out there from the right and left but think about THEIR political motivation.
Without a crummy tax system they'd have nothing to scare voters with (on both sides of the aisle) and they might have to run on actual social issues.
So you're saying that currently, company A needs to raise its prices to compensate for taxes? Alright, I see that.
What about in the fair tax plan, where the company is now paying a 20% tax on all the things they need for production? Doesn't this amount to the same effect, or possibly even more of one? (FAQ1 answers this, and gives a STRONG incentive for used goods.)
I could see the government giving checks back for food at the end of each month, but it would be much more efficient to simply not tax food at all, rather than tax it and pay the tax back. (I still stick to this after FAQ4)
Then, for the Average Joe argument, there is a tax cut, yes, but one cannot spend more than 100% of what one earns (legally or illegally.) 33% on all income gets more than 25% of say, 80% income (20% savings, assume.) It's more than 25% of all income too. The discrepancy is even greater for the higher bracket.
The tax cut would hurt the poor more than the middle or upper classes, and give them incentive to stay below the poverty line.
The upper and middle class are paying less tax, certainly. But this means that the government is getting less revenue. They'd have to scale back programs, foreign policy issues, domestic policy things, and limit spending in other areas (agriculture, which has its own problems, education, roads/transportation, etc.) to maintain a balanced budget.
Alright, FAQ 6 asserts that this tax would cover all current government spendings. Though I doubt this, I am not looking at the evidence currently.
The site is a little bit more technical than I care to delve into at 1:50am, but my biggest qualm is now used goods, and what would stop the market from degenerating into a big bazaar, where used goods are the norm? Yes, to become a used good, it must at one point be new, but the incentive is to go to EBay and see what can be gotten used (or other used goods/thrift stores).
Maybe when I'm more able to look at the stuff, and counters to it, I'll be able to make a more informed decision, but I'm still sticking with the current system.
I understand how you say that the Government's intake of cash would appear to be lower however, when it is taken into account that the prices of goods would stabilize and thus the prices wouldn't actually be that much higher than what they are currently.
That said, if you have more money to spend (even if it IS taxed at the register) you'll spend it. I know that sounds like a gross generalization but look at past spending trends and you'll see my point.
Let's not forget that the Government's annual contractors the IRS would no longer be needed in the regard that they currently are.
Lets also explore the options of new international business.... where will you open that new production plant? in America where you're not taxed on your employees and can negotiate a wage without getting advanced math involved or in.... say, Germany?
Which brings up another point with businesses. without the need for payroll deductions their HR/Accounting needs are sliced deeply (I say HR/Accounting even though it IS technically Accounting... but some HR dept.s do payroll for some reason)
As for hurting the poor I'm not sure I understand how the upper and middle classes are paying less tax whereas the poor are paying more taxes.
If everyone is paying the same tax rate on purchases, this nearly removed the "poor" from any tax liabillity at all since their consumption of goods is far below that of any other group.
Let's say that a poor family has a monthly income of $1000. under the current system that paycheck after taxes will be $667 which they'll spend every dime of just to get by (trust me, I've been there myself) leaving no savings or other means to better their lives. (remember that the definition of poor is not the poverty line.)
Okay, Same scenario but that person now takes home $1000 and buys the same $670 worth of goods. Their tax is $134 on purchased goods for a total spending of $804. meaning that they can stash nearly $200 in savings.
And then there's that monthly rebate check on consumed goods.
Now I like this idea because the tax money to the government will work by gathering an interest rate.
Your company does this as well if you get paid bi-monthly or every two weeks. that extra week YOUR money sits in THEIR bank account it accrues interest and makes money for the company.
I like the way you think and I am enjoying our logical conversation as well.
I just don't see in what ways the poor would be unfairly left out because of this tax cut... but I am open to new ideas, perhaps I've misunderstood something or I'm not seeing what you mean.
I think that for the poor, the poverty line didn't cross my line of thought earlier. Had the stipulation not been there that "consumption below the poverty line isn't taxed", the poor currently pay a lot less in taxes than our average joes, so the 30% at register tax (according to the site) would effectively make them pay more taxes than previously. Since it is there though, there is some incentive to save above the poverty line. (not consume above the poverty line). Savings wouldn't be taxed.
