[noname]

Ahhh.. Now the back of my eyeball hurts! Thanx noname for the breakdown. Funny this wasn't even really discussed in my intro econ classes...
Oh LO, you know you're a GW luva. C'mon, admit it

write in vote for Ron Jeremy!

 

[Ridemonkey]

Here's the problem. Many Americans live paycheck to paycheck. I believe the "average" american income is around $15,000-20,000/yr. So your rebate is going to be about half of the average american's annual earnings.

How do you propose those people live when their budgets are already stretched to the max?

Now...let's assume for a second that somehow millions of American can suddenly cope with the equivalent of a 50% pay cut for a year until they get their big rebate. How many of those construction workers, yard workers, factory workers, and general labourers can effectively ration that money out over the course of the next year? I think 1 in 10 would be generous.

As someone else said, it would be fine for the rich because it would only affect their disposable income (one less day at the spa), but for the average American it would be crippling.

It doesn't take an understanding of economics, just math.

If there's a big enough tax rebate to offset the increase in costs so that a poor family isn't burden, then how are dirt poor hurt?

If you want to discuss economics, then good... did you know that all taxes a company pays is passed on in the cost of the good itself? Imagine if there were no taxes except sales tax? The cost of goods would go down by an approximate amount that said company wouldn't have to pay. The cost of the good (without income taxes) + national sales tax + state tax isn't going to be that much higher than they are today.

Please understand the math and economics before you insult me... calling me a republican. Bah!

 

[Ridemonkey]

Ah, I missed this post. That actually makes some sense.

I believe Opie is discussing the Fair Tax. I'll try to explain it better for you, maybe then it will make more sense.
The first thing you have to understand is that businesses don't actually pay taxes. They figure out how much they need to make, estimate the cost, include their tax burden, then increase the cost to cover that tax while still leaving them the money they originally decided they needed. We refer to this as an embedded tax. The tax burdens of all people involved in the supply chain, hidden in the retail price of the goods.
When you go to a store, the average product has an embedded tax of about 22 percent. If you buy something that costs one hundred dollars, 22 dollars of that purchase actually went to pay the tax burden of the manufacturer, the materials suppliers, the delivery services, etc. Then you still have to pay the sales tax at the counter, as well as the fed. and state income taxes on your paychecks.
The fair tax elimenates all other taxes in exchange for a 30 percent consumption tax. It also allows a refund estimated on the cost of food/clothing for people. A monthly check to cover the taxes paid toward the neccessities. This way when you get your check you get all of it and don't pay any taxes till you buy something new(no taxes on used goods)
With a consumtion tax, goods that were once 100 dollars would quickly drop down to about 78-80 dollars, making their after tax cost roughly the same or less than it was with the curent tax system of income and sales taxes. Prices on goods at the counter would not go up, but peoples real spendable/savable income would go up dramatically.
Unlike citizens who would get the rebate checks every month, illegals would not, although they would be paying the same tax. That alone would be more than enough incentive to entice them to become legal citizens.

 

[LordOpie]

y'all are thinking way too linear and way too inside the box.

Yes, rebate checks would go out monthly... heck, why not a month in advance. Whatever it takes.

Point is two fold:

1. don't make a change just for the sake of making a change... which I believe ignoring the problem is a better solution than some of the proposals out there... which are change for change's sake.

2. There are solutions... not that we at RM will come up with the solution and if we did, not that we'd be heard, but y'all need to stop being Negative Nancy's. Stop pooping on ideas... modify them until they're right.

 

[Toshi]

why do we assume that the prices would drop to 78 dollars? i think the manufacturers would pocket the difference.

exactly where is this consumption tax applied? does it apply to wholesalers selling to retailers? suppliers selling to manufacturers? just to consumers? who exactly is a consumer, and how would that be defined?

 

[LordOpie]

why do we assume that the prices would drop to 78 dollars? i think the manufacturers would pocket the difference.

same laws of economics that apply now.

 

[sanjuro]

which is why everyone gets a large tax refund ($10k?) each year. The really poor wind up paying no taxes or even coming out a few bucks ahead.

It'll also encourage people to work. Let's say you can only get a refund up to the amount you earned. So the fast food worker making $6/hr will 'earn' ~$22k/yr... their salary plus the tax refund.

