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Demonizing Taxes, Heightening Inequality

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April 19, 2011 – Comments (59)

Yesterday was Tax Day in the US, and that's almost universally greeted with groans and complaints. That tax word's been so effectively demonized that it may be there's no coming back. Is it time for a new word?

Some research by Duke University's Dan Ariely suggests it might be.

Ariely's study showed that Americans actually want a more equitable society—in fact, they think they have one.  When asked to identify their homeland from a list of nations described only by their level of equality--a majority of those polled picked Sweden, thinking it was the US. When asked to create their ideal society, Democrats, Republicans, men and women, the rich and the poor all created a distribution of wealth that is much more equal than the one we've got.

All that "social mobility, low inequality" stuff--Americans love it. They just don't have it. In fact, social mobility here's been shrivelling, as the wealth gap's been opening up.

There are only a few ways to get that more equal distribution: government investment (benefits and services) corporate action (paying people more) or redistribution: taking from each according to their means, to help the whole.  We call that tax.

Yet according to Ariely, the very same people who expressed an ardent wish for an equal society have an highly averse reaction to the word tax.  Why, he wondered, recently, to National Public Radio.

It's not so hard to figure out. Day in day out, when you hear taxes mentioned, what's the context? Social citizenship? Tools of an equal society? Or is it rather all about how heavy the burden is, how overtaxed Americans are. The Taxman, the IRS--the first public workers our media teach us to hate.

There are taxes to hate--taxes that go to give a blank check to the military, or tax credits for corporations that export American jobs. But the truth is, taxes on the rich have done nothing but fall since the Reagan years. And inequality's only gotten bigger.

What's the money media's stake in all this? It's hardly hidden. Remember that GE tax refund for $3.2 billion? The co-owner of NBC and MSNBC isn't alone either. Time Warner and News Corp, owners of CNN and Fox, are also on a list of the biggest corporate tax avoiders.

When you hear that news story about how tax day is no fun, remember that you're actually paying more than the company behind the news. And remember who it was who taught you to hate taxes. And if you come up with a new word, let us know? - Laura Flanders

Best wishes,

Steven

59 Comments – Post Your Own

#1) On April 19, 2011 at 9:59 PM, ikkyu2 (99.13) wrote:

Well stated.

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#2) On April 20, 2011 at 1:58 AM, awallejr (83.85) wrote:

But the truth is, taxes on the rich have done nothing but fall since the Reagan years. And inequality's only gotten bigger

The rich get richer and the poor get poorer.  Sadly this tune has been sung before.

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#3) On April 20, 2011 at 8:31 AM, PeteysTired (< 20) wrote:

Instead of theft, why don't we strengthen our dollar and try to eliminate the bigget tax on the poor....inflation?

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#4) On April 20, 2011 at 8:35 AM, ChrisGraley (29.75) wrote:

The poor get poorer because of the structure of our tax system. Raise the taxes in the current system and you'll raise the poverty rate even if you redistribute a higher percentage of those taxes to the poor. The current tax system is designed to keep them poor.

Redesign the tax system to focus on non-regressive consumption taxes instead of productivity taxes and the poor would thrive.

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#5) On April 20, 2011 at 9:13 AM, SkepticalOx (99.45) wrote:

The poor get poorer because of the structure of our tax system. Raise the taxes in the current system and you'll raise the poverty rate even if you redistribute a higher percentage of those taxes to the poor. The current tax system is designed to keep them poor.

Could you explain this further? Moral and ethical arguments aside, how would raising the top marginal tax rate and using that on social programs for the poor make the poor, poorer?

 

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#6) On April 20, 2011 at 9:34 AM, catoismymotor (35.13) wrote:

In this country poor people are poor, most often, because of a cycle of bad habits/decisions. They keep themselves down. 

I don't like sounding like Monty Burns, but it is the truth as I see it.

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#7) On April 20, 2011 at 9:40 AM, SkepticalOx (99.45) wrote:

Cato... And none of this has anything to do with the fact that they are too poor to live in an area where they can't get a good education or good health care or are surrounded by crime?

The cycle? Luck has a hell of a lot to do with it. You're saying the opportunities afforded to a kid born into a millionaires family is the same as a kid who was born in a housing project in some shady neighborhood? No doubt some can make it out of those less fortunate conditions and make it big, but the playing field is tilted.

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#8) On April 20, 2011 at 9:43 AM, mtf00l (45.62) wrote:

SkepticalOx,

Agreed

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#9) On April 20, 2011 at 9:49 AM, ChrisGraley (29.75) wrote:

SkepticalOx, 

Our current tax system taxes productivity over consumption. This creates major hurdles for the poor.

1) A tax in productivity deters productivity. Businesses will set up in tax friendly nations and there will be fewer jobs to be had.

2) Taxing productivity reduces the incentive for the poor to find gainfull employment. Why work a 40 hour work week and have that money taxed when you can stay home all week and live off of government Assistance?

3) The increase in population on government assistance as a result of #2, leads to a decrease in benefits for people on government assistance.

4)  The stagnation of the poor leads to less demand for products and fewer opportunities for businesses to make profits.

A much better tax system would solely tax consumption. To avoid regression you would need to exclude basic necessities from being taxed. Corporate taxes are are aready paid by the consumer indirectly as it is without thought of regressivness. So instead of an Income and Corporate tax you would have a sales tax.

1) It allows the poor to acheive more by gainfull employment and leaving government assistence.

2) It discourages foolish spending and more saving and investing.

3) It allows our Corporations to be more competetive in foriegn markets which will create more jobs.

4) Since foriegn products bought domestically would have them same tax burden, it would transfer part of our tax burden to competing countries.

5) It puts our resource rich nation back on the path of being a net exporter instead of a net importer again. A more robust economy will will generate more tax dollars without increasing the tax burden. That tax money can be funneled to the poor.

There's a lot more to it than that SkepticalOx, but I'm at work right now so I had to put it into a nutshell.

 

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#10) On April 20, 2011 at 10:49 AM, catoismymotor (35.13) wrote:

Cato... And none of this has anything to do with the fact that they are too poor to live in an area where they can't get a good education or good health care or are surrounded by crime?

What can be done in this situation?

1) Sit in your own feces, lay down and die, continue to live in hell.

2) Find some situation you can live with (move in with a second family, split the rent in a better part of own) while you take the needed steps to improve your situation.

The cycle? Luck has a hell of a lot to do with it.

Luck? LUCK?! Do you call sacrifice and hard work luck? Do you call working 40 hours a week at job A, working 10 hours a week at job B and going to school at night in order to make a better life for you and your family luck? Do you call squeezing a family of four into a 600sf apartment for five years until you have enough money to put down on a house luck? Do you call working and saving most every dime while in high school while maintaining a GPA high enough to secure a scholarship for a college eduaction luck?

