Fair Tax ?

[Texas Contrarian]

Originally Posted by WTF

MR Giz..............''shifting the tax burden'' is what the tax should be called.

Reagan did that in the early eighties. You have seen the resulting disparity (read widening) in income gaps in the country since then.

The notion that rising income inequality in the U.S. was caused by "tax cuts for the wealthy" seems to be a popular (and enduring) myth, but it's completely false. In fact, multiple rounds of tax-cutting in the early '80s and early '00s largely removed the income tax burden from the bottom half of the income strata. (Rising inequality has mostly arisen from "globalization" and the shrinkage of our manufacturing base.)

The "Fair Tax" might be an interesting idea if spending had not exploded from 2001 levels. It comports with the simple principle that it's better -- and produces fewer distortions -- to tax consumption rather than income and capital formation. Now the Fair Tax couldn't even come remotely close to paying the bills. (Note that the federal budget has doubled since 2001.)

The task policymakers now face is how to extract large sums of money from the middle class in a non-politically suicidal way. I think that's what Obama's new deficit-reduction commission is all about. (A prominent fund manager recently referred to it as the "VAT-recommendation" commission.) Politicians need political cover before raising taxes on the non-affluent.

Last year's attempt to sneak a big tax increase on the middle class through the back door (cap-and-trade) is dead in the water, at least for now. And Obama backed himself into a corner with his promise to restict tax increases to those earning more than $250K -- but that would be unlikely to raise more than a nickel of every deficit dollar.

The simple fact is that Obama and congressional leaders need political cover for a huge tax increase on the middle class. No school of economic thought (classical, Austrian, Keynesian, or anything else) holds that it's even remotely acceptable to run fiscal deficits approaching or exceeding 10% of GDP with no end in sight and no credible plan for eliminating them.

My prediction is that Americans will soon be saying hello to the Value Added Tax.

[discreetgent]

Originally Posted by CaptainMidnight

My prediction is that Americans will soon be saying hello to the Value Added Tax.

VAT in itself is not necessarily a bad thing; devil is in the details. I think the key is that it is lower on staple goods - basic food, clothes - products and then higher and pretty much everything else. Of course other taxes would have to be adjusted as well or it becomes a political no go.

[atlcomedy]

The real reason - pragmatically speaking - it won't happen is the Seniors (and their VERY POWERFUL lobbies); particularly now as the Boomers starting to retire with many not far behind them.

Fundamentally, a "Fair Tax" changes from tax on income to consumption. Not going to be very popular with a group that went through their earning years taxed on income and now in their golden years get taxed on that same income again when they consume.

[notdeadyet]

Originally Posted by WTF

First off...there ain't such a thing as a Fair Tax.

Sure there is. A Fair Tax is one that somebody else pays.

Following up on a few other points made by others:

1. It's a bit misleading to talk much about tax rates now versus those of thirty years ago (when the maximum income tax rate was 70% -- it was a big deal when the maximum tax on earned income was dropped to only 50%). The reason is that there were numerous tax deductions allowed thiry years ago that no longer exist -- in essence, you once could use capital to make investments, and the deductions from the investments would shelter all of your current income. That approach is no longer possible for most middle and upper-middle class people.

2. The reality is that even vastly-increased taxes on "the rich" (whatever that means -- and the meaning changes, depending on who's talking) will not be sufficient to pay the obligations of the various levels of government -- there just are not enough of them. Hence, the only way to achieve a meaningful increase in tax revenue is to tax, directly or indirectly, the "middle class".

3. As CaptMidnight pointed out, the only realistic way to raise a large amount of money is with a VAT or national sales tax, and those items will be tremendously unpopular.

[MrGiz]

Originally Posted by WTF

MR Giz..............''shifting the tax burden'' is what the tax should be called.

Reagan did that in the early eighties. You have seen the resulting disparity (read widening) in income gaps in the country since then. We are becoming close to Mexico in that regard. Some may even think that a good thing.

So, are you saying Reagan created more rich? Or more poor? Or both?
Has the middle class grown so much?

A few more simple questions.... what has happened to tax revenue, as spending has exploded? Did Bush's war mongering and tax cuts create all of our current financial problems? Might it have been the Congress in place?

Have any of us here, ever spent our way out of debt?

[WTF]

Originally Posted by MrGiz

So, are you saying Reagan created more rich? Or more poor? Or both?
Has the middle class grown so much?