As to your example, $670 would be taxed at a 30% rate. This puts the total tax sum at $201. They pay a grand total of $871. There is still a savings of $129, but not as high as 200.
Now, let's assume that they do spend all $1000 they earn (in taxes and goods spent with the fair tax proposition). The government receives $230 (23% of total is the suggestion.) The government would lose $100 by the Fair Tax. Where would this be picked up?
Let's look at somebody earning 1,000,000 dollars. Assume they buy $1,000,000. They pay 230,000 in taxes. This is much less than the ~500,000 the government would get from them under the current system. Let's assume the loss of revenue for the government is 250,000 for each millionaire.
Where will this loss be picked up? Middle class?
Let's look at the upper echelon (150,000). Currently, they pay 33% (according to you or the site, I forget which.) So the government gets $50,000 from them, currently.
With the fair tax, the government can only get .23(150,000) or 34500. We can do this for every tax bracket, and see the government loses out on all of them.
Note that these costs are all BEFORE the deduction from the poverty line, and reimbursement for food and medicine. So the government is certainly receiving less money. Nobody can spend more than 100% of what they earn/have.
Now, this would be the only domestic tax the government has. (property tax may exist still, not sure, but it would either have to be jacked or not be enough.) Foreign taxes (tariffs, etc.) would have to be enacted, leading to less trade.
The IRS would become the Internal Reimbursement Service, and everyone would switch from tax code to making sure people got their reimbursements, and their reimbursements are fair. Little to no change there.
I'll conceed that it may be as high as 30, but I think we can agree that the savings of $129 is a lot higher than the savings of $0 and the tax rebate check hasn't been factored in yet either.
That $100 will be picked up in a number of areas. By cutting newly outdated offices such as the IRS (no longer needed) by the interest earned on the money paid, by more people having jobs (and thus a higher national consumption rate)
You are absolutely correct that a flat tax system would lessen the amount of money the government takes in from the higher wage earners in the nation but in reality, there are far more people in the middle and lower classes. Millionaires are more slim and those who are multi-millionaires are even HARDER to come by.
Also, think about the number of rich people who (legally or not) hide their money in tax shelters and never pay anything in taxes currently. with a consumption tax they would HAVE to pay their taxes just like everyone else.
With that in mind, who buys lavish posessions? the average joe or the guy with a $150,000 income and a porshe?
Now that said, the money will not only be recouped, but it will cause a windfall... it is estimated that nearly 20% of those making $150,000 per year either have cheated, or have found a legal way to not pay anything in 2003 taxes.
That's more than enough money for the overall 3% loss of revenue.
There may be a reduction in trade but there would be an increase of those trading companies, coming to the US to manufacture creating more jobs, and cheaper goods.
The reimbursements are a flat rate based on food consumption studies per person per age group.
All you do is let the government know your age, the age of your spouce/partner and the ages of your children(if any) and your check comes automatically.
There's a lot more information to the reimbursement but like you said, that site has a TON of information on it.
Currently, tax varies from state to state, but is approximately 7-8%, rarely more than 10%, if ever.
For Social Security and Medicare to be paid for (as the site says), tax would have to be raised by (I don't have a check nearby, but I think it's about 10%. Let's assume this.)
So now the tax rate is at about 20% on consumer goods, for social, medicare and state funding (essentially). Assume that foreign policy is shelling out, say, $200B a year. That's $100 per person. For the Gov't to function properly with this, people would have to spend $500 above the poverty line, or they would simply raise the tax rate to say 25% and only need $400 to run.
It raises questions: Would food be taxed? Do we keep property taxes, or is it just income taxes?
Now let's look at incentives. There is incentive to spend at or below the poverty line. There is incentive to save money instead of spending it. There is incentive to purchase less.
This last one is the big one. Companies will go out of business, because they can't make enough profit now that people aren't buying their product.
Eventually, yes, the market will stabilize, but the price will be higher, and when wages have to increase to compensate for the rise in prices, more companies will go out of business.
Say that after a while, people get used to the idea and don't mind paying the 20% tax anymore. People will still think twice about buying expensive luxury goods, since they now cost 120% of what they did previously. The very rich will not necessarily notice this. The somewhat rich though...
