Fair Tax?

[cycloneworld]

Example 1 - Single person, $75,000 income, no dependants, rents, low medical bills, doesn't donate to charity, spends all they earn.
Example 2 - Married, $75,000 income, 4 dependants, owns home, high medical bills, donates to charity, spends all they earn.

Not true. See fairtax.org. From the FAQ section:

How does the rebate work?

All valid Social Security cardholders who are U.S. residents receive a monthly rebate equivalent to the FairTax paid on essential goods and services, also known as the poverty level expenditures. The rebate is paid in advance, in equal installments each month. The size of the rebate is determined by the Department of Health & Human Services’ poverty level guideline multiplied by the tax rate. This is a well-accepted, long-used poverty-level calculation that includes food, clothing, shelter, transportation, medical care, etc. See chart in Figure 1 below.

Under your hypothetical, Person 1 gets a $2,238 annual rebate. Family 2 will get $7,898 annual rebate. The rebate difference is $5,660 which is equivalent to paying 7.5% less in taxes.

 

[cycloneworld]

I agree that they do. However, what do you think of this scenario?

Company A makes a truck, in America, with a manufacturered cost of $12,000. Now add $2640 for the government's share. That's a cost of $14,640. They sell it at 20% margin, for a sale price of $18,300.

Company B makes a truck overseas at a manufactured cost of $12,000, but doesn't have to pay that 22%. They can sell that truck at a 20% margin for $15,000.

Company A is not going to sell many trucks. They have choices to make. either lower their profit margin drastically, and hope that they can move a lot more trucks, or lower their manufacturered cost to sell a truck in the same price range, thus cheapening their product.

I am sure there are many other factors, but the math doesn't work out too well for domestic manufacturers of any sort. Which is a large reason why our trade deficit is growing, and companies are moving to other countries to make their products.

Bingo...you hit the nail on the head.

 

[Kyle]

I should point out that I do believe our current tax laws are rather screwy. That is the one area of the law I know I want to steer way clear of. I therefore think that the fairtax is excellent as a way of creating debate surrounding our tax policies that might hopefully lead to some reforms. I'm not sure it is the policy I would endorse though if I had to take a fresh crack at it.

 

[Cyclonepride]

1. In the same vein one shouldn't get a windfall based solely on the wealth of the parents. Warren Buffet said it best, something to the effect of, "Kids should have enough money to [do] anything, but not so much that they can do nothing." Also, an increased tax rate on wealth that you have done little to earn is not much of a penalty. I would love to be in a situation where I would incur such a penalty.

2. Socialism is (roughly) an economic system where the government controls the means of production and distribution. A progressive tax system can and is used effectively in capitalist countries (such as our own). Part of the reasoning behind both is the same, and to a large part it is sound reasoning. Marx was in large part right regarding his theories of how capitalism would lead to very uneven wealth distribution. His conclusion that it would lead to socialism is flawed IMO though, largely because he did not account well for other means of placing checks on capital, such as unions and legislation through the democratic process such as anti-trust laws and the progressive taxes we are discussing.

With all due respect, there is so much wrong with what you just wrote, that if I were to fully reply to that, I would probably test the character limit to my post.

So, you are saying that kids do not deserve to benefit from their parent's hard work? That the more deserving party would be somebody who doesn't have the wherewithall to get off their butt and support themselves? Is that your point?

I don't know where to start on your opinion on socialism. We have had the progressive tax for a long time now. And it has done wonders to balance things out. I mean, we have a pretty even distribution of rich, poor and middle class people, don't we?

Socialism completely ignores individual initiative. Our own brand of socialism gives so many benefits to the poor, that they have no incentive to work. And, in true socialist fashion, we have relabeled them underpriveleged, and they are no longer on welfare. They now have "entitlements", which implies that the government owes them this. This has worked out well. Let's extend that to illegal aliens too! Then it becomes a self fulfilling prophecy. Look at all these poor people who the government has to support. It must be the fault of these capitalist pig rich people. Sure, they have all kinds of "jobs" that these poor people could have, but those jobs are menial labor, and that's really beneath what they should have to do.

I don't blame you for thinking socialism is all that. It's what we teach in schools. You'd have to read from a lot of other sources to find out the truth.

 

[Cyclonepride]

Oh, and before you question my lack of compassion for my fellow man....

Part of the role of government is to help people who cannot help themselves. Disabled people. People who, through life's circumstances, need a helping hand to get back on their feet.

I love my son more than anything in the world. But if he gets to the age where he can support himself, and if for some reason he is not, the compassionate thing to do is not to give him enough money to live on. The compassionate thing to do is to motivate him to support himself, knowing full well that in order for him to develop a sense of self worth, he needs to learn to do this.

 

[cycloneworld]

1. In the same vein one shouldn't get a windfall based solely on the wealth of the parents. Warren Buffet said it best, something to the effect of, "Kids should have enough money to [do] anything, but not so much that they can do nothing." Also, an increased tax rate on wealth that you have done little to earn is not much of a penalty. I would love to be in a situation where I would incur such a penalty.

