[POLL] - Liberals, how much is a "fair share?" - Taxes

[thereisnospoon]

And in New Mexico we don't really have a sales tax but rather pay a gross receipts tax on almost all goods and services that we buy. The formula of what is taxed and what is not is complicated and often difficult to understand. Essentially distributorships with pass through products are not taxed on money received for those products but almost everything else is. But property taxes aren't the issue when it comes to a Fair tax or flat tax or whatever means of funding the Federal government is concerned.

Again we have already paid hefty federal taxes on the money we earned prior to retirement. And we saved what we could for our retirement and almost everything we have has been subjected to those hefty taxes already. So if we have to pay federal sales taxes now when we spend that money, most especially if it substantially raises the cost of the products we buy, we are being double taxed in a very cruel way. And if the Fair Tax is assessed as a value added tax all along the way, it will substantially raise the cost of goods and services that we buy.

This is something that I think really does have to be addressed in the process of choosing the most fair method of raising revenues for the Federal government.

In New Jersey 'necessities' are exempt from sales taxes.
These would be clothing, footwear( not athletic) food( unprepared) paper products for school purposes and some other items.
Shoppers from border communities in New York and Pennsylvania, shop in New Jersey.
Foe example, the mall parking lots in Bergen county are loaded with cars bearing NY license plates.

And as I previously posted, if we make our 'sales tax' significantly expensive, Canada or Mexico might look like a much more attractive place to shop for those in the border states. And there is the problem of how to handle internet sales when we buy from companies outside the USA.

I'm still not saying any of these are not a good idea, but a lot of these questions simply cannot be ignored. We either think it through before we act, or we could easily wind up with a far worse mess than what we already have.

"good intentions pave the way to Hell".

 

[Foxfyre]

In texas and florida, your home, your food products and production tools, production land etc. are pretty much the only things that are not applicable to sales tax. http://www.window.state.tx.us/taxinfo/taxpubs/tx96_280.pdf IOW they don't put a sales tax your right to life. They do put a sales tax on the extras. For land we have a smallish annual property tax. It seems to work to me and seems to be a fair system to all. I rarely find people complaining hard about the state taxes. Though I can say that some of the retired communities balk when there are property tax or sales tax increases in a city to pay for school bonds and such.

And in New Mexico we don't really have a sales tax but rather pay a gross receipts tax on almost all goods and services that we buy. The formula of what is taxed and what is not is complicated and often difficult to understand. Essentially distributorships with pass through products are not taxed on money received for those products but almost everything else is. But property taxes aren't the issue when it comes to a Fair tax or flat tax or whatever means of funding the Federal government is concerned.

Again we have already paid hefty federal taxes on the money we earned prior to retirement. And we saved what we could for our retirement and almost everything we have has been subjected to those hefty taxes already. So if we have to pay federal sales taxes now when we spend that money, most especially if it substantially raises the cost of the products we buy, we are being double taxed in a very cruel way. And if the Fair Tax is assessed as a value added tax all along the way, it will substantially raise the cost of goods and services that we buy.

This is something that I think really does have to be addressed in the process of choosing the most fair method of raising revenues for the Federal government.

Are you sure you paid income tax on your SS deposits? My SS deposits come off the top of my gross. The income taxes are calculated after SS tax not before. Or am I missing something? I understand that SS checks are taxed, with the exception of people for whom SS check is their only income?

What am I missing?

If you live in the United States your income tax is on the same gross that your Social Security taxes are on. Social security taxes are not deductible. So you do pay income taxes on your gross income and the social security taxes are figured on that same gross income. And though you have already been taxed on the income your social security contributions are taken from, once you start drawing social security, if your other adjusted gross income is above a certain amount, you are taxed on 80% of your social security benefits again when you receive them.

So that is why it is not acceptable to me to pay taxes via a national sales tax when I spend to support myself out of my retirement income and/or savings that have already been taxed once and sometimes twice.

 

[RKMBrown]

And in New Mexico we don't really have a sales tax but rather pay a gross receipts tax on almost all goods and services that we buy. The formula of what is taxed and what is not is complicated and often difficult to understand. Essentially distributorships with pass through products are not taxed on money received for those products but almost everything else is. But property taxes aren't the issue when it comes to a Fair tax or flat tax or whatever means of funding the Federal government is concerned.

Again we have already paid hefty federal taxes on the money we earned prior to retirement. And we saved what we could for our retirement and almost everything we have has been subjected to those hefty taxes already. So if we have to pay federal sales taxes now when we spend that money, most especially if it substantially raises the cost of the products we buy, we are being double taxed in a very cruel way. And if the Fair Tax is assessed as a value added tax all along the way, it will substantially raise the cost of goods and services that we buy.

This is something that I think really does have to be addressed in the process of choosing the most fair method of raising revenues for the Federal government.

Are you sure you paid income tax on your SS deposits? My SS deposits come off the top of my gross. The income taxes are calculated after SS tax not before. Or am I missing something? I understand that SS checks are taxed, with the exception of people for whom SS check is their only income?

What am I missing?

