Debunking a few myths about the economy

[Encryptshun]

Well, the fact that the director of ungrad studies at Harvard says Warren Buffett, one of the richest self-made men in the world, is wrong is enough for me.

Seriously, though, there isn't much meat in Miron's arguments. No one said that increasing taxes on capital gains would close the budget gap. I believe Buffett was pointing out that, if congress is using the "American people won't stand for increased taxes on the wealthy" line as rationale for stonewalling progress toward a bipartisan debt-reduction package, then he will go on record to say that he's one American who would not care if taxes went up.

[IBCoupe]

I'm in favor of increasing the income tax on the wealthy, simplifying the corporate tax structure, possibly lowering the capital gains rate for a spell, and coming up with some tax incentives for venture capital.

[stebo0728]

National Retail Sales Tax, with prebate to cover tax on necessities. Hits everyone FAIRLY. Just sayin'....

[Eikon]

National Retail Sales Tax, with prebate to cover tax on necessities. Hits everyone FAIRLY. Just sayin'....

YES!!!

[Encryptshun]

National Retail Sales Tax, with prebate to cover tax on necessities. Hits everyone FAIRLY. Just sayin'....

Sorry, but I think that would be terrible for the economy.

First off, it would be an unfair burdent to low and middle-income families, since they necessarily spend a higher percentage of their income than they can save.

Second, it encourages people NOT to buy, so sales of luxury goods, entertainment, vehicles, homes and preventative medical care would drop except among the wealthy or when necessity happened to coincide with desire.

Third, it would generate less net revenue than income tax would, because it would completely negate capital gains revenue. When you use money to make money, your income goes up but you don't spend a dime to acquire that wealth. Therefore sales tax wouldn't be a factor. Compare an income tax rate on someone who makes $1,000,000 a year to the same percentage sales tax rate. I guarantee someone who makes $1,000,000 doesn't spend $1,000,000. But someone who makes $35,000 is more likely to spend all of it.

There are plenty of other reasons, but they depend on exacty what kind of sales get taxed. Manufacturing inputs, for example, are tax exempt right now, because the final product is taxed. Are you thinking that manufacturers start having to pay sales tax on everything they buy that goes into their finished product?

[stebo0728]

First off, it would be an unfair burdent to low and middle-income families, since they necessarily spend a higher percentage of their income than they can save.

WHAT?!? Did you read the part between commas? If so did you comprehend what you read? The prebate makes things BETTER for lower income familes, as 100% of their sales tax is reduced to nil, or better, they may even MAKE money. Anyone spending at or below the poverty level would have ZERO tax liability, ZERO. Wait, we forgot something. They also get to keep 100% of their paycheck (except insurance and 401k perhaps). Your argument is invalid when the facts come out. Find other flaws if you like, but this whole "undue burden on the poor" doesnt fly.

Second, it encourages people NOT to buy, so sales of luxury goods, entertainment, vehicles, homes and preventative medical care would drop except among the wealthy or when necessity happened to coincide with desire.

Actually, wrong again, well partially. It may reduce incentive to buy NEW, but it would most definitely INCREASE incentive to buy used. Buying a second hand automobile or home would have ZERO tax component. I think that would all but wreck the economy, it would help one of the already struggling segments, used homes. We already have too many used homes on the market that need to move, this would encourage that. Secondly, you think Paris Hilton is thinking of taxes when she wants a new, well, anything? Sure wealthy are generally frugal, thats how they got wealthy. Is frugality to be discouraged? I think not, it should be a class in school, let Suze Orman or Clark Howard teach it. Now imagine that WITH taxes, prices stay relatively where they are. Is sales really going to go down? Now also imagine you get 100% of your pay check, more purchasing power, prices are relatively where they were, are sales going to go down?

Third, it would generate less net revenue than income tax would, because it would completely negate capital gains revenue. When you use money to make money, your income goes up but you don't spend a dime to acquire that wealth. Therefore sales tax wouldn't be a factor. Compare an income tax rate on someone who makes $1,000,000 a year to the same percentage sales tax rate. I guarantee someone who makes $1,000,000 doesn't spend $1,000,000. But someone who makes $35,000 is more likely to spend all of it.

