Posted on 01/28/2006 1:15:41 PM PST by Eaglewatcher
I didn't use a 2 person "benefit." I used a single person who gets $25K a year. If it makes you feel better then his income is part SS, part pension. His income doesn't change, it's $25K. Why is it so difficult for you accept the fact that single retired individual can have the same income as a retired couple? Marital status and family size have nothing to do with you income.
You keep calling my example "biased." It is no more biased than any used by the AFFT, or any other participant in this debate. It simply points out a reality that the FairTax community wants to deny or hide.
If you'd agree to, say, a more reasonable 15% in embedded taxes... I'll not agree to a number you pulled out of thin air, especially one that has even less to back it up than mine. Dream on. You may not like my 5% number but it's far more supportable than your WAG.
You can rationalize all you want about how "comfortable" someone who earn $25K a year is (and you'd be projecting) but you can't deny the fact that he gets screwed by the FairTax.
Dimples,
Let me turn your focus and ask you a question on future funding of SSI, Medicare and Medicaid.
Future projections call for a doubling in payroll taxes to meet the needs of future Seniors with only 2 people working for every retiree. That would be 15.3% chunk from your grandchildrens paychecks instead of 7.65%.
Payroll tax is already the most regressive tax and SSI only taxes up to $90,000 in earned wage income while Medicare taxes all earned income.
These programs are 60% of the federal budget and with out changes will swallow up the entire budget.
Our children and Grandchildren will be the losers with less and les takehome pay to save for a down payment on a home, to save for college for their kids or pay for basics.
THe damage of keeping the Status Quo is 10 times worse than your incorrect analysis of the Fair Tax.
With the Status quo EVERYONE WILL BE A LOSER in the future.
The IRS is a Titanic sized and decaying rust bucket on a collision course with an iceberg.
The same questions I asked Nightmare earlier and have not seen a response. What is your solution? and how does it answer the questions at post #267 on Flat Tax if that is what you favor.
Will the Flat tax reduce compliance costs if so how much??
Will Your version of the Flat Tax stil keep the most Regressive tax of all the payroll Tax???
What is the Rate of your Flat Tax on individual Income?
On Corporate Income??
On Investment Income, Capital Gains Income, and Retirement Income??
What write offs or exemptions do you keep and what do you do away with??
IS there a flat exemption of $xx,000 dollars ?
Is their a deduction for local taxes or mortgage interest in your tax plan?? What is the affect on the Housing market? Do you have a study on that or just an intuitive answer - either is fine.
How does your Flat Tax affect the Senior with Savings Pre or Post tax Savings??
How does your Flat Tax encourage Economic growth and American Manufacturing? How does it make US Shores the preferred TAx Free Zone in the world for business and investment like the FAir Taz does?????
You see I like a Flat Tax too. I just like it on Consumption at the Retail Level. Flat Income Tax is my distant number 2 choice but I don't believe it has the same Economic potential as the Fair Tax. Nor does it have the potential to affect our long term deficit problems with Social Security and Medicare.
We may agree to disagree, but I would like to hear your answers if you have time?
AND the additional questions
How will you solve future funding probelms for SSI and Medicare.
Now I know the official position of AFFT is that this is Revenue neutral and does nothing for SSI funding other than replacing it with a more progressive funding source with a wider tax base.( that is still a very big deal and a major help to the future of these programs)
With Increased economic growth this wider tax base will generate more income growth for SSI and Medicare.
What does your solution do and how does it do it????
I actually have another proposal for you to check out on SocialSecurity Reform. I call it the Tier 2 Solution.
Read Article: New deal for a New Century – Fair Tax plus the Tier 2 Solution.
http://fairtaxreform.blogspot.com/2005/05/new-deal-for-new-century-fair-tax-plus.html
Tier 2 Solution Summary:
1. Start the Tier 2 system with those people currently 30 years old or younger. Americans born in 1975 or later would be the Tier 2 Generation.
2. Grandfather all other retirees under the old system if born before 1975.
3. Redesign the system to match the realities of the new century and the global economy.
4. Using the Fair Tax as a catalyst set up a new 3 legged stool to retirement security. Three separate accounts;
New head of OMB was on CSPAN yesterday and was sharing info on future projections and deficits in the federal budget.
He said that just past 2016 we will have a spike in SSI and Medicare costs.
the Interviewer asked "how is this sustainable" It is not without major tax increases or spending cuts. This is the legacy that SQLs want to leave the next generation????
With the Fair Tax you are taxing a larger tax base which is considered more stable than income.
