The FairTax - Familiar With It? Never Heard Of It? - Page 2

The FairTax - Familiar With It? Never Heard Of It?

This is a discussion on The FairTax - Familiar With It? Never Heard Of It? within the Off Topic & Humor Discussion forums, part of the The Back Porch category; Originally Posted by BluesStringer LastManStanding, even if income taxes could legitimately be called unconstitutional at one time in our history, it cannot be any longer. ...

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Thread: The FairTax - Familiar With It? Never Heard Of It?

  1. #16
    Member Array LastManOut's Avatar
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    Quote Originally Posted by BluesStringer View Post
    LastManStanding, even if income taxes could legitimately be called unconstitutional at one time in our history, it cannot be any longer. I'm baffled as to how politicians convinced enough Americans to get the 16th Amendment passed, but even if there is controversy about how it got passed, it's been an amendment as far as the government is concerned for almost 100 years now. You'll get nowhere advocating for repealing the 16th and advocating for the notion that we, as citizens, have no responsibility to fund government. You can choose to fight for something that has a slim chance of getting passed, like The FairTax, or continue to fight for something that has absolutely no chance of even being considered within government. That's up to you, but I would ask again that you take your advocacy for something having absolutely nothing to do with the subject of this thread someplace else. Please.
    Sorry, I thought I was ADDING to the discussion of advocating/opposition to a Fair Tax Plan. I may disagree with your position of advocacy, but I believe you can respect my position nonetheless.

    My only position is, I think you would agree, is to drastically cut wasteful spending and "pork-barrel" projects FIRST, then let's talk about the responsibility of funding the Federal Government.
    LMO, OUT!


  2. #17
    Member Array BluesStringer's Avatar
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    Quote Originally Posted by LastManOut View Post
    Sorry, I thought I was ADDING to the discussion of advocating/opposition to a Fair Tax Plan. I may disagree with your position of advocacy, but I believe you can respect my position nonetheless.

    My only position is, I think you would agree, is to drastically cut wasteful spending and "pork-barrel" projects FIRST, then let's talk about the responsibility of funding the Federal Government.
    LMO, OUT!
    Well, obviously I don't agree that spending cuts must be talked about first, thus the title of this thread having nothing at all to do with that subject, and everything to do with The FairTax reform proposal.

    Of course I believe strongly that spending is run-amok, and you and I probably would agree on much in a discussion of that topic. That's not the topic being discussed here however, regardless of your rude and persistent attempts to make it such.

    Blues
    "A free people ought not only to be armed and disciplined, but they should have sufficient arms and ammunition to maintain a status of independence from any who might attempt to abuse them, which would include their own government." -- George Washington

  3. #18
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    Question Consumption Tax

    As I previously stated, philosophically, I would welcome a consumption based tax whereby those that consume more pay more, and there is no tax on savings or investment.

    What I do struggle with, however, is the transition from one tax regime to another on a "cliff" type basis. As I've done done a minor bit of reading (without actually crawling into the proposed statutes and mucking around, which is my day job), I ran across this:

    The FairTax delivers a tax holiday on IRAs and other tax-deferred plans. The income tax imposed on investment income and pension benefits or IRA withdrawals is repealed. No form of savings or investment is taxed. Pension funds, IRAs, and 401(k) plans had assets of over $11 trillion in 2003.9 An income tax deduction was taken for contributions to most of these plans. All beneficiaries and owners of these plans expected to pay income tax on them upon withdrawal, but are not required to do so once the income tax is repealed. Roth IRA owners and post-tax retirement savers break even.

    The IRA and retirement plan provision does in fact make this tax neutral for those with retirement plan assets. It does so by eliminating income tax on the distribution and replacing it with the proposed consumption tax. It works because the IRA and retirement plan balances were never taxed for income tax purposes.

    To state the Roth IRA and post-tax retirement savers break-even is beyond me, however.........to wit (and please bear with me):

    The after tax savings (Roth IRA and post-tax savings) are accumulation that were already taxed. So for every $1 dollar in the "plan" it took $1.53 in income before tax to accumulate $1 after tax. Proof:

    $1.53 X .35 (assumed income tax rate of 35%) = $.53 income tax
    $1.53 - .53 = $1.00

    Thus, the $1.00 in after tax savings has already born $.53 in tax. The retiree that then spends the $1.00 that was saved on an after tax basis then pays another $.23 in tax based on the rates utilized in the proposal. This is from the example of "inclusivity" in the first response to my queries: A $.77 item is taxed at 30%, thus the total cost is $.77 plus tax of $.23 for the $1.00 spent in total.

