Posted on 01/23/2008 3:28:27 AM PST by xcamel
H.R. 25, the legislative proposal inappropriately named the FairTax, would eliminate the Federal income tax and replace it with a national sales tax. It is axiomatic that if enacted, those individuals who have saved money during their lives would be faced with double taxation. (Under the Fairtax, someone who earned $1000 and paid income taxes of say, $250, would find his remaining $750 subject to a 30% sales tax on all retail purchases.)
Generally, when commentators have pointed out the above fact, they have been met with either personal attacks or nonsensical economic gobbledegook. Recently, Bruce Bartlett, a former deputy assistant secretary for economic policy in the George H.W. Bush administration wrote a treatise entitled “Why the FairTax Won’t Work” in a noted tax publication. In that same publication, a week later, Laurence Kotlikoff, who appears to be the lead economist speaking for Americans for Fair Taxation, responded. Mr. Bartlett’s statement with respect to double taxation and Mr. Kotiloff’s response are as follows:
Bartlett:
(The Fairtax) penalizes those late in life who have saved for their retirement during an era when saving was heavily penalized by the income tax. But rather than being able to spend their savings tax-free, as they anticipated, they will now have to pay sales taxes on everything they buy, including health care. It will be hard for them to avoid seeing this as a double tax.
Kotlikoff:
Bartlett suggests that it would be unfair to force wealth holders to pay extra taxes when they spend their wealth (principal). He might have added in his defense of the rich that most of the rich are older and that we should tread lightly with respect to the elderly.
Well rich members of today’s older generations may be a concern of Bartlett. They aren’t a concern of mine. Our country has spent the past five decades transferring ever greater sums from young workers to contemporaneous older generations, including extremely wealthy members of older generations. The most recent example his the introduction of Medicare Part D’s prescription drug benefit. This transfer to current and near-term elderly has a present value cost of some $10 trillion.
The above confirms that supporters of the FairTax understand and acknowledge that the Fairtax would cause anyone that has saved money during their lifetimes to face double taxation. (Mr. Kotlikoff’s extensive prior writings are consistent with his above paragraphs. Perhaps his most interesting paper is his short presentation in 2001 entitled: “The Case For a Tax Hike”.)
While it is the contention of both myself and Mr. Bartlett that the rich will undoubtedly be the mega-beneficiaries of the proposed FairTax, Mr. Kotlikoff’s acknowledgement that there would be double taxation to anyone, rich or poor, who saved money for their retirement is of great importance.
Older generations are and should be a concern of most Americans. Endorsing a tax plan that penalizes Americans who have saved money for their retirement is a pretty interesting position. Penalizing older Americans with double taxation because the government has determined to subsidize medications that keep them alive is, well, a bit beyond the pale.
The double taxation element of the proposed Fairtax is not an issue solely for the rich. It is an issue for anyone with any savings, including and particularly for the retired individual who has been responsible and saved for retirement. It is not an issue which is ameliorated by a monthly prebate of $188.00 which theoretically covers taxpayers at the poverty level; having income $1.00 beyond the poverty level does not make one rich.
The very thought of subjecting the savings of responsible social security recipients to double taxation on their savings should be a notion which is repugnant to Americans.
Hank Adler is an Assistant Professor at Chapman University
The following is from The Heritage Foundation site YOU referred me to: Consumption-Based. A tax code that does not discriminate against saving and investment is considered a consumption-based tax system, regardless of whether taxes are deducted from the paycheck or collected at the cash register. In this respect, a flat tax is a type of consumption tax. The difference between a flat tax and a national sales tax is where the tax is collected. A flat tax is levied on income—but only once and at one low rate—as it is earned. A sales tax is levied on income—but only once and at one low rate—as it is spent.
Both the flat tax and the sales tax differ dramatically from the U.S. Internal Revenue Code. The current tax code has numerous forms of double taxation, such as its treatment of saving and corporate income. The current tax code also has several forms of wealth taxation or asset taxation, such as the capital gains tax and the death tax. (These also are forms of double taxation since the assets were acquired with after-tax dollars.)The current tax code even has provisions that force taxpayers to overstate their income, such as forcing businesses to “depreciate” the cost of new investment instead of allowing immediate and full deduction (a policy known as “expensing”) when costs are incurred.
None of these forms of double taxation, wealth taxation, or overtaxation exist in either a flat tax or a national sales tax, which is why public finance economists categorize both systems as consumption-based taxes.
http://www.heritage.org/Research/Taxes/bg1866.cfm
The following is from The Heritage Foundation site YOU referred me to:
Consumption-Based. A tax code that does not discriminate against saving and investment is considered a consumption-based tax system, regardless of whether taxes are deducted from the paycheck or collected at the cash register. In this respect, a flat tax is a type of consumption tax. The difference between a flat tax and a national sales tax is where the tax is collected. A flat tax is levied on income—but only once and at one low rate—as it is earned. A sales tax is levied on income—but only once and at one low rate—as it is spent.
