You have learned nothing about the freedom of men and what it costs.
This is my last post to you on this thread. Say what you want. 
Posted on 04/14/2006 2:42:07 PM PDT by Eaglewatcher
of good news is that support is growing for complete replacement of the tax code with a national consumption tax. More and more taxpayers are demanding action from their representatives in Congress, and their representatives are listening.
Just one year ago, there were 33 sponsors and co-sponsors of HR 25, The FairTax Act, in the U.S. House. Now there are 53 supporters, and new co-sponsors are joining every month. In the Senate, Senator Saxby Chambliss (R-GA) was the lone sponsor of the FairTax Act, S 25, one year ago. Senators Tom Coburn (R-OK) and John Cornyn (R-TX) now join Senator Chambliss as co-sponsors. The word is spreading about the overwhelming benefits to our economy and our wallets when we replace the nine-million-word tax code mess with the fair and simple FairTax.
(Excerpt) Read more at townhall.com ...
You have learned nothing about the freedom of men and what it costs.
This is my last post to you on this thread. Say what you want.
The Hidden Burden Of Taxation:
How the Government Reduces Take-Home Pay
by Dean Stansel
Dean Stansel is a fiscal policy analyst at the Cato Institute.
--------------------------------------------------------------------------------
Executive Summary
One of the most confounding economic trends in the United States during the past 20 years has been the relative stagnation of workers' real wages. One of the primary reasons for flat wages is that taxes and other government mandates on employers have been expanding steadily, crowding out worker take-home pay.
Today an average manufacturing worker costs his employer $14.89 an hour (not including fringe benefits). But the employee's take-home pay is only $10.79 an hour. The government takes $4.10 per hour in taxes--federal and state income taxes, payroll taxes, unemployment insurance taxes, and workers' compensation--thus reducing the worker's take-home pay by 28 percent. Or to put it another way, abolishing income and employment taxes would raise the manufacturing worker's take-home pay by about $4.00 an hour. For a worker earning $60,000 a year and living in a state with average taxes, the government's share rises to 36 percent. That counts only the employment-related taxes that come directly out of the worker's paycheck or are paid by the employer on the worker's behalf. Workers still must pay a host of other taxes with their remaining take-home pay. The overall federal, state, and local tax burden is now at an all-time high.
Nearly half the amount taken from workers' paychecks is hidden. Three ways to bring those costs out of hiding are to replace federal income and payroll taxes with a national sales tax, to repeal withholding, and to encourage employers to adopt the Right to Know Payroll Form, first proposed by the Mackinac Center for Public Policy. That payroll form itemizes on workers' pay stubs each and every one of the costs that the employer must bear on behalf of the worker as a result of government tax and regulatory policies.
Introduction
Today the tax burden on middle-income workers in America is at an all-time high. According to the Tax Foundation, a median-income two-earner family pays nearly $23,000, or roughly 38 percent of its income, each year in federal, state, and local taxes.[1] That is more than the typical family pays for food, clothing, housing, and transportation combined. However, Americans are not required to write out a check to the tax collector for $23,000 every year, or for $1,900 every month, as they do when they make their mortgage, utilities, and car payments. Instead, much of that tax burden is hidden, collected from them indirectly through a mind-numbing assortment of taxes, fees, and levies.
One indication of such hidden taxation is the growing "tax wedge" between how much employers pay and how much their employees receive. As Table 1 indicates, a full-time worker earning the average manufacturing wage makes $27,200 but costs the employer a total of nearly $31,000 when unemployment insurance, workers' compensation, and the employer's share of the payroll tax are included. That figure does not include the cost of fringe benefits and tax and regulatory compliance, which the employer pays, or union dues and the host of other taxes--property taxes, sales taxes, gas taxes, cigarette taxes, and so on--that workers must pay out of their take-home pay. As Figure 1 shows, after income and payroll taxes are withheld, the worker gets in take-home pay only about 72 percent (or $22,400) of the $31,000 he costs his employer. The percentage ranges from a high of 75 percent in South Dakota to a low of 67 percent in Hawaii. That means that more than one-quarter of every dollar employers pay to keep an average manufacturing wage worker on their payrolls goes to the government rather than to the worker. The government takes an even higher share from higher-income workers. For a worker earning $60,000 a year in an average-tax state, the government's share is 36 percent (Figure 2).
