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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308225  
Subject: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 3:40 PM
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Fools,

The Fair Tax proposal ( http://www.fairtax.org/ ) has been getting a lot of press time in the past month. ( http://news.google.com/news?q=Fair+Tax+Bush&hl=en&lr=&sa=N&tab=nn&oi=newsr ) A version of this proposal was introduced in the House (HR 25) in 2003 and is on the calendar for review in the Senate (S.1162). This proposal was a major source of mud slinging in the Congressional elections, but didn't receive a lot of press until recently.

Bush has indicated his willingness to sign some version of HR. 25 ( http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=108_cong_bills&docid=f:h25ih.txt.pdf ) into law to abolish the IRS and it's looking increasingly likely that it may actually happen. I want to know what every one here thinks about this idea and how you think it will hurt or hinder you and your finances.

This post is only slightly OT, because it will have serious implications for your savings, investments and your credit card debt, present and future. I want to know what you think those might be.

- Joel
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Author: erichollins Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192910 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 4:11 PM
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My quick answer/opinion is that this is bad. Sales taxes are a regressive tax, meaning that the lower class pays a larger portion of their income towards taxes. The upper class may pay more in taxes, but the lower class pays a lower portion of their income towards sales taxes. Lower classes rarely have enough money to actually invest for their retirement because they are struggling to buy things such as groceries, clothes, etc. The upper class tends to spend their money on investments, stocks, mutual funds, etc. In this version of the Fair Tax, there is something about lower class families getting a rebate up to the poverty line so this may be an invalid argument. Actually, if you are really poor, you pay nothing in taxes, but if you are just over the poverty line, then you pay a lot in taxes and the rate of taxation goes down as income goes up.

I, for one, would buy less stuff to avoid paying more taxes and try to save my money. Some people wouldn't care and continue to spend. Also, people who are in more consumer debt (credit cards) would be paying a higher portion of their income towards taxes. Is this fair? Also, imagine if the entirity of the American population realized that they less they spend, the less taxes they pay. The American economy is a consumption-based economy and it is driven by people going out and buying stuff, whether they need it or not and whether they can afford it or not.

I may post more later, but I gotta get stuff done at work now.





Eric



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Author: WBuffettJr 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: 192912 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 4:15 PM
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If it happens I'll want to buy my new house and car REAL quick.

They say it can be bad for retirees, as they have already earned all their income and paid taxes on it, but now must pay the higher sales tax.

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192914 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 4:23 PM
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erichollins,

You wrote, Also, imagine if the entirity of the American population realized that they less they spend, the less taxes they pay. The American economy is a consumption-based economy and it is driven by people going out and buying stuff, whether they need it or not and whether they can afford it or not.

Woah there! Isn't this part of the premise behind TMF? (Spend less, save more!) Does that mean TMF is bad for the economy? Maybe Bush needs to pass a law against that... ;-)

- Joel
Who has more opinions about the Fair Tax proposal; but wants to hear more responses first...

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192915 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 4:25 PM
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WBuffetJr,

You wrote, If it happens I'll want to buy my new house and car REAL quick.

Will houses have sales tax? (Everything is supposed to.) Do you pay sales tax every time or only when it's new?

- Joel

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Author: Aranknitter Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192916 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 4:31 PM
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Will houses have sales tax? (Everything is supposed to.) Do you pay sales tax every time or only when it's new?

I come from a country with a consumption tax too. (We also have a flat tax rate, 20% up to a certain point and then 40% after that point, for everyone. No deductions.) When buying a house, the stamp duty is 1%. When buying a car, sales tax is 3%. When buying anything except food, books, and children's clothes, sales tax is 17.5%. Food, books, and children's clothes are tax-free.

The rates were correct 5 years ago when I left.

Hope that helps give insight how rates could be set?

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Author: l0ser Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192917 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 4:34 PM
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Executive Summary: Would be great if they could do it and simplify tax code, but poeple will always whine about anything.

Reality: Any exceptions to pyaing tax would basically require the IRS to stay. No exepmtions would force all the IRS employees, as well as a good majority of CPAs and accountants to find new jobs...taxes create jobs. Not good way to affect economy...increase unemployment .5%

Only would work if you really overhaul everything, including corporate side to make no loopholes. Loopholes are stupid.

I would advocate no taxes on food, school supplies, and certain items (ie electric cars - add incentive type deals) to make sure poor are not unduly affected. No exemptions, no paperwork, no anything to complicate the system.

