Aces High Bulletin Board
General Forums => The O' Club => Topic started by: Sabre on August 18, 2005, 01:30:52 PM
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There is currently a bill in committee in the US HoReps (H.R. 25) and a companion to it in the Senate (S.R. 25) called the Fair Tax Bill. Essentially, it would eliminate the Federal Income tax (and the IRS), the alternate minimum tax, corporate taxes, the death tax, the gift tax, and Social Security and Medicare withholdings, and replace them with a flat-rate consumption tax on goods and services. I've read quite a bit about it, and can't see any downside, other than all those IRS and H&R Block workers that would be out of work. It is revenue neutral, that is, the rate (currently proposed to be 23%), would exactly replace the revenue generated under the current system. It would replace the US Federal tax regulations, which run over 54,000 pages and well over a million words, with a tax plan that could be completely described on a 3x5 note card (one side, only). The bill also calls for the repeal of the 16th ammendment to the US Constitution.
Economists estimate that the economic growth that would be stimulated by the enactment of HR/SR 25 would be on the order of 10% annually. There is an interesting feature of the bill that address the concern that poor people would have to pay more taxes. Everyone would recieve a prebate check each month, that would in effect cover the fed consumption tax on essentials. Let's say the poverty level for a household of a certain size is a $20,000 annual salary. That household would receive a monthly check in the amount of 1/12 of $20,000 x 0.23, or approximately $383. Every registered household would recieve this, regardless of income, so that no one would be pay the tax on the necessities of life.
The tax would only be on new retail goods and services, not on used items or inventories, for example. It is not a value added tax, such as many European countries use. It is paid one time, and the point of retail sale. Your reciept would reflect how much tax you paid, and it would be complelely up to you how much tax you pay (since you decide what new goods and services you purchase).
The CBO recently estimated that US business and individuals pay as much as $500 BILLION annualy to comply with the federal tax laws. Add to that the fact that no company (and few individuals) make any major business decision without computing the tax liability, and you can see just the tip of the iceberg of the positive effect passage of this bill would imbue to the economy.
What do you guys think?
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I think you want to spend $3.50 to $4.00 for a gallon of gasoline. ;)
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I love the idea of a flat tax, but it will never pass...
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Originally posted by Bodhi
I love the idea of a flat tax, but it will never pass...
I prefer the flat tax to a national sales tax.
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I don't understand the "prebate" idea. Using the example you posted, anyone below the poverty line (20k in the example) effectively pays no tax. Ok by me.
Everyone would recieve a prebate check each month, that would in effect cover the fed consumption tax on essentials. Let's say the poverty level for a household of a certain size is a $20,000 annual salary. That household would receive a monthly check in the amount of 1/12 of $20,000 x 0.23, or approximately $383. Every registered household would recieve this, regardless of income, so that no one would be pay the tax on the necessities of life.
By "everyone", I assume it means everyone below the poverty line receives the prebate check?
Then the last sentence throws me. "Every registered household would receive this" -- meaning that everybody gets their 383 check a month, basically meaning they're not taxed on their first 20k of income?
Is that what's being said, in a roundabout way?
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I like a flat tax. Lot of pluses. No more huge corporations poking money through loopholes to avoid paying taxes would be nice. Might even keep the money in the U.S. as opposed to banking it all off-shore.
It will never pass, but it is a nice dream.
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Agreed skuz, however the first presidential politican to pick this up and make it part of his campaign platform will likely get my vote.
It just needs to be made a very public, national issue.
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Problem is, they make a part of thier campaign, then it gets dumped when they get elected.
Citizen Bob: But you said during your campaign.....(put whatever floats yer boat in this space).
Political Pacifier: PSYCHE!!!
And so the story goes, and so it will stay.
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I just thought of another huge problem with the type of tax you are describing, or "a flat tax".
Non-profit Organisations exist off of tax deductible donations. Without those these organisations would lose very high percentages of tehir budgets. That would be catastrophic to a lot of people who rely on them.
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This bill is called "Hide the Peanut"
See, here is how it works. They get the public all engaged and arguing over how "best" to tax you and no one spends the time to say Any Tax Reform Must Begin With how the Gov Spends It.
