Hoagland: FairTax legislation addresses many issues

Kansascity.com ^ | October 9, 2007 | Ken Hoagland

[Professional]

Our current tax code is a mess, that’s for sure. THe fair tax, flat tax though, while it sounds good does have some legit problems.

First and foremost is the politics of our country. I cannot see a scenario where the public would put enough pressure on the govt to make the change? Our current income tax system also doesn’t tax anything at all to people in low, or very low incomes, those folks are darn happy... Or for those crafty enough to work their returns.

Also, the fair tax will not lower taxes, since the govt must have a certain intake, to pay the bills, continue their programs. Maybe in a case like that, you get lucky and your tax becomes someone elses tax, but isn’t that a zero sum game?

In Europe, there they have a consumption tax, and at least 23% is tacked on to every product you can buy. A tax you can’t see, still is a tax after all.

Looking at tax history, we can all at least be thankful that rates on both income, cap gains, dividends are substantially lower than what they were even just a few years ago. Also, we have significantly raised the Unified Credit.

I’d say that right now, believe it or not, we live in the best tax times since the 20’s.

But, to be sure, I’m not a tax attorney, cpa, or an expert on this subject by any means. Maybe you are, and I’d be happy to hear your thoughts on my comments.

[camle]

Sorry I was out for the weekend. Managed to go and... do... well, we watched fiddlin’ on the roof and killer tomatoes, so the weekend wasn’t a total R&R.

One of the objectives of the “Fair tax”, as I undertstand it, it to illustrate justy how much taxes are being paid, how expensive our government can be. A much simpler method of doing that would be to eliminate payroll deduction and replace it with a monthly billing.

Part of fairness is that people who can afford to pay more will pay more, and those that cannot affford to pay as much will pay less. the most equitable method of doing that would be a simpel percentage of income.

Another part of fairness is the UNFAIRNESS of people who put nothing into the system demand more and more out of it. One of the reasons behind that is that they have no stake in the system other than what they can obtain from it. By including them into the realm of taxpayers, they become stakeholders and more able to comprehend the simple fact that whatever they get, somebody has to pay for - even themselves.

And, to be really fair, if we’re giong to tax capital gain - which some folk beleive is unearned income, then we ought to also tax government benefits received on a similar basis. that will not only increase the ownership of the system by the poor, it will also illustrate their real financial situation far better than anything else.

Finally, ALL income needs to be taxed at the same rate, top tax an inheritance at a different (higher) rate than other income creates a wedge that can be used to treat other types of income differently. consistency is part of fairness.

taxing major purchases, such as homes, out of the reach of people will have a negative effect upon those industries. the luxury tax was aimed at those who can afford half million dollar yachts (for example), but had the deepst effect upon those who made their living building and servicing those yachts that were mover overseas, or never purchased. it would be counterintuitive - sinking the American Dream.

Dangling the prospect of more take home pay is the lure. they promise that you’ll take home up to 30% more pay (depending), but fail to mention that you will no longer be able to purchase your American Dream, in fact, even perhaps your dream car.

Thgis is because removign taxes from the production of an item doesn’t mean that the price of the item will decline by an equal amount. Most, if not all industries will be able to garner a one time windfall by keepping some of that money for themselves, so costs will NOT delcine in lockstep with removal of taxes during production. When the 30% surtax is added to the price of an item, it will end up costing more in toto than it currently would.

And since the rate at which take home pay will rise will not be consistent, and the surtax will be consistent, those on the lower end of the scale will see less takehomeincrease than those at the higher end of the food chain - inequity and therefore UNfairness.

And how about the super rich? Those who spend less a percentage of their incomes on goods and services. Since they are fllush with income, they can shield more of it and pay less taxes that the middle class people who spend more of their income (as a percentage) upon goods and sevices. Again, the middle class gets the burden whilst the super rich skate by. this is fairness?

Of course soem people would stop right here and reflect upon who has the most to gain by this tax restructuring, and who has the most to lose.

But what about retirees? people on fixed incomes? How will THEY be able to afford things like new cars? OR do some people beleive that certain people, like retirees shouldn’t have new cars? Since their income is usually 1) in the lower end of the scale, and 2) subject to lower taxes therefore lower ‘increase’ in net, how will the largest growing population demographic be expected to cope with a 30% rise in costs? OR don’t they count?

Anyway, I have to get to work and do something for a change;-)

the “fair” tax isn’t.