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Fair Tax Solution for Ford, Delphi & American Manufacturing
The New Media Journal.US ^ | January 28, 2006 | Merrill Bender

Posted on 01/28/2006 1:15:41 PM PST by Eaglewatcher

Supporters of a Legislative package commonly called the FairTax, point out that no other tax reform and replacement idea comes close to providing the economic benefits for American working families and the growth of American Manufacturing like the Fair Tax HR 25/ S25. Major U.S. Manufacturers like Ford Motor and Delphi Corporation are facing difficult challenges and are planning or proposing major changes in order to compete in the global marketplace and to compete within the American marketplace.

Talk Radio has been a buzz on the plan by Ford to cut 30,000 jobs and close several facilities. For months, cities with Delphi Parts plants have be stewing over negotiations and plans that want to cut wages and possibly close facilities. Though part of the solution is to be more efficient and certainly to produce what the customer wants to buy, the other part of the debate is unfair trade practices and unfair labor wages in these competing countries.

Radio Talk Show host Neal Boortz is one talk show host that has discussed the solution for American Manufacturing repeatedly. He has also written a New York Times best selling book, “The FairTax Book” in conjunction with Congressman John Linder of Georgia. The book lays out the problems with our archaic income and payroll tax system and than reviews the benefits of the Legislative Replacement package sponsored by Congressman Linder and based on the 10 years of work and research conducted by Americans for Fair Taxation.

On Television, CNN's Lou Dobbs and Bill O'Reilly show their outrage on how American Manufacturing Jobs are leaving American Shores but provide no comprehensive solutions in their form of “sound bite journalism”. They and many other Americans misunderstand and dismiss the serious grassroots support and supporting research for a solution that will truly help the "little guy" and restore good paying American Jobs. (The Fair Tax HR 25/ S25. www.fairtax.org)

The solution for Ford, Delphi and American Manufacturing in general is not trade barriers or tariffs but is fair trade. But how do you get Fair Trade when competing countries do not pay a Fair Wage. American Workers do not need to compete globally by lowering their wages to such Draconian levels. Fair Tax supporters point out that the solution for better paying American manufacturing jobs at home is to have the lowest taxes on American Manufacturing companies.

American Manufacturing goes where it costs them the least to do business. Even with the higher costs of fuel to ship those goods from overseas, the low wage is what helps some countries compete and it is the Lower business taxes that helps other countries compete.

In Europe, Ireland has had the strongest economic growth and best employment numbers because they have the lowest taxes on business (Corporate tax 12 %). The Solution for America is Lower Taxes on American Manufacturing not Lower Wages on American Workers. The incentive for business to stay in America and not outsource is lower taxes on Corporate earnings with less tax compliance costs.

Ultimately, It is the consumer that pays the business tax in the end on all products and services. Business taxes like business costs for manufacturing are just worked into the price. The Consumer pays the tax not the business.

What if the United States had the lowest Corporate tax in the World? Would not business flock here to manufacture? What if instead of the Bahamas being the Offshore tax haven for business or Corporate headquarters that for Tax purposes those businesses made New York, or California, or Chicago their Corporate home and their preferred place to manufacture from and ship around the World?

There is such a tax plan in Congress waiting in the wings to rev up our Economy, by providing the right incentive for American Manufacturing to stay in America, for Good paying manufacturing jobs not to be outsourced, for American Families to have more take home pay, to make U.S. Soil a Tax free zone for business that can export products around the world Tax-Free. This is how we save American jobs and this is how we compete against substandard wages paid by our global competitors.

The Legislative Package in Congress has been around for several years; it is well researched and has sound economic data to back it up. It is commonly called the FairTax and has over 45 Co-Sponsors in the House and Senate. The bills are HR25 and S25. According to the Fair Tax Scorecard 155 Legislators are leaning in favor. Last Spring 75 Economists sent an open letter to Congress and the President in favor of the Fair Tax. They were joined by Alan Greenspan’s testimony in favor of a consumption tax as a replacement for an Income tax.

From an American worker stand point, the key point is that the Fair Tax helps save American jobs and promotes American Manufacturing that stays on U.S. Soil. It allows American workers to take home an average 30% larger paycheck each and every week by eliminating any federal withholding for income tax or payroll tax from an American workers paycheck. American workers take home 100% of their paycheck!!

American Manufacturers have the incentive to stay in the US and not outsource because they pay no Corporate tax. New American Manufacturing is created because Capital investment in the US is tax-free. Building new plants in the US will cost them less because of lower taxes. The Exports they send overseas pay no tax and are cheaper for sale in the global marketplace. This allows American Manufacturing to compete globally because of lower taxes and not lower wages like Delphi is trying to accomplish.