Imagine No change in the tax laws At All, and a Government that swipes just Half the waste off the books. The tax relief would equal this proposal.
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Originally posted by Hangtime
Agreed skuz, however the first presidential politican to pick this up and make it part of his campaign platform will likely get my vote.
So you voted for Steve Forbes?
And as Sandman ponted out, the Fair Tax (sales tax) is not the same as a Flat Tax (income tax).
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Originally posted by Sandman
I think you want to spend $3.50 to $4.00 for a gallon of gasoline. ;)
I assume you are getting those amounts based on adding 23% to the current/predicted price of gasoline. You have to factor out the imbedded taxes that you don't see in that price, and the lowered cost of doing business that comes with the elimination of the income tax. The models I have seen predict that the cost of goods and services will drop sufficiently to at least offset the 23% sales tax.
Originally posted by Tarmac
I don't understand the "prebate" idea. Using the example you posted, anyone below the poverty line (20k in the example) effectively pays no tax. Ok by me.
By "everyone", I assume it means everyone below the poverty line receives the prebate check?
Then the last sentence throws me. "Every registered household would receive this" -- meaning that everybody gets their 383 check a month, basically meaning they're not taxed on their first 20k of income?
Is that what's being said, in a roundabout way?
Every 'head of household' will recieve a prebate for the estimated amount of sales tax that will be spent on the basic needs of that houshold, regardless of income. It eliminates the class warfare approach of the current tax system.
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Originally posted by Bodhi
I just thought of another huge problem with the type of tax you are describing, or "a flat tax".
Non-profit Organisations exist off of tax deductible donations. Without those these organisations would lose very high percentages of tehir budgets. That would be catastrophic to a lot of people who rely on them.
OTOH, people do indeed give money to charitable contributions without regard for the tax deduction.
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You never know, we could get a flat tax or fair tax scheme some day... there are sure some pursuasive arguments for it. Seems like the idea is getting more and more attention...
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Not in my lifetime. Probably not in yours either. I think the Moon is scehduled for departure from Earth, and it will happen before we get something that would benefit the working folks of this country.
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like a flat tax. Lot of pluses. No more huge corporations poking money through loopholes to avoid paying taxes would be nice. Might even keep the money in the U.S. as opposed to banking it all off-shore.
Amen
It will never pass, but it is a nice dream.
Amen
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Although I am in favor of such ideas (flat tax and consumption taxes) it will never pass becuase it would curtail Congress' power to effect social engineering through the tax code.
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Flat tax? Love to see it happen. Probably wont. Even if it does, they'll find some way to keep the pressure on us. The feds have been screwing John Q Public with the Income Tax for decades. That is a perfect example of the Govt.'s idea of a "workable" tax. Bah. As for this Fair Tax? I dunno, sounds good at first. But digging a little it seems very complicated, almost worse than the Income Tax regulations we have now.
Here's a decent run down (although even this is a bit light on real info) on tax history and the "Fair Tax".
http://www.taxhistory.org/thp/readings.nsf/cf7c9c870b600b9585256df80075b9dd/cfbe9de4a695d74f85257014004f1184?OpenDocument
Keep in mind, the post there is written by tax analysts. There could be some prejudicial thinking involved in the opinions, and they dont entirely stick to facts. Who does anymore?
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Personally, I too prefered a flat income tax of around 14% for everyone regardless of income. At present I'd go for the "fair tax" plan as well.
As those pushing the plan have pointed out, you wouldn't see a 23% increase in the price of goods because there are already a large amount of taxes built into the final price of consumer goods.
As far as the effect of the fair tax on Non-profits like my church, we could handle a 23% sales tax because we really don't spend that much on goods and because of the previously mentioned drop in the cost of manufacture etc. We could even possibly pay the 14% flat tax with a lot of belt tightening (unfortunately this would also impact our ability to give diaconial assistance.) But what would definitely force us underground in no time would be being forced to pay corporate taxes at currently existing rates [6.9% state & 39% Federal & whatever the local rate is]. There is no way we could pay them and remain solvent. We are only just barely in the black as it is.
My fear, however, is that the "fair tax" will be implemented without abolishing the IRS, and eventually you will get a national sales tax AND a national income tax. Those who find that difficult to believe should remember that when the income tax originally came out it was claimed that it was not much of a threat because it would never go above 2%.