Meanwhile, the illegal makes $4/hr and his take home pay is essentially $3/hr or $6,000/yr (based on 40hr/week). That would seriously discourage illegal immigration.

In New Orleans, the city had a relatively high sales tax rate, 8.25%, with very low property taxes. It was a good way to tax the poor and the tourists while rewarding the rich.

While the federal taxes might be lower, state taxes vs sales tax is what matters. I believe Oregon, which I like quite a bit, has no sales tax but moderate property taxes. There is some equality between the poor and the middle class that way.

 

[DRB]

why do we assume that the prices would drop to 78 dollars? i think the manufacturers would pocket the difference.

exactly where is this consumption tax applied? does it apply to wholesalers selling to retailers? suppliers selling to manufacturers? just to consumers? who exactly is a consumer, and how would that be defined?

Because we live in a utopia where consumer happiness and well being is always put ahead of corporate interest.

Those are pretty unicorns.

 

[ohio]

I love that it's branded the "fair tax". Like the "Clean Air Act" which really rolls back environmental regulations limiting pollution, or "No Child Left Behind," which creates equality by leaving every child behind.

Spin, you whirling dervish, spin!

edit for more....
"The Patriot Act" which chips away at our core rights constitutional rights.
"Partial birth abortion" which makes it sound like the baby is halfway out the body when we put it in a blender.
"Operation Enduring Freedom" when we really mean enduring war followed by limited freedom under a theocratic government.

 

[Fshflys]

I like this Guys take on illegal's.

Here in Los Angeles, sometime my job takes me to the other side of the city, over a hundred miles away. Well one day I was runing a little late, and with rush hour traffic, it would make matters only worse. Solution? run down to your local home depot. Hey guy's I only need 1 person today, OK. The guy jumps in and I get on to the freeway and move right over to the High Occupancy Lane, zip over to the other side of town in no time at all, even make it there before I expected. Once off the freeway, I pull into a gas station, up to one of the pumps. I ask Juan to go buy me a pack of smokes as I hand him $5. As soon as he's 10ft away, I take off, hey times money!

 

[MMike]

I think the illegal mexicans should have to have a skin pigment reduction so that they blend in better..... and no sombreros....unless it's an Urban Sombrero....

That's what I think...

 

[noname]

why do we assume that the prices would drop to 78 dollars? i think the manufacturers would pocket the difference.

exactly where is this consumption tax applied? does it apply to wholesalers selling to retailers? suppliers selling to manufacturers? just to consumers? who exactly is a consumer, and how would that be defined?

First off RM. The average American does not live paycheck to paycheck, incomes average between 45 and 54k a year depending on the area.
Toshi. High volume low profit. think wal-fart. they have some of the lowest profit margins yet make tons of money buy dealing with large volumes, as soon as one manufacturer realizes that they can take market share away from the competition by lowering prices they will do so, then the competition will likewise follow. there are multiple real world examples of this. As for who gets taxed, it is a retail consumption tax on new goods at the retail level.
The next time you get a paycheck look at your stub and see how much of that goes to the government, then imagine being able to keep all of that and only have to pay taxes on it when you buy something new.
This program assists the poor in two key ways, it removes all taxes on used goods, as well as income. Meaning they have more money on hand every week to pay bills and save money. It also completely covers their tax burden for nesseccities. They only pay taxes on non essential items, and if they buy used or second hand(think pawn shop or consignment store) there is no fed tax, they come out ahead.

the system also provides a finacial incentive for illegals to become citizens. they came here for money so it only makes sense that they would try to take advantage of the situation. Also, removing the employment tax burden of the employer would negate some of the advantages of hiring illegal immagrants, thus slightly negating one of the sore points people have with illegal immegration.

 

[Silver]

They only pay taxes on non essential items, and if they buy used or second hand(think pawn shop or consignment store) there is no fed tax, they come out ahead.

Your tax rate (and I think the fair tax people use a slightly misleading rate for non-economists, is it tax inclusive or tax exclusive?) would have to be much higher than 30% if you start excluding non essential items to be revenue neutral.

 

[ohio]

First off RM. The average American does not live paycheck to paycheck, incomes average between 45 and 54k a year depending on the area.

