Author Topic: The tax man has cometh!  (Read 1075 times)

Offline Sabre

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« Reply #30 on: April 18, 2007, 04:09:01 PM »
Quote
Originally posted by Mickey1992
"The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn."  - from the website

I hear people talking about repealing the Gift Tax frequently.  Only annual gifts greater than $12K are taxed.  Are there really that many people giving that much in gifts to family/friends?  (and that's 12K PER PERSON.  So you can give a gift to a family of 4 up to $48K in value and it won't be taxed).


Yep, I mispoke.  Services are always "new." I meant to say, used goods would not b taxed.
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Offline lasersailor184

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« Reply #31 on: April 18, 2007, 04:37:15 PM »
Not quite Seagoon.  The key here was the SPENDING of the tax money.  The government could collect all it wanted if and only if it could prove that it was spending it equally on everyone.

Because of how difficult it would be to SPEND our tax money, very little was collected.  Very little was also collected because of the few things they needed to spend it on (as compared to the current state of affairs).


There was an income tax during the civil war, but it went away.  I believe in the 1870's or 80's, there was another income tax.  But someone sued the government saying that it was not being spent equally on everyone, and thus couldn't be levied.  The man won the court case, and the tax went away...


That is until the 16th amendment which said that the government could spend the money however they saw fit, including not spending it on everyone.  They key word in their is "Apportionment."


And as to rates higher the 2%, you only need to look at the tax rates during the civil war to see that what you said is not true.
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Offline Seagoon

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« Reply #32 on: April 19, 2007, 12:17:25 AM »
Lasersailor,


Quote
Originally posted by lasersailor184
Not quite Seagoon.  The key here was the SPENDING of the tax money.  The government could collect all it wanted if and only if it could prove that it was spending it equally on everyone.

Because of how difficult it would be to SPEND our tax money, very little was collected.  Very little was also collected because of the few things they needed to spend it on (as compared to the current state of affairs).


As I said, I am not a law expert, but from what I could gather this evening going over the materials available on the internet and the books I have at home on the history of the US Government, the issue that lead directly to the passage of the amendment was the need to permanently change the stipulations in the Constitution dealing with aportionment according to population. So it dealt with the ability to raise revenue with a direct tax, and not the spending of revenue raised. Here for instance is the relevant section from the FindLaw entry on the caselaw regarding the 16th amendment:

Quote
The ratification of this Amendment was the direct consequence of the Court's decision in 1895 in Pollock v. Farmers' Loan & Trust Co., 1  whereby the attempt of Congress the previous year to tax incomes uniformly throughout the United States 2  was held by a divided court to be unconstitutional. A tax on incomes derived from property, 3  the Court declared, was a ''direct tax'' which Congress under the terms of Article I, Sec. 2, and Sec. 9, could impose only by the rule of apportionment according to population, although scarcely fifteen years prior the Justices had unanimously sustained 4  the collection of a similar tax during the Civil War, 5  the only other occasion preceding the Sixteenth Amendment in which Congress had ventured to utilize this method of raising revenue. 6  


Regarding the Civil War income tax, which was about as popular as the draft, the highest rate was 10%, and it was repealed in 1872 by the Grant administration. A good article on it appeared in Prologue, the Magazine of the National Archives and is available here, the article also makes the point that the Amendment was passed specifically to permanently circumvent the 1895 Supreme Court ruling against direct taxation not according to aportionment as well as the fact that 2% was the magic income tax number the populists campaigned on and which was in fact passed by congress and in force until the 1895 ruling declared the tax unconstitutional.

In any event, thank you for forcing me to go back and read about the history of the infernal income tax, it was definitely something I wouldn't have done otherwise.

- SEAGOON
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Offline Silat

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« Reply #33 on: April 19, 2007, 12:49:19 AM »
Here is an interesting rebuttle to the Fair Tax.

http://www.mises.org/story/1814
+Silat
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Offline Seagoon

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« Reply #34 on: April 19, 2007, 01:45:56 AM »
Hi Silat,

Just wondering if you prefer the present tax system? If so, I'd love to hear a defense of the existing system and why we should keep it.