You're saying the opportunities afforded to a kid born into a millionaires family is the same as a kid who was born in a housing project in some shady neighborhood?

No. Social and political connections brought about by being born with a silver spoon is to the advantage of those born in wealth. They do give an early upper hand. But life is a contact sport. Those connections can be made and fostered by a person that grew up on the wrong side of the tracks. I would rather work with someone that achieved greatness on their own than received it as a graduation gift.

Two generations ago my grandfathers had a very different life. One grew up as a share cropper in North Carolina. He had a seventh grade education. At the age of twenty he and two of his brothers decided to scrape all the money together they could and start a business. They raised themselves up from dirty poor to rather well to do inside fifteen years by the sweat of their own brow and doing work nobody else wanted to. My other grandfather grew up poor in Atlanta, selling hot potatos to contruction workers from a wagon to help support his family, a total of ten ten kids. He graduated from high school. He and his father-in-law (third grade education) decided to start their own business in 1935. It was tough going for a few years but they made it. It did pretty well.

All that was accomplished in a era before any kind of social safety net, in a region that was largly marginalized or ignored by the rest of the country. Both sides of my family started out poor and pulled themselves out of it. Don't tell me it can't be done without luck. Luck is when chance meets with a prepared mind. Luck is manifested by hard work.

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#11) On April 20, 2011 at 12:08 PM, Melaschasm (54.49) wrote:

I don't need to spend thousands of dollars on a poll to know that the vast majority of americans want poor people to acheive financial success.

However, just because people want the poor to enjoy a better life, does not equate to a desire for a soviet style command and control society, or some other simillar socialist dream.

 

I can not count the number of times I have seen people turn down jobs, or quit a new job because they are going to lose 5 times more government benefits than they are earning at an entry level job. 

If democrats would reform the welfare system to help poor people, instead of punishing those who get a job, a large portion of republican voters would be praising and electing democrats.  The worse the current system gets, the more anger and frustration taxpayers will feel and express. 

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#12) On April 20, 2011 at 12:10 PM, mhy729 (31.34) wrote:

I like ChrisGraley's ideas on taxing consumption and not productivity.  If you really must place a greater tax percentage on the rich, do it by taxing expensive luxury items at a higher rate.  I suppose that might introduce questions as to what constitutes a luxury item.  Same might be said re: what constitutes a basic necessity that should be tax-exempt.

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#13) On April 20, 2011 at 12:32 PM, ChrisGraley (29.75) wrote:

Thanks mhy729, but it will never happen.

There's a certain population that wants to punish the rich more than they want to help the poor and they don't care if the poor crumble in the process.

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#14) On April 20, 2011 at 12:49 PM, Jbay76 (< 20) wrote:

+1 for Cato on #10. 

I could add to that by talking about my grandfather, his sister or brother, all of whom made it through the Great Depression and the Cristero Revolution and did amazing in So Cal, but not enough time

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#15) On April 20, 2011 at 12:51 PM, Rehydrogenated (32.53) wrote:

So here is why our tax code doesnt change:

A) The poor do not vote 

B) The middle class, filled with people who had to pull themselves up by their own boot straps, struggles with a high tax bill and wants to punish both the rich and the poor

C)The rich always vote more money to themselves

It would be nice if the poor voted...

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#16) On April 20, 2011 at 1:41 PM, Imperial1964 (97.83) wrote:

#15, I'm not sure if it would be nice if the poor voted.  Would not each group in theory just vote to help themselves?  Would the poor not just vote for more handouts?

I grew up poor, so don't think I'm bashing on the poor.  Technically, I was middle-class, but dating back to the great depression, my father and grandfather have lived like my immigrant, depression-era great-grandfather--poor.  Thus, my grandpa retired at 57 and my dad will retire this year at 56, after buying a 75 acre farm!

Anyway, I've walked, rode my bike, or slept in my car when I didn't have money for gas to get to school or work.  I've gone without meals.  But I've made it now, solidly upper-middle class.

And people tell me how "lucky" I am and how I've "got it made".  I'm sorry, but these people are the same ones who haven't done anything to help themselves and sit at home wondering why everyone else--people who show up to work (sober, even) and work hard--have things they don't have.

Don't get me wrong, there are people who work hard and never seem to get anywhere and I feel for them, but they are a minority in my experience.  I tire quickly of people telling me how "lucky" I am that I made good decisions and worked my @$$ off to get where I am.


I hate siding with the rich, because many are greedy, but as far as managing government finances, I would (cautiously) rather have a wealthy business owner, who knows how to handle money, in charge.


I agree with ChrisGaley on the taxation.  Why would you want your tax structure to punish productive labor with government policy that favors overconsumption.  (Remember Bush's go-out-and-shop speech?)

We have a problem of overconsumption and savings being concentrated among the rich and creditor nations, while everyone else digs themselves into debt, and the government's solution is always for more debt for the purpose of consumption.

Why would it ever be government policy to punish productive labor and incentivize ignorance, bad decisions, and poverty?  Sometimes I feel like a real fool for working hard when so many of my friends get a free ride.  Sure I have nicer stuff and they are envious of that, but when I have to get up in the morning and go to my "real" job I am envious of them.

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#17) On April 20, 2011 at 1:50 PM, TDRH (99.65) wrote:

Only two thing you have to do in this life as an idividual, die and pay taxes.  

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#18) On April 20, 2011 at 2:33 PM, SkepticalOx (99.45) wrote:

#10 cato, did I ever say that where someone ends up in life at the end is all down to luck? No. Where you start in life does. You don't choose or work hard to be born into a rich family instead of a poor family. That is luck. Random chance. 

From your first comment, you made it seem that you think where someone ends up in life is entirely dependent on how hard they work or on their merit. That is total crock of crap. It's a mix of both.

The question here is how to build a society that rewards merit and that gives people who want a shot at it a chance, and not just maintain the status quo of the rich always being rich. I know there are problems with the way government runs, trust me.

And I know the value of hard work. You don't need to tell me your family's story to make your point. My father escaped a war and came here with no money and no knowledge of the local language and through sheer hard-work and determination and perseverence has several very successful businesses.

But you know, the fact that he had access to relatively affordable post-secondary education system gave him an opportunity to get a start. I'm sure he would have been able to get ahead regardless, but it helps. You cannot deny that.  

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#19) On April 20, 2011 at 2:38 PM, awallejr (83.85) wrote:

The problem with a consumption tax is that it really hits the poorer/middle class harder than the rich.  Odds are people earning under 40,000 will pretty much spend all that supporting themselves and their families.  Assuming that to be true, all their income would taxed. 