If you live in the United States your income tax is on the same gross that your Social Security taxes are on. Social security taxes are not deductible. So you do pay income taxes on your gross income and the social security taxes are figured on that same gross income. And though you have already been taxed on the income your social security contributions are taken from, once you start drawing social security, if your other adjusted gross income is above a certain amount, you are taxed on 80% of your social security benefits again when you receive them.

So that is why it is not acceptable to me to pay taxes via a national sales tax when I spend to support myself out of my retirement income and/or savings that have already been taxed once and sometimes twice.

Looks like 1/2 of SS taxes are deductible for the self-employed. I confused my 401k pre-tax deductions for the SS deduction. Even more reason SS is the worst deal in the history of mankind.

So back to the sales tax. How would a sales tax be worse than income tax on your SS checks?

 

[kaz]

The one other consequence of going to a Fair Tax system that I haven't been able to get anybody to answer--not Huckabee, not the FairTax.org folks, not anybody--is how to do the transition. Mr. Foxfyre and I are recently retired and are living almost exclusively on money we have already paid tax on when we earned it. How does the Fair Tax get around taxing it again when we now spend it?

I didn't take it as "arguing," just responding to your points. I'm more "passionate' in my arguments then you, but in the end we both are focused on the points made, which is what i like about debating you. I find it sad but can't solve that most of the debates on this and every political site are mostly bickering with idiotic liberals making the same inane points when there are far more interesting issues to delve into.

As for your question, you have to go back to that you're paying it now anyway. There is no transition to be done. All the company's business taxes you bought from, the income tax for all their employees, employer and employee payroll taxes, unemployment taxes, capital gains taxes, taxes on debt payments and all the rest except for the death taxes are built into the price of what you are buying already just like the price of the steel and bricks they are made out of.

The price of products will not go up to be revenue neutral. And they will actually drop as all the tax inefficiencies are eliminated.

Now wait a minute. Currently the gross receipts tax on a loaf of bread in Albuquerque is 7%. The bread retails for about $1.25 plus tax or $1.34 at check out.

Now then, if all things remain the same, a flat tax would impose a 13% tax on that loaf of bread.

$1.25 plus 9 cents local gross receipts tax plus 17 cents fair tax = $1.51 for that same loaf of bread. You're telling me that the base cost of that loaf of bread will be reduced by at least 17 cents because of tax savings in the production, wholesale, and retail process?

Otherwise I will be taxed again on the money I use that was already taxed--quite heavily I might add--when I earned it.

Remember the fair tax replaces all other taxes, it's not added onto them. So, for the loaf of bread and your numbers:

$1.25 + 9 (local sales tax) + 17 (revenue neutral Fair Tax) - 17 (eliminated taxes that were included in the price) = $1.34.

Remember the business is no longer paying business tax, payroll taxes, unemployment tax, ...

Now here's the first kicker, think of all the money businesses spend on taxes that don't generate government revenue. Tax accountants, tax lawyers, time to fill in forms, tax disincentives to make economically decisions, ... Those costs go away too.

Now here's the second kicker, everyone who does cash work now and aren't paying taxes are going to be taxpayers because they pay tax when they buy things.

Now here's the third kicker, everyone selling goods in our economy (domestic and foreign companies) are paying the same taxes, which helps US firms compete.

And here's the biggest kicker of all, instead of driving out US companies, we're a tax haven and companies will actually come here.

The cost of the loaf of bread will quickly go down to less than $1.25. There is no transition to be made. On 12/31 we have our current crocked system, on 1/1 we go to the Fair Tax. Initially prices are stable, then they fall.

And you know what octopi those things are. Companies will get creative like they do now and find more advantages, only now they do it with a tax code that drives inefficiency and then they will do it with a market that drives efficiency.

And that doesn't even cover the liberty and privacy aspects of businesses and individuals reporting every piece of their financial data to government and politicians using the code to amass power.

 

[kaz]

I didn't take it as "arguing," just responding to your points. I'm more "passionate' in my arguments then you, but in the end we both are focused on the points made, which is what i like about debating you. I find it sad but can't solve that most of the debates on this and every political site are mostly bickering with idiotic liberals making the same inane points when there are far more interesting issues to delve into.

As for your question, you have to go back to that you're paying it now anyway. There is no transition to be done. All the company's business taxes you bought from, the income tax for all their employees, employer and employee payroll taxes, unemployment taxes, capital gains taxes, taxes on debt payments and all the rest except for the death taxes are built into the price of what you are buying already just like the price of the steel and bricks they are made out of.

The price of products will not go up to be revenue neutral. And they will actually drop as all the tax inefficiencies are eliminated.

Now wait a minute. Currently the gross receipts tax on a loaf of bread in Albuquerque is 7%. The bread retails for about $1.25 plus tax or $1.34 at check out.

Now then, if all things remain the same, a flat tax would impose a 13% tax on that loaf of bread.

$1.25 plus 9 cents local gross receipts tax plus 17 cents fair tax = $1.51 for that same loaf of bread. You're telling me that the base cost of that loaf of bread will be reduced by at least 17 cents because of tax savings in the production, wholesale, and retail process?