Both the flat tax and the sales tax differ dramatically from the U.S. Internal Revenue Code. The current tax code has numerous forms of double taxation, such as its treatment of saving and corporate income. The current tax code also has several forms of wealth taxation or asset taxation, such as the capital gains tax and the death tax. (These also are forms of double taxation since the assets were acquired with after-tax dollars.)The current tax code even has provisions that force taxpayers to overstate their income, such as forcing businesses to “depreciate” the cost of new investment instead of allowing immediate and full deduction (a policy known as “expensing”) when costs are incurred.
None of these forms of double taxation, wealth taxation, or overtaxation exist in either a flat tax or a national sales tax, which is why public finance economists categorize both systems as consumption-based taxes.
http://www.heritage.org/Research/Taxes/bg1866.cfm
Make up your mind.
How?
If you have put $500,000 into accounts that either are or have been converted and rolled into Roth vehicles, and you were at the highest income tax rate, you have already paid 125k+ in taxes. In fact, you’ve paid much more than that in real terms when you factor in inflation and the opportunity cost of not having the taxed money to invest separately. Someone could have 500k in traditional vehicles AND also have had the 125k+inflation to invest all along
***THIS MEANS THAT THE GOVERNMENT HAS CONFISCATED 25-33% of my money from the past -— more when you count the inflation and opportunity costs lost. This confiscation WOULD NOT have taken place in other vehicles such as traditional IRAs and 401ks. People made choices to pay taxes at an earlier time by using a ROTH with a guarantee from the government that they would not pay federal taxes later.
Could you provide the link that shows that I referred you to that information?
Regardless, I don't think that the "fair" tax will ever fly, and it certainly wouldn't please me if it isn't applied equally to ALL taxpayers. The scheme being tossed around now allows for a "rebate" based on the number of individuals in the household, and claims to be "progressive". I won't even consider any plan as being fair if it also claims to be progressive.
Here's a quote from the "fairtax" FAQ: "Under the FairTax Plan, poor people pay no net FairTax at all up to the poverty level!" Which means essentially that the same democRAT deadbeat base still get a break while the rest of us pay for it. If they can't shake out the socialism and income-redistribution from the scheme, how can they even think of calling it fair?
My error. I don't know how it got addressed to you -- it was meant for our resident know-it-all, 'xcamel'. Regardless, I don't think that the "fair" tax will ever fly, and it certainly wouldn't please me if it isn't applied equally to ALL taxpayers. The scheme being tossed around now allows for a "rebate" based on the number of individuals in the household, and claims to be "progressive".
It is one helluva lot more fair than the present one, because it applies to everyone. And it's "prebate" not "rebate."
I won't even consider any plan as being fair if it also claims to be progressive.
Pardon my saying so, but that has got to be the worst reason I have seen so far for rejecting anything. So, it leaves you with the present monsterousincome tax. Are you happy with it? Here's a quote from the "fairtax" FAQ: "Under the FairTax Plan, poor people pay no net FairTax at all up to the poverty level!" Which means essentially that the same democRAT deadbeat base still get a break while the rest of us pay for it. If they can't shake out the socialism and income-redistribution from the scheme, how can they even think of calling it fair? So, the use of the word "progressive", and the fact that the new law would still relieve the poor from paying taxes up to a certain level, as at present (a feature that will never die, regardless of what changes are attempted in tax laws), has blinded you to the vast improvement of the Fair Tax over the present system, and the tremendous permanent boost it would give the country??
PS: Remember you would also get a prebate. Do you dislike it so much that you would give it back?
FairTax people have a vested interest in the United States of America.
Smaller government. Less intrusion in private lives. Taxes that are NOT collected at gunpoint. Etc.
Indulge us all this, xcamel; Do you or do you not have a vested interest in maintaining the status quo tax system? (Another dodge on this question will be taken as a YES.)
So, being a tax cheat, you’ve been forced to pay your taxes at the point of a gun? Please tell us more...
You too are forced to pay your taxes at the point of a gun. Even under the FairTax, when you make a puchase, you will be forced to pay taxes at the point of a gun, you just choose when to make a purchase and that decision is NOT made at the point of a gun. Don't you understand that?
First, I'm not a tax cheat. If you have evidence otherwise, feel free to post it publicly here, on FR. Those are serious charges. Either prove your charges or retract them. If you can't prove them and you don't retract them, then I'm requesting that the mods ban xcamel.
Second, do you think that there would be the level of compliance if the government didn't have guns?
Since you dodged my question.....again, let it be known that xcamel has a vested interest in maintaining the status quo tax system.
All further anti-FairTax postings from xcamel should be ignored. (assuming that you, xcamel, retract your baseless charges of federal criminality and aren't banned)
Until you produce tangible evidence that I, or anyone here has a vested interest in maintaining the status quo tax system, knock it off, or continue being branded an “Ed Brown/Wesley Snipes” tax cheat.
On the other hand, you have made baseless charges against me that you refuse to retract.
I am asking the mods to ban xcamel if he does not retract his baseless charge against me in his next post.
Knock off your baseless accusations, and I’ll knock off mine.
No you won’t.
I agree. He won't.
I did not make any accusations. I asked you a direct question that you have refused to answer.
Once more. Either retract your accusation that I am a tax cheat or I will go directly to the mods with a request that you be banned forever.
Why didn't you ping me with this?
good luck with that... Remember... the mods can read too..
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