Aradorn's "fair tax" being adopted by Huckabee

[Diraker]

http://www.reuters.com/article/bondsNews/idUSN0636604820080106

snipped quote

Much of the focus has been on the social conservatism of Huckabee, an ordained Baptist preacher who has connected solidly with his party's influential evangelical base.

But some of his supporters have been attracted by his populist tax plan, which calls for an end to all income and payroll taxes. It is the key plank of his economic platform.

"Putting the IRS out of business" has been a common refrain in his speeches in both Iowa and New Hampshire and it always draws some of the most enthusiastic applause.

Huckabee says taxing income is a tax on productivity that stifles economic growth and hits the middle class and small businesses the hardest.

"The FairTax will replace the Internal Revenue Code with a consumption tax ... All of us will get a monthly rebate that will reimburse us for taxes on purchases up to the poverty line ... That means people below the poverty line won't be taxed at all," says his Web site.

[Konrad]

That's why I supported him when he was a delcared nobody, despite his strong religious views. Getting the government out of our paychecks is worth having a President who doesn't believe in evolution.

[Gnioss]

This seems to me to be a losing idea. Close the IRS but start another agency devoted to getting a check every single month to every single taxpaying citizen of the US? Do we really want another layer of bureaucracy in our lives?

[Diraker]

Me, I'd rather the government stay out of people's bed rooms and uteruses. And of course I think government should stay out of religion entirely.

Anyway the article is not that favorable and it talks about how most people would end up paying higher taxes. I don't really have issues with taxes because I benefit a lot from the government. Sure I think there is waste and corruption but I think we could clean up a bit rather than just ya know throwing it all away and starting totally new with something else.

[Konrad]

I agree about keeping the government out of people's bedrooms, bodies, churches and pretty much everything else (I disagree on the abortion issue but lets not get sidetracked). However, I firmly believe that to get the government out of other areas of our lives, we must first shrink and starve it; not feed it like we do now. My favorite response to people saying they want to see the money out of politics is, "First you have to get government out of money".

The Fair Tax is not a perfect system. However I would say that there is no perfect tax, because nobody really wants to pay a tax. The one thing that the Fair Tax does that is needed and is revolutionary is that it eliminates the ability for government (elected reps, bureaucrats, etc) to artificially assist or punish individual citizens or corporations of citizens simply by manipulating an unfair and incomprehensible tax system. It also closes the loopholes for those "super rich" who are able to manipulate the tax system to shelter their own assets (ever notice how those like Warren Buffet and the Hollywood elite who are wanting to raise taxes actually pay less in taxes than small business owners). It takes an opaque tax system and makes it transparent.

The Fair Tax also changes an extremely important taxation concept, and that is the taxation of productivity, which is completely asinine. Huckabee states this in the article and I believe that it is very important that we change this culture of punishing people for being productive and adding value to our market. This is not only important economically but philosophically and morally as well.

So while the Fair Tax has it's issues (I would say much less than our current system) and while it doesn't solve the problem of the government's size and scope, it is a great first step down the road of economic freedom, prosperity, and is also the path to securing social and personal liberties.

[Gnioss]

What's to say that the "fair tax" system will be any less exploitable? If you pay a huge sales tax but no income tax then instead of dodging income tax the very rich will make use of black markets to bypass the tax structure for expensive purchases, while the middle class will accept the majority of the tax burden

[Konrad]

There will probably be ways around it, just as there are now. Like I stated I believe that it is a step in the right direction. However I think the concerns about the system pale in comparison to the ones we currently face with our current "progressive" tax system.

[Diraker]

I favor a progressive tax structure because folk who make more money benefit more from what government offers people. From roads to general safety and stability. Basically if there was anarchy people would have a hard time doing business. With that said I still think there is plenty to improve on.

[Aradorn]

Anyway the article is not that favorable and it talks about how most people would end up paying higher taxes.

read Neal Boortz's book and it will change your mind on the Fair tax... Ron Paul iirc is also in favor of the fair tax plan

[Aradorn]

This seems to me to be a losing idea. Close the IRS but start another agency devoted to getting a check every single month to every single taxpaying citizen of the US? Do we really want another layer of bureaucracy in our lives?

the IRS is freaking huge, the system that would be devoted to cutting rebate checks would be way way way smaller and mostly done by computers.