Otherwise I will be taxed again on the money I use that was already taxed--quite heavily I might add--when I earned it.

Yes, that's exactly what he's telling you. And you're right to be skeptical, but it's complete rubbish.

I'm perfectly happy to debate liberals, anarchists or anyone else, but I require a critical, open mind. Fyrefox has both, you have neither. Sadly that's the objective of the left on non-left boards, to fill boards with their rubbish and block any real debate. I'm determined to learn to fight through that.

I will give you a chance to prove me right or you wrong by asking a question.

So if companies now pay payroll, business taxes and they have to pay all their employees enough to pay their taxes, and those costs for the business go away. Why in your numbers do prices not go down?

Your answer is companies are greedy and will keep the money. My answer is the marketplace will prevent that. So here's your chance, I'm not hopeful.

 

[kaz]

As a conceptual matter, the rate is a matter of "how you look at it", but 30% is the only honest way to frame. The public thinks of sales taxes as the percentage added, not the percentage of the total. Quoting the rate as 23% is a bit of sophistry designed to mislead the public. Then again, that's the whole point.

To Fyrefox on this point.

On the 23% versus 30%. Sales tax is added on to the price of an item. Income tax is taken from the whole. There is no inherent way to do it, it's done both ways.

The reason the Fair Tax chose to look at it like income tax is because all the taxes that it's replacing are calculated that way. They are all taken from the price of an item. If it's replacing a 10% income tax, but the percent was put in sales tax terms, the left would say we're replacing a 10% tax (taken from the total price) with an 11% tax (added to the total price). That would be mathematically correct, but that is what would be misleading.

The irony I find in this argument is like Polk saying it's a 30% tax, the Fair Taxers are liars. Well, since it's the revenue neutral number, first of all what difference does it make, and second of all, that means our current system is taking a 30% tax not a 23% tax as well. Why does he get to use the "bad" number for his opponent and the "good" number for himself? It's a typical liberal argument. Vacuous, misleading, and directed to the masses who don't know better.

 

[FA_Q2]

Are you sure you paid income tax on your SS deposits? My SS deposits come off the top of my gross. The income taxes are calculated after SS tax not before. Or am I missing something? I understand that SS checks are taxed, with the exception of people for whom SS check is their only income?

What am I missing?

If you live in the United States your income tax is on the same gross that your Social Security taxes are on. Social security taxes are not deductible. So you do pay income taxes on your gross income and the social security taxes are figured on that same gross income. And though you have already been taxed on the income your social security contributions are taken from, once you start drawing social security, if your other adjusted gross income is above a certain amount, you are taxed on 80% of your social security benefits again when you receive them.

So that is why it is not acceptable to me to pay taxes via a national sales tax when I spend to support myself out of my retirement income and/or savings that have already been taxed once and sometimes twice.

Looks like 1/2 of SS taxes are deductible for the self-employed. I confused my 401k pre-tax deductions for the SS deduction. Even more reason SS is the worst deal in the history of mankind.

So back to the sales tax. How would a sales tax be worse than income tax on your SS checks?

I think you somewhat missed the point that fox is getting at here. If I read her correctly, one of the problems that she is running into with that is the fact that all the savings that Mr. and Miss. Fox have acquired throughout the years has been subject to an income tax and NOT a sales tax. IOW, she has ALREADY paid for the government. By instituting a national sales tax and no income tax you have essentially shifted that burden BACK to her and are requiring her to pay taxes essentially twice – once on the income as it was earned and already paid and now a second time when she uses it. Such would essentially be a punishment for anyone that actually bothered to do the right thing and save some money for retirement.

 

[kaz]

So that is why it is not acceptable to me to pay taxes via a national sales tax when I spend to support myself out of my retirement income and/or savings that have already been taxed once and sometimes twice.

I understand how you feel when you say this. You're thinking that you are retired, you finally don't have to pay a lot of the taxes you did, it's someone else's turn. However, there are a couple of things that you have to remember.

1) Your generation paid social security tax, but they didn't save any money. They "lent" it to themselves, the government, and then spent it. Taxes come from taxpayers, so does what they pay you in social security. Whether you think of taxpayers paying you directly or taxpayers paying back social security and social security paying you, the money is coming from the same taxpayers, right?

2) Those taxpayers aren't paying it out of their savings either, they are paying it out of their earnings. Companies don't pay payroll and business taxes, they incorporate it in the price of their products. Employees need to earn enough to live AFTER taxes. In the end, whether the taxes are embedded and "hidden" or overt like the Fair Tax, they are coming from the same place.

In the end for your logic to work that you already paid the taxes and now you deserve a break, someone would have had to saved the money. Either government would have had to save the money or people would have to be paying their taxes going forward from saved money. If it's not saved, it's in the end being taken from the sales of products. So the best we can do is tax sales "flat" to minimize taxes driving inefficiency.

 

[FA_Q2]

I think there is a great deal of confusion here. The method that is used to collect taxes has nothing to do with the amount collected. That's determined by what the goverment requires for revenue.

