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Financial Planning / Tax Strategies
|Subject: Re: FairTax||Date: 9/28/2012 6:33 PM|
|Author: ferjen||Number: 116710 of 122320|
I am forced to take exception to that remark. I freely admit that I am a professional tax preparer. However, I have no fear of losing my job with the FairTax. Frankly, I could probably get a different job with minimal problems, or simply start a different business. I am not a one-trick pony. I choose to prepare taxes because, frankly, I enjoy it.
It was a joke, hence the big LOL! at the end. Lighten up.
My objections to the FairTax are based on social equity. I believe that taxes should be paid by those that have the money to pay the taxes. The more money you have, the more taxes you should pay and the higher percentage of your income you should pay in tax.
Our current system is an attempt to tax in that way, but with some admitted flaws. However, those flaws are far fewer than the flaws in the FairTax. The FairTax is flawed at its core.
I think it's unfair that nearly half of Americans pay no income taxes whatsoever. 23% of a lot is a lot more than 23% of a little.
The FairTax would tax lower incomes at significantly higher rates than the much higher incomes because it taxes consumption rather than income. It does not tax savings. And the more income you have, the more you are able to save and the less tax you would pay as a percentage of your total income.
If you make $30k or $40k a year as a family today, you pretty much spend it all by necessity. The FairTax proposal would collect about 23% of that as taxes less a baseline spending allowance. From their web site, those two would net out to roughly zero. So the poorest in the country would end up close to where they are now. So far so good.
As you pointed out, if you are poor or lower middle class, it will be neutral to you. But, we the consumers get to decide WHEN to pay the tax as opposed to the federal government demanding it from us. I like that a lot. I also like that money not currently taxed in underground economies, illegal aliens, etc. will get taxed with the Fair Tax. This would be extremely lucrative.
But let's say you make $100k and manage to save $10k. That leaves $90k for spending. Lop off 23% of that (about $20k) for the tax and you'd have $70k for spending. That's around at 20% tax rate on your total income. If you make $300k today and spend only $200k, you'd pay the 23% only on the $200k, or about 15% on your total income. And if you make $10 million and spend $5 million, that tax rate falls to 11.5%. That's a regressive tax.
That's a lot of what ifs that are unlikely. Why would someone making $100K only save $10K but someone making $300K manage to save 10X more? This is an apples and oranges comparison. The flip side is in retirement, the higher income person will spend and consume more and will pay more in taxes in the future.
And I don't like regressive taxes. I believe they are unfair.
I don't like progressive taxes. I believe they are unfair. This whole "tax the rich" thing is a load of crap. You and I both know if you seize all of the assets of the "rich", it wouldn't make a dent in the deficit or the debt. There is an optimal tax rate at which people are willing to pay that maximizes revenue to the Federal government. Above this rate, people will dodge it and below this rate, people are more than willing to pay it but might be willing to pay a little more. This is Economics 101. The problem is taxing the "evil rich" as proposed pushes that group of folks into the former condition. Or worse, they bail on the USA like the French. I believe the optimal rate is lower, not higher than current rates. The government needs to maximize revenue. It is not the job of the government to guarantee anyone a standard of living. It's my job to guarantee my standard of living. And I hang out here to improve my standard of living.
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