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Thread: A lower flat tax rate with NO deductions from taxable income?

  1. #1
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    A lower flat tax rate with NO deductions from taxable income?

    A lower flat tax rate with no deductions from taxable incomes is an excellent description of a general sales tax. The “Fair tax” grants tax consideration for lower income earners outside of the sales tax itself.

    I'm a proponent (to the greatest extent feasible) we transfer our federal revenue sources from income taxes to a general sales tax.

    Respectfully, Supposn

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    Quote Originally Posted by Supposn View Post
    A lower flat tax rate with no deductions from taxable incomes is an excellent description of a general sales tax. The “Fair tax” grants tax consideration for lower income earners outside of the sales tax itself.

    I'm a proponent (to the greatest extent feasible) we transfer our federal revenue sources from income taxes to a general sales tax.

    Respectfully, Supposn
    Since such a tax would gut the income of the US government to a miniscule portion of its current tax revenue, what would you cut from the budget? Would you significantly reduce military spending? Would you eliminate or severely cut Medicare or Social Security? You would have to make very significant cuts in all of these programs if this tax plan would become a reality since these programs make up the majority of government spending.

    Alternatively, if you want to limit how much you cut government spending (which is mainly composed of military spending, Social Security and Medicare), you could make the sales tax very high and would have to also implement it on high value items such as houses and cars. This would mean that the great majority of tax burden would shift from the rich to the Middle class and that the Middle Class would be effectively much poorer than it is now. This would also mean that it would purchase much less. Since the main drive of the US economy is the purchasing power of the Middle Class, this would mean that the whole US economy would decrease significantly.

    I would be quite interested to see if you have any specific answers to these concerns - mainly answers that address the numbers. In other words, I wonder whether you have thought through the consequences of such a tax in detail or whether this is a philosophical issue involving your opinion that such a tax would be more fair.

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    It certainly can be revenue nuetral

    Another Opinion, transferring any portion of income taxes’ or payroll taxes’ can and should be drafted as to be revenue neutral.

    The determining factors are the amounts of revenue lost due to reduction of income and payroll taxes and the revenue gained due to the enactment or increases of the replacing sales tax. You’re contending the replacement of any portion of income taxes to a sales tax cannot be revenue nuetral. Your contention is nonsense.

    Refer to the discussion thread entitled “Fair tax” within this board.

    Respectfully, Supposn

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    Quote Originally Posted by Supposn View Post
    Another Opinion, transferring any portion of income taxes’ or payroll taxes’ can and should be drafted as to be revenue neutral.

    The determining factors are the amounts of revenue lost due to reduction of income and payroll taxes and the revenue gained due to the enactment or increases of the replacing sales tax. You’re contending the replacement of any portion of income taxes to a sales tax cannot be revenue nuetral. Your contention is nonsense.

    Refer to the discussion thread entitled “Fair tax” within this board.

    Respectfully, Supposn
    Giving you the benefit of the doubt, I did go ahead and look at both Fair Tax threads. Just as I suspected, there was very little in the form of detailed analysis of the economics behind the "fair" tax - mostly philosophical discussions of fairness and unsuported claims that a certain percentage of sales tax would give revenue neutrality. It was clear that the fiscal concerns of those debating against the "fair" tax were very largely ignored by those who supported the "fair" tax - including yourself.

    If you are not willing to go into details yourself, then please point to a web site that specifically goes into the DETAILS of the economics behind the "fair" tax and does address the arguments of the opposition.

    As long as the arguements of the opposition are ignored, there is no reason to take proponents of the "fair" tax seriously. No major mainstream politician is taking "fair" tax seriously, so I doubt that the "fair" tax proponents have any good answers to give, but I would prefer to give you the benefit of the doubt and await those answers...

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    Another Opinion, I’ve posted a discussion thread entitled “FICA’s the most regressive federal tax”.

    This discusses transferring a portion of our tax revenue from our FICA payroll tax to a federal sales tax. We are aware of the revenue we derive from our current 15.3% FICA tax upon our (statistically effectively) entire USA payrolls. We are not absolutely certain as to the relative proportion of USA’s payrolls and our total gross sales. We don’t know what exceptions and/or loop holes the U.S. Congress may choose to incorporate if and when we enact a federal sales tax.

    Discussing transference of the revenue sources (from FICA to a sales tax) are incomplete and/or unconfirmed information and determinations requires us to employ suppositions, approximations and guesstimates. I regret that the discussion is not as explicit as we would wish it to be. If you find a superior discussion of the topic with more quantitative and accurate data, please forward the address link to me.


    We know a great deal less about our income tax base rather than our payroll tax base. The U.S. Congress and all the rest of us are much more in disagreement as to what is and what should be considered as net income. Discussing transference of income taxes to a sales tax revenue source is necessarily less explicit than discussing transference from the FICA payroll tax.

    Respectfully, Supposn

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    Quote Originally Posted by Supposn View Post
    Another Opinion, transferring any portion of income taxes’ or payroll taxes’ can and should be drafted as to be revenue neutral.

