Posted on 08/18/2005 6:34:27 AM PDT by GPBurdell
You mean marketing and truth can be in the same package? Wow! :-)
So what. I have my retirement in Roths. I have already paid tax on this and was led to believe that I would not be taxed again on this money.
Do you know how to spell "frugality"???
Yup ... needs a keeper!
You were led to believe WRONG. If you spend the money for anything under the present system you pay "taxes" on the money in the form of the hidden taxes which are really embedded tax costs that add to the prices of everything produced and/or sold presently.
This amounts to roughly the same amount as the FairTax would be. TANSTAAFL, as they say. You've been tricked out of your skivvies by the present tax system which so many on these threads are fighting SO HARD to keep us under.
Who told you that? That is current law. If you retire tomorrow, maybe not. Remember the proposal to put a one time surtax on all retirement accounts?
You income must still be reported the the social security administration.
Bullcrap. You have not one clue where that 20-25 embedded tax comes from. That 100% absolutely includes taxes paid for by the employees.
The only thing you need to do is get a clue. The fairtax tax base is over $10 Trillion dollars. To have 20% 'embedded taxes' in those goods, means you have over $2 Trillion of embedded taxes. If you eliminate the $1.3 Trillion that EMPLOYEES pay through payroll withholding, that only leaves a TOTAL of less than $0.7 Trillion worth of all other federal taxes combined. Even including the grossly exagerated $300 Billion in complinace cost (which by the way are mostly employee time spent preparing their own tax returns and have nothing to do with the costs of goods) you are still $1 Trillion SHORT of coming up with $2 Trillion of 'embedded taxes'. You really have no clue and believe all the lies. The ONLY possible way to say that there are 20-25% of 'embedded taxes' in goods and services is to include all the taxes EMPLOYEES PAY. There is no other way around. The FairTax numbers are a fraud.
Untrue, Rongie!!
Wages - not income - are reported to the SSA for the purposes of S/S & M/C which is mandated by laws other than the FairTax. In the case of self-employeds, their self-employment income must be reported since that is the equivalent of wages. Over and above that, no income is reported (interest, capital gains, etc.) for the very good reason that it isn't the governments business.
You need to stop the Chicken Little misinformation campaign.
No, it doesn't. Those withholding taxes (including the ER portion) go to increased takehome pay, not to embedded tax costs.
Embedded tax costs are the income taxes paid by businesses of all sorts as well as higher prices for everything THEY buy - and that cascade as things progress from inception to final consumption. In addition there are other types of costs such as compliance costs, opportunity costs, etc.
You may believe or disbelieve them if you wish - but you still pay them right now as higher prices.
Stop the Chicken Little misinformation campaign.
No. Rongie, it's YOUR numbers that are the fraud. Payroll/withholding taxes do not enter into it (as has been repeatedly pointed out to you in the past).
And it is not "embedded taxes" but "embedded tax costs" which includes a lot more than just the taxes that businesses pay. That's also a repeat bit on information.
Nor is $300 billion exaggerated. In fact it is undoubtedly quite low. Most of the numbers from responsible sources range from 250 billion to over 1 trillion with 500 or 600 billion being fairly common. Even then there are other costs related to complying with the income tax laws as has been also pointed out before.
Your calculations do not begin to approach a correct calculation of embedded tax costs.
Please stop the Chicken Little misinformation campaign.
Frankly, I think you are a broken record on this.
Let's take a simple example that you might even be able to understand. A single individual making $30,000 a year.
Currently, his federal tax liabilty (Fica and income) is $4,838. This leaves a disposable income of $25,163 a year. Let's stipulate that he saves nothing in this example.
Under the Fair Tax plan he will have his $30,000 income plus a monthly check to cover basic living expenses (they use $400 a month but it's based on where you live); for this example let's say $3,600 a year. This leaves $33,600 a year in disposable income. At his income/FICA tax level of disposable income (apples to apples) the 23% Fair Tax would be $5,890 leaving him with $2,547 more to save.
And if he saved, say, $2,400 a year under currently then his disposable income would be $22,763 and at 23% his Fair Tax would be $5,236. Based on the same calculation as above he would end up with $5,600 more under the Fair Tax.
This, of course, assumes he keeps his spending at the disposable level under the income/FICA system.
It also doesn't take into consideration the fact his employer won't have to match his Fica of $2,295 of which he might share. And his company won't have to pay the corporate income tax and thus won't need higher revenues to maintain their final profit percentage they wish to have.
I don't know if you know anything about budgeting but in my business we work on an a final after tax profit percentage and adjust revenues, and thus pricing, accordingly. Yes, we might keep it all under the Fair Tax but that would be stupid because not all of our competition would do the same. In my business, upscale hotels, the relation to room rate and occupancy is a tight rope we walk to maximize revenue and not having to pay a corporate income tax and match the hundreds of thousands of dollars FICA consumes would allow to decrease our rate and gain occupancy percentage increasing our bottom line even more.
And then there are the many businesses that have such small profit margins they can grow and keep prices low for the same reason: no FICA matching and no income tax.
Of course, you'll just reply with some snarky comment because, as we all know, you are the great Always Right!
Great analysis - & thanks much.
And I'm not 100% behind the idea or, right now, even care. I'm still a flat tax fan. I also know, based on state sales tax laws, that the opportunity for politicians to meddle is so great they won't leave it alone and the regulations could make the income tax codes look like Cliff's Notes.
But based on the basic idea versus the income/FICA tax system I'll always take the sales tax simply because it gives more control to the individual. Here in Tennessee we don't have an income tax and never will and my state tax rate opposed to others similar states is very low.
I spend and pay tax. I don't spend I don't pay tax. Quite simple. And I hate the idea that I'm stuck with a disposable income due to income/FICA with only increased earnings a way to have more money to spend, save or invest.
On principle I support the idea.
So what. I have my retirement in Roths. I have already paid tax on this and was led to believe that I would not be taxed again on this money.
You believe politicians? You have been sold a pig in the poke under the current federal tax system.
The following article covers the mechanism on how the current Federal tax system propagates and is embedded into consumption expenditure.
DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation
Guess what, you are going to be taxed again under the income/payroll tax system any time you take some out of that Roth and spend a penny of it and without any rebate of taxes that are collected by government through that expenditure.
Not only did you get hit at the front end with high premium tax rates during your earning years limiting and reducing the amount you were able to invest in that Roth or any other investment for that matter. You get hit on the turn around when you spend it through the embedded taxes built into prices and lower returns on investment due to the todays federal income/payroll tax system.
At least with a standard IRA taxfree going in counts for something in that one's highest tax rates usually occur in their earning years, with lower income tax rates in retirement as one pulls funds out and pays tax on them.
Feeling mugged? You aught to.
And keep in mind this point if the FairTax becomes the tax law and TN decides to conform its sales taxes to the FairTax:
Most sales tax laws are a riot of exemptions, exceptions, carved out politiacal favors and almost none tax services to any great extent. If TN decides to conform its sales taxes, then the state tax base becomes several times larger. I haven't looked specifically at TN, but for most states it would cause a decline to something like 1/3 or 1/4 of the present rate - or in some cases even less. This would still be revenue neutral for the state and offer all of the sales tax simplicity.
Not because the political class has not tried VERY hard to get you one in recent years either!
... and never will.
I pray that is so!
Why are you using his income tax disposable income to calculate the fairtax??? Your calculation makes zero sense. The problem is prices go up by 10-15% under the fairtax, so his expenses are higher and his tax is also higher than you calculated. You may think I am a broken record, but I am correct. The idea that after tax prices stay the same under the fairtax is 100% pure fantasy.
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