- SEAGOON
« Last Edit: April 19, 2007, 02:11:15 AM by Seagoon »
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Offline mietla

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« Reply #35 on: April 19, 2007, 10:11:52 AM »
The current system is extremely non-linear. Does not matter what kind of other tax system you replace it with, unless you'll keep the current no-linearity, the tax burden will shift to the "left" (I mean on the Tax vs. Income graph :)  ), meaning that less you make more of the tax hit you'll feel, and more you make the more tax relief you'll get. All those tweaks with "poverty levels", "minimum income" and such, do not change anything in principle, and just screw the middle class by artificially protecting the left end of the spectrum.

Since a rich guy has one vote just like the poor guy, the majority will always prefer the current system (however complicated and evil it might be).

In addition, any system without special interests, tax credits, tax breaks and such, will takes politician's favorite toy away.

It will never happen.
« Last Edit: April 19, 2007, 10:16:32 AM by mietla »

Offline Sabre

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« Reply #36 on: April 19, 2007, 12:12:28 PM »
Quote
Originally posted by Silat
Here is an interesting rebuttle to the Fair Tax.

http://www.mises.org/story/1814


Silat: Thanks for the link.  Here's my rebuttle to the author...

“FairTax advocates claim that their plan would repeal of the 16th Amendment."

Answer: No, they don’t.  However, it is a necessary requisite to have congress state that the 16th needs to be repealed, before the repealing can begin.  For the Fair Tax to be successful in the long run, repealing the 16th is absolutely essential, for the very reasons the author suggests.

“To repeal the 16th Amendment would require a constitutional amendment. Can Congress be relied on to pass a constitutional amendment that repeals the 16th amendment after a national sales tax has already been enacted?”

Answer: Of course it would require amending the constitution.  As to whether congress can be relied on to do so; well, that requires that we, the voters, hold their feet to the fire to insure they follow through.  The problem is, of course, that you can’t amend the constitution first, because that would cause in interruption in revenue collection while you waited for the Fair Tax bill to pass.  The Fair Tax bill has to come first.

“Although the FairTax would eliminate the filing of all individual tax returns, the FairTax turns every business into a tax collector. Every small service business and every Internet business that does not currently collect state sales taxes will have to collect taxes for the federal government. Every doctor will now have to charge sales tax on his services. Where will this end? Will the neighborhood boy who mows lawns have to begin collecting federal sales tax on each lawn mowed? Will the neighborhood girl who baby sits have to do likewise?”

This is a bit of a red herring to me.  Right now the IRS is responsible for collecting taxes from every business and individual.  The Fair Tax would reduce the number of points of collection (and enforcement) dramatically; the FairTax reduces them by about 80 percent (145 million to 25 million).  Because 45 our of 50 states already collect state sales taxes, the Fed would contract with state tax collection agencies to collect the federal sales tax.  As far as the neighborhood boy or girl that performs fee for service jobs, how would that be any different than today when those jobs are done on a cash only basis?  The weakness of this author’s entire case is displayed when he has to go to such a trivial case to make his point.
 

“The national retail sales tax rate under the FairTax plan is 23 percent. That is on top of state sales taxes that are currently collected by forty-five states. That is on top of the sales tax that many cities and counties also collect.”

Most people pay that much each year in federal taxes, especially when you include SS and medicare withholdings.  The author conveniently ignores that.

“That is on top of the special taxes that exist on hotel rooms in most areas of the country. I suppose that a national retail sales tax would also apply to gasoline. There is no mention of the federal gas tax anywhere in the Fair Tax Act of 2005. No list of taxes that are supposed to be eliminated under the FairTax includes the federal gas tax. Does this mean that there will be an additional 23 percent tax on each gallon of gasoline?”

I believe the author is correct in that the Fair Tax does not eliminate a very few special taxes, such as the federal portion of tax on gasoline (I may be wrong, but I though hotel taxes were state taxes, and there fore not addressed by the Fair Tax).  What the author fails to note or maybe realize is that hidden in the cost of that gasoline (and hotel room charge, for that matter) are 18-25 percent in hidden tax costs, i.e. the costs added to the product or service all along the way due to taxes eliminated by the Fair Tax.  When the cost of producing/providing a product or service goes down, the price to the consumer generally goes down due to market forces.

