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Income tax; Flat tax; National Sales tax; No tax

Which do you prefer:


  • Total voters
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again you confuse your dislike for my philiosophy-which exalts independence and despises parasitic politicians who cater to envy and mob rule with lack of knowledge. It is common among the left to assume that disagreeing with welfare-socialist blather is due to factual mistakes rather than admitting that there is more than one world view.

And again you seem to think that your so called "world view" or what I prefer to call your own self accepted belief system, is based on anything other than your own skewed and highly incorrect knowledge of history, historical events, the personalities from history, the motivations of those persons, and the purposes and functions of government itself. They are inseparable and must be considered together like two siamese twins forever co-joined.

You believe what you believe because you want to believe what you believe. You then attempt to justify those extremist beliefs with an factually incorrect interpretation of history as a way of justifying it.

One cannot - and I will not - separate your views from the totally erroneous interpretation of history that produced them.
 
This analysis 1998, but the economics are pretty much/remarkably the same in the recent analyses I will post below.

The 23 Percent Solution
NEW YORK TIMES OP-ED

Suppose a bunch of Rich people want to promote a national sales tax to replace the Federal income tax. How do they try to persuade the public to support such a plan? Simple: Play with the arithmetic.

Earlier this month, the well-financed group Americans for Fair Taxation, based in Texas, kicked off a sales-tax campaign with a full-page advertisement in several large newspapers. It called for replacing all the main Federal taxes--personal and corporate income taxes, payroll taxes and the estate tax--with a 23% national retail sales tax.
[....]
According to the group's figures, at 1995 levels a new sales tax would have to raise $1.36 trillion to replace all Federal income taxes, payroll taxes and estate and gift taxes. Under its plan, the group says, taxable spending would be $4.6 trillion (after accounting for rebates to partly protect lower-income families). So, $1.36 trillion divided by $4.6 trillion would be the required sales tax rate. Fine, except that $1.36 trillion divided by $4.6 trillion is not 23%. It's about 30%.

It turns out that the group's purported 23% tax rate is misleading and hypothetical. It came up with that number by dividing the sales tax by the cost of a purchase plus the tax. So if the tax on a $100 purchase is $30, the group prefers to call it a 23% "tax inclusive rate" ($30 divided by $130). Ever hear of computing a sales tax like that?
The fact that the group's sales tax, even by its own figures, entails a 30% tax rate is only the beginning of the math problems.
The group's backup materials also assert that almost a third of its projected sales-tax revenue is supposed to come from taxes the Government will pay to itself.
Build a road, pay Yourself a tax.
Buy some planes for the Air Force, pay Yourself some more. And so on.

Unfortunately, that shell game won't work. Without these Phantom governmental tax payments, the sales tax rate would have to jump to 42% to break even.

A bit more digging reveals that a quarter of the remaining sales taxes are supposed to be paid on things like church services, Free care at Veterans hospitals and a variety of hard-to-tax financial services like Free checking accounts.
If we discount the taxes on these items, the sales tax rate would have to climb to an astronomical 56% to break even.

Apparently, the millions of dollars that Americans for Fair Taxation says it has spent on focus groups and polling have taught it an important lesson: giving people the real facts about a national sales tax is politically disastrous for its proponents. So the group is trying the only other available route: cooking the numbers.
 
Fair Tax, Flawed Tax
Does adding 30% to the price of every house sold sound like a good idea to you?
BRUCE BARTLETT (deputy assistant secretary of the Treasury for economic policy from 1988 to 1993.)
August 26, 2007
Wall Street Journal
Expired but original was: Opinion & Commentary - Wall Street Journal - WSJ.com


[........]Aside from the incredible complexity and intrusiveness of tracking every American's monthly income--and creating a de facto national welfare program--the FairTax does not include the cost of this rebate in the tax rate. As noted earlier, the FairTax is designed only to match current revenues and does not cover any increased spending that it may require. Since the rebate will cost at least $600 billion the first year, either federal discretionary spending would have to be cut by 60% or the rate would have to be 5 percentage points higher than advertised.

