And people want these people running our healthcare?

[blacklegionfreak]

what are the percentages that they are discussing?

[Hilltop Customs]

^if a rich and poor person both spend the same amount, a poorer person will end up paying a MASSIVELY higher percentage of their income on tax.






"money as debt"

keep the debt bubble expanding while stroking our egos with "a better value on our brand new, greener car!"

[Lohman446]

what are the percentages that they are discussing?

As Hilltop pointed out it adversely influences the poor (and frankly middle class as well). The problem is not the graduated income tax, the problem is spending. The government should run a near zero sum balance sheet. Thus if we can quit supporting people who refuse to work (again I realize there are legitimate claims out there, but you also have to understand there are a lot out there that are not) we can lower the amount we need to collect or borrow. We need to stop trying to redistribute wealth through the tax code and use taxes to support the legitimate needs of government, not to support hand out programs.

That being said the killer on a consumption tax is this. Lets say family A makes $10 an hour at the job they work. Having no great marketable skill its what they can make. Since we have done away with government hand outs they work 50 hours and bring home $500 a week. Family B makes $20 an hour.

Of the $500 dollars you must buy certain things or set a certain amount of that money aside towards billes. Now the numbers are only for example

You buy $100 of groceries (taxed at 10%) you pay $10 in consumption taxes

You have a car payment of $50 a week - $5 of which reflects the consumption tax

You make your house payment of $200 - $20 of which reflects the consumption tax.

Whatever the numbers end up being if you pay $50 of your income in taxes on things that you have to have to live you pay 10% of your income on taxes related to necessities (food / shelter / utilities, etc). Assuming the same base necessities the family making more spends only 5%. on taxes related to necessities.

What about exempting so called necessities? Maybe, but at what level. For instance we decide to exempt vehicles. Ok, so no consumption tax paid on an Aveo? What about the single person buying the loaded out Excursion? Do we modify it if the Excursion is truly a need (you have 6 children for instance)? Ok what about food? Do we exempt bologna but not lobster? What about rent and or house? Ok, do we exempt only the first house one purchases? What if it burns down? What about exempting investment to encourage it? If we exempt only the first house then do we not hurt the poorest as the land-owners of rental units must recoup capital spent on taxes? Do we exempt anyone making less than $XX,XXXX? Does that not require an IRS system then to check those who claim to have thta low of an income? Does it not encourage people to be "creative" to make less than the cut-off. If I am making $1 less than the cut off it would require a large raise to make it worth making more. How annoyed will we be by people making $1 less than the cut-off and living with someone who pays for everything and makes far more?

The idea of a consumption tax is simplicity. In theory thats true. The reality is that it is not simple, nor for that matter as fair as it appears at first glance.


Our issues right now are unchecked spending - often debt financed, at both personal and government levels. There are flaws in the tax system but if we could reign in spending we could than address a far simpler tax system.

[grEnAlEins]

Do we exempt anyone making less than $XX,XXXX? Does that not require an IRS system then to check those who claim to have thta low of an income?

Does it not encourage people to be "creative" to make less than the cut-off. If I am making $1 less than the cut off it would require a large raise to make it worth making more. How annoyed will we be by people making $1 less than the cut-off and living with someone who pays for everything and makes far more?

The idea of a consumption tax is simplicity. In theory thats true. The reality is that it is not simple, nor for that matter as fair as it appears at first glance.


Our issues right now are unchecked spending - often debt financed, at both personal and government levels.

There are flaws in the tax system but if we could reign in spending we could than address a far simpler tax system.

Don't we already have such a system between the IRS and SSA? We do indeed.

Doesn't our current tax system do this as well with the bracket system? It does indeed.

It could be infinitely simple. 7% on all items. The poor have a higher burden on any one item, but may or may not have a higher burden by proportion overall; take the following into account: 1) the wealthy would buy more things at a higher value, so even if the tax on any one item is more burdensome on the poor than the rich, the system would "even out" considerably when spending habits and luxury items that the poor do not (well in theory anyway, should not might be more appropriate here) buy are accounted for. 2) Even if they do, so what? This will give incentive to the poor to accrue more wealth or see to it that their kids do. Is giving an incentive for productivity and self improvement a bad thing? Would this not fix the greater issue at hand, social leeching and societal idleness that plagues the US today?

