Consumption Tax - Expenditure

[Iriemon]

Which is exactly why I proposed a logarithmic scale. Keep in mind that the log of something less than 1 (which would be defined as the poverty level) is a negative value. [edit]

I do not see how this is a regressive tax in the slightest. I know there are issues with implementing it, however, I'm more interested in the normative aspect.

Edit: Of course, a new strategy would have to be implemented for those below the poverty line as the logarithmic scale drops steeply below "1". But I think there should be either no tax or some well funded programs to help those below that level.

I didn't study the proposal. I thought the expenditure tax was basically a sales tax paid at year end. How does the logarithmic tax scale work?

 

[Sergeant Stinger1]

IMO, taxing money the very poorest earn they need for basic necessities so that the very richest can have more luxuries is not fair.

_______
I understand, but thats what it should be. We can't expect other workers to cover for them. Besides, there are plenty of programs to help the poor.
BTW: How does taxing the very richest and the poor equal to the rich having more luxuries?

 

[Iriemon]

_______
I understand, but thats what it should be.

That is certainly a matter of opinion.

We can't expect other workers to cover for them.

We can certainly expect wealthier folks to burden a greater share of the tax burden.

Besides, there are plenty of programs to help the poor.

IMO, decreasing the tax on them is preferable to Govt aid programs.

BTW: How does taxing the very richest and the poor equal to the rich having more luxuries?

A flat tax has the effect of reducing the tax rate on the wealthy and increasing it on the poor. The guy making $10 million isn't worried about how he's going to afford to buy food. A 20% tax on a single woman raising a kid making $16k is a crushing burden. A 40% tax on the guy making $10 million means he might have to buy a 100' yacht instead of a 130' yacht.

 

[Synch]

The incompetence is subsidized regardless of who pays the tax. Someone has to pay for it.

Why not distribute this burden more equally?

Why would the ROR of US investment lower relative to foreign investments?

The higher supply of loanable funds means that you will get less return on your investment, in terms of purchasing assets of a corporation.

There would not necessarily be more US dollars in the international market. The extra savings comes at the cost of less purchases, which would also me less foreign goods purchased which would offset, even if your first step were true.

That effect would not be able to offset the impact of a lower interest rate. The MPS increases but the decrease in the amount of foreign goods purchased will be equal to the decrease in the domestic market, less demand for foreign goods would only offset this effect if all they stopped purchasing were foreign goods. That combined with the great demand to buy assets in foreign nations will have a net increase in the supply of dollars on the foreign market. The demand for dollars derived from its ability to purchase goods(and it's stability), foreigners will purchase more US goods at the same price level, increasing NX.

You mean the US dollar would devalue compared to other currencies? A decline in US real interest rates would not have an effect on foreign exchange rates necessarily.

Depends on various factors, but ceteris paribus it would be true.

 

[Iriemon]

Why not distribute this burden more equally?

Sure, based on the equality that the tax would take away money needed for necessities.

The higher supply of loanable funds means that you will get less return on your investment, in terms of purchasing assets of a corporation.

Doesn't follow to me.

 

[SFLRN]

Firstly, this expenditure proposal complicates the tax code more and it would not solve current problems caused by a complex tax code.
Nearly $500 billion is spent yearly to comply with the tax code (give or take). Moreover, "According to the current director of the Congressional Budget Office, making tax decisions" (decisions to decrease one's tax burden instead of increasing one's income) is a practice that costs our economy a whopping two trillion dollars a year (or 18% of the GDP). This proposal does not cut down on things such as the corporate income tax and other taxes and simply adds or replaces layers of our current tax code.
If you remove these layers of tax code that money would be spent to activities more prone to create economic growth. They will also divert that money toward wealth creation activities because they are not taxed or harmed in anyway for making more wealth. If you simplify the tax code and remove the incentives not to enhance profit the economy would see substantial growth. That is the kind of growth that can employ the poor and disadvantaged as well as every other American. (Using data from economists evaluating the Fairtax). There is an estimated 10 percent increase in overall economic growth from implementation of such a proposal. Simply put, implementing a simplified consumption tax would create enough growth to offset any possible cost to the poor (even if you throw out the idea of a prebate) because they would have so many more economic opportunities. This is a better economy for all of America. The analysis shouldn't simply be on the poor. It should be on America on the whole.
To address the points raised by Iriemon, a sales tax does not by default mean substantial increases in all prices. Indeed, a study by Harvard economist Dr. Jorgenson estimates our tax code is embedded with 22% of hidden taxes. That is to say, businesses simply take the costs of the taxes they pay and pass them onto consumers with higher prices. Implementing a tax that would create the same amount of revenue without all other taxes is roughly a 23% tax. On the whole, that is a one percent increase in the price once you remove the embedded cost. That is not the huge increase being advertised by opponents of a sale tax. To boot, removing this embedded tax would lower U.S. goods and their cost abroad and give us a significant trade advantage abroad. That then means more jobs when U.S. businesses can expand their options due to better trade competitiveness.
You would also create a tax haven for businesses who would no longer have their activities taxed. This is the reason many businesses make tax havens in the Caymans and the like, the tax system in the U.S. is not one which is desirable for businesses. You remove we would have the largest tax haven in the world and these businesses would have every incentive to relocate in the U.S.; thus, more job growth for the American population.
Interest rates would decrease as was mentioned earlier.
To address the point of fairness, fairness is by nearly any definition "giving to each his due" treating individuals equally. In no way does our current tax system embody equality. It specifically takes away a larger percent of one's income from a specific income group. It does not treat all in a similar manner; therefore, it escapes any contemporary definition of fair.