    The determining factors are the amounts of revenue lost due to reduction of income and payroll taxes and the revenue gained due to the enactment or increases of the replacing sales tax. You’re contending the replacement of any portion of income taxes to a sales tax cannot be revenue nuetral. Your contention is nonsense.

    Refer to the discussion thread entitled “Fair tax” within this board.

    Respectfully, Supposn
    The GAO ran numbers on the "fair tax" a couple years ago and they found that not only would it gut federal revenue, the cost of enforcement/collection would be HIGHER than it would be with the current tax system.

    They also provided the ONLY peer reviewed tax rate numbers to date and found that the tax rate would have to be over 38% for it to be effective. The fair tax is a simple(ton) solution to a difficult problem.

    That said, the solution to our current problem (which is essentially insolvency) is not as complex as many would make out. First, we need to cut spending, especially military spending, by a HUGE margin. Our military is LITERALLY designed and funded to re-fight WWII. The odds of having to fight a major two theater war in the foreseeable future is somewhere between slim and none.

    Second, we need to tax. And tax heavily. And we need to tax the rich, because they are the only ones who have enough money to actually make a difference. Trying to spread the tax burden "evenly" between the poor, the middle class, and the wealthy is just plain stupid. Then we need to go back and look REAL HARD at our corporate taxes and decide which "investment" activities we actually want to encourage with a low tax rate. Purchasing stock in an IPO of a promising young company, of course we should encourage that. That is NOT where most companies wall street investment profits come from, though. The truth is that companies make trillions of dollars a year in what amounts to computerized day trading on the stock market. That is why we can see 60% of individual investors pull OUT of the stock market in the last year, and the market still climbs. Laws of supply and demand tell us that should be impossible. The money left, prices should fall. They are kept artificially high by a never ending stream of computerized trades and commission churning junk trades from the big investment brokerages. And we REWARD this activity with a low tax rate and when you suggest that we should RAISE it you end up with a bunch of know-nothing bafoons arguing that raising capital gains taxes will stifle investment.

    The last head of the GAO resigned in disgust because he kept telling congress that if we continues as we have been doing, the US will end up a third world nation. He resigned and it appears he is going to spend the rest of his life on a SELF FUNDED lecture circuit trying to get the american people to listen to what he is saying and do some simple math.

    The head of our federal reserve (Bernanke) literally sat in front of congress last year and told them that the first thing he does every morning is check bond rates to see if US treasuries have crashed overnight.

    Frankly at this point the "fair tax" is little more than a mildly interesting case of mental masturbation at best. At its worse it is a rallying cry for those who are dumb enough to believe in something for nothing.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    Second, we need to tax. And tax heavily. And we need to tax the rich, because they are the only ones who have enough money to actually make a difference. Trying to spread the tax burden "evenly" between the poor, the middle class, and the wealthy is just plain stupid.
    I actually crunched these numbers recently. It is on my other computer but if I remember correctly you'd have to triple current middle class tax rates (basically aligning them with current rich person tax rates) in order to equal a tax increase of 3-4% from tax payers of $500k. I'll post the data when I get to work tomorrow. It was pretty remarkable. The middle class really has nothing to give.

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    Daewoo, refer to the first message of the thread entitled “The “fair” tax” that was posted on August 26, 2010.

    I do not believe that the “Fair tax act” as drafted and proposed to the U.S. Congress is feasible. I’m certain that it would be additionally expensive and imprudent to enact the transfer of the entire federal income and payroll taxes to be replaced by a general sales tax upon a single date.

    I doubt that an acceptable rate of sales tax could replace our entire federal income and payroll taxes.

    Such transfers must be enacted in incremental simultaneous steps. If I’m incorrect, a general federal sales tax will eventually replace all federal income and payroll taxes.

    If I’m correct than after one of the incremental steps the sales tax will approach an unacceptable rate and the transfers will be interrupted if not entirely ceased.

    To any feasible extent we enact such transfers of our revenue sources, we will achieve net economic and social benefits for our nation.

    Respectfully, Supposn

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    Fact Check

    Quote Originally Posted by daewoo View Post
    The GAO ran numbers on the "fair tax" a couple years ago and they found that not only would it gut federal revenue, the cost of enforcement/collection would be HIGHER than it would be with the current tax system.

    They also provided the ONLY peer reviewed tax rate numbers to date and found that the tax rate would have to be over 38% for it to be effective. The fair tax is a simple(ton) solution to a difficult problem.
    Also, I think you are thinking of the Bush tax reform commission and this result here: http://www.taxpolicycenter.org/Uploa...ak_5-16-05.pdf

    The rate would have to be over 41% (exclusive) now according to the report. Wow!

    Plus:

    Sales tax advocates sometimes claim that the NRST would be more effective than the current system of raising revenue from the underground economy, but that prospect seems unlikely. Other countries have attempted to implement some variant of a national retail sales tax with little success on the enforcement front when rates climb to more than 10 percent. For all of those reasons, several commentators have concluded that national retail sales taxes would face significant evasion and avoidance if the sales tax rate crept up much beyond 10 percent.

    So looks like Daewoo is an optimist. Who knew?

  10. #10
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    Spending cuts & the miitary budget

    Daewoo, every political party and politician agrees that we must decrease government expenditures (until we reach the determination of which specific expenditures we should reduce).

