Posted on 09/17/2007 11:29:12 AM PDT by Man50D
No. My bad-I was referring to the Code, not the Fair Tax.
As I understand the big picture, the US has the world’s highest corporate tax rate. Our capital gains tax rate is also high. These two realities explain to a large extent why so many US corporations have gone offshore. Our current system so distorts economic decisions it is hard to imagine what the investment world would look like without it.
Now, if corporate and capital gains taxes are eliminated, I suspect that capital will flow in a huge torrent back home to where they belong.
Even though one has previously paid income taxes prior to investmenting, I think the stock market will take off to unimaginable heights. Every investor wins, and wins big. My two cents.
In Caleefornya we were promised that all the money coming in from the lottery would go to schools, over and above what was already allocated. When the bond passed, the legislators voted in a law that MATCHED the same amount of money coming in from the lottery and REMOVED it from the school fund, putting it in the general fund.
Bottom line: I don’t trust legislators. They will find a way around this little ponzi scheme and we will all suffer from BOHICA.
investmenting = investment. Proof twice, post once.
There is little debate when any business person learns of the absurd bureacratic encumberances and the pre-bate government entitlement program.
The Fair (Sales) Tax is a snake oil scam designed to replace one bad system with a worse system.
There is ZERO justification to move from a bad system in order to become an UNPAID tax collector for the government.
The Fair Tax is EVEN MORE INSIDIOUS when you consider that TAX EXEMPT retirement income will be taxed at the transactional level.
Then again consider the INSANE concept of allowing the government to decide what is necessary for the pre-bate calculation. Remember Social Security was SUPPOSED to be a supplement.
The pre-bate SHALL become a replacement for work. Essentially paying the dreggs of humanity unemployment compensation for their entire lives.
The Fair Tax is a pure unadulterated scam which takes bits and pieces of good ideas into an unacceptable garbage pile.
(makes one wonder if there is any truth to that scientology mis-claim)
“If you want improvement, repeal the amendment that authorized the income tax.”
If you had read the Fair Tax book you’d already know that repealing the 16th Amendment is part of the Fair Tax agenda (not the plan itself, but the agenda).
And. when it does, one can cash in the profits without one whit of care about capital gains. I have to sweat that stuff every time I want to sell a client's investments. Pain in the butt.
“And you’re talking about raising the price of all new goods 30% while leaving prices of used goods the same.”
That’s not what the Fair Tax does. Most prices would remain roughly the same because the consumption tax replaces already embedded business taxes and compliance costs.
Have you read the Fair Tax book? Or the bill itself?
The only part of your post with any merit is the taxation of previously taxed savings. Needs work I'll admit. Most of us, however will receive the windfall of our lives when our tax deferred savings become tax free.
What compensation does a retailer receive for collecting, holding, and transferring the tax?You retain one fourth of one percent of what you collect.
How frequently will a retailer be required to transfer the collected taxes to the government?Small sellers, once a month...large sellers, once a week. Sec.501 Monthly Reports and Payments
What government agency will review and administer the process?State workers of 50 different states(turned federal tax agents) with 50 different interpretations of the law.-----
Who will certify inventories to ensure that sales are properly recorded?
You don't really think the fed is going to terminate the thousands of IRS employees, do you?Not when there would be at least 50 new state bureacracies to administer new federal taxes.
The FairTax proposes to repeal the Income Tax through a Constitutional Amendment.It's not true. There is no such "Fairtax proposal".
The trouble with a “flat tax” is it still requires the politicians and federal bureaucrats to determine the definition of income (through the use of devices such as deductions, exemptions and credits). That is where most of the hanky panky in the IRS code lies. The activity of congress, staff, lobbyists, accounts, tax lawyers, corporate staff and government bureaucrats related to income tax is in large part non-productive non-value adding activity in relation to the overall economy. The cost of all this non-productive activity and the actual cost of income , social security and medicare (payroll) tax taken from individuals and corporate entities anyway involved in design, production, marketing, transportation and sale of goods and services (imputed costs) comprise a significant percentage of the cost of such goods and services. This cost easily equals or exceeds the cost of the proposed Fair (sales) Tax. Most retailers already collect some form of state and/or local sales tax so the mechanism and concept is already in use. Yes, oversight and compliance will be necessary. Yes, there will be black market sales, lying and cheating. However, it cannot be more than what takes place under the current income tax system, including your friends and neighbors who fail to report cash income and who cross the line in taking credits, deductions and exemptions to secure a discount from many of their ordinary living and leisure time expenditures. If you believe in the reality of market forces and such complex concepts and elasticity of supply and demand, you will understand that these imputed costs will be wrung out of the cost of goods and services immediately. There will be disruption for those engaged in the non-productive activity specified above, but these are smart people and they will find something productive to do which will actually add to the overall economy. Those most negatively affected by the Fair Tax will be the politicians and lobbyists. It will significantly diminish their power (a very good thing) and this fact will be one of the main causes of opposition. Another significant cause for opposition will be “fear of the unknown”. For the ordinary citizen, the economy and the government (not the politicians) the Fair Tax would be a very good thing. Repeal of the 16th Amendment is mandatory.