The key is it is larger and as GDP grows so does tax revenue.
It will collect taxes from the illegal income area when they spend money in a restaurant, jewelry store, Walmart or Target.
It will tax illegal and undocumented workers often paid in Cash when they go to WalMart.
Those without valid Social Security numbers will not receive the Prebate.
Long term it is a better for business to be making decisions based on value to the business and not based on tax loopholes and compliance that are inefficient for the economy and for that business.
The future in a global economy is not looking good for American jobs if we keep the status quo tax system.
We do not want to compete by making all jobs minimum wage do we?? and shipping the rest overseas???
We can compete better globally with the lowest tax system on business and business investment in the world with the Fair Tax.
Eliminate the headache and regulation of the income tax code and you will see Daimler Chrysler headquartered in the US instead of Germany.
You won't have companies like Stanley Tools wanting to move their headquarters to the Bahamas.
You will make it more costly to move jobs to India and Chinia and cheaper for business to build manufacturing facilities and create jobs in the US.
Even it the Fair Tax was neutral for every family and neither a net gain as I beleive nor a net loss as you beleive But neutral; These other benefits can not be found in the Satus Quo or in other tax reform plans.
Looking at all the potential benefits, the FairTax is the better way to go for America's Future.
Wouldn't You Agree??? If Not what is your solution???
Good post. Thanks for all your posts.
Future projections call for a doubling in payroll taxes to meet the needs of future Seniors with only 2 people working for every retiree. That would be 15.3% chunk from your grandchildrens paychecks instead of 7.65%.And how is the FairTax going to change this? It's in the legislation that the rate changes every year so the FairTax would only collect as much for social insurance as the current system.
Payroll tax is already the most regressive tax and SSI only taxes up to $90,000 in earned wage income while Medicare taxes all earned income.I don't think payroll taxes are as regressive as make out and they certainly are the most regressive - excise taxes are. In fact, payroll taxes are progressive until the top 20% of wage earners - but the benefits are limited so why shouldn't the taxes be limited? Are you suggesting we steal from the rich to give to the poor?
Will the Flat tax reduce compliance costs if so how much??The Flat Tax will dramatically reduce compliance costs. On the individual level, only wages and pension contributions are taxed - no investment income is taxed - so it won't be complicated at all to determine tax burden. On the business side, the Flat Tax does away with the two most complicated issues of tax compliance - depreciation and foreign sourced income. All costs are expensed and the Flat Tax only taxes income generated in the U.S. (so all those trillions of dollars sitting in offshore accounts you talk about can come back to the U.S. tax free).
Will Your version of the Flat Tax stil keep the most Regressive tax of all the payroll Tax???A Flat Tax could, but on the personal side the Flat Tax is just a wage tax, just like the payroll tax, so it's not that big of a deal (certainly not as much as y'all like to make out of it).
What is the Rate of your Flat Tax on individual Income? On Corporate Income??Whatever rate is revenue neutral, just like the FairTax. What is the FairTax rate? I just saw a video yesterday on C-SPAN of an interview Linder did in December where he said the AFT recently had the FairTax scored and the required rate was 24-26% (which means it probably even high than that).
On Investment Income, Capital Gains Income, and Retirement Income??Zero percent. It's not a "Flat Tax" if it doesn't exempt the return from savings (investment income, interest, etc.).
What write offs or exemptions do you keep and what do you do away with??The Flat Tax eliminates all exemptions except for a standard personal exemption. It's not the "Flat Tax" unless it does away with all exemptions.
IS there a flat exemption of $xx,000 dollars ?Yes, this adds progressivity but, unlike the FairTax, doesn't allow for negative tax rates. People shouldn't profit from the tax system.
Is their a deduction for local taxes or mortgage interest in your tax plan?? What is the affect on the Housing market? Do you have a study on that or just an intuitive answer - either is fine.No deductions except the personal exemption. The only effect on the housing market will be from removing the government imposed bias (mortgage subsidies) toward home ownership. People will be free to make decisions based on their wants and need instead of what the government wants us to do. And, unlike the FairTax, it treats new homes the same as used homes so there won't be any government imposed bias between the two like there would under the FairTax.
How does your Flat Tax affect the Senior with Savings Pre or Post tax Savings??Like everyone else, none of their savings, pretax or post-tax, is taxed. The Flat Tax doesn't have the double taxation problem of the FairTax.
How does your Flat Tax encourage Economic growth and American Manufacturing? How does it make US Shores the preferred TAx Free Zone in the world for business and investment like the FAir Taz does?????The FairTax doesn't make the U.S. the preferred tax free zone in the world. It is in the bill (Title II;Section 905) that foreign corporation are taxed on their gross income from sources within the United States. Haven't you read the bill?