Odds are someone earning millions of dollars a year will not spend all that money.  Hence a good chunk would be tax sheltered.  And while that person making milllions will ultimately pay more than someone earning under 40k, the tax burden would be much harsher for that under 40k person.

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#20) On April 20, 2011 at 3:39 PM, Borbality (47.00) wrote:

yeah as soon as you passed a consumption tax, everyone would be going nuts saying how the poor spend a higher percentage of their money on consumables and the rich get off easy. I would agree it would be a much better incentive to take home more of what you are supposed to make at work, but it's tricky wording I think.

 

I definitely think there's plenty of room for tax reform though!

and I have to say I know how #16 feels, but at least in my case, those types I know will have their day of reckoning. Still annoying to see people not have to DO anything day to day for so long though, even if it will eventually crumble.  

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#21) On April 20, 2011 at 3:43 PM, ChrisGraley (29.75) wrote:

#19) On April 20, 2011 at 2:38 PM, awallejr (80.71) wrote:

The problem with a consumption tax is that it really hits the poorer/middle class harder than the rich.  Odds are people earning under 40,000 will pretty much spend all that supporting themselves and their families.  Assuming that to be true, all their income would taxed. 

 That would only be true if you allowed regressive taxation awallejr. By excluding basic necessities from the tax, you are lifting the burden of the poor. Yes the poor spend 100% of their income now. They spend it mostly on survival. Don't tax survival. Tax big screen TV's and Cable TV.

You want to help the poor? Don't tax someone twice as much for working 2 jobs to get ahead. Tax him if he's working that second job to get a big screen TV instead of to get food for his family. If you are truly poor, you should pay zero tax in my scenario. But in my scenario, you don't get penalized by trying to pull yourself up by your boot-straps. You are also rewarded for wise choices, hard work, and saving money.

I know it makes too much sense for people to agree, but I'll keep trying.

 

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#22) On April 20, 2011 at 3:55 PM, zymok (< 20) wrote:

#10 - 

Yes, Cato, you've pretty much expressed half the liberal mindset.  The other half is that you've got it, they want it, so they're going to take it.

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#23) On April 20, 2011 at 4:00 PM, catoismymotor (35.13) wrote:

From your first comment, you made it seem that you think where someone ends up in life is entirely dependent on how hard they work or on their merit. That is total crock of crap. It's a mix of both.

To which comment are you referring? #6 or the first one in #10? I agree, it is a mix of both. But a individual must be willing to put forth the effort to make it possible to take advantage of the moments in life that present a opportunity.

When I was talking about a "cycle" earlier I was eluding to the environment of drugs, alcohol, poverty, abuse, debt and being a Red Sox fan that can be handed down to the next generation. The problem as I see it, in part, with "bad neighborhoods" is kids see little that is positive. They see no way to progress that does not lead to jail. They don't look beyond the end of the block because they really don't believe there is anything better out there for them. If mom and dad didn't succeed with all that government assistance there must not be any hope for the new generation, right? That is their reality. That is their norm. That is what they fall back into as an adult and subject the next generation to. To use your words "That is a total crock of crap." that makes up the cycle.

So far as the public education system is concerned it is a failure when it comes to these under served communities. A FAILURE! So many private charities try to fill the void, make a positive impact. But the negativity that permeates these communities has been allowed to errode the morale of the teachers, administrators and school boards. All of them feel no need to put forth a good effort because they believe that the boys will end up in jail and the girls pregnant by age 15 so why bother to do a good job?! The kids spend seven hours a day at school. That should be a positive life changing experience. Instead often times school in the eyes of the parents is nothing more than a apathetic warehouse for their crotchfruit.

But you know, the fact that he had access to relatively affordable post-secondary education system gave him an opportunity to get a start.

I agree in full, with no reservations, that the cost of a college education has increased at a rate that is delusional. I can't imagine what the cost of a semester hour will be in 14 years when our first born makes his way to college. At the rate it is going I can't help but think some colleges will price themselves out of business. At the present my wife and I are attacking her student loan for post-grad. Ugh!

 

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#24) On April 20, 2011 at 4:04 PM, mhy729 (31.34) wrote:

Chris, thanks for pointing that out a second time.  I thought it was made quite clear in your original comment, and was about to respond to the complaints raised, but I see you've already done that.

Btw, are there any politicians/organizations/etc that support tax reform that would be similar to what you describe?

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#25) On April 20, 2011 at 4:12 PM, whereaminow (21.33) wrote:

In a free market, all incomes would move towards inequality, since ever person's contribution to the market (hence, the value of their labor) is unique - even people that perfom the same job function.

Wealth gaps between social classes, on the other hand, are exacerbated by the State. Corporations are created by a political act. Tax loopholes and taxation itself, the same.  Licensing and regulation further increases the cost of competition or restricts it completely. 

The problem isn't inequality. The problem is the State.  If you wish to reduce this wealth gap, you need to repeal legislation, repeal existing barriers to the creation of value adding production and competition, and existing barriers to wage movement (both up and down.)  Any new legislation enacted will only serve to further distort natural social cooperation, widen the wealth gap further.

I leave you with quotes and move on.

"The essence of the interventionist policy is to take from one group to give to another. It is confiscation and distribution." - Ludwig von Mises, Human Action, p.851

"Socialism and interventionism. Both have in common the goal of subordinating the individual unconditionally to the state." - LvM, Omnipotent Government, p. 44

"The effect of its interference is that people are prevented from using their knowledge and abilities, their labor and their material means of production in the way in which they would earn the highest returns and satisfy their needs as much as possible. Such interference makes people poorer and less satisfied." - LvM, Human Action, p. 736

"It is indeed one of the principal drawbacks of every kind of interventionism that it is so difficult to reverse the process." - LvM, Socialism, p. 440

David in Qatar

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#26) On April 20, 2011 at 4:15 PM, chk999 (99.97) wrote:

Devoish, I have a question. What is the largest percentage of someone's income that you think is reasonable to take as taxes?

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#27) On April 20, 2011 at 4:33 PM, ChrisGraley (29.75) wrote:

mhy729, as far as I know, no entity is proposing such a tax system right now. The next best thing though are the popular consumption tax movements of the Fair Tax and the Flat tax. Cato can give you an endless amount of info on the Fair tax if you are interested.

David, I also agree that the State is a barrier for the poor as well. Currently we function as a socalist corporatocracy. (maybe I shouldn't use the word function.)

I think that a change of tax systems would be a first step in that realization.

Once tax becomes truly voluntary and people have the choice of not being taxed by saving money, they will realize how little that they need the State.

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#28) On April 20, 2011 at 5:32 PM, eldemonio (98.64) wrote:

I don't think taxes are bad, and I would guess that the majority of people understand that taxation is necessary.  I would happily pay more in taxes if I thought my money would be spent intelligently.

