[TimG]

Hannie, on Jan 24 2008, 08:00 PM, said:

Good analysis Adam, except for the last paragraph and its conclusion, which I think are wrong. If you compare two people who spend most of their money, the shift to fairtax always benefits the higher salary independently of where they live and shop.

But, $100K in Lincoln is a higher salary than $100K in LA.

[awm]

My point is this. Suppose you take two people who make the same income. A lives in Los Angeles, B lives in Lincoln. Both of them rent moderately large one-bedroom apartments. Both of them eat out with about the same frequency, go to movies with the same frequency, etc. So their budgets might look like:

A makes $50K/year.
A spends $24K/year on rent.
A spends $5K/year on food.
A spends $10K/year on miscellaneous expenses.
A loses $10K/year to income tax.

A ends up saving $1K.

B makes $50K/year.
B spends $4K/year on rent.
B spends $3K/year on food.
B spends $6K/year on miscellaneous expenses.
B loses $10K/year to income tax.

B ends up saving $24K.

Looking at these numbers, it seems that after income tax A will be saving very little, whereas B has a huge amount of income left over.

If we switch to "fair tax" at say a 40% rate:

A pays 15.6K in fair tax instead of 10K income tax, $4600 in the hole.

B pays 5.2K in fair tax instead of 10K income tax, leaving him with 28.8K/year savings.

The point is that despite making the same income, it's reasonable to argue that A is barely making ends meet whereas B is saving huge sums. This is despite the fact that neither of them is spending recklessly and their expenses are similar (same size residence, etc). Why should the tax code further penalize A while giving B even more savings?

It's true that fair tax tends to help the "rich" -- my point is that even holding income fixed, fair tax tends to hurt people who have more expenses (even if these expenses are due to higher "cost of living" in their region). It's a similar problem to defining what "rich" means -- I remember four years ago the democrats wanted to raise taxes on the "rich" who they defined as single people making $100K/year or couples making $200K/year. But the fact is that for someone trying to live in (say) Manhattan, $100K/year is not much, whereas someone on the same salary living in the rural south (say) has a lot of disposable income.

[han]

Still, assuming that both spend all of their money, the relative buying power doesn't change.

But if you compare two people with equal buying power now (say 120k in LA vs 80k in Lincoln) then you'll see that the 120k person will have a higher buying power after the switch to fairtax.

[Echognome]

pclayton, on Jan 23 2008, 10:23 AM, said:

Canning the IRS is a good thing, but there's of lots of compliance issues with a Fair Tax, as long as paper money is still in circulation. You'd also see barter economies spring up, which will avoid a lot of taxes.

Shoot the messenger much lately?

Well, maybe the enforcer. Who do you think decides on taxes? Who do you think passes tax codes? Who do you think comes up with the interpretations and regulations?

As per the topic at hand, I think it's way too regressive. The tax code is complicated, I will grant everyone that. But the flip side is that if it were more simplified it would be more exploited.

Of course, there's always room for improvement.

[helene_t]

Am I right in assuming that the attractive thing about taxing consumption rather income is that it encourages people to work hard without spending the money?

But ultimately, one earns money in order to spend them at some point. So the question is how one wants to tax people who spent their income now, compared to those who spent their current income plus interests in the future. This is a question of interest tax rates versus salary tax rates, but also a question of whether my 2007-income spent in 2008 should be taxed according to 2007 rates or 2008 rates assuming the rates might change.

Another issue is one of implementation, whether a VAT scheme would be simpler to implement than an income tax scheme.

Finally, VAT schemes tend to target only selected commodities. Some countries have reduced VAT rates for food, books, training, health insurance, financial services. I don't think many countries charge VAT of the rental value of privately owned houses. So current VAT schemes favor people who spent much of their income on said commodities.

If I were to form an opinion on more VAT and less income tax, I would need to keep all those aspects separate. If some of the effects of such a scheme are undesired, but one still wants more VAT for some reason, one could offset the undesired effects, for example by combing VAT with a tax on capital income, or by extending the scope of the VAT.