No they don't. Unless by "depending on the area" you mean "only in those areas where incomes average between 45 and 54k a year."

This program assists the poor in two key ways, it removes all taxes on used goods

No it doesn't. Not in any different manner than the current tax laws.

Meaning they have more money on hand every week to pay bills and save money.

Is it possible to sleight of hand oneself? Their food, gas and rent all cost more. But because they can buy used shoes tax-free you think they have more spending power?

It also completely covers their tax burden for nesseccities.

How?

How do you deal with the supply chain? Are services taxed the same as goods? What about gifts? What about trade/barter? How about B2B goods and services? What do we do about real estate law? Are you going to add a 22% tax to the purchase price of a home?

 

[Silver]

One other thing I just thought of: Prop 13 in California acts a lot like rent controls...can you imagine what a 30% sales tax (once again, that's best case. It would likely be much higher) on the price of new homes would do to distort the housing market?

Services would need to be taxed to get to the extremely optimistic rate that the Fairtax people come up with. So Donald Trump and I both pay 30% extra on a doctor's visit. So does the homeless lady who collects cans for a living. Who takes that hit the hardest?

 

[noname]

No they don't. Unless by "depending on the area" you mean "only in those areas where incomes average between 45 and 54k a year." try looking these things up instead of just guessing, the last figures I heard quoted buy the Fed were around 54k


No it doesn't. Not in any different manner than the current tax laws.
it removes the embedded taxs all suppliers charge into the cost of their goods. What part of RETAIL don't you understand.


Is it possible to sleight of hand oneself? Their food, gas and rent all cost more. But because they can buy used shoes tax-free you think they have more spending power? they actually all cost the same at the counter, you wouldn't even really notice the difference. I'd retype all this again, but if you're too lazy to go back and read all my previous posts, it would be lost on you anyway.

How?

How do you deal with the supply chain? Are services taxed the same as goods? What about gifts? What about trade/barter? How about B2B goods and services? What do we do about real estate law? Are you going to add a 22% tax to the purchase price of a home?

Retail tax on all NEW goods. if you buy a new house, car, whatever, you pay the tax, but since the initial cost of the house will be much lower since none of the product manufacturers, builders, etc had to pay income or employment taxes, it actually comes out the same.
Silver it is an inclusive tax of around 32 percent, designed specifically to be revenue neutral.

 

[Silver]

Silver it is an inclusive tax of around 32 percent, designed specifically to be revenue neutral.

How do the Fair Tax people quote it? 23%, right? Hard to imagine that they would make an honest mistake like that, no?

Keep in mind, that's 32% in a perfect world, which is somewhat akin to the physics calculations we did in high school that ignored air resistance and friction...

 

[noname]

One other thing I just thought of: Prop 13 in California acts a lot like rent controls...can you imagine what a 30% sales tax (once again, that's best case. It would likely be much higher) on the price of new homes would do to distort the housing market?

Services would need to be taxed to get to the extremely optimistic rate that the Harvard economists people come up with. So Donald Trump and I both pay 30% extra on a doctor's visit. So does the homeless lady who collects cans for a living. Who takes that hit the hardest?

Are you familiar with corporate tax liabilities, empoyment taxes, and things of that nature? Ask your boss how much HE/SHE pays to employ you, aside from your actual paycheck, you'd be pretty surprised.
Doing away with all that eliminates a lot of overhead costs, aside from the actual direct monetary costs, there are the costs of accountants, filing fees, time lost, etc. You would be absolutely astounded if you knew just how much large companies pay just to b in compliance with the tax code. Remove all of those costs and the cost of doing business drops dramatically, and subsequently so do the prices.

 

[noname]

How do the Fair Tax people quote it? 23%, right? Hard to imagine that they would make an honest mistake like that, no?

Keep in mind, that's 32% in a perfect world, which is somewhat akin to the physics calculations we did in high school that ignored air resistance and friction...

23% is the embedded tax. you remove the embedded tax by removing all income/capital gains/etc. taxes and replace them with an inclusive sales tax of 32%.

 

[noname]

Keep in mind, that's 32% in a perfect world,

So you're saying it has to be perfect? there is no such thing as a perfect solution, only equitable and inequitable trade-offs.
I see the Fair Tax as a far more equitable way of generating revenue than the current system.