Furthermore, nearly half of that tax burden is hidden from workers. It cannot be found anywhere on their pay stubs. That hidden burden of taxation masks the true cost of government, leading Americans to believe that publicly provided services cost them less than they really do. Those hidden costs thereby distort the political process and create a bias in favor of expanding government. A sound tax system should make all taxes visible to the electorate, so they can make rational decisions about whether they are getting their money's worth.
One way to address that problem would be to replace the federal income and payroll taxes with a national sales tax, so that Americans would get a clearer picture of the cost of government every time they made a purchase. Americans for Fair Taxation--a Texas-based research and advocacy organization--has developed a plan for imposing a 23 percent national sales tax. Eliminating federal income and payroll taxes would increase an average manufacturing wage earner's take-home pay by 28 percent.
As an alternative, within the confines of the current tax system, the deceptive practice of tax withholding could be eliminated. Taxpayers would write checks for the full amount of their tax liability either monthly, quarterly, or annually, just as they do for other expenses such as mortgage payments and utilities. At the very least, employers could be encouraged to adopt the Right to Know Payroll Form, as first proposed by the Mackinac Center for Public Policy, a state-based think tank located in Midland, Michigan. That payroll form itemizes each and every cost borne by the employer for the employee and thereby makes the tax burden more visible to workers.
The Hidden Costs Government Imposes on Employers
To better understand how the burden of taxation is hidden from us, try the following thought experiment. Imagine that you are an average manufacturing wage worker. You receive a paycheck twice a month. Your gross earnings cost your employer $1,133.33 per pay period, but after unemployment insurance, workers' compensation, and the employer's share of the payroll tax are included, your employer must spend $1,289.76. After income and payroll taxes, your take-home pay is $934.73. Now, assume that our current system of withholding and employer-paid taxes does not exist. In your bimonthly paycheck, your employer gives you the entire $1,289.76 that he must pay to keep you on the payroll, rather than your previous take-home pay of $934.73. That is 38 percent more than you were receiving. However, individual employees now must pay each and every one of the various government-imposed costs themselves. Imagine that every time you receive a paycheck you have to go to a series of windows and pay the cashiers behind each.
At the first window you pay $86.70 for the "employer share" of the Social Security/Medicare payroll tax.
At the second window you pay $58.12 for the workers' compensation contribution.
At the third window you pay $9.28 for the state unemployment insurance tax.
At the fourth window you pay $2.33 for the federal unemployment insurance tax.
At the fifth window you pay another $86.70 for the employee's share of the Social Security/Medicare payroll tax.
At the sixth window you pay $85.31 for the federal income tax.
Finally, at the seventh window you pay $26.59 for the state income tax.
You have now paid the government its $355.03 share, only $198.60 of which (the amount from windows 5, 6, and 7) would have appeared on a standard pay stub. As a result, your new paycheck of $1,289.76 has shrunk by roughly 28 percent to $934.73. Of course, you will then have to pay additional taxes--property taxes, sales taxes, gasoline taxes, cigarette taxes, alcohol taxes, and the like--out of your remaining take-home pay.
In contrast, under our current system, you would have received a bimonthly paycheck of $934.73. If you took the time to examine your pay stub, you could have learned that your gross earnings were $1,133.33. However, the additional $156.43 that your employer remits to the government on your behalf would have been completely hidden from you. Over the period of a year, that amounts to $3,754.32 that your employer pays to keep you on the payroll and you never see. The government takes it all without even giving you notice that it has done so. That is the essence of our hidden burden of taxation.
