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Author: rhecker One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75383  
Subject: No income tax? Date: 4/23/1999 9:10 AM
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I recently read an article, I believe it was in the Washingtonian, about how the government could raise enough money with no income tax. Bottom line is that sales tax would be about 25%, but income tax would be zero. It would do all sorts of things like encourage saving (since you're only taxed on what you spend), and it would more or less get rid of the IRS and all of those tax forms. It sounds unlikely but still within the realm of possiblity - and I was thinking what if this happens before I'm ready to retire? (because it will be a long time before I do retire, and maybe they will find a way to make this idea work by then)

My QUESTION, though, is - how would this affect a ROTH IRA, where you've already paid the taxes? Would you get some kind of huge refund? Or would they just say "sorry"? On the flip side, how would this affect a regular IRA or a 401K? Would these investment vehicles suddenly become on par with what former Roths used to be? Would you suddenly be able to take it all out (as long as you met the age requirements, etc.) tax free?

Maybe there's no "correct" answer. Or maybe I'm worried for nothing - it will all work out, whichever IRA one uses. But I would love any informed and educated speculations, because I just have no idea.
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Author: pikapp383 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10114 of 75383
Subject: Re: No income tax? Date: 4/23/1999 9:32 AM
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I recently read an article, I believe it was in the Washingtonian, about how the government could
raise enough money with no income tax. Bottom line is that sales tax would be about 25%, but
income tax would be zero.


Hello there,

Don't mean to rain on your parade, but, as nice as no income tax sounds, a national sales tax will (IMHO) NEVER pass Congress. This is because a sales tax tends to be "regressive", that is, lower income households will be paying a relatively larger percentage of their income in taxes than those lucky, good-for-nothing, non-working, rich jerks.

At least this will never happen as long as my district is represented by the Honorable Richard "Dick" Gephardt. 8)


Sorry,
pikapp383
27 days until Phantom Menance!!!

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Author: Leviathan Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10115 of 75383
Subject: Re: No income tax? Date: 4/23/1999 9:53 AM
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Don't mean to rain on your parade, but, as nice as no income tax sounds, a national sales tax will (IMHO) NEVER pass Congress. This is because a sales tax tends to be "regressive", that is, lower income households will be paying a relatively larger percentage of their income in taxes than those lucky, good-for-nothing, non-working, rich jerks.

I disagree, the current income tax hurts middle class people who are trying to get rich by working hard. Most of the inequities in the tax code have occurred by Congress trying to "get the rich". The truth is that the rich have ways to avoid taxes by any number of methods and the middle class usually gets hit by them. Most people would end up paying less under a national sales tax than they do now (assuming that it also replaces Social Security and Medicare taxes). Speaking of that, the Social Security tax is regressive and that managed to pass through Congress. Is Dick Gephardt planning to fix that as well?

Leviathan

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10116 of 75383
Subject: Re: No income tax? Date: 4/23/1999 10:44 AM
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One of the disadvantages of the "national sales tax" is that it will raise prices. I know, your wages will also rise since you'll no longer be paying income taxes, but the "sticker shock" will be severe.

When I go into the Toyota dealer the day after national sales tax is in place and find a Camry has increased in price from $24,000 to $30,000, I'll be less likely to buy one. Or I'll start considering a Corolla or a Tercel.

A comsumption tax should reduce consumption. It may not cause a depression, but there's a good chance of a prolonged recession.

intercst

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Author: JABoa Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10117 of 75383
Subject: Re: No income tax? Date: 4/23/1999 11:00 AM
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In deference to Leviathan, I will say I have already stuck a fork in myself and this time it was steam coming out, not the usual hot air.

You already have to pay $2 for a loaf of bread that tastes any good, do you want it to be $5? If you travel and stay in a motel, will you like it when the clerk says, "Our rate is $80, that will be $120 please?" If you have to go to the dentist with a bad toothache, what will you say when he says, "I can't treat you before you give me the $50 for the Government"?

This is one you will find me on the barricades for.

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Author: tonyw44 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10118 of 75383
Subject: Re: No income tax? Date: 4/23/1999 11:26 AM
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You forgot the upside of this, Jaboa. You'll be getting a lot more in your paycheck, as in all of it. You'll take home the entire amount of your wages. So, if you make $50,000, instead of having taxes withheld from that, you'll take home all of it.