    So, the person that spends the $1.00 in after tax savings has actually been subject to taxation burden in total as follows:

    Income tax $.53

    Sales tax $.23


    Total tax $.76


    This is a rather high tax rate, in total, and especially when compared to just the original $.53. It actually represents a 43.4% increase in tax burden on that person. Thus, I don't understand this comment:

    Roth IRA owners and post-tax retirement savers break even.

    A 43% increase in tax is hardly "break-even"!

    I'm not attacking anyone, or making straw-man arguments. I'm just asking questions, and analyzing this just like any other proposed legislation I've seen the last 27 years.

    This is not a thread on government waste and excessive government size. Both are pandemic. Personally, I believe we need to starve the governments (all of them, and the ISD's too) to a more modest and appropriate size to accomplish their missions. But, this is a thread on tax policy. It is a policy discussion.

    Secondly, the US Supreme Court has held, long ago, that there are basic fundamental rules of taxation, which, if followed, make taxation perfectly legal. End of discussion. If you want to argue otherwise, go to a "Tax Protester" site or hold your tongue. I've heard them all. I've read them all, there's not an original or novel argument in the whole of them. Until the Congress eliminates taxation and the Supreme Court upholds the validity, you're wasting time. Sorry to be so brusque. That's just the way it is. Sorry. 27 years of working within the system just makes me grumpy, I guess. Please don't take it personally.

    I've started to get interested in this topic, and most of my questions have been answered, so as of now, I'm just reading for entertainment.


    The tyrant dies and his rule is over, the martyr dies and his rule begins. ― The Journals of Kierkegaard

  4. #19
    Senior Member Array Shadowsbane's Avatar
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    A few comments.

    1) Why do you think that the current tax system became so complicated? Part is excessive government spending but the other part is the fact that all these special interest groups are constantly lobbying for support of their clients though breaks in the tax code. How many thousands of pages of tax code are there? The FairTax eliminates those individual tax breaks.

    2) Right now there are an estimated 12-20 million illegal aliens in our country. Under the FairTax they are now taxpayers. As are all drug dealers. and tourists.

    3) I failed to see mention of the Prebate program that goes into affect with the enacting of the FairTax. This is a program for every single ''legal'' family (or individual) in this country. What it does is it factors in your cost of living by location and gives you a "rebate" for any taxes you spend up to the poverty line for life"s essentials. Income level does not matter. Make a million or make a penny and you get that rebate. As long as you have a valid tax ID number.

    4) Buy a used car or other used item, and it is tax free. As all items are taxed only one time under the plan.


    5)For the younger crowd imagine keeping 100% of your paycheck. Imagine how easily you could save up for a house, or college with that. (or imagine the number of bullets one could purchase :) ) For the older crowd, you will benefit from the prebate checks(just like everybody else) and the fact that any interest that your accounts earn will be tax free from that point forward. No more penalties for using that cash early, and no taxes paid on any pension payments. Also any items property or money you want to leave for your heirs is tax free for them, so none of that stupid death tax nonsense.

    6) The issue with government spending is a very important one, but a separate issue than the one at hand. First one must break the idea in peoples heads that they need the government in their personal lives. Best way to do that is to promote individual growth, give them away to pull themselves out of the mud. The fairtax does that. In ways no other tax system can. Once more people are weened from the control of the government they will vote for people who share those views, and like magic government spending goes down.

    Finally under this plan we become the world's largest tax shelter. All those nice companies that are moving their headquarters overseas to avoid the oppressive taxation here, will be coming back, and they will be bringing friends. That means jobs, and lots of them. It would be come a buyers market so to speak. As there are only so many people to fulfill these jobs. So wages would go up by necessity, for if a company refused to pay a competitive wage their competitors probably would be.

    Shadowsbane.
    Now, we must all fear evil men. But there is another kind of evil which we must fear most, and that is the indifference of good men.

    www.Lonelymountainleather.com

  5. #20
    Distinguished Member Array Chooie's Avatar
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    I've been a longtime supporter of the FairTax, and even have an autographed copy of the Boortz/Linder book. As much as I support the plan, I'm afraid that the general population of this country has no fathomable clue as to how it really works, having been subject to the spin of its opponents.