My problem with taxation is that I don't feel like we citizens are getting our money's worth from the taxes that we pay.  This screwed over feeling makes me loathe paying taxes.

That problem aside, our tax model is broken.  I don't know if a consumption based tax would be any better.  Maybe it would, but with so much of our nation's consumption coming from debt-consumption, there are still a lot of questions that must be answered. 

 

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#29) On April 20, 2011 at 5:39 PM, awallejr (83.85) wrote:

 ChrisGraley

So now with your comment 19 you are fiddling about with your consumption tax by pick and choosing what gets taxed and what doesn't. That was one of the complaints about the income tax, all those deductions in order to accomplish different things.  And who gets to pick and choose among all the million different categories to be taxed? The simplicity of the system argument goes out the window now.  Plus you will probably have a greater underground economy as a net effect.

I guarantee those millionaires would love your system because they would pay a heck of a lot less.  And those less able would hate it because they still will wind up paying more.  End result the Feds reinstate an income tax system because the lost revenue will be too great and then you would have an income tax and a consumption tax.

But as for this:

You are also rewarded for wise choices, hard work, and saving money.

Consumption tax doesn't do any of that. But it will reward some people for their obscene greed and outright thievery since it would now be easier for them to get away with it.  The FED will be looking at the "spending end" (companies collecting and forwarding the consumption tax) as opposed to the "income end" (through audits) as is the case now. 

Fortunately for the little guy this system won't get passed Congress.

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#30) On April 20, 2011 at 6:20 PM, ChrisGraley (29.75) wrote:

I'm not fiddling with it at all awallejr. If you scroll up, you'll see I stated as much before you posted and I've talked about this many times before.

You can pick as little as not taxing food, utilities, housing (you can set the exemption on that at median level) and gasoline and exempt about 90% of what the poor spend their money on. Also if you want, you can double the tax on luxury cars, yachts and any other high-brow item that you can think of.

Or you can make it more broad and exempt things like education, and healthcare ect...

Please tell me how the rich rape the poor in the above scenarios. The poor are spending all of their income on those basic items and the rich are spending very little of theirs.

Consumption tax doesn't do any of that. But it will reward some people for their obscene greed and outright thievery since it would now be easier for them to get away with it.  The FED will be looking at the "spending end" (companies collecting and forwarding the consumption tax) as opposed to the "income end" (through audits) as is the case now.

So someone a consumption tax does none of that?

A guy can work as much as he wants and is only taxed when he buys non-necessities and he's getting screwed? He gets taxed nothing on his savings and it doesn't help him save?

The FED won't be looking at anything, because taxes aren't their dept. I don't know about you, but I live in a State that has a sales tax and they don't seem to have any problem collecting. They do have a problem with people being honest on their income tax forms though and those people usually wind up in jail.  

Fortunately for the little guy this system won't get passed Congress. 

You are right that it will never get past Congress, but that is most unfortunate for the little guy.

It's the only system that I can think of where the little guy has control of his own fate and that scares the hell out of people that need him to be dependent on them. 

 

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#31) On April 20, 2011 at 6:25 PM, devoish (98.36) wrote:

david, thanks for chiming in and reminding us that there has always been a "state" whether you dream of something else or not. Whether that "state" answers to Democratic vote, GE imperialism, India Tea Company imperialism, the King of Denmark or King David of Israel makes a difference.

I feel like I owe Thomas Jefferson a fight in favor of his Democracy, because I feel like Democracy beats your ideas, even if Democracy is sucking wind right now.

chk999, good question, I have answered it before. I like ChrisGraleys opinion that the highest income should not be more than 35x the lowest. I see that as an "after taxes" result. With minimum wage at $7.50/hour that would put the highest after tax income somewhere around $500,000. With some folks claiming income in excess of 1bil, it would require an awfully high percentage to bring them to $7.50/hour x 35.

If you prefer to pay your floor sweeper more to free your supposedly more productive time up, rather than pay taxes, I would prefer that.  But since "trickle down" did not happen as conservatives promised it would, lets go with reality.

ChrisGraley, It takes a special mind to try to sell the idea that raising costs on the spending of the lowest wage earners will increase their standard of living, when there are people who have nothing to do with their money except thow it at speculating in commodities and act as a middleman who adds no value.

Neither will I abandon Democracy and submit to the control of those who have abused it at great financial and personal gain.

Usually if you have been robbed, the thief has the money. Not a load of debt like the Government has. I would look to private individuals especially in the financial industry to find it, not civil service employees.

Note to all - presumably buying shares in corporations would be considered discretionary and taxable under our "don't tax the neccessities" consumption tax plan?

The other question has to do with timing. Having spent the last ten years buying corporations without so much as a a sales tax on that consumption, you are now advocating that income earned on those purchases should now, not be taxed either.

Because if that is the idea you want me to buy, consider it likely to be a hard sell.

One thing about income taxes is that it impacts the liberal(?) George Soros equally as compared to the Libertarian David Koch. And that would certainly put a dent in the value of buying elected officials. Kind of an "equal"iser sort of a policy.

Say it with me folks - "equality" - an incredibly valuable concept.

equal rights, equal opportunity, equality under the law.

Best wishes,

Steven

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#32) On April 20, 2011 at 6:37 PM, devoish (98.36) wrote:

chk999,

A "consumption tax" should probably be in excess of 80% with the wealth realised as fully funded medicare and very comfortable retirements for all Americans. Where else would "neccessities" end and "taxable consumption" begin? I can raaise enough food for myself on one acre if my house is small enough, so does "luxury" begin at the end of one acre for corporations and citizens alike? Or are you exempting corporate citizens and spending from this tax? What is it they say? "The devil is in the details" not the populist slogans.

Note to all,

Thanks for the discussion, and thanks for the "recs".

Best wishes,

Steven

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#33) On April 20, 2011 at 6:57 PM, awallejr (83.85) wrote:

You can pick as little as not taxing food, utilities, housing (you can set the exemption on that at median level) and gasoline and exempt about 90% of what the poor spend their money on. Also if you want, you can double the tax on luxury cars, yachts and any other high-brow item that you can think of.

And there is the rub.  Who gets to determine what is or is not "a necessity" and which item goes where in the tax/tax not stage?  It is just like all the different deductions we have now.

The end result of any tax system really is how much ultimately gets collected and who do you put the burden of that payment on.  That pretty much is it.  Right now the little guy doesn't get crushed by the income tax system since, aside from social security/medicare payments, and with exemptions and credits, they are well under the initial collection bracket.  So what do they gain by a switch in collection systems?