Regardless, I've long felt that current combined taxation levels are well past confiscatory. It's humorous to reflect that Americans rebelled against the British government over a per capita taxation level of under 2%!
- SEAGOON
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Oh... and the House of Reps is nuts.
:D
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23% sure would be nice to drop down a few brackets.
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Uh.. sandie.. we allready have about 50 cents a gallon tax on gasoline.. there is no sales tax. Gas tax is supposed to go toward fixing the roads and infrastructure... the rate now is enough to build roads 4 feet thick in concrete and 75' wide...
because we are taxed so much on gas is why we have excellent roads in perfect repair.
lazs
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Originally posted by lazs2
Uh.. sandie.. we allready have about 50 cents a gallon tax on gasoline.. there is no sales tax. Gas tax is supposed to go toward fixing the roads and infrastructure... the rate now is enough to build roads 4 feet thick in concrete and 75' wide...
because we are taxed so much on gas is why we have excellent roads in perfect repair.
lazs
True enough, but wouldn't the national sales tax apply to gasoline as well?
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Originally posted by Sandman
True enough, but wouldn't the national sales tax apply to gasoline as well?
Sandman,
Here in North Carolina the combined State and Federal direct excise taxes are 40.8 cents per gallon of which 18.4 cents is Federal. Hopefully, with the implementation of the "Fair Tax" that 18.4 cents would be removed.
But even if it isn't removed, what we pay but don't see in the cost of gallon of gas are the embedded taxes that the oil companies have to pay the federal government and pass on to the consumer in the form of higher prices. Remove those taxes and you would see a major drop in the per gallon price of gas on the direct cost to consumers before taxation side.
Of course the 22 cents of state excise tax would remain, but hey, the states are always gonna want their slice of the pie.
- SEAGOON
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Originally posted by StarOfAfrica2
Flat tax? Love to see it happen.
I was in favor of the flat tax plan a couple of years ago, but I've changed my position in favor of the national sales tax plan. A flat tax would still be an income tax and the IRS would still remain. Income tax inherently punishes productivity, and the demise of the agency created to enforce it would not be a bad thing, to say the least.
One of the benefits of the Fair Tax is that previously untaxed sectors of our society would become part of the tax base. Monies earned through illegal activities that are not claimed as income now would be taxed at the retail level. Under the table workers, sellers of illegal products etc.
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Instead of mailing everyone a prebate check why not simply not charge taxes on food and clothing? Easier. Cheaper.
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Originally posted by rabbidrabbit
Instead of mailing everyone a prebate check why not simply not charge taxes on food and clothing? Easier. Cheaper.
because with the prebate check, washington gets to "estimate" how much peoplespendon them, rather than how much or little they actually do
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never heard of polling?
There are tons of better ways than spamming tens of millions of households with the same check every month.
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Originally posted by rabbidrabbit
never heard of polling?
There are tons of better ways than spamming tens of millions of households with the same check every month.
according to polls, less than 10% of people my age have drank or done drugs.
i agree, but you cant expect to much sense from politicians in one go, can you?
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Originally posted by StarOfAfrica2
Here's a decent run down (although even this is a bit light on real info) on tax history and the "Fair Tax".
http://www.taxhistory.org/thp/readings.nsf/cf7c9c870b600b9585256df80075b9dd/cfbe9de4a695d74f85257014004f1184?OpenDocument
That article is very uninformative and obviously emotionaly biased, as opposed to factualy opposed. The only legitimate point made is the method of computing the percentage of the tax paid. That argument has since been abandoned because the ones proposing it did not use the same method for the current tax system. Doing so weakened their position against the Fair Tax plan.
The difference in the method:
Spend $100 on an item.
Item cost, $77.
Taxes paid, $23.
23 is 23% of 100, but just under 30% of 77.
23% of your money went to taxes, but you paid 30% over the cost of the item in taxes.
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calif. does charge sales tax on gasoline and diesel.
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Originally posted by JTs
calif. does charge sales tax on gasoline and diesel.
Don't be so sure. I believe it's a city/county sales tax and not a state sales tax.