Sure, the prices on everything else will go up, but you'll be taking home a lot more. So, it wouldn't really make a difference as far as percentage of income.

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Author: Leviathan Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10119 of 75383
Subject: Re: No income tax? Date: 4/23/1999 11:30 AM
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You already have to pay $2 for a loaf of bread that tastes any good, do you want it to be $5? If you travel and stay in a motel, will you like it when the clerk says, "Our rate is $80, that will be $120 please?" If you have to go to the dentist with a bad toothache, what will you say when he says, "I can't treat you before you give me the $50 for the Government"?

Truth be known, I actually prefer a flat income tax, but I'm really more in favor of anything that involves giving less money to the government. I probably would be upset at the sudden rise in prices, just like everyone else.

Leviathan

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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10120 of 75383
Subject: Re: No income tax? Date: 4/23/1999 12:04 PM
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One of the disadvantages of the "national sales tax" is that it
will raise prices. I know, your wages will also rise since
you'll no longer be paying income taxes, but the "sticker
shock" will be severe.

When I go into the Toyota dealer the day after national sales
tax is in place and find a Camry has increased in price from
$24,000 to $30,000, I'll be less likely to buy one. Or I'll start
considering a Corolla or a Tercel.

A comsumption tax should reduce consumption. It may not
cause a depression, but there's a good chance of a prolonged
recession.

intercst
I THINK the percentage to break even with the personal 1040 tax is about 12%, not 25%--not so bad, but that's on top of Soc Sec and State Sales Tax. It LOOKS regressive, whereas the 1040 tax LOOKS progressive, so won't ever pass. Also it would put too many lawers, accountants, H & R Block and TurboTax out of business. And to be equitable it should tax services also, meaning the lawyers and accountants will fight it specifically. Overall the sales tax would ballance the lack of income tax so no consumption or recession should occur.
The disruption of losing benefits in tax shelters such as IRAs or the reverse for ROTHs are unfortunate but you have always had the problem that you may be in a higher tax bracket upon retirement than when puting the money into your pension. Redistributing wealth or taxes is going to hurt some and aid others, but overall its a breakeven. Ed


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Author: rhecker One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10121 of 75383
Subject: Re: No income tax? Date: 4/23/1999 12:25 PM
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I didn't really mean to start a debate on the merits (or lack thereof) of having no income tax with a high sales tax. I'm still wondering about the impact such a situation could have upon various types of IRAs (whether or not the high sales tax is a good idea). But just to clear up a bit of confusion people might be having, based on the fact that edcosoft posted:

"I THINK the percentage to break even with the personal 1040 tax is about 12%, not
25%--not so bad, but that's on top of Soc Sec and State Sales Tax."

I believe the 25% sales tax figure from the article was taking the sales tax which already exists into account. I could be wrong though. Anybody have the Feb, March, or April Washingtonian magazine on hand? (I'm not sure which one it was in, sorry).

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Author: JABoa Big gold star, 5000 posts Feste Award Nominee! Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10122 of 75383
Subject: Re: No income tax? Date: 4/23/1999 12:32 PM
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...but overall it is a breakeven.

This is what they did in France in the years before 1789. There was 1 noble and 100 peasants. The noble collected taxes from the peasants, kept a rake-off for himself, and passed as little as he could on to the French Crown.

Well, after 1789, there was a redistribution. Actually there was also a redistribution of the noble, too, because his head and the rest of him tended to be found in different places.

In my case, in my opinion, a lot of the taxes I pay are going so that a hairdresser in Roxbury, Massachusetts, who has worked hard all her life and now has sore feet and high blood pressure, can afford a halfway decent and dignified retirement.

More steam out... Ahhhh.

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Author: ZorroFool One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10123 of 75383
Subject: Re: No income tax? Date: 4/23/1999 12:53 PM
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It seems like everyone is concentrating on the negative price aspect of no income tax, but no one seems to be thinking about the negative impact on salary.

Theoretically, salary is based on supply and demand in the labor market. If an offered salary is too low, the company won't be able to attract workers. If it's too high, people will flock to the job (within reason), and the company wil probably realize it's goofed up and will try offering the next worker a little less. But the end result is the same: the salary is going to settle at what the market determines.

Some things that influence the salary that the market determines will impact everyone's salary. One example I can think of is cost-of-living (New York City salaries for most jobs will probably be higher than salaries in Idaho for similar work). I would argue that income tax figures into cost-of-living considerations.