“I am very skeptical of this.”
Thats what the bill actually says its going to do. Its right there in black and white. Not sure where there is much room for skepticism on that.
The proposed rate for Fair Tax is only 23%, not 30%. If you're trying to deal in nice, round multiples of 10, then 23% rounds down to 20%, not up to 30%.The proposed rate is "23% of the gross payments".
$100 plus $30 = $130 (gross payment)
$30 is 23% of $130 (gross payment)
Prices would increase 30%, not 23%.
And why hasn't anyone figured out that punishing people with a 30% tax for buying new goods when they can buy used goods tax free is going to cripple the economy?
http://www.fairtax.org/site/PageServer?pagename=about_faq
# 1
What is taxed?
The FairTax is a single-rate, federal retail sales tax collected only once, at the final point of purchase of new goods and services for personal consumption. Used items are not taxed. Business-to-business purchases for the production of goods and services are not taxed. A rebate makes the effective rate progressive.
What windfall? All they get is that they don't get taxed twice on money that they already earned and saved.
Tax deferred investments don't produce any windfall. All they do is prevent the loss that after tax investments take. The tax deferred investments wouldn't be taxed when they are withdrawn, so they wouldn't really be effected by switching to the fair tax. On the other end of the spectrum, those that put money in Roth IRAs would see those investments effectively reduced by the percentage the Fair Tax's sales tax would add to items. Investments that the US government said it would never tax again.
For me that would be a 5 figure loss in my Roth Ira's buying power, and I'm only 38 years old, and I don't max out what I can put in my Roth IRA.
Switching to the fair tax would be devastating to a lot of people who have worked and saved their whole lives.
It has the exact same effect on Education IRAs that people have set up for their kids education.
How can you compensate such people? The money has already been collected by the federal government and spent.
Or maybe you'll just give it away.
------
It could be that some allowance can be made for investors in the category you refer to. That allowance could come from those who stand to make a huge windfall from tax-deferred investments.
There's no windfall. The face value of your investments are less 23% on day one of the Fairtax act. The tax would still be deferred untill it's spent.
***The FairTax proposes to repeal the Income Tax through a Constitutional Amendment.
It's not true. There is no such "Fairtax proposal". How many more times am I going to have to post this before you read it?
http://www.fairtax.org/site/PageServer?pagename=about_faq
#50
Is there any provision in the FairTax bill to prevent both an income tax and a sales tax?
The short answer is that there is no provision in the FairTax bill (HR 25) that would prevent having a national sales tax and the income tax. However, the FairTax legislation does three things that effectively dismantle the income tax: (1) it abolishes the IRS, (2) it repeals all statutory language having to do with taxing income and payroll (i.e., the Internal Revenue Code), and (3) it eliminates the filing of annual income tax returns to the federal government for over 140 million Americans. The 16th Amendment does not “require” an income tax, it only “allows” one, and the FairTax will have broken that egg in a million pieces. It would be extremely difficult to put that egg “back together again.” Once the FairTax is enacted it would be an extremely daunting task for Congress to make people start filing income tax returns again. There would be a public uproar. Once the American public has experienced the freedom from filing income tax returns it’s hard to imagine them tolerating going back.
Furthermore, the sponsors of the FairTax are totally dedicated to the permanent repeal of the income tax. No current supporter of the FairTax would support the FairTax unless the entire income tax is repealed. There is a separate bill, HJR 16, which repeals the 16th Amendment to the Constitution but it must go through a different adoption process than HR 25. HJR 16 has to be passed by a two-thirds vote of members of both the House and the Senate and be approved (or ratified) by three-fourths of state legislatures (38). We are currently laying the organizational groundwork for this push and have already started the educational process at the state level.
Finally, the reality is that we already have both an income and a type of sales tax today. All of our U.S. produced goods and services are burdened with an “embedded” tax due to the cascading of income and payroll taxes paid by U.S. employers to the U.S. Treasury at every step of production. Of course, these costs are passed on to the ultimate payer, the customer. It’s fair to call these embedded taxes a “sales tax” because we pay it every time we buy any goods or services -- we just don’t see it. The FairTax eliminates these embedded taxes, resulting in a single-rate national sales tax visible to all.
Investing in bonds, such as government bonds is going to be a horrible investment, so the currency markets are going to take a horrible beating, and our currency may very well tank making the jump in inflation even worse.
The markets should recover and thrive given some time. However, some companies aren't likely to survive the turmoil very well. Investors are far more likely to flee to foreign markets in the short run which will not only be more stable, but will see substantial growth in the short run as people move their money there.
For all those who are retired or close to retirement, they need safe and stable investments. However, the typically safe bond market will be far from safe or stable. Gold will likely be safe and will likely skyrocket in value.
However, investors who have saved all their lives, can't accept a high level of risk, and need to live off of their investments without a source of now untaxed income are going to be royally screwed.
Younger investors have a bright future to look forward in the long run, but most of the money in the US is held by older people. Once they figure out what the Fair Tax means to them, the Fair Tax doesn't stand a chance, nor should it.
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