Thursday, June 12, 2008

Legislating Theft

One of the provisions for enacting the FairTax (might as well get the obligatory link done now) is the repeal of the 16th Amendment:
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.
Now, before I start the slaughter, I know that the government must have money to function, and I'm fully willing to accept that, since government doesn't actually produce anything other than red tape, they will get their money by taking it from us. I can accept that as a necessary evil.

However, it's the use and abuse of tax law, and the power of that amendment, that allows Congress to legislate theft. Such was the case when Democrats sought to punish oil companies with a "windfall" profits tax. Thankfully it failed, though it was more of a partisan bitch fight than common sense involved (yet another post).

Now let's set aside any argument over the oil companies and get down to a simple question: Should the government, if it sees someone who has earned money, raise their taxes and take it for the government?

Now if you answered yes, here's the second question (followed by a smack upside your head): If you owned something and sold it for an assload of money, would you want the government to come in and tell you you can only make half of what you made, then take it from you?

(Note: If you answer yes to the second question, you're really an idiot. Stop voting.)

The biggest reason for the FairTax is to take power away from a government that has figured out it can legislate for votes. First, they run up taxes on unpopular people and businesses. Then, they add in tax breaks for those that donate the most. In the end, you have a system designed to tax the people without the accountants and lawyers to figure out all the tax loopholes while garnering favor from the people with the most money and duping the lowest income people into believing the government CARES!!! about them. And while one party excels at this in my most unhumble and exalted opinion, there's no question both parties play the game.

Real change can only happen if we take power from the government and give it back to the people. And on that note, here's the last question of the day: Will your candidate do that?


Name: Soapboxgod said...

I read the Fair Tax and while it is demonstrably better than our current tax debacle it is still progressive. This I suppose makes it a more likely sell with liberals who always implore that the wealthy should pay more.

Patrick M said...

The important difference between the FairtTax and other progressive taxes is that it is wholly voluntary. Don't want to pay it? Don't buy more stuff than the prebate check covers.

But liberals don't seem to like it, because it means less power for government. That should tell us what their real agenda really is.

Name: Soapboxgod said...

True. I sort of go back and forth between this and between the Flat Tax. Of course with the Fair Tax, you'd likely get a larger revenue stream because it extends to anyone spending money within our borders.

Patrick M said...

That's one of the benefits of the FairTax. Here's a few others:

Fewer people for the IRS's replacement to track.

Elimination of an income-based tax system (vs the flat tax, which is our current system w/o an assload of loopholes and regulation.

No tax on used items.

No tax penalties for growth.

No death tax.

No hidden taxes. (no corporate taxes passed along)

Gas goes down!!!!!!!! (no gas tax, other than the FairTax)

I heard about the FaiTax several times before I broke down and read up on it. Since then, I've actually donated (from my federal tax refund, no less) to support it. And when I have enough money coming in, I'll probably donate more.

That's how committed I am to this.

Name: Soapboxgod said...

I know it all Patrick. I read the book a couple of summers ago.

Patrick M said...

So you're 1776% on board then. Good.

Toad734 said...

I can assure you that anything designed by rich people and incorporates the term "fair", is going to be about as far from fair as the camera's on the New England Patriots sideline. Such as with the Estate Tax, the Fair Tax is a cause rich people have somehow convinced poor people to fight for on behalf of rich people. Mike Huckabee's 2008 campaign championed the Fair Tax that is described in Neal Boortz's, The Fair Tax Book. The Fair Tax claims it will initiate a 23% flat tax on consumption, eliminate the IRS and all federal income taxes, social security, estate, gift, Medicare, capital gains, payroll and corporate taxes. The Fair Tax claims it will only tax consumption (items sold) and not production and will generate as much revenue as is currently generated under the current tax system and will merely simplify the tax system whilst collecting taxes on illegal immigrants and illegal activity....but not really.

First off, it's not nor would it be 23%; that's a simple sales trick like making you think 9.99 is 9 dollars as opposed to 10 dollars or when gas is 4.40 9/10 your brain thinks you are paying $4.40 when you are really paying $4.41. The real tax exclusive rate is 30%. They tell you its 23% because the $30 is 23% $130 when really you are paying $30 extra in taxes on a $100 item. What they are doing is making the retailer add the $30 on top of their usually $100 item, which by the way is 30%. If the Fair Tax was 23% the $100 item would cost you $123 but any Fair Tax advocate will tell you that a $100 item will cost you $130. They call it 23% tax inclusive but normal people call it 30% tax exclusive. That's problem number one with their fuzzy math. Another problem with the concept and fuzzy math itself is that George Bush's bi-partisan Tax Reform Advisory Panel concluded that in "balancing our budget" the included the income that the federal government would collect on its own purchases but left out the tax the Federal Government would have to pay on its purchases. It doesn't stop there, the Brookings Institute estimates for a flat tax to work, it would really need to be more like 44%, not accounting for tax evasion and the black market. Currently the IRS estimates about a 13% tax evasion rate of legal incomes which is about 300 billion dollars.