Now some people may argue it's not fair that others don't pay "taxes" (despite the fact that they still do through local sales tax and government tariffs and excise taxes, etc - but the complainers purposefully ignore that), but their real agenda is to simply try to lower their own liability.

Argue what you want, but in the end the rich will do better under a consumption tax system because their tax is fixed at a much lower rate than it is now.  End of story. 

Now if you want to argue lowering the corporate tax rate, then I am all ears, since there is where you will really help create new jobs and improve American corporate competitiveness.

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#34) On April 20, 2011 at 7:04 PM, awallejr (83.85) wrote:

Oh and P.S., when I say FEDs/FED I am not referring to the actual FED.  It is referring to the Federal Government via IRS).

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#35) On April 20, 2011 at 8:22 PM, ChrisGraley (29.75) wrote:

Enter devoish and the word twisting begins.

First, remember that my view on The highest paid employee being 35x the lowest paid employee is within a particular company. I have no ceiling and no floor on wages. I already know what your cap on taxes is. There isn't one. You and Chavez share a common goal.

Please explain to me how I am raising expenses for any of the lowest wage earners. 

Usually if you have been robbed, the thief has the money. Not a load of debt like the Government has

You got that right! The politicians have it as well and the bigger you make government the richer that they get. 

Note to all - presumably buying shares in corporations would be considered discretionary and taxable under our "don't tax the neccessities" consumption tax plan?

Note to devoish, taxing productivity is what got us in this mess in the first place.  (careful, your hatred for the rich at the expense of the poor is showing again) This is a consumption tax not a "hate the rich" tax.

awallejr, do you have an objection to exempting food, median level housing,  utilities as gasoline only?

I understand your fear that people may try to create loopholes, but we could never get to the loopholes that we have in the current tax system.  Most of those are unoticed because nobody sees individual tax returns, they will see tax exempt goods on shelves though.

 Right now the little guy doesn't get crushed by the income tax system since, aside from social security/medicare payments, and with exemptions and credits, they are well under the initial collection bracket.  So what do they gain by a switch in collection systems? 

They gain opportunity and incentive and still have a tax free lifestyle. Right now they are stuck in the same hole that we dug many years ago. Dependent on the government without any hope of ever getting out of that hole. With the economy  straining to keep the opening of the hole from caving in on top of them.

Sorry about not catching the FED thing.

I don't want to lower the corporate tax rate, I want to eliminate it. It keeps us from being competitive with other countries and is passed on to the consumer anyway. So why not cut out the middle-man.

 Argue what you want, but in the end the rich will do better under a consumption tax system because their tax is fixed at a much lower rate than it is now.  End of story. 

The only way it would be lower is if they didn't buy anything.

I have a feeling that rich people will still buy stuff. They have all the loopholes they need now, They've bought and paid for those many campaign contributions ago. 

 There is no way that this tax system could be anywhere near as cruel to the poor as the current one.

 

 

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#36) On April 20, 2011 at 9:53 PM, devoish (98.36) wrote:

They gain opportunity and incentive and still have a tax free lifestyle.

opportunity and incentive is no substitute for an education, healthcare, retirement, and opportunity and incentive.

Note to devoish, taxing productivity is what got us in this mess in the first place.  (careful, your hatred for the rich at the expense of the poor is showing again) This is a consumption tax not a "hate the rich" tax.

Wow. Lets jump right into calling me a hater again. Good for you, and I am glad you got that off your chest. Not taxing capital gains as regular income is one of the things that got us into this mess to begin with. Another biggy is equating taxing income with hating the rich. 

Anyway I am glad to see you want to subsidize investment income of the rich through lower tax rates as a way to help those without investment income. Your method is indirect and always fails. Directly helping them by rewarding their work with higher pay, health benefits and retirement income would probably be better. But hey, we gave corporate and high earners tax breaks in 2003 and they have squandered it on personal gain without rewarding those who worked for it. Let's try something less the same this time.

Best wishes,

Steven

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#37) On April 20, 2011 at 11:36 PM, whereaminow (21.33) wrote:

"The real issue is whether the lives of citizens are more interfered with than they were; not the nature of the agency which interferes with them....

...If men use their liberty in such a way to surrender their liberty, are they thereafter any the less slaves? If people by pleibscite elect a man despot over them, do they remain free because the despotism was of their own making? Are the coercive edicts issued by him to be regarded as legitimate because they are the ultimate outcome of their own votes?" - Herbert Spencer, 1884

I don't care how you feel about democracy. All I care about is are you increasing interference in our lives or not?  Are you increasing coercive cooperation or voluntary cooperation?

The original Liberals dedicated their lives to decreasing the amount coercive cooperation and increasing the amount of voluntary cooperation.  They decreased intervention and increased liberty.

Then, like all who come to power, they lost their way. They became what they fought against.  They reversed the freedoms they had granted.  But now it's different, they say, because the old regime was evil and we are righteous. It matters not.  I care little for your intentions or religious etatist beliefs.  I care only with results. The results of your agenda are a decrease in liberty and an increase in coercion.

David in Qatar

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#38) On April 21, 2011 at 1:42 AM, awallejr (83.85) wrote:

Yeah but Chris you are missing the point.  Yes the rich will buy stuff, but the bulk of their income will be sheltered unless they decide to spend every single penny they earn, which is highly unlikely.

As for things like nonprepared food they already are tax exempt in NY anyway.  All you are doing in the end is exchanging one convoluted system with another, but the net end result is the rich come out ahead under the consumption tax approach, since as said before, they will pay less overall, while the poor/middle class will wind up paying more overall despite your exclusions..

They gain opportunity and incentive and still have a tax free lifestyle. Right now they are stuck in the same hole that we dug many years ago. Dependent on the government without any hope of ever getting out of that hole. With the economy  straining to keep the opening of the hole from caving in on top of them

The incentive is always there, regardless of the tax structure.  You gave familial examples which seemed to have indicated more a desire by ancestors to advance through hard work and ingenuity than anything else.  People exaggerate the government depency argument.  Welfare, for example, really covers single mothers with children.  And they get bare subsistance.  Seriously, they aren't living high on the hog.

Now if you want to argue that constant extensions of unemployment insurance creates disincentives for people  to look for alternative work, I might agree.  I think it does.

As for eliminating corporate taxes that won't happen, but lowering it does stand a chance.

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#39) On April 21, 2011 at 1:51 AM, awallejr (83.85) wrote:

 I care only with results

Ah David where would a thread lie without your interdictions heheh.  In the end yes results matter.  The argument will always be over those "results" ;p

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#40) On April 21, 2011 at 2:04 AM, whereaminow (21.33) wrote:

awallejr,

Hi. We run into each other a lot. I'm going to start calling you my CAPS BFF if we keep this up :)

Spencer asked three questions in the quote above. Are you willing to provide your answer to those questions?  

