DescentBB

callmeslick wrote:

tunnelcat wrote:Prove that instituting a national sales tax won't hit the middle class and poor the hardest. Prove that the rich and all the rest of us buying loads of stuff will make up for the loss of income tax revenues. Prove that we could all spend enough to get our butts out of debt if we just didn't have all that nasty income tax. Prove that taxing already expensive medications isn't going to put a hardship on seniors. Prove that people won't just cut back on buying things to avoid the tax. Prove that a black market won't form to circumvent said tax.

minor quibbles......

No, actually, it is completely baseless full of false assumptions and a bit of the old red herring fallacy thrown in from her ideologue knee-jerk instinct.

I fail to see what would make a business that doesn’t collect state & local sales tax, suddenly start collecting federal taxes…

And, just who is going to collect the tax, when somebody buys drugs?

Spidey wrote:I fail to see what would make a business that doesn’t collect state & local sales tax, suddenly start collecting federal taxes…

And, just who is going to collect the tax, when somebody buys drugs?

A drug dealer makes hundreds or thousands of dollars a week/day whatever from selling drugs. He pays $0 tax on it right now. Under the FairTax he takes his illegal profits and either eats it or pays tax every time he buys something... Voila! New revenue to the tune of 5% of GDP every year suddenly becomes taxed!

Most states have a sales tax already in place. The same channels would be used to collect the FairTax. In a state that doesn't have it it would be set up. Jobs created to set it up...in some cases IRS employees freshly out of work with experience to fill them.

Why they would do it? The same reason they currently collect payroll and social security taxes etc. from their employees and report and deliver that revenue to the Fed...because it is the law. For the most part it would be a seamless transition. You don't have a payroll tax column any more but you now have a FairTax column instead. Minor adjustment to the work flow almost no change you just use a different multiplier, send it on a different form to a different address maybe...thats it..

I understand how the consumption tax theory works…

But, I think you misunderstood my question.

If a business is under the table now, why would they decide to suddenly start obeying the law, just because of another tier of sales tax? You did say it was going to bring in revenue from the underground economy, right?

So why would the underground economy choose to get legal?

I understand the rest, as far as that person spending the money in the overground economy.

Spidey, it is not a choice or adherence to any law the underground people will make. Tax revenues are generated every time they buy something. So not only will the cash register ring up a state sales tax it will also ring up a federal sales tax that you then pay at the counter as the total purchase price of the item. So when the local drug dealer or pimp goes out and pays cash for his new gold plated faucet, he now pays a federal tax and thus contributes to the nations economy.

Don't drug dealers already spend sales tax while still not paying income taxes right? I don't see how it would change in that respect. I do see the benefit to the individual though as a means of being able to have more liquid cash available to them which would lessen the need for credit.

Woody, I already gave Will that part of the point.

Will is stating that the Fair Tax wil derive revenue from the “underground economy” when people spend money at Wal-Mart…that’s the overground economy…nothing will change in the underground economy…

In fact, I can see people creating even more of it, because of greater demand.

So the fact is, there will be more revenue derived from the legit economy…but none from the underground.

The link I provided a few posts back is from a book review of the guy who has made the best attempt, and most credible research into just how much money is floating around in the underground economy. It has the figures I used.
Of that total he determined that roughly 3/4 of it is income received from illegal action or under reported income from small businesses and that 3/4 amounts to just under 5% of the GDP. that is a lot of unreported income!
ALL of that goes untaxed every year.
Under the FairTax it would be taxed. That is a tax of the income derived from the underground economy finally being brought in. In 1990 628 Billion dollars! was the estimated income earned from the underground economy THAT is going to be taxed. It is in that context I say the underground economy will be taxed.

If you are looking for the illegal sales of heroin etc. to be taxed at a sales tax level, 1% state sales tax per baggie of mexican brown in addition to the FairTax at the consumption point of the dealers...then no.
Congress hasn't quite become that sleazy....well they haven't figured out how to implement it or sell it to the voters anyway.

Flip, yes, they pay sales tax and avoid income tax. This would make them pay the FairTax which replaces income tax.

Spidey wrote:..