Why it won't work?

How do you collect taxes on intangible items (stock, intellectual property, etc)? They won't go for it because politically it means pitting the rich against the poor in a direct way.

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Author: l0ser Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192918 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 4:38 PM
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Will houses have sales tax? (Everything is supposed to.) Do you pay sales tax every time or only when it's new?


I beleive the answer is only new goods will be taxed. Goods that are resold will have a higher value due to the tax already have been paid.

Good example is a car in Germany. I am a US Citizen, so I can buy tax exempt. A German cannot. If I buy a used car from a German citizen, I will pay a higher price for the same car in the same condition than if I were to buy it from a US citizen. The difference is that the German has paid taxes on the car and this increases the value of the item for resale.

Doesn't really make sense, but that is how it is. I learned this when going car shopping....(proud owner of a '87 BMW 320i)

Cheers!

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Author: Fuskie Big funky green star, 20000 posts Top Favorite Fools Old School Fool Ticker Guide SC1 Red Winner of the 2010 Rule Breakers Challenge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192922 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 4:50 PM
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A couple points from a practical standpoint.

First, no one has demonstrated, that I have seen, that either a flat tax or a national sales tax would generate enough income to consistently and completely cover the federal budget.

Second, proponents of both alternatives to the income tax agree that there will have to be exceptions made, which opens the door to the same loopholes that have screwed up the current system.

Third, how does this apply to business? Would manufacturers be paying sales tax at each stage of construction when buying parts from suppliers, or would only consumers be paying the taxes?

Fourth, how would the new system affect state revenues? Would states and local governments still have the power to enact sales tax on top of the federal sales tax?

Fifth, currently most on-line sales are conducted tax-free and states generally turn a blind eye to reporting such transactions on your state returns. How would a national sales tax system be implemented on the internet?

Finally, what would be the cost of implementation? How would the IRS be affected in terms of layoffs, development of new software systems, and such. How would business be affected in terms of new tax reporting requirements? How would citizens be affected in terms of education and awareness?

Fuskie
Who would not be able to support a plan that was not well thought out, detailed, and proven conclusively to work...

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Author: jrsmith13 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192924 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 4:52 PM
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I think the biggest logistical pitfall is how to handle the savings of people that has already been taxed or "tax-exempted" or "tax-deferred". I guess tax-deferred stuff is not really a problem, but I can see some issues for IRA's, Roth vs. traditional, if some tax deductions were taken or not.

It seems like there would have to be some sort of "phase-in", where older people who have earned all of their money and already paid taxes on it would have to have some sort of exemption/rebate. This would have to be done considering age and income/savings levels, somehow. It could get messy.

jrsmith13

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Author: SlashdotAddict One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192925 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 4:56 PM
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Who would not be able to support a plan that was not well thought out, detailed, and proven conclusively to work...

So I take it that you're not a big fan of our current system, then? ;)


The first thing that came to mind when reading the OP - if they had done this a year or so earlier, Ken Jennings might still be champion of Jeopardy...

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Author: Fuskie Big funky green star, 20000 posts Top Favorite Fools Old School Fool Ticker Guide SC1 Red Winner of the 2010 Rule Breakers Challenge Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192926 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 5:02 PM
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So I take it that you're not a big fan of our current system, then?

Not really. As a single, childless male I am in the most discriminated against class whenever tax cuts are considered. But the devil you know is better than the devil you don't, so until someone proves a new system works better for all, I will stick with working the current system as best I can.

Fuskie
Who does not believe in change for change's sake but does support change that is logical and well thought out...

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192929 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 6:36 PM
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Aranknitter,

You wrote, I come from a country with a consumption tax too. (We also have a flat tax rate, 20% up to a certain point and then 40% after that point, for everyone. No deductions.) When buying a house, the stamp duty is 1%. When buying a car, sales tax is 3%. When buying anything except food, books, and children's clothes, sales tax is 17.5%. Food, books, and children's clothes are tax-free.

HR.25 proposes a simple system. Everything is taxable at the same rate, currently estimated to be 23%. Business purchases for resale, manufacture or export would be exempt – only consumption purchases are taxed.

A rebate allowance check will be issued each month to each registered family deemed to be sufficient to cover the sales taxes collected on the expenses needed to maintain a family of that size at poverty level adusted annually. Business will also be allowed to apply for rebates to cover bad debts, merchandise returns, refunds and insurance proceeds – ok, not all of these rebates are restricted to businesses.

