Fair Tax vs. Flat Tax: Why Income Taxes destroys US jobs

[edthecynic]

That would be true if all taxes (other than the death tax) were not built into the price of the products we buy. But they are. You're wrong, and since you just don't understand taxes, it's irrelevant to discuss until you do.

Translation: My rebuttal is so unassailable that you can only lower yourself a condescending personal insult.
Thank you for your white flag.

Aw, poor baby. I said you didn't understand it. I'm sorry I made you cry with my "personal insult." You don't understand, wow, vicious. I said that BTW because your post demonstrated you didn't understand it. You listen to liberal lawyers about economics. Because liberal lawyers know so much about our economy. They're doing such a great job, I see why you wouldn't want to risk listening to the field of economics instead.

Again, you can't rebut anything I posted so you can only spew condescending insults.

thank you again.

 

[FA_Q2]

You are constraining the flat tax to something that it should not be. Income, period, is the only thing that would be taxed and therefore your ‘points’ about the negatives are completely incorrect.

The proposals I've heard only flatten income taxes, they don't address business, payroll, unemployment or the death tax. What flat tax are you looking at?

And as for investment income, first of all it's a double tax since all the taxes were already paid by you on your investment and by the company you invested in on their earnings. Terrible for the economy.

And for income tax, investment taxes are s the biggest reason we need tax lawyers and accountants and you're keeping all that. All you changed is the rate, not the process.

Then what you read is not really a flat tax but rather a restructuring of the already convoluted tax system that we have. There is nothing to be gained by flatting income taxes and leaving the thousand other convoluted rules in place. I propose a flat tax on all income. That is it, nothing else. The tax code would be a single page; maybe some more to clarify the exact meaning of income, but you get the idea. No other taxes, period.

I don’t really care whether the investment tax is good for the economy. That is central planner horse manure. The tax code does not exist to assuage the economy. It has a single purpose, to fund the government. ANYTHING that the code is used to accomplish beyond that, including carving out special rates for an interest group (aka, investors) is not acceptable to me. You START with that exception and that only leads to more exceptions. If a tax break is good for the economy for investors then one for manufacturing is ALSO good for the economy. Green energy is an up and coming cash cow; let’s get some tax breaks for that because that is good for the economy. How about some tax breaks for Microsoft’s new office that will certainly spur the economy.

No thank you. Once you start rationalizing holes you can rationalize anything. Further, that is one of the MAJOR holes on your tax and the one that I find most grievous. You carve out special interests right from the get go. Nothing that is used in the creation of another product is put under a sales tax giving all kinds of people nice little loopholes in the tax code. Then, every proposal I have heard, they start carving out for things like food. How long do you think it will take before the major wireless networks successfully lobby to make cell phones a ‘necessity?’ Cars? Candy bars? Sneakers a pretty important. After all, we can’t have KIDS without shoes now can we…

Again, ONE exception means that we are going to be right back where we are now. Taxes need to go back to their actual purpose, funding government and nothing more. A flat tax on all income is the best way to do that imho.


Also, investment income (under a FLAT tax system) would NOT be double taxed.

The black market still avoids taxes in sales tax in your version as well. Seems to me that arguing illegal activities is rather inane to the discussion.

You mow someone's lawn for cash, don't declare the income you're not a taxpayer in the Flat Tax. In the Fair Tax, when you spend the money you pay tax on it. Yeah, they're taxpayers now.

You sell that carton of cigarettes out of your trunk – you’re not a taxpayer. You sell that dog food that you declared as part of your ‘business’ and poof, your no longer a tax payer.

Again, I can point out illegal ways to do this all day, neither system is full proof from fraud. Pretending that a flat sales tax is going to end fraud is ludicrous.

- US corporations still pay more taxes than foreign companies.

No, they pay nothing. I believe that is less than other nations.

Right, companies don't have to pay employees enough to live and pay their taxes. Sure they don't.

Sure they do. That is irrelevant. You were specifically talking about corporate tax structures (at least that is what I gathered from that specific point). They are STILL not paying more than foreign companies though, that is a misnomer. Even if they are, it is STILL irrelevant. I have already addressed this fact. Stop reverting back to the same argument without addressing my counter.

