[45_Fan]

I like the Fair Tax concept, I just have one question about what happens when you take it to the logical extremes.

Under a Fair Tax system, what mechanism would limit the unhealthy consolidation of assets?
Where "assets" broadly includes property, money, salaries, etc.

I'm not talking about or interested in communism or socialism, just looking at it from a functional "don't mess everybody else up" perspective. I don't like property tax. I really don't like it on a primary residence. But property tax is useful in that it makes it harder for someone (or a small coalition of folks) to assemble rental-only land monopolies. Similar arguments can be made for inheritance or income taxes -- positive and negative in both extremes.

The filter that I am using to look at this is that there will always be somebody who lives under a bridge because it just isn't a priority to change and there will always be somebody that works 120+ hours a week to get ahead and really earns every dime they make. Those are the extremes of the working people bell-curve.

The logical extents of a progressive income tax (higher rates on richer, lower rates and assistance on poorer) are easy to see. The Fair Tax has mechanisms for the bottom extents (prebates, food vouchers or exemptions, etc.), but I am not clear what the logical extent is on the high end of the bell-curve. Does the Fair Tax apply to stock purchases? What about the purchase of whole companies? In other words, is there a limiter or some mechanism that would prevent an asset snowball for a lucky few at the eventual expense of everyone else later?

 

[commodore_dude]

Why should it? The whole point is that you shouldn't be punished for succeeding, and the fruits of your labor are yours to use as you see fit. As far as land monopolies go, they would pay the tax if they purchased say a brand-new condo building, but not a used one.

 

[spector]

I like the Fair Tax concept, I just have one question about what happens when you take it to the logical extremes.

Under a Fair Tax system, what mechanism would limit the unhealthy consolidation of assets?
Where "assets" broadly includes property, money, salaries, etc.

I'm not talking about or interested in communism or socialism, just looking at it from a functional "don't mess everybody else up" perspective. I don't like property tax. I really don't like it on a primary residence. But property tax is useful in that it makes it harder for someone (or a small coalition of folks) to assemble rental-only land monopolies. Similar arguments can be made for inheritance or income taxes -- positive and negative in both extremes.

The filter that I am using to look at this is that there will always be somebody who lives under a bridge because it just isn't a priority to change and there will always be somebody that works 120+ hours a week to get ahead and really earns every dime they make. Those are the extremes of the working people bell-curve.

The logical extents of a progressive income tax (higher rates on richer, lower rates and assistance on poorer) are easy to see. The Fair Tax has mechanisms for the bottom extents (prebates, food vouchers or exemptions, etc.), but I am not clear what the logical extent is on the high end of the bell-curve. Does the Fair Tax apply to stock purchases? What about the purchase of whole companies? In other words, is there a limiter or some mechanism that would prevent an asset snowball for a lucky few at the eventual expense of everyone else later?

Does the far tax seek to repeal property taxes? I thought it only sought to replace the income tax.

Regarding capital gains, I'm not sure if the fair tax applies to purchases, but there is no reason why we should have additional taxes on capital gains. People who "speculate" usually end up broke, provided that the government doesn't bail them out. They should be adequately compensated for taking that risk and not have the government reduce that.

 

[45_Fan]

Why should it? The whole point is that you shouldn't be punished for succeeding, and the fruits of your labor are yours to use as you see fit. As far as land monopolies go, they would pay the tax if they purchased say a brand-new condo building, but not a used one.

But at the fullest logical extent, what mechanism prevents an effective return to a monarchy or despotism via an excessive consolidation of assets?

Again at the fullest logical extents, $10B as fruits of somebody's labor? At 100 hours/week and 50 weeks/year for a full 40 years is only 200,000 hours. That is $50k/hour. Even if an individual is wildly successful and their only life is work, what kind of labor can they be doing where $50k/hour is the fruit?

 

[45_Fan]

Does the far tax seek to repeal property taxes? I thought it only sought to replace the income tax.

I don't think so, but deep down I'd love for the property tax a primary residence to be covered under the Fair Tax.

Regarding capital gains, I'm not sure if the fair tax applies to purchases, but there is no reason why we should have additional taxes on capital gains. People who "speculate" usually end up broke, provided that the government doesn't bail them out. They should be adequately compensated for taking that risk and not have the government reduce that.

What is your retirement plan based on?

If someone genuinely invests in a company for the long term and reaps the rewards from that lending of money, I can understand it as investment with risks and rewards. I have a much harder time accepting today's stock market as an investment tool and see it as more of a speculative endeavor.

 

[spector]

Does the far tax seek to repeal property taxes? I thought it only sought to replace the income tax.

I don't think so, but deep down I'd love for the property tax a primary residence to be covered under the Fair Tax.

Regarding capital gains, I'm not sure if the fair tax applies to purchases, but there is no reason why we should have additional taxes on capital gains. People who "speculate" usually end up broke, provided that the government doesn't bail them out. They should be adequately compensated for taking that risk and not have the government reduce that.

What is your retirement plan based on?