 

[Silver]

23% is the embedded tax. you remove the embedded tax by removing all income/capital gains/etc. taxes and replace them with an inclusive sales tax of 32%.

Ceteris paribus, of course.

I have to run, but I'm sure ohio will pick this up if he's around. We've had this discussion before. Fair tax is like cold fusion. There's a reason you don't hear too many credible people banging the drum for it. That's not to say our tax system isn't screwed up, however.

 

[ohio]

Retail tax on all NEW goods. if you buy a new house, car, whatever, you pay the tax, but since the initial cost of the house will be much lower since none of the product manufacturers, builders, etc had to pay income or employment taxes, it actually comes out the same.

What about an addition on an old house. Do you have any idea the volume of tax dollars you will lose by not taxing the sale of vehicles and homes? Go have a look at the proportion of car or home sales that are for new vs. used.

You still didn't address the issues of services or B2B goods.

Look, the short version of this is that a pure consumption tax ends up being just as complex with just as many loopholes and thus just as many organizational costs as the current system.

 

[ohio]

Fair tax is like cold fusion

In that France is already doing it?....










(Hi Chang)

 

[noname]

What about an addition on an old house. Do you have any idea the volume of tax dollars you will lose by not taxing the sale of vehicles and homes? Go have a look at the proportion of car or home sales that are for new vs. used.

You still didn't address the issues of services or B2B goods.

Look, the short version of this is that a pure consumption tax ends up being just as complex with just as many loopholes and thus just as many organizational costs as the current system.

Anything bought new at the retail level, and that includes services. If I could get rid of all the employment taxes, accountant fees, business taxes at my shop I could lower the cost of my services considerably, or give everyone a mild pay increase, or both
On the federal level, it wouldn't matter much with used goods, since the feds don't charge a sales tax curently, but by dropping the costs of new goods considerably, it has a concurrent effect on comparable used goods.
Also, you are looking at the economy on a zero sum scale to make your assumptions, that's likely why it seems to fall short.

 

[Toshi]

Also, you are looking at the economy on a zero sum scale to make your assumptions, that's likely why it seems to fall short.

so you're saying we're leaving the magical money tree out of our calculations?

 

[noname]

so you're saying we're leaving the magical money tree out of our calculations?

the economy is always growing or shrinking, the policies enacted by the government have huge affects on the rate of growth, most government policy wonks don't take into acount increases due to relaxed taxes/regs then whine that we cut too much while turning a blind eye to the massive increases, or on the flipside, they ignore the huge slowdowns caused by topheavy economic policies.
example. say you cut a companies tax rate down by 30%. That frees up much needed fiscal resources for growth while making it cheaper to just keep all monies in the U.S and just pay the taxes here. The increase in finacial capital allows the company to expand to a larger market area faster, increasing exponetially their income thus their tax burden. So on the overall at the end of the fiscal year they have paid more into the government than they would have if they had been taxed at a much higher rate, but the wonks in DC just look at the end of year overall fgures, apply the old tax rate to those fiigures, and declare a loss. Completely unable to see the causal relationship.
Real world examples, tax cuts of Coolidge, Kennedy, Reagan, Bush.
Also, look at Dahmler Chrysler. They are a German company now because when the merger was going down it was found that being based in Germany insead of the U.S. posed less of a tax burden, making them more competative. think of all that tax revenue lost because the gov got greedy and started demanding too much.
On a side note, I think it's funny that we cut taxes, gov revenue and economic growth increase, and yet when the gov runs a deficit everyone blames the tax cuts. No one even looks at the huge increases in the rates of government spending. Non defense gov spending has increased more under Bush than at any other time in my brief lifetime.
on another note, we have totally hijacked this thread.

 

[LordOpie]

props to you noname!!

My response to Toshi would've been... :nuts:

 

[Toshi]

Real world examples, tax cuts of Coolidge, Kennedy, Reagan, Bush.

uh, you sure the tax cuts/policies of reagan and bush led to growth?