 

[Iriemon]

Firstly, this expenditure proposal complicates the tax code more and it would not solve current problems caused by a complex tax code.
Nearly $500 billion is spent yearly to comply with the tax code (give or take). Moreover, "According to the current director of the Congressional Budget Office, making tax decisions" (decisions to decrease one's tax burden instead of increasing one's income) is a practice that costs our economy a whopping two trillion dollars a year (or 18% of the GDP). This proposal does not cut down on things such as the corporate income tax and other taxes and simply adds or replaces layers of our current tax code.
If you remove these layers of tax code that money would be spent to activities more prone to create economic growth. They will also divert that money toward wealth creation activities because they are not taxed or harmed in anyway for making more wealth. If you simplify the tax code and remove the incentives not to enhance profit the economy would see substantial growth. That is the kind of growth that can employ the poor and disadvantaged as well as every other American. (Using data from economists evaluating the Fairtax). There is an estimated 10 percent increase in overall economic growth from implementation of such a proposal. Simply put, implementing a simplified consumption tax would create enough growth to offset any possible cost to the poor (even if you throw out the idea of a prebate) because they would have so many more economic opportunities. This is a better economy for all of America. The analysis shouldn't simply be on the poor. It should be on America on the whole.
To address the points raised by Iriemon, a sales tax does not by default mean substantial increases in all prices. Indeed, a study by Harvard economist Dr. Jorgenson estimates our tax code is embedded with 22% of hidden taxes. That is to say, businesses simply take the costs of the taxes they pay and pass them onto consumers with higher prices. Implementing a tax that would create the same amount of revenue without all other taxes is roughly a 23% tax. On the whole, that is a one percent increase in the price once you remove the embedded cost. That is not the huge increase being advertised by opponents of a sale tax. To boot, removing this embedded tax would lower U.S. goods and their cost abroad and give us a significant trade advantage abroad. That then means more jobs when U.S. businesses can expand their options due to better trade competitiveness.
You would also create a tax haven for businesses who would no longer have their activities taxed. This is the reason many businesses make tax havens in the Caymans and the like, the tax system in the U.S. is not one which is desirable for businesses. You remove we would have the largest tax haven in the world and these businesses would have every incentive to relocate in the U.S.; thus, more job growth for the American population.
Interest rates would decrease as was mentioned earlier.
To address the point of fairness, fairness is by nearly any definition "giving to each his due" treating individuals equally. In no way does our current tax system embody equality. It specifically takes away a larger percent of one's income from a specific income group. It does not treat all in a similar manner; therefore, it escapes any contemporary definition of fair.

Where are you getting this? Let me guess -- it starts with an "F" and ends with an "x", and is a classic examply of an oxymoron.

 

[SFLRN]

Where are you getting this? Let me guess -- it starts with an "F" and ends with an "x", and is a classic example of an oxymoron.

Iriemon, I compliment your compelling analysis. Not only did you throw out the current director of the Congressional Budget Office (the definition of an unbiased source) but you also choose to throw out Harvard Economist Dale Jorgenson. The five hundred billion dollar tax compliance cost comes from the Tax Foundation. Even if you doubt the exact amount its safe to say it’s in the hundred of billions of dollars. Moreover, your analysis provides no statistics from any source. How is the FairTax an oxymoron? By treating all purchases the same? Perhaps you could actually present analysis or even statistics. Do you doubt that removing a complicated tax code would remove a great deal of deadweight loss? That it would remove the embedded taxes in our current system? What is it that you take issue with?

