BIG NEWS

[HashiriyaS14]

Apparently, Americans have a very flawed conception of how the government spends money. This comes as a complete surprise given how well voters have done at electing determined deficit reducers over the last several decades.

Really I'm baffled. I thought everyone was onboard with cutting Social Security and Medicare benefits, which is why we've been so successful at it!

http://politicalticker.blogs.cnn.com/20 ... st/?hpt=T2



Bah.

[telcoman]

Really I'm baffled. I thought everyone was onboard with cutting Social Security and Medicare benefits, which is why we've been so successful at it!
Bah.

No everyone is not on board with cutting Social Security.

Many others are in favor of raising taxes on the rich

Telcoman

[stebo0728]

Really I'm baffled. I thought everyone was onboard with cutting Social Security and Medicare benefits, which is why we've been so successful at it!
Bah.

No everyone is not on board with cutting Social Security.

Many others are in favor of raising taxes on the rich

Telcoman

Sorry but your fairy tale of "taxing the rich" just wont cover the deficit. Your magic number of 250,000, only makes up 2% of taxpayers. Do you honestly think that taxing 2% of taxpayers can eliminate a trillion magnitude deficit? Nevermind your evil moral code that would consider that fair, fair or not, IT WONT WORK

[srellim234]

Allowing the Bush tax cuts to expire would generate about $336 billion. Such a huge discrepancy has been created between the top financial tier and the middle/lower classes in this country that the "only 2%" of taxpayers you refer to control an incredible amount of the wealth compared to the rest of the population. The gap continues to get wider and wider.

I prefer working in the direction of a flat rate income tax with no deductions whatsoever. Decide what a poverty level above which we should start charging is and go from there. In the meantime, a combination of steep spending cuts coupled with some of the population ponying up a few more percentage points is going to probably be necessary.

For those who propose a consumption based tax, I would point out that there is a very large issue associated with it that they don't even want to consider. It would destroy Wall Street entirely when you start charging that tax on every transaction that occurs there. Every single stock and commodities transaction must be included. There must be no exceptions for excluding any transaction. As a result, that tax will eliminate any short-term speculation, borrowing, or investment.

It actually would be a good thing in the long run. A lot of stability would be returned to the marketplace as companies returned to managing the long term business and not the short term stock price.

[AZhitman]

It'll be poetic justice if somehow, Howard's beloved 401k exceeds the "magic number" that defines one as "rich" the day after his oh-so-vaunted "tax the rich" program goes into effect.

Have fun paying Uncle Sam, and remember, it'll still be Bush's fault.

[stebo0728]

For those who propose a consumption based tax, I would point out that there is a very large issue associated with it that they don't even want to consider. It would destroy Wall Street entirely when you start charging that tax on every transaction that occurs there. Every single stock and commodities transaction must be included. There must be no exceptions for excluding any transaction. As a result, that tax will eliminate any short-term speculation, borrowing, or investment.

Actually you can exclude certain transactions, the FairTax does just that. For example, under the FairTax, there would be no tax component related to the purchase of a used car or home. The FairTax only taxes purchases of NEW goods or services. Likewise, you dont necessarily have to tax every stock trade either. The FairTax does place a tax component on services, such as doctors visits, or what have you, and therefore you could say that your stock broker's handling of your account is a service, but then the tax would be on your service fee to him, not on each trade he made.

[srellim234]

Tax everything or nothing. No exceptions. Like deductions, special interests will continue to lobby the creation of additional exemptions once you start that mess.

[stebo0728]

Tax everything or nothing. No exceptions. Like deductions, special interests will continue to lobby the creation of additional exemptions once you start that mess.

You have a problem with only taxing sales of NEW products? So each time a specific item is sold, it is to be taxed again? How many times would you like to place tax on one single item?

As far as the stock thing, i think its a definite distinction to tax the services rendered by the broker, but not to tax each individual trade. Its no different than taxing the end sale of a toaster without taxing the purchase of each component at the production level. This is why corporations are not taxed when reselling. The stock trade is simply the component level part of the service product they provide.

Also, just so you know, under the FairTax, any rate change or any type of "special interest exemption" would have to be passed through Congress with a super majority in order to succeed. Thats darn hard to come by.

[srellim234]

I do have a problem with that. It is not like buying parts to build a toaster. Stock is a commodity unto itself. I buy shares of stock, which is available in finite numbers. I get a stock certificate. Tax it. It is not a "fair" tax when it exempts transactions of those who can afford it. As for taxing an item every time it changes hands, why not/ New consumers of a product. and, if you do tax all sales, the tax rate will be greatly reduced.