Methodology
This study examines hidden taxes from the perspective of employment costs. Taxes and other government mandates increase the total cost that employers must pay for each of their employees. To estimate that cost, the profile of a full-time worker earning the average manufacturing wage is used.[2] That worker has annual earnings of roughly $27,200. The following factors were taken into account in deriving an estimate of the total employment costs in all 50 states and the District of Columbia: federal income tax, state income tax, Social Security and Medicare payroll tax, unemployment insurance, and workers' compensation. Unless otherwise noted, estimates refer to tax year 1996.
The estimates do not include all taxes, nor all employer expenditures for employee compensation. The following costs are not included in the estimates.
Fringe benefits. On average, fringe benefits such as employer contributions to private health insurance plans increase the employer's total cost of compensation for an average manufacturing wage worker by an additional 22 percent, from $31,000 to $37,800.[3]
Complying with the tax code. In 1996 complying with the federal tax system was estimated to cost roughly $225 billion, $157 billion of which was for the income tax alone.[4]
Complying with government regulations. Complying with just the federal government's regulations has been estimated to cost roughly $688 billion, or about $6,800 per family.[5] Another estimate is that the burden of federal regulations is from $3,000 to $4,000 per employee, or about $1.40 to $2.00 per hour for a full-time worker.[6]
Other taxes paid by workers. In addition to the employment-related tax burden, Americans must use a significant portion of their take-home pay to pay a host of other taxes--property taxes, sales taxes, gas taxes, cigarette taxes, and so on. While this study finds that the government's share of employer costs for an average manufacturing wage worker is 28 percent, that is by no means an estimate of the total tax burden. According to the Tax Foundation, when all taxes are included, a median-income two-earner family pays 38 percent of its income in taxes.[7] In addition to those government extractions, many workers, particularly those in manufacturing, are required to pay substantial union dues. Each of the five factors that are included in the estimates is explained below.
Federal Income Tax
For income tax purposes, the profile worker is assumed to take the standard deduction (for head of household filing status) and to have two children. A worker with two children who earns $27,200 and files as a head of household would have been eligible for a standard deduction of $5,900, a personal exemption of $2,550, and two dependent exemptions of $2,550 each. With taxable income of $13,650, all of this worker's income is taxed at the 15 percent rate, yielding a federal tax liability of $2,048. That is 7.5 percent of his gross earnings.
No assumption has been made about whether the profile worker is married or, if so, whether the spouse earns additional income. Many families do have two earners. However, since the purpose is to estimate how much an individual worker costs his employer, not how much that worker's household pays in taxes overall, additional income earned by the profile worker's spouse is not included. If a median-income spouse's earnings had been included, the profile worker would have faced an even higher effective income tax rate.[8] In addition, the federal earned income tax credit (EITC) was not included in this analysis.[9]
State Income Tax
The same procedure was followed for state personal income taxes. Nine states (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) do not levy a state income tax on wages and salaries. Two of those states (New Hampshire and Tennessee) do impose a limited income tax on interest and dividend income. For the remaining 41 states and the District of Columbia, deductions, exemptions, bracket levels, and rates varied widely.[10] The average state personal income tax burden for an average manufacturing wage worker was $638.
As is the case with the federal income tax, if a median-income spouse's earnings had been included, the profile worker would have faced an even higher effective state income tax rate. Several states have their own additional earned income tax credits. Those were not included in the analysis. Local income taxes were also not included.
Social Security and Medicare Payroll Tax
The profile worker is subject to the 7.65 percent Social Security payroll tax on his entire earnings of $27,200, which amounts to $2,081. The employer is responsible for paying an additional 7.65 percent payroll tax on the worker's earnings.
Although it is remitted by the employer, that employer share is actually borne by the worker. That is, the worker's gross compensation is $2,081 lower than it would otherwise have been. The price that employers are willing to pay for a worker's services is not just the wage they are willing to pay but the total cost--including taxes, benefits, and all the rest--that they are willing to bear to employ that worker. All else being equal, employers should be indifferent to whether the employer share of the payroll tax is remitted to the government or to the worker. Thus, if the payroll tax were eliminated, the gross earnings of our profile worker should rise by the $2,081 currently spent on the employer share of that tax.