 

[NYcarbineer]

plus about $30/wk in payroll taxes.

Assuming he works 40 hours a week, payroll taxes and unemployment would be about $220 a week.

lol, what? at 10 bucks an hour he makes 400 a week. First you say he pays no taxes, now you're saying he pays 50+% in taxes.

Speak English.

 

[OohPooPahDoo]

It's an illustration of the math, not a discussion of tax rates.

Then what is it doing in the poli board? Take it over to the math board you moron.

You calling anyone a moron is rich.

You have to understand the illustration I'm using to understand the implication of it. When you understand it, get back to me.

Its not based in reality so its implications don't matter.

 

[kaz]

plus about $30/wk in payroll taxes.

Assuming he works 40 hours a week, payroll taxes and unemployment would be about $220 a week.

lol, what? at 10 bucks an hour he makes 400 a week. First you say he pays no taxes, now you're saying he pays 50+% in taxes.

Speak English.

Ah, you meant Joe then, you said Steve. No biggie, just why I gave you the number I did. I also counted the total payroll taxes paid, you only counted the half that is printed on Joe's stub. However, both halves are paid by his employer to employ Joe.

And for Rabbi so he doesn't throw a rod, Joe's employer then passes it on to their customers.

 

[kaz]

Then what is it doing in the poli board? Take it over to the math board you moron.

You calling anyone a moron is rich.

You have to understand the illustration I'm using to understand the implication of it. When you understand it, get back to me.

Its not based in reality so its implications don't matter.

If you understood the calculation, then you would understand how it relates to reality. Once you grasp it, let me know. I'm tired of stupid, "duh, I don't get it" arguments from people like you and Ed, and I'm not going pretend there's any relevant discussion to your not getting the point.

Get the point, then we'll discuss. I may not agree with FA_Q2's assessment, but he's responding to what I'm saying. He's not sitting there telling me he's too intelligent to understand what I'm saying.

 

[OohPooPahDoo]

You calling anyone a moron is rich.

You have to understand the illustration I'm using to understand the implication of it. When you understand it, get back to me.

Its not based in reality so its implications don't matter.

If you understood the calculation, then you would understand how it relates to reality.

I understand arithmetic. The mere fact that your chosen numbers add up the way you say they do does not mean they correspond with reality.

Once you grasp it, let me know. I'm tired of stupid, "duh, I don't get it" arguments from people like you and Ed, and I'm not going pretend there's any relevant discussion to your not getting the point.

There's nothing to get. You just made up some numbers and did some math with them.

 

[kaz]

Then what you read is not really a flat tax but rather a restructuring of the already convoluted tax system that we have. There is nothing to be gained by flatting income taxes and leaving the thousand other convoluted rules in place. I propose a flat tax on all income. That is it, nothing else. The tax code would be a single page; maybe some more to clarify the exact meaning of income, but you get the idea. No other taxes, period.

It's still not as good as the Fair Tax, but that would be far better than what we have in place today. As I understand the Flat Tax proposals in DC though, they only flatten income taxes, they don't eliminate the other ones.

I don’t really care whether the investment tax is good for the economy...

This section is really for the Flat Tax or Fair Tax versus the current code, it's not the Flat Tax versus the Fair Tax.

Also, investment income (under a FLAT tax system) would NOT be double taxed

Maybe I got confused, but I thought you said investment taxes would be subject to the Flat Tax. If not, then I concur and it does eliminate a lot more double taxation. If they are subject to the Flat Tax, then it is clearly double taxation since the company already paid taxes on that income.

You sell that carton of cigarettes out of your trunk – you’re not a taxpayer. You sell that dog food that you declared as part of your ‘business’ and poof, your no longer a tax payer.

There are a lot more people doing work for cash then selling products without paying sales taxes. The ones working for cash now are not paying income tax, but they would pay the Fair Tax. The ones who would sell cigarettes out of their trunk to avoid the Fair Tax are already doing it to avoid current taxes.

Again, I can point out illegal ways to do this all day, neither system is full proof from fraud. Pretending that a flat sales tax is going to end fraud is ludicrous.