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Originally posted by rabbidrabbit
Instead of mailing everyone a prebate check why not simply not charge taxes on food and clothing? Easier. Cheaper.
Rabbid, there's a very good reason for sending a rebate check in stead. One of the reasons our tax code is so fracked up is because of special interest groups. First we'll have lobbiests for the various sectors of the food industry. Next, we'll have medical industry at the congress' door. Then energy, etc. One of the benefits of this plan is it completely removes the influence of various interest groups. Plus, it is predicated on the fact that when the imbedded taxes are removed, the cost of the item goes down, hopefully by nearly the same amount the sales tax adds. To be fair, it must apply to all sectors of the economy. A side benefit, from the stand point of those pushing this, is that the idea of a monthly check will make people more willing to consider this.
As for the "it will never happen" argument, it won't...unless enough people lobby thier elected fed reps and senators and demand it. This idea has been in development for 20 years, and it is not the first time it's been brough before the congress. Each year, more and more cosponsors have been added, and the current number in the House is 77 cosponsors. We can make it happen, but only if we let those yahoos know how important it is.
BTW, this plan is as simple as they come. It will do away with the IRS, and it's gastopo-like tactics. It will reduce the tax code to a few pages, instead of 54,000.
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Bah... flat tax is simpler. 10%... no excemptions, no exclusions, no prebate/rebates.
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income - tax%
0-15,000 -- 0%
15,000-25,000 -- 5%
25,000-35,000 -- 10%
35,000-45,000 -- 12%
45,000-55,000 -- 13%
55,000-75,000 -- 14%
75,000-95,000 -- 15%
95,000-125,000 -- 16%
125,000-250,000 -- 20%
250,000 > -- 40%
no excemptions, no exclusions, no prebate/rebates
Stick it to the man :)
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it would suck to make 251,000 by that one.. how about for each amount over...
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I think a flat sales tax could have the effect of making people save more and spaned less: this might not be a good thing.
I'd prefer a flat income tax (including corporate income and capital gains). 10% for everybody, no exemptions, no excuses and no need for accountants and a "tax industry" for 90% of the population.
One of the worst things I found about working in the US (and now in Australia as well): I can accept paying tax, I can't accept having to pay someone to figure out how much tax I should be paying and getting penalized if it's wrong. You want me to pay tax? Fine how much do you want me to pay? The PAYE scheme in the UK solves that problem for most people, but the Inland Revenue are slowly speading "Self-assessment" i.e. foisting off work they should be doing onto ordinary people.
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Pei, the consumption tax has a number of advantages over a flat income tax, one of those being that it incourages saving and investing, because it eliminates the penalties of doing both. That is a good thing, since it will generate capital investment, lower interest rates, and slow the rate of inflation. People will have more of their paycheck each month, so spending will remain pretty much what it is now... and business won't have to pony up the SS and Medicare matching funds that they do now. The addition of the fed consumption tax will be offset by the decrease in price of goods, due to elimination of imbedded tax costs in products and services.
A flat tax will not eliminate the need for a tax confiscation agency (aka the IRS), nor will it eliminate the volumous record keeping that must accompany it. A flat tax would also retain the current system of tax withholding, which is the most insideous aspect of our current tax system. Witholding is what allowed the tax burden to grow and grow, since it's easier to raise taxes without people really realizing it. Since, under the Fair Tax bill, the amount and percentage of the tax paid is on every reciept, it's more difficult to hide tax increases behind the small print.
Doing away with corporate taxes will encourage the return of business that fled this country because of the tax burden (currently the US has the third worst corporate tax burden of the industrialized world). Contrary to popular myth, corporations do indeed pay taxes, though that cost is passed directy to shareholders and consumers.
Economic growth will be the end result of the Fair Tax bill, further fueled by the $500 billion annualy that buesiness and individuals WONT have to spend complying with the tax laws. Economists disagree as to how much growth, but some are predicting as much as 10% annually.
Go to http://www.fairtax.org if you want to read more on the comparison between the Fair Tax and various flat-tax proposals.
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Originally posted by Sandman
I think you want to spend $3.50 to $4.00 for a gallon of gasoline. ;)
Heck, we in California will be paying that in a year or two.