To be continued...
Sabre
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Offline Sabre

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« Reply #37 on: April 19, 2007, 12:13:33 PM »
Continued from previous post...

“The FairTax will make it easier for Congress to raise taxes.”

Answer: In theory perhaps, but not in practice.  Because of the simplicity of the Fair Tax, any change will be highly transparent to the People, especially since it would translate to immediate out of pocket loss to the consumer.  The whole idea of implementing payroll deductions was to make it less obvious how much each change to the tax code would really affect you in the long run.  If you had to pay your entire tax bill in a lump sum, even a small change would be immediately apparent to you.  Transparency is one of the big draws of the Fair Tax.

“Under the FairTax system, there are no longer any Social Security and Medicare taxes. However, this does not mean that Social Security and Medicare will be eliminated. The inclusion in the combined percentage of the old-age, survivors and disability insurance and the hospital insurance rates means that the Ponzi scheme known as Social Security will continue as is—only the way it is funded will change.”

Answer: Yep.  Status quo, except that you won’t have that money mysteriously deducted from your paycheck every two weeks.  It’s called “The Fair Tax Bill”, not “The Fair Tax and Social Security Reform Bill.”  The bloated and broken SSN system will still need to be tackled.  So?

The "underground economy" that income tax advocates complain about will certainly increase under the FairTax system. Even if the highly dubious claim that there will be an "average producer price reduction of 22 percent for goods and services in just the first year after the adoption of the FairTax" is true, not having to pay a 23 percent tax on an item is a tremendous incentive to make a purchase in the "underground economy."

Answer: The phrase “will certainly increase under the FairTax system” is unsupported by the author; i.e. it is his opinion.  Tax evasion is rampant under the current system, simply because it is so complex.  The author ignores the most obvious question: What is the motivation for businesses to sell “under the counter” under the Fair Tax system?  Sure, the individual might like the idea of avoiding $23 percent of the cost of an item, but why would most businesses want to risk getting caught?  Also, go back to the number of people/business the IRS must monitor and enforce right now, compared to what it would be under the Fair Tax system.  Finally, one could argue that states should drop their sales taxes for the same reason.  Obviously they haven’t.

“The claim that the IRS will be eliminated under the FairTax is bogus.”

Answer: No, it’s a fact that the IRS as a federal entity will in fact cease to exist.  As the job of collecting federal taxes will be incredibly simplified and the number of collection points drastically reduced, a separate agency – with its attendant high cost – will be eliminated.  A modest size, commensurate with its reduced monitoring and enforcement requirements, will be created within the Treasury department.  This will come nowhere near the cost necessary to administer the current system.  Plus, the huge burden to the economy of complying with the current system will be all but eliminated, a fact the author ignores.

The FairTax is progressive. What could possibly be fair about a progressive tax where some people have to pay a higher percentage than others merely because they are deemed to be "rich"?”

Answer: This one left me scratching my head.  Under the current system, the top 50 percent of income earners pay 96 percent of the tax bill! The very lowest pays very little, and receives the Earned Income Credit, basically an income redistribution.  I don’t hear him complaining about that.  Under the fair tax, everyone, regardless of income receives the same prebate, and is taxed the same percentage on new goods and services.  Will rich people pay more? In most cases, because they consume more.  Do they pay more now?  You bet.

 “There is only one word to describe the fact that the federal government now spends almost $3 trillion a year: obscene. At least 90 percent of what the federal government spends is unconstitutional, wasteful, or against the limited-government principles of the Founders. The only thing the FairTax does is change the way the state confiscates the wealth of its citizens.”

Answer: Again the author is confused about the name, scope, or intent of the Fair Tax bill.  It is not “Fair Tax and Government Spending Reduction Bill”, so his criticism here is irrelevant.  Like the Social Security system, Government spending is in need of fixing, but the Fair Tax bill is not the vehicle to try to do so.

 “As Congressman Ron Paul says: "The real issue is total spending by government, not tax reform."”

Answer: His real issue, but not the only issue.  Let him push for SS reform and a balanced budget amendment if he wants (more power to him).  Fixing any one of these major issues is hard enough; only a masochist would insist they must all be fixed with a single piece of legislation.  Just fixing the tax system will be hard enough.