 

[ARealConservative]

Iriemon, I compliment your compelling analysis. Not only did you throw out the current director of the Congressional Budget Office (the definition of an unbiased source) but you also choose to throw out Harvard Economist Dale Jorgenson. The five hundred billion dollar tax compliance cost comes from the Tax Foundation. Even if you doubt the exact amount its safe to say it’s in the hundred of billions of dollars. Moreover, your analysis provides no statistics from any source. How is the FairTax an oxymoron? By treating all purchases the same? Perhaps you could actually present analysis or even statistics. Do you doubt that removing a complicated tax code would remove a great deal of deadweight loss? That it would remove the embedded taxes in our current system? What is it that you take issue with?

He's scared it won't soak the rich to his liking.

 

[rathi]

The economist is correct in that our current tax system has so much regulation that it costs far too much money. He is also correct about the stupidity of many corporate taxes. However, his solution is still pointlessly regressive. Income tax does not need to be nearly as complex or bureaucratic as it is now. And you can get rid of most corporate taxes while maintaining the current system.

His criticisms of our system are valid, but his solution throws in the unneeded regressive component.

 

[SFLRN]

The economist is correct in that our current tax system has so much regulation that it costs far too much money. He is also correct about the stupidity of many corporate taxes. However, his solution is still pointlessly regressive. Income tax does not need to be nearly as complex or bureaucratic as it is now. And you can get rid of most corporate taxes while maintaining the current system.

His criticisms of our system are valid, but his solution throws in the unneeded regressive component.

This is the most common objection to the FairTax; it would hit the poor especially hard. However, there are two problems wrong with that argument. Firstly, the FairTax provides a prebate that covers the cost of the tax on all necessities up to the federal poverty line. (The way they calculate this is takign the family size, matching it to the amount of income to be considered impoverished and then times it by the tax amount. A check (or card) is then sent out to all heads of households and they can use that check to pay for the necessities. Thus, the plan would account for any possibly increase in the prices of the essentials. Moreover, when you eliminate all other taxes you remove the embedded tax. Dale Jorgenson of Harvard puts our current embedded tax burden at 22 percent. The FairTax implements a 23 percent tax. Essentially the price would only raise by roughly one percent after you remove the source of the embedded taxes (payroll taxes, businesses taxes corporate income). Put simply, the idea that the FairTax would hurt the poor is simply inaccurate. The plan covers cost increases in necessities and would increase prices by a mere one percent.
The real point of analysis shouldn't be what the poor have to pay in the short term, even if the FairTax doesn't have a signifcant impact on that. The focus should be what happens for the entire economy. On the whole the plan is estimated to create 10 percent growth in its first year. It would help insure more capital investment which leads to more productivity. This is, by and large, the way one achieves higher living standards, higher productivity. The plan would overwhelmingly benefit the entire American populace, the poor included. That should the focus, not what happens to the minority of Americans, although they will be better off. I have yet to see any arguments from anyone against a sales taxes suggesting that the proposal would hurt the economy.

He's scared it won't soak the rich to his liking.
.

Class warfare is still alive and well. I never saw what equality existed in having the top 52% percent of Americans pay the overwhelming majority of all taxes.

 

[Iriemon]

Iriemon, I compliment your compelling analysis. Not only did you throw out the current director of the Congressional Budget Office (the definition of an unbiased source) but you also choose to throw out Harvard Economist Dale Jorgenson. The five hundred billion dollar tax compliance cost comes from the Tax Foundation. Even if you doubt the exact amount its safe to say it’s in the hundred of billions of dollars. Moreover, your analysis provides no statistics from any source. How is the FairTax an oxymoron? By treating all purchases the same? Perhaps you could actually present analysis or even statistics. Do you doubt that removing a complicated tax code would remove a great deal of deadweight loss? That it would remove the embedded taxes in our current system? What is it that you take issue with?

The "Fairtax" proposal is re-debated about every 6 months or so, most recently in this thread: http://www.debatepolitics.com/polls/17536-fairtax-act.html in which I set out why IMO it is an oxymoron to call it fair.

Rather than regurgitating the same stuff, I invite you to consider my comments on the subject in that thread (there were others as well but apparently have been deleted) and if you have any questions or comments about what was already written I'll be happy to elaborate.

As far as $500 billion in tax compliance, that would amount to about $5000.00 cost in tax compliance on average for every family in the United states, which seems unrealistically high to me. My tax return is more complicated than most -- I itemize, have deductions for mortgage interest, medical expenses, state taxes, dividend, capital gains and interest income as well as wage income. My cost was $15 for tax prep software. It took about 3 hours of my time. For millions more with less extensive taxes the cost and time would not be greater. The source of the $500 billion claim, Tax Foundation, is a heavily biased anti-tax proponent organization, so the fact that they'd assert this heavy cost for tax compliance is not surprising but subject to question, IMO. If you look into how these kinds of numbers are calculated, you find that the vast bulk of the cost claimed they are not actual expendiure but based upon estimates of time people spend with values attached for that.

