Actually, no, s-test, typically they will pay more in taxes than they do at present (due at least partially to all of the tax dodges and loopholes you outline). I've observed that the very rich prefer to buy NEW rather that USED (cars, homes, or anything else). In fact many of them will tear down a perfectly good, liveable house to put up a much more ostentatious one.
Not everyone has tax-advantaged savings my friend and even with those that do they will take a tax hit when it is spent either in the case of taxable withdrawals or in the form of higher prices caused by embedding tax costs into prices. These sorts of penalties are part and parcel of any income-based tax system.
And I note that some of your examples use already taxed income to tell us how it is possible to invest. Certainly that can be done, but that's not the point since using untaxed wages (with payroll taxes now back in the net pay as in the FairTax) helps anyone accumulate some measure of wealth faster. And even with taxed wages one has to spend a good bit of effort in trying to navigate the tax laws (and I've noted that some doing this sometimes stumble since the requirements are not always clear). Why have such unnecessaruy nonsense?
It is clear that you haven't read any studies of the effects of lifetime taxation which apply to the very well to do. The point is that most in the "tax specification business" believe that such wealth is eventually spent for consumption and in the intervening time is invested in some form helping our economy prosper.
I'm afraid it's a little tough to see if, as you say, that "... capital gains can be put off indefinitely ..." how the very rich could pay less in tax under the FairTax. Clearly just the opposite is true. Present investment is certainly not free of tax costs since there is always at least compliance costs involved in making and maintaining these investments. And many of them are actually dictated by the tax laws and can therefore be politically manipulated and lobbied for advantage by the K Street fellows. In some cases an investor will have to switch to other types of investments as tax laws ebb and flow.
I'd much prefer to see investments unencumbered by these sorts of manipulations and distortions so that capital could flow more efficiently to where the market might determine rather that the tax laws or politicians, or lobbyists. That's called economic freedom.
And no - buying used was in no way mentioned by me as a tax dodge ... that seemed to be what you were inferring in trying to present that "the rich" would buy only used things to not pay taxes. That certainly does not comport with the lifestyles of the rich I know. Used is seldom in their vocabulary (nor is unostentatious). BUT if they do, then that's fine since it is quite legal under the FairTax and the money can be invested tax-free to further the economy with no consideraaation of tax law requirements, etc., but strictly by investment reasoning.
If these folks "avoid" income taxes now (which you claimed in your post as though it were somehow easy to navigate the present tax laws), then it certainly no more "sinful" for them to "avoid" the FairTax by buying used things. Cant' be "good" one place and "bad" the other.
Dear pigdog,
"Actually, no, s-test, typically they will pay more in taxes than they do at present (due at least partially to all of the tax dodges and loopholes you outline)."
When the rich actually bother to generate income, they pay plenty of taxes, although often less than wage earners.
What you miss is that the rich may decide not to generate income that they don't want to immediately spend. Thus, they may decide not to take capital gains from a particular investment, because they have nothing to spend the money on.
That's the primary "loophole" the rich have.
Even then, it doesn't always apply.
"I've observed that the very rich prefer to buy NEW rather that USED (cars, homes, or anything else). In fact many of them will tear down a perfectly good, liveable house to put up a much more ostentatious one."
You've asserted, but haven't demonstrated. I've seen "tear-downs," but believe it or not, upper middle class folks are more likely to do those than really rich folks.
I live in an area that abounds with folks with lots of money.
Although there are many new homes being built with seven-figure price tags, and even larger number of already-existing exclusive homes is sold, as well. The fact is, most of the good waterfront is already gone. You want deep water on the South River (feeds directly into the Chesapeake Bay)? Lots easier to buy a $3 million property with a 10,000 sq ft house that's 10 or 20 years old than to try to find a couple of acres of still-undeveloped waterfront to build your own.
Now, will the new owner possibly do a $200,000 renovation? Maybe. Maybe not. But the $3 million for the property and house itself were entirely untaxable under the NSRT. At least, the fellow had to pay a bit of tax on the income to buy the property under the old system.
Cars?
