Fair Tax vs. Flat Tax: Why Income Taxes destroys US jobs

[OohPooPahDoo]

It's true some owners/managers act as you describe, but the consequences are not always to the benefit of anyone including the business. All businesses have a life cycle, successful ones train and keep their employees and pay and treat them fairly.

Econ 101, my friend. I realize liberal lawyers told you they know better and you should listen to them. Here's the 411, they are lying to you.

"Econ 101" is right wing code for "I don't know what I'm talking about so I'm going to try and make you look stupid"

 

[OohPooPahDoo]

Agreed that the system, the way it is, is an embarrassment. I'd love to see a Tax code that was 100 pages or less.

Such a tax code would be full of so many loopholes anyone who could afford a tax attorney would pay zero and the only people to ever pay any income taxes would be the poor. That's just the way you want it though, right?

 

[OohPooPahDoo]

Flat Tax
A foreign company = $90
A US company = $90 + $10 = $100

Fair Tax
A foreign company - $90 + $5 = $95
A US company = $90 + $5 = $95.

Hence my point the flat tax disadvantages US companies, the fair tax doesn't.

Your math is off

The FairTax rate after necessities is 23% and equal to the lowest current income tax bracket (15%) combined with employee payroll taxes (7.65%), both of which will be eliminated.

What is the FairTax | What is a Consumption Tax | Tax Reform Solutions - Americans For Fair Taxation

$90 X 0.23 = $20.70, not $5.


I'd sure like to see a single U.S. retailer that thinks a 23% sales tax + local sales taxes (this would mean 32% total where I live) would be beneficial to their sales.

 

[OohPooPahDoo]

This topic has come up in discussions, so I decided to start a threat to explain it. It's sad that government schools teach government, they don't teach capitalism. Capitalism is just a term for economic freedom.

Let’s say we have two employees, one is worth Three times as much as the other Joe is worth $10 an hour, Steve is worth $30. Worth is determined by the marketplace. If an employer pays them less than their value, they are unhappy, their work quality drops and they eventually leave for an employer who recognizes their value. Pay them more and they are happy, but their employer is unhappy because they are not getting their money’s worth. They push them more, raise the bar and if they can’t cut it they eventually replace them.

So now Obama comes along and says he isn’t going to tax Joe, he doesn’t make enough. But he is going to tax Steve 25% of his earnings. Steve is only taking home $22.50 an hour, but he’s worth three times as much as Joe who is taking home $10. So what happens?

Option 1) Nothing. Steve just gets to keep $22.50 an hour after taxes. Now his motivation drops, he’s unhappy. That causes him to work less hard. Steve is still better than Joe, but he’s not as productive as he was. He’s getting $22.50 an hour, that’s the value he works towards providing. He stops working late when required, takes on fewer hard tasks, that sort of thing.

Option 2) Steve gets a raise to $40 an hour. He pays 25% in taxes, and his take home is back to three times Joe. Steve is happy, his employer is paying the taxes, they raise the price of their products and their customers actually pay the tax.

Now, keep in mind, it’s not just Joe and Steve, it’s all the Joes and Steves who make up the marketplace. All the Steves are unhappy unless they are getting their fair compensation. Since government raised taxes across the board, companies have to pay it, the taxes are driving all the Steves across the marketplace to not be happy unless they get their $40 an hour so their take home is $30.

For the economists/finance people out there, I realize there are other implications, like it changes the NPV of projects and the increased prices affect sales, that sort of thing, but I’m trying to stay with this point to keep the discussion simpler.

So now to my points on comparing a flat income tax versus the Fair Tax.

1) Income tax harms US companies competing with foreign companies in the US. On average, US companies have more employees in the US than foreign. So, by charging taxes as a percent of payroll, you’re charging US companies more to sell products in our own markets.

2) Income tax drives companies to automate and reduce jobs. If you automate, you not only get rid of the employee’s salaries, but also their taxes. If you charge a percent of the sale, you are taxing it either way, including if they automated.

