A FAIRTAX PRIMER

self | May 14, 2006 | self

[Your Nightmare]

The tax on an individual IS in effect a tax on his employer who must raise his expenses to pass on the money for the employee to pay the tax.

So if the state employee was exempt from the FairTax, the state could pay them less - but they're not. So, using you logic, the state is paying the FairTax when their employees buy something and, on top of that, the state has to pay additional FairTax on those wages. That sounds like double taxation...

In addition, the governmental unit is also taxed in another manner by having to pay for example the ER portion of withholding at 7.65% ... or perhaps you think all governments are somehow not obligated to pay this to the feds (or even the feds themselves by shorting their employees of that payment)?????

I bet you weren't aware that any state that pays Social Security on their employees wages (there are some that don't) does so voluntarily. They have signed a "Section 218 Agreement" with the SSA. The federal government taxing the state government brings up constitutional intergovernmental tax immunity issues. These agreements get around that issue. Making the states pay FairTax may actually be unconstitutional (you do believe in federalism, don't you).

That certainly puts the lie to your "crap" statement and it's something you Squirrels ALWAYS ignore when attempting your Chicken Little approach to tax-terrorization of the uninformed. You seem to think that 7.65% of all government wages is chopped liver. Got news for you - it ain't!

I know that 7.65% is not chopped liver. I also know that 29.87% is larger than 7.65%.

Got news for you - it ain't! In addition, as has been pointed out to you more than once by other posters, not all governmental employees' wages would be subject to the FairTax ... but you've chosen to ignore that too and go on pretending 100% would be taxed while the ER portion is merely ignored.

I bet you also didn't know that these Section 218 Agreements are irrevocable. States aren't paying employment excise because of the IRC laws repealed by the FairTax, the are paying them based on irrevocable agreements made under Section 218 of the Social Security Act. Would they still pay that excise if the FairTax became law? The FairTax bill does not address this issue at all.

[xcamel]

Same bad news for the Fair Tax., and I love a cynic - or at least one with an open mind....

[Your Nightmare]

So it has no rules on what portion of SS income is really "taxable income" ?

SS income isn't taxed under the Flat Tax.

 

when to consider investment income, stock options or bonds as "taxable income" depending on who issued them, when purchased and when sold ?

Investment income isn't taxed under the Flat Tax.

 

there is nothing a business needs to keep track of in terms of capitalized vs. depreciated costs so that "taxable income" can be figured ?

There is no depreciation under the Flat Tax. Capital expenditures are written off. A business would pay tax (the same rate as individuals) on total revenue from sales of goods and services less purchases of inputs from other firms less wages, salaries, and pensions paid to workers less purchases of plant and equipment.

 

what about not-for-profit businesses ?

They would be exempt from the business tax but would have to pay tax on any fringe benefits they give their employees.

 

is welfare income ?

It doesn't matter, the Flat Tax doesn't tax income on the personal side – it only taxes wages, salaries, and pensions.

 

how about food stamps or housing assistance ?

Those aren't wages, salaries, and pensions so they aren't taxed.

 

if you sell your home, are there rules about how much of any gains are "taxable income" ?

None.

 

do they depend on marital status ?

There is no marriage penalty with the Flat Tax.

 

what if you were married and divorced several times while you held the house ?

Why would that matter?

 

what about rental income, depreciation, gains on selling, etc. ?

Rental income would be considered business income.

 

[Dimples]

(states & localities have to pay 30% tax on salaries... which isn't true IAE)

Perhaps you should read the bill before you shoot your snout off:

`SEC. 103. RULES RELATING TO COLLECTION AND REMITTANCE OF TAX.

`(a) LIABILITY FOR COLLECTION AND REMITTANCE OF THE TAX- Except as provided otherwise by this section, any tax imposed by this subtitle shall be collected and remitted by the seller of taxable property or services (including financial intermediation services).

`(b) Tax To Be Remitted by Purchaser in Certain Circumstances-

`(1) IN GENERAL- In the case of taxable property or services purchased outside of the United States and imported into the United States for use or consumption in the United States, the purchaser shall remit the tax imposed by section 101.

