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#1 2006-06-24 19:38:36

tenetnosce
Another You
From: The Singularity
Registered: 2005-09-23

Fair Tax Act

Lyra pointed out in another thread that this has gained very little attention in the media.  The "Fair Tax Act" not only repeals the income tax, but also payroll, estate, and gift taxes.  It replaces them with a sales tax (starting at 23%) which is levied against goods and services purchased for personal use.  Business uses of goods and services, as well as "intangible" assets, such as copyrights and securities, are exempt from levy.

I wanted to create a thread to discuss the possible implications of this passing Congress, as the other thread is more about the fact that it's not getting media attention, which is an interesting subject in itself.

OK on to the penny tossing. .

The most common argument against abolishing the income tax and replacing it with a general sales tax (usually in the ballpark of 25%) is that it will benefit the wealthy at the expense of the poor.  Considering that a "poor" person pays about 15% of their income in tax, it would seem like this would take more money out of their pockets.

The issue is debatable, but unfortunately very few people actually sit down and consider what the impact of abolishing the income tax would have on them personally.  Usually arguments are focused on how it will impact certain "groups", the definitions of which are sometimes quite questionable.

The broader philosophical issue, is whether tax should be assessed when one earns money or one spends money.  Taxes are levied against people and corporations as a recompense for damages occured by the State.  If you actually investigate the legal terms used to come up with the idea of a tax, it turns out to be quite different than what is commonly taught about taxation- that is is simply a means of the government to raise money.

So let's say you go to the store and you purchase a product.  The price is what you are paying for the product itself.  The tax is what you are paying to reimburse the State for damages incurred to bring that product to you.  The cost of regulating industry and transportation.  The cost of transportation itself, as evidenced by environmental damage, and wear and tear on roads.  The cost of legal fees and research fees related to the product.  And so on.

But now let's say that you go to work, and you earn money for your time.  Who is the one "damaged" here?   You are.  You are the one who is investing your time and your labor, which could be invested somewhere else.  Why should you pay the State for working?  Working is not a privilege.  The State should be encouraging people to work not penalizing them. 

When I was in high school, I dated a girl whose father had died, and whose mother was collecting social security benefits.  She actually wanted to work, but the problem was if she got a job she would lose her benefits, and there was no way she could make anywhere near the same amount of money working, especially after income taxes were taken out.

Then there's the whole deal with the IRS, the Fed, and the IMF which I think has stunk up the place long enough, so even if we maintained an income tax, I think I would still get behind abolishing the IRS and putting a new system of collection in place. 

The key is to make sure we are not replacing the current system with something worse.

Another interesting idea, which is very rarely talked about, is to abolish all federal taxes completely, pass laws requiring the federal gov't to operate within a balanced budget, and then simply print the money necessary to cover its expenses.


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#2 2006-06-24 19:39:30

tenetnosce
Another You
From: The Singularity
Registered: 2005-09-23

Re: Fair Tax Act

One interesting facet of the Act is called the “Business Use Conversion Credit".  Since business use of goods and services are not taxable, a person who paid a tax upon purchase for a personal use, but later converts the product or service for a business use, gets a refund of the money they paid.

The amount they get refunded is the lesser of:

1.  The amount of tax paid.

2.  The formula RV / 1-R where “R"  is the tax rate and “V"  is the fair market value of the goods or services.

So let's say you purchase a rapidly depreciating asset, like a laptop computer, for $2000.  At a 23% tax rate you pay $460 in taxes.  Later that year you convert the computer to business use, but by then it is only worth $1500.  You would only get $448 in return.  If the value drops to $1000 at the time of conversion, you get $299 back.

Since the tax rate is also variable, this can affect the amount of the refund as well.  Let's say that at the time of conversion the value of the computer is $1000, but the tax rate has raised to 25%.  The amount of the credit is $333.  If the rate drops to 21%, the credit is $266.

The process also works in reverse.  If you purchase the computer for business use, but later convert it to personal use, the tax becomes due at the time of conversion at the fair market value.

Last edited by tenetnosce (2006-06-24 19:40:05)


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#3 2006-06-24 20:11:57

lyra
Naked Emperor Pointer Outer
From: my own private idaho
Registered: 2004-03-25
Website

Re: Fair Tax Act

tenetnosce wrote:

Lyra pointed out in another thread that this has gained very little attention in the media. 
I wanted to create a thread to discuss the possible implications of this passing Congress, as the other thread is more about the fact that it's not getting media attention, which is an interesting subject in itself.

