Second, I know that 12k allows quite a bit, but still for small businesses, the cost of operating a 401(k) is enough so that many owners never opened them in the first place, so the money is under the mattress. Even if they did have the 401(k), it is still capped at 12k. I thought conservatives didn't have a screw the rich mentality. It isn't fair to double tax just because it is over a 12k annual limit. The death tax is a valid issue, and the NRST fixing this is great, but it can be fixed without an NRST, so this really isn't a valid argument.
Roth IRA - You are correct and I only brought it up because you mentioned IRAs. However, 23% of 17k is still around $4k, which is not chump change even for the poorer folks. But I'm willing to move on, because this is minor compared to the other factors.
With regards to Municipal Bonds - You proved my point for me when you argued correctly that rates will go up. When rates go up, owners lose money. This is why people who own municipal bonds will not support the NRST.
A second point on municipal bonds, relating to the subsidization. You are correct, they are subsidized, but it is not the investor that is reaping the great savings, it is the municipality, by being able to borrow for a lower rate. You argument is basically that there is a bubble, which is correct, BUT the response to the bubble hurts those that weren't gaining the benefit of the subsidization, the investor.
With regard to the capital gains on the CDs, let's look at a concrete example, because this is a similar point to that made before. Let's say you own $1 million in CDs. During accumulation of this wealth, let's say $400k in income tax was paid (this is reasonable). Over five years, lets say the $1m turns into $1.2 million, a gain of $200k.
Current system - You pay capital gains of 20% on $200k, or $40k. Final wealth available for spending $1.16 million. Total taxes paid: $440k.
NRST - You pay no tax on gain of $200k. Wealth $1.2 million. But you now pay 23 percent tax on purchases. Let's say its just 20 percent. You can purchase $1 million worth of goods. You are $160k worse off. Total taxes paid: $600k. This is the double tax.
Finally, you are preaching to the choir on the other double taxation. The death tax and the double taxation on dividinds get me so angry, I froth at the mouth like a rabid dog. But those don't justify the double taxation due to the transition to NRST. If your argument is that we are better because the new system eliminates the double taxation on dividends and the death tax even though it imposes a transitional double tax - you are probably correct, but this doesn't justify the new double tax.
Oh, I also agree with you on the taxation scam on SS. Absolutely rediculous. Again, eliminating this is good, and maybe in addition is a stronger argument for moving to the NRST, all I am saying is the following:
Over all, we will be better off with the NRST. Most people will benefit, but SOME people will NOT and will actually be WORSE off. Are you honestly trying to argue that in switching to the NRST, EVERYONE will be better off and NOONE will be unfairly double taxed??? I am NOT arguing that it isn't necessarily worth it, I AM arguing that some people will be paying extra, and they KNOW this, and they will NOT support the NRST - whether it is enough to stop passage, I don't know, but it ABSOLUTELY exists.
You gotta remember that 23% is only the marginal rate. Every American will recieve a rebate for taxes paid up to the poverty line. Let's say it's a retired couple. For a couple in 2004, it would be $18,620; that means that the couple would recieve enough taxes, $4,283, to pay enough taxes up to the poverty line. So, for this couple to pay at least 20% in taxes, they would have to spend AT LEAST $145,000 a year. ($145,000 - $18,620 = $126,380; $126,380 x .23 = $29,067.40; $29,067.40/$145,000 = 20.05%). Keep in mind that assumes ALL of their income is spent on taxable items (not used goods including a home, or savings), and it also assumes that the price of goods doesn't drop.
I know very few seniors who spend $145,000 a year.
I don't blame you for not looking at the marginal rate by not taking into account the "prebate" (Family Consumption Allowance). When I first came across the FairTax, I tohught the same thing. I'll give you a formula to figure out true tax rates:
First, the prebate is $9,310 for adults and $3,180 for children per year.
Use the following rules for the formula:
Income = I
Rebate = R
Tax Rate = T
Price Reduction (new price/old price) = P
Consumption Rate (% of income spent on taxable goods) = C
So,
(CTRIP)/I = Marginal Tax Rate
Glad to have you aboard on the FairTax.