What's to say that the "fair tax" system will be any less exploitable? If you pay a huge sales tax but no income tax then instead of dodging income tax the very rich will make use of black markets to bypass the tax structure for expensive purchases, while the middle class will accept the majority of the tax burden

gnioss they already exploit the system... most execs only get paid 1 dollar a year since they hold very hefty stock option packages. Which are only taxed at 15%. This is why warren buffet can claim he pays less in "taxes" than his secretary. However, when Mr. Newly Rich man buys a 250,000 dollar car he will pay ~57,000 dollars in taxes (Most people buy their cars here in america not in some foreign country). And while there maybe a black market setup for buying these items im sure it would be illegal and probably very rare. Most of the money would come from buying those gotta-haves (ipods, ps3s, etc...) that sell millions every year.

I would bring home an extra 400 dollars a paycheck that I could invest/save for retirement if I did not pay federal taxes.. =\

[Mutt]

lol do it. Canada and Mexico cant wait.

[Silver]

I would love a fair tax.

[Mutt]

I would bring home an extra 400 dollars a paycheck that I could invest/save for retirement if I did not pay federal taxes.. =\Yes, because every dollar you save on taxes will never be used on anything besides beneficial ends :icon_roll Not to mention your "tax savings" will be incurred by the cost increases of all your consumables.

[Konrad]

You damned foreigners would also have to pay taxes when you visit...though it could be argued that Anom paid quite enough on his last trip to the states.

[Aradorn]

Yes, because every dollar you save on taxes will never be used on anything besides beneficial ends Not to mention your "tax savings" will be incurred by the cost increases of all your consumables.

read the fair tax book it will show you the truth =)

[Gnioss]

the IRS is freaking huge, the system that would be devoted to cutting rebate checks would be way way way smaller and mostly done by computers.

The reason the IRS is so huge is simple, it's a massively inefficient but very important system of catching cheaters. All of the money saved by supposedly simplifying the tax code to this wondrous system of "OK YOU AGREE TO BUY EVERYTHING YOU BUY LEGITIMATELY AND GIVE US TAXES" will in fact be lost again enforcing the system.

History has proven time and time again when goods get more expensive, the use of black markets rise. Where there is greater black market involvement, there is more crime. Where there is more crime there is yet more enforcement required, necessitating even greater overhead, just out of another agency's budget.

The middle class will pay the tax out of loyalty, or fear, or whatever causes the middle class to pay taxes. The very rich will continue to be very rich by being good at managing money, in this case making major purchases under the table.



I would bring home an extra 400 dollars a paycheck that I could invest/save for retirement if I did not pay federal taxes.. =\

No you wouldn't. I promise every dime you spent now would still need to be paid, governments dont trend towards greater efficiency, they should add it into the second law of thermodynamics.

[Timestretch]

You damned foreigners would also have to pay taxes when you visit...though it could be argued that Anom paid quite enough on his last trip to the states.

I don't think that money got funneled to the Gov't. More like Organized Crime.

[Mutt]

You damned foreigners would also have to pay taxes when you visit...though it could be argued that Anom paid quite enough on his last trip to the states.Oh thats right, because making it more expensive wont push tourists to other locales, like you know mexico, the caribbean, south america, europre, etc, etc.

[Mutt]

I don't think that money got funneled to the Gov't. More like Organized Crime.more like breast augmentation

[Aradorn]

Ok taken from FairTax.org (Why dont you do the research yourself? =p)

"The FairTax will not be enforceable and evasion will be rampant"

The truth: More than 80% of all tax returns are eliminated under the FairTax--every individual filing. What remains are retail outlets collecting the FairTax. Of these, 80 percent of all retails sales now occur at large retail chains like Wal-Mart. The point is oversight will still reside under the Treasury Department but the government's responsibility will be over a far smaller "universe" of tax collection points making compliance oversight far less costly and far more effective than the current system which costs $265 billion a year in compliance costs and still comes up $350 billion a year short of what is owed.

heres some more info - http://www.fairtax.org/site/DocServer/TheFairTaxReducesComplexityComplianceCostsAndNonco mplian.pdf?docID=601

No you wouldn't. I promise every dime you spent now would still need to be paid, governments dont trend towards greater efficiency, they should add it into the second law of thermodynamics.

yes I would bring home ~400 dollars more a paycheck because it would eliminate FICA, Social Security and Federal withholding taxes which account for about 400 dollars a paycheck.

more...

How does the FairTax affect wages and prices?