The millionaire I guarantee spends quite a bit above the poverty level. The 35k guy, perhaps a bit above it, perhaps not depending on family size. I tend to side with the experts (not political experts mind you but economic ones) who've studied the plan and found it absolutely tenable. You may think getting rid of capital gains would hurt, and mind you thats your right of opinion, but I tend to think otherwise.

There are plenty of other reasons, but they depend on exacty what kind of sales get taxed. Manufacturing inputs, for example, are tax exempt right now, because the final product is taxed. Are you thinking that manufacturers start having to pay sales tax on everything they buy that goes into their finished product?

Devil is always in the details, you're right. In the plan, Manufacturers would still not pay sales tax as far as I know, but I'll double check.

[Encryptshun]

First off, it would be an unfair burdent to low and middle-income families, since they necessarily spend a higher percentage of their income than they can save.

WHAT?!? Did you read the part between commas? If so did you comprehend what you read? The prebate makes things BETTER for lower income familes, as 100% of their sales tax is reduced to nil, or better, they may even MAKE money. Anyone spending at or below the poverty level would have ZERO tax liability, ZERO. Wait, we forgot something. They also get to keep 100% of their paycheck (except insurance and 401k perhaps). Your argument is invalid when the facts come out. Find other flaws if you like, but this whole "undue burden on the poor" doesnt fly.

Whoah, relax. "The part within the commas" is pretty vague. You know what a prebate is, right? It's when someone gives you a specific amount before transactions take place. No where in your description do you mention that it will cover 100% of anything. Or that povery-level people won't have to pay any tax. You call out "necessities". Who defines what that is, or how much you're allowed to spend on it? You want a more educated reaction, state more facts to back up your assertion. Otherwise I'm free to cast as much skepticism on your vague and nebulous claims as I wish. Burden of proof is on you.

Second, it encourages people NOT to buy, so sales of luxury goods, entertainment, vehicles, homes and preventative medical care would drop except among the wealthy or when necessity happened to coincide with desire.

Actually, wrong again, well partially. It may reduce incentive to buy NEW, but it would most definitely INCREASE incentive to buy used. Buying a second hand automobile or home would have ZERO tax component. I think that would all but wreck the economy, it would help one of the already struggling segments, used homes. We already have too many used homes on the market that need to move, this would encourage that. Secondly, you think Paris Hilton is thinking of taxes when she wants a new, well, anything? Sure wealthy are generally frugal, thats how they got wealthy. Is frugality to be discouraged? I think not, it should be a class in school, let Suze Orman or Clark Howard teach it. Now imagine that WITH taxes, prices stay relatively where they are. Is sales really going to go down? Now also imagine you get 100% of your pay check, more purchasing power, prices are relatively where they were, are sales going to go down?

Where did you say that there would be no sales tax on used merchandise? And your logic is flawed. Taxing purchases at a lower percentage than you would otherwise tax income would only yield a next positive change in revenue if people buy more than they make. While not impossible, it would require massive individual debt accumulation which is again bad for the economy.

Third, it would generate less net revenue than income tax would, because it would completely negate capital gains revenue. When you use money to make money, your income goes up but you don't spend a dime to acquire that wealth. Therefore sales tax wouldn't be a factor. Compare an income tax rate on someone who makes $1,000,000 a year to the same percentage sales tax rate. I guarantee someone who makes $1,000,000 doesn't spend $1,000,000. But someone who makes $35,000 is more likely to spend all of it.

The millionaire I guarantee spends quite a bit above the poverty level. The 35k guy, perhaps a bit above it, perhaps not depending on family size. I tend to side with the experts (not political experts mind you but economic ones) who've studied the plan and found it absolutely tenable. You may think getting rid of capital gains would hurt, and mind you thats your right of opinion, but I tend to think otherwise.