Rejecting all the Tricks of FairTax supporters and calculating the tax rate honestly--by including the higher spending that it mandates and by being realistic about what could actually be taxed--professional revenue estimators have always concluded that a national retail sales tax would have to be much, much higher than 23%. A 2000 estimate by Congress's Joint Committee on Taxation found the tax-inclusive rate would have to be 36% and the tax-exclusive rate would be 57%.

In 2005, the U.S. Treasury Department calculated that a tax-exclusive rate of 34% would be needed JUST to replace the income tax, Leaving the Payroll tax in place. But if evasion were high then the rate might have to rise to 49%.
If the FairTax were only able to cover the limited sales tax base of a typical state, then a rate of 64% would be required (89% with high evasion).

I've emphasized problems with the FairTax rate because public opinion polls have long shown that support for flat-rate tax reforms is extremely sensitive to the proposed rate, with support dropping off sharply at a rate higher than 23%.
But there are also massive technical and administrative problems with collecting all federal taxes at the checkout counter and relying entirely on state governments to collect the federal government's revenue. - Among the problems: What possible incentive would the states have to be vigorous in their federal tax collections? What is to stop them from slacking off and giving their citizens a tax cut at federal expense? What about states with no sales taxes? What's to stop people from bypassing retail outlets and buying their goods from producers or at wholesale, tax-free?..."

Perhaps the biggest Deception in the FairTax, however, is its promise to relieve individuals from having to file income tax returns, keep extensive financial records and potentially suffer audits. Judging by the emphasis FairTax supporters place on the idea of making April 15 just another day, this seems to be a major selling point for their proposal. Yet all but six states now have state Income taxes. So unless one lives in one of those states, this promise is an empty one indeed. In short, the FairTax is too good to be true, and voters should not take seriously any candidate who supports it.
 
Close loop holes in current system.
 
Close loop holes in current system.

agreed. A flat tax with no loop holes. If you maintain a progressive income tax without loopholes, you will only increase the amount of tax fraud or mass layoffs (or both). The high-wage earners won't simply start paying more and give themselves a pay cut. They will compensate to maintain the lifestyle. You may disagree with their decision, but that is what will happen. And frankly, most of them have earned the position to make that decision for themselves.
 
This analysis 1998, but the economics are pretty much/remarkably the same in the recent analyses I will post below.

The 23 Percent Solution
NEW YORK TIMES OP-ED

Thank you for sharing this. I was not aware. I don't think it should be dismissed quite yet (though possibly), but I do think those who are trying to intentionally deceive the public should no longer be the ones pushing this legislation. If they try to trick us once, why wouldn't they try again. If the data can't stand for itself to push the position, then the position should change. The data cannot change. This is corrupt.
 
agreed. A flat tax with no loop holes. If you maintain a progressive income tax without loopholes, you will only increase the amount of tax fraud or mass layoffs (or both). The high-wage earners won't simply start paying more and give themselves a pay cut. They will compensate to maintain the lifestyle. You may disagree with their decision, but that is what will happen. And frankly, most of them have earned the position to make that decision for themselves.

No. No loop holes limits the ability for fraud. Fraud can be committed with any system, including a flat tax. With both, no loop holes, likely no deductions, the fraud would be in reporting income.

And the wealthy do this nayway, just as they would with a flat tax. Nothing there would change.
 
Honestly, to rein in a spendthrift Congress, I think we'll need a Constitutional amendment that restricts Congress's duties to a strict interpretation of what the Constitution dictates and b) otherwise prohibits any disbursement of taxpayer monies or any Federal policy that does not benefit all citizens, rich and poor alike, equally.

If we did that, we would immediately reduce the needs of the Federal government by a substantial percentage and thus reduce the amount of revenues necessary to fund it, and we eliminate 99% of the corruption that is now built into the system and that is demonstrated in those who dispense government benevolence and those who receive it.

It would require easing into it to avoid unnecessary pain and suffering, but we sure as heck could turn it around and start the process.

They aren't suppose to collect money that benefits anyone (personally). They are suppose to defend the country, and collect taxes for that purpose only.
 
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Do you folks really and truly believe that Congress appropriates money for things that they believe are NOT authorized by the Constitution?
 
Do you folks really and truly believe that Congress appropriates money for things that they believe are NOT authorized by the Constitution?

