The Problem with Taxes and the "Fair Tax"

Our current (progressive) system, I contend, is both immoral and fatally flawed. Whether by design (**puts on tin foil hat**) or by accident, it has created a situation where government is funded off a shrinking middle class and borrowing from abroad.

Currently, those making less than $30k a year pay no income tax, although they do pay taxes such as payroll, state and local, gas tax, sin tax, sales tax, etc. Those who are wealthy enough to have significant savings and stocks have the ability to ignore a salary in favor of dividends and other methods of non-payment of their progressive share of income tax. Couples, people with children, homeowners, etc have some loopholes, but those that are middle class and single do not.

This convoluted system of disparity and inequality has created a bitter class war and fueled the more malevolent fires within the marriage debate. The half the middle class wants to see the poor "pay something" and half want to see the rich kick in more.

We cannot ask the rich to pay more because they have the country with a gun to its head. Make me pay more and I ship jobs overseas.

We cannot ask the poor to pay more because of inflation and the cost of living. They'd literally starve paying out even 15%.

So the tax burden is stuck on the larges number of people to pay it: the middle class. Now, people will argue with me that the wealthy pay the largest share and to that I reply only when you include people making between $340-$500k a year. People like myself, the middle to upper middle class pay the largest portion of the tax all across the nation. A family making $340k a year is doing well, but they are also paying out more of their income than anyone else. They aren't living off of dividends and paying capital gains only. A family making $115k a year is in the top 5% and I know that they are not, either.

This country is turning into a crab boil where we are all trying to get to the top and out of hot water. We are fighting and bickering and that squabble is largely due to the tax burden. If we move to a consumption based system (food is excluded) we will both create an equitable tax system with more money in our pockets but also reduce the size of government. I would also propose killing of business tax entirely for companies in the US.

So I present the Fair Tax and hope many of you write your congress person.

 

This is a falsity. They pay taxes on profits whether earned here or overseas and will outsource jobs whenever it is economically profitable to do so.

The so-called "fair tax" is a slickly packaged deal dreamed up by rich guys and is a boondoggle for the richest and shifts even more of the tax burden away from the uber rich to the middle/upper classes.

It is just as susceptible to loopholes and gimmicks that benefit the rich as the income tax is. An example is built in to the "fair" tax itself. Spending on investment is completely excluded from all taxes, which in effect completes the uber's dream of -0- tax on investments.

If you want a tax that is fairly progressive, quit voting in folks who swear to Grover that they won't increase taxes on the ubers.

 

It seems you're trying to cite an insurmountable problem, but the wrong one. The real insurmountable problem is that no politician is going to propose a tax that Leftards will say raises taxes on the poor and lowers them for the rich, which is what a fair tax would do practically. Yes it would be utterly fair, but the Left would be screaming "unfair!" from the rooftops. I don't think you appreciate yet the difficulty of getting such a proposal off the ground.

 

So we should stick with a plan that disincentivises saving, investing and virtually every other economic activity, and simultaneously wonder why the economy tends to meander along like a drunk after a fifth of bad booze, eh iriemon?

There are a lot of problems with the FAIR tax almost all of which have to do with the ease with which the powers that be can tamper with it all in the name of the public good.

 

So we should stick with a plan that disincentivises saving, investing and virtually every other economic activity, and simultaneously wonder why the economy tends to meander along like a drunk after a fifth of bad booze, eh iriemon?

There are a lot of problems with the FAIR tax almost all of which have to do with the ease with which the powers that be can tamper with it all in the name of the public good.

 

The whole OP is completely wrong, take this statement,

The middle class is not funding this nation whatsoever. The top 5% of people in this country account for 60% of the taxes.

http://www.economist.com/blogs/democracyinamerica/2012/07/taxes-and-rich-0

Bottom line is that the wealthy are already paying their fair share.

 

I was about to do a thread on fiscal policy and specifically taxation but this thread pretty much encompasses most of my beliefs on it and some extra parts that I didn't consider. The only thing I would add is where should we make cuts in spending (as obviously with tax cuts you need spending cuts) I would purpose stopping subsidies to all companies, cut back on our over spent military, and a lot less stimulus bills. Though sadly a lot of spending has been done (like the bank bailouts) and it's hard to think how with this much debt and the fact we need to balance the deficit how we would fix these problems as well as stabilizing the economy, though I'm not an economist so my opinions right now could be very wrong.

 

(*)(*)(*)(*) straight. The average family is already paying a higher effective tax rate on federal taxes than Mitt. We don't need to give the Mitts of America even more tax breaks.

 

The only truely "fair tax" is a land value tax with a personal deduction equal to the total value of the nation's land divided by the number of people.
(and likewise a natural resource tax)

I am not saying that having only a land value tax would be practical or desirable, just that it is the only fair tax.

 

That is just income taxes, which make up only 42% of all federal revenue. They pay a much lower % when you add in other federal taxes.

Only when you ignore over half the taxes paid.

 

Not if the effect of the tax cuts is to spur economic growt skeptic.

Iriemon if the effective tax rate the rich pay is already lower than the rate paid by the middle class then lowering the stated tax rate closer to the effective tax while reducing the number of available loop holes will actually increase proceeds not reduce them.

 

Why are you ignoring the 800 lb. gorilla in the room, namely entitlement spending. Surely we could save massive amounts of spending by reducing that also.

 

Why are you ignoring the 800 lb. gorilla in the room, namely entitlement spending. Surely we could save massive amounts of spending by reducing that also.

 

I haven't looked into this much, mostly due to it not being seriously discussed, but have heard it tilts towards favoring the rich.