    I happen to concur with your targeting the military budget.

    The European Union can afford to defend themselves. We need not subsidize European defense budgets.

    USA’s invasion of Iraq upset the balance of powers in the Middle East. We have increased Syria’s and Iran’s ability to affect and/or interfere with USA’s foreign policy in the region.

    We’re being forced to maintain our presence in the region at great expense of wealth and of some expense of American blood due to our foolish foreign adventures. We have not decreased the bleeding of Iraq or Afghanistan populations.

    I agree there are good reasons for federal military not being employed as domestic police forces. If our nation cannot utilize the military to secure our own borders, why are we attempting to seal off the borders of Afghanistan and Iraq? We can’t protect ourselves from Iranian crossers.

    We are unable to grant democracy to other nations. We could better advance the concept of democracy in the world if we properly counted votes cast within our own state elections.

    Respectfully, Supposn

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    Special strokes for special folks

    Daewoo, I disagree that “we need to go back and look REAL HARD at our corporate taxes and decide which "investment" activities we actually want to encourage with a low tax rate”. I’m absolutely opposed to government determining which incomes are deserving of preferential treatment.

    Any favorable tax treatment of a classified income or investment is government’s inhibiting and penalizing other classified incomes or investments. I’m generally opposed to unnecessary government discretion or determination of economic policy, (unless we can logically conclude and overwhelming and long term benefit for such government determinations).

    Refer to the thread entitled “Capital gains income’s tax discount is unjustified”.
    Respectfully, Supposn

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    Quote Originally Posted by Supposn View Post
    Daewoo, I disagree that “we need to go back and look REAL HARD at our corporate taxes and decide which "investment" activities we actually want to encourage with a low tax rate”. I’m absolutely opposed to government determining which incomes are deserving of preferential treatment.

    Any favorable tax treatment of a classified income or investment is government’s inhibiting and penalizing other classified incomes or investments. I’m generally opposed to unnecessary government discretion or determination of economic policy, (unless we can logically conclude and overwhelming and long term benefit for such government determinations).

    Refer to the thread entitled “Capital gains income’s tax discount is unjustified”.
    Respectfully, Supposn
    It's a little late for fairness when we are over our heads in debt. I would absolutely penalize those who companies who don't produce anything.
    Last edited by Steeeeve; 09-21-2010 at 12:52 PM. Reason: missing a word

  13. #13
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    Quote Originally Posted by Supposn View Post
    Daewoo, I disagree that “we need to go back and look REAL HARD at our corporate taxes and decide which "investment" activities we actually want to encourage with a low tax rate”. I’m absolutely opposed to government determining which incomes are deserving of preferential treatment.
    ......... Refer to the thread entitled “Capital gains income’s tax discount is unjustified”. Respectfully, Supposn
    Steeeeve,
    . . . government’s function should be to maintain an equitable playing field and keep the game honest. It should not be government’s function to assist or penalize the players because (in the government’s opinion) they could perform better.

    Of course in explicitly specified situations where there are overwhelming and long term benefits to government’s mandating or prohibiting specified behavior, the government can and should do so.

    I’m not opposed to written laws and regulations but I have a justifiable mistrust for government’s discretionary power. We have courts and judges because we have yet to find superior methods. Judges, juries and panels of persons are not always correct.

    Refer to the threads on the economic board entitled
    “Reduce the trade deficit; increase GDP & median wage”
    posted on September 1, 2010.
    A trade deficit is always, absolutely without exception detrimental to a nation’s gross domestic product, (GDP).

    Respectfully, Supposn
    Last edited by Supposn; 09-21-2010 at 10:56 AM. Reason: spelling

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    Quote Originally Posted by Steeeeve View Post
    I actually crunched these numbers recently. It is on my other computer but if I remember correctly you'd have to triple current middle class tax rates (basically aligning them with current rich person tax rates) in order to equal a tax increase of 3-4% from tax payers of $500k. I'll post the data when I get to work tomorrow. It was pretty remarkable. The middle class really has nothing to give.
    That seems to be the mental block for a lot of people. You have to tax people who have money to pay. If you tax people and they can no longer afford to buy groceries and they die of malnutrition, you reduce your tax base. If you double the middle classes taxes, and they cant afford to pay their mortgage and end up living in the street and lose their jobs because, lets face it, nobody wants to hire people who do not shower regularly, you have not done yourself any favors.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

  15. #15
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    Quote Originally Posted by Steeeeve View Post
    Also, I think you are thinking of the Bush tax reform commission and this result here: http://www.taxpolicycenter.org/Uploa...ak_5-16-05.pdf

    The rate would have to be over 41% (exclusive) now according to the report. Wow!
    That may be what I was thinking of. I recall that in the same report I read about the methodology that several of the "fair tax" groups had used to come up with their numbers and it pretty much amounted to putting a group of unqualified individuals in a room and making up a number. I specifically remember that they included attorneys in the groups. What does an attorney know about government cash flows????

    So looks like Daewoo is an optimist. Who knew?
    I am just a ball of sunshine brightening up every conversation.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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