Winners and Losers under the 'FairTax'

hripka | September 28, 2005 | self

[RobFromGa]

Just because my employer's name is on the check (BTW, the money in the account was deducted from MY paycheck) doesn't make it an expense seperate from my salary. My employer counts my entire paycheck as part of the cost of doing business.

The withheld taxes were NOT deducted from your paycheck, they were deducted from your gross wages and the resulting amount is your paycheck, also called your "takehome" pay.

Your employer counts both your paycheck and the check he writes to the IRS on your behalf as part of the cost of doing business.

[AFreeBird]

Hurt: Those who have saved in the past in non-tax deferred accounts. They paid income tax on the money before saved and will have to pay again when spending it.

Huh? Non-taxed deferred, but taxed before saving?

This makes no sense.

My 401K was all pre-tax; off the top of my gross. It means I was betting on a better tax position when I retire.

Under fair tax, I only pay taxes on that retirement fund, when I spend it on new goods or services.

I figure that's a better tax position.

[TexasTransplant]

You are kidding right?

Prostitutes and Drug Dealers are both illegal (and untaxed)

In the words of Bill Murray (Stripes) "I want to Party with you!"

Seriously, More money from Illegal activity will be Taxed under the Fair Tax, it will not condone such activity (Which is what has to happen with an Income Tax, an Income Tax is a Tax on behavior, a Tax on Activity, a Tax on Productivity it is a Tax that CONTROLS YOU, it Controls what you do!)

The Fair Tax only Taxes you for what you buy, no matter how you made your Money. If you can afford all of those Hookers and Illegal Drugs, the STD's and the Court/Jail time... knock yourself out.

TT

[groanup]

I wasn't aware that only iPods were taxed. I thought it was also stuff like travel, golf clubs, health care, etc. You know, stuff old people consume.

So we're to leave the old, crumbling, punitive system in place so the (arguably) wealthiest among us can buy golf clubs? Sorry, they can play with mashies and niblicks as far as I'm concerned. Health care? What old geezer pays for his health care? It is all paid for by medicare. I'm supposed to carry a ball and chain and finance their travel? I'd rather they go suck eggs. Are you getting my drift here?

[TexasTransplant]

>>>My 401K was all pre-tax; off the top of my gross. It means I was betting on a better tax position when I retire<<<

We all bet, take chances I sure hope that your bet is the one that pays.

PS I never bet on Politicians or Taxes both are black holes of unending consumption and endless want.

[ancient_geezer]

For anything in this study to happen or have any meaning, you need to accept the assumption that gross wages need to fall to current takehome levels for the price drops to materialize.

Hardly as one can assume as easily that no change in gross pay need to occur at all, as the difference in result is merely a nominal one, rather than a deflationary one.

I think you have accepted this now, right?

I have accepted that the simplifying assumptions made by Jorgenson was maintaining takehome pay constant rather than gross wage, maintaining real purchasing power in any case.

Jorgenson's model merely addresses changes in tax per-se with no accounting of improvements arising from reductions in tax related overhead costs which provide a large range for reduction in prices acting to maintain gross wages where they are now constant levels with reductions in producer & investment product prices as well.

How do you think that this wage reduction will be managed?

No individual wage reduction need occur at all for the projected economic benefits to be realized.

In fact as Jorgenson himself stated to you in his response to you:

"A more reasonable interpretation of my 1996 testimony is that workers would keep that after-tax pay; producers' prices would fall, but retail prices would be increased by the national retail sales tax. Any gains by workers and investors would be the result of increase economic efficiency."

Thus no reductions need to be managed to realize a real gain out of economic efficiency of which reductions in tax related overhead costs incurred by business is a large component, (deadweight losses on trade being the other).

The net purchasing power of the consumer in "Jorganson's '96 testimony" from his pre-'96 works remains constant. Taking increases in economic efficiency into account provides significant potential for gains in real purchasing power of the household.

In point of fact the above study holds that a net 3% gain in consumer (after tax) purchasing power rising to 10% in the out years occurs taking only changes in taxes per-se into account.

[Always Right]

The Fair Tax only Taxes you for what you buy, no matter how you made your Money. If you can afford all of those Hookers and Illegal Drugs, the STD's and the Court/Jail time... knock yourself out.

The same as today. Legal transactions result in taxes being paid, illegal transactions don't. The only difference is that under the fairtax, the drug dealer sees the tax on his receipt, under the income tax, the taxes are embedded into the price of the goods. Really. The drug dealer cheats the fairtax system exactly like he does today.