Think about what would happen to everyone's salaries if the cost of living in New York City was suddenly reduced by 20-30%. Maybe salaries would not drop (that might be too politically incorrect, there's unions to consider for some jobs, and so on). But I would bet that younger, newer hires would probably get a lower starting salary than people used to. Also, annual salary increases (intended to keep up with cost-of-living changes, inflation, etc.) would probably be watered down for a long time, until inflation caught up with the (now inflated) salaries. Let's face it. Right now, companies have to pay you more to compensate you for income tax. If income tax goes away, why would they have that incentive?

So maybe prices will go up in the short run because of eliminating the income tax. But don't necessarily think that you'll richer by the amount of your income tax. Eventually, everything (wages and prices) will settle back to equilibrium again. Adam Smith's invisible hand will find a way.

JMHO. Any thoughts?

--Z

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10125 of 75383
Subject: Re: No income tax? Date: 4/23/1999 12:57 PM
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Rhecker: You wrote, My QUESTION, though, is - how would this affect a ROTH IRA, where you've already paid the taxes? Would you get some kind of huge refund? Or would they just say "sorry"?"

The change would, I suspect, be prospective only; incom taxes paid in prior years for income declared in those years would not be refunded. Roth IRA - sorry. It is one of several reasons I have not been interested in converting any of my accounts. I have elaborated on this issue previously, so I will not digress any further now.


You also wrote, "On the flip side, how would this affect a regular IRA or a 401K? Would these investment vehicles suddenly become on par with what former Roths used to be? Would you suddenly be able to take it all out (as long as you met the age requirements, etc.) tax free?"

Consistent with my prior belief, you have no income from a regular IRA until you withdraw, so if you withdrew after the change in the law, ther would be no income tax to pay. If this were to happen, you would hear a host of Hosannas.

As to the merits, I am with intercst when he says that a consumption tax will result in less consumption and more saving. Maybe not for everyone (or any particular person, but certainly in the aggregate). To me this seems so straightforward that I am having a hard time understanding the counter-position.

Also, apart from the other reasons stated as to why this will not come to fruition, (i) it would be much harder for future Congresses to reward their "special" friends with tax breaks because it would far to obvious and (ii) the National Association of Realtors and all homebuilders would be aghast at the loss of the home mortgage interest deduction. The absence of the home mortgage interest deduction would also, I believe, lead to a significant one-time reduction of residential real estate values that would effetively penalize all current homeowners.

Just my $0.02. Regards, JAFO



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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10126 of 75383
Subject: Re: No income tax? Date: 4/23/1999 1:04 PM
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ZorroFool: You wrote, in part, "Think about what would happen to everyone's salaries if the cost of living in New York City was suddenly reduced by 20-30%."

I cannot follow the assumption that replacing the income tax by a sales tax reduces the cost of living by a similar percentage amount? It seems to me that, for the most part, one expense is generally replaced by a different expense but the cost of living does not change dramatically.

To the board generally: Abolition of the federal income tax may not necessarily lead to the abolishen of state income taxes. I should have referenced this in my earlier post, but I am spoiled by living in Texas and sometimes forget.

Regards, JAFO

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Author: ZorroFool One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10127 of 75383
Subject: Re: No income tax? Date: 4/23/1999 1:45 PM
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JAFO, you wrote:

I cannot follow the assumption that replacing the income tax by a sales tax reduces the cost of living by a similar percentage amount?

To which I reply:

I was ignoring the replacement of the federal income tax by a national sales tax, just to make the point that federal income taxes drive up our salaries.

Given that everyone is paying a slightly different total federal income tax (as a percentage of their salary), due to the regressive structure of the federal income tax (or is it progressive? -- ouch, did I just use the words "progressive" and"federal" in the same sentence?), then the replacement of FIT by a national sales tax will impact everyone differently.

I guess I'm just suggesting that you need to consider each piece separately if you want to truly see what the impact will be.

Again, JMHO.

--Z

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Author: tonyw44 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10128 of 75383
Subject: Re: No income tax? Date: 4/23/1999 2:28 PM
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"Think about what would happen to everyone's salaries if the cost of living in New York City was suddenly reduced by 20-30%."

The cost of living wouldn't go down, it would go up. You still need to eat, put a roof over your head, and so on. And these things would be taxed.

However, you would have more take home pay to cover that.

