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Old 06-19-2003, 01:19 PM   #1
RATyson
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Default Consumption tax -vs- Income tax

Ok.. now that we have completely hijacked the 'What's wrong with the Democratic Party' thread.. let's give it back and continue our discussion on tax systems here.
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Old 06-19-2003, 01:26 PM   #2
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Flat tax is where it's at. Everybod pay their fair share. I wouldn't mind paying 20% of my salary to the government if everyone else did as well. Abolish sales tax, luxury tax, and all those other taxes and we'll be just fine.

Look at what things would really cost if we rid ourselves of all those taxes. Plus there would be no need for the IRS.
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Old 06-19-2003, 01:34 PM   #3
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Quote:
Originally posted by Turbosnow

I honestly think that this is a naive assesment, it won't matter if people are taking home more money if there is a huge benefit to selling things away from the sight on the govt, then people will do it. An extra 23% is definitely worth the risk, and people will take it. Even today many people work "under the table" if the responsability were offloaded to the sellers of individual items it woudl be way harde to track off the books purchases.

OK, but this makes it eaven easier for a black market to get going, "that car isn;t new, I just bought it in Canada a week ago".....
I'm not sure if you are getting the gist of what I'm saying. Everything that you buy will be CHEAPER that it is now. So it isn't that we will be paying an 'Extra' 23%.. we will be paying 'Only' 23%, instead of about 30% in hidden taxes.

Maybe you are saying that people would start a black market just to get out of paying any tax at all. Am I correct? If so, how do you propose that they will get the items to sell on this black market?
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Old 06-19-2003, 01:38 PM   #4
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Quote:
Originally posted by Rebelious Youth
Flat tax is where it's at. Everybod pay their fair share. I wouldn't mind paying 20% of my salary to the government if everyone else did as well. Abolish sales tax, luxury tax, and all those other taxes and we'll be just fine.

Look at what things would really cost if we rid ourselves of all those taxes. Plus there would be no need for the IRS.
flat tax would be cool...to bad rich people wouldnt like it and the IRS people wont want to give up their jobs
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Old 06-19-2003, 01:42 PM   #5
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flat tax would be cool...to bad rich people wouldnt like it and the IRS people wont want to give up their jobs

Why wouldn't the rich people like it? As I see it, the middle and lower class wouldn't like it. The rich would pay less in taxes and the low and middle class would pay more. I'd like to see the low and middle class pay their fair share.
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Old 06-19-2003, 01:43 PM   #6
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Yea a flat tax would be great.

Sure, 20% is lower than what I'm paying now, yet I would end up paying twice as much in taxes becuase there are NO deductions or credits in a flat tax system. In other words, 80% of the population will pay more income tax, the other %20 will pay a lot less.

The end result is that there are few goods being purchased because those that need the goods will have less purchasing power.
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Old 06-19-2003, 01:49 PM   #7
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Originally posted by beethoven
Yea a flat tax would be great.

Sure, 20% is lower than what I'm paying now, yet I would end up paying twice as much in taxes becuase there are NO deductions or credits in a flat tax system. In other words, 80% of the population will pay more income tax, the other %20 will pay a lot less.

The end result is that there are few goods being purchased because those that need the goods will have less purchasing power.
I couldn't have said it better myself.
The flat tax is a worse idea than what we have currently.
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Old 06-19-2003, 01:50 PM   #8
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Why would you need credits or deductions in a sales tax based system? It would remove the current sales tax, state income tax and federal income tax which would put more money in your pocket especially if your like me and pay almost 33% in payroll taxes already. If you want to save more money you simply don't buy as many things (consume less). There never should have been deductions for things like having kids since its a biased system designed to punish those without kids in the same way that they did with the marriage tax. People would be surprised how many hidden taxes can be found in the goods they are buying.

The one plan that I saw listed 18% as the national sales tax.
Oh and the sales tax wouldn't give them the chance to get you all year long and then get you again come April 15th. I'd rather have 18% in taxes versus the 33% that I have now along with the 7% sales tax, the federal and state gas taxes, property taxes and all the others.
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Old 06-19-2003, 01:53 PM   #9
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And here's another point. Several flat-tax proposals invovle exempting unearned income (investments, interest, etc.) from taxes to avoid double taxation, as it's called.

