so called "Fair" tax punishes savers and rewards borrowers - fair?

[OohPooPahDoo]

The so called "Fair" tax punishes savers and rewards borrowers - fair?

Its pretty simple.

Say that today Bob borrows $10,000 and buys 10k worth of stuff. He pays $0 in federal consumption tax because there is none yet - and pays $0 in income tax so far on the transaction since he hasn't made the income to pay the 10k yet.

Say that today John make $10,000 in income, pays 15% federal income tax on it, and saves the remaining $8,500.

Now say next year the federal income tax is abolished and replaced with a 15% consumption tax.

Bob then makes $10,000 in income to pay off the principal of the debt. He pays $0 in income tax since the federal income tax is now abolished.

John withdraws his $8,000 and spends it, but has to pay $1275 in consumption tax to spend it.

So Bob - who borrowed money to spend and paid it off later, pays zero dollars in taxes to the federal government.

And John - who saved $10,000 to save later - has paid $2775 total in taxes.


You can extrapolate this to a lifetime and figure out that eliminating the income tax in favor of a consumption tax would be a major screw over to everyone who has saved for retirement in non-tax deferred investments and to most people collecting social security. Middle class retired people have paid plenty in income tax over their lifetime - the fair tax essentially asks them to pay even more.

 

[ba1614]

That's above my pay grade, I just try not to go into debt and legally fuck them out of as much of the extortion known as tax as I can.

 

[Dont Taz Me Bro]

The so called "Fair" tax punishes savers and rewards borrowers - fair?

Its pretty simple.

Say that today Bob borrows $10,000 and buys 10k worth of stuff. He pays $0 in federal consumption tax because there is none yet - and pays $0 in income tax so far on the transaction since he hasn't made the income to pay the 10k yet.

Say that today John make $10,000 in income, pays 15% federal income tax on it, and saves the remaining $8,500.

Now say next year the federal income tax is abolished and replaced with a 15% consumption tax.

Bob then makes $10,000 in income to pay off the principal of the debt. He pays $0 in income tax since the federal income tax is now abolished.

John withdraws his $8,000 and spends it, but has to pay $1275 in consumption tax to spend it.

So Bob - who borrowed money to spend and paid it off later, pays zero dollars in taxes to the federal government.

And John - who saved $10,000 to save later - has paid $2775 total in taxes.


You can extrapolate this to a lifetime and figure out that eliminating the income tax in favor of a consumption tax would be a major screw over to everyone who has saved for retirement in non-tax deferred investments and to most people collecting social security. Middle class retired people have paid plenty in income tax over their lifetime - the fair tax essentially asks them to pay even more.

What email or Web site did you steal this from?

 

[Soggy in NOLA]

Number one... if he only made $10,000... he ain't paying no 15% in income taxes. And what was the interest rate on the loan? Why would someone making $10k/year spend $8,000?

Sounds pretty dumb.. he deserves whatever he gets.

 

[Fwalker]

First someone paid income tax on the $10,000.00 original dollars, it did not come from thin air as current Government Officials would have many believe. We do not live a fictitious life.

If say someone like me, 61 years old had / did put money into savings, Social Security, IRA accounts etc. they / me would still be better off retiring under HR:25 the fair tax.
Yes I paid income tax on that money. But unless it is in a Roth account you will pay income tax again on money you withdraw in the current system also. If it is a Roth or other so called tax free annuity etc. You will still have to pay the embedded cost of taxes on Corporations because it will still be passed on to the purchaser in goods and services. Corporations do not pay taxes unless they are some form of S type or partnership. Corporations are owned by share holders for the most part. Corporate managers pass on tax related cost to the purchaser rather than passing them on to the share holders whenever possible. Even S type & Partner Ship based Corporations pass on business related expense and taxes to their customers and or those who purchase their products and or services.

