'Fair' tax system

[airdvr 210]

http://www.pafairtax.org/resrcs/FlatTaxFairTaxComparison.pdf

Interesting idea. Basically a tax on consumed 'new goods'.

Please don't dent the planet.

Destinations by Roxanne

[CanuckInUSA 0]

The problem with consumption taxes is what to do about the people who flock to the underground economy. Of course the underground economy will always be there, but higher consumption taxes would likely drive the ranks of the underground economy even higher than what they are now.

Try not to worry about the things you have no control over

[mnealtx 0]

What underground economy? People buy things from thrift stores and garage sales *now*.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[rehmwa 2]

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What underground economy? People buy things from thrift stores and garage sales *now*.

keep up - if we do this, then thrift stores and garage sales will be in CAVES. Stuff will get damp, there'll be bears.....

...
Driving is a one dimensional activity - a monkey can do it - being proud of your driving abilities is like being proud of being able to put on pants

[mnealtx 0]

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What underground economy? People buy things from thrift stores and garage sales *now*.

keep up - if we do this, then thrift stores and garage sales will be in CAVES. Stuff will get damp, there'll be bears.....

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[lawrocket 3]

The Canuck speaks of a black market. Higher consumption taxes lead to transactions that fall short of regulations and taxation. Picture the stereotypical hijacking of a cigarette truck by the mob, where they'd be sold more cheaply without the taxes. one can imagine a black market in computers, etc.

Now, the probability of a black market isn't, I think, a good reason to not do something. But it merely creates an additional hurdle and administrative headache.

My wife is hotter than your wife.

[davjohns 1]

Re-post:

No tax is fair.

Taxes, like government, are a necessary evil. Both must be restricted to the least amount necessary to protect individual liberties that can not be protected otherwise.

But, I am of the opinion that all who are so protected should contribute in direct relation to their benefit. Therefore, a percentage of their earnings would be representative of what they have been able to do with their liberty. A rich person would contribute more and the poor would contribute less. Since all enjoy the liberties, all should contribute.

I know it just wouldnt be right to kill all the stupid people that we meet..

But do you think it would be appropriate to just remove all of the warning labels and let nature take its course.

[mnealtx 0]

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The Canuck speaks of a black market. Higher consumption taxes lead to transactions that fall short of regulations and taxation. Picture the stereotypical hijacking of a cigarette truck by the mob, where they'd be sold more cheaply without the taxes. one can imagine a black market in computers, etc.

Now, the probability of a black market isn't, I think, a good reason to not do something. But it merely creates an additional hurdle and administrative headache.

I understand the point - where his (and yours) breaks down, I believe, is in the fact that the tax is only assessed on *new* purchases. We have the cigarette black market (and others) now - I just don't see it increasing by any appreciable amount, when the purchaser has MORE money in pocket week-to-week and the tax on *new* purchases is exempted up to the poverty level.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[airdvr 210]

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The problem with consumption taxes is what to do about the people who flock to the underground economy. Of course the underground economy will always be there, but higher consumption taxes would likely drive the ranks of the underground economy even higher than what they are now.

My thoughts mirrored yours until I realized that it would be difficult if not impossible for someone to manufacture something and them sell it on the black market. Those sales don't exactly encourage investment in your company.

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Opponents of the fair tax claim it could create an underground economy of people trying to evade taxes. Under a sales tax, intermediate goods that are a part of production would not be taxed. This creates potential for businesses to claim something is an intermediate good when really it is the end product that should be taxed. This would however constitute evasion and the bookkeeping that would be mandated for businesses should prevent most of this. http://geekpolitics.com/10-pros-and-cons-of-the-fair-tax/

Please don't dent the planet.

Destinations by Roxanne

[GeorgiaDon 381]

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Under a sales tax, intermediate goods that are a part of production would not be taxed. This creates potential for businesses to claim something is an intermediate good when really it is the end product that should be taxed. This would however constitute evasion and the bookkeeping that would be mandated for businesses should prevent most of this.

Canada tried something like this when they implemented the "goods and services tax" (GST). All the excise and other taxes that previously were applied to the intermediate steps of making something/providing a service were removed and replaced with an up-front, visible GST on the final product. The theory was that, because manufacturers wouldn't pay taxes on components before assembling the final product, retail prices would fall. In reality, manufacturers kept the retail price pretty much where it was, pocketed the money they didn't have to pay in taxes, and the consumer was stuck with a 17-19% tax (GST + Provincial sales tax) on the end product. A 17% tax bite on a car, or a new house, certainly generates some "sticker shock". In the case of houses, most people had to borrow the money to cover the tax, so they started out with a mortgage for more than the house was worth. Of course, you could buy an older house and not pay the GST, as that house had been built when excise taxes were collected; this distorted the housing market by making older houses significantly cheaper than new ones. Do you think that will work in the US market?