Currently, there is about %50 tax on the highest income bracket. This is regardless of if they spend that much or no. To get this cash back, people in the high brackets would have to spend more than twice what they earn!
That's the fatal flaw to the plan. The country would have to severely reduce spending to compensate for such a plan. The budget would be balanced, but at the cost of our world power being removed.
Or, say the tax rate increases so that problem doesn't happen. Now people are even less inclined to buy things, less money is going to the government, and they either raise taxes or fail the people.
It's a no win situation, short or long term.
This is the longest comment ever.
Reply
Let's say that you are Company A, you understand that a certain percentage of your money will go to the government for taxes. so to compensate you raise the price of your basketballs from $20 to $30 to compansate.
now, the fair tax plan,
There is no longer the NEED to raise the prices of your goods to be profitable. that $20 basketball can stay there.
Now 20% of $20 is a tax of $4 dollars. not much.
You didn't read all of that website either, it mentions all of this as well as taxing food (and the monthly checks back from the government to offset the food taxes)
Also, consider this...
The current income tax rate is right around 33%. (unless you make 150,000/y in which case it jumps to the 50% range)
So right now the average Joe is paying 33% of his total income in tax. (with property tax it can be much much higher)
A Plan is being offered that will lower that to 20... shoot, let's say 25% but only on what he buys (meaning his money in savings is still in savings and not taxed)
I see a total CUT of 8% there.
So now knowing that the cost of goods would be lower since the cost of doing business would be lower and the price an employer pays the government per employee will be lower, they have PLENTY of room to lower costs to compensate for this.
I know there's a lot of political rhetoric out there from the right and left but think about THEIR political motivation.
Without a crummy tax system they'd have nothing to scare voters with (on both sides of the aisle) and they might have to run on actual social issues.
Reply
What about in the fair tax plan, where the company is now paying a 20% tax on all the things they need for production? Doesn't this amount to the same effect, or possibly even more of one? (FAQ1 answers this, and gives a STRONG incentive for used goods.)
I could see the government giving checks back for food at the end of each month, but it would be much more efficient to simply not tax food at all, rather than tax it and pay the tax back. (I still stick to this after FAQ4)
Then, for the Average Joe argument, there is a tax cut, yes, but one cannot spend more than 100% of what one earns (legally or illegally.) 33% on all income gets more than 25% of say, 80% income (20% savings, assume.) It's more than 25% of all income too. The discrepancy is even greater for the higher bracket.
The tax cut would hurt the poor more than the middle or upper classes, and give them incentive to stay below the poverty line.
The upper and middle class are paying less tax, certainly. But this means that the government is getting less revenue. They'd have to scale back programs, foreign policy issues, domestic policy things, and limit spending in other areas (agriculture, which has its own problems, education, roads/transportation, etc.) to maintain a balanced budget.
Alright, FAQ 6 asserts that this tax would cover all current government spendings. Though I doubt this, I am not looking at the evidence currently.
The site is a little bit more technical than I care to delve into at 1:50am, but my biggest qualm is now used goods, and what would stop the market from degenerating into a big bazaar, where used goods are the norm? Yes, to become a used good, it must at one point be new, but the incentive is to go to EBay and see what can be gotten used (or other used goods/thrift stores).
Maybe when I'm more able to look at the stuff, and counters to it, I'll be able to make a more informed decision, but I'm still sticking with the current system.
Reply
I understand how you say that the Government's intake of cash would appear to be lower however, when it is taken into account that the prices of goods would stabilize and thus the prices wouldn't actually be that much higher than what they are currently.
That said, if you have more money to spend (even if it IS taxed at the register) you'll spend it. I know that sounds like a gross generalization but look at past spending trends and you'll see my point.
Let's not forget that the Government's annual contractors the IRS would no longer be needed in the regard that they currently are.
Lets also explore the options of new international business.... where will you open that new production plant? in America where you're not taxed on your employees and can negotiate a wage without getting advanced math involved or in.... say, Germany?
