1,470 people who made more than $1 million in 2009 paid $0 in federal income tax.

[CJ7]

Originally Posted by CuteOldGuy

Explain please.

Under the FairTax, family households of lawful U.S. residents would receive a “Family Consumption Allowance” (FCA) based on family size (regardless of income) that is equal to the estimated total FairTax paid on poverty level spending according to the poverty guidelines published by the U.S. Department of Health and Human Services … Opponents of the plan criticize this tax rebate due to its costs. Economists at the Beacon Hill Institute estimated the overall rebate cost to be $489 billion (assuming 100 percent participation). In addition, economist Bruce Bartlett has argued that the rebate would create a large opportunity for fraud, treats children disparately, and would constitute a welfare payment regardless of need

raise tax or lose revenue


The sales tax would have to be pretty high to stay revenue neutral, i.e. bring in the same revenue for government as the current system. The bill that is currently in Congress is at 30% and independent groups have said the number is probably closer to 34%. This is a pretty large amount of money added to each thing we buy. This is especially true when you think of big ticket items. A $20,000 car suddenly cost $26,000. For somebody who has been saving under the current tax code, this would be a hard hit.

[waverunner234]

Originally Posted by CuteOldGuy

You people obviously have no idea what you're talking about. C'mon, Wave! Enlighten us with your wisdumb.

Told you, NOPE

[nwarounder]

Originally Posted by Laz

True but those will not be high volume items and a handful of irs guys can transfer to customs to deal with this. Place the burden of documentation on the buyer and simply hold the item until the taxes are paid so that he can get it. The volume will be low since the headache involved in that will make it easier to buy locally. Yes, some people will try to bypass the system but it will not be a large volume and the penalty for getting caught will make it unattractive.

We could argue for days, but the problem is that FairTax.org has been working on this for 7 years and they have yet to come up with solutions to these problems and THEY (Fairtax.org) will not answer these same questions that you are attempting to answer for them. They are talking about ammending the constitution in order to implement the FairTax and if they will not take the time to come up with the solutions, someone else needs to put something in writing so it can be legitimately debated. Consumption taxes are used successfully all over the world, no big argument from me, but FairTax.org and it's "FairTax" simply hasn't put forth the effort needed to ammend the Constitution, imo. I really don't think "ohh well, we'll figure it all out once it gets passed", is a legitimate solution.

[waverunner234]

Originally Posted by waverunner234

Told you, NOPE

But I gotta go >>>> Firestone >>>>> Oil change >>>>>>> Be back soon

[Laz]

Originally Posted by CJ7

The sales tax would have to be pretty high to stay revenue neutral, i.e. bring in the same revenue for government as the current system. The bill that is currently in Congress is at 30% and independent groups have said the number is probably closer to 34%. This is a pretty large amount of money added to each thing we buy. This is especially true when you think of big ticket items. A $20,000 car suddenly cost $26,000. For somebody who has been saving under the current tax code, this would be a hard hit.

The key to remember is that we are paying it now. The tax is simply hidden so that we do not see it as a tax. The transition will not be perfect but it would be worth the temporary headaches.

[bladtinzu]

Originally Posted by Laz

The key to remember is that we are paying it now. The tax is simply hidden so that we do not see it as a tax. The transition will not be perfect but it would be worth the temporary headaches.

Hidden? In most places in Alabama the sales tax is 10%. Add to this another 79 cents to every gallon of gas and it all adds up. Plus Groceries are taxed in Alabama. This has been a huge debate for years as most want to do away with it to ease the burden on the poor. But hey what can you expect when the idiots in Montgomery are ruled by the baptists who thing gaming and the lottery are super evil and will not allow either. Yet don't bitch when the state controls every single drop of alcohol sold in the state either.

[essence]

Originally Posted by Sexyeccentric1

Essence just type in the very question: How do the rich avoid paying federal income tax? or some other questions.. you will be surprised at what you find and the answers are there.