Don

_____________________________________
Tolerance is the cost we must pay for our adventure in liberty. (Dworkin, 1996)
“Education is not filling a bucket, but lighting a fire.” (Yeats)

[billvon 3,121]

>the tax is only assessed on *new* purchases.

Law of Unintended Consequences result:

People keep cars, washing machines, furniture etc much, much longer than they do now, and/or tend to buy used instead of new. To see a similar system in action, check out Cuba, where import restrictions make new cars prohibitively expensive. Bad for the economy (slows money velocity) but good environmentally, for the most part.

[airdvr 210]

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The theory was that, because manufacturers wouldn't pay taxes on components before assembling the final product, retail prices would fall. In reality, manufacturers kept the retail price pretty much where it was, pocketed the money they didn't have to pay in taxes, and the consumer was stuck with a 17-19% tax (GST + Provincial sales tax) on the end product.

I doubt the manufacturers were pocketing the money. Something else must have been in play because all it would take is one savvy manufacturer to undercut the competition and corner the market. I don't know anything about Canada's GST other than filing for a rebate on goods I purchased there. I do recall that after I subtracted the GST my purchases were significantly less than similar purchases made in the US.

Please don't dent the planet.

Destinations by Roxanne

[quade 4]

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>the tax is only assessed on *new* purchases.

Law of Unintended Consequences result:

Why the emphasis on "new" anyway? What does that actually mean? "Used" cars wouldn't be taxed? "Used" houses? "Used" Gulf Streams?

What about businesses that deal in nothing BUT "used" merchandise; would they be exempt from paying any taxes?

quade -
The World's Most Boring Skydiver

[mnealtx 0]

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>the tax is only assessed on *new* purchases.

Law of Unintended Consequences result:

People keep cars, washing machines, furniture etc much, much longer than they do now, and/or tend to buy used instead of new. To see a similar system in action, check out Cuba, where import restrictions make new cars prohibitively expensive. Bad for the economy (slows money velocity) but good environmentally, for the most part.

And the equally probable Law of Intended Consequences result:

People have more more money in their paycheck week-to-week as well as an exemption for the sales tax up to the poverty limit and their purchasing pattern remains unchanged, or increases.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[mnealtx 0]

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>the tax is only assessed on *new* purchases.

Law of Unintended Consequences result:

Why the emphasis on "new" anyway? What does that actually mean?

*eyeroll*

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"Used" cars wouldn't be taxed? "Used" houses? "Used" Gulf Streams?

What about businesses that deal in nothing BUT "used" merchandise; would they be exempt from paying any taxes?

My understanding is that they would be exempt from collecting the consumption tax, yes - just like how thrift shops do not collect sales tax, at least in some states.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[billvon 3,121]

>People have more more money in their paycheck week-to-week . . .

Yep. And that money is worth significantly less. What $10 once bought, you now need $15 for - so you lose a lot of what your money was once worth.

>and their purchasing pattern remains unchanged

Their purchasing power declines by the reciprocal of the sales tax, and their purchasing pattern changes to accommodate (above the poverty level, of course.)

[mnealtx 0]

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>People have more more money in their paycheck week-to-week . . .

Yep. And that money is worth significantly less. What $10 once bought, you now need $15 for - so you lose a lot of what your money was once worth.

And what you used to have to work 15 hours to earn, you now earn in 10 hours, so that's a wash.

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>and their purchasing pattern remains unchanged

Their purchasing power declines by the reciprocal of the sales tax, and their purchasing pattern changes to accommodate (above the poverty level, of course.)

And their earning power increases by the deletion of the payroll taxes - again, a wash.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[billvon 3,121]

>And what you used to have to work 15 hours to earn, you now earn in 10
>hours, so that's a wash.

Lower income people do not see a change. They still make in 10 hours what they made in 10 hours. Since they account for about half of consumer purchasing, that means a lot of people see higher prices and no higher income - which is where the negative economic impact comes from. They cannot afford to buy as much, retailers sell less, manufacturers have to lay off employees etc.

For the rich, you are correct. Their purchasing power is largely unaffected, beyond the second order effects (i.e. that factory owner above may like the lower tax, but not like the hit his factory takes.)

[CanuckInUSA 0]

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I do recall that after I subtracted the GST my purchases were significantly less than similar purchases made in the US.

Not sure where you got this from. Throw the GST out the window for a second. Most (not all) products which are identical and can be found in Canada as well as the USA, are more expensive in Canada. Then you add the GST to it (plus add more provincial sales taxes in every province except Alberta which presently does not have a provincial sales tax). But it could be worse. We could be talking about Europe's "Value Added Taxes". I think the European average is about 18% and as high as 25% in Sweden. But I do have to plead ignorance on income taxes Swedish people may need to pay. I would not be against a 15-25% sales tax if there was no income tax.