In fact, I can see people creating even more of it, because of greater demand.
....

What "greater demand"? The FairTax is revenue nuetral, people won't be hit with a sudden increased financial burden to the 'tax man' so the FairTax doesn't create a new incentive to go underground. Whatever inclination people have to do that will be unchanged by the FairTax.

In fact, the lower class, who in my estimation are the ones most likely to shop or sell on the underground market will be less likely to do so because their paychecks will have a net increase AND they will be recieving the pre-bate check every month to cover the FairTax on essential purchases. Where the rich family will be largely unimpressed with an extra $525 a month in addition to their paycheck the lower class family will be feeling better off financially for it so why go buy stolen meat or DVD's etc?

I'll tell you why I think the Fairtax is beating a dead horse and ultimately a huge waste of time and resources:

which would lessen the need for credit.

Our system is set upon the principal of borrowing and loaning. You change that too suddenly, and there's no telling what we end up with at the end of it. Some jackass's fly planes into buildings, and my whole way of life and the direction and mindset of this whole nation changed, in a moment. It will never make it. It's too drastic a change and yeah I noticed they invented their own words too, "revenue neutral" etc..................

I’m sorry, but there is a HUGE flaw in your theory…

By default the underground economy produces no tax income. NADA ZILCH! The system you describe has to wait until the money finally reaches the legit economy to the be taxed.

Let me give you an example…

The guy with the small sales cart, down the street from K-Mart, he is unlicensed and collects no sales tax. When he spends his money down the block at K-Mart, he pays a sales tax.

1 The underground transaction collected no tax.
2 The legit transaction collected tax.

Understand?

Please explain what is going to change at the #1 transaction? Because I already understand the additional tax at #2.

If you are saying tax can be made up for, sure that I understand, but to say the underground economy is going to start producing tax income is technically incorrect.

………………..

And if you don’t think paying and extra X percentage when you shop won’t create incentive to avoid the tax…well you live in a different place than I do.

But, I must commend you Will…you are probably a very honest person, because you have no clue how illegal businesses operate.

Spidey wrote:...

Let me give you an example…

The guy with the small sales cart, down the street from K-Mart, he is unlicensed and collects no sales tax. When he spends his money down the block at K-Mart, he pays a sales tax.
...

Right now the guy selling unlicensed down the street pays a sales tax if his state charges sales tax when he buys something...to the state...and pays no income tax to the Fed.
Under the FairTax he will still pay sales tax if his state charges sales tax...that part doesn't change. What is different is he now has to also pay tax to the fed when he buys something. Federal income tax and Federal payroll tax goes away and those are replaced by a national sales tax, the FairTax.

The underground economy right now produces hundreds of billions of dollars in income for people every year and they pay no income tax on it. The IRS has no way to capture that tax. However those people who currently avoid paying tax on their income can't avoid eating and buying clothes and other goods and services so under the FairTax the underground economy produces tax revenue.

Only if the guy buys his trinkets from a legit seller. But you are still ignoring the fact that he COLLECTS NO SALES TAX! And never will.

“The underground economy right now produces hundreds of billions of dollars in income for people every year and they pay no income tax on it. The IRS has no way to capture that tax. However those people who currently avoid paying tax on their income can't avoid eating and buying clothes and other goods and services so under the FairTax the underground economy produces tax revenue.”

That part I agree with, and was never in dispute.


Damn it man, I think you are doing this deliberately. So we are done.

flip wrote:I'll tell you why I think the Fairtax is beating a dead horse and ultimately a huge waste of time and resources:

which would lessen the need for credit.

Our system is set upon the principal of borrowing and loaning. You change that too suddenly, and there's no telling what we end up with at the end of it. Some jackass's fly planes into buildings, and my whole way of life and the direction and mindset of this whole nation changed, in a moment. It will never make it. It's too drastic a change and yeah I noticed they invented their own words too, "revenue neutral" etc..................

flip, how does the FairTax effect consumer need for credit? You are going to have to explain that one because I can't even guess what you mean by that.
And "revenue neutral" isn't a newly invented word or phrase!
It is a pretty common term that is used all the time. All it is saying, in this case is, replacing the income and payroll tax etc. with the FairTax does not change the amount the government takes in at the transition from one system to the other. No weasel words hiding something nefarious.