How about the flat tax? I see no flaw with a system such as that so long as it was kept universal and the unconstitutional FDR era entitlement programs were ended, not that a government program would/could end in the country...

[teufelhunden]

How about the flat tax?

Flat tax is too fair. You pay 15%, I pay 15%, and so does the guy down the street.

Every single day I work with clients who are in the 35% bracket - factor in that their tax home is NYC and you have to add 6.85% for NYS and and 3.648% for NYC and that's north of 45%. Obama gets his way and that becomes well over 50% (back to 39.6% top bracket, additional "surcharge" on the rich for obamacare). At that point, what is the incentive to continue to work, and continue to work here? These are finance industry people who could do the same living in say... the Caymans, Bermuda, or other countries with low income tax rates. And take their huge pending elsewhere.

It's almost discouraging getting rich.... or is that the point?

[Lohman446]

Don't we already have such a system between the IRS and SSA? We do indeed.

Doesn't our current tax system do this as well with the bracket system? It does indeed.

It could be infinitely simple. 7% on all items. The poor have a higher burden on any one item, but may or may not have a higher burden by proportion overall; take the following into account: 1) the wealthy would buy more things at a higher value, so even if the tax on any one item is more burdensome on the poor than the rich, the system would "even out" considerably when spending habits and luxury items that the poor do not (well in theory anyway, should not might be more appropriate here) buy are accounted for. 2) Even if they do, so what? This will give incentive to the poor to accrue more wealth or see to it that their kids do. Is giving an incentive for productivity and self improvement a bad thing? Would this not fix the greater issue at hand, social leeching and societal idleness that plagues the US today?

How about the flat tax? I see no flaw with a system such as that so long as it was kept universal and the unconstitutional FDR era entitlement programs were ended, not that a government program would/could end in the country...

But the poor would have a great burden based simply on the needs.

[teufelhunden]

Wait so the program worked, and that's somehow proof of something wrong with the program?

Your math is laughably simplistic, the total number of car sales in the country is a completely invalid figure for analysis. The definition of clunkers is quite restrictive.

As a pilot program, this worked out spectacularly well, illustrating that people would use the program and its goals can be achieved, probably better than was originally thought.

The conservative spin is breathtaking in its dishonesty.

The program worked, yes. The legislature failed to properly forecast the scope of its working - hence the relatively tiny budget. Everybody knew C4C would get people in and buying new cars. Everybody knows that people need healthcare. The legislature is failing to properly forecast costs. Did you know the bill does not include physicians fees?

No crap the math is simplistic. What apparently isn't simple enough for Congress is figuring out what the effect of their actions could be. The worst part is, they were so far off that only about 1/10th of the funding was burned through before it was readily apparently that they were screwed. Took 11 days - the funding was supposed to last until November.

This isn't a pilot program. This is the real deal, with real dollars.

The liberal lack of understanding is far more of a gut punch than the conservative spin.

[grEnAlEins]

But the poor would have a great burden based simply on the needs.

What part specifically were you addressing? Their burden would not be any greater by proportion in a flat tax system, nor is it likely to be elevated in a fair tax system. A tax system is naturally a burden, so the poor should feel burdened in a system with taxation just like everyone else in the same system. What I am shooting for is equalization of the burden within the system.

[blacklegionfreak]

The idea of a consumption tax is simplicity. In theory thats true. The reality is that it is not simple, nor for that matter as fair as it appears at first glance.


Our issues right now are unchecked spending - often debt financed, at both personal and government levels. There are flaws in the tax system but if we could reign in spending we could than address a far simpler tax system.[/QUOTE]


ok gotcha i will research it further, thank you for answering me in a rational articulate way.


-BLF

[blacklegionfreak]

Flat tax is too fair. You pay 15%, I pay 15%, and so does the guy down the street.