The trick and the problem with this system is that everyone must register annually in order to receive any rebates. Essentially you must maintain a residence of some kind, which may be a problem if you're homeless.

The registration process itself should be trivial. You will just need to submit a short form giving the names, SSNs and place of residence of the members of your family. You are under no obligation to register; but if you do not do so, you won't receive your rebate.

- Joel

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192930 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 6:55 PM
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l0ser,

You wrote, Reality: Any exceptions to pyaing tax would basically require the IRS to stay. No exepmtions would force all the IRS employees, as well as a good majority of CPAs and accountants to find new jobs...taxes create jobs. Not good way to affect economy...increase unemployment .5%

The collection and administration of Federal sales tax would be handled independently by each State. Currently 45 States already have a sales tax system in place. The Social Security Administration would receive a good portion of the proceeds of this sales tax since the Payroll tax is also being replaced. The Social Security Administration will be responsible for sending out rebate checks and handling registrations.

I happen to agree that unemployment will likely increase, at least temporarily as a result of this Bill. I also predict it will provoke another Recession. But that doesn't mean I think it's wrong to pass this Bill.

Also, Only would work if you really overhaul everything, including corporate side to make no loopholes. Loopholes are stupid.

Done. Pretty much. Business income tax will be abolished. Entirely. There are some cases where a business will be allowed to apply for a rebate on taxes collected and paid; but because of returns or whatnot, the sale wasn't final. Also, for some reason they included a rebate for insurance payments; but that seems to include businesses and individuals.

And, I would advocate no taxes on food, school supplies, and certain items (ie electric cars - add incentive type deals) to make sure poor are not unduly affected. No exemptions, no paperwork, no anything to complicate the system.

But doesn't your proposal complicate things? HR.25 proposes no exemptions period. Instead everyone gets a rebate to cover the taxes on subsistence level living expenses.

Finally, How do you collect taxes on intangible items (stock, intellectual property, etc)? They won't go for it because politically it means pitting the rich against the poor in a direct way.

You don't. No one ever collects sales tax on these items. You don't tax intellectual property now under any system and you only collect tax on the change in value of stock when it's sold – you may have to refund taxes paid if the stock declines – under our capital gains rules in our current income tax code.

Under HR.25, investments are not taxable. The government only collects tax when you buy something that's a consumable.

- Joel

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192931 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 7:08 PM
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Fuskie,

You wrote, First, no one has demonstrated, that I have seen, that either a flat tax or a national sales tax would generate enough income to consistently and completely cover the federal budget.

First, no one has demonstrated, that I have seen, that a national income tax would generate enough income to consistently and completely cover the federal budget. (Come on Fuskie! You can do better than that!)

Also, Second, proponents of both alternatives to the income tax agree that there will have to be exceptions made, which opens the door to the same loopholes that have screwed up the current system.

Like what? You say there are exceptions. Name them. I have an idea what they are; but you're just doing hand waving here and it seems like you're just using FUD to nay-say an idea that I happen to think has merit.

And, Third, how does this apply to business? Would manufacturers be paying sales tax at each stage of construction when buying parts from suppliers, or would only consumers be paying the taxes?

No. Only final sales are taxed.

Also, Fourth, how would the new system affect state revenues? Would states and local governments still have the power to enact sales tax on top of the federal sales tax?

That's hard to say. It depends on whether or not this tax actually discourages sales.

And, Fifth, currently most on-line sales are conducted tax-free and states generally turn a blind eye to reporting such transactions on your state returns. How would a national sales tax system be implemented on the internet?

Final sales would be taxed. I imagine you would start paying federal sales tax on mail order purchases. The same problems with collecting State sales tax would remain.

Finally, Finally, what would be the cost of implementation? How would the IRS be affected in terms of layoffs, development of new software systems, and such. How would business be affected in terms of new tax reporting requirements? How would citizens be affected in terms of education and awareness?

The net savings to the federal government has been estimated anywhere from $200-400B/year. Naturally this would result in a few lost jobs.

Business would have to report sales tax. They already do that in 45 States; the other 5 would have to join in the party.

One last item, Who would not be able to support a plan that was not well thought out, detailed, and proven conclusively to work...

Other countries rely on a sales/consumption tax system, though perhaps not the same exactly. If you would see precisely how well thought out, I recommend you read HR.25 on the House website.