Americans who produce goods and earn wages must pay significant tax and compliance costs under the current federal income tax. These taxes and costs both reduce after-tax wages and profits and are then passed on to the consumers of those goods and services in the form of price increases. When the FairTax removes income, capital gains, payroll, and estate and gift taxes, the pre-FairTax prices of these goods and services will fall. The removal of these hidden taxes may also allow wages to rise. Exactly how much prices will fall and wages will rise depends on market forces. For example, in a profession with many jobs and too few to fill them, wages will likely increase more than in fields where there are too many employees and not enough jobs.


look just read the FAQ on the site

http://www.fairtax.org/site/PageServer?pagename=about_faq

[Aradorn]

# How is the tax collected?

Retail businesses collect the tax from the consumer, just as state sales tax systems already do in 45 states; the FairTax is simply an additional line on the current sales tax reporting form. Retailers simply collect the tax and send it to the state taxing authority. All businesses serving as collection agents receive a fee for collection, and the states also receive a collection fee. The tax revenues from the states are then sent to the U.S. Treasury.


# Why is the FairTax better than our current system?

Our present tax system is one of the reasons that people are finding it so difficult to get ahead these days. It is one of the reasons the next generation may not have a standard of living as high as this generation. Cars replaced the horse and buggy, the telephone replaced the telegraph, and the FairTax replaces the income tax. The income tax is holding us back and making it more difficult than it needs to be to improve our families’ standard of living. It makes it needlessly difficult for our businesses to compete in international markets. It wastes vast resources on complying with needless paperwork. We can do better and we must.


obviously people who do not like the fair tax are worried about all their precious entitlement programs that i help foot the bill for. Dont worry the 23% consumption tax will keep them in place =)...

Is the FairTax fair?

Yes, the FairTax is fair, and in fact, much fairer than the income tax. Wealthy people spend more money than other individuals. They buy expensive cars, big houses, and yachts. They buy filet mignon instead of hamburger, fine wine instead of beer, designer dresses, and expensive jewelry. The FairTax taxes them on these purchases. If, however, they use their money to build job-creating factories, finance research and development to create new products, or fund charitable activities (all of which help improve the standard of living of others), then those activities are not taxed.

here are some figures for you...

Is it fair for rich people to get the exact same FairTax prebate from the federal government as the poorest person in America?

Let’s look at a billionaire under the FairTax -- if he spends $10,000,000 dollars he pays a tax of $2,300,000 and gets a prebate of $4,697 (assuming he is married and has no children). His effective tax rate as a percent of spending is 22.95 percent.

Now, let’s look at a middle-income married couple with no children under the FairTax -- if they spend $50,000, they pay $6,803 net of their prebate for an effective tax rate of 13.6 percent. The effective tax rate increases as spending increases, but never exceeds 23 percent!

Figure 4: Comparison of effective tax rates: FairTax, income tax

FairTax Current tax
Expenditures = income $50,000 $50,000
Net tax $6,803 $7,918
Effective tax rate 13.6% 15.8%

In contrast, if this same couple earns $50,000 in wages today under the current tax system, they pay $4,093 in income taxes and $3,825 in payroll taxes for a total of $7,918 in taxes (15.8 percent) -- a tax burden 14.1 percent higher than under the FairTax. In addition, their employer pays another $3,825 in payroll taxes. Most economists agree that the employer payroll tax is actually borne by employees in the form of lower wages. Looked at this way, this couple is paying $11,743 (23.5 percent) in taxes today, which doesn’t even include the hidden taxes they pay every time they make a purchase.

Finally, let’s look at a low-income couple that spends at the poverty level under the FairTax -- they pay no net FairTax at all. Today, under the income tax system, they not only pay 15 percent in payroll taxes, but they also pay hidden taxes -- arising from corporate taxes, private sector compliance costs, and payroll taxes passed on to consumers and embedded in the price of everything they buy.

[Diraker]

Yeah but surely you don't want to get all your information from a single (biased) source.

Anyway here's articles from Money Magazine. It's soft but it does bring up a few interesting points.

http://money.cnn.com/2005/09/06/pf/taxes/consumptiontax_0510/

http://money.cnn.com/2008/01/05/pf/taxes/fair_tax.moneymag/index.htm?postversion=2008010709

(there's links to other articles about in in Money magazine too)

And an op-ed about it. The writer was a Bush (Sr.) treasury secretary guy.

http://www.boston.com/bostonglobe/editorial_opinion/oped/articles/2008/01/05/whats_foul_about_the_fairtax/

[Soushia]

Flat Tax 4tw!