The way it would work is that yes, they would eliminate an entity titled the IRS. And in practice everyone would only pay a set rate of taxes on what they purchase and not what they earn. These taxes are on everything any individual, corporation or the government (education spending would be exempt) would buy including your doctor bill, new automobiles, porn, legal fees, credit card interest, home purchases, utilities, bread, diapers, etc. Companies would pay tax on their freight bills, their raw materials, janitorial services, office supplies, legal counsel, accountants, utilities, etc. Clearly illegal underground items such as drugs would still evade taxation. Obviously poor people spend a greater portion of their income on general living expenses and typically poor people spend every penny they make as opposed to rich people who only spend a portion of their incomes. With that being said, the Fair Tax would essentially be a regressive tax. The fair tax people, to be fair to not only poor people but to everyone, wants to fix that by having the government issue monthly living expense prebate checks to cover the cost of everyone’s everyday items on which the poor spend a high percentage of their income. This prebate check would cover the taxes paid to retailers for essentials such as bread, milk, diapers etc., that every one needs in order to survive. But not only the poor would get this check, multi-billionaires would get the same amount as someone who makes $15,000 per year. And what's even crazier is that for some reason, a married couple with no children would get a bigger prebate check than a single mom with two kids. Aside from Alaska and Hawaii, there is no adjustment for the cost of living for people living in New York as opposed to Mississippi. This prebate would become one of the biggest federal expenditures at about 500 Billion annually. This would bring a whole new meaning to income redistribution and welfare handouts as the more kids you have, the bigger your prebate check would be. This isn't exactly small government we are talking about.

Neal Boortz is they guy who is primarily responsible for the Fair Tax idea as he wrote a book about it. I can assure you that with his two airplanes, his winter home in Naples, FL and his radio talk show with 3.75 million listeners a week, Neal Boortz is a rich guy who would benefit, along with anyone else making over $200,000 per year, by having a national flat tax. He wouldn't be writing books about it and preaching it on his radio show if it didn't benefit him and other rich people like him. Otherwise, It would be like a cop arguing that cops should have to buy their own patrol cars. In the Fair Tax scheme, what would happen is that poor people who make under $15,000 per year would pay no taxes, the rich people, since they don't spend all their income would pay fewer taxes, the middle class would bear the largest burden and the United States would go bankrupt... I mean, even more bankrupt than we are now.

Let's start with the few most obvious points:

A. We would all still pay the same in taxes. By their own claim, they say the federal government would still collect the same amount which means we would pay the same amount. If "we" still have to pay the same amount of Federal Taxes, why would he go through the trouble of writing a book and promoting the flat tax? It seems like a lot of work for nothing until you see who would benefit; the rich and the dirt poor.

B. The government would no longer be able to encourage certain activities and stimulate job growth, specific technologies, business investment, home ownership, hybrids, children, etc. Investment tax credits which are a dollar for dollar tax credit on business expansions and business investments such as new machinery which are used to stimulate the economy and encourage employment would be a think of the past. The depreciation write off of machinery a company purchased, which stimulates the economy, as well as business expense write offs would also be a thing of the past. The interest deduction write off on your home mortgage gone as well.

C. Not only do you not get the write off for your home, but your home would now come with a 30% sales tax. So not only do you not get any tax incentives to buy a home but your home would now cost over 30% more. For someone like myself, I would pay 3 times the amount in taxes the day I bought a house than I would have paid in an entire year under our current system. Your $16,000 surgery would now cost $20,800, your $20,000 car would now cost $26,000 plus local tax which in my case the $20,000 car would cost $28,275 since my county tax is based on the price tag which would be tax inclusive. The government would also lose the ability to tax things such as gas guzzler vehicles and tobacco which raise the prices of health care and gasoline for the rest of the country.

Yes,the government now has the authority to encourage things such as business investment and tax credits to spring the economy back into life. They can also give tax credits to people for having children so again, the economy continues to grow. They can also encourage home ownership, which also stimulates the economy by allowing you to deduct mortgage interest. So you are right, the government would lose the power to help manipulate the economy but forgive me for thinking that perhaps Greenspan knows a little more about how the economy works that Neal Boortz.

Toad734 said...