I have done a bit of investigation, but I'm afraid I get very scepticle about these kinds of claims.

I see there is something about hedge funds, but that is just delaying tax?

I see there is something about capital loss on property - but a loss is a loss, surely? Or is the 'loss' fictional? When they eventually sell, the capital gains will be higher?

I see something about foreign tax credits, but is that because tax is being paid abroad? In a preferable tax regime?

I find in all these kinds of stories, the reality and the headlines are two different things. The media always has an agenda, either way.

Charitable donations only reduce taxable income, they don't eliminate it?

[nwarounder]

Originally Posted by essence

I have done a bit of investigation, but I'm afraid I get very scepticle about these kinds of claims.

I see there is something about hedge funds, but that is just delaying tax?

I see there is something about capital loss on property - but a loss is a loss, surely? Or is the 'loss' fictional? When they eventually sell, the capital gains will be higher?

I see something about foreign tax credits, but is that because tax is being paid abroad? In a preferable tax regime?

I find in all these kinds of stories, the reality and the headlines are two different things. The media always has an agenda, either way.

Charitable donations only reduce taxable income, they don't eliminate it?

Entirely possible under certain circumstances. But when you are making most of your income off of dividends and interest, the highest rate is 15%, that is what pisses most people off. Now do some research on trusts, endowments, privately owned foundations and offshore tax havens and you can get that down to 5% very easily. Some, but not all can get it to 0%, depending on what all was going on in any given year.

[Laz]

Originally Posted by bladtinzu

Hidden? In most places in Alabama the sales tax is 10%. Add to this another 79 cents to every gallon of gas and it all adds up. Plus Groceries are taxed in Alabama. This has been a huge debate for years as most want to do away with it to ease the burden on the poor. But hey what can you expect when the idiots in Montgomery are ruled by the baptists who thing gaming and the lottery are super evil and will not allow either. Yet don't bitch when the state controls every single drop of alcohol sold in the state either.

The hidden taxes are the federal taxes that are built into the prices of everything sold in the US. All the corporate taxes, income taxes, payroll taxes and any other tax levied by the federal or state government. The sales tax is the only honest tax that is clear and easily seen by the consumer. All the other taxes are just part of the products price and us sheep just blindly pay it without knowing the amount. Makes it easier to control the sheep.

[CuteOldGuy]

You guys really need to learn about this before you discuss it. I mean, really? Laz is right. Economists have calculated that approximately 22-23% of the cost of an item is due to tax compliance costs. If there is no income tax with which to comply, there are no compliance costs. Simple market pressures will cause the price level to decrease by that amount, generally. Then that same level of tax is added to the item, resulting in no significant change in the price level. Add to this the fact that no payroll tax is levied means people will have more money, and a stable price level which will spur spending and boost the economy. The 23% is meant to be revenue neutral, which means Congress will still have to get spending under control, but the economy would be booming. Companies would be relocating here, due to the immensely more favorable business climate, meaning more workers, more pay, more buying, and so on.

And imagine what would happen to the auto industry if they no longer had to include compliance costs in the price of an automobile? If they could reduce their prices by 25% for the overseas markets, think about the boom that would cause. Or Boeing. They could put Airbus out of business.

I don't like the pre-bate, but it's not a deal killer. I'd prefer leaving the tax off food, because used items would have no tax. Poor people would not have to pay any tax at all. But like I said, it's not a deal killer. I really see no downside, especially when compared to our current totally ridiculous system, except Congress would have give up a lot of its control over the people. But that's a good thing, isn't it?

[Texas Contrarian]

From the opening post:

Originally Posted by Sexyeccentric1

...The Buffett Rule will make sure that households making more than a $1 million dollars a year or more pay at least the same percentage of their income in taxes as middle class families...