[Aradorn]

there are some "problems" with the system. but honestly you cannot sit there and tell me the current system is better than the fair or flat tax?

[Diraker]

I have little opinion but I think it's important to be aware of what both advocates and opponents are saying. And like I said before, I favor a progressive tax structure because folk who make a lot of money do so because of the protections and services provided by the government. That they pay higher taxes is IMO already fair; they benefit the most. For example my wife is a lawyer so we are not scrounging for pennies and I don't mind that we pay more in taxes than say the family living in a apartment in someone's basement. My wife's company benefits from the stability that the government provides. Without the government there'd be no courts, no roads, no laws, etc and she couldn't be a lawyer and conduct business.

I also find it hard to get past the right wing rhetoric and grandiose claims made by the "fair tax" crowd. For all the times right wingers claim that liberals are idealistic it seems like the "fair tax parishioners" (to use a self applied label from one of the articles I linked) are being rather idealistic themselves.

[Soushia]

If nothing else...a flat tax with a greatly reduced tax code would make the taxation system easier to navigate while giving the illusion that everyone is truly equal.

After all, government isn't about efficiency and productivity....merely the illusion of them.




OH CANADA......

[Konrad]

Whether it is a flat tax or a fair tax, wealthier people pay more simply because they make and spend more money. The fact that today there are people who aren't wealthy that pay near 50% of their income on taxes, and are taxed on the same income multiple times through income taxes, dividend taxes, sales taxes, gift taxes, estate taxes, etc is simply ridiculous.

[Konrad]

And like I said before, I favor a progressive tax structure because folk who make a lot of money do so because of the protections and services provided by the government. That they pay higher taxes is IMO already fair; they benefit the most. For example my wife is a lawyer so we are not scrounging for pennies and I don't mind that we pay more in taxes than say the family living in a apartment in someone's basement. My wife's company benefits from the stability that the government provides. Without the government there'd be no courts, no roads, no laws, etc and she couldn't be a lawyer and conduct business.



Alright Diraker...I'll support a progressive tax system if the benefits you list there is all that I pay for. My tax money will only be used to provide infrastructure, national defense, civil police forces, and a court system. That would lower the tax burden much more than even a fair tax if I didn't have to pay for other people's education, pizza hut, big screen TVs, medicine, and every other ridiculous government program and grant that some grand politician in Washington tries to shove down my throat in the form of a gun barrel.

[Mutt]

If the only place people get taxed is when they spend money, how much do you think under the table cash transactions will take place? China towns across america will make a killing

[Silver]

I think I should decide what to do with the tax revenue.

[Aradorn]

If the only place people get taxed is when they spend money, how much do you think under the table cash transactions will take place? China towns across america will make a killing

but thsi is only a small percentage of the overall pie. You have to realize this kind of stuff still takes place now under the current system (hell i had a job in high school that paid under the table)...

Mutt what you need to do is read the FairTax.org site

here is again is something from their site (i have already posted this)

"The FairTax will not be enforceable and evasion will be rampant"

The truth: More than 80% of all tax returns are eliminated under the FairTax--every individual filing. What remains are retail outlets collecting the FairTax. Of these, 80 percent of all retails sales now occur at large retail chains like Wal-Mart. The point is oversight will still reside under the Treasury Department but the government's responsibility will be over a far smaller "universe" of tax collection points making compliance oversight far less costly and far more effective than the current system which costs $265 billion a year in compliance costs and still comes up $350 billion a year short of what is owed.

Majority of the tax would be collected at retail outlets like malls and walmart. Do you honestly think people are going to stop shopping at these places to go buy something illegally?

[Lozzt One]

you all have it wrong... you should send that cut of money to me =p

[Silver]

I want to be king.

"Its good to be da King."

[Gnioss]

Majority of the tax would be collected at retail outlets like malls and walmart. Do you honestly think people are going to stop shopping at these places to go buy something illegally?


It's entirely ignorant to think they wont stop shopping there. You know why people shop at wal mart? Let me give you a hint, it isnt for the ear piercing shrill cries of the native north american baby momma or the awe-inspiring beautiful decor. It's because the crap people need is cheap there.

If it's 30% more expensive (and, please, start using the right % point, it's 30%, not 23%. The 23% is the amount of the tax related to the total of the tax and item) then people will trend away from tranditional retail outlets and into the chinatowns and flea markets of america, places that don't have consumer protection laws and a promise of quality product. When the market goes underground, only safety can suffer. Both safety of the product, safety of the consumer, and safety of the country itself.