See you in the 'morrow, most likely.....

David in Qatar

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#41) On April 21, 2011 at 2:23 AM, awallejr (83.85) wrote:

...If men use their liberty in such a way to surrender their liberty, are they thereafter any the less slaves?

That really becomes a question of degree.  We discussed this earlier regarding social contract theory.  The masses do relinquish certain power to the few for overall social protection while those recieving that power become duty bound not to abuse said power.

If people by pleibscite elect a man despot over them, do they remain free because the despotism was of their own making?

Well despotism is an extreme example. If people choose to give all power into one person they deserve what they get I suppose.

Are the coercive edicts issued by him to be regarded as legitimate because they are the ultimate outcome of their own votes?"

As said, you get what you deserve.  But that doesn't mean the U.S. Constitution falls into this category, since it does not.

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#42) On April 21, 2011 at 2:14 PM, chk999 (99.97) wrote:

chk999, good question, I have answered it before. I like ChrisGraleys opinion that the highest income should not be more than 35x the lowest. I see that as an "after taxes" result. With minimum wage at $7.50/hour that would put the highest after tax income somewhere around $500,000. With some folks claiming income in excess of 1bil, it would require an awfully high percentage to bring them to $7.50/hour x 35.

This sure makes it look like progressive thought is founded on envy. Envy is the worst of the sins, because it isn't enjoyable while you are doing it. Why restrict the income of the highly productive? So the unproductive don't feel bad?

Say it with me folks - "equality" - an incredibly valuable concept. 

The problem with enshrining equality as a goal is that people are not equal. The only way to ensure equality is to hobble the highly capable to keep them from out performing. That sounds insanely stupid to me.

 

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#43) On April 21, 2011 at 2:36 PM, catoismymotor (35.13) wrote:

I have resisted as long as I could. I can no longer keep silent!

www.fairtax.org

Whew. I feel better, like after taking a really big dump.

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#44) On April 21, 2011 at 3:09 PM, whereaminow (21.33) wrote:

awallejr,

I liked your answers. I'll state my problems with them as straightforward as I can.

1. ...If men use their liberty in such a way to surrender their liberty, are they thereafter any the less slaves?

That really becomes a question of degree.  We discussed this earlier regarding social contract theory.  The masses do relinquish certain power to the few for overall social protection while those recieving that power become duty bound not to abuse said power.

I don't believe that answers the question. Are there degrees of slavery?  If so, should it be considered good or even neutral to move in a degree towards greater slavery?  It seems from your answer that as long as I am not getting whipped, it's just an incremental increase in slavery that is neither good nor bad. My response is that any move away from liberty is bad, not neutral, since it makes me less free and more of slave.

I also do not understand the concept of a master being duty bound to take care of his slave. Bound by what? What duty? Who gets to choose how he is bound? The master or the slave? Who gets to decide that he broke the bounds? The master or the slave? If the master always chooses and decides, then all that has changed is the dogma but not the substance.

2. If people by pleibscite elect a man despot over them, do they remain free because the despotism was of their own making?

Well despotism is an extreme example. If people choose to give all power into one person they deserve what they get I suppose.

Is there a recognized universal standard for the invasion of liberties that qualifies as despotism?  Yes, any invasion.  Some people hold up famous tyrants as if "as long as we are not as evil as Stalin, then we are not despots."  Wrong.  There are degrees of despotism.  But anyone who acts tyrannically is a despot even if they don't meet the high bar set by Che or Mao or GWB.

But in terms of your second sentence, I agree. Sadly, many people think that if they replace one vicious tyrant with a benevolent one, they are more free. They are not. The form of tyranny is still the same, even if the character is temporarily altered.

3. Are the coercive edicts issued by him to be regarded as legitimate because they are the ultimate outcome of their own votes?"

As said, you get what you deserve.  But that doesn't mean the U.S. Constitution falls into this category, since it does not.

Perhaps the problem is a lack of understanding of the nature of coercive cooperation versus voluntary cooperation. I hope, but do not know, that if more people understand the difference, they would be less likely to cast votes that are certain to reduce our liberty. I can hope, but that's really all I have.

David in Qatar

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#45) On April 21, 2011 at 6:30 PM, awallejr (83.85) wrote:

 catoismymotor

I'll admit that I didn't watch all 50 little video clips mainly because I got tired of hearing him say Fairtax is fair because it is fair.  Just a few comments:

1)  This system will be such a boon to the rich it isn't even funny.  They are basically capped at 23%  assuming they spend most of their money, which they won't.  Ceo of Ford is not spending 50 million dollars (which is his current income thanks to the generosity of his fellow board of directors).  Now the bulk of that money gets saved and all the future income (think compounding) is his and his family forever (no estate tax exists).

2)  His calculation of the tax rate and its application is inaccurate.  He basically took the bottom bracket amount of 15% and added the payroll tax (SS/medicare of around 8%) and came up with 23 %.  That is the figure he then uses for the "fairfortherichtax", arguing that they would be paying that amount anyway.  Except one thing many people wind up BELOW that 15% bracket after deductions, exclusions and credits.  You now have in effect more than DOUBLED their taxes  since they went from maybe 8% to 23%.

3) His way around the regressive argument is to send people what he called "prebates" mainly 23% of the poverty level line and that is sent to everyone so they now got reimbursed for POVERTY LEVEL necessities. Anything above that and you pay that 23% increase.

4) He does acknowledge my concern about Congress eventually reinstating the income tax and still leaving a consumption tax and acknowledges this will require the repeal of the 16th Amendment to the Constitution.  Fortunately that just won't happen.

5)  He argues that there won't be a need for the IRS anymore, except you still would but they would be auditing the collectors of the tax (the retailers).  You really going to trust that all cash flea market vendor keeping accurate books?

6)  I suspect you will see a boon in the "underground eceonomy"  (the "off the books" places).

7) I would also predict that revenue really would drop especially if people delay making purchases.  Congress will then slowly raise that 23% making it even more burdensome on the Average Joe.

But as said, it will never pass the Constitutional Amendment process so it is just academic. 

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#46) On April 21, 2011 at 6:41 PM, awallejr (83.85) wrote:

 whereaminow

I think you misunderstood my first answer.  Degree I was referring to is how much of one's liberties are surrendered.  Certainly if you give to a despot full authority over you you would be a slave, voluntarily become.  But then what about heirs, would you need their consent as well?

The point I think Spencer was making was are you less of a slave if you consent to being one by surrendering your liberties.  The simple answer is, of course not.  Now how you got there may be different, forced or freely surrendered, but the end result is the same.

We already went down the social contract road in another thread, and my head is starting to spin with all these different blogs I am responding to here lol.

