Maybe Fair Taxers are convinced that nobody drank during Prohibition.
I was always convinced that the leaders of this movement were morons. After reading their stuff, I’m now convinced that they are dishonest morons.
(Sorry about the long delay everyone.)
Buffet lost something like $16.5 billion in 2008. America's Biggest Billionaire Losers Of 2008
So no, I don’t think he really “earned money”. Of course, you may now want to point out that those aren’t losses in the eyes of the IRS until he realizes them. That aspect of the income/capital gains tax has largely been ignored in this thread.
An example:
“Charles” has received a sizable inheritance. Charles’ investments are doing well, and his net worth increases by $2 million this year. Like all wealthy heirs Charles wouldn’t dream of consuming that much of society’s resources, so Charles only spends $1 million. To do that he has to realize investments worth $1 million. Assuming they’re long-term investments he has to pay a 15% capital gains tax. But wait. That’s only on his gains. Let’s say his investments have gone up 50% on average when they’re sold. Taxes paid: 15% of $500,000, or $75,000.
Under the FairTax Charles pays (almost) 23% of his $1 million spending, or $230,000.
(Note that I took the 50% total rate of return out om thin air. The 50% spending is from Strassia, who I assume got it from the same place. I also have a nagging feeling I’ve forgotten something important in this example, but I’m sure someone will be along to correct me if I have. Or, come to think of it, even if I haven’t.)
**The point here is that you don’t have to pay the capital gains tax until you realize your gains, and you don’t have to realize your gains until you want to spend them. **
Clearly we do. I’m posting papers from respected economists, you’re countering with loud bluster and vague references to “some numbers someone posted in a thread somewhere”.
This you’re going to have to explain.
So you’re proving me wrong about “ ‘the poor’ as a group” not being worse off by coming up with an example where someone was worse off. Let me guess, for your next trick you’ll prove smoking to be 100% safe by pointing to how your wife’s great-uncle who smoked every day of his adult life is 92 and totally healthy?
Anyway, I’d like to see those numbers. I think you can probably find such an example, but I suspect you’ll need a family that depends on a lot of special tax deductions (indirect subsidies) to do it.
How about this: Let’s stick to the subject matter. If you have arguments, present them. I’m not interested in getting into a pointless bragging contest about “who’s read the most about the FairTax”.
Why would you have to “hide your income”?
How are you spending it tax-free? To do that you must convince the authorities that it was spent on a valid business expense, and not on personal consumption. I don’t see how that’s any easier under the FairTax.
Ad hominem.
I like how your question included a definition of “the rich” as “those who make quite a bit more than they spend”. Are you saying that only rich people ever make more than they spend? If so, I disagree.
So let’s rephrase your question. Those who currently spend less than their income (as measured by the IRS) will pay less as a percentage of their income. Who’s going to make up the difference?
The quick answer is: Those who currently spend more than their income (as measured by the IRS). Also, those who spend all their taxable income but pays less than 23% on their income today.
YamatoTwinkie’s list looks good to me if you want something more specific, with the exception that I don’t know much about how trust funds work. As long as they realize capital gains to cover payments to the beneficiary they should be similar to other kinds of wealth.
Cite?
I’m happy to work with the actual text of the resolution. If you have any specific complaints, say so. It’s certainly worthwhile to point out any flaws in the FairTax proposal currently in congress.
But it’s not all that important. If there are minor flaws, they can be corrected.
You’re right that there’s some fuzzy thinking going on about this among some FairTax supporters. I avoid this argument myself.
It’s not quite as bad as you make it out to be though. I believe the official answer is that a some “underground economy” purchases are done with untaxed money in the first place, and so when the drug dealer (for example) spends the money he got from a thief you get taxes you would not otherwise have gotten.
There’s also an emotional aspect of it. There’s a certain satisfaction in being able to say that a drug dealer has to pay taxes where before he paid none, even if there’s no real change for anyone. (Similar to how payroll taxes are split between employer and employee, despite how, as far as I can see, everyone involved usually ends up with the same amount of money regardless of who you say “really” paid.)