Things like this only benefit the people who are willing to work the black market: AKA organized crime. Remember when another major american commodity was forced into the black market and as a result caused a huge spike in crime and arrests in communities that would be otherwise healthy? I'll give you a hint, they decided to get rid of that way back in 1933. And that wasn't for low priced consumer goods, which america is much more addicted to.

[Mutt]

but thsi is only a small percentage of the overall pie. You have to realize this kind of stuff still takes place now under the current system (hell i had a job in high school that paid under the table)...

Mutt what you need to do is read the FairTax.org site

here is again is something from their site (i have already posted this)



Majority of the tax would be collected at retail outlets like malls and walmart. Do you honestly think people are going to stop shopping at these places to go buy something illegally?If its cheaper you bet they will. Theres a china town in every major urban centre. For me, living in a downtown area its even more convenient to go to china town than it is to drive out closer to suburbia where all these big box stores are.

80% of the people shop in those stores now because it makes no difference tax wise where you shop, just where the goods are. Make Walmart 23-30% more expensive than under the table goods and you can get the sales will take a drop.

Take the cost of cars for example now. Now that the US dollar is at or below parity with the loonie, many people drive across the border to go buy a car because it is about 20-30% cheaper on average. Even with the customs costs at the border the cars are much cheaper.

Back when the loonie was around 80 cents to every US dollar sales basically stayed pat because there was no major savings to inconvenience yourself to import a car.

[Aradorn]

omg we will have complete anarchy because people are now taxed for what they buy instead of each time they get a paycheck....

im sure my wife will stop shopping at belk, macy's, and express because of a sales tax increase... yeah right. you are naive to think that people will search out a black market in order to skip out on buying the item. black markets are typically pretty secretive, hard to find, and ILLEGAL! To say that a majority of people would shop at these "black markets" is completely absurd...

comparing prohibition to the fair tax is a bit of a stretch, considering they completely outlawed alcohol (meaning you cannot buy it at all) all we are doing now is moving the tax from your paycheck to the register.

[Konrad]

I have to say...if your main argument against the Fair Tax is that it will drive people to China Town...I don't even think I need to spell it out to you. It's just laughable.

[Aradorn]

look the point is, get teh governemtn out of the paychecks of every person in america. then collect those taxes at the register when we make a purchase. This will let americans CHOOSE whether they invest the money in savings accounts, stocks, iras, cds, bonds, etc. or buy that $400 purse at Coach.

Whatever the person does it will help stimulate the economy (investing or being a consumer).

The tax codes are ridiculous as it stands and they change every year. Having a simple easy to understand system that can only change by increasing the rate is the way to go.

Oh btw Congress can take 100% of your paycheck for "taxes" and you cant do a damn thing about it. However, with a fair tax system all they could do is raise the sales taxes. Which means I have the power to CHOOSE if I want to pay 500% sales tax or not. This would probably help with our government spending =P

[Mutt]

I have to say...if your main argument against the Fair Tax is that it will drive people to China Town...I don't even think I need to spell it out to you. It's just laughable.True, but thats not the main argument. That was just one example of refuting aradorns claim that everyone is still going to have the exact same shopping habits.

[Diraker]

Who then pays for aradorn's $400 "tax cut"?

[Roxie]

hopefully stay-at-home dads and canadians

[Aradorn]

Who then pays for aradorn's $400 "tax cut"?

wtf are you talking about? 400 dollars comes from the fact that my employer no longer subtracts FICA, Social Security, and ferderal withholding taxes from my check. It abolishes our national income tax...

[Aradorn]

True, but thats not the main argument. That was just one example of refuting aradorns claim that everyone is still going to have the exact same shopping habits.

and your claim that suddenly everyone will dodge the market is also stupid.

edit- i seriously doubt a black market can keep up with the demand...

[Diraker]

Then where does the government get the funds to pay for those things?

[Mutt]

omg we will have complete anarchy because people are now taxed for what they buy instead of each time they get a paycheck....

im sure my wife will stop shopping at belk, macy's, and express because of a sales tax increase... yeah right. you are naive to think that people will search out a black market in order to skip out on buying the item. black markets are typically pretty secretive, hard to find, and ILLEGAL! To say that a majority of people would shop at these "black markets" is completely absurd...Who says anything about a majority of people?