If HR: 25 The Fair Tax passed:
Shortly after passage of HR:25 these embedded cost would work their way out of the cost of goods and services effectively lowering prices on all goods and services. All cost related to filing taxes and the hassle of keeping records for individuals would cease. Unemployment in the U.S. Would plummet to very low levels. The cost of supporting Citizens on unemployment would decrease dramatically. Business and construction would boom. The improved economy & reduced cost of unemployment and Government overhead would lower the cost of goods and services and increase productivity for all. The taxes on any house or property I / We accumulated over the years could be sold tax free. The value of older houses and property would increase reducing waste and encouraging rebuilding and restoring. All current death related taxes and their related expediences would cease. Family farms and businesses would not need to be sold to pay the current death related taxes and expenses that are destroying the family farm. This would reduce the cost of farm supplied goods to everyone and increase and maintain strong competition in farm related businesses. Small & large business would see huge cost reduction relating to compliance under the current Income based tax system. The improvements to our Society and Nation as a whole would far out weigh any tax I may have to pay on money I have saved before HR:25 The Fair Tax.

I would be much better off and I would much rather retire and live in the United States after passage of HR:25. I would also have the benefit of the Pre-bate to offset the cost of HR:25 on my basic necessities. There will also be reduced cost to myself and other Citizens who worked and paid taxes under the current system because those people who did not report or make income and avoided income based taxes will pay the consumption tax under HR:25. No more free rides for the free loaders!

Under the current system I will still have to pay all embedded tax cost in goods and services. I will still pay income taxes even on part time work. I will still have to pay taxes on the money I pull out of the savings / retirement accounts. I will still have to keep records for the IRS. I will still have to pay the hidden cost of unemployment and underemployment and a Nation in steadily decline. I will still have to pay death related taxes on the value of my estate including those savings, retirements, and annuity accounts. I would not have the benefit of the pre-bate or lower cost and better life style that will come from passage of HR:25.

Yes I would love to see HR:25 passed, for myself and my children and grandchildren!

 

[OriginalShroom]

Even if such a anomaly actually could happen, it would be a one time occurrence. In following years, the money spent, even if borrowed, would be taxed.

 

[Scorpion]

The only thing accurate about the OP is what the government giveth, the government can taketh away.

 

[bripat9643]

The so called "Fair" tax punishes savers and rewards borrowers - fair?

It doesn't do that, but even if it did, how what that make it unfair? It would be bad tax policy, but not necessarily unfair.

Its pretty simple.

Say that today Bob borrows $10,000 and buys 10k worth of stuff. He pays $0 in federal consumption tax because there is none yet - and pays $0 in income tax so far on the transaction since he hasn't made the income to pay the 10k yet.

That's your first mistake. Bob pays the tax on everything he buys. You don't pay it on income. You obviously don't know a thing about the FAIR tax.

Say that today John make $10,000 in income, pays 15% federal income tax on it, and saves the remaining $8,500.

Now say next year the federal income tax is abolished and replaced with a 15% consumption tax.

Bob then makes $10,000 in income to pay off the principal of the debt. He pays $0 in income tax since the federal income tax is now abolished.

John withdraws his $8,000 and spends it, but has to pay $1275 in consumption tax to spend it.

So Bob - who borrowed money to spend and paid it off later, pays zero dollars in taxes to the federal government.

And John - who saved $10,000 to save later - has paid $2775 total in taxes.


You can extrapolate this to a lifetime and figure out that eliminating the income tax in favor of a consumption tax would be a major screw over to everyone who has saved for retirement in non-tax deferred investments and to most people collecting social security. Middle class retired people have paid plenty in income tax over their lifetime - the fair tax essentially asks them to pay even more.

1. No one makes 100% return on an investment, so your scenearo is ridiculous. Most people are lucky if they make a 5% return on their investment these days. So the money Bob would earn off his investment the next year is more likely to be $50 rather than $10,000.
   
2. Your scenario could only happen the first year the tax is in place, because after that no one would ever pay income taxes again.
   
3. Although there would be a 20% sales tax on everything, the price of everything already incorporates at least 20% in income tax on employee wages. That would disappear. The result is probably a wash in terms of the final price of goods and services.
   
4. Any money saved after the TAX is implemented would not be taxed. Only money that was saved when the income tax was in place would get double taxed, but it already gets double tax and even triple taxed.
   