“Because the FairTax is a consumption tax, Murray Rothbard's conclusion about consumption taxes is apropos:
The consumption tax, on the other hand, can only be regarded as a payment for permission-to-live. It implies that a man will not be allowed to advance or even sustain his own life, unless he pays, off the top, a fee to the State for permission to do so.” “

Answer: If the Fair Tax did not have the prebate feature, this might be true.  The current system is a much greater obstacle to advance your personal lot in life that the Fair Tax would be.

“The FairTax does nothing to tame the federal leviathan. The solution is nothing less than a drastic reduction or wholesale elimination of its revenue source. What is fair about allowing the government to confiscate 23 percent of the value of every new good and service? FairTax proponents may call it necessary legislation, but I call it highway robbery.”

Answer:  Exactly what would the author suggest is fair about the current system?  The Fair Tax is a lot fairer than the current system.  It does not address federal spending (get your own bill to do that, buddy), as noted, but neither does it eliminate the source of federal revenue.  It merely shifts how it collects it.
Sabre
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Offline Shamus

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« Reply #38 on: April 19, 2007, 12:22:25 PM »
I would think that there will be a lot of resistance from the stock and bond markets. Paying $123,000.00 for $100,000.00 worth of stock is going to upset a few folk.

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Offline mars01

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« Reply #39 on: April 19, 2007, 12:50:27 PM »
Quote
Silat: Thanks for the link. Here's my rebuttle to the author...

“FairTax advocates claim that their plan would repeal of the 16th Amendment."

Answer: No, they don’t. However, it is a necessary requisite to have congress state that the 16th needs to be repealed, before the repealing can begin. For the Fair Tax to be successful in the long run, repealing the 16th is absolutely essential, for the very reasons the author suggests.

“To repeal the 16th Amendment would require a constitutional amendment. Can Congress be relied on to pass a constitutional amendment that repeals the 16th amendment after a national sales tax has already been enacted?”

Answer: Of course it would require amending the constitution. As to whether congress can be relied on to do so; well, that requires that we, the voters, hold their feet to the fire to insure they follow through. The problem is, of course, that you can’t amend the constitution first, because that would cause in interruption in revenue collection while you waited for the Fair Tax bill to pass. The Fair Tax bill has to come first.


I had to stop reading to go to a meeting, but what you are saying we keep income tax rule on books and also institute Sales tax, with the hopes the politicians eventually repeal the 16th??

If that is the case, the whole Fair Tax deal is DOA.  I will and would never trust todays politicians to do that and would totally expect to then be taxed both ways.  No way.  Fair tax might be a good idea, but if repealing the 16th doesn't come first forget about it.

Offline Sabre

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« Reply #40 on: April 19, 2007, 01:37:22 PM »
The current system is not kept on the books, but is dismantled by the Fair Tax system.  Repealing the 16th amendment is necessary to prevent an income tax from being re-intituted.  Of course, with the current system gone, including the IRS, it would be a rather large endeavor to recreate it from scratch.  Not impossible though, hence the need to repeal the 16th.
Sabre
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Offline Sabre

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« Reply #41 on: April 19, 2007, 01:38:36 PM »
Quote
Originally posted by Shamus
I would think that there will be a lot of resistance from the stock and bond markets. Paying $123,000.00 for $100,000.00 worth of stock is going to upset a few folk.

shamus


Nope.  Investments are not goods or services (though the broker fee is).  There would be no sales tax on the purchase of stocks, bonds, or mutual funds.
Sabre
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Offline Shamus

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« Reply #42 on: April 19, 2007, 01:48:35 PM »
So you can buy and sell businesses and real property tax free.

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Offline Mickey1992

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« Reply #43 on: April 19, 2007, 01:51:29 PM »
Quote
Originally posted by Sabre
Nope.  Investments are not goods or services (though the broker fee is).  There would be no sales tax on the purchase of stocks, bonds, or mutual funds.


Nor is there tax on the Capital Gains when the stock is sold.  :aok

Offline Mickey1992

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« Reply #44 on: April 19, 2007, 01:52:36 PM »
What is there to keep someone from crossing the border to avoid paying the federal sales tax?  I could save a lot on a $20K car if I bought it in Canada and drove it back to the US.