[TimG]

awm, on Jan 25 2008, 12:04 AM, said:

The point is that despite making the same income, it's reasonable to argue that A is barely making ends meet whereas B is saving huge sums. This is despite the fact that neither of them is spending recklessly and their expenses are similar (same size residence, etc). Why should the tax code further penalize A while giving B even more savings?

I would argue that they are not both making the same income. Sure, they are both making $X, but the true measure is what they can buy with those $X.

I might also suggest that the guy who is making $50k per year and spending $24K per year in rent may be spending his money a bit on the reckless side. But, perhaps I am out of touch with the realities of responsible spending.

[kenberg]

A simple factual question: My son-in-law mentioned that he thinks most of the European countries do not have an income tax. Of course we all know about the VAT, but I thought there was an income tax as well. Can some of you straighten me out on this?

[Codo]

kenberg, on Jan 25 2008, 11:35 PM, said:

A simple factual question: My son-in-law mentioned that he thinks most of the European countries do not have an income tax. Of course we all know about the VAT, but I thought there was an income tax as well. Can some of you straighten me out on this?

I am sure that Germany has income taxes- up to 45 % if memory serves well.

I nevere thought much about it, I thought any country has it.

But it surely exists in Austria, Poland and Switzerland.

[cherdano]

kenberg, on Jan 25 2008, 08:35 AM, said:

A simple factual question: My son-in-law mentioned that he thinks most of the European countries do not have an income tax. Of course we all know about the VAT, but I thought there was an income tax as well. Can some of you straighten me out on this?

Your son-in-law is wrong.

[jtfanclub]

Some would argue that "Fair" is based on total wealth, not income. But even then, consumption isn't "Fair" by any stretch of the imagination.

I happen to really like a dual grade "Flat Tax", for example...

20% of income earned over $20,000
-50% of amount earned less than $10,000.

Person A earns $40,000. She pays 20K*20%=$4000 in taxes.
Person B earns $15,000. He pays nothing in taxes.
Person C earns $4,000. He gets a 6K*50%=$3,000 tax rebate.
Person D earns nothing. She gets a $5,000 tax rebate.

The great part is, I don't have to know that A is married to B, and that C is 12 and D is a baby and they're all one family unit. I don't have to know what church they donated to or look at receipts. It's a quick and easy calculation and I can submit all of them on one sheet of paper. It's fairly easy to catch cheaters (since the only ways to cheat is on under-the-counter income and making up people who don't exist), it's "fair" and it's revenue neutral.

But more importantly, it's almost impossible to make a mistake (what are you going to do, miscount your kids?) and it keeps the government out of our private lives. To me, those are the crucial parts.

[han]

mike777, on Jan 24 2008, 05:11 PM, said:

helene_t, on Jan 24 2008, 09:07 AM, said:

The name "fairtax" would, for me, be enough reason not to consider the scheme. A politician who thinks his voters are stupid enough to fall for such a cheap marketing stunt will not get my vote.

The fairtax is called VAT in Europe. I think you gals fell for it a long time ago.

Kenberg said:

A simple factual question: My son-in-law mentioned that he thinks most of the European countries do not have an income tax. Of course we all know about the VAT, but I thought there was an income tax as well. Can some of you straighten me out on this?

Is Mike777 your son-in-law?

[TimG]

jtfanclub, on Jan 25 2008, 11:43 AM, said:

Person A earns $40,000. She pays 20K*20%=$4000 in taxes.
Person B earns $15,000. He pays nothing in taxes.
Person C earns $4,000. He gets a 6K*50%=$3,000 tax rebate.
Person D earns nothing. She gets a $5,000 tax rebate.

I see two problems right off:

1) There is incentive to shift income from one spouse to the other: your A and B pay $4000 in taxes; couple C & D who make $35k and $20k pay $3000 in taxes.