`(2) CERTAIN WAGES OR SALARY- In the case of wages or salary paid by a taxable employer which are taxable services, the employer shall remit the tax imposed by section 101.

`SEC. 703. GOVERNMENT PURCHASES.

`(a) Government Purchases-

`(1) PURCHASES BY THE FEDERAL GOVERNMENT- Purchases by the Federal Government of taxable property and services shall be subject to the tax imposed by section 101.

`(2) PURCHASE BY STATE GOVERNMENTS AND THEIR POLITICAL SUBDIVISIONS- Purchases by State governments and their political subdivisions of taxable property and services shall be subject to the tax imposed by section 101.

Yes, governments would be required to pay FairTax on wages and salaries.

[pigdog]

More of your Chicken Little nonsense, Nightie. When combined with clever misdirection it can be very effective with those waiting to be fooled.

The situation isn't double taxation at all nor does your so claiming make it such. Unlike you I would not claim that the sate is (or is not) paying them more or less - that's up to the state - but I would think that generally a state (like most businesses in general) will be hard-pressed to pay them less. But as we all know governmental entities do all sorts of illogical things - so who knows.

If the state continues wages at 100% as will most of the businesses, then that is hardly a matter of being taxed by the FairTax, but increased takehome for those employees due to contractual obligations or other competitive wage pressures. Using my logic (and not my logic as misstated by you), the state (or other governmental entity) does not pay the FairTax for the employee since that selective decision is up to the employee in choosing his consumption, not the entity, and the additional money to the employee is caused by factors other than the FairTax.

It is certainly possible that some states may elect to drop their wage costs by sticking it to their employees. Under the income tax, the entity must furnish more money strictly due to the income tax system. The two situations are distinctly different and your attempt to make them the same falls flat. There is not double taxation here.

Any FairTax paid on some subset of employees wages IS a tax on the governmental entity involved just as at present when a entity has to tax itself by paying more to the employee who in turn sends it on to Uncle.

And you lose your bet on Section 218 since I am aware of it. I also know that it is not exactly "voluntary" but may (or may not) be done under the arcane sets of regulations of the IRC (after all it's part of the income tax system) and that it is typically done by referendum in the particular entity and then by positions not specifically employees. While it may be "irrevocable" the irrevocability is not so ironclad as you suppose (another off-topic red herring) but IAE does not offer universal exclusion to the entity in paying the ER's 7.65% for all employees but only those specific ones covered by the agreement which can be and often is highly selectibve.

I've never seen any numbers on the subject that seemed trustworthy and I doubt there are any. The fact, remains, however that many of the federal and state (and local) government employees that I know have the same withholding that you and I do WRT these entitlements. (Let me amend that by saying I don't know about you, but I pay them.)

As for the constituitionality or not of the FairTax, I rather doubt that it is unconstitutional but I'm certainly willing to let the SCOTUS fight that out - and surely you aren't a good source for that type of information as we've seen.

At any rate, not all employees of all governmental entities escape the 7.65% ER expense and it will represent a good bit more than chopped liver and the 29.87% figure you misleadingly throw out there for God and the whole world is meaningless, too, since that equates to tax-exclusive and we're talking tax inclusive here so it would be nominally 23% (but actually something like 19% as has been repeatedly reported in these threads).

Your last paragraph is something the entities and their employees would have to settle. It is not a FairTax matter but one of employee compensation and the FairTax provides the funds for these entitlements IAE ... or perhaps you're saying that the FairTax can be reduced by these excises if the entities stick it to their employees since they don't now pay the 7.65% and therefore the FairTax portion relating to these employees withholdings can be withheld from transfer to the entitlements - that'd be further savings to the FairTax. Another benefit.

[Kellis91789]

Well, I could almost live with those definitions of income. It looks like it excludes about $5 trillion of the tax base, and leaves welfare and social security recipients as non-taxpaying voters, so that's not good.

It could be much improved by removing lines 2 thru 7 from the Individual form, and adding '2(d) Export Sales' to the Business form.

And be sure the SS/M tax is completely eliminated as well, and I'm on board.

Of course, to be revenue neutral, line 7 of the Individual form would probably need to be 25%.