How will you solve future funding probelms for SSI and Medicare.It doesn't. Neither does the FairTax. In fact, the FairTax could exacerbate the problem. It's in the bill that Social Security payments be indexed by the FairTax rate. So payouts increase by 30%. Didn't you know this? It's in the bill (Title III; Section 303). You have read the bill, haven't you?
You will make it more costly to move jobs to India and Chinia and cheaper for business to build manufacturing facilities and create jobs in the US.How is it going to "make it more costly to move jobs to India and China"? And businesses aren't moving their manufacturing facilities overseas because of taxes, they are doing it because of labor costs.
I don't think payroll taxes are as regressive as make out and they certainly are the most regressive - excise taxes are.That's "payroll taxes aren't the most regressive - excise taxes are."
Future projections call for a doubling in payroll taxes to meet the needs of future Seniors with only 2 people working for every retiree. That would be 15.3% chunk from your grandchildrens paychecks instead of 7.65%.It's 15.3% now.
... you continue to use a series of false claims about the FairTax, and you continue to ignore specific rebuttals to those claims. I've asked you twice to discuss them (on another thread), and you have, so far, run away from the discussion. It appears you are more inclined to cover your eyes and hold your ears than you are to discuss the problems.
Since you started with it, let's talk specifically about the SS/MC problem:
You are confusing tax policy with spending policy. Social Security and Medicare are not tax system problems, they are first spending problems, and second out-sized welfare programs that need substantial and immediate reforms. The primary problem with both programs is that neither is funded with investment. As such there is no creation of the necessary capital to sustain the systems. Merely opening the lid on taxing current generations to pay beneficiaries (as you are suggesting) is nothing more than a tax increase to fund an ill managed, bloated system of welfare programs and will mask the true cost of the programs while removing the impetus to attack systemic reform.
As I said in another thread to you: Folding SS/Medicare funding into the general system of taxation is the WORST thing you can do.
The first step to reform is deciding the purpose and objectives of the programs. The original objective of SS was to clear the decks of aged workers to make room for young workers with families who were out of work because of the depression. SS was the ticket to entice older worker to retire and open a job slot. That purpose is no longer served, yet the program has changed little.
I propose making the purpose of both SS and Medicare to serve as a the safety net of last resort to catch those that fall through a system of heavily incented, even mandated, self funded privatized accounts that sustain people in retirement.
First, both systems (SS/MC) should be replaced with self-funded private account systems. Contributions to these systems should be mandatory, as today, to a minimum level of contribution. That contribution, and any excess contribution to such accounts should be tax free: tax free now, tax free forever. These accounts should be managed as investments. The investment gains should be tax free: tax free now, tax free forever. We may wish to cap tax free contributions at some level, but that level should be high enough for an individual to salt away substantial sums of money to fund a comfortable retirement WITHOUT ever needing a dime from the government.
SS/MC programs should be sunsetted in favor of this new approach. Your level of participation in the current programs should be adjusted to reflect your years from retirement. Those near retirement can continue to participate fully in the current system; those farther from retirement will have a reduced benefit from the current system; those with 25 years or more until retirement will be completely transitioned to the new system.
In the interim, the current system should be altered to add a means test. Beneficiaries with adequate means should receive reduced benefits or have their benefit eliminated completely.
If there remains a funding deficit, then we need to bite the bullet and pass a special tax, linked directly to the underfunded programs, and with a specific sunset provision, to fund the shortfall.
In short, the SS/MC problem has NOTHING to do with the Income Tax system and is NOT solved by the FairTax. In fact, as proposed, the FairTax makes reforming SS/MC more difficult by removing the urgency of a funding shortfall.
Reforming SS/MC as I propose can reduce the cost/size of government by nearly 50%! You're "solution" amounts to throwning more money down an endless hole.
Anytime you're ready, let's talk about those false claims you keep using. Perhaps when you realize you're advocating a pipe dream, you might come around.
In short, I favor a flat tax on individual labor income as described by Your Nightmare with one minor change: I would not tax pension contributions or ANY savings/investment targeting sustaining one in retirement.
Such a tax is a Consumption Tax, but allows for incentives to set aside tax free funds that will NEVER be taxed. I believe this to be an important feature to wean people off of the teat of government support in retirement.
The FairTax cannot offer that.