Actually that thread was supposed to be about any and all things pertaining to the Fair Tax Act.  My very first post asked if anybody out there has heard anything about this, and if so, what do they know?  Is it good?  Is it bad?   Here's the website, what do you think?  etc. etc. ETC..  The goal of the thread wasn't supposed to be "Let's discuss how this hasn't had media attention."  That's stupid!  There would be nothing to talk about if that was the case.   Just because I mentioned the lack of media attention in a second - follow up - post, doesn't mean that's where I wanted the sole focus to go! So, major misunderstanding going on in that regard. 

What you're posting here is exactly what I was looking for over there.   Since there's now this thread, may as well just delete mine, since it doesn't make sense to have both.

Last edited by lyra (2006-06-24 20:23:54)


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#4 2006-06-24 21:31:29

tenetnosce
Another You
From: The Singularity
Registered: 2005-09-23

Re: Fair Tax Act

lyra wrote:

Actually that thread was supposed to be about any and all things pertaining to the Fair Tax Act.  My very first post asked if anybody out there has heard anything about this, and if so, what do they know?  Is it good?  Is it bad?   Here's the website, what do you think?  etc. etc. ETC..  The goal of the thread wasn't supposed to be "Let's discuss how this hasn't had media attention."  That's stupid!  There would be nothing to talk about if that was the case.   Just because I mentioned the lack of media attention in a second - follow up - post, doesn't mean that's where I wanted the sole focus to go! So, major misunderstanding going on in that regard. 

What you're posting here is exactly what I was looking for over there.   Since there's now this thread, may as well just delete mine, since it doesn't make sense to have both.

My apologies for the misunderstanding.


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#5 2006-06-25 04:11:18

Risen
The Anti-Ism
Registered: 2005-10-01

Re: Fair Tax Act

You know, I don't really support any sort of tax like this.  Its ridiculous.

HOWEVER.

It just occurred to me that person such as myself *might* actually be able to save a lot of money like this.  It seems the key here  is just dont BUY anything.  Which, I don't purchase a lot at all really.

Meh.. well I'm still not for it any more than I'm for "income taxes".


This is no time for the righteous
Only the wicked survive
Bake up a batch of the Yellow Cake
Bake up a batch of the lies
- - - - -[ Yellow Cake - Ministry - Rio Grande Blood (2006)

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#6 2006-06-25 05:06:53

tenetnosce
Another You
From: The Singularity
Registered: 2005-09-23

Re: Fair Tax Act

Risen wrote:

It just occurred to me that person such as myself *might* actually be able to save a lot of money like this.  It seems the key here  is just dont BUY anything.  Which, I don't purchase a lot at all really.

Exactly. . . especially saving that 20% or so you are paying for taxes on the front end. . you could put that money toward investments, or even stuff it in your pillowcase.  Since you weren't going to spend it anyway, seems like a good way to start a little nest egg.

Risen wrote:

Meh.. well I'm still not for it any more than I'm for "income taxes".

As usual with politics, the choice seems to be between the lesser of two evils. . .


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#7 2006-06-25 05:58:46

tenetnosce
Another You
From: The Singularity
Registered: 2005-09-23

Re: Fair Tax Act

Another piece is the concept of a "taxable employer" which is defined as either a household employing domestic servants, or the government, excepting certain "governmental enterprises."  Wages and salaries paid by a "taxable employer" are subject to tax.

So I guess that means that if you are working for the government, you would still be paying an income tax.  The federal government currently employs about 3 million people, or about 1% of the population. 

I don't know how many people are currently employed in the U.S. as domestic servants.


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#8 2006-06-25 13:09:00

whywhywhy
????????
From: LA
Registered: 2005-09-18

Re: Fair Tax Act

It is not only the "flexibility" of choosing when, where and how much we pay but the fact that the Government will save billions of dollars by rendering the IRS, A.K.A. The Gestapo, useless.  Unfortunately, lobyist groups comprised of the following groups will put up a fight in Congress to keep the bill from being enacted:

1. CPA Associations
2. Tax attorneys
3. The H&R Blocks of the business

Even elements in our Government will resist the bill because they use the IRS as a leverage against criminals and certain "undesirable" individuals in our society. 

