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

[Polk]

I've never argued any such thing. What you talking about, Willis?

That's exactly what you've been arguing. That's the only way to make the "FairTax" math work. Otherwise, you have to explain how a sales tax will generate the same amount of revenue as the individual income tax while not increasing the cost of goods.

So just to be clear, so you don't care what you make after taxes, only before taxes. You don't incorporate that into your salary needs for your employer. As I pointed out businesses factor in all their costs, but you don't. You know what your mortgage is, your car payment, your food bill and you ask your employer for enough to cover that. You do not ask them to cover your taxes, that's your problem and you don't expect them to pay you anything more to cover for that. That's what you're telling me.

You're making two different claims and hoping no one will notice. Of course I care about what my after-tax income is. And, at the margin, that means I will want a higher pre-tax income, ceteris paribus. That does not mean that my employer pays my taxes for me.

 

[Polk]

I already addressed this.

No, you haven't. You've posted long rants that avoid the issue.

You know how you could be reading Shakesphere to a dog and in the middle say their name and they'd hear "blah blah Spot blah blah." You're like that with socialism. The only thing that's not blah to you is what you want to hear.

You realize attacking me doesn't fix the problem with your argument, right?

 

[Foxfyre]

Let's try it Dick & Jane style, Kas.

I hire Polk for $10/hour on a normal 40 hour week. That is a gross salary of $400. I withhold 20% or $80 of his wages that HE is obligated to pay for state and federal income tax, social security, and medicare. His check is $320 and the amounts I remit to state and federal government is $80.00 PLUS my employers' required FICA contribution for him PLUS SUTA, FUTA, work comp premiums based on his gross salary, general liability premiums based on his salary, and any other required taxes and/or wage-based insurance.

ALL of that comes out of my gross earnings. I can deduct some or all of it as business expense which helps reduce the taxes that I owe from my business, but the taxes I do pay are on top of all those other employee expenses.

And yes, all of that IS baked into the price of my product sold to my customers.

The only employee based expense I would not have under a Fair Tax system is that I wouldn't pay the employers' share of FICA or FUTA. The other expenses stay the same.

And assuming that I would have to pay Fair Tax on anything I buy for the business that is not for resale, I would guess my taxes would go up a bit above and beyond those payroll expenses.

 

[Polk]

Let's try it Dick & Jane style, Kas.

I hire Polk for $10/hour on a normal 40 hour week. That is a gross salary of $400. I withhold 20% or $80 of his wages that HE is obligated to pay for state and federal income tax, social security, and medicare. His check is $320 and the amounts I remit to state and federal government is $80.00 PLUS my employers' required FICA contribution for him PLUS SUTA, FUTA, work comp premiums based on his gross salary, general liability premiums based on his salary, and any other required taxes and/or wage-based insurance.

ALL of that comes out of my gross earnings. I can deduct some or all of it as business expense which helps reduce the taxes that I owe from my business, but the taxes I do pay are on top of all those other employee expenses.

And yes, all of that IS baked into the price of my product sold to my customers.

The only employee based expense I would not have under a Fair Tax system is that I wouldn't pay the employers' share of FICA or FUTA. The other expenses stay the same.

And assuming that I would have to pay Fair Tax on anything I buy for the business that is not for resale, I would guess my taxes would go up a bit above and beyond those payroll expenses.

You're missing part of his argument. He's not talking about just the expenses you listed. He's also saying the $80 I pay in taxes in your scenario are fully factored into his cost.

 

[RKMBrown]

Let's try it Dick & Jane style, Kas.

I hire Polk for $10/hour on a normal 40 hour week. That is a gross salary of $400. I withhold 20% or $80 of his wages that HE is obligated to pay for state and federal income tax, social security, and medicare. His check is $320 and the amounts I remit to state and federal government is $80.00 PLUS my employers' required FICA contribution for him PLUS SUTA, FUTA, work comp premiums based on his gross salary, general liability premiums based on his salary, and any other required taxes and/or wage-based insurance.

ALL of that comes out of my gross earnings. I can deduct some or all of it as business expense which helps reduce the taxes that I owe from my business, but the taxes I do pay are on top of all those other employee expenses.

