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Second Lieutenant
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11/17/2008 8:17 AM
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| From an economics student to an economist, I'm curious how you think this new tax law will affect the agregate damand and agregate supply in both the short run and the long run Sean.
I like the idea behind the reform, and can see many benifits. But unless the social structure is changed, I think this new poicy is really going to hurt the lower income class of society (single mothers, students, low skilled labourers, and new entrants into the workforce), if I'm correct in assuming these low income people pay little to no income tax in the current system.
Is this new system going to take away some of the buerocracy, or is it going to expand it. If America still cares about the lower class of society, this new tax reform could cause more headaches than it solves.
Sometimes the charlatan's ideas seem to make alot of sence, but further study shows him to be just that, 'a charlatan'. |
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Money is like diarrhea, it runs out fast. |   |  |
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General
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3/20/2008 10:52 AM
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| "Fair tax" seem like an oxymoron. No tax is fair. :p
Here are some quick calculations for a family of four that earns about $70,000 a year: Let's say they spend $20,000 they would pay $4,600 in tax under the "fair tax" system. According to the site below they would recieve a rebate of about $6,000, so they would actually make an extra $1,400 a year. The income tax at that level I would guess is 15% meaning they would pay $10,500. So it seems like quite a bit of savings, in fact earnings. 
How much would a single mother with 3 children spend in a year? She could spend up to $19,350 and still pay no tax at all.
Check my math and starting figures because it doesn't seem right, at least not if the government wants to take in the same amount of money that they do now.
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I'm not an economist so I don't know what would happen to retail prices. Would they remain similar, increase, or decrease?
I would think that since corporations and retailers would no longer have to pay taxes that the products price would decrease which would be offset by the increase in sales tax. Or would the corporations and retail stores keep the prices the same and then add the 23% in order to earn more profits?
I think that if the cost of goods increase people will either 1) reduce spending and begin saving or 2)enter the black market/barter for goods (as Tosk suggested above). Both of which will cause short term problems with the economy.
Also, senior citizens will get the short end of the stick with this plan. They paid income tax their whole lives and all of the sudden they have to start paying a lot more on goods.
I found a good website that discusses the benefits of a "fair tax" system. It addresses both Ness's question about education and Scipio's concerns about charitable contribution.
Fairtax.org
Is this new system going to take away some of the buerocracy, or is it going to expand it.
Well there will be no IRS and extremely long tax codes to deal with so I would assume that it would reduce the bureaucracy. | --
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Elite Pathogen
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Elite Warlord
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Grognard fantôme
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| Darn, that link is not working right now Winner. Hopefully it's just temporary; I'm curious to see what they have to say about philanthropy and education, as well as low-income.
RE: your disagreeing Tosk, true enough. Lots of filthy rich folks probably would give it away even if they didn't get the write off, but some (which could vary between 1 and 99% :p ) MIGHT give LESS.
If you've got 6 gagillion dollars, and you know that Uncle Sam is either going to take 4 gagillion of it, OR you can give away 3.36 gagillion to whomever YOU choose, and then Uncle will only take half a gagillion, that is motivating to give your favorite charity the dough (be it universities, churches, nature preserves, the arts, museums, zoos, public works, schools, entrepreneurs, science development, whatever YOUR favorite happens to be), versus giving it to Uncle and letting him buy $700 hammers, and $2 billion bombers that crash and burn.
I'm all for rich folks Tosk! Rich folks rock! I got my education thanks to rich folks, and yes I agree, if you achieved it, you should have the option to do what you want with it.
But what I am saying is this: America, indeed the entire history of civilization, would not be what it is today, if not for rich folks who put their money where their dreams, or preferences are. Allowing people to make lots, but then giving them "encouragement" to give lots away to constructive sources is a good thing for a society to have. My only concern is that, a tax system would take away that encouragement, and thus reduce the benefit that those rich folks have for society as a whole.