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#47) On April 21, 2011 at 7:41 PM, catoismymotor (35.13) wrote:

awallejr,

I encourage you to really learn about The FairTax. Please read into it without prejudice. Your seven points illustrate that you don't understand how the idea works. 

As for the idea being purely academic I have to laugh. 

Cato.

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#48) On April 21, 2011 at 8:38 PM, awallejr (83.85) wrote:

Cato, what you just said in #47 is a total cop out.  I gave several specific comments responding to things Mr Fairtax was arguing and your only response is to say watch it again because I don't understand it?  At least whereaminow responds to content.

Either you are lazy to actually reply to the points or you are disingenuous in that you really don't understand his system.

As for it being academic, good luck in getting it passed the Constitutional Amendment process. (rolls eyes).

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#49) On April 22, 2011 at 9:06 AM, catoismymotor (35.13) wrote:

Cato, what you just said in #47 is a total cop out.

Yes. Because I have grown weary of trying to teach cows to sing. It is a waste of time and annoys the cow.

At least whereaminow responds to content.

Dave enjoys teaching cows to sing, even if it takes a brass band and a bazooka. He loves to argue. He is of a different temperment.

Either you are lazy to actually reply to the points or...

I don't like to argue when it serves no purpose. I refer to the cow teaching comment above.

...you are disingenuous in that you really don't understand his system.

I have clocked over 500 hours and collected close to 36,000 signatures in the past three years as a volunteer for The FairTax. How is that lazy and disingenuous? If I did not understand and believe in the idea I would not take that time away from my family. I do it because I believe it is a far better system than is currently in place, will benefit this country and my kids.

Can you guess why I held out so long to #43 to even bring it up? Because I KNEW someone would want to pick a fight over it if I introduced it earlier. I leave the heated debates to others. In my view you either get it or you don't. If you really dig into it and don't think it will do a world of good then I don't know what to say to change your mind.

 

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#50) On April 22, 2011 at 9:58 AM, devoish (98.36) wrote:

awallejr,

Despite cato's contentions otherwise, I think you understand the fair tax perfectly well, and the goal of those who promote it.

chk999

The problem with enshrining equality as a goal is that people are not equal. The only way to ensure equality is to hobble the highly capable to keep them from out performing. That sounds insanely stupid to me. - chk999

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness - Someone who was not chk999

Taxing income does not hobble the highly capable. Neither are exteme financial rewards required to motivate the highly capable. Taxes spent to ensure "equal opportunity" by providing for schools are not to be feared. Taxes spent to ensure "safety nets" and make years of research and many failures possible are not to be feared either. Perhaps taxing income motivates and rewards the "truly capable" and not taxing income rewards only the rent seekers. 

In 1955 Salk's years of research paid off. Human trials of the polio vaccine effectively protected the subject from the polio virus. When news of the discovery was made public on April 12, 1955, Salk was hailed as a miracle worker. He further endeared himself to the public by refusing to patent the vaccine. He had no desire to profit personally from the discovery, but merely wished to see the vaccine disseminated as widely as possible

Best wishes,

Steven

 

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#51) On April 22, 2011 at 10:32 AM, catoismymotor (35.13) wrote:

Fine. He is the bone you want to chew:

1) Yeah. So what? I see no problem with that.

2) You will not double anyone's taxes. If anything everyone will end up paying less. This is proof you did not understand what you read or you failed to read far enough to see how it works.

3) See my answer for #2.

4) Repealing the 16th Amendment is a key issue. Otherwise The FairTax might as well be a VAT. So the repeal is part of the idea.

5) Yes, I do. It is easy book keeping. 

6) No. The items you pay for should stay the same price. If you had read far enough you would understand how this is true.

7) No. There would be no delay in making purchases. Again, if you read far enough you would understand where the price you pay now would stay the same.

Here is the idea, in the smallest nutshell possible, as to why you will not pay more at the register:

No companies would pay tax on anything needed to make their product. Thus you save the compounded embedded tax cost. Each step in the process when one company sells to another they pay sales tax, from the raw materials company all the way to the retailers.

Example for a product made today in the USA: To make a widget it costs $100 in raw materials. A 8% sales tax is paid on those raw materials once they go to the manufacuter, by said manufaturer for a total of $108. The manfacturer builds the widget, sells it to a distrubutor for $250 plus 8% sales tax for a total of $270. Then the distributor sells it to a retailer for $325 plus 8% sales tax totalling $351. The retailer then sells it to you for $500 plus 8% tax for $540.

The total embedded taxes is $94.00. The FairTax cancels out those taxes from the companies. Once you remove those embedded taxes the cost of the widget goes down to $406.00 at the retail level. Now when you go in to buy it, pay the 23% FairTax the total to you is $499.38. In this senario you save $40.62.

The idea is that leaves you with an extra $40 to do with as you please. You can save it, invest it, spend it on an extra nice out with your best girl/guy. This will help make for a stronger economy.

I am aware that 8% is not the sales tax everywhere. I know it is the rate for Atlanta/Fulton County, in my area, thus my rationale for picking it.

There is also the added benefit to companies under The FairTax is not having to deal with payroll taxes. That is a huge expensive headache to deal with. The money used to wrestle that mess can be put to better use or shaved off the cost of doing business, paying a larger dividend, upgrading technologies or making for a more competetively priced product. A possible side effect is some businesses may move to the USA from overseas to avoid those same taxes at home. That would help to generate some jobs, make their owners/share holders happy.

Another added benefit of taxing illegal immigrants, prostitutes, pimps and others that currently don't pay into the system.

Now go learn more on your own. Buy into it or not I don't care. I think it is a good idea. Beyond this entry I have nothing more to add.

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#52) On April 22, 2011 at 11:09 AM, mhy729 (31.34) wrote:

Part of the objection may have to do with the fact that tax revenues likely would go down with such a system, requiring a downsizing of government (assuming you want a balanced budget).  I have not delved too deeply into the "Fair Tax" proposals, but it does sound sensible and beneficial to me.  Yes, wealthy individuals who do not spend all of their money on consumption would be taxed less, but the money they do save/accumulate would provide capital for investment and potential further economic and business development which can provide for new jobs.

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#53) On April 22, 2011 at 12:31 PM, mtf00l (45.62) wrote:

I wrote a full page comment on many of the topics presented here, read it, read it again and decided,... nah.

I would like to point out one thing on the most recent comments.  Specifically, that that 8% sales tax that is collected does not all go to the tax man.  A percentage, state by state, is retained by the seller as a stipend to collect and report the sales tax. Simply FYI.

Lastly, in case I never post the full page diatribe...

I would like to express again my appreciation for you who, albeit anonymously, share your oppinions and convictions in the pursuit of learning.