3) Income tax drives manufacturing overseas. Again, you build it here, you pay your employees taxes. You build it overseas, you don’t.

Agreed that the system, the way it is, is an embarrassment. I'd love to see a Tax code that was 100 pages or less. Income Tax V.S. Sales Tax? I'd go with taxing Income. Taxing Product or Services only promotes the Black Market. It does not need the encouragement. The Code needs to be simplified and made fully transparent.

I think taxing products is way better it promotes savings Smart poor folks can get ahead.

How on Earth does it "promote saving" among the poor to effectively reduce their total incomes? That's that most retarded ******* thing I've heard all day. "Hey, we're going to take some of your money, to encourage you to save more!" - Dumb ass.


Funny, isn't it? Right wing morons like you evidently think taxing the rich, even one more penny than they pay now, will cripple the rich and make them unwilling and/or unable to produce - but taxing the poor will make the poor more able to get ahead. Do you seriously believe that shit? I find that hard to believe!

 

[auditor0007]

Flat rate of 7% for income tax. (State and Federal income tax would be no more than 14% of your paycheck. Medicare and Social security should be no more than 5% total)

Let's see; if we only collect 5% of payroll combined for Medicare and Social Security, where in the **** is the money going to come from to pay out benefits to all the retirees?

 

[auditor0007]

Agreed that the system, the way it is, is an embarrassment. I'd love to see a Tax code that was 100 pages or less. Income Tax V.S. Sales Tax? I'd go with taxing Income. Taxing Product or Services only promotes the Black Market. It does not need the encouragement. The Code needs to be simplified and made fully transparent.

I think taxing products is way better it promotes savings Smart poor folks can get ahead.

How on Earth does it "promote saving" among the poor to effectively reduce their total incomes? That's that most retarded ******* thing I've heard all day. "Hey, we're going to take some of your money, to encourage you to save more!" - Dumb ass.


Funny, isn't it? Right wing morons like you evidently think taxing the rich, even one more penny than they pay now, will cripple the rich and make them unwilling and/or unable to produce - but taxing the poor will make the poor more able to get ahead. Do you seriously believe that shit? I find that hard to believe!

Cons are convinced that if you tax a person who makes decent or great money, then they will quit working because they will stop liking money.

 

[OohPooPahDoo]

Flat rate of 7% for income tax. (State and Federal income tax would be no more than 14% of your paycheck. Medicare and Social security should be no more than 5% total)

Let's see; if we only collect 5% of payroll combined for Medicare and Social Security, where in the **** is the money going to come from to pay out benefits to all the retirees?

It will just magically appear out of a magical money tree that the free market will create using Jesus and the music of Rocker Ted Nugent.

 

[edthecynic]

The biggest problem with the unFair tax is it is the most regressive of all the tax schemes devised by the rich. Not only do the rich spend very little of their income thus paying a tax on very little of their income. The poor and Middle Class on the other hand not only spend most if not all their money, very often they are spending money they borrowed and therefore paying taxes on money they don't have.

 

[OohPooPahDoo]

I think taxing products is way better it promotes savings Smart poor folks can get ahead.

How on Earth does it "promote saving" among the poor to effectively reduce their total incomes? That's that most retarded ******* thing I've heard all day. "Hey, we're going to take some of your money, to encourage you to save more!" - Dumb ass.


Funny, isn't it? Right wing morons like you evidently think taxing the rich, even one more penny than they pay now, will cripple the rich and make them unwilling and/or unable to produce - but taxing the poor will make the poor more able to get ahead. Do you seriously believe that shit? I find that hard to believe!

Cons are convinced that if you tax a person who makes decent or great money, then they will quit working because they will stop liking money.

Yeah and where you and I live - the real world - if we bring home less money, that doesn't make us want to bring home even less than that.

 

[OohPooPahDoo]

The biggest problem with the unFair tax is it is the most regressive of all the tax schemes devised by the rich. Not only do the rich spend very little of their income thus paying a tax on very little of their income. The poor and Middle Class on the other hand not only spend most if not all their money, very often they are spending money they borrowed and therefore paying taxes on money they don't have.