  6. #21
    VIP Member Array SammyIamToday's Avatar
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    Quote Originally Posted by goawayfarm View Post
    I probably didn't explain myself very well...........I'm NOT avocating the same PERCENTAGE tax burden, I'm advocating the exact same taxfor everyone.....YOU PAY THE SAME DOLLAR amount that I & everybody else would pay. What ever that dollar amount would be........If I pay $2000 & make $10,000/yr, you would pay $2000.00/yr if you made $100,000/yr.......everybody pays exactly the same amount....that would be a fair tax.
    That's a flat tax. I'd be all for that too. Anything other than the stupid graduated taxation that punishes you for being successful.
    ...He suggested that "every American citizen" should own a rifle and train with it on firing ranges "at every courthouse." -Chesty Puller

  7. #22
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    Taxation drives economic behavior. Here's a portion of this proposal that has an obvious immediate impact:

    The FairTax taxes only new goods and services........They can buy used cars, used appliances, used homes, even used clothing. They are very much in control of their tax burden.

    So, the price of used goods will increase! For instance, a new GMC Yukon at $50,000 has an additional $15,000 (30%) tax levied on it. A fresh "used" one has $0. That's a $15,000 immediate incentive to buy a used one.

    Simplistic? Yes! It does not recognize the arguments that the price of the GMC will decrease in actuality at enactment if their estimates are correct, but it is a relative argument, so that does not really apply.

    How would you like to be the schmuck that bought a new one for $50,000, and the next day the sticker price goes down, to say $40,000 so your used car immediately gets an instant $15,000 "haircut".......not very fun.

    Back to the used example, the demand for gently used GMC's (say 2-3,000 miles as an "executive car") would soar, ergo the price of used vehicles would soar.......... Not more than $15,000 though, as the "upper limit"..........

    Again, not arguing, just pointing out matters that affect how a tax like this can really work.........

    Darn! And I used to come here to get away from taxes!
    Last edited by Rock and Glock; October 1st, 2007 at 05:54 PM. Reason: Correct a typo


    The tyrant dies and his rule is over, the martyr dies and his rule begins. ― The Journals of Kierkegaard

  8. #23
    Member Array mousehunter's Avatar
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    Congress/Senate have 3 major sources of pork they can award thier donors. Government contracts, tax benefits, and favorable industry regulation.

    I seriously doubt any discussion as to eliminating 1/3rd of their power to get contributions is anything more than rhetoric to appease voters - it will never happen.

  9. #24
    Member Array BluesStringer's Avatar
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    Shadowsbane, thank you for the knowledgeable post, it's refreshing. I only caught one minor mistake in it, when you said:

    What it does is it factors in your cost of living by location and gives you a "rebate" for any taxes you spend up to the poverty line for life"s essentials.
    Everything is accurate except for the "by location" part of the equation. The rebates will be distributed based solely on the nationally-published poverty levels regardless of location. The important thing to remember though, is that the government's poverty numbers are based on averages from across the country, so the cost of living in a given area is likewise accounted for through averaging.

    Here is the schedule that would've been paid out the year that The FairTax Book was published, which, if I'm not mistaken, was 2005:



    Here's the most current schedule available. The numbers are taken from the government poverty level publishings as of Jan, 2007:



    Rock and Glock, I realize that some, or maybe even most, of your last couple of posts are your own figures and analysis, but you also quote a couple of things that you said you ran across. It would help me a lot to confirm or debunk those quotes if you would tell me where they're from.

    As far as your calculations which show a 40-some-odd percent increase in the tax burden on retirement and Roth accounts, I can confidently say that that is not accurate. However, I can't show you why until I dig through some files that I haven't reviewed for quite some time. If I don't address that particular subject within the next couple of days, please remind me, but don't think I'm ignoring it or dodging having to respond to it. Thanks.

    Blues
    "A free people ought not only to be armed and disciplined, but they should have sufficient arms and ammunition to maintain a status of independence from any who might attempt to abuse them, which would include their own government." -- George Washington

  10. #25
    Moderator
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    My quotes came from the "White Papers" here:

    http://www.fairtax.org/site/PageServ...about_research

    On non-tax deferred accounts (e.g. after tax savings):

    The Roth and after tax savings figures are reasoned. Roth and non-tax preferenced savings (e.g. after tax savings) are accumulations of money after income tax has been paid on the income earned to accumulate those amounts. Thus, to put $1.00 in a Roth, you have to earn $1.53 (if you're in the 35% tax bracket) as follows: Earn $1.53 subject to a 35% income tax of $.53 (35% of $1.53). $1.53 minus $.53 equals $1.00.

    So, based on the above, you've already paid $.53 in tax to have that $1.00 after tax!

    If you then spend that $1.00 and pay a 23% inclusive sales tax tax, you actually paid $.53 plus $.23 in tax, or $.76 in total!

    $.76 minus $.53 equals $.23, when divided by $.53, is 44%, roughly.