This still begs the question. If your tax base is reduced, your net revenue will be reduced. It's easy math. Which number is higher, 15% of $2.3 Trillion or 15% of $1.3 Trillion? In order to keep revenue the same you would have to tax sales at the same rate and people would have to spend 100% of what they make. It's just not feasible.

[stebo0728]

Didnt mean to come across as overreacting. I assumed something perhaps I shouldnt have, that you were at least partially familiar with the FairTax, which what I'm referring to in the plan. I did not state such, thus leaving it open to have been any plan, point taken.

On the prebate, the poverty level is taken by analysis of census data to come up with the basic amount of spending required, by household size, to live. All tax burden for that amount is then removed from everyone, rich or poor, in the form of the prebate. Its no different than having the standard deduction now on your income tax, it accomplishes the same goal, to remove the tax liability on the cost of living, the essential cost of living. If you live below that line, you make money. If you live above that line, you start paying tax on it. The US Government is levying the tax, therefore they must be the ones to figure out what that base line is. If you want to outsource that analysis to the private sector, and bind the policy to their findings, then heck I'm all for that, but someone has to set the policy some how. I understand your notion that "who are they to decide how I live, and whats a necessity" but keep in mind we're figuring this in relation to taxes. If it were for any other purposes you're thoughts would make perfect sense.

The idea of no taxes on used items is part of the FairTax plan. Again, taxation on purchases should only occur at the inception of the good, the initial consumer purchase. Any subsequent taxation equates to double taxation. Once its out the door, its none of the governments business anymore, except of course for licensed or permitted items, but they are kept up with for different reasons, not taxation reasons.

[Encryptshun]

Gotcha. I will do some research on this.

Pardon the snark, but I do find if funny that "economists say [x], so it must be true" is probably the most cherry-picked type of data we see. Economists that agree with something we're already predisposed to agree with are "right" and those who don't are wrong.

Good example are all the economists who say that what we need right now is increased government spending in order to stimulate the economy, while other economists are cited as saying we need to reduce spending and taxes. At the end of the day, no one can predict the future and either side of a debate will try to debunk the other's star witnesses while simulteneously accepting thier own as gospel.

[stebo0728]

Agreed, but given economists on one hand and politicians on the other, which would you prefer? If economists publish their true beliefs, and not media driver, or politician driven propoganda, then it should be fairly sound advice. The trick is to know how to differentiate the two. FairTax is not a very popular set of ideas with most politicians, yet it sits rather well with alot of economists. Why does it not sit well with most politicians? Because its one of the single largest shifts of power ever presented. It takes the almighty power of the Fed, and its ability to create dependency away, and it puts the power squarely into the hands of the people. If they dont like where money is going, how its being spent, they vote with their dollars. If they want to know how much they are paying, they look at a receipt, not tax law degree necessary. That gives it ground in my book. What really drives me crazy is the "its a great plan, but it'll never happen" crowd.

Ya it would be great to be independent from Great Britain, but it'll never happen....

[Encryptshun]

My point is that economists frequently don't agree with one another. So it's likely that you can subscribe to an economic theory that is touted by one economist or one school of economics but decried by another.

What irritates me is when I hear someone say "Economists say [x]", when I just got done hearing economists say the opposite. That's throwing stones in a glass house.

[stebo0728]

I agree, and their you've hit on it, and seems you ninja edited it out, but the phrase "our economists" when it should just be "economists". Whose economists are "our economists", as in who's inside out pocket are they holding on to? We've gotten into the reports/results/statistics buying business, and its nothing but shady dealings all the way around. When you have economists attached to politicians, who themselves are attached to lobbyists, who themselves are attached to special interests, results are every man for himself.

What I like about the FairTax, is that it wasn't "someone's economists" that came up with it. It was an independent study, that had complete freedom to come up with the best plan, and this is the plan that came out of it. In fact, the idea of a national retail sales tax was the backbone, and the panel came up with the name "FairTax" all on their own, as they realized just how fair the plan was to the most amount of people.