The biggest variable in how taxes are collected is the degree of progressiveness. If that were to be changed it would undoubtably result in advantaging some income levels at the expense of others compared to the present. Every alternative that I've heard for changing to advantages the wealthy at the expense of the middle class. That's an economic downer.

Unless you believe in supply side economics which has failed every time it's been tried.

The left likes a simple claim that I believe you have argued for before:
That the rich pay a far lesser percentage of their income than the middle class.

It is simply NOT possible for the middle class to pick up a larger share of that burden with a flat tax if they are already paying a greater percentage of their income. Mathematically, that is completely impossible. You cannot shift the tax burden from someone paying 13% to another that is currently paying 30% by making the percentages the same. For that matter, it is even less likely that many of the poor will pay a greater percentage either as payroll taxes are a HUGE hidden tax against the poor, among other hidden taxes, and is something that would simply cease to exist in a flat tax scenario.

Beyond that, it is the rich that are essentially the sole benefactors of the complex and convoluted deductions that are allowed in this nation. That going away will hit the rich pretty hard. In reality, the poor that get massive kickbacks and the rich are the two that will be taking the burden OFF the middle class, not the other way around.

 

[RKMBrown]

If you live in the United States your income tax is on the same gross that your Social Security taxes are on. Social security taxes are not deductible. So you do pay income taxes on your gross income and the social security taxes are figured on that same gross income. And though you have already been taxed on the income your social security contributions are taken from, once you start drawing social security, if your other adjusted gross income is above a certain amount, you are taxed on 80% of your social security benefits again when you receive them.

So that is why it is not acceptable to me to pay taxes via a national sales tax when I spend to support myself out of my retirement income and/or savings that have already been taxed once and sometimes twice.

Looks like 1/2 of SS taxes are deductible for the self-employed. I confused my 401k pre-tax deductions for the SS deduction. Even more reason SS is the worst deal in the history of mankind.

So back to the sales tax. How would a sales tax be worse than income tax on your SS checks?

I think you somewhat missed the point that fox is getting at here. If I read her correctly, one of the problems that she is running into with that is the fact that all the savings that Mr. and Miss. Fox have acquired throughout the years has been subject to an income tax and NOT a sales tax. IOW, she has ALREADY paid for the government. By instituting a national sales tax and no income tax you have essentially shifted that burden BACK to her and are requiring her to pay taxes essentially twice – once on the income as it was earned and already paid and now a second time when she uses it. Such would essentially be a punishment for anyone that actually bothered to do the right thing and save some money for retirement.

With regard to SS income, that is going to be taxed via income tax anyway and only half was taxed as the corp side of SS deposits is pretax, so if the sales tax replaced personal income tax, that change should be a wash.

With regard to savings... my 401k is pretax money, I believe IRAs are also pretax money, so in theory pretax savings that become income would be taxed as income anyway no? Thus the income tax from the pretax savings systems would also be a wash in the change to sales tax.

I suppose for people that have after tax savings, that are not taxed as income then yeah for that money, such as Certificates of Deposit and Inherited money that has already gone through probate, yeah I suppose for already taxed assets, such as my home, my car, my savings etc. when those are taxed again as sales then I loose out by being taxed again.

That said most "large" investments have a return on investment. Most large savings eventually grow to a size where it starts earning a return on investment that is significant. Those returns on investment are typically taxed as capital gains. So again if that is converted to sales tax it should be a wash.

Thus one would have to argue that they have a large nest egg that has already been taxed, and for which there is no short or long term capital gain taxes or further personal income taxes and/or penalties to be applied on withdrawl (aka capital basis). Such as that may be the case, in that circumstance I could see the system for changing over from income to a sales tax system that would allow that particular money that was void of income tax, when spent, to be void of the federal portion of sales tax since it is an asset that is apparently void of federal taxes.

Note: This is the rough equivalent of deciding not to tax the rich for the assets they already have when they spend them, because they already paid taxes once on that money. I'm good with that but I doubt you'll find any democrats who agree to not tax the rich. The argument will simply move from current tax rates in which the rich get a discount (because its not personal income its capital gains) to sales tax rates that the rich get a discount for because they are using money that was previously taxed.

For me half my 401k is currently gain, not basis. I hope by the time I retire, 2/3-3/4 of my 401k will be gain not basis.

 

[Foxfyre]

Are you sure you paid income tax on your SS deposits? My SS deposits come off the top of my gross. The income taxes are calculated after SS tax not before. Or am I missing something? I understand that SS checks are taxed, with the exception of people for whom SS check is their only income?

What am I missing?

If you live in the United States your income tax is on the same gross that your Social Security taxes are on. Social security taxes are not deductible. So you do pay income taxes on your gross income and the social security taxes are figured on that same gross income. And though you have already been taxed on the income your social security contributions are taken from, once you start drawing social security, if your other adjusted gross income is above a certain amount, you are taxed on 80% of your social security benefits again when you receive them.

So that is why it is not acceptable to me to pay taxes via a national sales tax when I spend to support myself out of my retirement income and/or savings that have already been taxed once and sometimes twice.

Looks like 1/2 of SS taxes are deductible for the self-employed. I confused my 401k pre-tax deductions for the SS deduction. Even more reason SS is the worst deal in the history of mankind.