Yes I do .
 
No. No loop holes limits the ability for fraud. Fraud can be committed with any system, including a flat tax. With both, no loop holes, likely no deductions, the fraud would be in reporting income.

And the wealthy do this nayway, just as they would with a flat tax. Nothing there would change.

Fraud can be committed with any system. And yes, it will be more difficult with a 'no loop holes system'. My point isn't that there will be more fraud because it is easier. My point is that you are giving high income earners incentive for fraud (by cutting their pay) and incentive to lay off workers so that they maintain their net lifestyle. Which they will inevitably do. i.e. If you have 10 workers and make $150k net dollars after taxed say 25% (so a pay of $200k gross) and the government forces you to pay another 10% of your income to them, your net pay is now $130k. So your net pay has decreased 13.33% from a 10% tax hike. Ouch. So how do you make back that 13.33%? Perhaps you put more of your own sweat and blood into your job again the way you did when it first started and lay off one person. Perhaps you fire one person and distribute their work among the others. Perhaps you start asking for cash payments and keep your profits off the books, if you are so inclined. Such a drastic action as your suggestion will have consequences. The people of the US need to admit that every plan has consequences. Including mine. I know what they are. We need to discuss the consequences and figure out which is the higher priority to each of us. Denying consequences as you are will not get us any closer to finding the answer.

And your broad generalization on the wealthy committing tax fraud is indicative that you are not trying to find a reasonable answer. You're trying to bicker among partisan lines.
 
Do you folks really and truly believe that Congress appropriates money for things that they believe are NOT authorized by the Constitution?

No. I think they have themselves convinced that they could interpret the constitution in a not-so-straight forward way to back their agenda. Don't get me wrong, I'm not necessarily against some of the ways they are spending money (though mostly I am), I am just against a not-so-straight forward interpretation of the constitution. Congress once believed we needed an amendment for prohibition. Now we don't believe we need an amendment to force health insurance on every American. The constitution hasn't changed. The interpretation has. If society supports such change, we need to update the constitution. Allowing the government to do whatever it wants under the guise that the constitution's meaning can be altered leaves us with a government with limitless power over the people. We need to adhere to a governing document with strict interpretation or we will have a tyranny eventually (today we are still moral enough that we have most of our freedoms, but as the power grows, the morals will decrease as they always have. Both sides of the political spectrum are guilty of this (see Hitler and Stalin))
 
Fraud can be committed with any system. And yes, it will be more difficult with a 'no loop holes system'. My point isn't that there will be more fraud because it is easier. My point is that you are giving high income earners incentive for fraud (by cutting their pay) and incentive to lay off workers so that they maintain their net lifestyle. Which they will inevitably do. i.e. If you have 10 workers and make $150k net dollars after taxed say 25% (so a pay of $200k gross) and the government forces you to pay another 10% of your income to them, your net pay is now $130k. So your net pay has decreased 13.33% from a 10% tax hike. Ouch. So how do you make back that 13.33%? Perhaps you put more of your own sweat and blood into your job again the way you did when it first started and lay off one person. Perhaps you fire one person and distribute their work among the others. Perhaps you start asking for cash payments and keep your profits off the books, if you are so inclined. Such a drastic action as your suggestion will have consequences. The people of the US need to admit that every plan has consequences. Including mine. I know what they are. We need to discuss the consequences and figure out which is the higher priority to each of us. Denying consequences as you are will not get us any closer to finding the answer.

And your broad generalization on the wealthy committing tax fraud is indicative that you are not trying to find a reasonable answer. You're trying to bicker among partisan lines.

Anyone can use any reason to commit fraud. It is a lame excuse to sugegst a proggressive tax encourages the wealthy to commit fraud. And I gave no broad generalization. It is a fact that we have fraud now, and fraud committed by the wealthy. Crime is not limited to one economic class. It just seems to me you're trying to excuse crimes by those with wealth.
 
fredmertz (great screen name by the way)

Almost everybody sees it exactly the way you would hope they see it. Almost everyone believes that their interpretation of the Constitution is the correct one - or "straight forward" as you put it.
 