Spidey, the trinket seller will only have a very limited, indeed tiny customer base. What I think may be a better example would be a barter community tho I can't imagine so complete that all the peoples needs would be met. Yes there will still be a underground economy, but it will be a much reduced one.

I won't debate the merits of the Fairtax because I'm not well-versed enough in it to make a compelling argument one way or the other, except to say it's a fringe idea and not likely to take root. So, I stand by my statement as being a waste of time and energy.

flip wrote:I won't debate the merits of the Fairtax because I'm not well-versed enough in it to make a compelling argument one way or the other, except to say it's a fringe idea and not likely to take root. So, I stand by my statement as being a waste of time and energy.

The Wright brothers had a fringe idea....ever notice the positive effect of aviation on the world?
Seriously dude, you seem to have decided it is a bad idea without any basis for your determination.

Spidey wrote:Only if the guy buys his trinkets from a legit seller. But you are still ignoring the fact that he COLLECTS NO SALES TAX! And never will.
.

I never said it would solve the state sales tax avoidance problem created by people buy stolen goods to resell!

Here is what I said"

Under the FairTax approximately 3/4 of the underground economy, the part that is untaxed income, sole proprietors under reporting income, drug dealers not reporting income, illegal immigrants not reporting income, etc. etc., would become 'above ground economy' earnings and be taxed for the first time.
That number was roughly 5% of GDP , 628 Billion, in 1990 that would suddenly be taxable.

I said nothing about the state sales tax avoided by underground economy, and frankly that isn't a federal problem, it is a drop in the bucket relative to the previously un taxed revenue the FairTax DOES capture and the sales tax avoidance you are talking about is already a problem so it isn't caused by the FairTax so I don't see why you are trying to tie it to this discussion.

No, just the first one that popped in my head that turned me against it. It's a good idea. Let's say from now on you start taxing just what I spend. You quit taking that huge chunk out of our paycheck every month. Well, that's alot of money. So, now I could probably purchase my goods with my own money and not rely on credit. Well, then I soon realize, that I only lose theoretical money when I spend it. So, I quit spending for a certain time and live on bare essentials. Well, that money starts stacking up. I start investing it and let it start creating theoretical wealth for me. 10-15 years I have a good stake and I become a player. Not gonna happen although I love the idea. I think on that basis alone you could sell it to every American and make them all comfortable at the same time. Not gonna happen.

flip wrote:No, just the first one that popped in my head that turned me against it. It's a good idea. Let's say from now on you start taxing just what I spend. You quit taking that huge chunk out of our paycheck every month. Well, that's alot of money. So, now I could probably purchase my goods with my own money and not rely on credit. Well, then I soon realize, that I only lose theoretical money when I spend it. So, I quit spending for a certain time and live on bare essentials. Well, that money starts stacking up. I start investing it and let it start creating theoretical wealth for me. 10-15 years I have a good stake and I become a player. Not gonna happen although I love the idea. I think on that basis alone you could sell it to every American and make them all comfortable at the same time. Not gonna happen.

You just described one of the benefits to not just yourself but to our economy delivered by this system. Because you are liquid, have a little more money and the tax revenue is more fairly collected from the people who spend more ie; the semi-rich... filthy rich.

Politicians 'say' they want us to save more but they don't do anything to enable it....now they can.

Not gonna happen.

They told the Wright brothers that too.
Look at their web site, play with their calculator see how it effects people....then sign up and make it happen. It is a lot more than a vague idea, you'll see what they have done, lots of economic studies, models of the way it will roll out and boost the economy, countering misinformation, etc.

Will, we could all be rolling in money if that was what was desired. As soon as they said on TV, we're rocking and rolling again, it would start that very moment. The whole damn thing is built on perception. There is any number of things that can be done right now that would turn it around in a day. But I quote Welch from the other night "Why haven't they then?"