So back to the sales tax. How would a sales tax be worse than income tax on your SS checks?

Yes, the self employed pay ALL the social security contribution - the employee's part and and employer's part. And the employer's l/2 of that is deductible.

The formula is 1/2 of your social security benefits added to any taxable income you receive during the year. If the combined amounts exceed $32k for a married couple or $25k for a single person or zero for married couples filing separately, up to 80% of your social security benefits are taxable. But social security benefits under those caps are not subject to income tax.

With a sales tax you pay tax on everything you spend.

Seriously, given how pitiful the social security checks usually are, that isn't really a biggie. But we have already paid taxes on almost all of our retirement savings and investments. And to have to pay tax again via a sales tax when we spend that money just seems extra burdensome.

It would be a wash only for those who used the tax deferred plans for their IRAs etc.--we do have some money in those and yes, that would likely be a wash--but the Roth IRA's and similar vehicles are not tax deferred and many went that route simply to avoid higher taxes on their retirement income by pre-paying those taxes at the time the income was received. And believe me we are nowhere near rich.

 

[FA_Q2]

If the tax is low enough on a flat income tax, no exemption would be necessary. Imagine the logstics of mailing out or electronically transmitting all those prebates on a fair tax system. People moving, their economic circumstances constantly changing, etc. etc. etc.

Compare that to a true flat income tax. Make it low enough and there would need to be no exemptions at all. But if you needed a somewhat higher rate than apply a flat exemption of $2,000 or $5,000 or whatever to a person's total earnings. Everybody gets the same flat exemption. Everybody pays the same percentage of whatever income they earn over that exemption amount. If the exemption is $10,000, those earning $10,000 get all the taxes they pay back at the end of the year. The guy making a million pays taxes on $990,000. So he gets the same refund as the guy making $10,000 but he pays 99% more in taxes than the guy making $10,000.

I used to agree with this but another poster in a thread long ago dead gave me an argument that changed my mind. No exemptions can exist, ever. Not even a small one that all get on the first X dollars. It SEEMS like a good idea at first but the problem is that is what gives the politicians leverage and influence through tax code. Even something simple like a deduction on the first couple of thousand allows the politicians to essentially start the class warfare over again. This will create the same situation that we have now with large numbers of people paying nothing in taxes voting to continue that trend or even rising tax rates that will never touch them. If the first 50K ends up nontaxable and people want a new expensive and extravagant perk, those that are not taxed really do not have a reason not to vote to raise the taxes on everyone else another 10 percent to get it. ANY exemptions remove the term ‘flat’ right out of that concept and all of them must be avoided. ALL income, no matter the source and no matter the amount, needs to be taxes at exactly the same rate. Simplicity and the complete removal of governmental powers in sucking up to special interest groups is the purpose of a flat tax.

 

[FA_Q2]

Looks like 1/2 of SS taxes are deductible for the self-employed. I confused my 401k pre-tax deductions for the SS deduction. Even more reason SS is the worst deal in the history of mankind.

So back to the sales tax. How would a sales tax be worse than income tax on your SS checks?

I think you somewhat missed the point that fox is getting at here. If I read her correctly, one of the problems that she is running into with that is the fact that all the savings that Mr. and Miss. Fox have acquired throughout the years has been subject to an income tax and NOT a sales tax. IOW, she has ALREADY paid for the government. By instituting a national sales tax and no income tax you have essentially shifted that burden BACK to her and are requiring her to pay taxes essentially twice – once on the income as it was earned and already paid and now a second time when she uses it. Such would essentially be a punishment for anyone that actually bothered to do the right thing and save some money for retirement.

With regard to SS income, that is going to be taxed via income tax anyway, so if the sales tax replaced personal income tax, that change should be a wash.

With regard to savings... my 401k is pretax money, I believe IRAs are also pretax money, so in theory pretax savings that become income would be taxed as income anyway no? Thus the income tax from the pretax savings systems would also be a wash in the change to sales tax.

I suppose for people that have after tax savings, that are not taxed as income then yeah for that money, such as Certificates of Deposit and Inherited money that has already gone through probate, yeah I suppose for already taxed assets, such as my home, my car, my savings etc. when those are taxed again as sales then I loose out by being taxed again.

That said most "large" investments have a return on investment. Most large savings eventually grow to a size where it starts earning a return on investment that is significant. Those returns on investment are typically taxed as capital gains. So again if that is converted to sales tax it should be a wash.

Thus one would have to argue that they have a large nest egg that has already been taxed, and for which there is no short or long term capital gain taxes or further personal income taxes and/or penalties to be applied on withdrawl (aka capital basis). Such as that may be the case, in that circumstance I could see the system for changing over from income to a sales tax system that would allow that particular money that was void of income tax, when spent, to be void of the federal portion of sales tax since it is an asset that is apparently void of federal taxes.

Note: This is the rough equivalent of deciding not to tax the rich for the assets they already have when they spend them, because they already paid taxes once on that money. I'm good with that but I doubt you'll find any democrats who agree to not tax the rich. The argument will simply move from current tax rates in which the rich get a discount (because its not personal income its capital gains) to sales tax rates that the rich get a discount for because they are using money that was previously taxed.