Oops, Just noticed I repeated myself with regards to tax credits and what not but I also wonder how we would collect taxes on companies who outsource thier work and set up factories in Mexico for instance. If we are no longer taxing their profits then wouldn't they have a bigger incentive to move their manufacturing facilities to other countries where the could buy local raw materials which didn't come with a flat consumption tax? Do we really need to give more incentives for companies to outsource and export jobs?

Yet another thing the fair tax people haven't thought about.

I will probably do my own post on this at some time in the near future.

Hey you wanted me to read the fair tax site and I did, with an open mind even. I agree, I pay too much in taxes but you guys are the ones who want the big government invading other countries and intalling puppet regimes and that costs money. Thats why I was willing to look at other possibilities but the Fair Tax isn't fair and its not a well thought out plan and rather deceitful.

Name: Soapboxgod said...

Yes it is much more realistic to assert that liberals are the sole arbiters of fairness. Lest we forget, a fairness mind you which laments that it is "unfair" the wealthy benefitted much more than the poor due to Bush's tax cuts and yet not so "unfair" when it comes to the percentage of the overall tax burden that said wealthy carry.

Patrick M said...

Toad: Before I get into how wrong you are, if you have a better idea, try posting on it.

Now, for clarification. The FairTax is a consumption tax. It is not the flat tax, which is an income tax.'

The purpose of it is to create a single transparent tax rather than the insane system we have now.

It doesn't differentiate by income.

There are no loopholes.

You only pay tax if you buy new stuff over the poverty level.

And you leave out the whole concept of embedded taxes: The corporate and capital gains and windfall profit and payroll and regulatory and progressive and regressive and whatever other taxes that are put into the price of what we pay. Take those out and see what happens to prices.

How you define fair is income redistribution. You really don't have a clue what fair really is, do you? All you know how to do is to attack the "rich" people who are supporting it. Will they benefit? Yes. We'll all benefit when we know how much the government is sucking out of our pockets.

And I do have an example of how this will affect the "poor" people. I did the FairTax calculator (And I shared this with you already). When I plugged in my 2006 info, I found that I broke even. The difference is that I wouldn't have had to wait while the government juggled my money around for up to a year before they gave it back. I would not have benefitted in the amount I paid, but I would have definitely had more money when I needed it.

By the way, Boortz is not the primary author of the legislation, nor did he do the research. He's just the most vocal person out there on it. And I guarantee he will pay a big chunk of FairTax when he buys his next plane under the new system.

Now on to your points:

A. It's about freeing capital, creating transparency, and simplifying the shit out of a tax system no one understands. By getting rid of it.

B. GOOD! I got back on the FairTax because the Democrats were trying to take fairly earned profits by legislating theft. Please show me where the fuck in the constitution the government is granted the power to regulate our lives and I'll take it all back.

C. You have three problems here. First, there's a reason the Fairtax is inclusive. You figure it in to the costs. Second, Again, you forgot to factor out the embedded taxes. And third, if you're paying the FairTax, then you must be buying a new house and new cars you rich bastard you. I have yet to do either, and I don't think my parents, who have pretty good cash flow at this point, have bought a new car in my lifetime, as far as I can remember.

But I guess you believe letting the government run shit will benefit this country. Explains a lot.

Toad734 said...

I would say our currrent tax system, although a little more complicated, is better than the Fair Tax. It is most certainly better for me or anyone in the middle class. Personally, it takes me 15 minutes to do my taxes every year so the "complicated" tax code isn't an issue for me but it sure does create a lot of jobs.

A. But you and I still pay the same amount until we buy things such as a house or a car then we would pay much more. There are plenty of people in the IRS , plenty of accountants and plenty of tax lawyers who understand it perfectly. My dad worked for the IRS almost all his life. He has no problem understanding the tax code although he does admit that it is too complex for the average Joe. You don't understand Nuclear Fission but it doesn't mean it shouldn't happen beecause you don't understand it. Do you also want to do away with Patent laws because they don't always make sense?

B. 16th Amendment. So you don't want a tax deduction for the interest you pay on your mortgage? You aren't benefiting from Child Tax Credits? Again, child credits aren't something I personally support but it certainly benefits you. And we could argue about "fairly earned profits" especially when it comes to Exxon. I mean, lets be honest, who do you think they gave the majority of their political donations to and who benefited the most from the Iraq war?