But again, you’re right it’s not a very good argument.
What kind of fundamental principle of economics is it you think would come into play when you increase the rate?
There’s no “lie”. That’s … untrue.
There’s an explanation here: http://www.fairtax.org/site/News2?news_iv_ctrl=1541&page=NewsArticle&id=8248
I’ve tried to use the 23% and 30% numbers as appropriate to the context. When you’re discussing a new taxation system you need to compare it with the system it replaces. If I’m talking about a 15% capital gains tax I’ll compare it with a 23% FairTax. If it’s compared to a sales tax or you’re talking about an “increase”, 30% is the appropriate figure.
Yes, I know some supporters get a bit overzealous in this regard. But the whole inclusive/exclusive thing can be hard to explain in a short soundbite or TV-ad, so I don’t blame people for using the smaller number. That way the FairTax won’t be dismissed out of hand by people who don’t get the distinction.
You seem to have accidentally overlooked pretty much everything I said in the post you quoted. Let me try again. .
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The price controls were used to try to make the transition easier. Not “for the fun of it”.
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Price controls can not work in the long run if you try to fight the natural market prices. In this case you’re not fighting the market, you’re fighting irrational behavior.
I didn’t understand your argument because it doesn’t make any sense.
Let me try an example:
Poor guy Bill is living right at the poverty threshold. He gets a monthly prebate that covers the tax on every dollar he spends, and so he effectively pays no taxes. One day Bill gets a $100 gift from rich guy Charlie. When Bill spends that $100, $23 ends up with the government. The prebate can’t “untax” it because Billy gets the same prebate no matter how much he actually spends.
However, I still have to concede the point. It looks like the FairTax preserves the current tax breaks for charities. In my example, rich guy Charlie will give the $100 to a not-for- profit charity. That charity will buy stuff tax-free for $100 and give it to poor guy Bill. No taxes paid.
(I guess you need to keep the charity deductions in the system if you want to have any chance of getting the FairTax enacted. I don’t like it though. It would have been simpler and better if all consumption was taxed.)
The prebate is 23% of total spending, including the tax.
If you pay $100 for an item in the store, 23% ($23) will be tax. This is +30% on the base price of $77.
If you spend $10,400 (1 person poverty limit spending), 23% ($2,392) of that will be taxes. That’s the annual prebate. The numbers work out.
And why isn’t he spending his $500,000? Why is this noble, altruistic hero sacrificing everything he could have gotten for that money in favor of helping society by lowering interest rates, creating jobs, raising wages, creating cheaper goods and services, building homes and so on? (AKA “investing the money”.) Answer: He plans to spend it later, with interest. Maybe with the help of his wife and/or kids.
Instead consider two people who both spend $50,000. They have the same standard of living. They use the same portion of the resources available in society. Why is it fair to tax one of them several hundred percent more than the other because he does more valuable work and contributes more wealth to the total amount available?
Actually, I’ve encountered several people who really do think “the rich” are hoarding vast sums of money that’s “not used” for anything. Presumably in giant money bins or something. (Investing the money should also help lower price inflation, though I’m not how that works out.)
Your example is missing the point. What is it you want with that money? Why won’t you use it to save the lives of starving African children or something? Oh, right. You expect it to help your children or grandchildren, or great grandchildren, by giving them better lives. How does having a number in an account somewhere improve their lives? It doesn’t. You’re assuming the money will enable them to increase their spending.
And how long is it you think the money will remain in your family? Two generations? Five? Ten? For all eternity, as the Great House of Voyager takes over the planet, the solar system and then the galaxy due to their conservative, foolproof investment strategies and the wonders of accumulated interest? When I say the money is spent “eventually” I really do mean eventually. (This does not mean that the FairTax will only work after hundreds of years. This is an ongoing process.)