?

Reagan created an illusion.

He tax'd the middle class by raising the SS tax rate'/limit. He cut the rate on the wealthiest income. Do the math. Yet he is hailed as some great tax cutter. Nothing is further from the truth. Oh he also raised the tax on a gallon of gas. He increased Regressive tax's. That hurts the little man any way you shake it.

Our economy was built on low oil prices. We had a huge benefit at the outset of globalization. Not so much so now that others have stepped up manufacturing. When you inject as many new workers into the equation that globalization has, the workers wages in the wealthiest of nations can't help but go down. But that Jennie has been let out of the bottle and there is nothing to do but compete. Should be a interesting next fifty years when we are competing with countries that have not had their manufacturing bombed the kingdom come and the other half of the world is shut up in a commie system.

I agree with whomever said Obama fuc'd himself...he thought this cap and trade pony show would save his ass on the revenue front.

RK is correct (as much as I hate to say that) the middle class will catch the brunt of any new tax's. Of course the middle class needs to learn a fucking lesson that they may just should start paying for what they want. They want a war or welfare , they need to pony up!


Sp to sum up...I agree with atl, RK and CaptainMidnight's view on what has went on in the past.

[MrGiz]

I have always been amazed at the lack of responsibility Congress is given, for their totally inept performance!

Can you explain, exactly how any of the Presidents have actually caused anything?

[Rudyard K]

Originally Posted by MrGiz

So, are you saying Reagan created more rich? Or more poor? Or both?
Has the middle class grown so much?

A few more simple questions.... what has happened to tax revenue, as spending has exploded? Did Bush's war mongering and tax cuts create all of our current financial problems? Might it have been the Congress in place?

Have any of us here, ever spent our way out of debt?

Geez, C’mon. Such sweeping, global questions are meaningless.

There are two sides to all this stuff. “What we (the Gov) spends the money on?” (that’s the part where WTF spouts all his stuff about the military). Then there is “How we (the Gov) raise the revenue?” (that’s the part about taxes where many of the conservatives banter around). The two really don’t have a lot to do with each other, except for the part that they need to meet up again at the end of the day.

Tax rates have declined significantly over the course of the years…both income taxes and capital gain taxes. But as someone said, all kind of deductions have gone away. Investment Tax Credit (ITC) is gone. Medical expense deduction has changed to where it is only deductible to the extent it exceeds a certain percentage of your income. Even charitable deductions have changed to where they are only deductable to the extent they exceed a certain percentage of your income (I think the % is 3%). So, if you make $100K a year, and you only give $2K to charity, you don’t get to deduct the $2K. Then there is Alternative Minimum Tax (AMT). This is a whole separate calculation of tax based on a different set of rules than the normal tax code. If the normal tax code yields more tax…that is your tax. If the AMT yields more tax…then that is your tax. Percentage depletion deduction used to be 27.5%...now it is 15%. Things that used to be expensed, now must be capitalized and depreciated over time. Have all of these things meant the real effective tax rate is higher or lower? Who the hell knows? I think I know, but I haven’t a clue as to how to prove it.

But when I watch these threads and see that the tax code is being discussed, and then see someone jump in and start talking about government spending, I know they are either neophytes who don’t know what they are talking about, or they are simply trying to divert the conversation away from a real fact. Likewise, when there is a thread about government spending, and it runs off on the tax rate or tax code…the same thing is happening.

[WTF is, of course, excluded from these condemnations because 1) he has been feeling a little put upon here lately, and 2) he is the poster boy for the Tourette's/ADD foundation.]

[MrGiz]

Originally Posted by Rudyard K

Geez, C’mon. Such sweeping, global questions are meaningless.....

Hey... I'm bored.... and there are many self-proclaimed experts here. What better place, to shop for meaningless answers?

[Rudyard K]

Originally Posted by MrGiz

Hey... I'm bored....

Fair enough!! You could go hit the links. It looks purty out there.

[DFW5Traveler]

If taxes are laid upon us without our having a legal representation where they are laid, we are reduced from the character of free subjects to the state of tributary slaves. - Samuel Adams

An unlimited power to tax involves, necessarily, a power to destroy; because there is a limit beyond which no institution and no property can bear taxation. - John Marshall, McCullough v. Maryland, 1819

That's all I have to say about that!!!