And yes, all of that IS baked into the price of my product sold to my customers.

The only employee based expense I would not have under a Fair Tax system is that I wouldn't pay the employers' share of FICA or FUTA. The other expenses stay the same.

And assuming that I would have to pay Fair Tax on anything I buy for the business that is not for resale, I would guess my taxes would go up a bit above and beyond those payroll expenses.

You're missing part of his argument. He's not talking about just the expenses you listed. He's also saying the $80 I pay in taxes in your scenario are fully factored into his cost.

Where did the $80 you paid in taxes come from? The corporation right? Ok, where did he get the $80 from the cost of goods right? Can you explain to me how you think the 80 bucks you got as income from the sale of the goods was not factored into the cost of the goods your comany sold? You think that money just grows on trees?

 

[kaz]

That's exactly what you've been arguing. That's the only way to make the "FairTax" math work. Otherwise, you have to explain how a sales tax will generate the same amount of revenue as the individual income tax while not increasing the cost of goods.

So just to be clear, so you don't care what you make after taxes, only before taxes. You don't incorporate that into your salary needs for your employer. As I pointed out businesses factor in all their costs, but you don't. You know what your mortgage is, your car payment, your food bill and you ask your employer for enough to cover that. You do not ask them to cover your taxes, that's your problem and you don't expect them to pay you anything more to cover for that. That's what you're telling me.

You're making two different claims and hoping no one will notice. Of course I care about what my after-tax income is. And, at the margin, that means I will want a higher pre-tax income, ceteris paribus. That does not mean that my employer pays my taxes for me.

I didn't say your employer pays your taxes for you, I said your employer has to pay you enough for you to pay your taxes, so your taxes are baked into the price of your employers products. If you seriously still don't get that, live long and prosper.

 

[kaz]

No, you haven't. You've posted long rants that avoid the issue.

You know how you could be reading Shakesphere to a dog and in the middle say their name and they'd hear "blah blah Spot blah blah." You're like that with socialism. The only thing that's not blah to you is what you want to hear.

You realize attacking me doesn't fix the problem with your argument, right?

Wrong again, I'm mocking you. If you consider that an "attack," you're quite the little girly poo.

 

[kaz]

Let's try it Dick & Jane style, Kas.

I hire Polk for $10/hour on a normal 40 hour week. That is a gross salary of $400. I withhold 20% or $80 of his wages that HE is obligated to pay for state and federal income tax, social security, and medicare. His check is $320 and the amounts I remit to state and federal government is $80.00 PLUS my employers' required FICA contribution for him PLUS SUTA, FUTA, work comp premiums based on his gross salary, general liability premiums based on his salary, and any other required taxes and/or wage-based insurance.

ALL of that comes out of my gross earnings. I can deduct some or all of it as business expense which helps reduce the taxes that I owe from my business, but the taxes I do pay are on top of all those other employee expenses.

And yes, all of that IS baked into the price of my product sold to my customers.

The only employee based expense I would not have under a Fair Tax system is that I wouldn't pay the employers' share of FICA or FUTA. The other expenses stay the same.

And assuming that I would have to pay Fair Tax on anything I buy for the business that is not for resale, I would guess my taxes would go up a bit above and beyond those payroll expenses.

I'm not positive I understand what you are saying, but let me repeat it back, you can let me know if I went wrong. You're saying that Polk makes $400 a week, and he actually saves his portion of the payroll taxes as well as his withholdings, not me.

Well, let's say his take home pay is $350, the other $50 he was paying in various taxes. Here are my observations.

1) I know the guy, and he isn't worth $400 a week, you're overpaying him.

2) He was actually willing to work for $350 a week. Everyone knows when we switch to the fair tax. His employer is probably going to look at all staff and make some sort of announcement. Like putting out a memo saying that they are cutting salaries by 20%, which covers things like payroll taxes they never got anyway. The memo will explain that this amount leaves them take home as well as they were before, but since taxes are now being paid directly by the employer, they can't pay both. It will also mention that payroll taxes are covered by the fair tax.

3) The best employees at Polk's company will probably get a better deal, something closer to the whole thing. Polk won't get that deal. But they are doing it to retain those employees. Those employees have the market power, there's nothing wrong with that.

