Tuesday, February 21, 2006

An introduction...

Yes, friends, it's time for an introduction for some of you to the wonder that is the Fair Tax Plan. Today, for you, I have an article from one Justin Wong, who writes for the MIT paper, the Tech. His article gives a brief overview of some of the points for the Fair Tax. Intrigued? Hate it? Questions? Go to Fairtax.org and take a look around before you come back. You might be surprised at what you learn.


patsbrother said...

How much will sending that check to every American each month cost?

And how will this save us all a whole lot of money and yet raise the same amount for the federal coffer?

Whose average do we use? Alabama's or New York's?

And let me get this straight: if I don't work, I still get paid? Each month? Automatically?

Patrick Armstrong said...

One day, I will have time to devote to annihilating this argument. Perhaps the Matrix has me, and I believe this would be too simple a system to work. Perhaps I just see that linking our tax base to the shifting winds of economic change may be unstable. Perhaps I just fear change.

I am not perfect, and I must offer that before saying the following:

I despise the idea of going to an all sales tax system. But at least we're talking about the tax system, which is currently more broken than an all sales tax system.

I like multiple streams of income for the tax base, and that's for stability and security more than 'dirty liberal wants his hands in every pie.'

I look at my taxes, and I pay waay more for health care than I do for any indidivudal tax. Add it all up and I get 33% shaved off the paycheck. That 33% could be spent better, but not much better.

I hate taxes. But we've got to pay them for services rendered. We get neat things like bridges and schools and M1A1 Abrams Main Battle Tanks for paying our taxes. (We also get sleazy politicians wasting our money.) The point is not to have everyone else (the rich and the poor-poor) leave you (the middle & working classes) holding the check.

I see the point of income taxes for their stability: they help pay for infrastructure and guns and the people who keep us safe.

I see the point of property taxes for stability: schools and county development and the people who keep us safe.

I like the idea of sales taxes because of the huge amount of commerce we do, even in downturns. I like the idea of sales taxes because everyone pays in, and that is very important to me.

But the idea that our current tax system discourages success is a right-wing two-scoops of rasins idea. People who want to be successful in business are going to be successful in a 5% or a 50% tax bracket. People who want to spend all day at the beach goofing off and playing rock and roll (like me) will be successful doing those things in a 5% or a 50% tax bracket.

Our economy is still the biggest in the world, so I have to question motives of the authors (other than simplification of the tax code). Oh woe is our great and powerful civilization.

The problems with our economy have faar more to do with the fact that for every individual rowing the boat, we have eight people trying to steer the boat.

Dante said...

"How much will sending that check to every American each month cost?"

Technically, it wouldn't cost anything since in theory the check you're writing would only be covering taxes paid on living expenses. You'd merely be refunding that amount back to the tax payer who paid it in the first place.

"And how will this save us all a whole lot of money and yet raise the same amount for the federal coffer?"

I think you underestimate exactly how many people pay little to no federal income tax. Under this system, everyone is going to be paying into the federal coffers. That refund check will amount to more than most lower-middle to lower class folks get as tax refunds but they're still going to be shouldering a chunk of the tax burden under the fair tax system. If that refund actually hit the ideal amount it's supposed to, a portion of that money the poor shower on Budweiser and McDonalds is actually going into the federal coffers.

"Whose average do we use? Alabama's or New York's?"

Now I think you're just grasping at straws. By this logic, how can we possibly have a welfare system? It'd be unfair to the people of New York and people in Alabama would live like kings without even working! I suggest you (and those behind the fair tax plan) look at the Welfare Reform packages during both the Nixon and Clinton administrations. They've both covered this topic pretty thoroughly.

"And let me get this straight: if I don't work, I still get paid? Each month? Automatically?"

Thats right. You'd get paid the amount you spend on sales tax on the bare necessities of life. I wouldn't exactly hold out hope for it being a living wage here. Besides, even if you don't work, you still have to live and that requires paying somehow for the basic neccessities of life.