It should be noted, as Figure 3 illustrates, that the payroll tax has risen substantially since its enactment in 1937, from a combined employee-employer share of 2 percent to 15.3 percent. In 1955 a median-income two-earner family spent about 3.1 percent of its income on the payroll tax. Today that figure has risen to 13.7 percent of income.[11]
Unemployment Insurance
Unemployment insurance is a joint federal-state program financed through employer payroll taxes. The federal unemployment tax rate is 6.2 percent on the first $7,000 of each employee's earnings. However, employers are allowed an offset credit of 5.4 percent against their state unemployment tax; therefore, the net federal tax rate is 0.8 percent, for a maximum of $56 per full-time employee per year. State rates and taxable wage bases vary widely. The average state unemployment tax burden paid by the employer of an average manufacturing wage worker was $223.[12]
It should be noted that many states have recently reduced their unemployment insurance taxes. However, many of those reductions are not reflected in the most recent data available, which were used in these estimates. The estimates herein are for 1996.
As is the employer share of the payroll tax, the unemployment tax burden is borne by the worker in the form of lower gross earnings.
Workers' Compensation
Most employers are required to purchase insurance to cover the cost of workers' compensation benefits, medical care, and cash benefits paid out to workers injured on the job. Workers' compensation laws vary widely from state to state, and within states the costs can vary from industry to industry. In most states employers can choose from a variety of competing insurers, but in six states--Nevada, North Dakota, Ohio, Washington, West Virginia, and Wyoming--and the District of Columbia employers must pay into a monopolistic state government fund. Comparable estimates for those seven jurisdictions were not available, so a value of zero was used and those states were not included in figuring the national average for workers' compensation. Therefore, the total employer cost estimates for those states are not comparable to those for the other 44 states. For manufac-turers, the average workers' compensation premium per $100 of payroll is $5.13.[13] So for the profile worker earning $27,200, the average workers' compensation cost is about $1,395.
Like that of the previous two items, the cost of workers' compensation is ultimately borne by the worker in the form of lower wages.
Major Findings
When all of the government-imposed employer costs described above are taken into account, an average manufacturing wage worker costs his employer $30,954. That's 14 percent more than the worker's earnings of $27,200, and 38 percent more than the employee's take-home pay of $22,434. As Figure 4 shows, while the average manufacturing wage is $13.08 per hour, after allowing for taxes the employer pays, the hourly cost of that worker to the employer is $14.89. Again, that figure does not include other costs such as fringe benefits and tax and regulatory compliance. After the government takes its share, the employee is left with only $10.79 per hour in take-home pay. So government reduces the worker's take home pay by about $4.10 an hour, or 28 percent. And workers must pay a host of other taxes out of their remaining take-home pay. In addition to those government extractions, many workers, particularly those in manufacturing, are required to pay substantial union dues.
The government's share is even larger for higher-income workers. For instance, in an average-tax state like Kansas, an employee who earns $60,000 per year costs his employer $67,700 but takes home only 64 percent of that amount. The other 36 percent goes to the government.
Tables 2 and 3 show the employer costs and take-home pay for an average manufacturing wage worker for all 50 states and the District of Columbia. The difference among the states is a result of the variation in state income and unemployment taxes and workers' compensation costs.
The U.S. average for employer costs was $30,954. The three states with the highest costs were Hawaii ($32,327), Rhode Island ($32,246), and Maine ($31,834). The three states with the lowest costs were Virginia ($30,045), Indiana ($30,113), and South Carolina ($30,260).
The U.S. average for take-home pay was $22,434. The states with the highest pay were the nine states with no broad-based state income tax--Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming--where take-home pay was $23,072. The three states with the lowest pay were Hawaii ($21,534), Oregon ($21,543), and Wisconsin ($21,664).