The "Buffett Rule" is more of a campaign slogan than a specific policy recommendation or set of recommendations. It simply states a desire to require high-income households to pay tax at an effective rate of about 30%, presumably irrespective of whether that "income" is comprised of salary, interest, dividends, capital gains, or anything else. I assume that politicians will try to achieve the desired goal by eliminating a number of loopholes and deductions and sharply increasing the tax rate on capital gains, qualified dividends, and carried interest.

Interest in the issue was stoked by Buffett's NYT op-ed last summer:

http://www.nytimes.com/2011/08/15/op...uper-rich.html

I encourage people to take a look and engage in a little critical thinking. Did you notice something that sort of sticks out like a sore thumb?

Think about this for a minute: Buffett said that his tax bill last year was just a little under $7 million, and that he paid tax at a 17.4% rate -- implying that his "taxable income" was somewhere around $40 million. But hold on just a minute! Buffett's net worth, according to numerous published reports, is somewhere around $50 billion. That means that his "taxable income" is less than one-tenth of one percent of his net worth! If the aforementioned $40 million taxable income were taxed at a 30% rate, instead of 17.4%, Mr. Buffett would have to write a check to the Treasury for an additional $5 million. To put that into perspective, that's like a guy with a net worth of $10 million having to cough up an extra thousand bucks -- not a very terrible burden. So you can plainly see that the imposition of the "Buffett Rule" would have an extremely miniscule effect on Warren Buffett himself!

Buffett doesn't make his tax return details public, so I have no idea where the $40 million comes from, since Berkshire common (BRK-B) does not pay dividends. Perhaps he earns interest and dividends from a couple of billion dollars or so held in portfoilos outside Berkshire Hathaway.

But what about the $50 billion stake in BRK-B? Since the stock pays no dividend, Buffett's net worth piles up untaxed. In fact, it gets even better. BRK benefits from the holding compnay exclusion on dividend income upstreamed from partly or wholly-owned subsidiaries. This allows the company to act as a fantastic compounding machine, since lightly-taxed or untaxed dividend income can be aggressively put to use on the acquisition trail. Talk about the ultimate rich man's tax shelter!

We had a good discussion of this last year:

http://eccie.net/showthread.php?t=274906

It's a very long thread -- 176 posts. The essence of the issue was discussed in post #156 and in posts #164-168, where nevergaveitathought made some excellent points. He also mentioned the issue of "tax incidence", which seems to be very poorly understood by most people, and continues to be a topic of interest for a lot of financial analysts and economists.

The capital gains tax has been a hotly-debated issue for decades. Although a lot of disingenuous demagoguery comes from people on both sides of the issue, history shows that there's a strong inverse correlation between net realizations and the top-bracket tax rate on capital gains.

A good non-ideological bit of commentary on the issue can be found here:

http://www.cbo.gov/sites/default/fil.../taxbrief2.pdf

[essence]

Originally Posted by nwarounder

Entirely possible under certain circumstances. But when you are making most of your income off of dividends and interest, the highest rate is 15%, that is what pisses most people off. Now do some research on trusts, endowments, privately owned foundations and offshore tax havens and you can get that down to 5% very easily. Some, but not all can get it to 0%, depending on what all was going on in any given year.

Dividends are only taxed at 15%? In the UK, they effectively get the same top marginal rate as personal income (which tops out at 50% at present).

Wow. Now I know how y'all can party all the time.

[JD Barleycorn]

Warren Buffet is already about four years behind on his personal taxes. He is currently in court challenging them. Do you really think this will make him pay them or General Electric that didn't pay any taxes after moving a 100,000 jobs to China.

[Texas Contrarian]

Originally Posted by JD Barleycorn

Warren Buffet is already about four years behind on his personal taxes. He is currently in court challenging them.

Actually, the dispute has nothing to do with Buffett's personal taxes -- it involves Berkshire Hathaway's corporate taxes.