5. As you noted above, none of this would apply to tax deferred investments (401K) which is the kind most people have. Only the rich make enough to pour after tax money into investments, and you want to penalize the rich, don't you?

 

[Papageorgio]

Even if such a anomaly actually could happen, it would be a one time occurrence. In following years, the money spent, even if borrowed, would be taxed.

No kidding, what a stupid, ignorant and disingenuous thread.

 

[dblack]

The so called "Fair" tax punishes savers and rewards borrowers - fair?

Its pretty simple.

Say that today Bob borrows $10,000 and buys 10k worth of stuff. He pays $0 in federal consumption tax because there is none yet - and pays $0 in income tax so far on the transaction since he hasn't made the income to pay the 10k yet.

Say that today John make $10,000 in income, pays 15% federal income tax on it, and saves the remaining $8,500.

Now say next year the federal income tax is abolished and replaced with a 15% consumption tax.

Bob then makes $10,000 in income to pay off the principal of the debt. He pays $0 in income tax since the federal income tax is now abolished.

John withdraws his $8,000 and spends it, but has to pay $1275 in consumption tax to spend it.

So Bob - who borrowed money to spend and paid it off later, pays zero dollars in taxes to the federal government.

And John - who saved $10,000 to save later - has paid $2775 total in taxes.


You can extrapolate this to a lifetime and figure out that eliminating the income tax in favor of a consumption tax would be a major screw over to everyone who has saved for retirement in non-tax deferred investments and to most people collecting social security. Middle class retired people have paid plenty in income tax over their lifetime - the fair tax essentially asks them to pay even more.

Are we sure the fair tax proposals aren't taxing interest payments on debt? I would assume they would cover that, but I haven't looked into it.

I'm not a big fan of Fair Tax, but I can't help but see most of the opposition to it coming from people who don't want to let go of the income tax with it's multitude of loopholes and social engineering levers.

 

[emptystep]

The wealthy wrote the tax code. The wealthy have a methodology for doing things. The tax code falls along their methodology of doing things. Anyone who has never moved large sums of money around looks at the tax code and sees something very complicated but does not see any pattern in it. That is because they don't know the pattern of the wealthy. If you take the pattern of the wealthy and put it on the pattern of the tax code, guess what? Yeah, you guessed it.

 

[editec]

so called "Fair" tax punishes savers and rewards borrowers - fair?

Asute observation, OPPD.

Of course, note how borrowing doesn't fairly reward all classes of borrowers?

Note how, for the most part, borrowing only rewards the capital classes?

And the more capital one has, the more likely that you can be of that class that can borrow and take a tax break on that interest.

For instance, millions of people own homes and can, IF THEIR INCOMES ARE HIGH ENOUGH, deduct the interest they pay on their mortgages.

But note that if they do NOT make enough money to justify itemizing their deductions?

Every cent they pay in interest is NOT tax deductable?

That is basically what separates the upper middle class from the working class.

And the higher one goes up in the capital class, the more you see them having deductions for things that the rest of us cannot take deductions for.

Example?

You drive to work every day on YOUR dime. If you do not itemize you cannot even deduct the mileage.

Someone in the upper middle class CAN deduct their mileage getting back and forth to work.

Somebody in the highest elevations of the capital class, can not only deduct his limo, his driver and all costs associated with transportation to and from his labors, but at the stratosphere of wealth, the MASTERS can deduct (usually through their corporate taxes) the JETS they get to use as their own, the working vacations they "must" take, etc, etc.

Fair taxation?

The notion of that ever happening in a society devised for capital FORMATION is somewhat preposterous.

We hear all the time about how a flat tax would eliminate "loopholes".

What we almost NEVER hear about is what LOOPHOLES, the flat taxers would include.

Let me tall yas' almost none of them will be loopholes they get to enjoy.

But the upper middle class? (probably the MOST productive class of society?)

Yeah, THEIR loopholes (like deducting for home mortgage interest?) WILL be eliminated..count on THAT.

 

[bripat9643]

You drive to work every day on YOUR dime. If you do not itemize you cannot even deduct the mileage.