That being said, I certainly agree with the concept of simplifying the tax code. But that is not an argument for a consumption tax; the income tax can be vastly simplified by removing volumes of rules designed to give loopholes that mostly benefit the wealthier, which is why folks like Kerry and Cheney and Buffet pay a smaller rate of tax than a typical upper middle class worker. I would certainly agree to simplify the tax code and have everyone pay a tax simply based upon their income, with no exceptions or exemptions.

And I would also support eliminating the corporate tax. The individuals who benefit from corporations -- CEOs, shareholders, and employees, should pay the tax based on their benefit.

 

[Iriemon]

This is the most common objection to the FairTax; it would hit the poor especially hard. However, there are two problems wrong with that argument. Firstly, the FairTax provides a prebate that covers the cost of the tax on all necessities up to the federal poverty line. (The way they calculate this is takign the family size, matching it to the amount of income to be considered impoverished and then times it by the tax amount. A check (or card) is then sent out to all heads of households and they can use that check to pay for the necessities. Thus, the plan would account for any possibly increase in the prices of the essentials.

It is true that the prebate part of the Fairtax removes the regressiveness inherent in a consumption tax off the very bottom. So the effect of a consumption tax would be to shift a part of the tax burden to the very wealthy (who can afford to save a lot more of their income) to the middle classes. As I demonstrated in this thread:

http://www.debatepolitics.com/polls/17536-fairtax-act.html

Moreover, when you eliminate all other taxes you remove the embedded tax.

Since the current tax system is based on income taxes that are inbedded as part of the salaries paid, this statement is true only if salaries are reduced in an amount equivalent to the income tax eleiminated.

We discussed this in detail in the above thread as well.

Dale Jorgenson of Harvard puts our current embedded tax burden at 22 percent. The FairTax implements a 23 percent tax. Essentially the price would only raise by roughly one percent after you remove the source of the embedded taxes (payroll taxes, businesses taxes corporate income).

The actual tax is 30%, it is only 23% when looked at "internally." For example, a good cost $100. The fair tax adds a 30% tax, so the good cost $130. They say it is 23% by taking the amount of tax ($30) and dividing it by the after tax price of $130. 30/130 = 23%.

Also extensively discussed in the earlier thread, with examples.

Moreover, the proposition that prices would fall 23% assumes that everyone gets an equivalent 23% in their salaries -- a highly dubious assumption, IMO.

Also extensively discussed in the earlier thread, with examples.

Finally, many question whether a 30% tax will be sufficient to replace current revenues (which are already $500 too low to match spending), for good reason.

The real point of analysis shouldn't be what the poor have to pay in the short term, even if the FairTax doesn't have a signifcant impact on that. The focus should be what happens for the entire economy. On the whole the plan is estimated to create 10 percent growth in its first year.

Sure. Anyone can estimate anything. The proposition that you can slap a 30% tax on the cost of goods that that'll cause the economy to grow 10% is BS, IMO.

It would help insure more capital investment which leads to more productivity.

We have plent of capital investment. The cost of capital is relatively low. The reduction in demand would decrease economic activity.

This is, by and large, the way one achieves higher living standards, higher productivity. The plan would overwhelmingly benefit the entire American populace, the poor included. That should the focus, not what happens to the minority of Americans, although they will be better off. I have yet to see any arguments from anyone against a sales taxes suggesting that the proposal would hurt the economy.

Discussed in the previous thread as well.

Class warfare is still alive and well. I never saw what equality existed in having the top 52% percent of Americans pay the overwhelming majority of all taxes.

Yes, class warefare is still alive and well, and has been fought very effectively (with their slogans like "the death tax") the the wealthiest and their Republican army over the past several years. No only have income taxes been slashed, but the inheritance tax has been dramatically reduced, as have cap gains and dividend taxes, the taxes that the wealthy pay. Meanwhile, the SS tax, the tax that the working poor pay, has not been lowered one percent.

 

[Iriemon]

He's scared it won't soak the rich to his liking.

You are correct. The Fairtax will reduce the tax on the wealthiest and shift it to the middle class, which is to your liking.

 

[ARealConservative]

You are correct. The Fairtax will reduce the tax on the wealthiest and shift it to the middle class, which is to your liking.

The fair tax will reduce the overall tax buren on the middle class as well, just not the the same extent. It will depend very much on the individual's buying patterns.