Every single day I work with clients who are in the 35% bracket - factor in that their tax home is NYC and you have to add 6.85% for NYS and and 3.648% for NYC and that's north of 45%. Obama gets his way and that becomes well over 50% (back to 39.6% top bracket, additional "surcharge" on the rich for obamacare). At that point, what is the incentive to continue to work, and continue to work here? These are finance industry people who could do the same living in say... the Caymans, Bermuda, or other countries with low income tax rates. And take their huge pending elsewhere.

It's almost discouraging getting rich.... or is that the point?

i am fairly sure thats the piont

[Lohman446]

teufelhunden you forgot the luxury taxes many of these people pay on items they purchase - they are likely already closer to that 50% then you would like to think.

What part specifically were you addressing? Their burden would not be any greater by proportion in a flat tax system, nor is it likely to be elevated in a fair tax system. A tax system is naturally a burden, so the poor should feel burdened in a system with taxation just like everyone else in the same system. What I am shooting for is equalization of the burden within the system.

This is an interesting lesson in the limits of the Federal government often enough brought up by those favoring limited government. I am a particular fan of the argument and story myself. For those who will whine about the source google it and you will find it sourced in a tremendous amount of places, this was the easiest one to read.

http://www.freerepublic.com/forum/a3a56e63f2e63.htm

"'It is not the amount, Colonel, that I complain of; it is the principle. In the first place, the government ought to have in the Treasury no more than enough for its legitimate purposes. But that has nothing to do with the question. The power of collecting and disbursing money at pleasure is the most dangerous power that can be intrusted to man, particularly under our system of collecting revenue by a tariff, which reaches every man in the country, no matter how poor he may be, and the poorer he is the more he pays in proportion to his means. What is worse, it presses upon him without his knowledge where the weight centers, for there is not a man in the United States who can ever guess how much he pays to the government. So you see, that while you are contributing to relieve one, you are drawing it from thousands who are even worse off than he. If you had the right to give anything, the amount was simply a matter of discretion with you, and you had as much right to give $20,000,000 as $20,000.

If you have the right to give to one, you have the right to give to all; and, as the Constitution neither defines charity nor stipulates the amount, you are at liberty to give to any and everything which you may believe, or profess to believe, is a charity, and to any amount you may think proper. You will very easily perceive what a wide door this would open for fraud and corruption and favoritism, on the one hand, and for robbing the people on the other. No, Colonel, Congress has no right to give charity. Individual members may give as much of their own money as they please, but they have no right to touch a dollar of the public money for that purpose. If twice as many houses had been burned in this county as in Georgetown, neither you nor any other member of Congress would have thought of appropriating a dollar for our relief. There are about two hundred and forty members of Congress. If they had shown their sympathy for the sufferers by contributing each one week's pay, it would have made over $13,000. There are plenty of wealthy men in and around Washington who could have given $20,000 without depriving themselves of even a luxury of life. The congressmen chose to keep their own money, which, if reports be true, some of them spend not very creditably; and the people about Washington, no doubt, applauded you for relieving them from the necessity of giving by giving what was not yours to give. The people have delegated to Congress, by the Constitution, the power to do certain things. To do these, it is authorized to collect and pay moneys, and for nothing else. Everything beyond this is usurpation, and a violation of the Constitution.'"

There are people living at the bottom of the pay scale who simply cannot afford to give up 15% of the wages they are given. These people already depend on social assistance for food and the like. Any major change has to first address spending, and likely remove that social assistance to the able bodied who have work readily available. Most states do not have a living wage law, and federal minimum wage will not support most families - in fact those depending on it would find themselves well below the poverty line. Keep in mind that being of the opinion that people should be self reliant I am also of the opinion that we would be far better off if children were family raised and not institutionally raised. If we accept that federal minimum wage is the lowest reasonable livable wage and then institute a 15% tax on it then we will be forced to raise it 15%. Raises to the workers do not come for nothing, and this will in turn be reflected in the costs of goods and services.

Many proponents of consumption and flat taxes favor a cut-off point where the tax would not be applied to address the working poor. It sounds wonderful but it immediately undoes a lot of the simplicity of the flat tax. If there is a cut off point all those people below it must have a verifiable way of applying for the exemption. All of the sudden a government agency is needed again. More to the point if we say the cut-off point is 20K dollars and I am making $19,999 it would take a healthy raise to make it worth making more.