Look there is a certain level of taxes that the government needs to function (of course for most people they take more than they need, but thats beside the point). In 2007 the US brought in about 1,200 billion dollars in income tax.

For every 1% of americans that deviate their consumer shopping in the new system that is 120 billion dollars no longer in the system. Not exactly small change. A 5% deviation could pay off the entire Canadian federal debt.

[Konrad]

For every 1% of americans that deviate their consumer shopping in the new system that is 120 billion dollars no longer in the system. Not exactly small change. A 5% deviation could pay off the entire Canadian federal debt.

Erroneous!!! Haha, but really that is an extremely devious misuse of statistics. You don't take into account that (I forget the exact percentages) 10% of the population pays the vast majority of tax incomes. You also do not add in the effect on the economy that such a system would have and every study suggests that it would have an extremely positive effect. This would suggest that tax revenue would very possibly increase.

Yes, the government would be completely at the whim of consumer spending patterns for their budgets and I think that is a good thing.

Aside from these specific problems you see in the system, what do you think about effects of a Fair Tax system that I brought up; such as a clear and transparent tax system, the removal of the government to punish or reward at will, the inability of government to attempt to affect behavior through taxation?

[Mutt]

and your claim that suddenly everyone will dodge the market is also stupid.

edit- i seriously doubt a black market can keep up with the demand...And its just not black markets, its external non taxed markets. How many people from detroit will take a drive across the border to ontario and stock up on cheaper goods once or twice a month?

Fairtaxes answer: It is unlikely that “shopping across the border” in Canada or Mexico will result in any cost savings to the consumer.

lol BS. An economy is like physics, if you take energy (money) out of one area you need it coming in at some other area to balance it out.

[Konrad]

Fairtaxes answer: It is unlikely that “shopping across the border” in Canada or Mexico will result in any cost savings to the consumer.


Real Fairtax answer: Go ahead, it's your money, do what you want with it. Isn't freedom refreshing?

[Mutt]

Aside from these specific problems you see in the system, what do you think about effects of a Fair Tax system that I brought up; such as a clear and transparent tax system, the removal of the government to punish or reward at will, the inability of government to attempt to affect behavior through taxation?Dont get me wrong, there are good points to the fair tax system, and those are some of them. However there are pros and cons to everything and the fair tax system isnt some holy grail. Recognizing only the pros without any of the faults is going to lead to trouble.

No matter what system gets implemented there are some fundamental truths.
1) The government will make sure it gets paid
2) The rich will find ways around the system to put more cash in their pockets
3) The poor will still be stuck living paycheck to paycheck

Personally, I would buy property outside of the US (housing in Canada, or condo/resort property in South America) and funnel that rental income back to me in the US thereby avoiding taxes.

As a closed system I think fair tax has a better stand, but the economy is so globalized it really helps to have that reliable tax base.

[Gnioss]

This fair tax fanboi-ism is naive. You are basing all of your assumptions on current conditions. 30% is a *lot of money* especially when you are reminded that you pay it every day when you buy a roll of toilet paper. People will seek out alternate ways to buy things, I promise. Just because right now flea markets and chinatown are outside the mainstream and considered something that is not commonly done, that doesnt mean that if you introduce a huge direct tax it wont have huge consequences. It will be unenforceable, or if it is, then it will require huge resources to police.

PS: mutt makes a good point, giving the government less money in tax doesnt mean the government gets more efficient. It just makes the national debt higher.

[Mutt]

Erroneous!!! Haha, but really that is an extremely devious misuse of statistics. You don't take into account that (I forget the exact percentages) 10% of the population pays the vast majority of tax incomes.Wait, I thought your argument for Fair Tax was so that rich bastards like Warren buffet paid taxes? Apparently all the rich guys are paying less than their secretaries according to aradorn.

[Konrad]

30% is a *lot of money* especially when you are reminded that you pay it every day when you buy a roll of toilet paper.


It is alot, but I already pay more than that in federal income tax alone, not to mention all of the embedded and hidden taxes that are already in the goods and services we buy.

I have a lunch meeting, but I'll respond more when I get back.

[Gnioss]

It is alot, but I already pay more than that in federal income tax alone, not to mention all of the embedded and hidden taxes that are already in the goods and services we buy.

I have a lunch meeting, but I'll respond more when I get back.