- Joel

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192932 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 7:17 PM
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jrsmith13,

You wrote, I think the biggest logistical pitfall is how to handle the savings of people that has already been taxed or "tax-exempted" or "tax-deferred". I guess tax-deferred stuff is not really a problem, but I can see some issues for IRA's, Roth vs. traditional, if some tax deductions were taken or not.

It seems like there would have to be some sort of "phase-in", where older people who have earned all of their money and already paid taxes on it would have to have some sort of exemption/rebate. This would have to be done considering age and income/savings levels, somehow. It could get messy.


Ding! Ding! Ding!

Hah! Now I know you're a real thinker! This has probably got to be the best thought-out concern I've heard so far in this thread, though it's one I also happen to have had as well.

Unfortunately, I don't know the answer – I haven't gotten that far in HR.25, assuming an answer is even there.

Clearly IRAs and 401(k)s would vanish overnight. So would the wasteful and expensive sales and administration staffs currently associated with these accounts. The money would simply become yours to invest as you please the most Foolish way you know how. Wouldn't that be grand?!

Unfortunately, Roth and personal savings accounts would suddenly become worth a whole lot less… Oh dear.

- Joel
Personal note: Need to settle with the XSO quick while my e-fund is still worth something!

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Author: Azotic Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192933 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 7:25 PM
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Under HR.25, investments are not taxable. The government only collects tax when you buy something that's a consumable.

And this is the reason that this proposal taxes the poor while leaving the wealth of the rich alone -- thus making it that much harder for the poor to dig themselves out of their hole, even if they're motivated to do so.

Also, I figure most businesses would simply pocket the currently-withheld taxes they would not have to pay, leaving their employees to shoulder the burden of this consumption tax out of their current after-tax income.

-- Mark


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Author: 4inthefamily Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192935 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 8:16 PM
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I want to know what every one here thinks about this idea and how you think it will hurt or hinder you and your finances.

I'm not sure how they would handle our Roth vs. Traditional Retirement savings. We have money in both and I am curious if they would then essentially become equal - which really isn't fair (yes, I am a middle child).

I'm not sure if our overall tax liability would increase or decrease, but I think that a law that discourages consumerism, such as this law, will have a hard time passing.

-4

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Author: TheBookWorm One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192936 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 8:29 PM
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Finally, what would be the cost of implementation? How would the IRS be affected in terms of layoffs, development of new software systems, and such. How would business be affected in terms of new tax reporting requirements? How would citizens be affected in terms of education and awareness?

Fuskie


I'm usually a lurker here, but I just can't keep quiet on this one. You make me think, Fuskie...

What will happen to 401(k)'s and pension plans? A lot of employers put them in place in large part because they get a tax deduction for the contributions. Also, as an employee, I'll lose the only tax break I get. I don't own a home, no kids...Seems like a "$cr&w the little guy" tax, to me.

There's a lot of complexity to the current tax code. They'll have to address all the twists, turns and loopholes. It won't be simple.


the worm


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Author: ARRazorback Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192938 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 9:38 PM
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Everything is taxable at the same rate, currently estimated to be 23%.

So if you lived in a state where there was a 10% sales tax, for every dollar you spend 33% would go in taxes?

So if you buy $175 in groceries a month you pay $57.75 in taxes???

ARR

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Author: 3muttsmom Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192945 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 11:27 PM
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Seems like a "$cr&w the little guy" tax, to me.

I have to agree with Bookworm.

No taxes on businesses. No taxes on wealthy individuals who live off their investments.

Sounds like Bush's base would make out like robber barons.

And, call me cynical, but I just don't see employers giving a 20-30% pay increase to all their employees now that they don't have to pay corporate income tax and their employees now have to pay significantly increased sales taxes.

jmho

3MM


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Author: SlashdotAddict One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192946 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 11:29 PM
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so, as an employee, I'll lose the only tax break I get. I don't own a home, no kids.

The whole point is that there would no longer be an income tax that you would need "breaks" from.

Another point the "it'll screw the poor" folks aren't getting is that the most regressive tax of all - Social Security/Medicare, which takes 7.5% of the very first dollar made by the poor (and everybody else) - also goes away under this plan.

On the flip side, what happens to the borrowing costs of state and local governments, if their bonds no longer carry any kind of tax advantage? The interest rates they pay would almost certainly have to rise to just below that of blue-chip corporate bonds...