As for charitable foundations, are you really going to complain about how the money is used in its entirety (supposedly) for the good of society? Instead of being taxed at 15% and then used (supposedly) for the good of society by the government? Make it donations for the Church of Scientology and I can see your point, but most people generally consider charity a good thing.
http://www.fairtax.org/site/PageServer?pagename=about_faq_answers#9
4 a: increasing in extent or severity <a progressive disease> b:* increasing in rate as the base increases** <a progressive tax>*
6. Increasing in rate as the taxable amount increases: a progressive income tax.
They’re not “redefining” anything.
I feel that all this petty obsessing over “what changes” is a red herring.
The two main questions that need to be answered with regards to the FairTax are:
1. Will the FairTax lead to a more efficient, faster growing economy?
The answer from most experts, even those who oppose the FairTax for other reasons, is “yes”. A consumption tax is better for the economy. Even if you don’t believe that there’s still the matter of hundreds of billions of dollars of compliance costs under the current system, as well as enormous efficiency losses from tax-caused market distortions.
Basically, the FairTax ensures that there will be a bigger “cake” to share.
Which leads us to the next important question.
2. Will the FairTax be fair? Or, at the very least, as fair or more fair than the current system? (For the “taxation is unfair by definition” crowd out there.)
It seems to me that “everyone pays the same tax, and everyone gets the same prebate on basic spending” is about as fair as you can get. So, “yes”. But this is where people start pointing out the obvious differences between taxing income and consumption.
I say that your spending – your standard of living – is most important. That’s the best way to measure a person’s well-being. If people have to pay taxes I prefer that they pay more the more of society’s resources they consume.
Others disagree. They feel that taxes should be based on how much wealth a person creates. The more you build, they argue, the heavier the “fine” should be. If you’re doing valuable work, but spending little, it would be unfair to tax you the same as another who does less valuable work but consumes the same amount of society’s total wealth.
From my description you can probably guess what I think of this opinion. It’s absurd.
So summarize; with the FairTax there will be a “bigger cake”. This is good. People will be taxed based on how much they eat, not how much they contributed to the baking of the cake. This is fair.
There is nothing to support those claims, other than “pie-in-the-sky” specious arguments. Mind you, it’s possible. Or it will cause a disaster. We don’t know. No one has ever tried dumping Income tax and replacing it entirely with a VAT/Sales tax. Personally, experimenting with the US budget and economy I find foolish in the extreme.
There will still be compliance under the “Fair Tax”. Note that businesses, when complying with GAAP etc, pretty much have to keep those records anyway.
Why say there will be a bigger cake? Why not say there will be pie in the sky, bye and bye? It’s as good of a claim.:rolleyes:
Not really. He has lost some potential wealth in the sense that he would have made more money on shares he sold a year ago than he would today. But considering he has owned his shares since the 70s, he still would make huge capitol gains on any happened to sell last year. You are confusing wealth with income, he lost wealth, but he still had income.
You are right as long as 100% of Charles income is from long term capitol gains. It is more likely that he has a diverse portfolio with bonds, stocks, and sources of income. The tax rate on long term capital gain may be 15%, but short term capital gains, rents, dividends, and interest are taxed as standard income. So people earning income only by selling stock they have held for more than a year and spending all that money will pay more under the fair tax. However, the money that went into the nest egg will never have been taxed (if earned under the new system).
Or reinvest them in something else. And as stated above you seem to think that the only source of passive income is selling stocks. It is not.
My problem with the bigger cake theory is that it assumes that (a) the transition period will not cause a significant decrease in cake size (which I find doubtful), and (b) it assumes that a larger cake means more for everyone. If we end up with an economy that is 5% larger than we would have with income taxes, the top 1% of income earners end up with 10% more of the total, why should anyone else support that? Bragging rights? We should feel blessed that our rich are now richer than anyoneelse’s? I am not trying to be anti rich, and my personal income is higher than it was 10 years ago, but I it seems that on top of everything else that has gone wrong recently, the all the recent increases in our economy have gone towards the top, without any of them finding their way into the middle or bottom.
Jonathan