For what it's worth, I despise multiple streams of income for our tax base. It makes it easy to forget just how much you're paying in taxes. I want to keep a sharp eye on how much money I'm paying the government and what I'm getting for that money. If politicians aren't trying to get their money-grubbing hands on more of the pie then when new types of tax are introduced, taxes elsewhere should go down. That rarely happens.

What a nice segway to my final point. Do I support the fair tax plan? Repeal the 16th Ammendment and I'll think about it. Until then, I'll fight it with my dying breath. I'm not even falling for this one. Sure we'll do away with federal income tax in favor of a federal sales tax for now but ten years from now, Congress is going to bring the federal income tax beast back but only to tax "the rich." By the time my kids are working full time jobs, they will be paying both the federal income tax and the "fair" tax if the 16th isn't repealed before passing a fair tax bill.

petallic said...

Heh. I have nothing to add here except Justin Wong is my second grade teacher's son and my first grade teacher's grandson.

Cute kid. Glad he's doing well.

patsbrother said...

The cost I was referring to was the cost of having people keep accurate records of who's who, buying paper, printing the checks, actually sending a check through the mail, overhead, administrative costs, set-up fees, having investigators to ensure there is no fraud, and - oh, how does this rid us of the IRS?

And Dante, you really didn't answer how this would generate the same ammount as well as give us a tax break. If you're refunding the poor everything they pay on necessities, are you really taxing them more are aren't you? And, as this seems to be a windfall for the rich (unless you count stocks as retail), it seems we'd be getting less from that arena. So where is the extra cash coming from?

And my example, I admit, was a little far-fetched. However, necessities do cost more or less in different areas. Will people in South Fulton and people in Buckhead be getting the same check back? Do we give larger checks to those living without transportation to the supermarket who must rely instead on the the higher-priced corner stores?

Dante said...

As far as administative costs, it would be a less overhead than the IRS since there's a flat rate going out to everyone based on where they live. Auditing would be a LOT simpler and almost entirely revolve around fraud investigation (which the IRS already does anyways).

"oh, how does this rid us of the IRS?"

My firm belief is that it won't.

"are you really taxing them more [or?] aren't you?"

Even our poorest spend a lot more money on luxury items than you give them credit for. In a perfect system, they'd be taxed more than they currently are at the Federal level because of this. Personally, I'd be more in favor of exempting taxes on items required for basic living but that wouldn't give taxpayers the "refund" fix they currently get from federal income tax.

Stocks are essentially a form of loan so I don't really expect them the be taxed this way. I don't see this as necessarily a "windfall" for the rich since they just have the opportunity to keep what they earned in the first place. They still have to spend money though and when they do, they'll be taxed for it just like everyone else. Sure there will probably be ways to get around the fair tax code but I doubt it'll be any worse than getting around our current income tax code.

The "extra cash" is coming from everyone, not just the rich. I'm pretty sure (but not certain) that's where the word "fair" comes into play.

"However, necessities do cost more or less in different areas."

And once again, I'm going to have to defer to the wealth of research done on the subject of determining welfare payments to give the best idea of how to distribute refund checks.

I think this plan is interesting because it encourages savings and spreads tax burden out pretty evenly, but as I've previously mentioned I'm not going to support any new form of tax being implemented even if it's to replace a current form of tax. Taxes have a nasty habit of never really going away once implemented.

The main reason why I post pro-fair tax arguments is because some of the arguments I'm seeing could be a lot better. I'd hate to see weakly put together straw man arguments bolster the fair tax cause. This is one area where the opponents could do a lot more damage to a cause by bringing up logically thought out questions instead of preying on people's irrational concerns.

S.A.W.B. said...

Sprouty, sprouty, sprout...

I don't think I've ever seen you go out of your way to step on your wang over an issue like you have with this one.

For some inexplicable reason, you have taken the 'liberal class-warfare' snap, and run expected Donnan Sweep with it.

Really, I thought you'd at least throw something more substantial up than a few weak straw-men.