The supermajority should absolutely be abolished and not allowed to return. Our country should be "one person, ne vote." The supermajority means that a person's vote for the majority is worth less than a person's minority vote. Everyone's vote should count the same.

From what yo describe it sounds like the Fair Tax is just another way to gouge the middle and lower classes while protecting the rich and continue to expand the wealth discrepancy in this country..

[telcoman]

It'll be poetic justice if somehow, Howard's beloved 401k exceeds the "magic number" that defines one as "rich" the day after his oh-so-vaunted "tax the rich" program goes into effect.

401k and 403b, and Ira plans allow pre tax money to grow tax free while Roth plans allow after tax money to grow tax free with unlike 401k & 403 b plans allow for no taxes due upon withdrawal.

The power of compounding interest and qrowth is quite remarkable so if one starts early in their working career a substandtial sum can be accumulated and transferred to the next generation if desired for further growth and compounding.

Now in the case of Greg one would have to assume he is quite well off to fear increased taxes on income over 250k or even one million that some are proposing.

So in order to generate $250k in income at a reasonable return of 4% a year Greg probably has in excess of $6,250,000 socked away that he is trying to shield from any increased taxation.

Sorry to say I am not in Greg's league.

Telcoman

[R/T Hemi]

Have fun paying Uncle Sam, and remember, it'll still be Bush's fault.

At least we have a nice war to remember him by, as well as a banking fiasco, mortgage scams and...shall I go on....
Look, I don't believe Bush was evil, but what he left behind was certainly evil. I don't think the all the forces and power mother nature possesses could undo the tangled mess the current administration inherited.

Oh, and I hate paying taxes too. But I'd rather pay taxes and see kids getting free flu shots than live somewhere else where the kids suffered.

[telcoman]

At least we have a nice war to remember him by, as well as a banking fiasco, mortgage scams and...shall I go on....
Look, I don't believe Bush was evil, but what he left behind was certainly evil. I don't think the all the forces and power mother nature possesses could undo the tangled mess the current administration inherited.

Oh, and I hate paying taxes too. But I'd rather pay taxes and see kids getting free flu shots than live somewhere else where the kids suffered.

Some want to keep cutting education funding until we end up like here

http://www.npr.org/templates/story/stor ... d=19333953

Telcoman

[themadscientist]

Have fun paying Uncle Sam, and remember, it'll still be Bush's fault.

At least we have a nice war to remember him by, as well as a banking fiasco, mortgage scams and...shall I go on....
Look, I don't believe Bush was evil, but what he left behind was certainly evil. I don't think the all the forces and power mother nature possesses could undo the tangled mess the current administration inherited.

Oh, and I hate paying taxes too. But I'd rather pay taxes and see kids getting free flu shots than live somewhere else where the kids suffered.

The seeds of the banking fiasco were planted during the Clinton administration guy. The likes of Barney Frank and Chris Dodd gave them water and fertilizer, and Bush just brought the sun in the form of deregulation.

Obama's been in office two years now, still tangled up in those wars and now he's playing in Libya.

[R/T Hemi]

...

Obama's been in office two years now, still tangled up in those wars and now he's playing in Libya.

And I think that goes back to the original sin. Entering a war without a defined goal and an exit strategy. As far as Libya goes, I think we've had a defined goal, and Obama has certainly defined his exit strategy, however, the elephant in the room is whether on not NATO intervention is enough. It's a hard call, but it appears the current admin. has learned from the mistakes of the previous one.

[IBCoupe]

I do have a problem with that. It is not like buying parts to build a toaster. Stock is a commodity unto itself. I buy shares of stock, which is available in finite numbers. I get a stock certificate. Tax it. It is not a "fair" tax when it exempts transactions of those who can afford it. As for taxing an item every time it changes hands, why not/ New consumers of a product. and, if you do tax all sales, the tax rate will be greatly reduced.

...

From what yo describe it sounds like the Fair Tax is just another way to gouge the middle and lower classes while protecting the rich and continue to expand the wealth discrepancy in this country..

...from a libertarian-originated tax plan? That unpossible!

I'm just wondering what's left behind when we take out all of these "excluded transactions."

No homes, no cars. No stock transactions. Gee, it seems like we're really limiting it to bread and butter items... which sort of seems like it's going to hit one demographic harder than others...