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sandie... a national tax would apply to gas but.... the idea of a national tax is that you get rid of the others first.... Most of the gas tax is a federal tax... you would have to eliminate that before you added another... you couldn't have two federal taxes...
I would think the same thing on booze and the current federal income tax you pay.
lazs
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Plus, it is predicated on the fact that when the imbedded taxes are removed, the cost of the item goes down, hopefully by nearly the same amount the sales tax adds.
Partially offset, but only very partially.
The "embedded" taxes in products are usually small, they are comprised of part of the tax companies pay, part of the employment taxes, etc
The largest chunk of taxes raised are from income tax on individuals, by far. And those taxes are not embedded in the cost of goods.
One of the benefits of the Fair Tax is that previously untaxed sectors of our society would become part of the tax base. Monies earned through illegal activities that are not claimed as income now would be taxed at the retail level. Under the table workers, sellers of illegal products etc.
And the downside is that many things that are taxed now will switch to the underground economy.
Want some building work on your house? 15% discount if you pay cash, the work doesn't go on the books.
It happens all the time in countries with VAT, and the higher the rate, the more incentive there is to fiddle the system.
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Originally posted by Nashwan
Partially offset, but only very partially.
The "embedded" taxes in products are usually small, they are comprised of part of the tax companies pay, part of the employment taxes, etc
The largest chunk of taxes raised are from income tax on individuals, by far. And those taxes are not embedded in the cost of goods.
And the downside is that many things that are taxed now will switch to the underground economy.
Want some building work on your house? 15% discount if you pay cash, the work doesn't go on the books.
It happens all the time in countries with VAT, and the higher the rate, the more incentive there is to fiddle the system.
Actually, depending on the item or services, the embedded federal tax (including payrole FICA, SS, and Medicaid) averages from 18% to 25%. So on average, the price of goods and service will go down about 22%. As for the "cheating" aspect, that goes on now. Neither system will totally eliminate that. However, it will mean the job of monitoring such tax evasion will only have to cover businesses, and not both business and individuals as it does now. Also, there will be some incentive to comply with the consumption tax, since the states, and also some businesses, will recieve a fee from the Fed for collecting taxes, which will be a percentage of the amount collected.
This isn't about finding the perfect system. Since we don't live in a perfect world, such a thing is an impossibility. However, of the alternatives I've seen presented thus far, the Fair Tax bill seems to offer more advantages and fewer problems than others, such as a flat-rate income tax and the VAT. It is revenue neutral, gets rid of the oppressive IRS, eliminates nearly all of the compliance costs currently bourne by individuals and the private sector, will stimulate significant growth in the economy, bring business back to the USA, encourage saving and investing, severly reduce the power of special intrests and thier lobbiests, and make the tax system simple and transparent. It also includes provisions for jump-starting the process to repeal the 16th ammendment (an absolute imperative to prevent an income tax from creeping back in. The 23% figure being used is conservative, since it doesn't factor in the effects economic growth would have on growing increasing revenues. The bill ties the tax rate to growth, such that that that percentage would shrink as the economy grows. We as voters would still have to remain ever-vigilant, holding our government accountable for spending and insuring they don't try to fiddle with the program or "back-door" new taxes.
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The Fair Tax Plan is a good idea on paper but it would never work unless there was a Consitutional amendment that went along with it outlawing all forms of income taxes. As soon as this plan was passed states like CA, MA and NY would drastically increase their income taxes. This would offset any gains made in the Fair Tax plan. Also what would stop a future congress from re-instating the income tax on top of the Consumption tax. They could use any crisis to do this, i.e. Social Security.
A better plan is a flat 10-15% income tax WITH NO WITHHOLDING! Every American must write a check for thier taxes every month. Do this and you will see the public very quickly start demanding that the Gov. be more fiscally responsible and LOWER the rate. Right now a large part of this nation don't even understand that they are paying taxes. Just ask them
Question: How much did you pay in taxes last year?
Answer: I didn't pay anything, I got money back!
And this my friends is why this will be very dificult to ever change.
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Originally posted by Hangtime
Agreed skuz, however the first presidential politican to pick this up and make it part of his campaign platform will likely get my vote.
It just needs to be made a very public, national issue.
Two words...John Kerry.