4) Polk won't quit because he's still making $350 take home, like he did before.

5) Going forward, take home salaries and job changes will just be calculated on the new method, it's a one time decision every company will have to make.

You have to remember that just like employers are looking at every tax as a cost, employees are looking at take home pay. An adjustment will have to be made. Employers will make it, they won't pay Polk his $400 gross and then pay his taxes for him. And since the change is across the economy everyone will be making it.

You're right that employers can't just absorb it. They won't.

 

[Polk]

Let's try it Dick & Jane style, Kas.

I hire Polk for $10/hour on a normal 40 hour week. That is a gross salary of $400. I withhold 20% or $80 of his wages that HE is obligated to pay for state and federal income tax, social security, and medicare. His check is $320 and the amounts I remit to state and federal government is $80.00 PLUS my employers' required FICA contribution for him PLUS SUTA, FUTA, work comp premiums based on his gross salary, general liability premiums based on his salary, and any other required taxes and/or wage-based insurance.

ALL of that comes out of my gross earnings. I can deduct some or all of it as business expense which helps reduce the taxes that I owe from my business, but the taxes I do pay are on top of all those other employee expenses.

And yes, all of that IS baked into the price of my product sold to my customers.

The only employee based expense I would not have under a Fair Tax system is that I wouldn't pay the employers' share of FICA or FUTA. The other expenses stay the same.

And assuming that I would have to pay Fair Tax on anything I buy for the business that is not for resale, I would guess my taxes would go up a bit above and beyond those payroll expenses.

You're missing part of his argument. He's not talking about just the expenses you listed. He's also saying the $80 I pay in taxes in your scenario are fully factored into his cost.

Where did the $80 you paid in taxes come from? The corporation right? Ok, where did he get the $80 from the cost of goods right? Can you explain to me how you think the 80 bucks you got as income from the sale of the goods was not factored into the cost of the goods your comany sold? You think that money just grows on trees?

He pays it to me the first time (as salary). He doesn't pay it again when I pay it in taxes. He's double-counting that money.

 

[Polk]

So just to be clear, so you don't care what you make after taxes, only before taxes. You don't incorporate that into your salary needs for your employer. As I pointed out businesses factor in all their costs, but you don't. You know what your mortgage is, your car payment, your food bill and you ask your employer for enough to cover that. You do not ask them to cover your taxes, that's your problem and you don't expect them to pay you anything more to cover for that. That's what you're telling me.

You're making two different claims and hoping no one will notice. Of course I care about what my after-tax income is. And, at the margin, that means I will want a higher pre-tax income, ceteris paribus. That does not mean that my employer pays my taxes for me.

I didn't say your employer pays your taxes for you, I said your employer has to pay you enough for you to pay your taxes, so your taxes are baked into the price of your employers products. If you seriously still don't get that, live long and prosper.

You said both of those things. You may not realize you said both of those things (since one of them is an unstated premise of another claim you make), but you did.

 

[RKMBrown]

You're missing part of his argument. He's not talking about just the expenses you listed. He's also saying the $80 I pay in taxes in your scenario are fully factored into his cost.

Where did the $80 you paid in taxes come from? The corporation right? Ok, where did he get the $80 from the cost of goods right? Can you explain to me how you think the 80 bucks you got as income from the sale of the goods was not factored into the cost of the goods your comany sold? You think that money just grows on trees?

He pays it to me the first time (as salary). He doesn't pay it again when I pay it in taxes. He's double-counting that money.

If your company does not bake the cost of the 80bucks into the cost of the goods you don't get the 80bucks, you get a 1099 that is minus the 80 bucks, the 80 bucks stays in the hands of the customer.

 

[Polk]

That's what you don't get. For the "FairTax" math to work, it's not 80 bucks being "baked in". It would 160 "baked in". No one is disputing that the portion of salary that ultimately becomes taxes is "baked in" to the cost of goods. What is being disputed is that the same value is baked into the price again when it goes from the employee to the federal government.