[Encryptshun]

Yeah, sorry about the ninja edit. Originally I was going to say "Our economists are right and your economists are wrong" but then I realized that by the time it's reported, the pundits don't usually admit to their being any diversity of economic thought -- their misdirection is based on omission.

My point is that it's ALL academic. The only way to debunk academia is either by poking holes in the methodology or by putting the theory into practice and letting it work or fail on its own.

Why else do you think that there is still not universal academic concensus on things like man-made global warming, evolution, the nature of the universe, how to manage the Fed, how to best educate our children, etc. etc.?

[stebo0728]

Why else do you think that there is still not universal academic concensus on things like man-made global warming, evolution, the nature of the universe, how to manage the Fed, how to best educate our children, etc. etc.?

One resounding answer to that, if you ask me that is. Partisanship. People beholden to a group mentality rather than beholden to their own convictions and beliefs. It might sound like the lack of such would lead to even more anarchy and confusion of ideas, but what you get is a square cubical made of brick that contains only a select few ideas, mostly idea that are beholden to one special interest or the other, and therefore all the other ideas, some great some lousy, are completely ignored by all but the fringe group brave enough to peep their heads over the wall. But they have no way to relate what they've seen to rest of the masses trapped within the walls.

On the FairTax, if it passes us by, it will truly be "the one that got away". Other nations are already whispering (small ones mind you) about implementing very similar plans. Oh and please dont confuse the FairTax with its murderous criminal cousin, the VAT tax. World of difference.

[/toke]

[IBCoupe]

I'm in favor of increasing the income tax on the wealthy, simplifying the corporate tax structure, possibly lowering the capital gains rate for a spell, and coming up with some tax incentives for venture capital.

I should clarify: this isn't an attempt to close any budget gap. I'm not looking at the deficit; I'm looking at manipulating incentives to pull forward some economic movement from the future.

And I think taxing "sales" is the wrong way to do it. There are folks who can avoid buying things, and there are folks who can't, prebate aside. Either your prebate is big enough to negate the entire plan, or your prebate is too small to avoid hurting people who can't afford it. That, and I retain a strong distrust for people who wave around catchy names as solutions to real problems. But let's examine the idea of a prebate, and see how it hits people "fairly." I know I've taken the time to walk through marginal rates before, and how they work, but let's walk through the FairTax.

I'm lazy. I don't like to work when I don't have to, and so I take a job that lets me coast. It's kinda nice, but I don't make much: a meager $35,000 this year. The FairTax sends me $2,000 in a prebate, and that gets me up to $37,000. So I've got a car and a house that I have to pay for, and we'll say that my annual expenses come to $24,000, or $2,000/month (Thanks, FairTax, for March!). I live pretty meagerly, you know; as meagerly as I can come up with. That $24,000 then jumps to $31,200 (because of the 30% sales tax imposed by the FairTax), leaving me with $3,800 to save for next year, or 10.8% of my annual income.

Stebo's a pretty successful venture-capitalist. He rakes in a healthy $350,000 this year, and the FairTax sends him $2,000 as a prebate. Stebo lives modestly, however, because he's a saver - turns out, this is as cheaply as he and I can both figure how to live! So he incurs the same costs as me. His monthly expenses are $2,000 (Thanks, FairTax, for September!), and he ends up spending $24,000 for the year ($31,200 after FairTax). That leaves Stebo with $320,800, or 91.6% of his income.

Now, if we acknowledge that both I and Stebo have in our possession $24,000 worth of stuff, it looks a bit better, but still pretty stacked: I keep $79% of my income, and Stebo keeps 98.5% of his income. Welp, have fun planning for retirement!

But let's compare that to the income tax we have now. We'll pretend that Stebo is going to take the standard deduction, because he just loves paying for his government, and because he wants to make the hypothetical easier to figure out (and make it look like he's going to pay more taxes than he otherwise would). Also, we're gonna pretend that we're both filing unmarried single.