In addition, I am NOT generally in favor of a personal exemption or other mechanism that adds progressivity UNLESS such a mechanism is implemented specifically to eliminate, reduce or avoid a government transfer payment to individuals that would other wise simply keep the exempted tax amount. This is precisely why I dislike the "prebate" mechanism. It is a government transfer payment. I would rather let people keep an exempted amount than have the government send it to them. Ideally, I'd rather eliminate the progressivity, because that maximizes the general economic benefits.
This kind of Consumption tax on Labor Income has been modeled by Jorgenson and has been shown to offer similar and in some forms superior economic benefits to a Retail Sales Tax like the FairTax.
It does not have the price/wage behavior problem of the FairTax.
It can be transitioned into place smoothly with fear of two, coexisting tax systems, unlike the FairTax.
Now, hopefully, the next time we are accused of supporting the Status Quo, you'll know the accuser is lying. This is not the first time we've laid out these ideas, but many, here, continue to pretend otherwise.
So, tell me. What's all this negative hype about "regressive" taxes? Why do you consider it bad? More of that "ability to pay" crap? More of that "from each according to his abilities, to each according to his needs" crap?
Unfortunately the word "regressive" has been high-jacked and misapplied by "progressives" to connote a bad thing. A truly regressive tax would be one where the tax rate was INVERSELY related to the quantity taxed (high income tax rates for low income, lower income tax rates for high income.) A FLAT tax (like the payroll tax) is neither progressive or regressive ... it's flat ... it's equitable.
... and SSI only taxes up to $90,000 in earned wage income while Medicare taxes all earned income ...
As You Nightmare pointed out, that is because SS benefits are capped, Medicare benefits are not. You seem to be advocating for high earners to pay more for each dollar of SS benefit they will receive than a low earner. Nothing "fair" about that. That would be like charging a high earner more for the same loaf of bread that a low earner would be charged simply because of his ability to pay. Not very "fair" of you.
Maybe you're advocating for uncapping SS benefits AND contributions. While that might be fair, it would not be very smart.
No spin required.
The calculation of the Savings Rate does not take into account assets held as investments. In other words, owning a house, stocks, bonds, other real estate, commodities, an IRA, a 401K, etc. are not counted as Savings ... they're Investments. The real story is that folks have shifted from saving to investing.
The savings rate will go even more negative as more folks retire and start living off of investment assets.
What's your spin?
"You keep calling my example "biased." It is no more biased than any used by the AFFT, or any other participant in this debate"
Indeed it is biased and intentionally and heavily so. You merely took a guy, made his income basically tax free and compared that with a chosen example from the AFFT website (which was for two people, not one). In fact you changed the parameters a good bit since the AFFT example was for two people each receiving $1,081 in S/S and you chose to bias it as you did to specify a single person having the same amount of income. IOW your example is quite different.
The 5% you use for embedded tax is not at all supportable (except in your own Squirrels'-brain world of combatting the FairTax by any means at all). I agree that there are certainly circumstances where there will be instances where some pay more FairTax than under the Income Tax (that's never been a secret) and your biased example as you defined it is one of those since it was selected to be so.
Let's instead take your guy with the income you show for him and use a 15% hidden tax figure - probably more reasonable than your 5%. And let's see how the single guy compares with the FairTax example (which supported two people rather than one). Also note that this assumes the FairTax example makes no use of the purchase of used items and that all income is spent and none saved. We have:
Income Tax FairTax
$25,944 gross $25,944 gross
-$3,892 (15% hidden tax) $4,402 prebate
$22,052 net spendable $30,346 net spendable
0 tax on n. s. -$6,980 FairTax
-------- -------
$22,052 spendable $23,366 spendable
In this example (which I believe is more representative), we have the FairTax supporting two people rather than one, paying almost $7,000 in tax AND still having more money than your single guy which means they could spend as freely as he and STILL save almost $1,314. That certainly doesn't qualify as the IT guy getting "screwed" as you so colorfully phrase it.
So, perhaps without realizing it, you have now demonstrated the absolute NECESSITY for SIGNIFICANT price reduction for the FairTax to live up to its promises. IF price reductions are 10% your examples are awash; if they are less than 10%, you're screwed. If you live alone, you're screwed! So the argument comes back to where it started: How much will after-tax prices RISE under the FairTax? So far, the consensus seems to be that they will rise 17 to 24%, maybe more. No one has made a credible analytical case for anything less.
AND you still got the example wrong! You're comparing apples and oranges; and in the process completely obscure the truth. To come out ahead, you had to count on a lowered standard of living (yes the standard of living for two people living off of the same income as one person is lower!), DOUBLE the prebate AND reduce pre-tax prices 15% ... none of that pertains to the Single Retiree under the FairTax! Face it, the single, low income retiree LOSES under the FairTax.
