Carter introduces Fair Tax Act

This is part of the problem. This concept that only income matters. Some people out there are rich, but are now getting no income. They already have their money, but no longer pay taxes on them, because they are living off what they have. In the end we want to encourage investment. Investment means that businesses grow and in turn generate more money.

Not all states have income tax and not all states have sales tax. Alaska, Delaware, Montana, Oregon and New Hampshire have no sales taxes. Now here's the deal. I live within minutes of the Delaware state line. And yet, I rarely go across the line to save myself the sales tax. And that is the case with most people.

8 states have no income tax: Wyoming, Washington, Texas, Tennessee, South Dakota, Nevada, Florida, and Alaska. Additionally New Hampshire only charges income tax on interest and dividends, but not wages/salaries.

And yet there are 7, effectively 8, states out there with no income tax and only a sales tax that are making right now. So we already have the examples we need to show that this system works.

In this day and age, why would we want to go backwards to paper checks, when we are already doing food stamps and other programs with cards and EFT? Logistically speaking, it would be a lot easier to set this all up electronically. Hell most of our income taxes are filed electronically.

We have seven states that would just need a slight modification. Start with them doing the prebates and removing all sales tax exemptions.

Oh and two other aspects that might make this more appealing. First, the Fair Tax would also be getting income from the tourist trade, and since it's all on the retail level with no exemptions, churches and other religious organizations would also being paying the taxes.

 

Hence the prebate

Hence my point on reducing the load from 291 million entities to less than 32 million entities to track for compliance.

Pretty much the problem with most proposals.

The Fair Tax on the surface alone is supposed to do that, especially with the removal of exemptions so that consumption of anything beyond basic necessities levels are taxed. The calculations did not account for any potential rise in manufacturing, and thus jobs, that could arise by the US being the lowest business tax burden in the world. The whole thing was based on the concept of get the $X income from sale tax instead of income, estate and the other taxes to be eliminated.

 

I got all that from your posts.
Is all that in the current proposal? Prebates, etc?

It will require buy in from both parties to push it through.

 

And in the proposed plan, if it includes the 'prebate', then your statement is no longer applicable.

 

If that happens.
But as of now, they contribute.
I doubt they will get 100% of purchases prebated.

 

They will receive the money to cover the taxes on the purchases for necessities. There is nothing in the bill to hold them accountable for what the money is used on, anymore so than most other programs. Further, If they make, and buy with, anything above that poverty line tax level, then of course they will be taxed just like everyone else.

 

That's in the current proposal?

And a prebate? That means the get money before they spend it? How is it known how much money will be spent by those poor income people?

EDIT: I assume they just get a lump sum of cash. And as you said, what they spend it on is up to them. So if they spend above that amount of cash, then they are using their own money to pay any tax.

 

Looks like it from what I can tell. It states that the refund (the language of the bill, not the way it's presented) shall be the product of the tax rate and the poverty level.

Yes. The idea is that people receive the prebate prior to spending money so that the sales tax for necessities is already covered.

There will be no way to know what is actually spent. But what we can, and already do, calculate, is what is the cost of living. That is to say that the poverty level we calculate already is the amount of money necessary to cover the basic necessities.

Let me make an example. Numbers are for the example's sake only and for ease of explaining and understanding. They are not intended to reflect any kind of reality of numbers needed.

Let's say that the poverty level is $1000 a month. Which means in spending that $1000 the 30% sales tax will add an additional $300 to their purchases. At the beginning of each month, each family gets $300 up front. This is supposed to be added to the $1000 they will be spending a month on necessities. By doing so, they are in effect not paying any taxes on necessities. Anything that they spend above and beyond the $1000 will be taxed just like the original $1000, but there will be no extra coming in the form of the prebate. So yes, their own earned money will have to pay that sales tax beyond the original $1000 worth of tax.

Now again, The example isn't intended to show the variations in family and local poverty levels and all that. It's to show the mechanism of what the prebate is supposed to do.

 

Where did I say the wealthy should provide the majority of (financial/tax) support to society. My entire point was that they should pay at least as much tax on their incomes as a % of their total income as the working class tax payers do. Not more, not less.