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10129 of 75383
Subject: Re: No income tax? Date: 4/23/1999 3:28 PM
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ZorroFool wrote,

Some things that influence the salary that the market determines will impact everyone's salary.
One example I can think of is cost-of-living (New York City salaries for most jobs will probably
be higher than salaries in Idaho for similar work). I would argue that income tax figures into
cost-of-living considerations.


Having worked as an engineer in New York, Los Angeles, and Texas I haven't seen much in the way of salaries being adjusted to reflect the relative cost of living in each city. True, New York salaries might be slightly higher, but not high enough to compensate for the increased cost of living. When I worked for a large oil company it was almost impossible to get someone to agree to a lateral transfer from Houston to New York. No doubt cost of living was a least one factor in Exxon moving its headquarters from New York to Dallas.

intercst

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Author: DHatch Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10130 of 75383
Subject: Re: No income tax? Date: 4/23/1999 4:02 PM
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<<Sure, the prices on everything else will go up, but you'll be taking home a lot more. So, it wouldn't really make a difference as far as percentage of income.>>

It might hurt those of us who happen to be retired, living on an annuity, or existing on a fixed income.



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Author: DHatch Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10131 of 75383
Subject: Re: No income tax? Date: 4/23/1999 5:06 PM
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If it is our desire to simplify our present tax system, lower the income tax, and possibly one day eliminate it entirely, all we need is one:

LAST AMENDMENT!

The last amendment we would ever need is a constitutional amendment which requires that:

The President and Vice President of the United States;

Every Senator and every Congressman;

All of the Justices of the Supreme Court; and

The Director and immediate staff of the Internal Revenue Service and all of the major civilian presidential appointees -

All personally prepare and completely fill out their own personal federal and state income tax forms and all schedules and attachments, all by themselves, in their own handwriting, and certify under oath that they have done so under the threat of dismissal or removal from office, impeachment, disbarment, and both criminal and civil action of a most punitive nature.

We would see the most amazing simplification of the existing tax code you could ever imagine. Perhaps this concept also could be beneficially phased into state governments over a period of time.

I really do not believe that those who pass our tax laws, those who decipher our tax laws, or those who administer and enforce out tax laws should ever be immune from the effects of our tax laws or that they should ever be able to continue to hide behind lawyers, accountants, or tax preparers.

I believe that if we all got behind it, it would work.

Folks, that's all we need - just one

LAST AMENDMENT!!

Sincerely,

DHatch



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Author: IndecisiveFool Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10132 of 75383
Subject: Re: No income tax? Date: 4/23/1999 5:31 PM
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DHatch,

Great amendment. Also liked another suggestion made in the last month. Move the election day to April 15.

..IF

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Author: aq67sceb One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10133 of 75383
Subject: Re: No income tax? Date: 4/23/1999 9:19 PM
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One of the disadvantages of the "national sales tax" is that it will raise prices. I know, your wages will also rise since you'll no longer be paying income taxes, but the "sticker shock" will be severe.

Except for the fact that the taxes currently hidden in every product you buy would disappear, as well as the tax compliance costs, and corporations would be able ro lower their prices considerably. Maybe not so low that the increased sales tax is completely offset, but enough that most of it would be offset. The sticker shock would not be nearly as much as you think.

- Ted

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Author: aq67sceb One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10134 of 75383
Subject: Re: No income tax? Date: 4/23/1999 9:23 PM
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"I THINK the percentage to break even with the personal 1040 tax is about 12%, not 25%--not so bad, but that's on top of Soc Sec and State Sales Tax."

Abolish the Income TAX, Medicare, and FICA and a 23% National Retail Sales Tax will be revenue neutral.

This does NOT include existing sales taxes, which are imposed by state and local governments, and could still be imposed in addition to the National Retail Sales Tax.

For more information, check out www.fairtax.org.

- Ted


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Author: Wardhog Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10139 of 75383
Subject: Re: No income tax? Date: 4/24/1999 5:26 PM
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As someone who has studied the tax code I can tell you that it has nothing to do with being "progressive" and everything to do with special interest groups who were able to get to congress. Who makes up most lobbying groups? The rich. Only the very well off are able to finance "tax deductions" such as a home, kids, a business and the many, many business tax deductions that come along with it.

I think a national sales tax would be more fair. It would also capture some of the illegal money making businesses in this country such as drug dealers, prostitution, etc. In addition, we could save billions by simplifying the IRS not to metion the time and money spent on tax preparation. Who would it hurt? Lawyers and CPA's--Is that a bad thing? (By the way, I am a lawyer.)