The cost of sending the check to every American, or head of household, every month, cannot possibly touch the cost of applying and enforcing the current archaic tax code. Remember, the feds get to mail stuff for essentially free(bulk and metered rates), ink is cheap, paper is cheap. It becomes even more cost effective if the option is presented to have the monthly prebate deposited electronically.

It costs a lot of money to run a Federal Bureaucracy the size of the IRS. Even if we trim it's workforce by 1/3, those savings annually will dump money into the federal fund-hole.

I would figure we would use a NATIONAL average, seeing as how it's being proposed as a NATIONAL sales tax.

Yep. You get paid every month. Just like the bill says. Under 18? Your folks/guardian gets the check I'd guess. Retired? you get a check. Student? welcome to beer money. That's why the bill states it in plain english. EVERY month, EVERY American will recieve a check to cover the cost of basic goods.

I don't know about your current situation, but I know from my own personal experiences that the current system is wholly unfair to a great number of us. I don't believe that you would quantify me as 'rich', but if you saw what I paid in taxes every year, I would hope that you would think that perhaps I'm paying more than my 'fair share'. I know I do.

Buzzzbee said...

I'll try to be brief even though economics are almost always complicated. This is the exact opposite of what we need. Your first, basic college course in microeconomics will teach you that sales taxes are bad for business. Sales taxes create what is called "dead weight loss". It's sort of odd that this comes up here now, because I am about to tutor someone on this very chapter of Dr. Matthew's Microeconomics class. If I knew how to upload a picture here I would draw it out for you in graph form, but I can't. Anyway, sales taxes are bad for the consumer and they are bad for business. We should take an opposite path and abolish sale tax and go to a strictly income tax system. We still have to pay our bills. Whether we take them out out of our check or pay them every single day at the checkout. The key difference is, sales taxes artificially alter demand towards the negative, which hurts the supply side of the economy, and I know you good Reaganites wouldn't dream of hurting those guys.

Patrick Armstrong said...

You want a straw man? I'll give you a straw man. This ain't about class stuggle, this is about people using stuff that other folks paid for long ago.

I hate our archaic tax code, and I would love to see it simplified. I would love to see costs cut by eliminating waste and increasing efficiency. I can't stand the ideas of earmarking and pork barrell politics.

But I'm not willing to give up on the things that we've been able to achieve as a society that business never would have done on their own. I'm not willing to tie our whole system to a sales tax where revenue increases or decreases based on the direction the economic wind blows.

We are a giant, multifaceted nation, and it costs a lot of money to keep this place in business.

The first thing our taxes do is raise & sustain our Armed Forces. Those taxes also pay to support folks who have already served and take care of those injured or the families of those killed defending us. This allows folks to conduct business in peace, and have a chance at making some money for themselves.

The second thing our taxes do is raise & sustain our judiciary system and subsidize our police and law enforcement agencies. This allows us to rise above the barbarity of anarchy and pursue justice and redress of grievances among the population. This allows folks to conduct business in peace, and maybe make a little money for themselves.

The third thing our taxes pay for is the infrastructure linking this big landmass, and our interests around the world, together. Find me a business anywhere in America whose products don't have to travel by road, rails, sea or sky (all subsidized industries); find me a business anywhere in America who doesn't benefit from having electricity & phone lines (subsidized advances); find me a business anywhere in America who doesn't take advantage of water management and plumbing; show me a wealthy man or a poor man who does not benefit from something paid for at least in part by the collective wealth of this nation. This is the big dawg, because this really helps folks conduct business.

A rich business owner is not 'punished' by increased taxation, he is charged more for greater access and usage of the taxpayer's bought and paid for stuff. A wealthy man who transports 10 tons of widgets through plane, train or ship is using a higher percentage of stuff I own stock in than I do.

Why should I be expected to pay the same percentage as him?

Now, he don't gotta pay a whole lot more of a percentage IMHO, because I know his transporting 10 tons of widgets benefits me in many indirect ways (that's why we chipped in for those planes, trains and boats in the first place). But he don't get to act like me demanding he 'pay in' is some sort of violation of his rights.