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Author: 3muttsmom Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192947 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 11:32 PM
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As a single, childless male I am in the most discriminated against class

Take heart, Fuskie! You're not the MOST discriminated one. DH and I would individually be in the 25% bracket, but MFJ, we're pushed into the 28%. DINKs are really pounded at a certain income level.

3MM

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Author: SlashdotAddict One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192948 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 11:34 PM
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No taxes on wealthy individuals who live off their investments.

Good point. If they can live off their investments without consuming anything at all, then yes, they would pay no taxes.

I say we keep the current system where people like the Kerrys with their $5,000,000/year income pay a lower percentage of their income (12% last year, I believe) in taxes than we did (and we made way less than $5 million last year)

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Author: blkmagwom Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192949 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/3/2004 11:39 PM
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I say we keep the current system where people like the Kerrys with their $5,000,000/year income pay a lower percentage of their income (12% last year, I believe) in taxes than we did (and we made way less than $5 million last year)


Why target the Kerrys? Nearly all wealthy people fall into that circumstance. In fact, Bill and Hillary Clinton have both said that they think it is ridiculous that as wealthy as they are, they pay so little tax.

-b-

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Author: 3muttsmom Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192950 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/4/2004 12:02 AM
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Another point the "it'll screw the poor" folks aren't getting

Actuall, my post didn't address Screwing the poor folks at all. It addressed direct give-aways for big business and the wealthy, who don't need another tax break imho.

Aranknitter mentioned that they have a combination of both income and consumption taxes in the UK. That might work - corporations still pay income tax. Besides, just because we don't tax stock purchases now doesn't mean we couldn't add it.

3MM

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Author: 3muttsmom Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192952 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/4/2004 12:07 AM
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If they can live off their investments without consuming anything at all, then yes, they would pay no taxes.

I say we keep the current system where people like the Kerrys with their $5,000,000/year income pay a lower percentage of their income (12% last year, I believe)


If they inherited all their "stuff" (remember, Bush also wants no inheritance tax), then just how much of $5million do you think they'd pay in consumption tax?

And, please, ALL rich people shelter their income. You think the Bushes don't? Or the Cheneys? Gimme a break.

3MM

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Author: SlashdotAddict One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192954 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/4/2004 12:23 AM
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And, please, ALL rich people shelter their income. You think the Bushes don't? Or the Cheneys? Gimme a break

No argument there. The Kerrys were the first ones that came to mind, simply because a big deal was made of their tax return during the campaign.

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Author: Azotic Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192955 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/4/2004 12:43 AM
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I say we keep the current system where people like the Kerrys with their $5,000,000/year income pay a lower percentage of their income (12% last year, I believe) in taxes than we did (and we made way less than $5 million last year)

Under this proposal, the Kerrys' percentage (and that of others similarly situated) would generally go down because most people in that income range do not direct a large percentage of their income to consumption.

-- Mark


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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192956 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/4/2004 1:14 AM
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SlashdotAddict,

Fuskie wrote, Who would not be able to support a plan that was not well thought out, detailed, and proven conclusively to work...

To which you replied, So I take it that you're not a big fan of our current system, then? ;)


The first thing that came to mind when reading the OP - if they had done this a year or so earlier, Ken Jennings might still be champion of Jeopardy...


ROTFLOL!

- Joel

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192957 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/4/2004 1:35 AM
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Fuskie,

You wrote, As a single, childless male I am in the most discriminated against class whenever tax cuts are considered. But the devil you know is better than the devil you don't, so until someone proves a new system works better for all, I will stick with working the current system as best I can.

Ah, come on Fuskie! You have to take a chance sometime...

Besides, everyone got the only real say they were going to get in this proposal last month. The Republicans co-opted this idea from the Libertarians a few years ago when it became clear that a flat tax wasn't going to fly. (Talk about a regressive tax...) Now that you foolish voters have given the reins of government, do you honestly think they won't pass this Bill in some form or other? I mean honestly, it must be the hottest domestic item on the Hill at the moment, most Republicans are in favor of it and the Republicans have a commanding domainance in the House and Senate as well as the Executive.