I personally like the act and would love to see it pass so we can get rid of the existing convoluted system.

Regards,

Lee

P.S.
Tenet,

Have you read the book "Cracking the Code"?  It is very interesting althought I have not consider implementing  the guy suggestions.  I have had my run ins with the IRS and frankly I am wore out.  Nevertheless, the book is a good read.

http://www.losthorizons.com/Cracking_the_Code.htm

Last edited by whywhywhy (2006-06-25 13:15:05)

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#9 2006-06-25 20:08:42

Risen
The Anti-Ism
Registered: 2005-10-01

Re: Fair Tax Act

Well, beyond my usual objection to taxes, here is what is sticking out in my head:

I'm not sure a sales tax fixes things any more than an income tax.  Heres why... Tenet mentioned above that "The State should be encouraging people to work not penalizing them.".  Well, is the same not also true for purchases?  I mean, purchasing is truly what keeps the economy alive in the first place.  Without it, circulation of currency freezes up and our economy becomes a stiff corpse.


This is no time for the righteous
Only the wicked survive
Bake up a batch of the Yellow Cake
Bake up a batch of the lies
- - - - -[ Yellow Cake - Ministry - Rio Grande Blood (2006)

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#10 2006-06-25 23:18:05

tenetnosce
Another You
From: The Singularity
Registered: 2005-09-23

Re: Fair Tax Act

whywhywhy wrote:

Have you read the book "Cracking the Code"?  It is very interesting althought I have not consider implementing  the guy suggestions.  I have had my run ins with the IRS and frankly I am wore out.  Nevertheless, the book is a good read.

I haven't read that particular book, however I have read (what I assume to be) similar works.

I've done pretty hefty investigation into these matters, and there seems to be a lot to it.  Unfortunately, people involved with it tend to end up in federal prisons, which tells me there's still a lot of guesswork involved.  Personally, I'd rather not take on the IRS in court.

I do know of a person who is currently awaiting sentencing on a case where he was originally brought up on charges relating to illegal trust activity.  Near the end of the case, the prosecution tacked on six "willful failure to file" charges.  All of the charges except for two of the willful failure were eventually thrown out.

The courts have been delaying sentencing for over a year now because this individual has apparently found a way to bond his own case. . . which essentially means that he owns it.  What this means is that if he has bonded the case for, say $15 million, and the courts find damages of $8 million, the State has to cut him a check for the difference.

Quite a little quandry there. . .

Last edited by tenetnosce (2006-06-25 23:18:29)


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#11 2006-06-25 23:25:49

tenetnosce
Another You
From: The Singularity
Registered: 2005-09-23

Re: Fair Tax Act

Risen wrote:

I'm not sure a sales tax fixes things any more than an income tax.  Heres why... Tenet mentioned above that "The State should be encouraging people to work not penalizing them.".  Well, is the same not also true for purchases?  I mean, purchasing is truly what keeps the economy alive in the first place.  Without it, circulation of currency freezes up and our economy becomes a stiff corpse.

I agree there are problems with a national sales tax, and depending on how it's all structured, it may become oppressive.  What it does do is give individuals much more control over when they pay taxes, which in a lot of ways, is more important than how much one pays.

In a healthy system, I would argue that investing is what keeps the economy alive, with purchasing being a secondary contributor.

Unfortunately, the U.S. economy is currently being kept alive almost solely by borrowing, the majority of which has been against people's houses in recent years.

If you adjust for the amount of "growth" that has resulted from people borrowing against their houses (Mortgage Equity Withdrawal, or MEW), the GDP actually turned negative in 2001 and 2002, and in 2005 was less than .5%.

http://bigpicture.typepad.com/comments/images/gdp_w_and_wo_mew_2.jpg

Last edited by tenetnosce (2006-06-25 23:29:11)


It is not for us to understand love, but simply to make space for it.

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#12 2006-06-26 05:04:18

tenetnosce
Another You
From: The Singularity
Registered: 2005-09-23

Re: Fair Tax Act

So let's bring the whole alternate timelines into this subject for a moment.

Suppose I decide that I like the "Fair Tax Act" and that it would benefit me personally.

A timeline dynamics perspective would say that future timelines exist where this Act passes Congress and others where it doesn't.  So that would suggest all one would need to do is consciously choose which timeline they want and viola!

Or is it more complicated than that?


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