My only other questions about this are:
1) How much of a negative impact will it have to essentially disband the entire tax infrastructure? Think about how many hundreds of thousands of jobs are DIRECTLY tied up with the current tax system, not to mention the hundreds of thousands more which are indirectly tied up, and then hundreds of thousands more which are involved with. Think of all the records, the procedures, the policies, the organizations that would have to be revamped, redone, eliminated, or otherwise changed. It seems almost unbelievable, and I wonder if they have really thought it through in terms of the risk that a sudden change would spark off a major recession?
2. What is "consumption?" Does electricity count? What about ammunition? Pet food? Stocks and bonds? Real estate? Cinema? Plane tickets? Membership on a web-site? Tipping? Should everything be taxed at an equal percentage? If so, then the law will certainly disadvantage lower income folks who spend a relatively much larger percentage of their income on basic goods and commodities. If not, then it will create the opportunity for loopholes and abuse.
If all commodities are not taxed at an equal rate, then what is to prevent folks with large capital from purchasing large portions of non-taxable consumables, and then holding them off the market to raise the prices (ala De Beers warehouses full of diamonds)?
I guess I'm just not convinced that it is so easy as replacing a voluminous code with a 3x5 note card code, and that the guys that dreamed this up are so expert that they have foreseen ALL the ramifications and potential outcomes, and LOOPHOLES that it will create. Are there any polities that currently have this sort of tax structure? |
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"'The front' is wherever you stop running away. Get used to it. This is what modern warfare looks like." K T Cat | | | |
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Elite Pathogen
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die with honor
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| Well I have been aware of this for some time but have never taken a real close look. The main reason is because of the things I stated before in terms of it's chance of passage.
A few points:
SS now just goes into the GF and the Govt promises to pay X when you get older, the supreme court has already ruled that they do not need to keep this promise due to the way SS was written up. So what changes??? except your payroll deductions stop.
Illegals pay no federal tax, yet they get federal benefits, (under emergency, don't ask don't tell, services laws) now they will pay into the system also, so remaining illegal is no longer an advantage, and to some extent will offset the cost of emergency services. What is it now 30 million illegals ... that is some serious money that they send home because they pay no federal tax income.
I think many of the questions, several of you have asked, now make the rebate proposal make more sense to me. I had asked, why not just not tax the nontaxable items. The rebate, or proposed govt monthly check, is based on the national mean to offset non taxable items.
That appears to say, as I understand it, that everyone gets the same monthly check (say $1,000) it makes no difference if you make 20 grand a year or 20 million a year you get the same thousand bucks. That 12 thousand a year is a much bigger boon to the low income and elderly than it is to the wealthy. It also means that when a wealthy guy buys a new Lear jet he raises that mean for every one, rich and poor alike. So the more the rich spend the higher everyone monthly check is. It also means that Illegals will not get this monthly payment, so now it becomes a disadvantage, rather than an advantage to be illegal. They pay the tax but don't get the check.
At least that is how I understand it.
Education has no part in the federal income tax. If any is unaware, Education is state funded by state property tax. The fact that the Fed gives the states aid for education has nothing to do with federal income taxes. The same goes for health care, different subject.
If we the people start to demand all sorts of riders to address unrelated issues then we will be doing our part to convince them to do nothing.
Lets try to change one thing at a time rather than trying to make a totally unworkable be all end all bill that ends up longer than the current tax code.
If this thing ever gets anywhere close to passing I'll get real serious in looking into all aspects of it ... but for now it is just food for thought.
I agree with jerm ... it would create quite a jolt. |
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Mine honor is my life; both grow in one:
Take honor from me, and my life is done:
Da Bard ... But something tosk would say.
Americans used to roar like lions for liberty; now they bleat like sheep for security.
~ Norman Vincent Peale~
We don't have to live in the kind of America the two Major parties have in store for us.
Together, let us lay the foundations for an America worthy of our Founding Fathers.
~Ron Paul~
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Veteran Warlord
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