[AZhitman]

4% is for chumps. Hope you've got good LTC insurance.

We did 17% in a crap economy last year... One thing Howie and I CAN agree on is the beauty of frugality, saving, and taking advantage of the opportunities of the tax code... I don't want to pay in ANY more than I absolutely have to.

I'm funding a Roth (well, one for me and one for Bex) as well as my employer's 403b (which is a tad weak due to no employer contribution and lame fund choices)... but the bulk of my retirement is in mutuals.

I don't own gold. Surprised?

Since I was 18 I've had a "plan": I don't plan on SS or an inheritance, I don't believe in the lottery, and I'm NOT ok with being a burden on the state (or my kids).

p.s. I WISH I was as financially savvy as the OP (or even most of you guys).

[telcoman]

4% is for chumps. Hope you've got good LTC insurance.

Yup got good LTC insurance

401k rose over 40% last year

4% is considerated a reasonable withdrawal rate to avoid running out of money

I don't own any gold either. It doesn't pay any dividends

[srellim234]

...You have a problem with only taxing sales of NEW products? So each time a specific item is sold, it is to be taxed again? How many times would you like to place tax on one single item?

As far as the stock thing, i think its a definite distinction to tax the services rendered by the broker, but not to tax each individual trade. Its no different than taxing the end sale of a toaster without taxing the purchase of each component at the production level. This is why corporations are not taxed when reselling. The stock trade is simply the component level part of the service product they provide...

Re: the toaster. Businesses buying parts aren't paying taxes on the purchase of parts. They're not sold to the consumer until they are put together and then taxed. An individual buying parts pays taxes on the parts but not on the finished product since he assembles it himself. Exactly as happens today when you use your business license here to buy supplies for your business at a place like Smart n Final.

Re: the stock trade. I'm not referring to the stock trade. I'm referring to the stock itself. It's the product that is being sold. I walk into a broker's office and buy stock just like I'm buying a car at a dealer. I have a choice of products, I make an offer and it's accepted or rejected. When I finally buy I pay a price for a product. Whether it's the stock certificate or the % of the business it's still a tangible asset and product.

Re: the tax on broker services. So you are still proposing an income tax, only you are going to call it a "service tax." Don't forget to tax the service of everyone else you come in contact with. How about an additional tax if you use he tailor's service at Men's Wearhouse in addition to the salesman and the cashier? Should we pay extra taxes on that? Let's see, how do you quantify what's service to be taxed and what isn't at the doctor's office and the lawyer's? Not sure how you quantify a lot of this stuff but it sounds like what you are calling for is consumption taxes AND income taxes. Simply another way to complicate things to make the rich richer and the poor poorer.

A flat rate income tax on individuals with no deductions is my preferred method. Since corporations don't pay taxes (their customers do) let's eliminate the corporate taxes and watch them flock back with jobs galore. Putting the taxes on each individual will show us exactly how much this great government we have is costing us per person. Then we can decide if they're worth it. Makes them much more visibly accountable when they decide they want more, too.

Obviously, the % of income tax will go up but so will the wages to offset it. Supply and demand will drive up the wages as the companies bring the jobs back. With payroll currently being a smaller % than taxes as a cost of doing business here, I could even handle some additional government dictates regulating payroll and forcing companies to pay a higher "living wage" to employees as the corporate taxes are removed. I might even tolerate something like limiting the highest paid wage earner, including bonuses, to 12 or 15X the lowest wage earner in the company, but that's probably a discussion for a different thread.

[IBCoupe]

You mean no deductions aside from a standard deduction, right?

[srellim234]

Use an independent determiner of the poverty level as the starting point at which to begin collecting tax and then no deductions.

[IBCoupe]

I'm just trying to sort out the kinks. Would you be in favor of a flat tax that creates an exception where tax dollars, when taken away, couldn't put you into poverty?

I get the feeling that it's going to create some silly examples.

Imagine that, for the sake of argument, we decide that $20,000/year is poverty, and above that line is not. If the flat tax is 5%, and Tom makes $20,001.00, would it be that he's left with $19,000.95? Or is he only taxed up to the $20,000 buffer, and sends in $1.00? And wouldn't that mean that the person who makes $21,052.63 feel like the government is just knocking him down to poverty when it taxes him? And in any event, aren't you creating an inherently progressive system, albeit condensed?

I'm not trying to challenge your plan. I'm just mulling over the details. Might be a good idea.