Also, look at Dahmler Chrysler. They are a German company now because when the merger was going down it was found that being based in Germany insead of the U.S. posed less of a tax burden, making them more competative. think of all that tax revenue lost because the gov got greedy and started demanding too much.

i assume you mean daimler-chrysler (got serial killers on your mind?). and you're proving my point from earlier: companies do what's best for them. we're never going to be a tax shelter since we have a huge military (among many other entitlements that must be paid for) so your point is moot.

furthermore, germany might not be such a shining example of a low tax state...

http://www.euractiv.com/Article?tcmuri=tcm:29-153787-16&type=News

The 'tax wedge,' ie the difference between labour costs to the employer and the net take-home pay of a single-earner employee is the biggest in Belgium (55.4%), Germany (51.8%), Hungary (50.5%) and France (50.1%), a fresh report by the Organisation for Economic Co-operation and Development (OECD) reveals. The calculation includes all cash benefits received from government welfare programmes.

Calculated for a single person on average earnings, the taxes are the lowest in New Zealand (20.5%), Mexico (18.2%) and Korea (17.3%). The US registered 29.1%, the UK 33.5% and Japan 27.7%.

 

[Changleen]

'Fairtax' doesn't seem very fair to me.

 

[noname]

uh, you sure the tax cuts/policies of reagan and bush led to growth?

i assume you mean daimler-chrysler (got serial killers on your mind?). and you're proving my point from earlier: companies do what's best for them. we're never going to be a tax shelter since we have a huge military (among many other entitlements that must be paid for) so your point is moot.

furthermore, germany might not be such a shining example of a low tax state...

http://www.euractiv.com/Article?tcmuri=tcm:29-153787-16&type=News

Take a look at the numbers, government revenue grew incredibly well, it just was overrun by government spending. For every 80 cent increase in government revenue they increased spending by just over a dollar. If you lived your life like that I'm sure you'd be in the hole pretty deep as well.
Unlike germany, and many other Euro countries, the U.S. charges a corporate entity tax on all earnings, regardless of where they originated. Germany has a VAT tax that must be paid at every level of production, but if you export the product the taxes are reduced or eliminated. Also, they aren't taxing them for goods manufactured and sold in the U.S. If they had headquartered in the U.S., they would be paying taxes on all goods they sold regardless of what country they sold it in to the U.S. government as well as to the other governments. So yeah, that's a pretty heavy tax liability.
Our military really isn't much of the Federal budget. Besides if we had a less restrictive tax code that encouraged foreign businesses to relocate to the U.S. they would be employing more citizens, that would mean more jobs and more people spending money in the U.S., at a tax rate of 30% that would create a hefty increase in government revenue.

 

[Silver]

Our military really isn't much of the Federal budget.

Intervention time: You need to quit talking out of your ass.

NASA, the Corps of Engineers, the EPA, Commerce...all not much of the federal budget.

The military is a huge chunk. The largest of the federal budget, in fact.

 

[ohio]

Anything bought new at the retail level, and that includes services. If I could get rid of all the employment taxes, accountant fees, business taxes at my shop I could lower the cost of my services considerably, or give everyone a mild pay increase, or both

Uh you're going to have to give them a moer than a "mild" pay raise since everything they buy will now cost 30-odd percent more (and I would guess closer to 40 if we're taking reality into account). So why don't you look at your balance sheet and figure out which is more expensive to you: the taxes you currently pay or 35% of your employees take-home and health benefits.

Also, you are looking at the economy on a zero sum scale to make your assumptions, that's likely why it seems to fall short.

No I'm not, I'm giving you the benefit of the doubt and saying that your tax scheme won't hurt economic growth, even though it dis-incents the creation and purchase of anything new.

 

[ohio]

Take a look at the numbers, government revenue grew incredibly well, it just was overrun by government spending. For every 80 cent increase in government revenue they increased spending by just over a dollar. If you lived your life like that I'm sure you'd be in the hole pretty deep as well.

Consumption tax will have zero effect on the incentives behind government budgeting.

Unlike germany, and many other Euro countries, the U.S. charges a corporate entity tax on all earnings, regardless of where they originated. Germany has a VAT tax that must be paid at every level of production, but if you export the product the taxes are reduced or eliminated. Also, they aren't taxing them for goods manufactured and sold in the U.S. If they had headquartered in the U.S., they would be paying taxes on all goods they sold regardless of what country they sold it in to the U.S. government as well as to the other governments. So yeah, that's a pretty heavy tax liability.