 

[Toro]

All I'm saying is that income taxes, business taxes and all the rest that derive from companies are clearly in the end directly baked into the price of the products/services sold by that company. A death tax is actually paid by a person's estate when they die. I'm not defending it clearly, but when you say the death tax is the same, I don't know what you mean that it's baked into the price of products sold by companies. It's just purely taxing wealth and is done to remove money from individual people and is not designed to fund the government. It's a punitive, hateful tax by cynical socialists and politicians. It's not an economic tax.

I'd scrap the estate tax.

It's 0% in Canada.

 

[Toro]

Hence the term ... wait for it ... wait some more ... almost there ... almost ... Revenue Neutral ...

You're saying all individual income taxes today are baked in to the price of every good. That's a much broader claim.

It's an obvious claim. Employees don't care what their gross pay is, they care what their take home pay is. Clearly if you hire an IT programmer, they are marketable than someone who is reliable but has no job skills. If you pay an IT Programmer $80K, and the government takes $60K in taxes, and the latter makes $20K and pays $0 in taxes, the programmer's not going to work harder. They aren't making any more, you (liberals) are.

Companies have to pay employees a market rate that is high enough to pay their taxes. As tax rates go up for higher skilled employees, their pay does as well to pay the higher taxes. Then liberals cry about the rapidly raising pay for higher skilled ignoring that higher and higher portions are just to pay the higher taxes. It's a cluster you have going.

But that the cost of individual taxes is baked into the products sold by their employers is obvious for anyone but a socialist ideologue. If employers can't pay their employees enough to pay their taxes, they don't work for them. The total cost of employees is baked into the price of their products just like the cost of steel.

That's true if there is price inelasticity of the product being made. It's not true if prices have a high degree of price elasticity.

 

[kaz]

You're making two different claims and hoping no one will notice. Of course I care about what my after-tax income is. And, at the margin, that means I will want a higher pre-tax income, ceteris paribus. That does not mean that my employer pays my taxes for me.

I didn't say your employer pays your taxes for you, I said your employer has to pay you enough for you to pay your taxes, so your taxes are baked into the price of your employers products. If you seriously still don't get that, live long and prosper.

You said both of those things. You may not realize you said both of those things (since one of them is an unstated premise of another claim you make), but you did.

A distinction without a difference. No matter how you slice it, your employer has to charge their customers enough to cover your taxes. You're just arguing a side. The content is here. Care or don't. I'm not going to explain it to you anymore.

 

[Toro]

7. The base price of goods and services (that is, their cost of production before adding any taxes, profits, etc.) would be lower because the embedded costs of the current income tax system would no longer be a factor. This would partially offset the increase in the total price of new products and services that would result from the Fair Tax.

I doubt this would happen. It might over the long-term, but it certainly wouldn't in the short and probably not intermediate term. The gains would almost certainly accrue to the owners of capital.

Theory has it that the rate of return on capital should approximate the return on the capital stock, i.e if the real return of the economy is growing at 2% a year, the return on capital should be 2%. Also, wages should rise with the level of productivity. However, this has not happened broadly over the past 20 years. Returns on capital have been well above the real growth of the economy and wages have lagged productivity growth. These gains have accrued to capital, not labour.

Prices are sticky. Because of human biases and how the modern economy is structured, deflation is virtually impossible. In theory, one would expect that the excess gains not arising from a decline in prices from the so-called "Fair Tax" would be distributed amongst labor and capital relative to productivity and capital formation. However, given the experience of the past two decades, there is no reason to think this would happen over even the intermediate term.

For a real world example, in Canada, when they implemented the GST to replace a manufacturers' excise tax and was designed to be revenue neutral, the price of products rose substantially and never came back down.

 

[kaz]

You're saying all individual income taxes today are baked in to the price of every good. That's a much broader claim.

It's an obvious claim. Employees don't care what their gross pay is, they care what their take home pay is. Clearly if you hire an IT programmer, they are marketable than someone who is reliable but has no job skills. If you pay an IT Programmer $80K, and the government takes $60K in taxes, and the latter makes $20K and pays $0 in taxes, the programmer's not going to work harder. They aren't making any more, you (liberals) are.

Companies have to pay employees a market rate that is high enough to pay their taxes. As tax rates go up for higher skilled employees, their pay does as well to pay the higher taxes. Then liberals cry about the rapidly raising pay for higher skilled ignoring that higher and higher portions are just to pay the higher taxes. It's a cluster you have going.