The Fair Tax is a revenue neutral replacement of the individual and corporate Income tax; payroll tax, capital gains tax, the Alternative Minimum Tax (AMT) and the Death Tax (Estate Tax). It is replaced with a National Sales Tax on retail purchases of all new products and services and supports the funding of the National Budget including Social Security and Medicare.

According to the Legislation, the national sales tax will be included in the price tag you see on a product and will be broken out as a separate line item on your receipt so that Americans know how much they are being taxed and how much they are sending to Uncle Sam with every purchase.

American Families do not have to wait until April 15th to get a refund of their own money. Middle Income Families will take home an average 15% more because of no Income tax withholding and an additional 7.65% because of no payroll tax withholding. Under the Fair Tax, the tax collected replaces the income that funds the national budget and replaces the payroll taxes that fund Social Security and Medicare.

The Fair Tax Legislative package is much more than just a national sales tax it is a package that also has a Prebate (rebate) system that truly untaxes the poor and treats everyone equally and fairly. No forms to keep, no receipts to log in or file. Everyone gets the same prebate check based on family size and valid Social Security cards for each family member.

Maid or Millionaire; the simple way to be sure no one pays a national sales tax on the essentials is not complicated exemptions but to simply send each household a monthly check (debit card) to cover the national sales tax on all spending up to the poverty line for that Family size.

Health and Human Services calculates the poverty line for a married couple with 2 children at $25,660 for the year 2005. The Fair Tax assumes every family of 4 will spend at least that much and sends them a prebate to cover the national sales tax on every dollar up to $25,660. The Inclusive tax rate is 23% or $5,902. The Fair Tax sends each month $492 (5902/12). If that family makes less than $25,660, they still receive the monthly check for $492.

It is a fact, if you make more you spend more. Under the Fair Tax if you spend more you pay more. With the Prebate, the Fair Tax is progressive in that the net tax rate for those American families at the poverty line is a true ZERO; for those at twice the poverty line the net rate is about 11.5%; at 4 times poverty that family is about 17.2%; and the wealthy at 10 times the poverty line and higher, average between a 20 to 23% net federal tax rate.

The Fair Tax truly untaxes the working poor by eliminating the payroll tax of 7.65% and allowing the working poor to take home 100% of their paycheck and receive an additional $5,902/ year to cover the National Sales tax on essentials like clothing, food, housing, or daycare. (Family of 4)

Trillions of Offshore dollars that wealthy individuals and wealthy Corporations hold offshore because of America's current tax laws will return to US shores under the Fair Tax. This capital will find a tax free zone in America and want to invest in American Manufacturing and business that will not only sell to Americans at home but to the entire world. American Exports will not have the 23% national sales tax on them for export. These exportable products will also drop in price because we have removed a major cost element from the supply chain. With no business income or payroll taxes, the cost of those products will go down. With no IRS you reduce the compliance costs dramatically for complying with the IRS rules and regulations. This savings throughout the supply chain will also be reflected in a lower price at home and for export.

It depends on the economist and it depends on the economic model but the estimated price drop on products and services is between 10 and 25% on average. Something you bought for $100 under the income tax will drop to somewhere between $75 and $90 dollars. When you add in the National Sales Tax the final price will be between $97.50 and $117.00. (30% exclusive tax rate equals 23% inclusive or income tax equivalent rate)

Under the Income tax a lower middle income tax family had to earn $129 in order to take home $100. This is based on a 15% income tax withholding and a 7.65% payroll tax withholding.

Under the Fair Tax you take home more money and you have more money to spend even after buying the same items and paying the Fair Tax. You take home $129 and spend $117 with the Fair Tax to buy the same $100 worth of goods you bought with $100 in take home pay under the archaic Income and payroll tax system. You are $12 ahead and on top of that will receive the monthly Prebate check.

Under the Fair Tax Legislative package you lower taxes on business; you give them the incentive to produce and manufacture here within the US and not in China or India, or Mexico.

The way to compete in the 21st Century is not to cut our wages in half. The way to compete in the world is to provide the incentive for business to do business inside the US.

The Fair Tax Legislative package does so much in so many ways. Our American Economy will boom when American manufacturing is growing in the US. The Fair Tax is the best vehicle to do that.

When the Lobbyists and their paid economists come out against it beware. With out the convoluted tax code, Lobbyists, Congressmen, congressional aides and "K" Street will lose a lot of their power and influence. If they come out against it than it must be good for average American families.

Every Politician that came out in support of this idea last election cycle won. This is a winning issue for politicians and when average American people are presented all the facts of the Fair Tax 80 to 90% love it. Get the Facts at www.fairtax.org

If Average American workers can get people like Lou Dobbs and Bill O'Reilly to truly study all the facts that support the Fair Tax, perhaps we can get them to join the over 75 economists that wrote a letter to Congress last Spring in support of the idea. The Fair Tax is the most comprehensive solution to aid American Workers, American Families, American Manufacturing and the American Economy.