Anyone can use any reason to commit fraud. It is a lame excuse to sugegst a proggressive tax encourages the wealthy to commit fraud. And I gave no broad generalization. It is a fact that we have fraud now, and fraud committed by the wealthy. Crime is not limited to one economic class. It just seems to me you're trying to excuse crimes by those with wealth.

I'm not saying that a progressive tax encourages the wealthy to commit fraud. I'm suggesting that your tax solution will encourage the wealthy to commit fraud. I'm speaking in relative terms. Relative to where we are now (a progressive system with loopholes) to the system you suggest (a progressive system without loopholes) will significantly impact the net income on the wealthy. The result is an incentive for fraud. In no way at all am I saying that they have an excuse for this fraud or that they are justified in committing fraud. I'm not saying that it will be easier to commit fraud. Please read what I'm writing. I'm spending more time explaining what I'm NOT writing because you're jumping to conclusions that I'm not trying to make. I'm just explaining what the consequences of your plan are.

And you did write "and the wealthy do this nayway, just as they would with a flat tax. Nothing there would change." -- when I read "the wealthy" I assumed you meant all of the wealthy since you didn't have a qualifier. This is the logical conclusion. I cannot assume your qualifiers; you must state them. If you meant 'some' so be it. Correct yourself. Don't deny what you wrote. Explain what you meant - it's fine. An honest mistake. I understand now. Just because we're on different sides doesn't mean that I'm trying to attack you. I simply misunderstood what you meant because you didn't write what you actually meant.
 
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fredmertz (great screen name by the way)

Almost everybody sees it exactly the way you would hope they see it. Almost everyone believes that their interpretation of the Constitution is the correct one - or "straight forward" as you put it.

This is true today. The reason I'm libertarian is because I fear the future. I believe there is a day coming in the next generation (I'm 25, so I'm talking about a generation not yet born) that they will knowingly pass laws that go against a reasonable interpretation. They'll see that in the past (our present) we changed the meaning of the words. That reduces the value on those words. On that path, the words will become worthless and they will not care about how it's interpreted. The future is in big trouble on the current path, IMO.
 
I'm not saying that a progressive tax encourages the wealthy to commit fraud. I'm suggesting that your tax solution will encourage the wealthy to commit fraud. I'm speaking in relative terms. Relative to where we are now (a progressive system with loopholes) to the system you suggest (a progressive system without loopholes) will significantly impact the net income on the wealthy. The result is an incentive for fraud. In no way at all am I saying that they have an excuse for this fraud or that they are justified in committing fraud. I'm not saying that it will be easier to commit fraud. Please read what I'm writing. I'm spending more time explaining what I'm NOT writing because you're jumping to conclusions that I'm not trying to make. I'm just explaining what the consequences of your plan are.

And you did write "and the wealthy do this nayway, just as they would with a flat tax. Nothing there would change." -- when I read "the wealthy" I assumed you meant all of the wealthy since you didn't have a qualifier. This is the logical conclusion. I cannot assume your qualifiers; you must state them. If you meant 'some' so be it. Correct yourself. Don't deny what you wrote. Explain what you meant - it's fine. An honest mistake. I understand now. Just because we're on different sides doesn't mean that I'm trying to attack you. I simply misunderstood what you meant because you didn't write what you actually meant.

I rarely ever mean all. I merely mean that this is done now and that won't change. I see no reason that anyone should comit fraud, regardless of impact. At all levels we see an impact for anything done, but this doesn't excuse breaking the law.
 
I rarely ever mean all. I merely mean that this is done now and that won't change. I see no reason that anyone should comit fraud, regardless of impact. At all levels we see an impact for anything done, but this doesn't excuse breaking the law.

On this, we definitely agree. If it is law, then abide by it. If you want change, elect different representatives, is my opinion. But simply because we both agree that they shouldn't commit fraud doesn't mean that they won't. I'm a realist at heart. I'm not completely against a progressive tax system without loopholes, assuming that the rates are lowered. The rich are paying (I've read multiple figures, but this is the most recurring) about 18% actual federal income tax after loopholes. That's not enough, IMO. Let's take out the loopholes and drop the written tax bracket, but put it higher than the current actual rate of 18%. Also, the bottom 48% aren't paying federal income taxes at all. They need to be. It doesn't have to be a lot, even 5% would suffice. But they need skin in the game, IMO. They don't get the benefits of government for free. Nothing is free. It's my belief that we can't tax one person and not another within the same country. I have a hard time accepting progressive tax as it is. But a reformed progressive tax would be a nice compromise. But it has to be realistic. We need everyone to see the consequences of the extremes we suggest.