2) You're only making 50 cents on the dollar at the low end of the scale.

Oh, and babies are worth $5k/year.

[kenberg]

Hannie, on Jan 25 2008, 12:26 PM, said:

Kenberg said:

A simple factual question: My son-in-law mentioned that he thinks most of the European countries do not have an income tax. Of course we all know about the VAT, but I thought there was an income tax as well. Can some of you straighten me out on this?

Is Mike777 your son-in-law?

On the internet, who knows??? But unless he is posting under an alias, no.

An intriguing thought.

[helene_t]

jtfanclub, on Jan 25 2008, 06:43 PM, said:

Some would argue that "Fair" is based on total wealth, not income.

I had a conversation with a first-year law student from Copenhagen:

Law student: we just started learning about philosophy. Ethics and stuff.
Helene: Interesting. Could you tell me: do ethicists have anything to say about the concept of "fairness"?
Law student: Yes. They consider it an empty concept.

[pclayton]

Echognome, on Jan 24 2008, 10:23 PM, said:

Well, maybe the enforcer. Who do you think decides on taxes? Who do you think passes tax codes? Who do you think comes up with the interpretations and regulations?

When the 'interpretations' and 'rulings' of this labyrinth become as important as the codes themselves then I would agree with you.

The IRS is no different than the EPA, DFW and rogue agencies that feel the need to set policy.

[kenberg]

In discussing with friends the European taxes, VAT and Income, it was mentioned that some countries, Sweden and Germany were mentioned, have a religious tax. I'm rarely struck speechless but this qualifies. Is it true?

I apologize for being the uniformed American, but I was totally unaware of this and I want to check back for verification.

[helene_t]

It means that churches use the revenue service for collecting membership fees. It's a purely administrative thing. It's not important.

[Winstonm]

Slightly off topic, but a Louisianna jury acquited an attorney named Tom Cryer of criminal charges.

Unlike the snakeoil salesman that raled againt IRS and ended in prison, this attorney took a reasoned approach.

World Net Daily reported:

Quote

Although the legal citations in the case tend to run the length of paragraphs, Cryer told WND the underlying issue is not that complicated. Essentially, he argued that income is not necessarily any money that comes to a person, but rather categories such as profit and interest.

He said the free exchange of labor for compensation has been upheld as a right by the Supreme Court, but that doesn't necessarily make the compensation income

.

As he pointed out, WalMart may sell billions of dollars worth of goods but are not taxed on total sales - they back out the costs and are only taxed on profits; alternately, wages are taxed as if they were 100% profits.

An interesting concept.

[helene_t]

I think it's silly to take such philosophical issues to court. The law is quite clear.

[ArtK78]

Winstonm, on Jan 26 2008, 11:31 AM, said:

Slightly off topic, but a Louisianna jury acquited an attorney named Tom Cryer of criminal charges of tax evasion.

Unlike the snakeoil salesman that raled againt IRS and ended in prison, this attorney took a reasoned approach.

World Net Daily reported:

Quote

Although the legal citations in the case tend to run the length of paragraphs, Cryer told WND the underlying issue is not that complicated. Essentially, he argued that income is not necessarily any money that comes to a person, but rather categories such as profit and interest.

He said the free exchange of labor for compensation has been upheld as a right by the Supreme Court, but that doesn't necessarily make the compensation income

.

As he pointed out, WalMart may sell billions of dollars worth of goods but are not taxed on total sales - they back out the costs and are only taxed on profits; alternately, wages are taxed as if they were 100% profits.

An interesting concept.

No, that is not true.

The government dropped the charges of tax evasion before trial. He was acquitted of two counts of willfully failing to file income tax returns. He argued to the jury that he did not believe that he had to file any tax returns, so he did not willfully fail to file. The jury bought it.

At trial, Cryer did not argue that the income tax was not valid or that it did not apply to him. So all of the crap being sent out over the internet that the Income Tax is not lawful is just that - crap.

This is an isolated case. And a silly jury.