TOPICS: Business/Economy; Constitution/Conservatism; Government
KEYWORDS: amoronlooey; economy; fair; fairtax; fraud; fraudtax; ignoranceisstrength; scamtax; tax
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To: pigdog
In addition you haven't responded to the fact that you have intentionally biased the example both by using a full S/S 2-person benefit

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.

361 posted on 01/30/2006 9:06:13 PM PST by Dimples
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To: Dimples

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;


362 posted on 01/31/2006 5:41:53 AM PST by merrillbender (Those That Know the Facts, love the Fair Tax.)
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To: Dimples

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???


363 posted on 01/31/2006 6:06:07 AM PST by merrillbender (Those That Know the Facts, love the Fair Tax.)
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To: merrillbender

Good post. Thanks for all your posts.


364 posted on 01/31/2006 6:21:17 AM PST by Zon (Honesty outlives the lie, spin and deception -- It always has -- It always will.)
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To: merrillbender
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).

I know you FairTax people like to think the FairTax will have low compliance costs but I'm afraid they will be significantly higher than you think - and they hit a particular industry (retailers) harder than others. To be truly neutral economically, shouldn't the burden be distributed across all businesses?


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?

And, I stated above, foreign sourced income isn't taxed under the Flat Tax (it's a consumption tax and that money isn't from U.S. consumption). U.S. companies could manufacture goods here and sell the elsewhere without paying U.S. taxes.


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?
365 posted on 01/31/2006 9:25:31 AM PST by Your Nightmare
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To: merrillbender
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.

Y'all need to realized that there good reason manufacturing jobs are leaving the U.S. - it's because our most precious resource, labor, is too valuable to allocate to manufacturing. Our labor is better used doing other things.
366 posted on 01/31/2006 9:32:48 AM PST by Your Nightmare
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To: Your Nightmare; merrillbender
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."
367 posted on 01/31/2006 9:38:30 AM PST by Your Nightmare
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To: merrillbender
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.
368 posted on 01/31/2006 9:41:39 AM PST by lewislynn (Fairtax = lies, hope, wishful thinking and conjecture.)
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To: merrillbender
You're rambling ...

... 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.

369 posted on 01/31/2006 10:15:07 AM PST by Dimples
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To: merrillbender
I concur with most everything said by Your Nightmare in his response to you, with a couple of exceptions which I'll outline here. Please note, this does not signify disagreement, just an opportunity to discuss a few refinements.

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.

370 posted on 01/31/2006 10:45:58 AM PST by Dimples
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To: merrillbender
Payroll tax is already the most regressive tax ...

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.

371 posted on 01/31/2006 11:13:35 AM PST by Dimples
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To: phil_will1
... the national savings rate is now in negative territory - first time since the great depression. It should be interesting to see how the SQLs spin this one.

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?

372 posted on 01/31/2006 12:38:54 PM PST by Dimples
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To: Dimples
"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.

373 posted on 01/31/2006 12:56:07 PM PST by pigdog
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To: pigdog
What's you beef with this "bias" charge? I purposely chose an example of a low income person that loses under the FairTax. I chose it because you and others continue to represent (falsely) that the FairTax is a win for everybody (except, perhaps drug dealers and illegal immigrants.) Of COURSE I changed the AFFT example. It is biased the other way! OF COURSE the example is "quite different." IT IS MEANT TO SHOW AN OUTCOME DENIED AND HIDDEN BY THE AFFT and OTHER FAIRTAX SUPPORTERS! Get over 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.

374 posted on 01/31/2006 2:11:18 PM PST by Dimples
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To: Dimples

Which flat tax proposal are you describing?


375 posted on 01/31/2006 3:15:57 PM PST by phil_will1 (My posts are in no way limited or restricted by previously expressed SQL opinions)
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To: lewislynn

"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.


376 posted on 01/31/2006 3:22:25 PM PST by phil_will1 (My posts are in no way limited or restricted by previously expressed SQL opinions)
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To: phil_will1

One I can support.


377 posted on 01/31/2006 4:02:34 PM PST by Dimples
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To: Your Nightmare

"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.


378 posted on 01/31/2006 4:49:07 PM PST by phil_will1 (My posts are in no way limited or restricted by previously expressed SQL opinions)
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To: Dimples

"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".


379 posted on 01/31/2006 4:51:35 PM PST by phil_will1 (My posts are in no way limited or restricted by previously expressed SQL opinions)
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To: phil_will1
I answered your question.

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.

380 posted on 01/31/2006 5:09:16 PM PST by Dimples
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