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Author: WilliamLipp Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10141 of 75383
Subject: Re: No income tax? Date: 4/24/1999 5:43 PM
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Wardhog Date: 4/24/99 5:26 PM Number: 10139
I think a national sales tax would be more fair. It would also capture some of the illegal money making businesses in this country such as drug dealers, prostitution, etc. In addition, we could save billions by simplifying the IRS not to metion the time and money spent on tax preparation. Who would it hurt? Lawyers and CPA's

I don't trust them to eliminate the income tax as part of creating a national sales tax. I fear we would end up with both a sales tax and an income tax. Then I fear they would gradually ratchet up both taxes. When the Constitutional Amendment to permit an income tax was being debated, it was an extreme statement to suggest that at some future time this innocous tax might rise to the burdensome level of 10%. A flat income tax has many of the benefits you cite without the risk of both tax systems.

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Author: zgriner Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10142 of 75383
Subject: Re: No income tax? Date: 4/24/1999 6:16 PM
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In case anyone cares, there is a national organization dedicated to the idea of a flat national flat tax. Its 'Americans for Fair Taxation', 1-800-FAIR-TAX or www.fairtax.org.

Zev

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Author: aq67sceb One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10145 of 75383
Subject: Re: No income tax? Date: 4/24/1999 7:36 PM
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I don't trust them to eliminate the income tax as part of creating a national sales tax. I fear we would end up with both a sales tax and an income tax.

If we are going to introduce a national retail sales tax, we would need to repeal the 16th amendment. Then it would be impossible to reinstate an income tax without AGAIN passing a constitutional amendment to allow it.

And "ratcheting up" the sales tax would be much more difficult than it is with the current income tax. If every purchase you made said "sales tax: 23%" at the bottom, and it suddenly said "sales tax: 24%", everyone in the country would know that taxes had been raised. With the income tax, taxes can be raised in a multitude of ways without you being aware of it: raise corporate taxes, reduce exemptions, lower the cutoff for exemptions/deductions, etc.

The problem with a flat tax, is that it is too easily corrupted by the same things that have made the current income tax such a mess.



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Author: TicTocMan Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10152 of 75383
Subject: Re: No income tax? Date: 4/25/1999 5:18 PM
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I am a sucker and have to respond. -- It is not going to be a simple sales tax, it will be Value Added Tax (VAT) so they will be able to increase the tax anywhere along the chain before it gets to the store and you won't see an increase in the tax just an increase in the price (ie, a VAT on the raw material, a VAT on the manufacturer, a VAT on assembler, a VAT on the distributers, a VAT on the warehouse could all be raised without it showing up as an increase in the VAT at the retail level). You are naive if you think that there is no way to hide tax increases just because you have not thought of them yet. VAT is probably even more fraught with evil than income taxes.

But this is just my predjudice showing.

TTMan

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Author: ahatcher Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10155 of 75383
Subject: Re: No income tax? Date: 4/25/1999 8:09 PM
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Gee, are you related?

See:
http://homepages.infoseek.com/~etdad/amendment.html

My father wrote this several years ago. I put it on the web for him. :)



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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10156 of 75383
Subject: Re: No income tax? Date: 4/25/1999 10:49 PM
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<<It is not going to be a simple sales tax, it will be Value Added Tax (VAT) so they will be able to increase the tax anywhere >>

Exactly right. And this is why a VAT will be seen in the US only over Republican/Conservative's dead bodies. Everybody has seen how this trick played out in Europe and Canada. People also saw how they ended up with *both* an income tax and a sales tax. Again, forewarned is forearmed. Unless the Democrat/Liberals manage to get a huge majority in the House, Senate, and White House, there will not be a national sales tax without the 16'th Amendment being repealed.

Ray

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Author: tonyw44 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10157 of 75383
Subject: Re: No income tax? Date: 4/25/1999 11:04 PM
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"It might hurt those of us who happen to be retired, living on an annuity, or existing on a fixed income."

Again, not necessarily. I believe that those are taxed, correct? So, if you lose the tax on those, then you get more money to spend. And you'll need it, because you will need to pay the new sales tax.

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Author: tonyw44 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10158 of 75383
Subject: Re: No income tax? Date: 4/25/1999 11:09 PM
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Funny, I don't consider myself to be rich. I can take the mortgage deduction. I also get to take deductions due to charitable contributions.