Don't forget the bulk of perception is based on reality in this case. When almost every homeowner that didn't lose his home to foreclosure has lost some where around 25 to 30% of the home value that alone puts a big damper on the economy. I never realized just how easily the economy can be hurt by rapidly dropping home values until it unfolded on us. So much is built around those long term safe havens for equity.

All those people were depending on at least having a job and the time to pay. I don't buy into this stereotype of "all these dumbass spoiled civilians buying houses they cant afford". bull★■◆●, the sentiment was good and right and these people expected their representatives to have their back. Most of them, there only crime was believing the bull★■◆● they were being told. Don't take away somebody's ability to pay, then blame the crisis on non-ability to pay. Damn.

Spidey wrote:Only if the guy buys his trinkets from a legit seller. But you are still ignoring the fact that he COLLECTS NO SALES TAX! And never will.

It seems to me that's accounted for in the "3/4 of the underground economy" figure. The drug dealer won't collect sales tax, but he will pay sales tax on a lot of transactions. Illegal immigrants will go from paying zero to their full share, or maybe even extra (since they won't get the "pre-bate"). It's not a perfect solution, but it does capture some of what presently falls through the cracks.

I don't know of one person that I've ever met at the swap meet claim to collect sales taxes or pay tax on the goods they sale, and why should they? The items were already taxed at initial purchase and now I got to pay an additional tax on the buying and selling of it again? That's gonna be a hard sell, and that's just another aspect of "underground commerce" of which I'm sure there's plenty more.

A couple of points to consider that seem to be lost in this discussion:

*The current system of federal income tax collection and any proposed alternative to the current system have nothing to do with the state or municipalities collecting sales tax.

*I never said the FairTax would address a state or municipality's problem of uncollected sales tax.

*The "underground" economy is much more than just the state sales tax aspect and it is the billions in unreported income aspect of the underground economy that I have been talking about.

Also, the revenue from the underground economy that the FairTax would capture is just one of many advantages the FairTax system has over the current system.
The greatest advantage by far in my mind is the end of politicians being able to add an exemption or an addition to the tax code to do favors for a special interest in exchange for campaign donations and other support.

That is a serious bit of reform that will help us in so many ways both fiscally and to clean out the corrupt relationship of fatcats lobbiests and congressmen.

Other advantages are the influx of investment capital to the U.S. where suddenly no capital gains tax makes investing here a much better deal.

And in spite of the naysayers who want you to believe that rich people will just buy the minimum essentials like a poor person would so they can stuff their mattresses with all that cash to avoid paying tax on it that is dead wrong! Rich people buy fancy cars and second homes and eat at expensive restaurants and wear expensive clothes and pay for all sorts of services from pool cleaning to massages to maid services to having their yards landscaped to bling..bling..bling...
They will pay more tax.

The current system already has all sorts of tax code loopholes and ways to hide their income from the tax man using their business expenses and under reporting income etc. and unless they literally do start to live like poor people and bury the money in their yard they will find less opportunity to avoid the taxman under the FairTax.

Will, that all makes perfect sense. I remember awhile back watching this guy on TV. I can't remember all the details exactly but it seems he was testifying before Congress and was supposed to understand the tax code. He explains that it is about 3 feet thick and no one can understand it. LOL, yeah a system where the goto guy throws his hands up in the air needs to be revamped. Everything seems counter-intuitive to forward progress. I was searching through the channels the other night and the former CEO of GE, I think, name was Welch. He said that EVERY other nation in the world allows their corporations to bring money that they made abroad back to their home nations without penalty. So, why would companies based here bring back their money here when it becomes an instant loss of capital? BULLSHIUT%IKU*OYR)O VB)O*BP&R $E

OK, let me put this to you Will. The top 1% of the U.S. population has 43% of the financial wealth, and that's not income by the way, it's wealth. The bottom 80% has a measly 7% of the wealth.