[stebo0728]

Wow lots of good nuggets there, sorry I was incognito during the weekend.

First, we just seem to have a fundamental disagreement between adequate taxation levels. In my humblest opinion, products should only be taxed once in their lifetime, not each new owner. If conductors of repeat sales intend to duck a tax, they will duck it, sell in the back alley, whatever, so why try to tax a puff of smoke? Now Im not saying thats why I dont agree with taxing subsequent sales, just pointing out that its useless. Sure its maybe easier to keep up with home and car sales than treadmills and patio sets, but still, why should it be different based on what it is? My fundamental belief is, tax once, then forget about it, regardless of what it is.

Now I guess you've drawn a witty conclusion that service taxes equate to income taxes? But under that same logic, product taxes can equate to income tax as well. If you consider someone who is in business for themselves, perhaps selling porch swings they build, or sculptures, or whatever, if they are collecting taxes for each product they sell, then whats the difference when someone collects a tax for each service they render? A service is no different than a product, in fact a service, on the fundamental level, IS a product. In fact if you were to exempt services from taxation, and remove the income tax, then you create a niche of product that escapes taxation, the very thing you argued should NOT happen. You try to draw a distinction between goods and services, but the distinction does not exist. Blood, sweat, tears, and time are every bit as tangible as lumber, screws, and paint. Here is how you draw the distinction. The only goods and services taxed are goods and services at the consumer level. Any services rendered at the "pre-product" level are not taxed, just as any goods purchased at the "pre-product" level. You are right in saying that if you buy parts as a consumer, you pay taxes, and this is proper. Likewise, any services that are normally "pre-product" that are rendered to a consumer, would also have a tax component.

Now, I could not POSSIBLY disagree more with your assessment that a consumption tax would keep the rich rich, and the poor poor. The rich keep themselves rich just fine, and the poor do a pretty fair job of keeping themselves poor as well. Have you ever considered what might happen if some of those "poor" actually applied themselves. Maybe they could acquire some market share for some of the goods and services provided by the "rich", maybe provide a bit more competition in the market, maybe get a piece of the pie themselves, maybe actually make something of themselves, something they could value as being a product of their own ability, but no, its become more admirable to be a member of the "looter class". What happens when we finally drive the producers away? What teet will you latch to when theres no teet left to latch to? You try to use emotion to apply to reason based things, and you cant do that. When injustice appears, sure we deal with it, we did so with civil rights, but then we threw things way on the other side when we started this absurd "affirmative action" business. Then suddenly we made it correct to employ the lazy, and pass on the productive, merely because of skin color. Should everyone have a fair shake at a job, sure, but based on ability alone.

John Stossel did a great story series last week, on Freeloaders, and he covered it all, pan-handlers, corporations, minority farmers, and native americans. The bit on native americans was very interesting. We've made native americans a ward of the state, on other group of people gets more funding from our government. And actually, they are just about completely supported by the government. Yet they are one of the most poverish group of people in the nation. The story followed a tribe in SC thats not recognized by, I think they were in Pembroke, SC, and they are the most prosperous, they have made it on their own. Did we do the natives wrong? Sure, but have we made up for it? More than made up for it. Get them off the teet too, let them prosper of their own ability. We should all prosper of our own ability, and if you are born mentally challenged, then maybe you have a case, but otherwise, get off your duff.

Ok so the last 2 bits were ranty, sorry, but that doesnt demish their value. Relevance to the topic, certainly, but still valid in my mind.

[srellim234]

Stebo, I have to go right now but I'll talk to you here a little later. Nothing too argumentative; I just think we have different views as to what constitutes a product and should we have high tax on the first sale or a lower tax on all sales.

IB- Subtracting the $20k threshold in your example I would only tax the $1, not the whole $20,001. If the tax rate were 15% the person paying would only pay 15 cents and keep the other $20,000.85. That way every individual would know exactly how much they get to keep out of each individual dollar they make and not be thrown back under the level. The person making $1,000,000 would pay the 15% on $980,000.

[IBCoupe]

Ah, okay. So you'd effective thane the same system if marginal rate taxationthat we have, just eliminating the deductions and getting rid of all but two marginal rates: 0% and something higher than 0%.

[IBCoupe]

Because I'm not on a real computer, I didn't get to read all of what you wrote Stebo, but if the dispute is between low tax on all transactions and high tax on the first transaction, I don't know that I can find a public policy interest in the latter.