My income is $35,000. My taxable income is $29,200. I pay $5,303. I'm left with 84.8% of my income.
Stebo's income is $350,000. His taxable income is $344,200. He pays $117,075.20. He's left with 66.5% of his income.

The current system would be harder on Stebo at the federal level, for sure, but, if we use imputed income, the difference is about the same as FairTax, only inverted. And when you start to include state taxes, the regressive nature becomes more apparent. Without the dreaded imputed income, the FairTax is oppressively regressive.

Except that if he's actually a venture capitalist, he's probably mostly getting capital gains, which means that he's actually left with 85% of his income, but that wasn't part of the calculation. This is a serious question: what does the FairTax plan to do with capital gains? From what I can tell, it eliminates it. So it's really a worse deal for everybody.

tl;dr:
The problem with the FairTax is the problem with any tax that purports to take away equally: it never leaves behind equally. And that's what's ultimately unfair.

[AZhitman]

People making $350K a year don't have $2K monthly living expenses. C'mon.

[IBCoupe]

But they could, is my point. Their biological needs are the same.

[IBCoupe]

It's the difference, Greg, between:

"If I really pinch my pennies, this month, I can save 11% of what I made."

and

"If I really pinch my pennies this month, I can save 98% of what I made."

You want a FairTax? Have a tax that recognizes that. I think the current system does.

[Encryptshun]

Plus, as stated by stebo, the Fair Tax encourages people to buy things used. Our entire non-consumable manufacturing economy is built on the notion of planned obsolesence. You start encouraging people to buy used, new item sales drop. New item sales drop, manufacturing cuts production, which cuts jobs, which drops GDP while raising unemployment. High unemployment means people don't buy what they don't need, so they live off their prebate, effectively making an impovrished welfare state, right?

[IBCoupe]

One we couldn't afford, because revenues would be through the floor.

I'm not sure if that follows, but I'll spend some time pondering it.

[smockers83]

I think that would all but wreck the economy, it would help one of the already struggling segments, used homes. We already have too many used homes on the market that need to move, this would encourage that.

Huh? Very, very few real estate transactions are ever taxed, so no help would be generated from this sort of tax incentive.

The tax incentive in housing is mortgage interest, which may, among other things, resulted in over-investment in housing, leading us to the housing market we've been in for years now.

[smockers83]

The argument that a national sales tax will discourage spending is something people will poke at along with high income vs. low income.

A national sales tax would not discourage spending. If I've quickly read the previous posts correctly, the proposal is to replace the income tax with a national sales tax. To use a recent Warren Buffett analogy, when was the last time you or anyone you know said, "I'm not going to buy that because of the sales tax!" Let's be real here. So the notion that it will change spending habits would be false only if such a tax didn't dramatically change the tax outlay of the individual compared to the income tax. Whether you tax the individual on income or on a transaction, if you take relatively the same amount away in aggregate, the individual doesn't notice the difference.

Also, in regards to the high income vs. low income debate. People don't operate that way. What people spend is ultimately a function of their expected income. Also, an individual with a low income is going to be spending a higher percentage of their income on essentials, such as food. Transactions on food aren't currently taxed. They aren't going to be spending a whole lot on consumer goods whereas the higher income individual will spend a greater amount on consumer goods, in which those transactions are taxable.

One major advantage of a national sales tax is that it is a much more efficient tax system as opposed to an income tax.

[IBCoupe]

Also, in regards to the high income vs. low income debate. People don't operate that way. What people spend is ultimately a function of their expected income.

But it doesn't represent fairness, which is the point. Eliminating what spending is a choice from that which is necessary, the rich have an opportunity to avoid more tax than the poor.

Transactions on food aren't currently taxed.

that's not always true. In most states it's the case, but in a number of states (I want to say it was something around 15-20) tax food and provide a credit to the poor, and two states (Texas and... Alabama, I think) tax food with no such credit. How does the FairTax work?

One major advantage of a national sales tax is that it is a much more efficient tax system as opposed to an income tax.