    On taxed deferred accounts (e.g. 401(k)'s, Traditional IRA's, 403(b)'s, etc.) this is what my prior post stated:

    The FairTax delivers a tax holiday on IRAs and other tax-deferred plans. The income tax imposed on investment income and pension benefits or IRA withdrawals is repealed. No form of savings or investment is taxed. Pension funds, IRAs, and 401(k) plans had assets of over $11 trillion in 2003.9 An income tax deduction was taken for contributions to most of these plans. All beneficiaries and owners of these plans expected to pay income tax on them upon withdrawal, but are not required to do so once the income tax is repealed. Roth IRA owners and post-tax retirement savers break even.

    The IRA and retirement plan provision does in fact make this tax neutral for those with retirement plan assets. It does so by eliminating income tax on the distribution and replacing it with the proposed consumption tax. It works because the IRA and retirement plan balances were never taxed for income tax purposes.

    Relax, I don't demand fast answers. If my logic is flawed, let me know.


    The tyrant dies and his rule is over, the martyr dies and his rule begins. ― The Journals of Kierkegaard

  11. #26
    Restricted Member Array SelfDefense's Avatar
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    Currently, the top 50% of wage earners pay 95% of the taxes. Exactly what incentive does the bottom 50% have to change the system?

    Welcome to socialism.

    The first step is not changing the tax code or vacating the Sixteenth Amendment, but rather it is to change the voting demographics. Until we only allow those with a stake in America (the current taxpayers) to vote we will continue the inexorable, slow, torturous march to a European type socialism.

    I am a firm supporter of the Fair Tax. Even if it personally costs me money, it is good for the future of the United States of America.

  12. #27
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    Quote Originally Posted by SelfDefense View Post

    Until we only allow those with a stake in America (the current taxpayers) to vote we will continue the inexorable, slow, torturous march to a European type socialism.
    Methinks that would run afoul of the 24th Amendment, to wit:

    The 24th Amendment, ratified in 1964, outlawed the use of any tax as a pre-condition in voting in Federal elections. The 1966 Supreme Court case Harper v. Virginia Board of Elections extended this explicit enactment as a matter of judicial interpretation of a more general provision, ruling that the imposition of a poll tax in state elections violated the Equal Protection Clause of the 14th Amendment to the United States Constitution. This is one of several rulings that rely on the Equal Protection Clause of the 14th Amendment rather than the more direct provision of the 15th.


    The tyrant dies and his rule is over, the martyr dies and his rule begins. ― The Journals of Kierkegaard

  13. #28
    Restricted Member Array SelfDefense's Avatar
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    Quote Originally Posted by Rock and Glock View Post
    Methinks that would run afoul of the 24th Amendment, to wit:

    The 24th Amendment, ratified in 1964, outlawed the use of any tax as a pre-condition in voting in Federal elections. The 1966 Supreme Court case Harper v. Virginia Board of Elections extended this explicit enactment as a matter of judicial interpretation of a more general provision, ruling that the imposition of a poll tax in state elections violated the Equal Protection Clause of the 14th Amendment to the United States Constitution. This is one of several rulings that rely on the Equal Protection Clause of the 14th Amendment rather than the more direct provision of the 15th.
    Just to clarify, I am not recommending a poll tax. I do support the Founders' intent: those (and only those) with a stake in America should be allowed to vote. There is noright to vote in the Constitution, which is why some Amendments prohibit disctimination based on well defined vriteria.

    Those milking entitlement programs (including illegal aliens) should not be allowed to vote until they become productive citizens. That is the only way we can escape from the inevitable road to socialism, which is why the liberals are trying to provide more and more entitlements for the middle class.

  14. #29
    Moderator
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    Quote Originally Posted by SelfDefense View Post
    Just to clarify, I am not recommending a poll tax. I do support the Founders' intent: those (and only those) with a stake in America should be allowed to vote. There is noright to vote in the Constitution, which is why some Amendments prohibit disctimination based on well defined vriteria.

    Those milking entitlement programs (including illegal aliens) should not be allowed to vote until they become productive citizens. That is the only way we can escape from the inevitable road to socialism, which is why the liberals are trying to provide more and more entitlements for the middle class.
    I agree philosophically, but the "tax" as defined in the 24th and thereafter includes most all taxes.

    I would certainly think Proof of Citizenship should suffice, whatever that may be............birth certificate, USA Passport, naturalization papers, etc....but not that <gasp> "National ID Card"!


    The tyrant dies and his rule is over, the martyr dies and his rule begins. ― The Journals of Kierkegaard

  15. #30
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    This is interesting and depressing. I don't see a very bright future for us.

    Austin

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