How is that any better than someone winning the lottery? At least their parents WORKED for the money. But just because they won the money and didn't work for it, doesn't mean the government should take more of it...that doesn't make much sense.

 

[Kyle]

How is that any better than someone winning the lottery? At least their parents WORKED for the money. But just because they won the money and didn't work for it, doesn't mean the government should take more of it...that doesn't make much sense.

I'm not sure exactly what your point was in this quote, but I think it was summed up by the part I bolded. If that is case, I disagree with you. You don't see a legitimate reason for taking more from someone who gets their money by dumb luck than from someone who worked for it? I have no problem with a different tax rate based on such a distinction.

 

[cycloneworld]

I'm not sure exactly what your point was in this quote, but I think it was summed up by the part I bolded. If that is case, I disagree with you. You don't see a legitimate reason for taking more from someone who gets their money by dumb luck than from someone who worked for it? I have no problem with a different tax rate based on such a distinction.

No, I don't. They spent their $1 of their hard-earned money for a long-shot...why should they be penalized more for being lucky?

With your logic...why don't we just increase the capital gains tax? Earning interest wasn't worked for. Investing in the right stock isn't really work. Let's tax those people who initially invested in Wal-mart, eBay, etc at a higher rate because they "got lucky". While we are at it, let's tax food stamps too because people didn't "earn" those either.

 

[Kyle]

With all due respect, there is so much wrong with what you just wrote...

I beg to differ...:wink0st:

So, you are saying that kids do not deserve to benefit from their parent's hard work? That the more deserving party would be somebody who doesn't have the wherewithall to get off their butt and support themselves? Is that your point?

How does having a progressive tax prevent children from benefiting from their parent's financial situation? The children of wealthy individuals will clearly benefit from what their parents have done, just not to as great an extent as they otherwise would, because the money they get (because they were born into a family with money) will be taxed at a higher rate.

I don't know where to start on your opinion on socialism. We have had the progressive tax for a long time now. And it has done wonders to balance things out. I mean, we have a pretty even distribution of rich, poor and middle class people, don't we?

I'm not sure what your point is, but the part I highlighted only seems to directly support my possition, not undermine it.

Socialism completely ignores individual initiative. Our own brand of socialism gives so many benefits to the poor, that they have no incentive to work. And, in true socialist fashion, we have relabeled them underpriveleged, and they are no longer on welfare. They now have "entitlements", which implies that the government owes them this. This has worked out well. Let's extend that to illegal aliens too! Then it becomes a self fulfilling prophecy. Look at all these poor people who the government has to support. It must be the fault of these capitalist pig rich people. Sure, they have all kinds of "jobs" that these poor people could have, but those jobs are menial labor, and that's really beneath what they should have to do.

I don't blame you for thinking socialism is all that. It's what we teach in schools. You'd have to read from a lot of other sources to find out the truth.

1. I never advocated socialism.
2. There is a good argument against unconditioned welfare to lazy bums. There is a difference between that and providing healthcare to children or loans to college students.

 

[Kyle]

No, I don't. They spent their $1 of their hard-earned money for a long-shot...why should they be penalized more for being lucky?

Um... because they just got lucky and didn't work for it? I don't think I'm too far out of the mainstream with that sentiment. There seems to just be a fundamental difference between us on this.

With your logic...why don't we just increase the capital gains tax? Earning interest wasn't worked for. Investing in the right stock isn't really work. Let's tax those people who initially invested in Wal-mart, eBay, etc at a higher rate because they "got lucky". While we are at it, let's tax food stamps too because people didn't "earn" those either.

Capital gains taxes are intuitively appealing to me actually. In reality they have to be tempered so as to not discourage economic investment though.
As far as taxing food stamps, it would be stupid to tax something being paid for by taxes.

 

[cycloneworld]

As far as taxing food stamps, it would be stupid to tax something being paid for by taxes.

You never know with the federal government...:wink0st: :laugh8kb:

 

[brianhos]

Bingo...you hit the nail on the head.

But both cars are made here in the US. How does that make company A any different than company B? Unless it is top heavy corportate bloat with an expensive unionized workforce like the american car companies.

 

[Cyclonepride]

Kyle........that part about doing wonders to balance things out. That was sarcasm. Just for the record:eek4wd:

Brian.......I know that many Toyotas are made in the US. I don't know the exact figures, but I would wager much of my meager income that they aren't all made here. And does that mean made in the US, from top to bottom, or assembled in the US? I really don't know the answer to that, but I would be interested to know. Also, if a lot of their cars are made in Japan, that would allow them to cost average them, and still come up with a better overall rate.

 

[Skyh13]

My 2 cents:

Outsourcing = the end of American labor
Apparently paying decent wages is just getting too costly these days.

Also

The middle class is getting beaten up hard core in this day and age.
And I'm sorry (and argue with me if you want, I won't be responding to it), but anyone who is actually rich and is seriously complaining about the amount of taxes they have to pay (and I'm not referencing anyone on this board, just in general).... honestly. Deal with it. None of the rich have suddenly become not rich because of taxes. And if you believe that the majority of taxes shouldn't have to be paid by the wealthy (a.k.a., the people who actually have money), then figure out where that money should come from instead. And it can't come from the people who still don't have it.