It's just not. A centralized tax agency that everybody knows, once a year, versus billions of transactions every day. Which do you think is the more efficient method of taxation?

[stebo0728]

IB, we just have differing views of fairness. My view of government does not include its concern for what it leaves. My view is only concerned for what it takes. In an environment of personal freedom and private property rights, mine is the only view that makes sense to me. To "leave behind" fairly necessitates infringement upon the very rights we represent.

Smockers, I'm with you, the FairTax would not discourage sales. One thing most folks dont realize, is that there is already a tax component in the products you buy, of about 22% giver or take. That component goes away from the cost base when the FairTax takes over. Now theres much debate about whether and how long that reduction of cost base will trickle into pricing structure, but my wager is that it will happen within a year, and mostly likely within a couple months. As soon as one corporation sees an advantage by lowering their prices, a flurry of competitive action ensue, and suddenly prices are about 22% lower, offsetting the 23% FairTax, which means your actual FairTax hit is only about 1%. Thats why I asked previously, if prices stay relatively where they are currently at, would sales really go down?

Other advantages include but not limited to: anyone illegally residing here will pay tax on every sale, but receive NO prebate. All "under the table" income will be taxed when the person paid shops. Taxes paid are CLEAR and CONCISE, printed right there on your sales slip. Offshore wealth suddenly has a reason to be back in play in our economy, and will influx back in.

As long as we continue to employ social engineering (right or left wing) then we're going to get nowhere. This nation yet to learn some valuable lessons on human nature, and how to better work WITH it, because there is NO changing it.

[stebo0728]

the rich have an opportunity to avoid more tax than the poor.

Exactly what part of the prebate are you not comprehending? The poor avoid 100% of their tax burden. 100%!!

ONLY those wealthy enough to spend more than the poverty level will even have a net tax burden.

[IBCoupe]

My view of government does not include its concern for what it leaves.

Your view of government does not consider the effects of its policies, and thus, with invariably accomplish nothing it intends to, and cause much of what it doesn't.

Exactly what part of the prebate are you not comprehending? The poor avoid 100% of their tax burden. 100%!!

ONLY those wealthy enough to spend more than the poverty level will even have a net tax burden.

That doesn't seem to be the case. Care to critique my walk-through, or do you want to provide a different one?

[stebo0728]

Ok made it through the TL;DR

There are some flaws in your scenario. You included your automobile and home into your expenses, no in fact you included your actual expenses, which is a mistake. Ok first lets take the home and auto back out, you dont pay federal taxes on those anyway, maybe ad valorem locally, but you cant count that. Ok so lets say 300 for the car and 650 home or rent. Thats 950 out of the 2k which leaves 1050. Ok so now everything else we'll assume taxable expenses. So now comes the 23% tax on the 1050 you will be spending on living expenses, groceries, grooming, entertainment, etc. First of all, under the FairTax you still only spent 1050, because the tax is inclusive, not exclusive, so you tax component of the 1050 was 241.50. Times 12 means you paid 2898 that year total in FairTax. Thank you FairTax for the 2000 prebate that means you only paid 898 in taxes. Seems you are still living a bit above the poverty level young man. So, 898 total FairTax, which is what is now funding the federal government, means out of 35000 you only spent 898 of your own money (dont count the prebate as income, it was to wash off your tax liability, and went right back out the door) which means you get to keep roughly 97.5% of your income, other expenditures notwithstanding, like retirment, healthcare, state and local taxes, and etc.

So same figures for me (btw thanks for the modest income, I shall use it wisely ) so my FairTax component is still only 898, same as you. Thats 99.5% of my income. I got news for you though. If I make 350k a year, I'm not living on 2k a month. Sure get wealth envy if you like and b*tch about my 99.5%, but dont piss on the 97.5% you got to keep.

On to capital gains. Yes they go away. Yes the FairTax will adequately replace them. I must admit however, that I'm currently not as well spoken on that aspect of the plan, and why it will work. That shall be my next assignment on the issue, and perhaps I can enlighten you then.