Which brings up another point with businesses. without the need for payroll deductions their HR/Accounting needs are sliced deeply (I say HR/Accounting even though it IS technically Accounting... but some HR dept.s do payroll for some reason)
As for hurting the poor I'm not sure I understand how the upper and middle classes are paying less tax whereas the poor are paying more taxes.
If everyone is paying the same tax rate on purchases, this nearly removed the "poor" from any tax liabillity at all since their consumption of goods is far below that of any other group.
Let's say that a poor family has a monthly income of $1000. under the current system that paycheck after taxes will be $667 which they'll spend every dime of just to get by (trust me, I've been there myself) leaving no savings or other means to better their lives. (remember that the definition of poor is not the poverty line.)
Okay, Same scenario but that person now takes home $1000 and buys the same $670 worth of goods. Their tax is $134 on purchased goods for a total spending of $804. meaning that they can stash nearly $200 in savings.
And then there's that monthly rebate check on consumed goods.
Now I like this idea because the tax money to the government will work by gathering an interest rate.
Your company does this as well if you get paid bi-monthly or every two weeks. that extra week YOUR money sits in THEIR bank account it accrues interest and makes money for the company.
I like the way you think and I am enjoying our logical conversation as well.
I just don't see in what ways the poor would be unfairly left out because of this tax cut... but I am open to new ideas, perhaps I've misunderstood something or I'm not seeing what you mean.
Reply
As to your example, $670 would be taxed at a 30% rate. This puts the total tax sum at $201. They pay a grand total of $871. There is still a savings of $129, but not as high as 200.
Now, let's assume that they do spend all $1000 they earn (in taxes and goods spent with the fair tax proposition). The government receives $230 (23% of total is the suggestion.) The government would lose $100 by the Fair Tax. Where would this be picked up?
Let's look at somebody earning 1,000,000 dollars. Assume they buy $1,000,000. They pay 230,000 in taxes. This is much less than the ~500,000 the government would get from them under the current system. Let's assume the loss of revenue for the government is 250,000 for each millionaire.
Where will this loss be picked up? Middle class?
Let's look at the upper echelon (150,000). Currently, they pay 33% (according to you or the site, I forget which.) So the government gets $50,000 from them, currently.
With the fair tax, the government can only get .23(150,000) or 34500. We can do this for every tax bracket, and see the government loses out on all of them.
Note that these costs are all BEFORE the deduction from the poverty line, and reimbursement for food and medicine. So the government is certainly receiving less money. Nobody can spend more than 100% of what they earn/have.
Now, this would be the only domestic tax the government has. (property tax may exist still, not sure, but it would either have to be jacked or not be enough.) Foreign taxes (tariffs, etc.) would have to be enacted, leading to less trade.
The IRS would become the Internal Reimbursement Service, and everyone would switch from tax code to making sure people got their reimbursements, and their reimbursements are fair. Little to no change there.
So the government has to cut back, still.
I've got to go, but I'll be back.
Reply
That $100 will be picked up in a number of areas. By cutting newly outdated offices such as the IRS (no longer needed) by the interest earned on the money paid, by more people having jobs (and thus a higher national consumption rate)
You are absolutely correct that a flat tax system would lessen the amount of money the government takes in from the higher wage earners in the nation but in reality, there are far more people in the middle and lower classes. Millionaires are more slim and those who are multi-millionaires are even HARDER to come by.
Also, think about the number of rich people who (legally or not) hide their money in tax shelters and never pay anything in taxes currently. with a consumption tax they would HAVE to pay their taxes just like everyone else.
With that in mind, who buys lavish posessions? the average joe or the guy with a $150,000 income and a porshe?
Now that said, the money will not only be recouped, but it will cause a windfall... it is estimated that nearly 20% of those making $150,000 per year either have cheated, or have found a legal way to not pay anything in 2003 taxes.
That's more than enough money for the overall 3% loss of revenue.
There may be a reduction in trade but there would be an increase of those trading companies, coming to the US to manufacture creating more jobs, and cheaper goods.
The reimbursements are a flat rate based on food consumption studies per person per age group.
All you do is let the government know your age, the age of your spouce/partner and the ages of your children(if any) and your check comes automatically.
There's a lot more information to the reimbursement but like you said, that site has a TON of information on it.
Reply
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