Let's pass a "fair tax" but impose the tax on the sale of ANYTHING - including shares of stocks and corporate bonds. We'll see how the rich like it, then.

 

[FA_Q2]

Option 1) Nothing. Steve just gets to keep $22.50 an hour after taxes. Now his motivation drops, he’s unhappy. That causes him to work less hard. Steve is still better than Joe, but he’s not as productive as he was. He’s getting $22.50 an hour, that’s the value he works towards providing. He stops working late when required, takes on fewer hard tasks, that sort of thing.

Option 2) Steve gets a raise to $40 an hour. He pays 25% in taxes, and his take home is back to three times Joe. Steve is happy, his employer is paying the taxes, they raise the price of their products and their customers actually pay the tax.

Now, keep in mind, it’s not just Joe and Steve, it’s all the Joes and Steves who make up the marketplace. All the Steves are unhappy unless they are getting their fair compensation. Since government raised taxes across the board, companies have to pay it, the taxes are driving all the Steves across the marketplace to not be happy unless they get their $40 an hour so their take home is $30.

That is mischaracterized though in the fact that the fair tax does the EXACT same thing. Essentially, an employee does not measure compensation by the number of worthless pieces of paper that the employer pays him. No one really cares about money; they care about what that money can get them. In that respect, taxing the employer’s wage or the product is utterly irrelevant, the employee still has the same purchasing power.

A fair tax creates one of 2 things (or a mix of them) – either wages decrease commensurate to the amount of taxes that were being paid so that the end product price does not change (basically, Steve only gets 22.50 anyway) OR the price of the product increases and Steve ends up with more dollars but still has the same purchasing power.

The only real valid criticism you have is with offshoring/foreign competition but even then, that is not a real problem with taxes but rather with free trade. Taxes make up a minute portion of the expenses that drive manufacturing overseas. The real cost is labor in general. The answer there has nothing to do with taxes but rather free trade agreements which are asinine for America to be involved in when we have such massive demands on our local companies but require nothing past slave labor from the foreign ones.

 

[NYcarbineer]

So now Obama comes along and says he isn’t going to tax Joe, he doesn’t make enough. But he is going to tax Steve 25% of his earnings. Steve is only taking home $22.50 an hour, but he’s worth three times as much as Joe who is taking home $10. So what happens?

Steve is making 62,400. When did Obama 'decide' to take 25% of that in taxes?

That's a 15,600 federal tax bill.

 

[kaz]

I think taxing products is way better it promotes savings Smart poor folks can get ahead.

I understand what you are saying, but what I am saying is that if you go a level deeper, then in the end the people who buy products and services from companies are paying the taxes.

Employees don't work to give money to Obama. So they have to be paid enough to pay their taxes and then get their value.

The advantage of the Fair Tax is that it removes the disadvantages all the other taxes provide by treating all revenue the same. That removes the overhead and disincentives other types of taxes create.

 

[kaz]

Must be nice to be in a position where you can turn down money because you don't like the taxes on it. Most normal people don't have that luxury, and the world isn't ever going to be short of normal people.

I'm not pursuing you down your rat holes. You don't understand what I said, and you don't know what you're talking about. This comment is irrelevant.

 

[kaz]

It's true some owners/managers act as you describe, but the consequences are not always to the benefit of anyone including the business. All businesses have a life cycle, successful ones train and keep their employees and pay and treat them fairly.

Econ 101, my friend. I realize liberal lawyers told you they know better and you should listen to them. Here's the 411, they are lying to you.

"Econ 101" is right wing code for "I don't know what I'm talking about so I'm going to try and make you look stupid"

I'm not the one making you look stupid.

 

[kaz]

The biggest problem with the unFair tax is it is the most regressive of all the tax schemes devised by the rich. Not only do the rich spend very little of their income thus paying a tax on very little of their income. The poor and Middle Class on the other hand not only spend most if not all their money, very often they are spending money they borrowed and therefore paying taxes on money they don't have.