Nice strawman there, I never said it would "end" fraud.

Sure they do. That is irrelevant. You were specifically talking about corporate tax structures (at least that is what I gathered from that specific point). They are STILL not paying more than foreign companies though, that is a misnomer. Even if they are, it is STILL irrelevant. I have already addressed this fact. Stop reverting back to the same argument without addressing my counter.

Can you clarify what point I didn't respond to? We've had a lot of discussion, I didn't pass on anything intentionally.

 

[kaz]

There's nothing to get. You just made up some numbers and did some math with them.

That you only see the numbers as numbers and don't grasp the application to reality is my point.

This is probably the most lucid discussion I've ever seen you have with anyone.

 

[OohPooPahDoo]

Maybe I got confused, but I thought you said investment taxes would be subject to the Flat Tax. If not, then I concur and it does eliminate a lot more double taxation. If they are subject to the Flat Tax, then it is clearly double taxation since the company already paid taxes on that income.

It is not. The corporation is a separate legal entity from its owners. That's two taxes - two entities.

If you don't want double taxation then don't form a C Corp for fucks sake.

 

[kaz]

Maybe I got confused, but I thought you said investment taxes would be subject to the Flat Tax. If not, then I concur and it does eliminate a lot more double taxation. If they are subject to the Flat Tax, then it is clearly double taxation since the company already paid taxes on that income.

It is not. The corporation is a separate legal entity from its owners. That's two taxes - two entities.

If you don't want double taxation then don't form a C Corp for fucks sake.

It is double taxation. You and I pool our money together to start a business. The pool pays taxes. Then when we get our money out of the pool, we pay tax on it again. You paid taxes on it once, then you pay taxes on it again. How many times did you pay taxes on the same money?

You like math, Cue the Jeopardy music, 1 + 1 = ...

Do you get this time how the math pertains to the discussion?

 

[kaz]

The corporation is a separate legal entity from its owners. That's two taxes - two entities.

Since it's a legal entity and it's paying taxes, corporations should get to vote, right?

 

[OohPooPahDoo]

Maybe I got confused, but I thought you said investment taxes would be subject to the Flat Tax. If not, then I concur and it does eliminate a lot more double taxation. If they are subject to the Flat Tax, then it is clearly double taxation since the company already paid taxes on that income.

It is not. The corporation is a separate legal entity from its owners. That's two taxes - two entities.

If you don't want double taxation then don't form a C Corp for fucks sake.

It is double taxation.

You can say it is over and over - at the end of the day its two taxes on two separate legal entities. 2/2 = 1.

You and I pool our money together to start a business.The pool pays taxes. Then when we get our money out of the pool, we pay tax on it again. You paid taxes on it once, then you pay taxes on it again. How many times did you pay taxes on the same money?

Why would I form a business with some moron who isn't aware that a corporation owned by only two U.S. citizens doesn't have to pay income tax?

Oh - that's right - I forget that reality doesn't matter to you.

 

[The Rabbi]

Corporations are "pass through" entities. That is explicitly so in Sub-S corps and practically so in C corps. Therefore they should not pay income tax.

 

[OohPooPahDoo]

Corporations are "pass through" entities. That is explicitly so in Sub-S corps and practically so in C corps. Therefore they should not pay income tax.

Because you say they are "practically so" ?

LOL!

So only the good things should pass through - like income - but the bad things - like liability past the investment amount - should not, right?

 

[FA_Q2]

Then what you read is not really a flat tax but rather a restructuring of the already convoluted tax system that we have. There is nothing to be gained by flatting income taxes and leaving the thousand other convoluted rules in place. I propose a flat tax on all income. That is it, nothing else. The tax code would be a single page; maybe some more to clarify the exact meaning of income, but you get the idea. No other taxes, period.

It's still not as good as the Fair Tax, but that would be far better than what we have in place today. As I understand the Flat Tax proposals in DC though, they only flatten income taxes, they don't eliminate the other ones.