If someone genuinely invests in a company for the long term and reaps the rewards from that lending of money, I can understand it as investment with risks and rewards. I have a much harder time accepting today's stock market as an investment tool and see it as more of a speculative endeavor.

Well, the fair tax is a national endeavor and the property taxes are local. I know what you're saying, but I don't want to mix that. We've had enough erosion of local government as is. I live in FL which has no income tax, so I'm sort of spoiled that way.

My retirement plan first requires that I get out of debt, so I'm not investing. But when I do trade or invest, I always use 3% trailing stops. I hate risk, so I never put more than 3% on the table. When a stock drops 3%, I'll rebuy when it drops to 5-6% of it's original value, depending on how things look. If it hits 3% then bounces back up, I'll buy something else. Or wait. Never really concerned me.

But I know what you're saying. I think the stock market as we know it may not be the best investment tool (read Taleb's "Black Swan") and I will look more towards angel investing/venture capital when I get out of debt. I'd much rather have most of my money in a safe investment and then allocate a small percentage in high-risk/high-reward spots, like really far out of the money options, or a small startup.

Regardless, I don't think it's the gov's job to make sure that stock market is the best investment vehicle for retirement any more than it's their job to make sure that hybrid cars are the best driving vehicles. Perhaps the stock market IS all speculation --- oh well. Stay out of it if that concerns you. I don't want the gov interfering and trying to make something it's not. That assumes that 1)They SHOULD "fix" it and 2) they CAN "fix" it. With technology and increasing decentralization, providing startup capital to small companies directly may be the way of the future. I don't know for sure, but the government DEFINITELY doesn't know and shouldn't be directing the economy one way or another.

 

[commodore_dude]

But at the fullest logical extent, what mechanism prevents an effective return to a monarchy or despotism via an excessive consolidation of assets?

Again at the fullest logical extents, $10B as fruits of somebody's labor? At 100 hours/week and 50 weeks/year for a full 40 years is only 200,000 hours. That is $50k/hour. Even if an individual is wildly successful and their only life is work, what kind of labor can they be doing where $50k/hour is the fruit?

It's not up to me to judge someone's net worth, as long as they didn't commit any crimes to get there. And I just really have a hard time believing some evil rich person is going to buy the country out from under us. China maybe, but not some captain of industry.

 

[livesounder]

It's not up to me to judge someone's net worth, as long as they didn't commit any crimes to get there.

QFT

 

[gunsmoker]

First of all, does the "Fair Tax" plan even cover business-to-business transactions? I didn't think so. I thought it was only for retail purchases. Companies don't pay taxes, only people do. That's the theory right? Wait until the human beings that own the corporations try to USE their wealth by buying things for themselves personally, and THEN the Fair Tax applies.

So it seems to me that businesses could become obscenely wealthy while avoiding taxation, as long as they only spend their money on business-related items. They would gain power and influence by being rich, even if they didn't spend very much of what they had to live a rich lifestyle.

My second problem with the Fair Tax is that people would be able to avoid it by doing their shopping from or at foreign nations. You want a 72-inch plasma TV but don't want to pay 18% extra to buy it in the USA? Buy it from Mexico, or Canada,or even from Taiwan and have it shipped here.

My third beef with the Fair Tax has to do with their stupid propaganda about abolishing the IRS. There's no way that can happen. If you really did get rid of the IRS, you'd need to have some other federal agency step in and do the same job, investigating people, assessing fines, making people document things and threatening to throw them in prison if they don't do it right. Because you can't have a tax system with some exceptions and exemptions WITHOUT a federal agency to monitor people and businesses to make sure they are playing by the rules. Without an IRS to keep people honest, no individual would ever buy a big screeen TV again. Instead, some "business" would buy the TV as "business inventory" to rent or resell. No tax would be paid. Then you hand some money to the business owner and you quietly take your new TV home.

 

[hkdave]

So it seems to me that businesses could become obscenely wealthy while avoiding taxation, as long as they only spend their money on business-related items. They would gain power and influence by being rich, even if they didn't spend very much of what they had to live a rich lifestyle.

that made me laugh.

FYI imports get taxed, and have you ever shipped something overseas before? It is exorbitantly expensive.

 

[commodore_dude]

First of all, does the "Fair Tax" plan even cover business-to-business transactions? I didn't think so. I thought it was only for retail purchases. Companies don't pay taxes, only people do. That's the theory right? Wait until the human beings that own the corporations try to USE their wealth by buying things for themselves personally, and THEN the Fair Tax applies.

So it seems to me that businesses could become obscenely wealthy while avoiding taxation, as long as they only spend their money on business-related items. They would gain power and influence by being rich, even if they didn't spend very much of what they had to live a rich lifestyle.

No, it applies to any end user - person, company, or even government entity. If you're buying a pen to write with, you pay the FairTax. If you're buying it to resell it, you don't.

My second problem with the Fair Tax is that people would be able to avoid it by doing their shopping from or at foreign nations. You want a 72-inch plasma TV but don't want to pay 18% extra to buy it in the USA? Buy it from Mexico, or Canada,or even from Taiwan and have it shipped here.