*IF* you are going to go to a consumption based tax you would almost have to make it a tariff style system. This would keep the system from having to be flat. Purchasing a car below 20K - 15% tax. Purchase one 20K-30K 20%, purchase one above 0K - 30% etc. What if a person goes into Canada and purchases something. How do we charge tax on that? Theoretically states charge sales tax on out of state purchases, how well does that actually work?

The point is not that the current system is working. I believe it could be made to work. However, proponents of flat taxes and consumption taxes will normally point out, if questioned, that the system is not as easy as it seems. I know, the concept of "its fair" is out there too.

Let me tell you a story. I was basically given anything I could need when I was young. College was paid for and I was driving a Corvette to and from when the weather was nice, and a SUV when it wasn't. I had the luxury of being able to devote as much time and effort as I wanted. Now I know anyone can go to college - I understand that. But my earning potential was far more easily raised than those who worked themselves through college. The point is this - life is not fair. There has to be a room for understanding of those who do not have the ability to make the kind of money many of us can but still do work at it. We cannot burden these people more in the name of fairness with a straight face. I believe in the working poor. I also believe that the definition of poor in this country has gotten out of hand and many of those claiming it need to look at some basic facts of life just a few generations ago. One example, good the historical reference big wheel in relation to cheese and spending. Look at the consumption of meat per person compared to the same time periods. Even easier, look around at the amount of restaurants around you. While I don't buy that everyone who claims they are poor are, I buy that the working poor exist.

[teufelhunden]

teufelhunden you forgot the luxury taxes many of these people pay on items they purchase - they are likely already closer to that 50% then you would like to think.

Yeah, NYC sales tax is something like 8.25% - that pushes it over 50%. I was speaking strictly income taxes though - I guess one doesn't have to incur sales taxes (don't buy taxable things), but one can't legally avoid income taxes.

[grEnAlEins]

Yeah, NYC sales tax is something like 8.25% - that pushes it over 50%. I was speaking strictly income taxes though - I guess one doesn't have to incur sales taxes (don't buy taxable things), but one can't legally avoid income taxes.

Sure one could if so inclined. Here in Ill-annoy we tons of people that do it.

More to the point if we say the cut-off point is 20K dollars and I am making $19,999 it would take a healthy raise to make it worth making more.

*IF* you are going to go to a consumption based tax you would almost have to make it a tariff style system. This would keep the system from having to be flat. Purchasing a car below 20K - 15% tax. Purchase one 20K-30K 20%, purchase one above 0K - 30% etc. What if a person goes into Canada and purchases something. How do we charge tax on that? Theoretically states charge sales tax on out of state purchases, how well does that actually work?

The point is not that the current system is working. I believe it could be made to work. However, proponents of flat taxes and consumption taxes will normally point out, if questioned, that the system is not as easy as it seems. I know, the concept of "its fair" is out there too.

Not necessarily. You could do something similar to the current system and make the first 20k free for everyone, then there is always an incentive to go further. Where our system goes wrong today is that there is a diminishing return on labor due to our bracket system.

Point taken on the consumption tax. It is true that it would require completely ethical citizenry and that would never happen here or anywhere else. Again with the cars a bracketed system would likely be a fairer way of doing it (first 20k at 10%, second 20k at 12%, etc) and yes it is complex but it is closer to fair than the current system. Really though you could tax buy item class. All food is 5%, all vehicles are 10%, all toilets are 12%, etc. Why should you pay proportionally higher tax because you want a nicer widget. Isn't paying more in amount enough? I believe it is.

I am not sure that our current system will work well in my lifetime. We can take Russia as an example. Look what happened when they lowered their tax rate and went to a flat tax (with a floor IIRC)... Their revenue went up because the tax code was no longer infinitely complex and the people actually paying felt that they were given a fair--or more fair shake--resulting in less tax fraud. I think we should do the same here. I am not saying we can, will, or should have a completely simple tax code, well I did above just as a quick example, but if we create and stick to a few simple and cold cut rules I see the system as being much better off.