For me half my 401k is currently gain, not basis. I hope by the time I retire, 2/3-3/4 of my 401k will be gain not basis.

Certainly all true but this is one of the reasons that I am put off on the idea of a national sales tax. It is also quite regressive as well as being complex in many respects. I personally believe that an income tax would be far simpler and effective and have not seen an effective argument here that makes a sales tax any better or less corruptible than an income tax.

 

[RKMBrown]

If you live in the United States your income tax is on the same gross that your Social Security taxes are on. Social security taxes are not deductible. So you do pay income taxes on your gross income and the social security taxes are figured on that same gross income. And though you have already been taxed on the income your social security contributions are taken from, once you start drawing social security, if your other adjusted gross income is above a certain amount, you are taxed on 80% of your social security benefits again when you receive them.

So that is why it is not acceptable to me to pay taxes via a national sales tax when I spend to support myself out of my retirement income and/or savings that have already been taxed once and sometimes twice.

Looks like 1/2 of SS taxes are deductible for the self-employed. I confused my 401k pre-tax deductions for the SS deduction. Even more reason SS is the worst deal in the history of mankind.

So back to the sales tax. How would a sales tax be worse than income tax on your SS checks?

Yes, the self employed pay ALL the social security contribution - the employee's part and and employer's part. And the employer's l/2 of that is deductible.

The formula is 1/2 of your social security benefits added to any taxable income you receive during the year. If the combined amounts exceed $32k for a married couple or $25k for a single person or zero for married couples filing separately, up to 80% of your social security benefits are taxable. But social security benefits under those caps are not subject to income tax.

With a sales tax you pay tax on everything you spend.

Seriously, given how pitiful the social security checks usually are, that isn't really a biggie. But we have already paid taxes on almost all of our retirement savings and investments. And to have to pay tax again via a sales tax when we spend that money just seems extra burdensome.

It would be a wash only for those who used the tax deferred plans for their IRAs etc.--we do have some money in those and yes, that would likely be a wash--but the Roth IRA's and similar vehicles are not tax deferred and many went that route simply to avoid higher taxes on their retirement income by pre-paying those taxes at the time the income was received. And believe me we are nowhere near rich.

Ok, don't get mad this is a fair and serious question:

By your tax fairness doctrine of making sure everyone pays the same tax rates, each time we raise tax rates, for example by raising SS taxes to save SS, we should go back and charge everyone that got the earlier discounted tax rate additional back taxes to make up for the SS taxes that we did not take from your salary when you were paying SS taxes at the discounted rate? Same with income tax rates and deductibles, all tax rates should be retroactively calculated to account for previous income and previous taxes paid. Or is your fairness doctrine a one way street?

 

[Foxfyre]

If the tax is low enough on a flat income tax, no exemption would be necessary. Imagine the logstics of mailing out or electronically transmitting all those prebates on a fair tax system. People moving, their economic circumstances constantly changing, etc. etc. etc.

Compare that to a true flat income tax. Make it low enough and there would need to be no exemptions at all. But if you needed a somewhat higher rate than apply a flat exemption of $2,000 or $5,000 or whatever to a person's total earnings. Everybody gets the same flat exemption. Everybody pays the same percentage of whatever income they earn over that exemption amount. If the exemption is $10,000, those earning $10,000 get all the taxes they pay back at the end of the year. The guy making a million pays taxes on $990,000. So he gets the same refund as the guy making $10,000 but he pays 99% more in taxes than the guy making $10,000.

I used to agree with this but another poster in a thread long ago dead gave me an argument that changed my mind. No exemptions can exist, ever. Not even a small one that all get on the first X dollars. It SEEMS like a good idea at first but the problem is that is what gives the politicians leverage and influence through tax code. Even something simple like a deduction on the first couple of thousand allows the politicians to essentially start the class warfare over again. This will create the same situation that we have now with large numbers of people paying nothing in taxes voting to continue that trend or even rising tax rates that will never touch them. If the first 50K ends up nontaxable and people want a new expensive and extravagant perk, those that are not taxed really do not have a reason not to vote to raise the taxes on everyone else another 10 percent to get it. ANY exemptions remove the term ‘flat’ right out of that concept and all of them must be avoided. ALL income, no matter the source and no matter the amount, needs to be taxes at exactly the same rate. Simplicity and the complete removal of governmental powers in sucking up to special interest groups is the purpose of a flat tax.

The simplicity of an income tax is why it appeals to me more than a national sales tax. A truly flat tax with it written ironclad into the law that it must be kept flat for all socioeconomic groups whether the tax is raised or lowered makes it very difficult to manipulate by politicians and bureaucrats. And because it puts a lot more skin into the game, it also makes it much more difficult to use the tax code for political advantage.

As we have already discussed, a national sales tax applied every step of the way from conception of the product until it appears on the store shelves has potential to greatly increase the cost of many products if no exemptions are allowed. And if exemptions are allowed, that gives the government the opening it needs to dicker constantly with the tax code until it is as nightmarish and impossible for ordinary people to understand as it is now. . . .