Did you switch the channel when he was on TV ranting about tax loopholes etc.
You had your chance.
:p
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Actually, depending on the item or services, the embedded federal tax (including payrole FICA, SS, and Medicaid) averages from 18% to 25%. So on average, the price of goods and service will go down about 22%
So if the government is already getting about 22% of the price of goods in taxes on businesses, and gets income tax on top of that, how can a 23% vat rate replace both?
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Kerry? he ran?
Wasn't he the guy that wuz budy-buddy with hanoi jane, turned his back on his crewmates and checked outta vietnam on a 3 scratch rule, (only one to ever do so, if i recall) and chucked his medals over the whitehouse fence... only to have them magically re-appear proudly framed in his congessional office 30 years later?
Never heard of him.
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That's the guy Hang. He had a serious hard-on for my little island...probably would have shut us down completely if he had made it to Pres.
Thing is....he would have destroyed the US re-insurance industry at the same time.
Sometimes us wee little tax free places actually benefit the US economically. See, the US re-insurers move their head offices to places like Bermuda not to avoid taxes on US source income, but to defer taxes on non-US source income.
These same companies file their returns religiously for the US stuff and pay millions in corporate tax. The non-US stuff gets taxed as soon as it is repatriated into the US.
The tax deferral, combined with a much less restrictive business environment, makes places like this an ideal platform from which these companies can compete GLOBALLY.
Without them the Europeans and Asians would "rule the school" in the re-insurance business.
Unfortunately short-sighted politicians (ala Kerry) can get many Americans all wound up about their percieved loss of tax dollars and pull all the right heart strings to try and get themselves voted in. Then they can potentially do more damage then good.
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Originally posted by Curval
That's the guy Hang. He had a serious hard-on for my little island...probably would have shut us down completely if he had made it to Pres.
Thing is....he would have destroyed the US re-insurance industry at the same time.
Sometimes us wee little tax free places actually benefit the US economically. See, the US re-insurers move their head offices to places like Bermuda not to avoid taxes on US source income, but to defer taxes on non-US source income.
These same companies file their returns religiously for the US stuff and pay millions in corporate tax. The non-US stuff gets taxed as soon as it is repatriated into the US.
The tax deferral, combined with a much less restrictive business environment, makes places like this an ideal platform from which these companies can compete GLOBALLY.
Without them the Europeans and Asians would "rule the school" in the re-insurance business.
Unfortunately short-sighted politicians (ala Kerry) can get many Americans all wound up about their percieved loss of tax dollars and pull all the right heart strings to try and get themselves voted in. Then they can potentially do more damage then good.
You see these are concepts the Liberal/Leftist mind just cannot understand.
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I always figured that a free floor flat tax would be a good idea.
Say the first 30K (inflation adjusted) is free then any income over that is taxed at a flat rate. (For argument sake say 10%)
Someone who makes 40K would be taxed on the last 10K, and at 10% his tax bill would be $1,000 only 1/40th of his income would me sent to DC. Just over a 2% tax rate.
Some one who makes 1,000,000 would pay 10% of 970,000 or $97,000. A 9.7% tax rate.
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Originally posted by Hangtime
Kerry? he ran?
Wasn't he the guy that wuz budy-buddy with hanoi jane, turned his back on his crewmates and checked outta vietnam on a 3 scratch rule, (only one to ever do so, if i recall) and chucked his medals over the whitehouse fence... only to have them magically re-appear proudly framed in his congessional office 30 years later?
Never heard of him.
Cmon Hangtime, He's the one with Fonda that are responsible for our losing Vietnam! How could you forget??!! :D
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Originally posted by Holden McGroin
I always figured that a free floor flat tax would be a good idea.
Say the first 30K (inflation adjusted) is free then any income over that is taxed at a flat rate. (For argument sake say 10%)
Someone who makes 40K would be taxed on the last 10K, and at 10% his tax bill would be $1,000 only 1/40th of his income would me sent to DC. Just over a 2% tax rate.
Some one who makes 1,000,000 would pay 10% of 970,000 or $97,000. A 9.7% tax rate.
Good idea but my gut instinct is that once the math is done the tax %age would need to be higher to generate the needed revenue.
culero