The issue is rather arcane and involves NetJets, a BH subsidiary which is an aircraft charter and management service. It revolves around who, if anyone, should pay a federal transportation tax, sometimes called a "ticket tax", for the utilization of fractional aircraft ownership interests. I think Buffett actually has some pretty good arguments on his side in this case. After all, he has a fiduciary duty to protect the interests of his shareholders, not just his own interests. I realize that on its face this looks like something of a delicious irony. But as with so many things, there's more than meets the eye.

I saw this piece just a couple of weeks ago, and I think Sorkin does a very good job of explaining the issue in some detail:

http://dealbook.nytimes.com/2012/03/...ett-and-taxes/

Originally Posted by essence

Dividends are only taxed at 15%? In the UK, they effectively get the same top marginal rate as personal income (which tops out at 50% at present).


Wow. Now I know how y'all can party all the time.

Yes, we like to party hearty here in the States!

Prior to the Bush-era tax cuts, we paid tax at a 39.6% rate on qualified dividends, but that was cut to 15% in 2003. Current tax-the-wealthy zeal will probably not allow that rate to continue and most of us doubt that the 15% rate will survive. On the other hand, most analysts seem to doubt that the rate will return to the top-bracket rate on ordinary income, since economists of all stripes realize that would cause some collateral damage. Equity valuations undergird pension funding for a lot of very large institutions and organizations, both public and private.

Essence, if you see this post, I'd be curious about your take on this issue:

Is there as much palpable resentment over rising income disparity in the U.K. as there is in the U.S.?

I didn't realize the extent of the problem in the UK until I saw this:

http://www.guardian.co.uk/society/20...wing-faster-uk

The report says that according to the OECD, inequality is rising faster in the UK than in any other wealthy country. I suppose that should not come as a surprise. It would seem that factors contributing to income disparity exist in the UK just as they do in the US.

All the discussion concerning the Fair Tax is interesting, but of course it has no chance in hell of becoming reality.

Philosophically and in principle, it would be far better to tax consumption rather than work and production. Supporters of the Fair Tax say that it would be revenue-neutral compared with our current tax system. But, of course, the problem is that the current system only pays for about 60% of our spending, and we have to make up the rest with borrowing and outright Fed-provided monetization.The Fair Tax was first proposed in the late 1990s, when we were spending less than half of what we do today in nominal dollars.

Politicians are not going to cut spending in any area to any appreciable degree. That's why I think that within five years or so, we'll see rising income taxes on everyone -- not just the "rich" -- and a VAT stacked on top of that.

Of course, that won't happen until we suffer some type of fiscal crisis. For decades, vote-buying politicians of both parties have been telling people they can have all the free ice cream they want, and that the fat kid down the street will eat their broccoli for them.

But political hacks cannot conjure up some magic that supersedes the simple laws of arithmetic.

[essence]

I'm not an expert on the Uk situation by any means, but...

- the Guardian is considered a slightly left of centre paper. So it is my normal reading material . I usually read the Telegraph, but that is so I know what names to put in my black book come the revolution.

- I think most agree the disparity is large and growing, and certainly much greater than in, say, Nordic countries.

- this may be partly because London (which is very different from the rest of UK) is very attractive place for people to reside in, it attractcs great wealth. Of course, city of London also pays enormous salaries and bonuses.

- there is certainly a resentment by many 'normal' UK citizens about the high level of salaries and bonuses earnt by the few, particularly of course wrt the banks.

- there is a funny battle going on between prospective myors of London, Boris Johnson (on the right) and Ken Livingstone (on the left). They are accusing each other of tax evasion. Boris is probably winning the argument, but Boris makes far more than Ken. Boris gets £5k per week for a column which he says takes 30 mins to write. Ken's income is far far less.

= It is the normal British tendency to see virtue in poverty! But Ken's problem is that he once accused people of being rich bstds who should pay full tax, so any tax loopholes he uses are fair game for the shit to come down on him.

- it's basically too complex to detail here, but y'all in US would find it amazing. Poverty a virtue?