Those hurt the most will be illegals and people that take major steps to reduce their tax burden - such as having a high mortgage compared to ones salary.

The middle class drives American policy - so it will be good for them to feel the effects of the policies they implement.

 

[Iriemon]

The fair tax will reduce the overall tax buren on the middle class as well, just not the the same extent. It will depend very much on the individual's buying patterns.

It is impossible for a change in tax law to reduce the taxes paid by the wealthier, reduce the tax paid by the middle class, and have no change on the tax paid by the poor, and still generate the same amount of revenue as the current tax system.

Those hurt the most will be illegals and people that take major steps to reduce their tax burden - such as having a high mortgage compared to ones salary.

It is true there are regressive components to our tax system, such as the mortgage deduction you mention, and the fact that dividens/cap gains are taxed at vastly lower rates.

My response to that would be to eliminate those loop holes. Though I would not be against a sales tax if it also contained a component to make it progressive.

Dale Jorgenson, whom the Fairtax folks rely upon extensively, is actually not a fair tax supporter. He recognizes the regressive effect of a sales tax, and proposes it be combined with a tax on property generated income.

The middle class drives American policy - so it will be good for them to feel the effects of the policies they implement.

They'd feel it. But it wouldn't be good for them.

 

[SFLRN]

It is true that the prebate part of the Fairtax removes the regressiveness inherent in a consumption tax off the very bottom. So the effect of a consumption tax would be to shift a part of the tax burden to the very wealthy (who can afford to save a lot more of their income) to the middle classes. As I demonstrated in this thread:

http://www.debatepolitics.com/polls/17536-fairtax-act.html

Since the current tax system is based on income taxes that are imbedded as part of the salaries paid, this statement is true only if salaries are reduced in an amount equivalent to the income tax eliminated.

Are you asserting then that the companies would not lower prices but instead keep prices constant? I'll disregard that this goes against actual evidence on the topic. If one business does it, say it lowers prices by 20% then isn't it feasible to say others will be forced to follow?

We discussed this in detail in the above thread as well.
The actual tax is 30%, it is only 23% when looked at "internally." For example, a good cost $100. The fair tax adds a 30% tax, so the good cost $130. They say it is 23% by taking the amount of tax ($30) and dividing it by the after tax price of $130. 30/130 = 23%.

That is simply a different way to calculate the numbers. However, that really doesn't go to the heart of the matter itself.

Also extensively discussed in the earlier thread, with examples.

I understand your previous argument. That we should worry about the effect it has on the lowest members of society versus society as a whole. It is a limited analysis. You can't possibly tell me policy makers should worry more about a possible harm to the poor (which is covered by prebates) if it means a 10 percent growth for everyone else. What philosophy allows you to uphold policies that prevent everyone else from seeing growth because of your concern for one specific minority group. You have yet to provide any philosophical backing for why anyone should value a speculative harm to the poor over a benefit for the nation as a whole.

Moreover, the proposition that prices would fall 23% assumes that everyone gets an equivalent 23% in their salaries -- a highly dubious assumption, IMO.

No one suggests that you get an equivalent 23% in your paycheck increase and then a decline in wages. The system would remove those taxes from either price or lead to higher incomes, or a mix of the two. In either scenario, the money would be shifted.

Also extensively discussed in the earlier thread, with examples.
Finally, many question whether a 30% tax will be sufficient to replace current revenues (which are already $500 too low to match spending), for good reason.

Many can question it. Do you have an actual source that questions it? Moreover, expanding the tax base by 300 million would help bring in revenues from the different aspects of the shadow economy. Simply put, its not very easy to evade a sales tax.

Sure. Anyone can estimate anything. The proposition that you can slap a 30% tax on the cost of goods that that'll cause the economy to grow 10% is BS, IMO.

If you're going to attack the validity of a proposal it can't simply be because it is BS in your own opinion. You need actual data that suggests that the tax would not deliver significant growth, or would not enhance growth at all. That being said I will further emphasize a point you have dropped, even if we look past tax compliance costs. As the director of the Congressional Budget Offfice said, nearly 2 trillion dollars is lost from our economy because businesses make tax decisions and not business ones. That is a completely non-partisan objective source clearly stating the problem in our current tax system. The FairTax eliminates this by giving businesses no incentive against maximizing wealth.
In short, if you can't refute the growth aspect then how can we not accept the proposal as enhancing the well being of America as a whole? Isn't the best way to help the middle class through solid growth strategies?

We have plenty of capital investment. The cost of capital is relatively low. The reduction in demand would decrease economic activity.

I'm not saying we're completely capital starved but wouldn't an increase of 70% of capital spending easily benefit us in the long run?