I thank you.

mtf00l

p.s. I actually wrote a line about "leveling" where I referenced
"any blog from David in Qatar".  Affectionaltely thought of as "where a minow"

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#54) On April 22, 2011 at 12:44 PM, awallejr (83.85) wrote:

 catoismymotor

You know Cato you were the one creating a blog with your Fairtax link.  If you didn't want any comments on it then say so right off or don't even link.

I took the time to at least try to get through that link before I realized that it is nothing but a rich man's con job.  But feelings aside I set forth legitimate comments. And for 2 blogs now you simply ignored them saying how Fairtax is fair and that is that and you just tried to denigrate, despite the fact that my initial comment was civil. You drew first blood, not me.

Now if you want to go waste your time trying to champion  a con job cause with your petitions be my guest.  But I call it as I see it and while you "tried" to finally respond to my points, it was cursory at best.

I will leave you with 2 important points.  Points I made before.  Points derived from YOUR MR FAIRTAXS' OWN FIGURES.

1.  The whole regressive argument against a consumption tax is as said here and elsewhere, it hurts the poor/middle class more than an income tax.  Mr. Fairtax's solution?  Give prebates which are based off THE POVERTY LEVEL.  So big deal you throw the Average Joe a few thousand and say there ya go it is fair now, despite the fact that the Average Joe would get greater deductions, exemptions and credits under the current income tax system.

2.  Mr. Fairtax tries to argue how rates aren't raised over the poor/middle class because he used the lowest tax bracket to come  to his pct of 23 (15 + 8% mandatory ss/mediare).  And as I said most of those people DON'T PAY 15%, because of the deductions, exemptions and credits.  They still have to pay the 8% ss/medicare.  So those people's tax really is 8% not 23%  If you just don't understand that then you don't understand the current tax system.

Now those 2 points are factual arguments, not opinion.

As for the reduction in cost of goods by doing away with the added on taxes that could be removed now without changing the current income tax system.  But the con artists instead try to use it as a guise to getting their real agenda thru, allowing them to keep their wealth tax free forever.  Hence you will have an even greater concentration of wealth and an even wider disparity between the few and the many.

You want to argue lower taxes in principle, smaller govt, lower government spending, fine.  But you and Mr Fairfortherich tax can spin your wheels all you want because as I said, it will never pass the Constitutional amendment process.  Have fun trying. 

 

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#55) On April 22, 2011 at 2:19 PM, catoismymotor (35.13) wrote:

awallejr,

You know, at times it is hard not to come off sounding like a jack ass, troll or fear monger, yours truely included. This medium does not provide for inflection, tone, body language, lack of caffeine or the addition of alcohol. I did not mean to "draw first blood". When reading your reply I read into it a tone of belittling snark. Perhaps I was projecting that into the equation? I apologise for my tone in our exchanges up to this point on this subject.

From the information I have been exposed to it makes sense to me. I see it as a way to control the taxes I pay, to get rid of the IRS as we know it, foster job growth and reduce the size of government. I know you think of the idea as a unworkable pipe dream that would hurt, not help. I'm not in the business of changing that. But to my advantage there have been many pipe dreams forced upon us over the last decade. One more couldn't hurt, right? :)

Humbly yours, with a olive branch, bottle of 12 year old scotch and two glasses,

Cato

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#56) On April 22, 2011 at 3:07 PM, devoish (98.36) wrote:

Example for a product made today in the USA: To make a widget it costs $100 in raw materials. A 8% sales tax is paid on those raw materials once they go to the manufacuter, by said manufaturer for a total of $108. The manfacturer builds the widget, sells it to a distrubutor for $250 plus 8% sales tax for a total of $270. Then the distributor sells it to a retailer for $325 plus 8% sales tax totalling $351. The retailer then sells it to you for $500 plus 8% tax for $540.

The total embedded taxes is $94.00. The FairTax cancels out those taxes from the companies. Once you remove those embedded taxes the cost of the widget goes down to $406.00 at the retail level. Now when you go in to buy it, pay the 23% FairTax the total to you is $499.38. In this senario you save $40.62. - Cato.

Ruh roh.

NY State (and Ca and Texas and...) have something called a "Resale Certificate".

So...

Example for a product made today in the USA: To make a widget it costs $100 in raw materials. A 8% sales tax is paid on those raw materials once they go to the manufacuter, by said manufaturer for a total of $108. Except that the manufacturer fills out a resale certificate stating that the raw materials are not for personal consumption but for resale to someone else who then has the responsibility of  collecting the sales tax. Total tax incurred 0%. The manfacturer builds the widget, sells it to a distrubutor for $250 plus 8% sales tax for a total of $270. Except that another resale certificate gets signed and filed and 0 sales tax is collected. Then the distributor sells it to a retailer for $325 plus 8% sales tax totalling $351. The retailer files a resale certificate with the distributor and 0 sales tax is collected. The retailer then sells it to you for $500 plus 8% tax for $540. Correct. If the price is $500, the end user will pay 8% of the selling price in sales tax. But the price is actually lower because that chain of sales taxes does not exist.

The total embedded taxes is $94.00. Very incorrect. The FairTax cancels out those taxes from the companies. There are no embedded taxes from those companys. Once you remove those embedded taxes the cost of the widget goes down to $406.00 at the retail level. Presuming the price of that product without the embedded taxes is actually $406 the 8% sales tax will bring the price you pay to $438.38.  Now when you go in to buy it, pay the 23% FairTax the total to you is $499.38. In this senario you save $40.62. $499.38 minus $438.38 means that in the real world a 23% "fair tax" will cost you an additional $61 on that $406 product.

Best wishes,

Steven

Been there, done that, signed the resale certificates myself.

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#57) On April 22, 2011 at 3:33 PM, catoismymotor (35.13) wrote:

Warning: The following may or may not be true.

Fine. I surrender. I am the wrongest person on TMF. My math is all wrong. The current tax system is just peachy. I'm going to find the uglist IRS agent, male or female, and make sweet love to that person because I love my government.

Warning: The following is true.

The previous warning was not directed at awallejr. The olive branch and scotch are still extended as a token of friendship.

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#58) On April 22, 2011 at 3:54 PM, catoismymotor (35.13) wrote:

Something that may help explain things is to scroll down to the fairtax five on this page.

If you still remain opposed because your numbers are different than what is presented, I'm cool with that. As all of know data can be spun. Is that what has happened with the data in this case? I don't think so. But to think and know are two different things. I have to admit to putting some measure of faith in what is presented.

Have a good weekend.

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#59) On April 22, 2011 at 5:11 PM, awallejr (83.85) wrote:

Humbly yours, with a olive branch, bottle of 12 year old scotch and two glasses,

Cato

I could never hold a grudge against anyone who offers me scotch ;)

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