 

[St. Lou Clone]

I think it is fair to ask the rich to pay more for the government that they benefit from.

I always look at tax dollars as a part of the social contract we created in this country. Now, as a well-to do person in this country there are benefits given to you from that status. Everyone in Iowa in particular remembers the wealthy kid's parents in town. The kid and the parents got treated differently. Now, if someone were to make a whole lot of money and than decide to hide that money, I would question whether the tax they pay is fair. However the vast majority of extremely wealthy/heck just plain wealthy folks take advantage of the wealth that they have.

It affords you the opportunity to be more charitable in your personal life in the current set-up. In essence the current tax code rewards charity. How would a fair tax provide that incentive? Now, I realize not everyone wants government to provide those types of support, but I do. I think it's a positive thing to give people a tangible benefit for giving to charity. I can tell you that even on goodwill items alone. I would not care as much if we didn't receive a tax credit on the items. Maybe that makes me a bad person, but I do find it an incentive. There are a ton of these incentives that would go away with a fair tax.

Do I think it would make some times of my year easier, yes. But, I think the end result of a tax basis on only sold items would be a great hinderance to our country. Additionally, looking at our national budget, I don't see how a fair tax and the savings from the IRS removal will be an equality.

And if I were extremely wealthy, and wanted to buy a large luxury item that was going to be heavily taxed, why would I buy it in America? Simply is no reason, if you ask me. And than the other side of that question if I were extremely wealthy, I would want to have my citizenship in America and have my taxes here, but I wouldn't want to live here. I could live in a foreign country, pay property taxes, and spend my money at a better rate. Maybe that would be good for the development of Canada and Mexico, also the other tropical countries, but not good for America.

I throw out these points, and won't feel too bad if someone slams every point. These are just some thoughts that I have on the suggestions. I also probably won't respond to your arguments, so don't feel bad. I just can't ever see myself voting for a "fair"tax system.

 

[St. Lou Clone]

following up on that outsourcing issue someone just mentioned.

I started to think about this. All of us who didn't care when the manual labor jobs started moving off shore need to realize we helped enable outsourcing.

When the large corporations realized that people don't care where their products are made, just that they are cheap. They realized that outsourcing everything will eventually make sense.

Tell me what happens when everyone in America either works at Wal-Mart, or is a CEO?

 

[Cyclonepride]

You bring up a valid questions regarding charitable giving, but I really wonder if that is an issue. One of the most charitable givers in our history was Andrew Carnegie (another evil capitalist), and I don't believe that that was done due to tax write offs.

I also have trouble seeing that the rich people would just move off to other countries, or buy all their stuff from outside the United States, unless it were for a really ridiculously priced luxury item.

And yes, we did help to enable outsourcing, but the consumer isn't the source of the problem. If things could be made cheaply here in the US, people would buy those products. Without 22% tacked on, they should be reasonably competitive, with the shipping costs hopefully helping to offset the cheap labor.

The thing that really worries me about all this, is that in World War II, the United States was able to fight and win two wars simultaneously, because we were able to convert our manufacturing capability into a war time juggernaut. It's starting to become a matter of national defense. If another world war broke out, where is the bulk of the manufacturing capability? China? Better hope we are not fighting them.

 

[safmusic]

There are very good reasons for a progressive tax system.

#1. I don't believe your base ideas at all. Statistics show that majority of the rich work for it. Sure some inherit a bit of seed money but most by the third generation that money is gone. If I have any left I want some going to my kids regardless of what they have done or haven't done. It's my money, not some bureaurocrats that is telling me what to do, that is soaking everyone, that has a great retirement NOT tied to social security that guarantees them millions and their spouse the same. I am ready to start ranting if you can't tell.
#2. This is baloney. If you equally distribute all the money at one time so everyone is equally "rich" in a short time something like 5 years the distirbution would be like it is now economists say (conservative ones anyway). The rich work for it, desire things, are motivated, work to educate themselves and stay ahead and updated. Most people are not motivated by the same things or to the same degree, are happy with less, don't want to work that hard, do not have goals for attainment. Guess what, most of the philantrophic donations for research, for charity, for university football teams, for people in this country and over the world come from wealthier people. To equally share all the money-- it is not American. All wealthy people do not give money away which is their perogative since it is their money. Many, however, do great things. Poor people cannot give money to help poor people and they cannot buy food for other poor people if they cannot feed themselves.
#3. MORAL grounds??/ gov't teaching morals?? That is an oxymoron. Again if gov't would get out of the way and just do what was originally purposed for it to do (i.e. to protect us), everyone would have a lot more money and more money would be available in the people's hands for donations to poor, needy, etc. I should not be angry at gov't for spending my and also your money sooooo wisely. I don't think makes any difference to the party in power. With that much money around and available to the gov't, there is too much corruption and wasted money. I would rather give it all to my church (my example and doesn't have to be yours certainly) for a variety of missions that would more than take care of many causes that you mentioned in your original post.
I think we are looking for the same results just doing it differently.