What extra 18%? As of the publishing of the first FairTax book in 2005 (I have the followup on order, don't know if the numbers have changed significantly), the 23% tax is offset by the elimination of the average 22% embedded taxes that corporations have to recover in their pricing. No corporation would be able to price their items 22% higher for long, because eventually someone would see a competitive advantage by reducing their prices and maintaining the same profits as before, and then all of their competitors would have to as well.

My third beef with the Fair Tax has to do with their stupid propaganda about abolishing the IRS. There's no way that can happen. If you really did get rid of the IRS, you'd need to have some other federal agency step in and do the same job, investigating people, assessing fines, making people document things and threatening to throw them in prison if they don't do it right. Because you can't have a tax system with some exceptions and exemptions WITHOUT a federal agency to monitor people and businesses to make sure they are playing by the rules. Without an IRS to keep people honest, no individual would ever buy a big screeen TV again. Instead, some "business" would buy the TV as "business inventory" to rent or resell. No tax would be paid. Then you hand some money to the business owner and you quietly take your new TV home.

Your average consumer isn't going to jump through those hoops. And you're involving a lot of people in that scenario that would all be committing fraud, it isn't very likely that they would all be OK with that.

 

[pml]

JMO, but people are drawn to the fair tax because it is implied that "everyone" would be paying taxes. Neal Boortz pumps the "fairness" crap. The reality of proposed plans provides a sliding scale for a huge amount of low income earners which would provide them large rebate checks every month. The rich would escape paying taxes on on investments and other income gains entirely. And that would stick you know who picking up the tab even worse than we do today.

Getting around the sales tax is not a big deal. We'd have more smuggling, bootlegging, and of course, an incredible amount of bartering. Professionals already trade services to avoid income tax, example: do dental work receive tax prep or contractor remodeling. Try to enforce that.

 

[bdee]

I think a fairER system is a 15% flat tax with no deductions. Nothing for charity, home ownership, having lots of kids, etc.

 

[mb90535im]

There is nothing fair about the fair tax. It is regressive in every way, shape, and form.

 

[bdee]

My problem with it is that when you tax a certain activity like purchasing, folks are going to look for a way around it. The fair tax would create black markets and a whole new criminal class. That's why I think a no-deduction flat tax is more fair.

 

[spector]

There is nothing fair about the fair tax. It is regressive in every way, shape, and form.

No.

A fair tax provides rebates each month up to poverty-level spending to eliminate the regressive nature of a tax solely based on consumption.

It is NOT regressive. Read it before saying that.

 

[45_Fan]

What extra 18%? As of the publishing of the first FairTax book in 2005 (I have the followup on order, don't know if the numbers have changed significantly), the 23% tax is offset by the elimination of the average 22% embedded taxes that corporations have to recover in their pricing. No corporation would be able to price their items 22% higher for long, because eventually someone would see a competitive advantage by reducing their prices and maintaining the same profits as before, and then all of their competitors would have to as well.

The extra is tax added at the register and isn't usually displayed on the price tag. A candy bar with a dollar price tag costs $1.06-$1.08 at the register today. Under the Fair Tax, a candy bar with a dollar price tag would cost $1.18-$1.23 at the register.

 

[45_Fan]

There is nothing fair about the fair tax. It is regressive in every way, shape, and form.

No.

A fair tax provides rebates each month up to poverty-level spending to eliminate the regressive nature of a tax solely based on consumption.

It is NOT regressive. Read it before saying that.

It can be...
Joe makes $35k/yr.
Jack makes $65k/yr.
They both live on $30k/yr and save the remainder.
Percentage-wise, Joe is paying a higher percentage per dollar earned than Jack.
How is that not regressive?

 

[hkdave]

There is nothing fair about the fair tax. It is regressive in every way, shape, and form.

No.

A fair tax provides rebates each month up to poverty-level spending to eliminate the regressive nature of a tax solely based on consumption.

It is NOT regressive. Read it before saying that.

It can be...
Joe makes $35k/yr.
Jack makes $65k/yr.
They both live on $30k/yr and save the remainder.
Percentage-wise, Joe is paying a higher percentage per dollar earned than Jack.
How is that not regressive?

That's what each chose to do. Not jack's fault that Joe chose to work at mcdonalds.

Sounds like you wish to punish people as they make more and stifle competition?

 

[commodore_dude]

The extra is tax added at the register and isn't usually displayed on the price tag. A candy bar with a dollar price tag costs $1.06-$1.08 at the register today. Under the Fair Tax, a candy bar with a dollar price tag would cost $1.18-$1.23 at the register.

No. If a candy bar costs $1.06 at the register ($1 + 6% GA sales tax), about 22 cents of that dollar is covering the corporate taxes involved. If we replace that with a 23% consumption tax on the stripped price of $0.78, you're now looking at $1.02 at the register ($0.96 + 6% GA sales tax).

ETA - one thing I just thought of, that I admittedly don't know the answer to, is if state sales tax would be levied on the total price including FairTax. Some quick googling isn't turning up an answer, so if anyone knows that post up!