The problem here is that someone like Bill Gates could essentially top working (i.e. stop being a producing member of society) and live off of his unearned income tax free. Who do you think will pay to offset the $100 million that Bill Gates pays in individual income taxes?

Not only that, this also prevents the trickle down effect, which is supposed to be one of the few benefits of giving the wealthy more money.
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Old 06-19-2003, 01:59 PM   #10
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Someone mentioned housing costs earlier. Also a bit about investments.
This is from the FAQ of www.fairtax.org.

How will the FairTax affect my investments?

The stock market, mutual funds, and retirement funds will prosper under the FairTax for both small and large investors, because corporations will face lower operating costs and individuals will have more money to save and invest. The FairTax will significantly enhance the retirement savings of all Americans. Tax-free bonds will still be tax-free. And in addition, all stocks, bonds, and other investments will be tax-free as well!

The FairTax will greatly benefit real estate in a number of ways, starting with the non-taxability of mortgage interest, which doubles the value of the mortgage interest deduction over today's allowable deductions.

Taxpayers will for the first time be able to pay interest with pre-payroll and income tax dollars. Today, at best, taxpayers must pay mortgage interest with after-payroll tax dollars. Under the FairTax, mortgage interest rates will fall by 25 to 30%. For example, on a $150,000, thirty-year home mortgage at an interest rate of 8 percent, the monthly mortgage payment would be $1,112.64. On that same mortgage at a 6 percent interest rate, the monthly payment would be $907.64. The two-point decrease in interest rates in this instance would result in a $73,800 cost savings!

Under the Americanís for Fair Taxation plan, home ownership will be a possibility for many who donít have that option under the current income tax system. Lower interest rates, the repeal of the income tax, the repeal of all payroll taxes, and the FairTax rebate will mean that people will have more money to spend, as well as the opportunity to become home owners.

Currently, interest rates will drop quickly by approximately 25% after passage of the FairTax Bill. Interest rates include compensation to the lender for the tax that they must pay on interest. That is why taxable bonds bear a higher interest rate than tax-exempt bonds. When the tax on interest is removed, interest rates will drop toward today's tax-exempt rate.

Under the current system, savings and investments are taxed. Under the FairTax, savings and investments will not be taxed at all. As Americans save more money, and businesses invest more in the world's only "zero tax" advantaged country, the pool of funds in lending institutions will grow, thereby causing the cost of borrowing funds to drop.
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Old 06-19-2003, 02:00 PM   #11
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Quote:
Originally posted by N/A
Why would you need credits or deductions in a sales tax based system? It would remove the current sales tax, state income tax and federal income tax which would put more money in your pocket especially if your like me and pay almost 33% in payroll taxes already. If you want to save more money you simply don't buy as many things (consume less). There never should have been deductions for things like having kids since its a biased system designed to punish those without kids in the same way that they did with the marriage tax. People would be surprised how many hidden taxes can be found in the goods they are buying.

The one plan that I saw listed 18% as the national sales tax.
Oh and the sales tax wouldn't give them the chance to get you all year long and then get you again come April 15th. I'd rather have 18% in taxes versus the 33% that I have now along with the 7% sales tax, the federal and state gas taxes, property taxes and all the others.
The flat-tax is an income tax and is what I was talking about. The problem I see with a national sales-tax only, is that it will force those who can affor to, to spend their money outside of the country. It's the same problem as the luxury tax has now. If someone can affort to buy a yacht, they can afford not too, or they can afford to buy it elsewhere.

As for you and me, who can't afford to make big purchases elsewhere (or retire to a Carribean island), we get stuck shouldering the tax.

Although one of the benefits of a sales only tax would be forcing people to save and invest money. Of course, that means less going into the economy.
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Old 06-19-2003, 02:02 PM   #12
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Quote:
Originally posted by Rebelious Youth



Why wouldn't the rich people like it? As I see it, the middle and lower class wouldn't like it. The rich would pay less in taxes and the low and middle class would pay more. I'd like to see the low and middle class pay their fair share.
Actually rich people wouldn't really like it. Because the upper class is able to take advantage of the tax code enough to have an effective tax rate lower than the middle/working class (basically, Americans without real property). I know my parents are able to.