That's my interstate, that's my port, that's my heavy rail system, that's my air traffic control system; they didn't just grow out of the ground. Hell, my Momma's family was payin' in at the same time they were buildin' stuff like that.

Like I said, business man can use that stuff too, 'cause he paid in too back in the day. But now that he's usin' the stuff don't free him of the responsibility of payin' for it.

Dante said...

"I'm not willing to tie our whole system to a sales tax where revenue increases or decreases based on the direction the economic wind blows."

That's fine but the rest of your writing here has little to do with that. The rest of your blurb merely points out the merits of making sure the government has plenty of spending money. A federal income tax is just as vulnerable since incomes typically also go down along with spending in an economic downturn.

"Now, he [rich business owner] don't gotta pay a whole lot more of a percentage IMHO, because I know his transporting 10 tons of widgets benefits me in many indirect ways (that's why we chipped in for those planes, trains and boats in the first place). But he don't get to act like me demanding he 'pay in' is some sort of violation of his rights."

But he does pay a whole lot more. Here's some numbers on that:

The table at the bottom has the info I'm referring to. Proportionally, the top 1% of income earners pays 1/3 of all federal income tax taken in, the top 5% pay half, the top 10% pay 2/3, and the top 50% pay 96.54% of the money the government takes in as federal income tax.

From the looks of those numbers, that's his interstate, that's his port, that's his heavy rail system, that's his air traffic control system. At the very least, 2 of the 4 are his.

I'm not saying he should be exempt from taxes, but I am saying that he is paying a LOT of money in compared to everyone else.

Patrick Armstrong said...

Yes, but he also makes a whole lot more through their use.

(Whist I have to pay for gas and drive for 5 hours to get to Atlanta, he gets to write off gasoline, a cellphone, his truck, maintenance on his truck...)

IF there weren't no money to be made in business, people wouldn't go into business.

Dante said...

"(Whist I have to pay for gas and drive for 5 hours to get to Atlanta, he gets to write off gasoline, a cellphone, his truck, maintenance on his truck...)"

I think you're a little misinformed on this topic. I can see how it would be easy to be confused over the confusing nature of corporate taxes. Seeing as I am currently figuring my corporate taxes, I can shed a little light on the subject. The [gasoline,maintenance costs] or [mileage] (your decision but has to be consistent from year to year) can be written off but only while engaged in business activities and only while not on commute to a daily office. If what you as a typical employee are doing fits into the same category and you are not being reimbursed for mileage or time for your trip, you can also claim the same deductions but your standard deduction will probably still come out ahead (and you'd have to file that pesky 1040 instead of a 1040-EZ or a 1040-A).

The cell phone works similarly. A business cell phone should only be used for busines purposes. If not, you must figure what percentage or cost of the time was spent waking personal calls and take that out of the deduction.

As far as corporate vehicle is concerned, you can only deduct a vehicle that you use more than 50% of the time for business purposes and you can only deduct a percentage based on the mileage you spend travelling for business purposes vs. the mileage you spend for personal purposes. And even that is only based on an archaic depriciation scheme that is bad enough that most businesses lease now despite the higher cost of lease vs. ownership.

Now I do realize that a lot of businesses cheat on these taxes and claim personal expenses as business expenses but that's not very different from the myriad of ways that non-business owners can cheat on taxes.

And I know this is really just further hair splitting on my part but after paying corporate taxes for a year myself, I've been very surprised at how the tax system really works vs. how most people think it works for businesses. I just figure I'd share what I learned.

"IF there weren't no money to be made in business, people wouldn't go into business."

Nobody is arguing that. The argument I see is that business owners are paying more than their fair share. Your take on the argument (not meaning to put words in your mouth so correct me if I'm wrong) is that the business owners are using resources that reflect their tax rate. My take on the argument is that they are probably being taxed at a higher rate compared to their resource use.