It's very clear that any "accumulation" of wealth today must be done primarily using only income after it has been taxed which reduces the capital that can be used for savings/investment.
Under the FairTax there is no taxing of income so that savings and investment may be done with untaxed money. This alone gives a person more working capital. In addition, there are no embedded tax costs in the prices of things purchased under the FairTax as there are today which also make for more working capital.
Since income is not taxed under the FairTax, the capital accumulation will progress much more rapidly than at present and it is only when someone chooses to spend on taxable items (and not all things are taxable) that such consumption is taxed. There is no requirement as at present to jump through a myriad of hoops, forms, and regulations in the hope of minimizing the income tax to some degree. There is no tax on income under the FairTax, and it seems ridiculous to have to go to such lengths under the present system - all caused by the income tax system.
What your post really seems to illustrate is the arcane complexity of trying to minimize taxation now and the class-envy rhetoric in the latter part of your post is misplaced since under the FairTax anyone consuming taxable things will be paying at the same tax rate. If they (or you) have your money invested instead of consuming, power to all of you. That will, overall, eventually redound to the economic benefit of the country and help create jobs in doing so.
A lot of folks buy used goods right now (and not just rich ones eoither) and that is perfectly legal under the FairTax. Trying to present it as some sort of illegal or questionable tax dodge is just plain silly since you could do that also.
Dear pigdog,
"It's very clear that any 'accumulation' of wealth today must be done primarily using only income after it has been taxed which reduces the capital that can be used for savings/investment."
If you're premise were true, you'd have a point.
However, for all but the wealthy, the existence of tax-advantaged retirement accounts permits most individuals to use pre-tax income to accumulate wealth. The new limits on 401(K)s go up to $40,000 and 25% of one's income. That means that anyone making $160,000 or less may invest fully 25% of their pre-tax income in stocks, mutual funds, and bonds, and that money may be invested pre-tax. That's even before payroll taxes.
Even folks who are not covered by 401(K)s, 403(b)s, SEP IRAs, SIMPLEs, and the like, may invest modest sums into regular IRAs.
As well, although initial investments are with taxed income, those who are building wealth through real estate investment can create streams of long-term tax-deferred income that can be reinvested, to accumulate real estate wealth.
I had an employee who worked for me for about seven years, and by the time he left my employ, he'd accumulated five rental properties this way, using taxed income only to acquire the first. Pretty good for a guy who was in his early 30s.
As for the wealthy (where this conversation started with the other poster before it decided to question my motives), in that the very wealthy often invest for the long-term, and thus only pay taxes when they realize capital gains of certain investment instruments (remembering that in real estate, even the taxation of capital gains can be put off indefinitely with Starker Exchanges), they don't pay much at all in taxes on their investments, either.
And they will pay markedly less in taxes under the proposed system.
"There is no tax on income under the FairTax, and it seems ridiculous to have to go to such lengths under the present system - all caused by the income tax system."
It may seem ridiculous, but if one remembers a single principle to the concept of an income tax, it becomes readily explicable: only actual income is taxed, not all revenue. That's the principle that permits an income tax to even begin to approximate fairness, but it is also the principle that introduces complexity, with that I agree.
"What your post really seems to illustrate is the arcane complexity of trying to minimize taxation now and the class-envy rhetoric in the latter part of your post is misplaced since under the FairTax anyone consuming taxable things will be paying at the same tax rate."
There are parts of the current income tax law that ARE unnecessarily complex and arcane. Can you say "alternative minimum tax"?? That one makes me crazy.
But for the most part, the rest is about figuring out the difference between revenue and income (revenue is the total amount of bucks that come into an enterprise or household, income is the amount of "profit" left after deducting all legitimate expenditures required to generate the revenue).
Without the AMT, I can just about figure my income taxes in my head.
As for class envy, there are no classes I envy, so I'm not sure what you're talking about. To note that the very rich will pay fewer taxes isn't class envy, just a statement of fact. And in that we're positing that nearly every class, including the very rich, are going to pay less in taxes, it does legitimately raise the question of how this is going to be revenue neutral at 30%.
"...since under the FairTax anyone consuming taxable things will be paying at the same tax rate."
Well, sorta yes, and sorta no. In fact, in that ambiguity lies much of the actual direct appeal that NSRTers make, as they point out that although the actual sales tax rate applied is the same to all income groups, because the "prebates" are the same for everyone, and we assume wealthy folks will consume more than non-wealthy folks, NSRTers actually point out the overall progressivity of the overall actual, effective rate of taxation.
However, the advantage to the wealthy (and disadvantage to the not-so-wealthy) is that the very wealthy often spend far less percentage of their income on taxable items than the not-so-wealthy.
So, based on percentage of INCOME, the non-wealthy will often pay a larger percentage than the wealthy (although for those in the lower half of the income distribution, it's likely that they will pay little net taxes at all, just as now).
"If they (or you) have your money invested instead of consuming, power to all of you. That will, overall, eventually redound to the economic benefit of the country and help create jobs in doing so."
That occurs now, without recourse to the NSRT.
"A lot of folks buy used goods right now (and not just rich ones eoither) and that is perfectly legal under the FairTax. Trying to present it as some sort of illegal or questionable tax dodge is just plain silly since you could do that also."
Gee, that's your interpretation, that it's an illegal or even questionable tax dodge. But when Bill Gates buys his umpteenth "used" $10 million estate, rather than build new, and pay an extra 30%, it WILL be a way of avoiding the sales tax. A legitimate, perfectly legal way to avoid it, but a way to avoid it, nonetheless.
And he will avoid the tax with his already-tax-free income.
The same thing will happen as he expands his fleet of classic cars, buys a used airliner, and buys a pre-owned 100-foot yacht. He'll be buying this stuff tax-free with his tax-free income.
He won't be able to buy his food used, so he'll pay sales tax on that.
I imagine that the very rich will be the greatest proponents of this law.
sitetest