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What is the FairTax?
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Posted on 04/04/2006 2:17:28 PM PDT by Eaglewatcher
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To: Badray
I want to try something new that I believe will be better, but you persist in holding your breath til things change.Your proposal cannot possibly change anything, and I told you why in my previous post.
301
posted on
04/07/2006 12:19:08 PM PDT
by
Shalom Israel
(Pray for the peace of Jerusalem.)
To: Badray; Shalom Israel
I want to try something new that I believe will be better, but you persist in holding your breath til things change. When you desire to experiment with changes that are obviously flawed in the minds of many Americans but benefit you in some way, you have to expect that those offended by your selfishness will object.
302
posted on
04/07/2006 12:32:38 PM PDT
by
eskimo
(Political groupies - rabid defenders of the indefensible.)
To: eskimo
Nothing is difficult to understand about it.
What you do not seem to understand is that there are many other areas that will benefit. Both sides must be quantified and compared to see what the NET effect is.
For example, suppose you are 55 years old and planning to work until 65. You have $200K in already-taxed savings, and can afford to add $5K per year under the income tax. Without income and payroll taxes you could afford to add $20K per year.
This is the breakdown of earnings, savings, and spending:
Earnings: $125K
PIT:
Savings (401k): $15K
Savings (A-T): $5K
Fed Income + Payroll Taxes: $35K
Spending: $70K
FairTax:
Savings (401k): $15K
Savings (A-T): $20K
Spending: $70K
FairTax: $20K
When you were 65, assuming a 7% rate of return and 28% Federal Tax bracket, the 401k accounts are equal, but the A-T accounts are very different:
Income Tax would allow A-T savings to grow to only: $390K
Under the FairTax, your A-T savings would have grown to: $670K
Spending that money over a 25 year period would allow for withdrawals:
Under income tax system: $2,800/month
Under the FairTax system: $4,800/month
Since only $3,640 would be needed to buy $2,800 of goods and pay the $840 FairTax, this person with 10 years left to work gains so much by his accelerated savings rate that the FairTax leaves him with MORE purchasing power in retirement. He can spend $3,700 + $1,100FT each month compared to $2,800 he would have had under the income tax -- if he actually owed any income tax on the interest, he'd have even less.
Even if we assume all the gains on his savings was long-term capital gains at a 15% tax rate rather than 28%, those savings would grown to only $422K and allow for only $3,100/month withdrawals.
Note:
I assumed ZERO income tax owed on gains after retirement.
I assumed ZERO price drop under the FairTax.
I assumed FULL 23% rate of FairTax, no FCA benefit counted.
So your original comment "damned near everyone over 50 who has saved anything (will get screwed)" doesn't bear out, does it ? Here is an example of your typical 55 year old middle-income worker that benefits greatly.
303
posted on
04/07/2006 4:23:22 PM PDT
by
Kellis91789
(Don't go around saying the world owes you a living. The world owes you nothing. It was here first. ~)
To: Shalom Israel
304
posted on
04/07/2006 5:39:02 PM PDT
by
Badray
To: eskimo
For reasons that I will not go into, I will be one of those whose tax burden goes up.
If all that mattered to me was money, maybe I'd just continue on the present course. However, I have children and grandchildren that I want to leave a better world and a freer country. The slave tax's demise will help to do just that.
If all that mattered to me was money, I'd still be working 60 or 80 hours a week. I care more about this nation and its liberty than I do about money.
305
posted on
04/07/2006 5:48:53 PM PDT
by
Badray
To: Kellis91789; eskimo
"Sure there will be a new tax, but existing taxes go away.
So what is the NET effect ?"
Ok, good question. I guess the simplest way to put it is with a question: Would you rather pay a dollar for an item and keep the current IRS and all of it's hassles and costs, or would you rather pay $1.01 for the item and dump the IRS and all of it's hassles and costs?
The net effect the FairTax is more money in your pocket because you don't pay any income tax and you don't have to deal with the IRS. You don't pay any federal taxes at all (remember, we're talking at the federal level only. State and local taxes are unchanged by the FairTax) You file no 1040. Your capital gains and interest are untouched. No one (except liberals) cares how much you make any more. Then when, and only when, you buy something new, you pay a tax.
There are quite a few people out there raising fears over the amount that the FairTax sales tax would be, but as proposed it is 23 percent. And, under current calculations by those who have researched this extensively, that would be an increase of 1 penny on the dollar on the price of goods after the FairTax is enacted because the embedded costs of tax compliance under the current system fall out of the price you pay now currently.
I'm not an accountant. Don't want to be. I hate with unbridled passion sitting down every year and spending hours working with unintelligible forms demanded by the IRS just so that I can get a portion of the money they stole from me back. I hate it that they take it in the first place and have hated it since my first job in my teens. Under the FairTax they can no longer take anything out of my paycheck, including social security and medicare, and I no longer have to worry about dealing with the IRS, ever. If the FairTax people are correct, the price of things I buy changes little but I have more money available to me to spend. A net gain. Furthermore, there are no tax penalties for early withdrawal on tax deferred savings plans and investments no longer require careful tax considerations. It is win/win.