No they can't, moron. Driving to work is not deductible unless it's over a certain distance, like 50 miles. That's only one of the idiocies in your post. I won't bother detailing the rest since that should be sufficient to show everyone you don't know your ass from a hole in the ground.

 

[dblack]

so called "Fair" tax punishes savers and rewards borrowers - fair?

Asute observation, OPPD.

Of course, note how borrowing doesn't fairly reward all classes of borrowers?

Note how, for the most part, borrowing only rewards the capital classes?

And the more capital one has, the more likely that you can be of that class that can borrow and take a tax break on that interest.

For instance, millions of people own homes and can, IF THEIR INCOMES ARE HIGH ENOUGH, deduct the interest they pay on their mortgages.

But note that if they do NOT make enough money to justify itemizing their deductions?

Every cent they pay in interest is NOT tax deductable?

That is basically what separates the upper middle class from the working class.

And the higher one goes up in the capital class, the more you see them having deductions for things that the rest of us cannot take deductions for.

Example?

You drive to work every day on YOUR dime. If you do not itemize you cannot even deduct the mileage.

Someone in the upper middle class CAN deduct their mileage getting back and forth to work.

Somebody in the highest elevations of the capital class, can not only deduct his limo, his driver and all costs associated with transportation to and from his labors, but at the stratosphere of wealth, the MASTERS can deduct (usually through their corporate taxes) the JETS they get to use as their own, the working vacations they "must" take, etc, etc.

Fair taxation?

The notion of that ever happening in a society devised for capital FORMATION is somewhat preposterous.

We hear all the time about how a flat tax would eliminate "loopholes".

What we almost NEVER hear about is what LOOPHOLES, the flat taxers would include.

Let me tall yas' almost none of them will be loopholes they get to enjoy.

But the upper middle class? (probably the MOST productive class of society?)

Yeah, THEIR loopholes (like deducting for home mortgage interest?) WILL be eliminated..count on THAT.

Right. But I think the idea is that the Fair Tax will make it harder to hide all those subtle perks and loopholes. As you point out, income tax is rife with little 'presents' for those with the clout to influence legislators. If the Fair Tax is promising limit those, to simplify our taxes and give us a chance to limit the corporatist urge to use the tax code to hand out favors, then I'm willing to consider it. I'm not convinced (yet) that it would do that, but it seems like a worthwhile goal.

 

[JakeStarkey]

The so called "Fair" tax punishes savers and rewards borrowers - fair?

Its pretty simple.

Say that today Bob borrows $10,000 and buys 10k worth of stuff. He pays $0 in federal consumption tax because there is none yet - and pays $0 in income tax so far on the transaction since he hasn't made the income to pay the 10k yet.

Say that today John make $10,000 in income, pays 15% federal income tax on it, and saves the remaining $8,500.

Now say next year the federal income tax is abolished and replaced with a 15% consumption tax.

Bob then makes $10,000 in income to pay off the principal of the debt. He pays $0 in income tax since the federal income tax is now abolished.

John withdraws his $8,000 and spends it, but has to pay $1275 in consumption tax to spend it.

So Bob - who borrowed money to spend and paid it off later, pays zero dollars in taxes to the federal government.

And John - who saved $10,000 to save later - has paid $2775 total in taxes.


You can extrapolate this to a lifetime and figure out that eliminating the income tax in favor of a consumption tax would be a major screw over to everyone who has saved for retirement in non-tax deferred investments and to most people collecting social security. Middle class retired people have paid plenty in income tax over their lifetime - the fair tax essentially asks them to pay even more.

There is not going to be your kind of 'fair' tax.

 

[editec]

you drive to work every day on your dime. If you do not itemize you cannot even deduct the mileage.

no they can't, moron. Driving to work is not deductible unless it's over a certain distance, like 50 miles. That's only one of the idiocies in your post. I won't bother detailing the rest since that should be sufficient to show everyone you don't know your ass from a hole in the ground.

fyi?

washington — the internal revenue service today issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

56.5 cents per mile for business miles driven.
24 cents per mile driven for medical or moving purposes.
14 cents per mile driven in service of charitable organizations.