That would be true if all taxes (other than the death tax) were not built into the price of the products we buy. But they are. You're wrong, and since you just don't understand taxes, it's irrelevant to discuss until you do.

 

[kaz]

So now Obama comes along and says he isn’t going to tax Joe, he doesn’t make enough. But he is going to tax Steve 25% of his earnings. Steve is only taking home $22.50 an hour, but he’s worth three times as much as Joe who is taking home $10. So what happens?

Steve is making 62,400. When did Obama 'decide' to take 25% of that in taxes?

That's a 15,600 federal tax bill.

It's an illustration of the math, not a discussion of tax rates.

 

[kaz]

Option 1) Nothing. Steve just gets to keep $22.50 an hour after taxes. Now his motivation drops, he’s unhappy. That causes him to work less hard. Steve is still better than Joe, but he’s not as productive as he was. He’s getting $22.50 an hour, that’s the value he works towards providing. He stops working late when required, takes on fewer hard tasks, that sort of thing.

Option 2) Steve gets a raise to $40 an hour. He pays 25% in taxes, and his take home is back to three times Joe. Steve is happy, his employer is paying the taxes, they raise the price of their products and their customers actually pay the tax.

Now, keep in mind, it’s not just Joe and Steve, it’s all the Joes and Steves who make up the marketplace. All the Steves are unhappy unless they are getting their fair compensation. Since government raised taxes across the board, companies have to pay it, the taxes are driving all the Steves across the marketplace to not be happy unless they get their $40 an hour so their take home is $30.

That is mischaracterized though in the fact that the fair tax does the EXACT same thing. Essentially, an employee does not measure compensation by the number of worthless pieces of paper that the employer pays him. No one really cares about money; they care about what that money can get them. In that respect, taxing the employer’s wage or the product is utterly irrelevant, the employee still has the same purchasing power.

A fair tax creates one of 2 things (or a mix of them) – either wages decrease commensurate to the amount of taxer that were being paid so that the end product price does not change (basically, Steve only gets 22.50 anyway) OR the price of the product increases and Steve ends up with more dollars but still has the same purchasing power.

I mischaracterized nothing, you just repeated my point back to me. Steve is indifferent regardless of the system. That isn't why we're doing it. We're doing it for the other reasons I stated and pointing out that Steve is indifferent doesn't contradict that. You didn't contradict anything I said actually and you didn't address the scenarios.

And we didn't even start talking about the massive overheads to collect all the various taxes. Lawyers, accountants, disincentives to efficiencies, management time. It's endless. And it goes away to be replaced by a simple tax.

Also, all the people who work cash based and don't pay taxes now become taxpayers because it's collected when they spend, not earn.

As for the pay cut, Steve will no longer pay payroll taxes or income tax, so he's going to take home the same money. If his net pay was $1,000 twice a month before the fair tax, it is after the fair tax as well. So is he really going to have an issue with that? There will be a market adjustment time, but markets adjust quickly.

The only real valid criticism you have is with offshoring/foreign competition but even then, that is not a real problem with taxes but rather with free trade. Taxes make up a minute portion of the expenses that drive manufacturing overseas. The real cost is labor in general. The answer there has nothing to do with taxes but rather free trade agreements which are asinine for America to be involved in when we have such massive demands on our local companies but require nothing past slave labor from the foreign ones.

You aren't an employer. As I said, we're not just talking income tax, we're talking social security, medicare, unemployment and we're talking about the employer and employee portions. And you multiply that across an entire plant of people, and you say it's not a big deal? That's preposterous.

 

[kaz]

What is hysterical is you dont even know what you are saying. First you talk about corporations paying tax, then deny you said that.

I said corporations pay it, then they charge their customers for it. It's not that hard. Well, for you apparently it is.

So, employees pay income tax, their employers pay their employees their market value, which includes the amount they need to pay in taxes, and then they charge their customers.

You don't get that?

First you talk about people's "worth" then you deny you said that.

No idea what you're talking about. People are worth what the market says they are worth, which is what I always said.

Listen, go get yourself some kind of education that doesnt come from reading narcolibertarian web sites and we can talk intelligently.