I've posted this before, but it's got some good graphs of our country's wealth distribution:

http://sociology.ucsc.edu/whorulesameri ... ealth.html

I still think that even after a "prebate", a consumption tax would hit the bottom 80% of our country very disproportionately while the top 1% would hardly notice a difference. Think about it. There is no way the top 1% of our country could possibly spend enough money on food or things to make up for the loss of income taxes the government now collects. Consumption taxes are usually regressive, despite the glowing efforts at showing the Fair Tax Act as a "progressive tax". I just think it would impact the poor and middle class of our nation the most, while the wealthiest would come out ahead with no income taxes or estate taxes to deal with and only a measly 23% sales tax on the things they buy. 23% would look like round-off error to anyone with a lot of money, while someone scraping along at or near minimum wage would see it as a big hit to their wallet, prebate or no prebate.

But even if it could somehow work out beneficial for all income brackets, I still don't see how this tax would even generate remotely enough revenue to make up for the loss of income and estate taxes our government now takes in. But I guess if one wants a small government with few services and benefits for the people, like the Tea Party, it'll work just fine.

But Will, I'll let my husband, who's more financially inclined, take a look at the Fair Tax Act and see what his opinion of it is. I'm going on my gut instincts here myself.

tunnelcat wrote:...
But even if it could somehow work out beneficial for all income brackets, I still don't see how this tax would even generate remotely enough revenue to make up for the loss of income and estate taxes our government now takes in. But I guess if one wants a small government with few services and benefits for the people, like the Tea Party, it'll work just fine.

There you go again....you assign an outcome that is not at all applicable to the implimentation of the FairTax and then use that false premise as the reason you are against it! R-E-V-E-N-U-E.... N-E-U-T-R-A-L....it means your premise is wrong. The transition would maintain the current levels so no need to drop it to crazy-tea-party-size but you need to say it would so you can find fault in it!
What kind of logic is that?!? Why do you pretend to consider something then use unfounded fears to prop up your disagreement with it?
I wish I had asked a liberal to propose it to you, you would probably be all over it...

tunnelcat wrote:But Will, I'll let my husband, who's more financially inclined, take a look at the Fair Tax Act and see what his opinion of it is. I'm going on my gut instincts here myself.

God be with him...or Clapton...or SpongeBob...whatever works.

Will Robinson wrote:Don't forget the bulk of perception is based on reality in this case. When almost every homeowner that didn't lose his home to foreclosure has lost some where around 25 to 30% of the home value that alone puts a big damper on the economy. I never realized just how easily the economy can be hurt by rapidly dropping home values until it unfolded on us. So much is built around those long term safe havens for equity.

one of the warped fallacies that has popped up over my lifetime is the 'safety' of 'investing' in a home.
Real Estate, as in actual land itself, is a very safe long-term investment, but houses? Houses generally depreciate as fast as cars, unless the building is some master work of a prominent architect. The land they are built upon will generally rise in value slowly, but if you're thinking that half-million dollar McMansion on a half acre is a wise investment in your portfolio, you will find yourself sorry some day.

tunnelcat wrote:I still think that even after a "prebate", a consumption tax would hit the bottom 80% of our country very disproportionately while the top 1% would hardly notice a difference.

and, I think you are correct.

Think about it.

a lot of wealthy folk are really hoping you don't, and the American voter seldom disappoints.....

callmeslick wrote:

tunnelcat wrote:I still think that even after a "prebate", a consumption tax would hit the bottom 80% of our country very disproportionately while the top 1% would hardly notice a difference.

and, I think you are correct.

Think about it.

a lot of wealthy folk are really hoping you don't, and the American voter seldom disappoints.....

And you think that based on looking at the specifics of this plan or just because you expect it to disappoint?
I ask because if it is set up to broaden the tax base enough and the prebate is set right it could be progressive enough to keep the lower class burden down and get more from the upperclass and,yes, the very rich wouldn't be hurt relative to their income level but collecting revenue isn't about revenge...unless you are on the class warfare team of american politics.

Simply put, it can be done correctly with a slight progressive slant or it can be done poorly in a regressive way...it's all in the numbers. But you probably haven't even examined the numbers and studies to know have you?

tunnelcat wrote:OK, let me put this to you Will. The top 1% of the U.S. population has 43% of the financial wealth

What do you think is the appropriate distribution of wealth?

What percentage of wealth should the top 1% have? How about the top 20%? Can you give a principled reason for why you picked those numbers?