The rate for business miles driven during 2013 increases 1 cent from the 2012 rate. The medical and moving rate is also up 1 cent per mile from the 2012 rate.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the modified accelerated cost recovery system (macrs) or after claiming a section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in rev. Proc. 2010-51. Notice 2012-72 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

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[bripat9643]

you drive to work every day on your dime. If you do not itemize you cannot even deduct the mileage.

no they can't, moron. Driving to work is not deductible unless it's over a certain distance, like 50 miles. That's only one of the idiocies in your post. I won't bother detailing the rest since that should be sufficient to show everyone you don't know your ass from a hole in the ground.

fyi?

washington — the internal revenue service today issued the 2013 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

56.5 cents per mile for business miles driven.
24 cents per mile driven for medical or moving purposes.
14 cents per mile driven in service of charitable organizations.

The rate for business miles driven during 2013 increases 1 cent from the 2012 rate. The medical and moving rate is also up 1 cent per mile from the 2012 rate.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the modified accelerated cost recovery system (macrs) or after claiming a section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in rev. Proc. 2010-51. Notice 2012-72 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan.

Follow the irs on new media
subscribe to irs newswire

None of that applies to commuting to the office, moron. If my boss tells me to drive to a conference in Orlando when I live in Tampa, then I can deduct my mileage. However, most companies compensate you for your mileage in such cases at the standard rate the IRS specifies.

Your normal daily to commute to the office is not deductible. Just ask your accountant.

 

[emptystep]

You don't think Price Waterhouse can get this to somehow apply to any drive anywhere?

Publication 463 (2012), Travel, Entertainment, Gift, and Car Expenses

This chapter discusses expenses you can deduct for business transportation when you are not traveling away from home as defined in chapter 1. These expenses include the cost of transportation by air, rail, bus, taxi, etc., and the cost of driving and maintaining your car.

Transportation expenses include the ordinary and necessary costs of all of the following.

Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Tax home is defined in chapter 1.

Visiting clients or customers.

Going to a business meeting away from your regular workplace.

Getting from your home to a temporary workplace when you have one or more regular places of work. These temporary workplaces can be either within the area of your tax home or outside that area.

 

[Papageorgio]

You don't think Price Waterhouse can get this to somehow apply to any drive anywhere?

Publication 463 (2012), Travel, Entertainment, Gift, and Car Expenses

This chapter discusses expenses you can deduct for business transportation when you are not traveling away from home as defined in chapter 1. These expenses include the cost of transportation by air, rail, bus, taxi, etc., and the cost of driving and maintaining your car.

Transportation expenses include the ordinary and necessary costs of all of the following.

Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Tax home is defined in chapter 1.

Visiting clients or customers.

Going to a business meeting away from your regular workplace.

Getting from your home to a temporary workplace when you have one or more regular places of work. These temporary workplaces can be either within the area of your tax home or outside that area.

Tell you what, go ahead take it as a deduction and then call the IRS to come in and audit you and see how it goes. Then you can tell us all about it. Also if you could give us how much in taxes and how much was the penalty and how much was the interest they said you owed.

 

[emptystep]

You don't think Price Waterhouse can get this to somehow apply to any drive anywhere?

Publication 463 (2012), Travel, Entertainment, Gift, and Car Expenses

This chapter discusses expenses you can deduct for business transportation when you are not traveling away from home as defined in chapter 1. These expenses include the cost of transportation by air, rail, bus, taxi, etc., and the cost of driving and maintaining your car.

Transportation expenses include the ordinary and necessary costs of all of the following.

Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. Tax home is defined in chapter 1.

Visiting clients or customers.

Going to a business meeting away from your regular workplace.

Getting from your home to a temporary workplace when you have one or more regular places of work. These temporary workplaces can be either within the area of your tax home or outside that area.

Tell you what, go ahead take it as a deduction and then call the IRS to come in and audit you and see how it goes. Then you can tell us all about it. Also if you could give us how much in taxes and how much was the penalty and how much was the interest they said you owed.

Hell yeah I would get audited if I tried this but answer me this, when was the last time a Price Waterhouse return got audited? It's good to run the world.