AND there is the disparity of the prebates to help offset the burden of the tax for low income families. A prebate in Mississippi would be huge--in New York state the same prebate not so much. The cost of living varies by tens of thousands even within some states and certainly across the country. A flat income tax would not have anywhere near those same kinds of variables.

But if somebody can show me how a sales tax would be less oppressive and more fair, I am all ears.

 

[RKMBrown]

I think you somewhat missed the point that fox is getting at here. If I read her correctly, one of the problems that she is running into with that is the fact that all the savings that Mr. and Miss. Fox have acquired throughout the years has been subject to an income tax and NOT a sales tax. IOW, she has ALREADY paid for the government. By instituting a national sales tax and no income tax you have essentially shifted that burden BACK to her and are requiring her to pay taxes essentially twice – once on the income as it was earned and already paid and now a second time when she uses it. Such would essentially be a punishment for anyone that actually bothered to do the right thing and save some money for retirement.

With regard to SS income, that is going to be taxed via income tax anyway, so if the sales tax replaced personal income tax, that change should be a wash.

With regard to savings... my 401k is pretax money, I believe IRAs are also pretax money, so in theory pretax savings that become income would be taxed as income anyway no? Thus the income tax from the pretax savings systems would also be a wash in the change to sales tax.

I suppose for people that have after tax savings, that are not taxed as income then yeah for that money, such as Certificates of Deposit and Inherited money that has already gone through probate, yeah I suppose for already taxed assets, such as my home, my car, my savings etc. when those are taxed again as sales then I loose out by being taxed again.

That said most "large" investments have a return on investment. Most large savings eventually grow to a size where it starts earning a return on investment that is significant. Those returns on investment are typically taxed as capital gains. So again if that is converted to sales tax it should be a wash.

Thus one would have to argue that they have a large nest egg that has already been taxed, and for which there is no short or long term capital gain taxes or further personal income taxes and/or penalties to be applied on withdrawl (aka capital basis). Such as that may be the case, in that circumstance I could see the system for changing over from income to a sales tax system that would allow that particular money that was void of income tax, when spent, to be void of the federal portion of sales tax since it is an asset that is apparently void of federal taxes.

Note: This is the rough equivalent of deciding not to tax the rich for the assets they already have when they spend them, because they already paid taxes once on that money. I'm good with that but I doubt you'll find any democrats who agree to not tax the rich. The argument will simply move from current tax rates in which the rich get a discount (because its not personal income its capital gains) to sales tax rates that the rich get a discount for because they are using money that was previously taxed.

For me half my 401k is currently gain, not basis. I hope by the time I retire, 2/3-3/4 of my 401k will be gain not basis.

Certainly all true but this is one of the reasons that I am put off on the idea of a national sales tax. It is also quite regressive as well as being complex in many respects. I personally believe that an income tax would be far simpler and effective and have not seen an effective argument here that makes a sales tax any better or less corruptible than an income tax.

Income tax has the effect of convincing people to stop working or to work less as the more you work the more you are punished. Sale taxes encourages more efficient consumption. With more income in our pockets from our labors, we would have more money to invest, resulting in growth. Think 401k on steroids.

 

[RKMBrown]

If the tax is low enough on a flat income tax, no exemption would be necessary. Imagine the logstics of mailing out or electronically transmitting all those prebates on a fair tax system. People moving, their economic circumstances constantly changing, etc. etc. etc.

Compare that to a true flat income tax. Make it low enough and there would need to be no exemptions at all. But if you needed a somewhat higher rate than apply a flat exemption of $2,000 or $5,000 or whatever to a person's total earnings. Everybody gets the same flat exemption. Everybody pays the same percentage of whatever income they earn over that exemption amount. If the exemption is $10,000, those earning $10,000 get all the taxes they pay back at the end of the year. The guy making a million pays taxes on $990,000. So he gets the same refund as the guy making $10,000 but he pays 99% more in taxes than the guy making $10,000.

I used to agree with this but another poster in a thread long ago dead gave me an argument that changed my mind. No exemptions can exist, ever. Not even a small one that all get on the first X dollars. It SEEMS like a good idea at first but the problem is that is what gives the politicians leverage and influence through tax code. Even something simple like a deduction on the first couple of thousand allows the politicians to essentially start the class warfare over again. This will create the same situation that we have now with large numbers of people paying nothing in taxes voting to continue that trend or even rising tax rates that will never touch them. If the first 50K ends up nontaxable and people want a new expensive and extravagant perk, those that are not taxed really do not have a reason not to vote to raise the taxes on everyone else another 10 percent to get it. ANY exemptions remove the term ‘flat’ right out of that concept and all of them must be avoided. ALL income, no matter the source and no matter the amount, needs to be taxes at exactly the same rate. Simplicity and the complete removal of governmental powers in sucking up to special interest groups is the purpose of a flat tax.