I also might add that's there's nothing 'magical' about investment income and it is the income derived from those investments where talking about not the investments themselves. Arguing otherwise is exactly the type of 'special pleadings' Adam Smith railed against. Why is the income earned by a plumber from providing his services to the economy somehow less important to society than the income a financier earns from providing his services or that he receives from his own personal investments? The point is that income is income and all sources of income should be treated the same. If that means lowering the rate of income tax while broadening the base at the base fine.

 

So, when an 'investment' is 100% at risk, I will assume that it would be excluded from full taxation? Losses will be deducted from taxable income in full?

Also, when is it considered 'income', when it is on paper, or when the investment is liquidated? It matters.

 

Part of the point in lower taxes for investment income was to encourage those of lower income to put more into savings and other investment streams, such as CD's and others. If you are getting taxed at the same rate of your pay, then what point in savings when a large chunk will be taken out?

 

Good point.

 

Since when has lower income people have money for saving and investments?

 

I know a number of them that put aside as little as $5 a week out of their paycheck to a savings account, and use it for Christmas or a big ticket item. It's not much, but with direct deposit being the thing these days, what you don't see, you don't miss.

On the investments, not so much, depending on one's definition of lower income.

 

As of November, 63% of Americans were living paycheck to paycheck. So, it gets interesting who has money for savings with inflation running wild.

 

Some sources say 59%, but the definition of 'paycheck to paycheck' varies also.

Some people cannot separate need from want. Not saying everyone, but way too many.

 

You suggesting that the government should manage peoples spending habits as well?

 

True but all of us homeowners already pay a tax on wealth, its called a property tax.

 

Hi, Woolley.

Absolutely true. Renters also 'pay' the tax through a pass-along in the cost of rent. Taxes on wealth are nothing new. They are not used as an overall federal tax, however.

Regards, stay safe 'n well.

 

Oh hell no, not even close.

Why should other people take responsibility for other people's spending habits?

 

There's 'risk' attached to all sources of income, investments are no different in that regard the only thing that varies is the level of risk which is supposed to be taken into account via the risk/return calculation. And my comment related to the income derived from investments not the investment itself i.e once realized. Losses offset gains in any one financial year - with the proviso that the losses are real and not artificial. And in any event my original point was that caps should apply to all deductions, ALL deductions from all sources of income. Hypothetically? If someone relying totally from investment income takes a bath and makes nothing at all in any one particular year there is no income to tax.

In any case the hypothetical impact of a single income tax rate with a cap on deductions would need to be modeled using real world historical data so as to determine what, if any effect the cap would have on the long term viability of all forms of investment. In any event the real benefit of a cap is that it nullifies the use of complex tax evasion schemes on the collection of income. Oh you can still have them of course but once you hit the cap it doesn't matter how many offshore trusts or corporate 'service delivery' arms you have in your tax structure.

 

My starting point is that low payed workers, as a rule consume the vast majority of their income on basic needs while the rich have the capacity to invest a far larger % of their income and over time make far more from those investments than the poor ever will. It follows that the rich are far and away the main beneficiaries lower tax rates and other concessions applied to investment income. If your talking about 401Ks? There's no particular reason that arrangement need would be impacted by my suggestion.

As I keep empathizing my point is not to 'soak the rich'. It's simply to have the wealthy pay as much in tax (as a % of their total income) as the poor do. Or do you perhaps believe that this already happens in America? Because the stats I've seen indicate this is far from being the case.

 

Not all of the lower incomes are so far gone that they can't save anything. Not to mention that those with job might well have IRA's and other investment opportunities where the job matches contributions.

 

No, but that doesn't mean that the government can't put into place incentives to do so.

 

No, But the question is whether income is the actual metric that we need to be going by in determining our source of taxes for the government. Mind you the concept behind Fair Tax does not account for improper spending by the government. That's a separate issue that exists regardless of source of taxes. The whole income issue gets even worse when people start bringing in the concept of imputed income. I remember a story at least a decade back or more, where one state wanted to add imputed income/wealth/something, based upon the view certain properties had, that supposedly added value to those property beyond what they were originally taxed at. But for income strictly, imputed income tax could well mean that the value of benefits from work are taxed, such as health care or stock options (yes even floor level employees can get this in some companies/businesses), or any number of things.