Well, lemme tell ya. I love new cars, myself. Preferably Benzes. But guess what? I have a two-car attached garage and a four-car detached garage. I have three cars right now. One was purchased new. Another was purchases a couple of years old, because it was low mileage. But the third was purchased 15 years old. Because it's a classic model, and I wanted one. And I'd like to acquire a few more over the coming years. I'd like to get one model of Mercedes SL that ran from the late '70s through the '80s (broadly speaking). I'd like to pick up a couple of old 300Es for my kids as they learn to drive over the coming years (great, reliable, safe, fun sedans). And in a few years, maybe I'll pick up a used diesel E-series.
It's fun to have new cars, absolutely, and I can afford 'em. But after one or two new cars, if you're well-off and want to have a collection of cars, it's more likely that you'll be picking up "used" vehicles that happen to satisfy your personal interests and tastes.
As well, for art, antiques, etc., by the very definition, these items are bought "used."
"And I note that some of your examples use already taxed income to tell us how it is possible to invest."
I noted that an initial real estate investment may be with after-tax money (although by borrowing most of the money and paying the mortgage back with the pre-tax cash flow of the property, one even minimizes that), that the tax-free income stream then will buy plenty of real estate with tax-free money.
"Certainly that can be done, but that's not the point since using untaxed wages (with payroll taxes now back in the net pay as in the FairTax) helps anyone accumulate some measure of wealth faster"
Not really. Since this is SUPPOSED to be revenue neutral, most folks are likely not to have a lot more income than under the old system, when one takes into account that they'll be paying 30% sales taxes.
"It is clear that you haven't read any studies of the effects of lifetime taxation which apply to the very well to do. The point is that most in the 'tax specification business'' believe that such wealth is eventually spent for consumption and in the intervening time is invested in some form helping our economy prosper."
The merely modestly wealthy spend most of their bucks. I've been talking about the very wealthy. They don't spend most of their bucks. They pass 'em on to their heirs. Mr. Bush has already repealed the death tax, and is working on making that permanent. The very wealthy don't need much more than that.
"I'm afraid it's a little tough to see if, as you say, that "... capital gains can be put off indefinitely ..." how the very rich could pay less in tax under the FairTax. Clearly just the opposite is true. Present investment is certainly not free of tax costs since there is always at least compliance costs involved in making and maintaining these investments. And many of them are actually dictated by the tax laws and can therefore be politically manipulated and lobbied for advantage by the K Street fellows. In some cases an investor will have to switch to other types of investments as tax laws ebb and flow."
This paragraph appears self-contradicting. Get back to me when you've decided whether the rich will pay more or less under whichever system you decide.
I think the rich will pay a lot less under the new system than the existing system.
"And no - buying used was in no way mentioned by me as a tax dodge ... that seemed to be what you were inferring in trying to present that "the rich" would buy only used things to not pay taxes."
No, I said the rich DO buy lots of used things, and in that way, will avoid a lot of sales tax. But even if they didn't already buy lots of used things, they sure would start now.
Rich folks don't get rich by spending money unnecessarily.
"Used is seldom in their vocabulary (nor is unostentatious)."
I know a guy who is worth $300 million who drives a Ford Explorer. I know a guy who has so much money, he leads a group that is vying to buy the Washington Nationals baseball team, for something in the neighborhood of half a billion dollars (a purchase, by the way, that would be entirely tax-free, as it would be an investment, no??). He drives an older domestic car.
The very rich often aren't very ostentatious at all. Not in proportion to their wealth.
"If these folks 'avoid' income taxes now (which you claimed in your post as though it were somehow easy to navigate the present tax laws), then it certainly no more 'sinful' for them to 'avoid' the FairTax by buying used things. Cant' be 'good' one place and 'bad' the other."
Issues of morality don't enter into it for me, not under the proposed NSRT, nor under existing law. My view is, if you can legally avoid the tax, good for you!
I only point out that the very rich will do very well under the proposed new system.
As will the poor, the working class, and the lower middle class.
I think pretty much, under the proposed system and proposed rates, only the upper middle class, and certain types of investors, are going to take it in the neck.
But that then raises the question, if nearly everyone is prospering from this (and if the very rich are prospering a whole bunch from this), how can it be revenue neutral??
I know, I know, "reduced compliance cost" and "increased taxation of the underground economy."
Well, I know that "compliance costs" have been exaggerated beyond what is defensible, and I suspect that we're not going to get quite as much out of the underground economy as some folks think.
Which means:
1. Upper middle class folks, and certain types of investors, are still going to get crushed; and
2. It may be that rates may have to be higher than 30%, anyway, in which case, it's gonna get ugly.
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