With a flat tax, we still keep the IRS and all the accounting and legal headaches that come with it. Thus, the embedded IRS costs don't go away. They might get more simple, for a while, but they don't go away and congress can still manipulate individuals through the tax code. You still owe them money just because you made it. The net loss is the embedded tax. Whatever other savings you make by changing to a flat tax, you suffer a net loss in the embedded costs of compliance and you still have to deal with the IRS every year.
Remember, the FairTax is for government purposes, a revenue neutral plan. It is not designed to change what the government takes in. It only changes the way that people pay the government, and greatly relieves the public of the current pains involved with tax compliance. It also greatly frees them to conduct private or public business unencumbered by those extra costs of compliance.
Many FairTax people actually feel that the tax will be lowered after a while because of the surplus brought in by such a free economy. I don't trust government much to do that so I don't count on it. But getting rid of the IRS is worth a lot more to me than just a penny increase in the price of goods.
Sorry to be so long winded.
Eskimo said regarding taxes paid on savings:
"I hope not, it is a serious flaw affecting a large portion of the population. It needs to fixed not argued for."
My answer is that I don't think that there is any way to make savings tax free at some point so long as we pay taxes, period. However, go back to my opening response, to the question I put forth, and think about that. I take the second choice, hands down.
306
posted on
04/08/2006 7:15:51 AM PDT
by
wgflyer
(Liberalism is to society what HIV is to the immune system.)
To: GSlob
I'm curious. Do you have a vested interest in keeping the IRS alive?
307
posted on
04/08/2006 7:17:31 AM PDT
by
wgflyer
(Liberalism is to society what HIV is to the immune system.)
To: Kellis91789
Both sides must be quantified and compared to see what the NET effect is. Problem is, that can not be done without making more guesses than most rational people would be comfortable with.
308
posted on
04/08/2006 8:26:36 AM PDT
by
eskimo
(Political groupies - rabid defenders of the indefensible.)
To: R.W.Ratikal
You don't seem to understand that the FairTax eliminates the income tax (and several other taxes), the IRS (and defunds it to boot) and requires destruction of income tax records. It all goes "bye-bye". Zip, zero, nada. gonzo ... got it???
309
posted on
04/08/2006 8:35:36 AM PDT
by
pigdog
To: Final Authority
Nonsense, Finial. You've had it pointed out several times that the prebate is not a "guarantee" of anything, but is a refund of part of the taxes you'll have paid. Just like your April 15 tax refund presently.
310
posted on
04/08/2006 8:41:25 AM PDT
by
pigdog
To: Badray
If all that mattered to me was money, maybe I'd just continue on the present course. I'm too old to care about hoarding wealth. I live simply and probably not very much longer. I am very concerned for my grandchildren and great-grandchildren though. In my opinion, anyone pushing a tax scheme that raises the price of goods by $30 on $100 and does not expect to see a society damaging criminal black market emerge, is not credible on the other guesses as to what will happen.
311
posted on
04/08/2006 8:51:56 AM PDT
by
eskimo
(Political groupies - rabid defenders of the indefensible.)
To: Always Right
Hi, Rightie. I see that you persist in you old, shopworn tactic that anyone in favor of the FairTax is a lian and thief - and has bad breath to boot.
You may actually sucker a few who are uninformed and can't read into falling for that, but for the most part you're losing your battle to protect your little income tax niche.
312
posted on
04/08/2006 8:52:41 AM PDT
by
pigdog
To: Final Authority
Sorry, Finial, it's no dole. It's a refund of some of the taxes you've paid.
313
posted on
04/08/2006 8:54:59 AM PDT
by
pigdog
To: Shalom Israel
314
posted on
04/08/2006 8:56:24 AM PDT
by
pigdog
To: wgflyer
My vested interst is in keeping my purchasing power, which I have been saving up for decades, as intact from the likes of you, and your frauds, as possible. IRS does not bother me - for me [due to my invested after-tax savings which you want to tax the second time] Vanguard makes Turbotax free.
315
posted on
04/08/2006 8:57:17 AM PDT
by
GSlob
To: Always Right
In fact, Rightie, most people will be better off with respect to disposable personal income under the FairTax.
316
posted on
04/08/2006 8:59:15 AM PDT
by
pigdog
To: Always Right
Almost entirely rong Rightie. Savings are not taxed by the FairTax - consumption spending (or some part of it since not everything is taxed) is taxed. Savings & any earnings thereof remain untaxed.
At present, whenever you buy something using tax or untaxed savings you still get nicked with the taxes embedded in prices since there's no free lunch, poddner!
317
posted on
04/08/2006 9:03:49 AM PDT
by
pigdog
To: eskimo
You should talk to more people, then, and urge them to investigate what happens with the FairTax by visiting the FairTax website which has a wealth of economic data:
http://www.fairtax.org/research.html
Or get them a copy of The FairTax Book to read. Don't merely let them stick their heads in the sane like an ostrich. Help them learn.
318
posted on
04/08/2006 9:08:48 AM PDT
by
pigdog
To: eskimo
Then he's as misinformed as you. Help educate him.
319
posted on
04/08/2006 9:10:52 AM PDT
by
pigdog
To: wgflyer
...and I no longer have to worry about dealing with the IRS, ever. No one I know believes that either.
320
posted on
04/08/2006 9:11:03 AM PDT
by
eskimo
(Political groupies - rabid defenders of the indefensible.)
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