C.So you admit that its 30%, not 23%?
You are adding new embedded taxes which didn't exist before. Again, if they still pay the same amount, they still have just as many expenses. Sure they aren't paying payroll taxes and Social Security (or are they) but they are now taxed on their freight bills and office supplies and no longer get tax breaks and credits for depreciation of new equipment etc. Don't you think the government should have some power to stimulate the economy by offereing tax breaks and credits encouraging comopanies to invest? Which do you think is more likely to encourage a company to invest in new equipment and expand in a time such as a recession:
A. If they get a dollar for dollar tax deduction and any new piece of machinery they buy in a given period of time and are also able to write off the depreciation in one year as opposed to over the course of 5 years.
B. If they have to pay an extra 30%on any investment.

I realize that the average middle class worker will pick up a bigger burden of the tax bill and companies and rich people and the dirt poor will pay a little less (except maybe the companies) but I don't see how that's either fair or good.

Why does it have to be a new car? You still pay that kind of tax on any car, and if not on a house, then on rent. So if you are paying $800 in rent, you will now be paying an extra $2880 dollars per year more. And when you do buy a house, you will no longer get a deduction for your mortgage interest but a $200,000 house will now cost you $230,000. Mortage that $30,0000 over 30 years at 6% interest and see how much that house now costs you. SUre you kept 30% more of your income but your house will cost you well over 30% more in the long run.

I'm all for simplifying the tax code I suppose; again, I have never had too many complications with it but I just don't think this is the way to go. Plus, most people feel like even the 30% is far too low for us to generate as much revenue as we need, or at least to meet what we are collecting now.

Patrick M said...

I would say our currrent tax system, although a little more complicated, is better than the Fair Tax.

Toad: Are you nucking futs?

You've always been about the progressive tax system. But you're talking positive about a system that allows the "rich" you have so many issues with to hide their cash while the middle class bears the burden. While the numbers do say the rich pay more, your defense of Satan's tax code makes no sense based on what you otherwise argue.

A. Two words you seem to miss: embedded taxes. Take them out, the net price stays the same, maybe even drops.

As for my taxes, I can fly through mine pretty easily, especially with all the neat-assed online options. Doesn't mean that I wouldn't scrap it in a heartbeat.

Oh, and unlike the bloat of the IRS, fission serves a purpose.

B. I'll break even. And again, you play class and wealth envy, then champion a system designed to favor the buddies of whoever has power....

C. Let me repeat the numbers: 23% inclusive. That means something that is $100 now becomes $77 after removing the embedded taxes that already exist. Add back that in the FairTax and it costs... $100!

On a $130 item, the tax would be $30. So if you calculate in the way that sales tax is calculated, then yes, it's 30%.

But you keep forgetting embedded taxes. These are the costs and taxes that corporations pay, then 'embed' into the price of every damn thing they have. So we pay it, plus our own taxes to boot.

And the government needs to stop its incessant need to 'manage' recessions.

Now the problem is that you like to skew the numbers, adding 30% to every price that currently exists. If you had read the details, you wouldn't be arguing incessantly on points you're plainly wrong on. Because if my memory serves, you were kind of on board until you heard that corporations weren't going to be punished, then you said "Oh well then I think that system sucks if only consumers have to pay taxes...." But you forget that we do anyway.

So rather than stacking a few dozen "facts" on top of each other, why don't you try asking one question at a time, then let me give you the correct answer?

Toad734 said...

No, I was open to the possibility of a new tax system which is why I read their web site.

If you think the middle class has it bad now wait until the fair tax is enacted. You know the poor aren't going to pay any taxes and if every rich guy from here to the Cayman Islands is for the Fair Tax we know who it really benefits.

I read it, it doesn't make sense. What embedded taxes? Social Security? Payroll? Profit? Show me. I don't need to make things cheaper for corporations because they wont pass those savings on to me, they will pocket them, again, benefiting the rich. Its the same concept of Levis jeans and tennis shoes actually costing more now that they are made overseas as opposed to getting cheaper. Look at the price of Levis in the 80s compared to now, look at the cost of Chuck Taylors 5 years ago when they were made in NC and compare that to now, they cost more. Same would happen even in the unlikely event that corporations ended up paying less in taxes.

Yes, I want corporations to pay their fair share, whats wrong with that? The tax burden over the past 60 years has shifted sharply towards the individual and mainly the middle class individual.

Yes I hate tax loopholes rich people use now but that doesn't mean you throw away the IRS and replace it with a welfare office like the Fair Tax people call for. You simply close those loopholes. As I pointed out, outsourcing all your Mfg to Mexico and paying no taxes is a pretty fucking big loophole don't you think?

Patrick M said...

Okay, last time I'm going to repeat this, because I need sleep:


They take any tax burden they encounter, figure it into the price of their product, and pass it on to US!

That's what is known an an embedded tax.

Any questions?