The U.S. average share of employer costs that goes to employees in take-home pay, rather than to the government, was 72.5 percent. The three states where the employee's share was the highest were South Dakota (75.4 percent), Tennessee (75.2 percent), and Arizona (74.5 percent). The states with the lowest employee's share were Hawaii (66.6 percent), Rhode Island (69.8 percent), Kentucky (70.1 percent), and Oregon (70.1 percent). The difference between what employers pay and what their employees receive in take-home pay is sometimes referred to as the "tax wedge." On average, 56 percent of that tax wedge is paid directly by workers through their income and payroll taxes. However, even the visibility of those direct taxes is diminished by withholding. The rest is paid by the employer, although the burden is ultimately borne by the worker in the form of lower wages. The taxes paid by the employer are even less visible since they do not appear anywhere on workers' pay stubs. Thus, the larger the share of the tax wedge paid by the employer, the less visible the overall tax burden. Tables 4 and 5 show the total size of the tax wedge and the share of that amount that is paid by the employer.
There's plenty more where that came from.
But that should be sufficient to demonstrate that you don't belong in this debate.
You know little about it, and what you do know is a danger to the naive and ignorant...
You just keep piling one doozy on top of another tonight.
That comment reminds me of a doctor who is more interested in mopping up the blood on the floor than in stopping the hemorrhaging.
If you have more than 4 years until retirement, the additional untaxed savings you'll be able to add will more than offset the FairTax when spending your Roth account.
Or the couple who returns home from an evening out to find a torrent of water pouring from the ceiling of the kitchen and start looking for the wet vac!
The point - as you know - is that it eliminates the political argument against the FairTax and how it would be regressive since with the prebate it is not.
It certainly isn't an entitlement and never has appropriations bills as entitlement programs do.
Simpler ... perhaps (nor would many of the sup[porters object to seeing a lower rate) >>> BUT that open up the political issue of the tax being regressive whereas with the prebate it is not.
Despite what you claim, the perbate is very mush the same as the April 15 refund - both give overpaid tax money back to the taxpayer ... and that's as similar as can be.
Since you've admitted to favoring the current tax system and opposing the FairTax, I think that most readers will see through upir last "welfare" paragraph replete with "political manipulation" on something that is determined by existing laws. And it is NO misrepresentation.
The difference is more subtle.
There is nothing subtle about the Fair Tax. It is transparent because the tax will be itemized on the bill for everyone to see.
If the tax is on the consumption end, to fight back, he must not eat, travel, keep a roof over his head, keep warm and acquire property.
I stand corrected. This is as ridiculous as your previous statement. You actually believe no one will be able to eat with the Fair Tax is beyond irrational. Food clothing and shelter are considered necessities under the Fair Tax and therefore will be reimbursed for the taxes paid on the both by the prebate up to the poverty level. Fair Tax FAQ #3
Your incredibly irrational statements clearly reveal you have not bothered to read any of the Fair Tax bill or visit the AFFT website. Read them before you make anymore statements. http://http://www.fairtax.org
Yep. Rebating money that was never earned.
While I'm concerned about the amount of money taken from people's pockets, I'm more concerned with the amount of money going to the governments.
Socialist programs require vast amounts of substance to remain viable. Right now social security, the base program for our socialist structure, is starving to death. I want it to starve to death.
Face it, Will. --- The USA is committed to some form of 'social security/medicare', and the way we fund it now is not working. -- The FairTax scheme is as good a start towards true reform in that area as is possible.
The US may be committed, I agree, but I really don't want to help it.
You are 'helping' it now, by cooperating with the withholding system. Do you want that system to continue?
The NRST will fund it, and it's perpherial programs, into perpetuity.
Like it or not, some sort of 'social welfare' programs are a political reality. We may as well find a Constitutional way to fund them.
The problem with some form of social/security/medicare is that, with human nature, it grows. It has certainly grown in this country to what we have now. It's reasonable to assume that that kind of central distribution of wealth will grow from any social payment seed. I believe we will either have a socialist country or we won't. If what Frederic Bastiat said in "The Law" is true.
Look, - no one here likes "social welfare". But we simply have to face the fact that if we want to live in a free republic, we also have to figure out some Constitutional way to fund safety net type welfare programs, if for no other reason than to keep the streets clean. Can you see my reasoning?
The viability of the NRST is itself dependent on socialist principles, the prebate, which is simply another form of redistribution of wealth. And the NRST depends on it.