That is true but that is because politicians are not interested in a fair or flat tax. AFAIK, no one at all has submitted a ‘fair’ sales tax so I am at a disadvantage with the politicians twisting a good idea to a self-serving purpose where they have not polluted yours yet Most of congresses power comes from 2 functions (economically) – they can grant cash prizes to a specific company (like Halliburton) or they can manipulate the tax code to give backers benefits and market advantages. Other than that, congress does not influence the actions of companies all that much. Most regulation is not even touched by congress and instead handled by various agencies. The first method is effective but dirty and leaves the politicians open to a LOT of criticism and ire as well as convoluted laws. The second (manipulation of the tax code) is very discrete. Essentially, congress is simply paying lip service to two groups (the ones that want simple taxes and the ones that are upset at those that ‘do not pay taxes’) but they don’t want actual change. If that happened, they would be neutered in their ability to pay the lobbies and backers back.

I don’t really care whether the investment tax is good for the economy...

This section is really for the Flat Tax or Fair Tax versus the current code, it's not the Flat Tax versus the Fair Tax.


Maybe I got confused, but I thought you said investment taxes would be subject to the Flat Tax. If not, then I concur and it does eliminate a lot more double taxation. If they are subject to the Flat Tax, then it is clearly double taxation since the company already paid taxes on that income.

Only under the current system. Remember, I believe that a flat tax should be devoid of corporate tax altogether. To me, that is simply another hidden tax. The consumers pay it anyway but they never see it. One of the things that I despise about the current tax code is that the vast majority of taxes simply are hidden. It’s not true that the bottom rung pays no income tax – it is just hidden in the employer side of the paystub. That is asinine to me as the only real point to doing this is so the politicians can levy a tax on people without them actually knowing it and then they blame the companies for the low pay. Part of the reason that pay is low is because the employer is paying a lot more than the workers think.

As an argument against the current system, the statements against double taxation make sense but I don’t think there is a real argument there. I think that we both seem to really despise the current system so there is not going to be much debate as to whether or not a piece of that is effective or ‘good.’

If it is double taxed under the system that I propose, please show me how.

There are a lot more people doing work for cash then selling products without paying sales taxes. The ones working for cash now are not paying income tax, but they would pay the Fair Tax. The ones who would sell cigarettes out of their trunk to avoid the Fair Tax are already doing it to avoid current taxes.

Again, I can point out illegal ways to do this all day, neither system is full proof from fraud. Pretending that a flat sales tax is going to end fraud is ludicrous.

Nice strawman there, I never said it would "end" fraud.

I’ll give you that. My point is that fraud is going to happen. I disagree that it is more prevalent with an income system rather than a sales system because of the extra loopholes that exist for items that are used to make another product. Even if it is, I would not structure a major change because of relatively little fraud. If it is a problem, prosecute those that are guilty.

Sure they do. That is irrelevant. You were specifically talking about corporate tax structures (at least that is what I gathered from that specific point). They are STILL not paying more than foreign companies though, that is a misnomer. Even if they are, it is STILL irrelevant. I have already addressed this fact. Stop reverting back to the same argument without addressing my counter.

Can you clarify what point I didn't respond to? We've had a lot of discussion, I didn't pass on anything intentionally.

That overseas competition should not be ‘evened out’ with the tax code. As I stated, all taxes should have a single purpose, to fund the government. That is, IMHO, the only power that the federal government has as far as taxing. I don’t think that the purpose of that power was ever to control the markets. Foreign competition should be handled by another power – the power to form treaties and international agreements. IOW, levy import fees if there is a disparity between tax here and tax there. Let’s face it, taxing changes are simply not going to solve that anyway as they still have no EPA or labor law to deal with so even taxes at zero all around would not keep companies here or put them on even footing. That does not even address the fact that some governments back their companies in other ways as well. Rather than structure the tax code around foreign competition and offshoring, use trade agreements for that.

I understand there are consequences to that as well but tbh, we are already paying much of those consequences. I believe that ‘free’ trade is anything but and the concept is rather asinine but that is for another thread. It is not as though other nations would not react in a similar fashion anyway if they see their companies paying a sales tax and that was making trade difficult.

 

[kaz]

You can say it is over and over - at the end of the day its two taxes on two separate legal entities. 2/2 = 1

The gains were earned once and taxed twice. Once by our pool and once again by you and me individually.