Yes, class warfare is still alive and well, and has been fought very effectively (with their slogans like "the death tax") the wealthiest and their Republican army over the past several years. No only have income taxes been slashed, but the inheritance tax has been dramatically reduced, as have cap gains and dividend taxes, the taxes that the wealthy pay. Meanwhile, the SS tax, the tax that the working poor pay, has not been lowered one percent.

Of course it hasn't been lowered. Liberal ideology give the government so much power and then wonder why the working class gets robbed. The reason is simple, you have excellent intentions, but you try to achieve it through the most inefficient means possible. I don't know how you are really surprised that politicians are abusing the power that liberal welfare policy gave them. If you really have a beef with our current system then why not implement a policy that doesn't penalize work? How many actual working Americans would rather have their income taxed than their spending?

 

[Iriemon]

Are you asserting then that the companies would not lower prices but instead keep prices constant? I'll disregard that this goes against actual evidence on the topic. If one business does it, say it lowers prices by 20% then isn't it feasible to say others will be forced to follow?

Why would businesses lower price? What evidence on the topic?

Businesses pay about 7% of wages in FICA and about 1-2% of gross sales in corporate taxes. In a competitive but profitable industries you'd expect to see prices decrease maybe 8-9%.

I understand your previous argument. That we should worry about the effect it has on the lowest members of society versus society as a whole.

No that is not my previous argument. It is that the tax burden will shift from the wealthier to the middle classes.

It is a limited analysis. You can't possibly tell me policy makers should worry more about a possible harm to the poor (which is covered by prebates) if it means a 10 percent growth for everyone else. What philosophy allows you to uphold policies that prevent everyone else from seeing growth because of your concern for one specific minority group. You have yet to provide any philosophical backing for why anyone should value a speculative harm to the poor over a benefit for the nation as a whole.

Who says there's going to be 10% growth? I mean other than the "fair"tax folks and their backers.

No one suggests that you get an equivalent 23% in your paycheck increase and then a decline in wages. The system would remove those taxes from either price or lead to higher incomes, or a mix of the two. In either scenario, the money would be shifted.

If you are saying that either prices will increase or wages will decrease, I might agree with you.

Many can question it. Do you have an actual source that questions it? Moreover, expanding the tax base by 300 million would help bring in revenues from the different aspects of the shadow economy. Simply put, its not very easy to evade a sales tax.

Many can propose it. There review of several positions on the subject on Wiki under the heading revenue neutrality.

FairTax - Wikipedia, the free encyclopedia

If you're going to attack the validity of a proposal it can't simply be because it is BS in your own opinion. You need actual data that suggests that the tax would not deliver significant growth, or would not enhance growth at all.

Show me the actual data the indicates the economy will grow at 10%, since it is their claim.

That being said I will further emphasize a point you have dropped, even if we look past tax compliance costs. As the director of the Congressional Budget Offfice said, nearly 2 trillion dollars is lost from our economy because businesses make tax decisions and not business ones.

Can you give me a cite to the quote so I can see what he is talking about? That is a huge number, I wonder what he bases it on.

That is a completely non-partisan objective source clearly stating the problem in our current tax system. The FairTax eliminates this by giving businesses no incentive against maximizing wealth.

What incentives are their for businesses to not maximize wealth now? Seems to me most of them are trying to make a profit.

In short, if you can't refute the growth aspect then how can we not accept the proposal as enhancing the well being of America as a whole? Isn't the best way to help the middle class through solid growth strategies?

If you can't prove the growth aspect its BS.

I'm not saying we're completely capital starved but wouldn't an increase of 70% of capital spending easily benefit us in the long run?

1. What is the basis for the assertion there would be a 70% increase in capital spending?

2. If there is already plentiful capital so that the cost of capital is not high, increasing savings has marginal benefit. However, the loss of demand from people that cannot afford to buy as much would have an immediate effect.

Of course it hasn't been lowered. Liberal ideology give the government so much power and then wonder why the working class gets robbed.

Err, if you hadn't noticed, "liberal ideology" has not had a heck of a lot of power in government, particularly the past 6 years.

The reason is simple, you have excellent intentions, but you try to achieve it through the most inefficient means possible. I don't know how you are really surprised that politicians are abusing the power that liberal welfare policy gave them.

What power did liberal welfare policy give politicians?

If you really have a beef with our current system then why not implement a policy that doesn't penalize work? How many actual working Americans would rather have their income taxed than their spending?

I don't know. I'd guess most if they understood it would mean they'd be paying more taxes while the wealthier paid less.

It is kind of surprising, they have been focusing on taxing spending in Europe for decades with their VAT.