I think a 'prebate' of taxes is Constitutional, as long as every citizen is equally reimbursed. -- If it takes $1500 a month in purchases [taxed at 30%] to nominally exist, a $450 prebate per person would be 'fair'..
All the arguments of "fair" rest on it.
Of course they do. -- Because it would be 'fair' to exempt basic living expenses from taxation.. The prebate scheme accomplishes that goal with its innate simplicity.
Every argument of unfairness of the NRST impacting low income and elderly is resisted by citing that provision.
The 'prebate' idea, implemented properly, could conceivably replace all of the current fed, state, & local welfare mess.. -- With enormous savings & reductions in government.
If a man can't afford to buy groceries this month, and next month when will he have enough money to buy groceries? Even though he is given the expected NRST on the groceries, this is money he would have paid but can't. Other people paying the tax will provide enough revenue to give that to him.
The basic fact is he gets money he didn't have before, and didn't earn in the form of a payment in a medium of exchange. He might spend the money on booze.
Yep, the 'prebate' would become a defacto welfare payment. -- So what? One way or another, we don't let people in America starve on the streets. -- Will you admit that?
Of course. People apply for a welfare program and they eat. Then more find out you can apply for a welfare program and you eat, then more, then they have children who learn of the cornucopia, more programs are added, existing ones increased. This is the way it goes.
There is only one way to stop it, not disperse government funds to any individual or corporation for any reason whatsoever unless on contract to provide goods and services.
There are always a certain number of people who have no ability to provide the market with needed "goods & services". -- In effect, you're saying 'let em starve'.. -- Get real, this will not happen in America.
To go back now, there will probably some people starving on the streets, except those with true disabilities that were not assisted by their families or churches. Could you handle that, if it meant removing the systems in place?
Sure, -- I could 'handle that', seeing I've long been advocating a return to the old 'three hots & a cot' work farm system we had prior to social security.. -- But in political reality, that kind of system is gone with the wind.
The FairTax scheme could work to restore our liberties by abolishing unconstitutional income taxation. Those who oppose repeal of the 16th really need to rethink their priorities.
Wrong on both counts, fellas. The vast majority of Americans would spend far more in taxes than the rebate.
-- Sure, those who didn't would be getting unearned income.
-- But what else is news?
Face it, -- politically we are stuck with some sort of 'security net welfare system'.
-- We may as well find a constitutional way to fund one.
Not that you two could ever be bothered by Constitutional concerns.
My definition of 'welfare' is the government giving you money that exceeds what you paid in taxes.
95% of people will have paid more FairTax than they receive in prebate. For those people it will certainly NOT be 'welfare' by any rational definition. So you are talking about the other 5% of the poorest Americans, right ?
Only 12% of people living in America live below the poverty line. Those are the ONLY ones that would not have paid AT LEAST the prebate amount in FairTax. At least half of those are illegal aliens and won't get the prebate. So we are talking about 5% of the people collecting a prebate as possibly exceeding the FairTax they paid. That's $25B. If they spend it on FairTaxable stuff, then the government gets back 23% of it. Which brings the net 'welfare' down to a MAXIMUM of $19B.
That's less than the fraud in the EITC program -- a program that would be eliminated along with the Income Tax.
Well put.
But don't hold your breath for a rational reply.
I'm not speaking for myself, but it's obvious you've never tried to raise 2 kids on $15K a year, if so you'd be a lot more sympathetic to the working poor!
So many personal choices involved in that simple sentence...
So, you think you can get 2/3 of the House and Senate on board with an amendment to repeal the 16th Amendment? Otherwise, getting rid of the income tax is only temporary until Demoncrats (with the help of RINOs) get back in power. Then they will re-establish the income tax (only on the "rich" at first) and we will be taxed on both income and consumption - making us worse off than we are now.
The whole thing sounds good - but so do most plans until you get to reality. Call me when there is some reality.
Do you have sources for any of the perrcentages you are throwing around? And do you honestly think that the prebate wouldn't become one of the social engineering tools of this tax code?
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