[pigdog]

I'm afraid you've missed what was said, xcamial.

[xcamel]

I'm afraid I wasn't posting a reply to you, Puppy-Poo

[pigdog]

Hey, Nightie, are you now saying you've (finally) defined the Nightmare Tax so we can all see it. (And that you know how Congress is going to define all those things since you've never offered us a specific Nightmare Tax bill).

GOLLLLLYEEEE!!!

And, hey, that (supposed) "postcard" looks to be about the same size as the first IT form in 1913. Some things never change, do they. And BTW, that's the Hall-Rabushka tax form you're using which you've never claimed as your own!! What we'd like to see (and you'd show us if you were being square with everyone) is the Nightmare Tax form. Why is that???

[Dimples]

It could be much improved by removing lines 2 thru 7 from the Individual form ...

Let's see, you don't like giving a taxpayer a minimum non-taxable living allowance from his own earnings, but you do support sending that same person/family a monthly check whether or not that person/family pays any FairTax?

Help me understand your logic.

[Dimples]

And be sure the SS/M tax is completely eliminated as well, and I'm on board.

Let's see. You could support the Flat Tax IF the SS/MC tax was completely eliminated; yet you now support the FairTax which has the SS/MC tax embeded (buried, hidden) in the rate?

Help me understand your logic?

[Your Nightmare]

And, hey, that (supposed) "postcard" looks to be about the same size as the first IT form in 1913. Some things never change, do they.

Except the 1913 form 1040 had a line for gross income. The Flat Tax is a consumption tax - it doesn't tax gross income.

[Your Nightmare]

Let's see, you don't like giving a taxpayer a minimum non-taxable living allowance from his own earnings, but you do support sending that same person/family a monthly check whether or not that person/family pays any FairTax?

You notice that the Flat Tax has a standard deduction, not a credit. With the Flat Tax, a person may pay no tax but they won't make money off the tax system (unlike the FairTax).

[pigdog]

What you post is old news and well-known ... but that's not what I'm referring to. States and localities pay the FairTax (which is more likely a 19% t-i rate IAE) on W&S of only a subset of W&S - not all which is what you had claimed, erroneously, originally.

So it is your snout that is in the wrong end of the horse.

BTW - why post the bit about purchases since that doesn't apply to W&S stuff at all. Perhaps you're trying to add impressive verbiage to your post - but that ain't it!!

[pigdog]

'Fraid you're beyond help Dimp-Dimp, since one of those is a refund of taxes paid (hint - it's the 2nd one you mention and misstate since there won't be anyone "not paying any FairTax").

[pigdog]

As I said, you're no doubt beyond help, but the SSMC rates are hardly embedded/buried since they're clearly delineated in the bill.

In the one case, your taxes are taken regardless of your desires, in the other it is your choice to pay them.

Since you seem unble to distinguish, the FairTax is this latter one.

[lewislynn]

You seem to think that 7.65% of all government wages is chopped liver. Got news for you - it ain't!

It ain't 7.65% of ALL government wages either (following the lunatic's mold of nitpick)

Does he think it's more because there are so many government employees? Maybe he's using his compounding/cascading "embedded taxes" method for his figuring.

[pigdog]

Is that what it says in the Nightmare Tax bill??? Seems like that would still be the same sized tax form, wouldn't it???

What does it say about obtaining a sizeable contribution to the tax revenue from those with illegal income???

How does the NMT bill go about helping exporters become more competitive???

Oh, yeah, and how does it define the need to pay the SS/MC withholding that still applies??? The ER portion thereof????

Hey, Nightie, come to think of it ... why have a tax form at all when it can easily be done with no form as with the FairTax which will do all those things I asked about???

[pigdog]

Hey, Looey - why don't you post the exact number of government employees that do NOT have the ER portion paid for them???

I do know that there are one hell of a lot of government employees and those I know have the ER portion paid since they're on SS/MC.

[Kellis91789]

No, if you recall my posting history, I oppose the FCA within the FairTax as well.

I think all taxes should be evenly applied -- from the first dollar. It is the only fair way to tax people that all have an equal vote.