I agree, but it's irrelevant. I'm arguing the effect this will have on the retail economy. The direct cost people *see* when they buy goods is what will drive them to markets outside traditional taxable retail markets. The money paid in taxes isnt "real" money in the mind of the average american. in fact, when people get income tax returns most people think of it as "free" money, not money that is being returned to them sans interest.

[Aradorn]

if retail outlets see a loss from the fair tax then they will drop prices to bring people back. markets will always correct themselves (ala the housing market). i have already admitted the fair tax system has problems, but its definitely better than what we currently have.

[Mutt]

if retail outlets see a loss from the fair tax then they will drop prices to bring people back. markets will always correct themselves (ala the housing market). i have already admitted the fair tax system has problems, but its definitely better than what we currently have.toilet paper != housing. There is direct costs to that product.

It costs x to buy raw resources, y for infrastructure to produce it, z for labour, w for transport, v for middle man markup, etc.

In housing much of the cost is basically what people are willing to pay for the location. The more "desirable" the location, the more people are willing to pay.

How is walmart going to be able to cut prices to win people back? They already operate on thin margins that rely on moving tons of product to make a profit (they get goods at lowest cost due to the large quantities in which they purchase). You can be damn sure there isnt a 20-30% margin to play with.

Just because the US switches to a fair tax system doesnt mean its going to be any cheaper to buy goods from china unless you buy in even larger quantities. That cost is pretty much static.

During prohibition what did the liquor industries of Canada, caribbean and mexico do? Sales went through the roof. The law was enforced but that didnt stop anything.

Whatever overhead costs lost by downplaying the IRS and agencies like them is going to be mitigated by higher enforcement costs.

Borders are going to slow down as every good will need to be declared, certified, etc.

Even reputable retailers will be tempted to pad their margins by offsetting goods bought from US distributors (subject to sales tax) by those bought via external ones (not subject to tax).

In short, going to a consumption based tax means NAFTA is going to fuck the US in the ass hard core.

[Konrad]

You are not figuring in the corporate and payroll taxes that Walmart has embedded into its prices. The prices would indeed lower because these corporations would no longer be adding that cost into their products.

And an aside...Wal-Mart does have the margin...they make some of the best margin in the retail industry.

[Gnioss]

Yes, walmart does have an excellent profit margin for big box stores of that volume: 3.2% (http://www.hoovers.com/wal-mart/--ID__11600,period__A--/free-co-fin-income.xhtml).

Big box retail stores simply *can not* cut prices enough to maintain current price levels with an addition of 30%,not even with the minimal savings payroll taxes take out of the equation.

[Konrad]

3.2% is not their margin, that may be their bottomline net profit. We occasionally do business with Wal-Mart, and do so sparingly because they are notorious for putting their vendors out of business. Their margin on the products that we sell them are between 40-50% and that is fairly standard across the board.

Payroll taxes are not insignificant, but you are still not factoring corporate taxes, which for a company the size of Wal-Mart is somewhere around 35%.

[Aradorn]

Yes, walmart does have an excellent profit margin for big box stores of that volume: 3.2%.

Big box retail stores simply *can not* cut prices enough to maintain current price levels with an addition of 30%,not even with the minimal savings payroll taxes take out of the equation.

prove it

[Gnioss]

hey aradorn u smell.

[Dong]

When I worked at Wal-Mart in high school, I remember reading it was something like ~23% on average.

[Mutt]

Their margin on the products that we sell them are between 40-50% and that is fairly standard across the board.From the link Gnioss posted their gross profit margin is 24% simply from (sale of goods) - (costs of goods) without factoring taxes, operations, etc yet. Some products might be more, some might be less, but as a whole that is their gross margin.

Their net margin currently paying taxes is 3.2%
without taxes their net margin is about 5%

[Roxie]

go choke on some ol' roy, mutt

[TheGrimm]

Flat tax, remove tax breaks. Let's say 15%. If you take away the loopholes they can't be used. YES, it isn't perfect, but seriously... fair tax is fundamentally flawed... people will find ways to buy/import their expensive crap from Canada etc. Yes, I would probably suck it up and pay my extra 30% for TP.. etc, but most toys and electronics (which is where I seem to spend most of my money) I would totally buy off ebay from canada.

[TheGrimm]

And another thing... If this ever does go in, what's to stop me (the Canadian) from buying stuff and selling it to Americans as "used" goods on ebay? I could make a hefty profit doing so.

IN FACT, if this ever goes in for real, consider me your personal shopper (with a 10% finders fee of course ;P)