But then, like a lot of the FairTax problems, you have to obscure the truth to make it sound better than it is.
Which flat tax proposal are you describing?
"You can be the first to prove my tag line wrong... Unless you're afraid to try."
As you can see, LoisLane's a bad M...... when safely ensconced behind her computer screen hurling insults behind a cloak of anonymnity. Just challenge her to a debate in public and see how fast the bravado evaporates.
One I can support.
"The Flat Tax will dramatically reduce compliance costs."
"A Flat Tax could, but on the personal side the Flat Tax is just a wage tax, just like the payroll tax, so it's not that big of a deal (certainly not as much as y'all like to make out of it)."
"The Flat Tax eliminates all exemptions except for a standard personal exemption."
Notice the careful wording .... "The Flat Tax"
There is no reference to a bill number or a specific proposal. Why is that? Probably because there is no current flat proposal in congress which meets the bill of particulars that YN is laying out.
If all these benefits are actually possible, why hasn't someone introduced a bill that would make all these things attainable for the American people?
As a matter of politics, the flat tax momentum is.... well .... flat (pardon the pun)
There is a single flat tax bill in the house, sponsored by Rep. Burgess with 5 co-sponsors. It is a flat tax option (meaning that it doesn't replace a line of the current 60,000 page mess); also, it isn't revenue neutral. That makes it dead politically.
There are 3 flat tax bills in the senate; their primary sponsors are Senators Shelby, Wyden and Specter. Senator Shelby's is the only one of the three with any co-sponsors: he has one. I haven't analyzed which of these bills does all the wonderful things that YN claims, but it would seem that if any one of them did, at least the other flat taxers would jump on board. Also, if the flat tax had any real legs, you would expect to at least see these three senators negotiating among themselves on a single bill that they could all support. Anyone want to bet that is happening now?
As evidenced by this information, flat taxers can't even arrive at a consensus between and among themselves as to which version they prefer. One has to also wonder why the Armey bill, which I believe was not a flat tax option, has morphed into the Burgess bill, which is. Surely Mr. Burgess knew when he did that that retaining the whole horrid current system would make his proposal less palatable to true reformers. He apparently concluded that a flat tax replacement proposal was just not going to fly politically.
Another point to note about flat taxers is that there is no visible and noteworthy attempt to educate Americans on the advantages of any of the flat tax proposals. Mr Armey used to have an organization called CSE (Citizens For a Sound Economy), but it got merged in with Bill Bennett and Jack Kemp's group (I can't recall the name of the new group) and you don't hear anything about tax reform from them now as an organized group. Sure, you still see the orphans wandering around pining for their great idea to catch on. They are in denial about the fact that the flat is on the wane in terms of support, rather than in its ascendency.
So the flat taxers have nowhere to go, no mechanism for educating others except in small and isolated ways and to try to stem the gradual erosion of support for the flat. When was the last time you met someone who is zealous about the flat who was new to tax reform? I never have, and I doubt they are out there in any significant numbers. The flatters will go to their graves believing in it, but they are not bringing in new converts, and since their numbers are so minute, theirs is a futile attempt.
Since the FairTax has usurped what they view as their rightful role as the frontrunners in tax reform, they spend their time attacking FairTaxers anytime they can maintain their anonymnity. Dick Armey was whacked around quite a bit by Billy Tauzin a few years ago in a series of debates, and since he quit, no flat taxer has been willing to debate. Tauzin introduced an earlier version of the sales tax as a bill into congress.
For those new to these threads, this is the dynamic in a nutshell behind all the nasty remarks between the FairTaxers and the flats. They may be quite sincere in their desire to see a flat get implemented, but their attacks on the FairTax are never going to create that desired result. The only way they are going to get any momentum is to do what FairTaxers do - do the hard work to educate Americans step by step as to why tax reform is important and why their proposal offers the best alternative. I doubt that you will find a single flat tax article posted on FR in the past few months.
Unless and until they do that, I will continue to refer to them as "SQLs" since they may not be intending to perpetuate the current system, but that would be the result if they were successful, intended or not.
"Which flat tax proposal are you describing?"
"One I can support."
LOL
See what I mean? That is the one question the flats can't answer.
But they take great offense if you refer to them as "SQLs".
If that is not the answer you were looking for, then perhaps the fault lies in the question, not the answer.
Oh, and just for the record, a BAD bill with CLUELESS sponsors does not deserve support just because it's there.
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