But that the cost of individual taxes is baked into the products sold by their employers is obvious for anyone but a socialist ideologue. If employers can't pay their employees enough to pay their taxes, they don't work for them. The total cost of employees is baked into the price of their products just like the cost of steel.

That's true if there is price inelasticity of the product being made. It's not true if prices have a high degree of price elasticity.

Price elasticity isn't binary. And there are a lot more factors then that in the equation. If gum is 10 cents a stick and the price is elastic, if government drives up the cost of producing a stick of gum to 12 cents a stick, no one is going to produce gum, or they are going to at least greatly reduce production to the point where supply and demand are back in equilibrium. Are you familiar with the supply and demand curve?

There is truth in what you say, but you way oversimplified it.

 

[Foxfyre]

Let's try it Dick & Jane style, Kas.

I hire Polk for $10/hour on a normal 40 hour week. That is a gross salary of $400. I withhold 20% or $80 of his wages that HE is obligated to pay for state and federal income tax, social security, and medicare. His check is $320 and the amounts I remit to state and federal government is $80.00 PLUS my employers' required FICA contribution for him PLUS SUTA, FUTA, work comp premiums based on his gross salary, general liability premiums based on his salary, and any other required taxes and/or wage-based insurance.

ALL of that comes out of my gross earnings. I can deduct some or all of it as business expense which helps reduce the taxes that I owe from my business, but the taxes I do pay are on top of all those other employee expenses.

And yes, all of that IS baked into the price of my product sold to my customers.

The only employee based expense I would not have under a Fair Tax system is that I wouldn't pay the employers' share of FICA or FUTA. The other expenses stay the same.

And assuming that I would have to pay Fair Tax on anything I buy for the business that is not for resale, I would guess my taxes would go up a bit above and beyond those payroll expenses.

You're missing part of his argument. He's not talking about just the expenses you listed. He's also saying the $80 I pay in taxes in your scenario are fully factored into his cost.

The $80 you remit as your taxes ARE fully factored into my cost because I am the one who furnished you the money to pay them. They reduce your take home pay, which doesn't directly affect me, but first they also came directly out of my bottom line. I pay the full $400 dollars whether you pay anything in taxes whatsoever. And so yes, that full $320 that you keep plus the $80 in taxes you pay is an expense baked into the cost of the business's products as much as is the light bill or the raw products I buy to make the product.

 

[RKMBrown]

That's what you don't get. For the "FairTax" math to work, it's not 80 bucks being "baked in". It would 160 "baked in". No one is disputing that the portion of salary that ultimately becomes taxes is "baked in" to the cost of goods. What is being disputed is that the same value is baked into the price again when it goes from the employee to the federal government.

Wrong. The example has the 80 in tax moving from income tax to sales tax (80 is baked in to the retail price of the item to cover the sales tax you have to pay for items). The total price of the item (with the 80 baked in for your paycheck) goes up 80 for sales tax but that sales tax 80 goes to the government as sales tax not your paycheck. So while the total item plus tax includes 160, your paycheck only has the sales tax 80 amount that was baked into the retail price. Assuming the company does not change the retail cost of the product he pays you the same and instead of you paying income tax you pay sales tax. Oversimplified but this example shows how the tax just moves from income to sales. Everyone is happy except the people that don't have income and thus were benefiting from not having to pay income tax. Which explains why retired folks prefer income tax over sales, unless we give them some credit for previous income taxes paid (as sales tax credit).

The only way you can reduce the 160 is to have no taxes. I like that, then companies can reduce your paycheck by 80, and reduce the price of the item 80, and does not have to add sales tax... voila item is 160 cheaper. Course then we have no government services. But you could buy them on the fly based on what you need. I suspect that would be about $20, thus the company would have to bake in 20 for the item. Yeah I'd much prefer -60 for the cost of items -60 for payroll and no involuntary taxes.

 

[Foxfyre]

But the point is, whether the employee pays taxes as income tax or social security tax or medicare tax or whether the employee pays taxes in a Fair Tax system, unless there is an adjustment in gross wages, the employer's cost is the same except that he won't be subject to the employer's half of FICA or the FUTA tax.