I dont want to say that you intentionally misrepresented things, and so I wont. Only that I had to correct some of the details of your scenario. One of the things that irritates me to no end with FairTax neigh sayers, is that they love to misrepresent the facts. One good example, and again I'm not advocating that you intentionally did this, but

(because of the 30% sales tax imposed by the FairTax)

What you've done here is to consider the FairTax to be exclusive, but still enjoyed the benefit of considering the Income tax inclusive. It doesnt work that way. Lets keep it apples to apples. Ill explain. Lets take a 100 VCR (who buys those anymore right?) Ok so

1) Inclusive tax - means that the tax component is included in the price on the shelf. $100, tax is $23. Last time I checked 23 was 23% of 100 right?

2) Exclusive tax - the way sales tax currently works and the way opponents like to view the FairTax, comes in after the price on the shelf. So figuring above, the toaster cost is $77, then $23 on top of that for taxes. Now is where things get ugly because $23 is 30% of $77.

Why does this difference matter you ask? Lets consider how we calculated our income tax before. Using your example only (dont need both).

1) Inclusive tax - this is how you like to view the income tax, so you made $35k for the year, and your tax was $5303. Thats roughly 15% of your total income.

2) Exclusive tax - means you would pay the tax externally after your income. Well you cant pay more than you made, so for calculation we'll reduce your annual gross by the tax amount and call that figure your actual income. So 35k take away 5303 leaves 29697. So now 5303 is a whopping 17.5%.

Now, I realize looking at Income tax exlusively is sortof mind twisting, and not really how we'd want to look at it. But for honest arguments sake, lets also commit to considering the FairTax, or any other plan, on the same grounds as the income tax. Either look at both inclusively, or exclusively, your choice, but lets keep it real. And just so you know, the FairTax is proposed as an inclusive tax anyway. Makes things much easier for the general public. The goal then would also be to get any state sales taxes to also switch to an inclusive method, thereby making purchasing alot easier, as there would be no more "ok so how much will that be with tax...." discussions at the checkout.


EDIT - Yes I excluded both of our actual living expenses. First of all, the prebate is not designed to pay your expenses, only to preimburse you for the tax component of those expenses. You cant figure expenses in these scenarios, they are out of the control of the government, they are extremely volatile details that could change at anytime. Additionally, you've gotten comfortable allowing your living expenses to be an additional 80% of your income. Thats not fiscally healthy, improve yourself son. But thats not the government's bag to carry.

[IBCoupe]

The actual numbers dont matter. It's the principle. If you increase or decrease the prebate or any of the estimations, the percentages will change, but not the trend. The same thing is true for an inclusive or exclusive tax. If you like, you can switch around the numbers so that the bigger number is first.

You're banking way too hard on the inclusive exclusive angle. You're not changing anything except the value of the thing. Either it's worth $100 or it's worth less. It doesn't matter for the sake of comparative analysis.

Similarly, it doesn't matter whether the tax is a higher or lower percentage. It shifts the same way, and doesn't eliminate the disparity.

[AZhitman]

Additionally, you've gotten comfortable allowing your living expenses to be an additional 80% of your income. Thats not fiscally healthy, improve yourself son. But thats not the government's bag to carry.

[Encryptshun]

Hmm, that generalization definitely depends on where you live and how much money you make.

Cost of living has far outstripped wage rates in recent years in urban areas (where the jobs were when I entered the market). I'd say I was in my 30s before I was able to live off 50% of my paycheck. Prior to that it was around 80% and when I first started out it was probably 99%. When you're making $12.50/hour with car insurance, student loan, rent, gas, utilities (I didn't have cable, internet, or a cell phone), and food it's pretty difficult to set anything aside. If I saved 5 bucks, it was because I went hungry.

My take-home pay after taxes and insurance was about $1100 a month in my first job after grad school, living in Chicago. My monthly expenses were:
$425 for rent (had a roommate)
$30 for utilities (monthly average)
$35 car insurance
$300 for fuel
$165 student loan
$115 for food

That's $1070.