You wrote that you only want to tax an object once, which leads to an odd world that disincentivizes innovation and creation, by making it less appealing to buy something new. On the other hand, refusing to tax anything more than once seems like a pretty arbitrary rule, to me.

[stebo0728]

No no not at all, my scenario does not disincentivize buying something new, it disincentivizes buying something new NEEDLESSLY. If innovation produces superior product, and the superior nature overcomes the cost prohibition of purchasing new as opposed to used, then the new is purchased. This doesnt stiffle innovation, it forces it to move faster, to move with greater efficiency.

So answer me this, how do you quantify how many times an item will be resold? Then base a taxation curve on this? The market will work against you no matter how you turn. Sales wont be logged, and how could you ensure they are? You cant. The only right way to go about it, is to properly tax it the first time, then its out of the system, tax wise, and free to move about however the market pleases, without you worrying about how to keep up with it and tax it at every turn.

[IBCoupe]

I don't know why you think it would be any more difficult to track resales than it would to track sales.

And who are you to dictate what's NEEDED?

[stebo0728]

I don't know why you think it would be any more difficult to track resales than it would to track sales.

And who are you to dictate what's NEEDED?

Please tell me your joking, that you really know that resales would be nearly impossible to accurately track. Now autos and homes you might be able to keep up a bit easier, but the more mundane items, most certainly not.

And when did I interject an assessment of need? The individual or corporation will make their own assessment of need when faced with having to procure a product. If the new stuff on the market outweighs the cost benefit of more of the old stuff, used, then the purchaser will make that evaluation for themselves.

EDIT: Quit overcomplicating things. While the FairTax is designed to be revenue neutral, its also designed to be painfully simple. This is what scares me about ANY new tax policy, is the big brained folks who think everything needs tweaking, are going to get ahold of whatever we pass, and try to blast it all to hell with new regulations and new limits, and new this and new that, all the while mucking it up beyond recognition, just as we have now. Quit trying to micromanage the economy. The FairTax takes the micromanagement off the table.

[IBCoupe]

It won't be any more difficult to track new items than it would to track used. New items can be sold through the same quiet channels as used, and even mundane used items can be resold through secondhand methods. Trying to make a distinction between new and used is just going to encourage evasion.

"No no not at all, my scenario does not disincentivize buying something new, it disincentivizes buying something new NEEDLESSLY."

What else did you mean by that? It disincentivizes buying new things, which means that people are only going to buy things that are absolutely necessary. That's not going to make innovation more efficient; that's going to make innovators less willing to take the risks involved with true innovation.

I'm not telling you that the FairTax needs tweaking. I'm telling you it's got fatal flaws, at least in the way that you're presenting it. I'm telling you the policy issues that come up when you try to implement it, and it doesnt look like you've accounted for them in your support for it.

[szh]

I'm just trying to sort out the kinks. Would you be in favor of a flat tax that creates an exception where tax dollars, when taken away, couldn't put you into poverty?

I get the feeling that it's going to create some silly examples.

Imagine that, for the sake of argument, we decide that $20,000/year is poverty, and above that line is not. If the flat tax is 5%, and Tom makes $20,001.00, would it be that he's left with $19,000.95? Or is he only taxed up to the $20,000 buffer, and sends in $1.00? And wouldn't that mean that the person who makes $21,052.63 feel like the government is just knocking him down to poverty when it taxes him? And in any event, aren't you creating an inherently progressive system, albeit condensed?

I'm not trying to challenge your plan. I'm just mulling over the details. Might be a good idea.

I have spouted on length on a flat tax ... including having a simple threshold below which the person pays no taxes (albeit I am not totally in favor of this, since I think that everyone should feel an "ownership" of their responsiblity). Please feel free to search for these old posts of mine to understand where I stand on the topic.

Simplistically, my approach to handle the "poverty" problem. would be a straight reduction of the income by a fixed amount on which no tax is paid at all.

If the threshold is set at $20k (hypothetically), then my calculation recommendation is as follows:

1. How much income did you make?
2. If less than or equal to $20k, you owe nothing. Stop further calculations.
3. If more than $20k, then subtract $20k from that income.
4. Send in 15% of the result to the Feds and 5% to the State you live in.

No capital gains or capital losses modifications to income. You invest and do okay, good! You invest and lose, tough!

No deductions for anything - whether it is mortgage interest, medical bills, whatever! House ownership is not a "right".

Z