First of all, you're wrong. European countries tax corporate profits as well, in addition to their VAT, which is no different than our sales tax (sessentially). Second of all, the "heavy" corporate taxes in the US are more than compensated by the wonderfully lenient corporate liability laws that have made the US the global center for innovation and economic growth for 50-odd years.Corporations that want to take risks (and risk is a necessity for growth) will continue to do so in the US.

 

[noname]

Intervention time: You need to quit talking out of your ass.

NASA, the Corps of Engineers, the EPA, Commerce...all not much of the federal budget.

The military is a huge chunk. The largest of the federal budget, in fact.

the defense dept recieves 16% of the U.S. budget, as oppossed to say medicaid that receives 25% or social security that recieves 20%.
The largest chunk of the federal budget is the dept of Health and Human Resources at 699.6 billion dollars.

 

[noname]

Consumption tax will have zero effect on the incentives behind government budgeting.


First of all, you're wrong. European countries tax corporate profits as well, in addition to their VAT, which is no different than our sales tax (sessentially). Second of all, the "heavy" corporate taxes in the US are more than compensated by the wonderfully lenient corporate liability laws that have made the US the global center for innovation and economic growth for 50-odd years.Corporations that want to take risks (and risk is a necessity for growth) will continue to do so in the US.

I never said it would affect government budgeting, although it actually would in ways you probly haven't even thought about.
In germany the VAT tax is removed from exports.
As for being global leaders, the rest of the western world was recovering from a war that devastated the countries of europe and asia while leaving our homeland untouched. We had a considerable head start on everyone else.
Lenient corporate liability laws? Maybe so far as employment goes, but even there euros have an advantage because many of the things that labor unions push the companies to provide here are provided by the governments of those countries. reducing corporate outlay.

 

[noname]

Uh you're going to have to give them a moer than a "mild" pay raise since everything they buy will now cost 30-odd percent more (and I would guess closer to 40 if we're taking reality into account). So why don't you look at your balance sheet and figure out which is more expensive to you: the taxes you currently pay or 35% of your employees take-home and health benefits.



No I'm not, I'm giving you the benefit of the doubt and saying that your tax scheme won't hurt economic growth, even though it dis-incents the creation and purchase of anything new.

Why you keep insisting that it will cost 30% more is beyond me, obviously you're not paying attention, or just can't grasp the concept of a company adding the price of their tax liability to the cost of their product. go back and reread all of my posts and if you still can't comprehend how it works I'm sorry for you. That's the primary reason for polticos not pushing the idea, they know that a majority of the voting public just can't even understand how it all works. Sad.

 

[Silver]

the defense dept recieves 16% of the U.S. budget, as oppossed to say medicaid that receives 25% or social security that recieves 20%.
The largest chunk of the federal budget is the dept of Health and Human Resources at 699.6 billion dollars.

You're futzing with numbers again. Also, if you're going to give numbers, why not cite the source? And little things like the year, perhaps?

You don't understand the difference between discretionary spending and non? I should have made that clear, sorry about that.

 

[ALEXIS_DH]

Why you keep insisting that it will cost 30% more is beyond me, obviously you're not paying attention, or just can't grasp the concept of a company adding the price of their tax liability to the cost of their product. (

wait, do you expect business to really pass the whole savings on to their costumers???? and not take a considerable bite of the "cost savings" in their manufacturing process in the meanwhile??

specially when they know for a fact people on the street are making "more" money since they dont pay income taxes anymore???

 

[ohio]

go back and reread all of my posts

You mean like this one?

Silver it is an inclusive tax of around 32 percent, designed specifically to be revenue neutral

You can switch back to the 22-23% of you like, if it mean you will actually address the content of my posts.

 

[ohio]

That's the primary reason for polticos not pushing the idea, they know that a majority of the voting public just can't even understand how it all works.

I thought one of the primary justification for the consumption tax was that it was a much simpler system that everyone could understand, and fewer people could manipulate? I would say that the voting public would have no problem understanding the concept (as you do), but have a very difficult time grasping the true ramifications of such a tax (as you are).