The current tax system is terrible. I don't really understand why any of you want to keep it -- except for those of you that pay little or nothing anyway. (And of course Democrats won't be able to influence your votes by giving away freebies in the tax code.) But of course if you've studied basic economics you know that it's simply impossible to know how any radcal change in fiscal policy will ultimately impact the economy of a country, even if it's been successful in others -- there are just too many variables to make prediction possible -- so the only choice is to make an educated guess, try to fill in all the unknowns and try it out.

Personally I'm a Libertarian Fool -- neither Democrats nor Republicans received any of my votes this past November -- but even I'm not foolish enough to believe that every potential problem has been worked out of this plan.

A lot of our financial planning revolves around today's tax code. If today's tax code gets thrown out the window and only a portion of the currency suddenly become worth less than the rest tomorrow, I'm not crazy enough to believe that we won't have serious troubles with this law; but I also believe today's tax code is extremely wasteful and unnecessarily intrusive. In my book HR.25 has a number of incredibly attractive features, not the least of which is the abolishment of the IRS, if we can only get to that point. But whether or not our newly elected officials can actually figure out how to make the transition without completely trashing the economy and alienating most of the population remains to be seen...

- Joel

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192958 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/4/2004 1:45 AM
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Azotic,

I wrote, Under HR.25, investments are not taxable. The government only collects tax when you buy something that's a consumable.

To which you replied, And this is the reason that this proposal taxes the poor while leaving the wealth of the rich alone -- thus making it that much harder for the poor to dig themselves out of their hole, even if they're motivated to do so.

Bull.

First, wealth is meaningless until you spend it. If a wealthy person saves and saves and saves and never spends anything, in the end what was all that savings worth? Nothing.

Second, under HR.25 if you spend all your money on debt, you don't pay any taxes. How can that be? Well debt is essentially a reverse investment so the interest you pay isn't taxable and neither are the payments you make toward your principal. Essentially HR.25 revives the old pre-1986 consumer interest tax deduction by ommision!

Of course if you're foolish enough to borrow even more money to live beyond your means, then guess what?! You're going to get to pay more taxes! Hah! Take that, you fool!

- Joel

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192959 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/4/2004 1:47 AM
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4inthefamily,

You wrote, I'm not sure if our overall tax liability would increase or decrease, but I think that a law that discourages consumerism, such as this law, will have a hard time passing.

I think you underestimate the current Republican-controlled government...

- Joel
A Libertarian Fool

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192960 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/4/2004 1:56 AM
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TheBookWorm,

You wrote, What will happen to 401(k)'s and pension plans? A lot of employers put them in place in large part because they get a tax deduction for the contributions. Also, as an employee, I'll lose the only tax break I get. I don't own a home, no kids...Seems like a "$cr&w the little guy" tax, to me.

There's a lot of complexity to the current tax code. They'll have to address all the twists, turns and loopholes. It won't be simple.


The current incarnation of HR.25 totally and completely abolishes the current tax code without exception and replaces it anew.

From what I've seen there are no provisions for retirement accounts beyond Social Security. Your current accounts would probably simply become your personal, individual accounts held by your current custodian. What you choose to do with them is your business -- as it always should have been.

I have no idea what corporations will have to do with defined benefit pension plans. Because they have no tax advantage for the company, I imagine companies will slowly replace them with something else. I also don't know what will happen with current pension assets. Guidelines need to be included for that.

People will need to learn to save for themselves again. Fortunately a consumption tax encourages precisely that behavior.

- Joel

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192961 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/4/2004 2:06 AM
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ARRazorback,

I wrote, Everything is taxable at the same rate, currently estimated to be 23%.

To which you replied, So if you lived in a state where there was a 10% sales tax, for every dollar you spend 33% would go in taxes?

So if you buy $175 in groceries a month you pay $57.75 in taxes???


You got it.

Of course I imagine poverty level will be close to $1,000/m for a family of 4, so it's likely you'll get a $230/month rebate check in the mail -- which should just about cover that $232.75/month grocery bill.

What exactly do you not understand here? The SSA will issue everyone a check to cover the taxes paid sufficient to cover the taxes on minimal subsistance living expenses. If you are willing to live at that level, the government is willing to refund to you all the money you paid without any proof you actually spent it. Spend below the poverty level and the rebate will actually help you with your living expenses. Spend above that level, and you pay extra in taxes for the priviledge.

How hard can that really be to understand? Compared to the current system, these rules are a child's play.

- Joel

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 192962 of 308225
Subject: Re: OT: Fair Tax (National Sales Tax) Date: 12/4/2004 2:15 AM
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