In my ideal world a flat tax would be in place. But moving to a flat tax from where we are now would be catostrophic. The hurt it would put on the lower classes initially wouldn't be worth the long term 'fairness' that I think it creates. And in the long term, I think the lower classes would rise again. But again, the cost short-term is people starving and I understand that. We cannot just jump into a flat tax.

We can have a compromise and we must. If we take too much from the poor, they starve (if not literally, then figuratively). Too much from the rich and they will decrease costs (wages) to maintain income and the economy starves and the long term consequences will be dire. It needs to be balanced.
 
On this, we definitely agree. If it is law, then abide by it. If you want change, elect different representatives, is my opinion. But simply because we both agree that they shouldn't commit fraud doesn't mean that they won't. I'm a realist at heart. I'm not completely against a progressive tax system without loopholes, assuming that the rates are lowered. The rich are paying (I've read multiple figures, but this is the most recurring) about 18% actual federal income tax after loopholes. That's not enough, IMO. Let's take out the loopholes and drop the written tax bracket, but put it higher than the current actual rate of 18%. Also, the bottom 48% aren't paying federal income taxes at all. They need to be. It doesn't have to be a lot, even 5% would suffice. But they need skin in the game, IMO. They don't get the benefits of government for free. Nothing is free. It's my belief that we can't tax one person and not another within the same country. I have a hard time accepting progressive tax as it is. But a reformed progressive tax would be a nice compromise. But it has to be realistic. We need everyone to see the consequences of the extremes we suggest.

In my ideal world a flat tax would be in place. But moving to a flat tax from where we are now would be catostrophic. The hurt it would put on the lower classes initially wouldn't be worth the long term 'fairness' that I think it creates. And in the long term, I think the lower classes would rise again. But again, the cost short-term is people starving and I understand that. We cannot just jump into a flat tax.

We can have a compromise and we must. If we take too much from the poor, they starve (if not literally, then figuratively). Too much from the rich and they will decrease costs (wages) to maintain income and the economy starves and the long term consequences will be dire. It needs to be balanced.

I believe if they wouldn't now, they won't under any system. And if they would under a progressive tax without loop holes, they would under a flat tax. Either way they pay more actual dollars, and would resist doing so.
 
I believe if they wouldn't now, they won't under any system. And if they would under a progressive tax without loop holes, they would under a flat tax. Either way they pay more actual dollars, and would resist doing so.

Ahhh, I see your point. That's another reason for taxing the lower 48%. Misery loves company. I think if I made $200k and my taxes were increased, but the $15k earner who doesn't produce as much still didn't have to pay taxes, then I'd be very frustrated. But if everyone has to pay something and a little more than before, then it's more a situation that the country is in and we all need to do our part. The main objection from the folks on my side of the line is fairness. If rich folks are paying more so that the poor doesn't have to, then there will be much more objection. But if we're all paying more because the nation is in trouble, then that's what we have to do.

It won't please everyone, like you said and there will be some resistance. But this is the way of least resistance that I can think of to get to the same goal we all have: get out of debt!
 
Ahhh, I see your point. That's another reason for taxing the lower 48%. Misery loves company. I think if I made $200k and my taxes were increased, but the $15k earner who doesn't produce as much still didn't have to pay taxes, then I'd be very frustrated. But if everyone has to pay something and a little more than before, then it's more a situation that the country is in and we all need to do our part. The main objection from the folks on my side of the line is fairness. If rich folks are paying more so that the poor doesn't have to, then there will be much more objection. But if we're all paying more because the nation is in trouble, then that's what we have to do.

It won't please everyone, like you said and there will be some resistance. But this is the way of least resistance that I can think of to get to the same goal we all have: get out of debt!