 

[ARealConservative]

It is impossible for a change in tax law to reduce the taxes paid by the wealthier, reduce the tax paid by the middle class, and have no change on the tax paid by the poor, and still generate the same amount of revenue as the current tax system.

Sure there is - we are introducing a whole new set of tax payers - illegal aliens.

And - as you pointed out before - Many of the very wealthy take advantage of loopholes that allow them to pay a lower rate then the middle class. If you truly believed this - then account for it in your analysis.

 

[bandaidwoman]

She should have planned ahead, insuring herself an education capable of supporting a child before squeezing one out. She has no right to pilfer from the coffers of others..

This type of comment that finds the opportunity to portray single mothers as manipulative and self-serving is deeply mysoginistic.

I know plenty of struggling women who are single mothers who did not get there by "poor planning". I Know of more exceptions than the stereotypical.

example. One woman was a RN nurse and quit her full time job to raise 3 kids for the last 12 years. Her husband was a very wealthy successul ENT/plastic surgeon who was caught in a huge methamphetamine scam. All his assets and property ( house etc.) have been turned over. She has no right to access any of it. She lived out of her car for 2 mos until she could reinstate her RN license and go back to work. All her salary goes to rent and after school day care for her 3 kids and she lives in a low rent disrict. I can't imagine what would happen she did not have a degree. He is still in prison so no help from him there in terms of child support!

 

[Iriemon]

Sure there is - we are introducing a whole new set of tax payers - illegal aliens.

If we assume there are 10 million illegal aliens, and they getting paid illegal under the table $10,000 a year, and they would spend every dime on taxable income (ie not buying used or black market stuff), that would add 23 billion additional revenue -- which adds about 1% of total revenues.

And - as you pointed out before - Many of the very wealthy take advantage of loopholes that allow them to pay a lower rate then the middle class. If you truly believed this - then account for it in your analysis.

Fair point. IMO, the way to address that is to eliminate the loopholes that allow folks like Cheney and Kerry to pay an effective 12% tax rate rather than institutionalize a system that has inherent regressive features.

 

[ARealConservative]

If we assume there are 10 million illegal aliens, and they getting paid illegal under the table $10,000 a year, and they would spend every dime on taxable income (ie not buying used or black market stuff), that would add 23 billion additional revenue -- which adds about 1% of total revenues.

No weaseling out.

You asked how tax can be lowered - while pretending new tax payers don't exist. Now that I caught you in your dishonesty - you admit they do exist - now the dishonesty switches to what impact they would have.


The total number of tax payers will increase. The loopholes for the rich will be gone. The loopholes that allow the middle class to pay less taxes by having an extrvagent mortgage will be gone. The hidden tax will be gone. All of these things will have an impact. Stop being dishonest.

 

[Iriemon]

No weaseling out.

You asked how tax can be lowered - while pretending new tax payers don't exist. Now that I caught you in your dishonesty - you admit they do exist - now the dishonesty switches to what impact they would have.

I don't understand your point. Where did I ask how taxes can be lowered?

The total number of tax payers will increase. The loopholes for the rich will be gone. The loopholes that allow the middle class to pay less taxes by having an extrvagent mortgage will be gone. The hidden tax will be gone. All of these things will have an impact. Stop being dishonest.

I don't believe I ever said they would not have an impact. Just not the fairly land impact the "fair"tax folks claim.

 

[ARealConservative]

I don't understand your point. Where did I ask how taxes can be lowered?

It is impossible for a change in tax law to reduce the taxes paid by the wealthier, reduce the tax paid by the middle class, and have no change on the tax paid by the poor, and still generate the same amount of revenue as the current tax system.

not impossible, just dishonest.

I don't believe I ever said they would not have an impact. Just not the fairly land impact the "fair"tax folks claim.

Your malfunction is in determining what is fair while maintaining your views on class warfare.

 

[SFLRN]

Why would businesses lower price? What evidence on the topic?[QUOTE/]
Free market economics. The fact that if a business has a way of lowering their prices they generally will for a competitive edge. If I was a business man and I could lower my prices significantly I would to help ensure that my business would win out in the market. The airline industry presented a specific example in that it saw a significant decrease in a factor of production and could lower their prices. One small company did such to gain an advantage and the whole industry did as a result.

What evidence do you have on anything? You can't nit-pick my evidence and then provide nothing in the way of hard evidence against my position. You're trying to bury this debate in details to distract everyone from the fact that you have no hard evidence. You lack any analysis from any source other than yourself.

Businesses pay about 7% of wages in FICA and about 1-2% of gross sales in corporate taxes. In competitive but profitable industries you'd expect to see prices decrease maybe 8-9%.
[QUOTE/]
Are you suggesting that the analysis of Jorgenston is incorrect? Embedded taxes are more than just those taxes.