Flat taxes are preferrable, so long as they increase the income to the government. A lot of resources are wasted on doing taxes.
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Old 06-19-2003, 02:04 PM   #13
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Originally posted by RATyson


I'm not sure if you are getting the gist of what I'm saying. Everything that you buy will be CHEAPER that it is now. So it isn't that we will be paying an 'Extra' 23%.. we will be paying 'Only' 23%, instead of about 30% in hidden taxes.

Maybe you are saying that people would start a black market just to get out of paying any tax at all. Am I correct? If so, how do you propose that they will get the items to sell on this black market?
Yes that is absolutely what I was saying, they will get the items to sell from outside the country. You cannot control thousands of miles of borders and shoreline, it's just impossible.
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Old 06-19-2003, 02:06 PM   #14
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You can't really spend your money outside the US since customs can still tax you for goods bought outside the US and brought back as well as any lengthy time spent living outside the US to dodge taxes will only require the person to then pay taxes to the country that they are staying in. A flat tax also doesn't mean that people on welfare pay into the system (unlike unemployment where its taxed), drug dealers, illegal aliens and other people working off of the books.

The entire trickle down theory is a joke so can we stop acting like there is actually a trickle cause it rarely trickles down especially in any kind of ratio that is favorable to the would be employees who its meant to help in the long run.

Either way I already invest my money, have zero faith in social security and buy as much as I can when I go over to Canada. However its only Cuban cigars and Moslon XXX that I am picking up in Canada.
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Old 06-19-2003, 02:17 PM   #15
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Yes that is absolutely what I was saying, they will get the items to sell from outside the country. You cannot control thousands of miles of borders and shoreline, it's just impossible.
I'll have to look through the research to see how that is addressed, if it is addressed. But it seems highly unlikely that the implementation of this type of consumption based tax system would lead to the birth of a black market economy. It just wouldn't be practical enough to make any money.
I'm sure it is possible that there would be pockets of resistance to the sales tax in this way.. but I don't see it as being any worse than the people who are already evading taxes today.
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Old 06-19-2003, 02:19 PM   #16
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Originally posted by RATyson


I'll have to look through the research to see how that is addressed, if it is addressed. But it seems highly unlikely that the implementation of this type of consumption based tax system would lead to the birth of a black market economy. It just wouldn't be practical enough to make any money.
I'm sure it is possible that there would be pockets of resistance to the sales tax in this way.. but I don't see it as being any worse than the people who are already evading taxes today.
Of course it would be worse, there would be more money to be made, A LOT more money. Why do you think that drug crime is such a problem? It's not about drugs, it's about money.
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Old 06-19-2003, 03:01 PM   #17
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Of course it would be worse, there would be more money to be made, A LOT more money. Why do you think that drug crime is such a problem? It's not about drugs, it's about money.
I think this may have some info you are looking for to answer your concerns. I have a small clip from a paper that can be found here: http://www.fairtax.org/pdfs/theundergroundeconomy.pdf

Here is the clip:

Some of the problems regarding the underground economy that exist under the income tax would
remain under the FairTax, particularly those involving cash transactions made in the illegal
economy or with the explicit intent of evading taxation. However, as the costs of compliance
shrink and the perceived fairness of the tax system increases, some of the hostility to the tax
system will decline. People who are in non-compliance because they perceive the present system
as unfair or illegitimate may choose to comply with the FairTax. Most importantly, because of
lower marginal tax rates, the benefit from lawful tax avoidance or illegal tax evasion will be
much less at the margin relative to either the present system15 or competing alternative tax
systems, such as the USA Tax or flat tax16, that have higher marginal tax rates, particularly on
wages or self-employment income.17 Research has confirmed the intuitive relationship between
higher marginal tax rates and higher rates of evasion.18 Lower rates, all other things being equal,
imply lower evasion because the benefits from evasion decline while the costs of evasion remain
comparable.
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Old 06-19-2003, 03:17 PM   #18
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I'm opposed to taxes period.

As an interim step, though, I'd like to see taxes be a flat amount per person; ie a service fee rather than a way to redistribute income. It should not be deducted from pay but should be a monthly bill like many other bills.