The simplicity of an income tax is why it appeals to me more than a national sales tax. A truly flat tax with it written ironclad into the law that it must be kept flat for all socioeconomic groups whether the tax is raised or lowered makes it very difficult to manipulate by politicians and bureaucrats. And because it puts a lot more skin into the game, it also makes it much more difficult to use the tax code for political advantage.

As we have already discussed, a national sales tax applied every step of the way from conception of the product until it appears on the store shelves has potential to greatly increase the cost of many products if no exemptions are allowed. And if exemptions are allowed, that gives the government the opening it needs to dicker constantly with the tax code until it is as nightmarish and impossible for ordinary people to understand as it is now. . . .

AND there is the disparity of the prebates to help offset the burden of the tax for low income families. A prebate in Mississippi would be huge--in New York state the same prebate not so much. The cost of living varies by tens of thousands even within some states and certainly across the country. A flat income tax would not have anywhere near those same kinds of variables.

But if somebody can show me how a sales tax would be less oppressive and more fair, I am all ears.

The simplicity of income tax vs sales tax? cmon don't start making stuff up.

There are only five states in the nation that do not already have a sales tax. I've never ever heard someone complain that sales taxes are complicated.

Note: sales taxes do not apply to food products or drugs or the roof over your head.

Sales taxes are for things like a kitchenware, TVs, toys, cars, etc. If you don't live in a sales tax state, you may not know how sales taxes are typically applied. Thus you may be worried about something that you don't need to worry about.

 

[FA_Q2]

Income tax has the effect of convincing people to stop working or to work less as the more you work the more you are punished. Sale taxes encourages more efficient consumption. With more income in our pockets from our labors, we would have more money to invest, resulting in growth. Think 401k on steroids.

That is absolutely false. I have no idea where you get that idea. A progressive system might cause that where one income is taxes at a different level than another but a flat tax applied to all dollars evenly across the board does no such thing. There is difference in incentive to create that first 80c than there is to create the millionth 80c as that is what you are going to earn every time you create a dollar. Sales tax does the exact same thing btw as it drives up the cost of the product that you are taxing and therefore reduces the demand in that product. In reality, such is already built in as you pointed out and reduces incentives to create weather or not it is applied to incomes or products. The only changes are how that money is collected. As I stated before, an income tax is simpler in that regard and is not regressive like a sales tax would be.

 

[FA_Q2]

The simplicity of income tax vs sales tax? cmon don't start making stuff up.

There are only five states in the nation that do not already have a sales tax. I've never ever heard someone complain that sales taxes are complicated.

Note: sales taxes do not apply to food products or drugs or the roof over your head.

Sales taxes are for things like a kitchenware, TVs, toys, cars, etc. If you don't live in a sales tax state, you may not know how sales taxes are typically applied. Thus you may be worried about something that you don't need to worry about.

Except that even in declaring its simplicity you have already removed the ‘flat’ in your tax. You have broken that by declaring something different, not included. Food, I believe, was included because it is a necessity. Nice, in theory, but the beginning of the complete failure in that system. What avout McDonalds? That is technically food. I can guarantee that if you are not including them, you will soon as their lobby gets ahold of congress. Before long we are going to be looking at special interest lobbies stating that gas is required for life. We all know you can’t get by without energy. What about a vehicle? That is a requirement. Possibly diapers too. Then we can get into other special interests that want a piece of the pie like green energy and the like.

No exemptions at no time or a flat tax is pointless. If you are going down that road, you might as well just stick with what we have.

Then, with a sales tax, you have another whole problem. Are you going to tax services as well? Are you going to tax the sale of the wood to the furniture manufacturer as well as the sale of the couch they build to Wal-Mart before the sale to the customer? At what point do you apply this ‘sales’ tax? Just the end user?

You see, it can get very complex very fast.

 

[RKMBrown]

Income tax has the effect of convincing people to stop working or to work less as the more you work the more you are punished. Sale taxes encourages more efficient consumption. With more income in our pockets from our labors, we would have more money to invest, resulting in growth. Think 401k on steroids.

That is absolutely false. I have no idea where you get that idea. A progressive system might cause that where one income is taxes at a different level than another but a flat tax applied to all dollars evenly across the board does no such thing. There is difference in incentive to create that first 80c than there is to create the millionth 80c as that is what you are going to earn every time you create a dollar. Sales tax does the exact same thing btw as it drives up the cost of the product that you are taxing and therefore reduces the demand in that product. In reality, such is already built in as you pointed out and reduces incentives to create weather or not it is applied to incomes or products. The only changes are how that money is collected. As I stated before, an income tax is simpler in that regard and is not regressive like a sales tax would be.

No it's true. While you are correct that progressive taxes make the issue of working harder even more ridiculous, similarly forcing me to pay more for the same government services than my neighbor simply because I work more hours than my neighbor is ridiculous. Why work more hours when the government is gonna get a portion of the extra work?

You are ignoring the part I mentioned about people deciding to invest their income vs spend their income. The ability to take most of my earned income and put it into savings would be a tremendous incentive to work more hours for the single purpose of building a nest egg. You see I already have all the income I need to live, what's the point of working harder than I have to. Income tax is socialist, in this regard. From each according to his ability to pay, to each according to his needs.