I'm certainly not a Rockefeller or a Mellon.

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Author: bytejockey One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10159 of 75383
Subject: Re: No income tax? Date: 4/26/1999 8:16 AM
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I am a sucker and have to respond. -- It is not going to be a simple sales tax, it will be Value Added Tax (VAT) so they will be able to increase the tax anywhere along the chain before it gets to the store...

Where did you find this information, or is it just an opinion? VAT and national retail sales tax are not the same animal.

VAT is probably even more fraught with evil than income taxes.

Agreed, that's why I support the national retail sales tax instead of the VAT or income tax.

Billy


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Author: TicTocMan Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10160 of 75383
Subject: Re: No income tax? Date: 4/26/1999 9:10 AM
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<<Exactly right. And this is why a VAT will be seen in the US only over Republican/Conservative's dead bodies.>>

Ray, there are Democrats/liberals who are against the VAT/Sales tax also. It would be an interesting coalition, eh?!

TTMan

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Author: aq67sceb One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10164 of 75383
Subject: Re: No income tax? Date: 4/26/1999 12:12 PM
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It is not going to be a simple sales tax, it will be Value Added Tax (VAT) so they will be able to increase the tax anywhere along the chain before it gets to the store and you won't see an increase in the tax just an increase in the price.

That is incorrect. If you look at the proposal at www.fairtax.org, you will see that it is NOT a VAT, it is a retail sales tax.

VAT is probably even more fraught with evil than income taxes.

And that is why the proposal is for the enactment of a retail sales tax, not a VAT.

The proposal also calls for the repeal of the 16th amendment so that there cannot be the possibility of both an income tax and a sales tax.


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Author: zgriner Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10185 of 75383
Subject: Re: No income tax? Date: 4/27/1999 5:58 AM
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Just to reiterate my post further in the board, because people are talking theoretically, when there is an organization that has a concrete proposal. It addresses many of the concerns mentioned above:


For anyone interested in a sane discussion of a national sales tax, please look at http://www.fairtax.org, 'Americans for Fair Taxation'.

The flat sales tax is levied on all goods and services paid for by consumers, not businesses. Period. Unfortunately, as time goes on, Congress would be sure to complicate it.

The proposed flat tax abolishes all income taxes, as well as SS & Medicaid tax; these are to be correctly accounted for out of general revenues. There will also be no capital gains tax, inheritance tax, gift tax, etc. IOW, any money not spent is money not taxed.

There will also be no deductions. Period. Mortgage interest, depreciation, charity, etc.

A properly designed flat tax avoids being regressive by giving every person -- man, woman, & child an automatic 'tax refund', so to speak, to offset any tax they may pay. If they are too poor to pay much or any tax, they effectively get a welfare or earned-income payment, depending on how you look at it.

Most of the IRS would be abolished, as well as the need for tax professionals of all sorts, as well as the billions spent on tax compliance. Retail businesses would be paid a small percentage (just like lottery sellers are) to collect and remit the tax on the goods and services they sell.

Prices should not rise because the cost of taxes is built into the prices that are paid. The sales tax merely shifts where the tax is being paid.

Please look at the link at the beginning for more info.

Zev

PS. I am for it, even though I believe I will end up paying a bit more tax.

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Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 11056 of 75383
Subject: Re: No income tax? Date: 6/3/1999 9:59 PM
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About a month ago (I'm still catching up), aq67sceb wrote (in part):

The [retail sales tax] proposal also calls for the repeal of the 16th amendment so that there cannot be the possibility of both an income tax and a sales tax.

I belatedly reply:

Actually, that won't do the trick. As originally enacted, the Constitution permitted "direct Taxes" so long as they were "apportioned among the several States . . . according to their respective Numbers." U.S. Const. art. I, § 2, cl. 3. When Congress first passed an income tax, a very conservative (even by today's standards) Supreme Court concluded that it was a direct tax, and invalidated it on that basis. A present-day Supreme Court could disagree, or Congress could find a way to enact an income tax that was "apportioned."

Moreover, if a sales tax is a direct tax, then repealing the Sixteenth Amendment would invalidate it as well, unless the sales tax were "apportioned" among the states. I'm guessing that the apportionment process would make us wistful for the good old days of a nice, easy Form 1040. In other words, be careful what you wish for -- you may get it. --Bob

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