Gary Johnson support the Fair tax with a prebate for basic necessities.

Since the devil in any tax policy is n the details, I'm not sure if a Fair Tax could be more equitable than a progressive tax. Regardless of what system is in place, we can't afford to have less revenue coming in, even with spending cuts. That's the bitter truth no politician will touch. We need to make do with less while paying at least some more. We're over-extended and need to eliminate any deficits and pare down our debt before we are overrun by the inevitable rise in interest rates.

For instance, last year (FY 2011) the Government took in $2.3 Trillion in total revenues and paid over $450 Billion in interest payments. That's roughly about 1/5 of all revenues going to pay interest on the debt. That's bad enough, but a rise in interest rates will be crippling.

 

EVERYONE can do what Romney has done and if they haven't done so, whose fault is THAT? Start a freakin business!
I can't get a real job anymore and so I started my own little one family company. My wife has a good job which pays our bills paycheck to paycheck but it is my own little company which supports us come tax time, not via our company earnings but via our allowable deductions.... and allows us to keep our home by giving us a good tax refund which we use to pay our home's annual real estate taxes.

Hell... 14%, after deductions, is a HIGH tax rate, IMO. If you pay more, you are tax law illiterate or maybe just too lazy to take advantage of the tax law?

Personally, I would love a flat tax at anywhere under 8% in addition to the mortgage interest and local tax deduction.

 

The problem is competing ideologies on the definition of "fair share". To the Left, the "fair share" is for the rich and middle class to pay for everything and low income people pay not a penny. To conservatives and libertarians, "fair share" means everybody pays the same portion of their income. It's unfortunate, but Americans are bewitched by an entitlement mentality and prefer the Left's definition of fairness, making others pay for everything because they're richer and deserve it. It's why I have scant hope that tax reform will ever really happen.

 

We don't have a revenue problem we have a spending problem. Reduce entitlements and military spending and the problem is solved. Democrats won't touch entitlements and republicans won't touch military, that is the true source of the problem.

 

I agree that the current tax code needs to be dramatically revamped. It's way to full of loopholes and special privileges for the richest.

But you have it completely backwards. We do not need to incentive savings even more. There are trillions sitting in offshore bank accounts doing nothing. Our current system rewards investing too much. We need to stop incentivizing speculative investment and start incentivizing spending.

And the so-called "fair" tax, adding a 30-50% increase to prices, probably isn't going to do that.

 

Who is included in the top 5%? I am in that and I am by no means rich.

 

See above: Start a business... even an Ebay one which costs NOTHING but gives you boocoo deductions. Don't be lazy and you can legally get a lower tax rate than even Obama or Romney.

I don't know what "Loopholes" and "special privleges" exist ONLY for the wealthy.
Please tell us what they are... since I bet I am POOR and take advantage of many of those loopholes you want to complain about? At least Romney said those loopholes would be eliminated ONLY for those who earn over $250K, or something like that?

 

We've had worse growth with lower taxes.

You are misconstruing what I said.

You may be correct. But given that tax revenues are propotionately about $750 billion lower than they were in 2000 and the trillion dollar deficit we have, IMO we need to get back to the the status of 2000, not merely make revenue neutral changes to the tax code.

 

Crap alert! You have no idea how much money is in offshore accounts, much less if it even comes close to the figure of "trillions".

But Zoiasmom, pay attention to this, watch Iriemon and the rest of the Leftards and see if this isn't true. They don't believe that money belongs to individuals, they believe it belongs to the collective. They grow outraged when people do whatever they want with their money, like the San Francisco Chronicle writer who was upset that traders at the city's investment houses aren't going to lunch as much, spending money at the restaurants. They believe they have a right to people's money because they believe it's "everyone's money" as Michael Moore has made the case. It's this sick, twisted, covetous, impious mentality of Iriemon and everyone like Iriemon that will be a hinderance to ever restoring fairness to the tax system.

 

We have had many long, detailed, heavily researched and analyzed threads on the subject in the past.

That is what the "fairtax" is. But the "prebate" isn't just for basic necessities. Billionaires get the prebate too.

Since the devil in any tax policy is n the details, I'm not sure if a Fair Tax could be more equitable than a progressive tax. Regardless of what system is in place, we can't afford to have less revenue coming in, even with spending cuts. That's the bitter truth no politician will touch. We need to make do with less while paying at least some more. We're over-extended and need to eliminate any deficits and pare down our debt before we are overrun by the inevitable rise in interest rates.

Given that tax revenues over the past three years have been, proportionate to GDP, $750-800 billion lower than in 2000, I would definitely agree we need to increase revenues as part of a budget balancing deal.

But we have one party that has sworn allegiance to Grover's no tax increase pledge. Therein lies the problem.

Had the Govt collected revenues relative to GDP at the same level it did in 2000, revenues would have been over $3 trillion. But no doubt this mounting debt is extracting a cost on our nation.

So lets elect more non-compromising ideolougues to office, and a president who proposes to make the Bush tax cuts permanent, take 20% off of that, and a whole host of other revenue cutting proposals. That's the ticket.

 

I have struggled myself with putting money offshore because it pisses me off that my money is going to the DHS and Big Brother. I am paying the government to spy on me. I don't begrudge people wealth if they make it with integrity (which I personally believes is less than 5%, but...), and I believe everyone at the end of the day between federal, state, and local has a right to at least 70% of the money they earn.

I suggest the Fair Tax (which by no means is my ideal) as a way of starting the conversation.

 

Revenues over the past three years have been proportional to GDP $750-800 billion lower each year than they were in 2000. That amount makes up well more than half the deficit.

Sounds like there is a revenue problem to me.