At the moment it would be about $1000/per adult per month. Yes, I know many people could not afford that, which is one of this idea's good points; they would quickly elect people who would lower taxes.
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Old 06-19-2003, 03:20 PM   #19
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RAT et all...

Is there any country currently using the consumption tax or flat tax?
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Old 06-19-2003, 03:44 PM   #20
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Quote:
Originally posted by Mike Wevrick
I'm opposed to taxes period.

As an interim step, though, I'd like to see taxes be a flat amount per person; ie a service fee rather than a way to redistribute income. It should not be deducted from pay but should be a monthly bill like many other bills.

At the moment it would be about $1000/per adult per month. Yes, I know many people could not afford that, which is one of this idea's good points; they would quickly elect people who would lower taxes.
I would have to say that this is a completely ridiculous plan. It would create many more problems than it would cure.
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Old 06-19-2003, 03:58 PM   #21
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Quote:
Originally posted by Rebelious Youth



Why wouldn't the rich people like it? As I see it, the middle and lower class wouldn't like it. The rich would pay less in taxes and the low and middle class would pay more. I'd like to see the low and middle class pay their fair share.
rich people dont like being taxed
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Old 06-19-2003, 04:04 PM   #22
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Well, it depends whether you think the purpose of taxes should be to pay for gov't services or to redistribute income. Right now it mostly does the latter.

How about this: We add to my plan a "Success Punishment Tax" of 30% on all incomes over $40,000 a year. Businesses that create jobs and useful services and products also pay a 30% "Success Punishment Tax." Anyone who makes less than $20,000 a year gets a "Failure Reward" that brings their income up to $20,000. Anyone with kids gets $1000/year each "Force Everybody Else to Pay for the Kids You Can't Afford Bonus"

Does this sound familiar?
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Old 06-19-2003, 04:17 PM   #23
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HAHAHAHA Thats a quacktastic idea!!

That is, in a nutshell, exactly what we have now. And unfortuently it ain't goin anywhere anytime soon.
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Old 06-19-2003, 04:28 PM   #24
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Quote:
Originally posted by RATyson


I think this may have some info you are looking for to answer your concerns. I have a small clip from a paper that can be found here: http://www.fairtax.org/pdfs/theundergroundeconomy.pdf

Here is the clip:

Some of the problems regarding the underground economy that exist under the income tax would
remain under the FairTax, particularly those involving cash transactions made in the illegal
economy or with the explicit intent of evading taxation. However, as the costs of compliance
shrink and the perceived fairness of the tax system increases, some of the hostility to the tax
system will decline. People who are in non-compliance because they perceive the present system
as unfair or illegitimate may choose to comply with the FairTax. Most importantly, because of
lower marginal tax rates, the benefit from lawful tax avoidance or illegal tax evasion will be
much less at the margin relative to either the present system15 or competing alternative tax
systems, such as the USA Tax or flat tax16, that have higher marginal tax rates, particularly on
wages or self-employment income.17 Research has confirmed the intuitive relationship between
higher marginal tax rates and higher rates of evasion.18 Lower rates, all other things being equal,
imply lower evasion because the benefits from evasion decline while the costs of evasion remain
comparable.
Respectfully, that is a load, the benefits of the "undergound ecomony" would increase due to taxation being limited to the realm of goods. In addition, the ease of subverting the system would increase substantially, the reason that income taxes work to some degree is because it is difficult for an employer to "hide" wages that it pays. This would not be the case if taxes were tied entirely to goods. The things is I knid of liek th idea of having taxes tied to consumption, I jsut wnat to find a way to avoid the kind of crime and violence that we have with the underground drug market, due to it's profitability. I can't see a way to do this without becomeing a police-state which monitors every transaction.

Also, I'm wondering how will this do away with state sales taxes? Many states rely on sales tax for a great deal of their revenue, will that need dissappear?
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Old 06-19-2003, 04:37 PM   #25
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Quote:
Originally posted by Brad Pittiful


rich people dont like being taxed

Nobody likes paying taxes.


But paying 20% is less than paying 33%. That's the point. Everybody pays 20%.




If 10% of the population pays the bulk of the taxes then the 90% aren't paying their share. When everybody pays the same percentage, you have more tax revenue and less governemnt overhead.


If you find my the average salary for the US and the tax rate breakdown I'll prove it to you.
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