Since you ask, Michigan MBA, high distinction (top 10% of class), Beta Gamma Sigma honor society (general business), FMA Honor society (finance), career spent in GE management and management consulting in NY & DC working in the financial services industry. You'd know all my clients names, but I'm under non disclosure. Now I'm an entrepreneur.

You on the other hand are a socon who wants ubiquitous government power, you just want to tweak what the liberals want. You use the same arguments and you have the same lack of comprehension of discussions and you can't put two coherent words together to analyze points or defend yours.

 

[The Rabbi]

Option 1) Nothing. Steve just gets to keep $22.50 an hour after taxes. Now his motivation drops, he’s unhappy. That causes him to work less hard. Steve is still better than Joe, but he’s not as productive as he was. He’s getting $22.50 an hour, that’s the value he works towards providing. He stops working late when required, takes on fewer hard tasks, that sort of thing.

Option 2) Steve gets a raise to $40 an hour. He pays 25% in taxes, and his take home is back to three times Joe. Steve is happy, his employer is paying the taxes, they raise the price of their products and their customers actually pay the tax.

Now, keep in mind, it’s not just Joe and Steve, it’s all the Joes and Steves who make up the marketplace. All the Steves are unhappy unless they are getting their fair compensation. Since government raised taxes across the board, companies have to pay it, the taxes are driving all the Steves across the marketplace to not be happy unless they get their $40 an hour so their take home is $30.

That is mischaracterized though in the fact that the fair tax does the EXACT same thing. Essentially, an employee does not measure compensation by the number of worthless pieces of paper that the employer pays him. No one really cares about money; they care about what that money can get them. In that respect, taxing the employer’s wage or the product is utterly irrelevant, the employee still has the same purchasing power.

A fair tax creates one of 2 things (or a mix of them) – either wages decrease commensurate to the amount of taxer that were being paid so that the end product price does not change (basically, Steve only gets 22.50 anyway) OR the price of the product increases and Steve ends up with more dollars but still has the same purchasing power.

I mischaracterized nothing, you just repeated my point back to me. Steve is indifferent regardless of the system. That isn't why we're doing it. We're doing it for the other reasons I stated and pointing out that Steve is indifferent doesn't contradict that. You didn't contradict anything I said actually and you didn't address the scenarios.

And we didn't even start talking about the massive overheads to collect all the various taxes. Lawyers, accountants, disincentives to efficiencies, management time. It's endless. And it goes away to be replaced by a simple tax.

Also, all the people who work cash based and don't pay taxes now become taxpayers because it's collected when they spend, not earn.

As for the pay cut, Steve will no longer pay payroll taxes or income tax, so he's going to take home the same money. If his net pay was $1,000 twice a month before the fair tax, it is after the fair tax as well. So is he really going to have an issue with that? There will be a market adjustment time, but markets adjust quickly.

.

It would be nice if you actually understand what you were saying before posting to save everyone else a lot of time.
You disagree with FA and then lecture as to how he is correct. You introduce a scenario of two workers and then tell us it doesnt really matter.
The truth is that 1) The US is a net beneficiary of job outsourcing. 2) Outsourcing has made the economy more efficient. 3) Jobs are not outsourced based solely on tax rates. Together those three facts show that if you want a Fair Tax for purposes of keeping jobs here, you're going to be disappointed.

The virtues of the Fair Tax are simplicity and fairness--everyone buying the same product pays the same tax.
Unfortunately the Fair Tax will be anything but simple. What qualifies as a final product and what as an intermediate product? WIll dog food used for trained racing animals be taxed the same as dog food used for domestic pets? England ran into exactly this with the VAT. The result has been an enormous bureaucracy unanswerable to anyone making these decisions while companies spend ingenuity to game the system. Additionally people will not see the taxes coming out, leading to pols raising the Fair Tax, just as has happened in Europe under the VAT.
Flat Tax is much simpler: all income taxed at the same rate, no deductions. Everyone pays so everyone feels the effects of taxes.