I won't argue that some won't feel that way, but I wouldn't. I make more than some, but don't need those who make less paying what I pay. I think I'm not alone either. But I do believe logically that those who benefit most and can pay more, which includes me, should.
 
I won't argue that some won't feel that way, but I wouldn't. I make more than some, but don't need those who make less paying what I pay. I think I'm not alone either. But I do believe logically that those who benefit most and can pay more, which includes me, should.

In terms of the real compromise: I'm not saying they should pay what I pay. I'm saying they should pay more than they currently are paying as the rich will also be paying more than they are currently. Even if that change is minimal, it should be there. I make an average living at present (per national standards) and I'm frustrated that 48% of others aren't paying. I don't want them to pay the same dollar figure I do. That wouldn't be fair to them. But I don't think it's fair that I'm paying for their government and they're not. I'm not asking for an extreme. But I am asking for something.

In terms of the 'ideal world' which was the basis of this poll, I also believe those who benefit more should pay more (which are generally the wealthy). But I'm sure we disagree here: how to determine how much more. I say that if the poor man making $15k pays 20% ($3k) then the rich man making $1,500,000 pays 20% ($300,000). This is a debate that there is no answer to that I've ever found. I just can't understand how someone thinks that 'fair' is when the rich man pays 40% in the 'ideal' world and the poor man pays 20%. But I've also found that others don't understand why I think that the rich man should only pay 20%. I know their reasons (the rich have a superflous amount above what would be unreasonable amount necessary to live on and so they can better afford a higher income rate), but I don't see at all how this is fair. Simply because they are in a position to pay more without hurting themselves financially doesn't mean we should obligate them to. They are making more because they are producing more (generally) and so I feel the government has no right in taxing them at a higher rate, despite what they can afford.

The reason I'm telling you all of this is because I'm hoping you don't see me as an enemy by now and rather a person looking for the best solution. If you could shed any light on your way of thinking (and/or why you disagree with my way of thinking), I would appreciate it. As one person, I can't really do anything. But if we all keep trying to understand each other, maybe our leaders will follow OUR lead. This world is upside down.
 
In my ideal world a flat tax would be in place. But moving to a flat tax from where we are now would be catostrophic. The hurt it would put on the lower classes initially wouldn't be worth the long term 'fairness' that I think it creates. And in the long term, I think the lower classes would rise again. But again, the cost short-term is people starving and I understand that. We cannot just jump into a flat tax.

We can have a compromise and we must. If we take too much from the poor, they starve (if not literally, then figuratively). Too much from the rich and they will decrease costs (wages) to maintain income and the economy starves and the long term consequences will be dire. It needs to be balanced.

Any ideas and/or suggestions on how you believe this could be done without catastrophic results?
 
Any ideas and/or suggestions on how you believe this could be done without catastrophic results?

of course! If it can't be a flat tax, then it must be a progressive tax. So what are the 2 problems (Glaring problems) of the current system? 1) loop holes 2) 48% of wage earners presently don't pay any federal income taxes.

We obviously have a deficit as well. This isn't getting into how we absolutely have to cut spending. But at the same time, a tax increase is in order for the short term to pay off this debt. And whose debt is this? the Nation's debt. So we ALL must get tax increases. Even those 48% paying $0 right now. They need to be paying something, even if it is a small amount of 8% (or even less).

So I suggest we break this down to 3 very basic, no loop hole brackets. I've read multiple numbers, but the most common is that the wealthiest pay only about 18% income tax after deductions and loopholes.

first bracket for earners from $0-poverty line: =/< 8%
second bracket for earners from poverty line to $XXX,XXX: 15%-17%
Third bracket for above $XXX,XXX: 20%

If everyone in the nation were paying 19% without loopholes, I've calculated that we would not be running a deficit (figures from bea.gov last year).

Even suggesting a progressive tax system is hard to type out. The idea of the unfairness and inefficiency for the long run is awful to suggest. But I really think it's what would be best from this point. And these rates seem incredibly low because we're used to loopholes and higher stated rates. But the net amount going to the government will drastically increase. The below poverty earners won't contribute much, but this debt problem is as much their problem as it is anyone's. They need to contribute. You don't get all the privileges of being an American for free.
 
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