When your kids earn income, either you or they declare the money for taxes, just because you are two legal entities it still doesn't mean the government can tax you both for the same earnings.

 

[NYcarbineer]

This topic has come up in discussions, so I decided to start a threat to explain it. It's sad that government schools teach government, they don't teach capitalism. Capitalism is just a term for economic freedom.

Let’s say we have two employees, one is worth Three times as much as the other Joe is worth $10 an hour, Steve is worth $30. Worth is determined by the marketplace. If an employer pays them less than their value, they are unhappy, their work quality drops and they eventually leave for an employer who recognizes their value. Pay them more and they are happy, but their employer is unhappy because they are not getting their money’s worth. They push them more, raise the bar and if they can’t cut it they eventually replace them.

So now Obama comes along and says he isn’t going to tax Joe, he doesn’t make enough. But he is going to tax Steve 25% of his earnings. Steve is only taking home $22.50 an hour, but he’s worth three times as much as Joe who is taking home $10. So what happens?
.

According to fairtax.org, once the fairtax 'prebate' is applied, Steve's tax rate is zero (or less, depending on family size etc.),

and Joe's is 11.5%.

 

[kaz]

It's still not as good as the Fair Tax, but that would be far better than what we have in place today. As I understand the Flat Tax proposals in DC though, they only flatten income taxes, they don't eliminate the other ones.

That is true but that is because politicians are not interested in a fair or flat tax.

Fair enough, it just would have helped if you'd clarified that up front, I thought you were talking about the Flat Tax as discussed in DC.

AFAIK, no one at all has submitted a ‘fair’ sales tax so I am at a disadvantage with the politicians twisting a good idea to a self-serving purpose where they have not polluted yours yet

Sure it has. John Linder proposed in in 2007. I heard he proposes it every year, I didn't verify that though. He's had a variety of co-sponsors.

Rep. John Linder introduces HR 25, "The FairTax Act of 2007" - Americans For Fair Taxation

If they are subject to the Flat Tax, then it is clearly double taxation since the company already paid taxes on that income.

Only under the current system. Remember, I believe that a flat tax should be devoid of corporate tax altogether.

OK, fair enough, then I agree it's not double taxed.

That overseas competition should not be ‘evened out’ with the tax code. As I stated, all taxes should have a single purpose, to fund the government.

I'm not proposing we do it to "even out" as some esoteric standard of fairness. I'm pointing out that our tax code actually helps foreign competition. I want to do it because giving them a tax break and putting all our taxes on US companies and foreign companies that build plants here doesn't make sense. Tax everyone who sells good in our market evenly and it helps our companies. I'm not a sobby liberal crying it's not fair. I'm a capitalist saying it's stupid to shoot ourselves in the foot.

As for your goal, by widening the tax base, it helps fund the government better.

 

[OohPooPahDoo]

This topic has come up in discussions, so I decided to start a threat to explain it. It's sad that government schools teach government, they don't teach capitalism. Capitalism is just a term for economic freedom.

Let’s say we have two employees, one is worth Three times as much as the other Joe is worth $10 an hour, Steve is worth $30. Worth is determined by the marketplace. If an employer pays them less than their value, they are unhappy, their work quality drops and they eventually leave for an employer who recognizes their value. Pay them more and they are happy, but their employer is unhappy because they are not getting their money’s worth. They push them more, raise the bar and if they can’t cut it they eventually replace them.

So now Obama comes along and says he isn’t going to tax Joe, he doesn’t make enough. But he is going to tax Steve 25% of his earnings. Steve is only taking home $22.50 an hour, but he’s worth three times as much as Joe who is taking home $10. So what happens?
.

According to fairtax.org, once the fairtax 'prebate' is applied, Steve's tax rate is zero (or less, depending on family size etc.),

and Joe's is 11.5%.

Steve would actually need to either be married (with or without children) or have 3 or more children for all of his income to be covered by the prebate.

At $10, if Steve works 40 hour weeks and takes two weeks unpaid vacation per year - that's 20k.

Frequently Asked Questions Answers - Americans For Fair Taxation