No that is not my previous argument. It is that the tax burden will shift from the wealthier to the middle classes.
[QUOTE/]
What evidence suggests that if there was indeed a shift, that it would be unbearable? It provides for the basic necessities already, meaning that things like food would have their tax burden covered under a prebate. So it will create an incentive not to spend as much. Is that a bad thing? Are you suggesting we want to encourage our current level of spending against more long-term savings? In the long-term saving is beneficial for the economy as a whole and this plan would increase incentives to do such. Furthermore, what about all the rich individuals who pay no income tax because they make their money off of dividends and the like, aren't we increasing the tax burden on them as well? Does that not mean that there will be rich people who will have a heavier burden as well? What percent of middle class income is spent on consumption of new goods? The rich also purchase things and generally more expensive things than the middle class. I want you to give me evidence that this will significantly shift the tax burden. I also want you to provide your philosophical standard of fair.

Who says there's going to be 10% growth? I mean other than the "fair"tax folks and their backers.
[QUOTE/]
In short, Jorgenston and a Boston University Economists, among others. Scroll down a bit.

If you are saying that either prices will increase or wages will decrease, I might agree with you.
[QUOTE/]
I'm saying that prices will increase, slightly. Wages would not decrease

Many can propose it. There review of several positions on the subject on Wiki under the heading revenue neutrality.

FairTax - Wikipedia, the free encyclopedia


Show me the actual data the indicates the economy will grow at 10%, since it is their claim.
[QUOTE/]
S

Can you give me a cite to the quote so I can see what he is talking about? That is a huge number, I wonder what he bases it on.
[QUOTE/]
I'll get the quote in the following post. However, how do you plan on discrediting the CBO?

What incentives are their for businesses to not maximize wealth now? Seems to me most of them are trying to make a profit.
[QUOTE/]
They are incentives in our tax code and other taxes on capital gains that discourage using the most effective means of production.

If you can't prove the growth aspect its BS.
[QUOTE/]
economist Dale Jorgenson of Harvard University states that, “…the revenue neutral substitution of the FairTax for existing taxes would have an immediate and powerful impact on the level of economic activity. GDP would increase by almost 10.5 percent in the first year.”9 Laurence Kotlikoff of Boston University found that implementation of the proposed tax reform plan “…raises the economy’s capital stock by 42 percent, its labor supply by 4 percent, its output by 12 percent, and its real wage rate by 8 percent. It also lowers real interest rates by more than one quarter.”10
8 Beach, William W., “The Case for Repealing the Estate Tax,” The Heritage Foundation, Backgrounder # 1091, August 21, 1996, estimates using both the Washington University Macro Model and the U.S. Macro Model of Wharton Econometric Forecasting that repeal of the estate and gift tax would increase Gross Domestic Product by $11 billion per year, create 145,000 new jobs, increase personal income by $8 billion per year and increase federal revenues marginally."

1. What is the basis for the assertion there would be a 70% increase in capital spending?

2. If there is already plentiful capital so that the cost of capital is not high, increasing savings has marginal benefit. However, the loss of demand from people that cannot afford to buy as much would have an immediate effect.
[QUOTE/]
Even with a short-term down-turn in demand that would be offset by the increases in the economy cited earlier. Furthermore, it would increase capital stock, by a large number (you can debate what specific number) by firstly removing capital gains taxes and my making access to credit cheaper with a larger supply of savings for banks to loan out. This also lowers the interest rate as a result and will mean businesses can take out loans at a less prohibitive cost.

What power did liberal welfare policy give politicians?[QUOTE/]

Namely, more power through the purse and by allowing for the passage of income withholding they made it harder for Americans to track their tax burden. Moreover, the whole policy bases itself on more government spending which means government's having more power. Also, your class-warfare rhetoric is the same kind of rhetoric that allowed for the income tax to be formed. It was originally advertised as being simply applied to the rich. Obviously, it expanded to cover the poor and working class.

I don't know. I'd guess most if they understood it would mean they'd be paying more taxes while the wealthier paid less.[QUOTE/]

Why is the only point of your entire analysis based on class distinctions? Why do you only focus on the fact that we're not screwing the wealthy enough with a plan? If the plan creates sizable growth, which the estimates do show, then shouldn't that be the focus?

It is kind of surprising, they have been focusing on taxing spending in Europe for decades with their VAT[QUOTE/]
The VAT is different from the FairTAx. The VAT is applied at every level of production. The FairTax is a one time only tax on new goods.
Pardon the formatting.