Try not to worry about the things you have no control over

[mnealtx 0]

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>And what you used to have to work 15 hours to earn, you now earn in 10
>hours, so that's a wash.

Lower income people do not see a change. They still make in 10 hours what they made in 10 hours.

True, they do - I should have said "they take home the same amount after 10 hours that they used to have to work 15 hours for" - an exaggeration, but no worse than the 'what $10 once bought, now you need $15 for' that you used.

They still see an increase in their paycheck, since withholding goes away. If they have a $10/hour job, they're getting $400 at the end of the week instead of $344.

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Since they account for about half of consumer purchasing, that means a lot of people see higher prices and no higher income - which is where the negative economic impact comes from. They cannot afford to buy as much, retailers sell less, manufacturers have to lay off employees etc.

And false again - the tax rebate gives them $209 of tax-exempted spending each week. They're also getting $56 more in their paycheck each week from the deletion of withholding.

So, no - they're *NOT* seeing 'higher prices and no higher income', sorry.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[kallend 2,156]

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Re-post:

No tax is fair.

CORRECT. One has to be suspicious of anyone claiming fairness in a tax system. Clearly they are bent on deception.

...

The only sure way to survive a canopy collision is not to have one.

[kallend 2,156]

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Do you think that will work in the US market?

Don

It's so stupid it's a non starter, even with a GOP controlled Congress.

...

The only sure way to survive a canopy collision is not to have one.

[quade 4]

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Re-post:
No tax is fair.

CORRECT. One has to be suspicious of anyone claiming fairness in a tax system. Clearly they are bent on deception.

I wonder if we could ever pass a bill called something to the effect of, "The Objective Legislative Naming Bill"?

It would require that all bills not use subjective words in their titles.

quade -
The World's Most Boring Skydiver

[billvon 3,121]

>They still see an increase in their paycheck, since withholding goes away.

Agreed. But if withholding is the big issue, we can stop doing that right now. That's just a game; you have to pay it all in the end anyway.

>And false again - the tax rebate gives them $209 of tax-exempted
>spending each week.

No, that's quite true for people who spend more than $209 a week, which means most people will see a penalty if they spend on things like white goods. (Try to buy, say, a refrigerator and spend less than $209 a week.)

>So, no - they're *NOT* seeing 'higher prices and no higher income', sorry.

Sorry, they are. ANY increased consumption tax means higher visible prices. And for around 50% of Americans, that means no higher income.

I have no problem with a consumption tax. But to pretend that it will magically create more income while taking less money from people is asinine. It's just a different mechanism of accomplishing the same task.

[mnealtx 0]

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>They still see an increase in their paycheck, since withholding goes away.

Agreed. But if withholding is the big issue, we can stop doing that right now. That's just a game; you have to pay it all in the end anyway.

No, the consumption tax would replace the withholding.

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>And false again - the tax rebate gives them $209 of tax-exempted
>spending each week.

No, that's quite true for people who spend more than $209 a week, which means most people will see a penalty if they spend on things like white goods. (Try to buy, say, a refrigerator and spend less than $209 a week.)

$10,830 per year is exempted from the tax, so unless they're buying a commercial unit for a restaurant, it'll still even out over the course of the year.

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>So, no - they're *NOT* seeing 'higher prices and no higher income', sorry.

Sorry, they are. ANY increased consumption tax means higher visible prices. And for around 50% of Americans, that means no higher income.

My calculator says that $400 (40 hrs x $10) is higher than $345 (40 hrs x $10 after taxes). Add the exemption and they're further ahead.

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I have no problem with a consumption tax. But to pretend that it will magically create more income while taking less money from people is asinine. It's just a different mechanism of accomplishing the same task.

Nothing magical about it - 400>345.

Current tax:
10/hour job. 20800/year. 5700 standard exemption and 3650 personal exemption. 15% tax bracket. Tax paid, $2889. Remainder: 17910.

"Fair" tax
10/hour job. 20800/year. Tax paid, 0.
Remainder: 20800.

Purchases: 10000/year.
Current tax remainder: 7910
"Fair" tax remainder: 10800

Purchases: 15000
Current tax remainder: 2910
"Fair" tax: 959
"Fair" tax remainder: 9841

US GDP (2008)(personal consumption): 10.1T
23% 'fair' tax(personal consumption): 2.33 T
Tax revenue (2008)(personal/business income and payroll tax): 2.49T

That difference equates to a 1.6% increase in personal consumption - something much easier for someone with 7k in pocket vs. 3k.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706