Take some time to think about it. Then read inequality in equalland (by Colin Percival, winner of the best flamewar ever.)

callmeslick wrote:one of the warped fallacies that has popped up over my lifetime is the 'safety' of 'investing' in a home.
Real Estate, as in actual land itself, is a very safe long-term investment, but houses? Houses generally depreciate as fast as cars, unless the building is some master work of a prominent architect. The land they are built upon will generally rise in value slowly, but if you're thinking that half-million dollar McMansion on a half acre is a wise investment in your portfolio, you will find yourself sorry some day.

I'd have to agree on this. One of the things i've been watching (because for some reason it interests me) is housing prices and in the past ten years i've seen it fluctuate about as wildly as a six flags roller coaster. I cannot in good conscience invest in any kind of housing, especially around these parts where values just keep going up and up.

Sure, it looks like a good idea because almost immediately you generate a return. but the last time the housing market was in this shape, a massive crash followed, and those who invested only in this 'safe bet' lost almost everything.

So I've decided to invest in metals. Not gold because that's out of my reach. But Copper, Nickel, Lithium and soon to be neodymium and boron.

The actual value in a house, is derived from living in it.

Historically, real estate (land) has returned only a miniscule amount over inflation, with higher returns for areas that end up growing significantly and lower returns for areas that end up failing. It's not usually a good investment for growth of wealth; it's a good investment for stable value in certain circumstances. Real Estate agents telling you "housing has been booming for the last few years, and if you don't get in now you'll be priced out forever" means you're not in the right circumstances.

Precious metals are, similarly, a stable store of wealth in certain circumstances. If people are telling you to buy, it's not the right circumstances.

Stocks are a way to capture whatever the broader economy is doing, by owning a portion of a company (or, if you go with a low-cost index fund like the ones from Vanguard, a portion of a lot of companies). Stocks have had good historical returns in the US because our economy has grown hugely since WWI. Bonds are a lot like stocks but more focused on dividends/profits rather than total company value. Either way, they make sense if you expect the economy -- and particularly the parts represented by your stock choices -- to grow.

You might be interested in the permanent portfolio as a really nice stable investment strategy.

What about purchasing buildings and renting them out?

I'd be interested in more ideas and how others have approached financial investing. We somehow, haphazardly and Forest Gump like, ended up in a pretty good position considering the state of the economy. Maybe I can make this emaciated eagle ★■◆● for me before it dies

Will Robinson wrote:God be with him...or Clapton...or SpongeBob...whatever works.

Fine. You want to be insulting, go live in your la la land where taxes are only for those stupid, lazy working lowlifes while the greedy wealthy people who runs things (so important!) think they're entitled to pay less by virtue of their stature. I was open and willing to talk with someone else to get a second opinion and continue the discussion with you and all you do is spout a snarky, degrading response. You're probably a paid Republican troll, because only Republicans and Tea Partiers are pitching the Fair Tax Act.

Lothar wrote: What do you think is the appropriate distribution of wealth?

What percentage of wealth should the top 1% have? How about the top 20%? Can you give a principled reason for why you picked those numbers?

I didn't come up with those numbers, someone else did. You disagree with them? You don't think the top 1% of this country, or even the top 10%, are taking more and more of the wealth, while the rest of us suffer more and more of the burden of maintaining this country, all the while working to keep good a living standard? What planet are you living on Lothar?

I'm not for total equality of wealth. What the heck good is that? That's just couched language for "You're a Commie". What a tired old saw conservatives always drag out when someone attacks their beloved system, Capitalism. Just because I'm against a system that is set up in favor of the powerful and wealthy, doesn't mean I'm for wealth redistribution. What I see is a system that is now rigged against the average person attaining that wealth. I think we are back to the period right before the Great Depression, where the Robber Barons took everything without guilt or conscience and blamed the workers for the troubles. History is repeating itself, AGAIN!

Lothar wrote:What do you think is the appropriate distribution of wealth?

What percentage of wealth should the top 1% have? How about the top 20%? Can you give a principled reason for why you picked those numbers?

I've gotta say these sound like heavily-loaded questions.