[Blood of Tyrants]

You are a fool. There is no employer in the US who will be able to say to the employees, "Well, since you don't have to pay income taxes and I don't have to pay income taxes, I am just going to keep what you were paying."

[Blessed]

>And the majority of wealth is held in after-tax savings, both financial instruments like stocks and bonds, tangible possessions, ROTH IRAs and real estate. In most cases there is no further tax due on the principal for the bulk of retirees savings.<

The bulk of liquid assets for the average person retiring now are in 401K and IRA savings.You also minimize the fact that many people will not spend at the rate they withdraw from their 401K/Ira.They will continue to grow these assets tax free.With compounding of interest on the extra 15-20% of assets the consumption tax vs. income tax will at a minimum be a push.

[Always Right]

You are a fool. There is no employer in the US who will be able to say to the employees, "Well, since you don't have to pay income taxes and I don't have to pay income taxes, I am just going to keep what you were paying."

Probably so, but that just means according to the fairtax experts that after tax prices go up significantly with the fairtax.

[phil_will1]

"One of the most horrible pieces of unconstitutional legislation ever passed was the one that threatened the tax exempt status of the churches if they DARED to be involved in politics as they had been since our country began."

Great point. I still don't understand how African-American churches can use the pulpit for political purposes all they want, but other churches can't.

[TexasTransplant]

>>>"The same as today. Legal transactions result in taxes being paid, illegal transactions don't. The only difference is that under the fairtax, the drug dealer sees the tax on his receipt, under the income tax, the taxes are embedded into the price of the goods. Really. The drug dealer cheats the fairtax system exactly like he does today"<<<

Exactly what Income Tax did this Drug Dealer pay?

[Always Right]

Exactly what Income Tax did this Drug Dealer pay?

When he buys a car, the drug dealer effectively pays the income tax of every person who sold the car, transported the car, assembled the car, and made parts for the car. The difference with the fairtax is the tax is shown on the receipt. That is what the 23% of 'embedded taxes' are that fairtaxers talk about.

[TexasTransplant]

Do you have Employees?

Every Employee is floating a Resume somewhere else, at all times, if you are an Employee and you are not doing so as well, you are a fool.

Every Employer should treat every Employee as if they had a Resume floating out there in front of the Competition, it is how you evaluate every person / keep good Employees and how you let the Competition hire your dregs.

[phil_will1]

"So if there were to be any loss in American consumption, our exportation of products would still drive demand for workers. Workers in demand drives price up as the supply is reduced."

It's a little more subtle than that. The initial decline in US consumption would have two components:
1. a substantial decrease in the consumption of imports, combined with
2. a smaller magnitude increase in the consumption of US produced goods.
IOW, it isn't just foreign demand for US goods that would increase; domestic demand would go up, also, even though total overall consumption would initially decline.

However, the rate of growth in consumption would be greater after that initial decline, owing to a faster growing economy. By about the 4th or 5th year, total consumption would have caught up to where it would have been under the old system and would be positive from that point forward.

[TexasTransplant]

>>>"That is what the 23% of 'embedded taxes' are that fairtaxers talk about"<<<

And the Income Tax that he paid on his "Income" (Drug Dealing) was collected by whom?

[Always Right]

And the Income Tax that he paid on his "Income" (Drug Dealing) was collected by whom?

The exact same person who the prostitute is going to remit her $23 to when she performs a $100 service. No one. But just like the income tax system, the drug dealer and prostitute get to pocket that $23 instead of send it in to the government. They will cheat the fairtax system just like they cheat the income tax system. Really, really.

[phil_will1]

"How can both be true? Consumption will fall and income will rise."

"It was not consumption that gave China its miraculous growth rate but investment, which reached an astounding 44 percent of GDP."

p. 61. "Three Billion New Capitalists - the great shift of wealth and power to the east", Clyde Prestowitz.

Prestowitz does a great job of explaining the historical foundation for our economic policies which encourage borrowing, spending and consuming and the dangers we face if we continue with outdated policies in the 21st century.

[phil_will1]

"9. Companies will start a Company Store for tax-free employee benefits"

Incorrect. Companies purchasing items for personal consumption will be charged the sales tax on them for just this reason.

[GOPJ]

Why?

Trust Fund Babies (folks like Paris Hilton, John Kerry etc)