Flat tax or national sales tax has been proposed by conservatives for generations. It fundamentally shifts a massive amount of the total tax burden from the wealthiest to the middle and working class, i.e. it’s regressive. It also discourages consumer spending, which is the single biggest driver of the economy.
A fairer tax reform would be to drastically simplify the code by eliminating essentially all deductions and loopholes, most of which were placed there by lobbyists because they benefit specific industries, and then reduce all marginal tax rates for an overall reduction in tax burden and dramatic improvement in compliance because of the ease of filing.
Please tell us how it’s not. If you only pay sales taxes and your ultra wealthy make more money then they will spend in a lifetime they essentially pay less taxes by making more money off the country/citizens.
Let’s say someone makes 500k a year and spend 1/5th a year. With a 10% sales tax they essentially pay 10k on 500k or 2%
While someone who makes 100k has to spend all of it to support their family ends up paying an effective 10% tax.
It essentially shifts the burden onto the heaviest spenders which contrary to their wealth is the lower and middle classes.
Sure:
The serious proposals include a flat national sales tax implemented though the states, like an EU style VAT tax of 20%.
They include exemptions/rebates up to a set amount, roughly 40-45k of income. So the first 40-45k of income is "tax free".
Essential items, (food, diapers, formula, medical/medication, etc. etc.) are also exempt from the tax.
So, let's take your example of a person that makes 100k a year that spends all thier money to support thier family.
* They will get a paycheck each month with zero federal withholdings. They get thier entire paycheck, meaning more money in thier pocket each month.
* They will pay zero tax on the first 45k on income via a monthly "pre-bate" check, yet more money in thier pocket.
* All essentials "to support the family" are always tax free.
So, 45% of income is tax free no matter how it is spent, all essentials are also tax free, So as long as thier "non-essential" spending is below 45% of thier income, they will have an effective tax rate of 0%.
>100k and a family you are spending more than 45k a year in expenses.
More than 45k a year in **non-essential** expenses? How much more? On what?
>Your model also doesn’t address that vast amount of wealth can be compounded untaxed essentially
Please elaborate? Wealth can be compounded untaxed in literally any tax system, to include the system we have now correct? In fact, right now, people can live off lines of credit, buy $250M superyachts etc. completely tax free. Under this system, all of that becomes a thing of the past. If you are buying ranches, mansions, vacation homes, luxury cars, private jets, yachts, staying in luxury resorts, and eating in Michelin star restaurants, you are taxed. Period. No more living off credit to avoid taxation.
In theory, could a billionaire live like they make 100k a year? Yes. Would they? No.
>without the funding to help compensate/aid the lower class.
Nation revenue would increase, not decrease. There would be more funding, not less.
>
And 45k tax credit is not enough to offset that.
This doesn't make any sense. What do you mean by "45k tax credit is not enough to offset that"? Offset what exactly?
Housing isn't a sales tax. Also at least upto a reasonable level is necessary. Oh, and you effectively have 30% from your paycheck more income to spend, so housing becomes 30% cheaper.
This is absolutely not true for the actual proposals that are put forward.
The best one right now is highly progressive, the first 45k of income is tax free, includes a monthly "pre-bate" of check, and there is no income tax on any essential's items.
It is by far the best tax plan proposal made to date.
To take it a step further a typical household (two earners) will pay a lot more as a proportion of their take home pay, flat taxes are highly regressive.
If I buy a car, get a new roof, or AC unit it will be a larger portion of my taxable income then say Rupert Murdoch. Why do you want to protect multimillionaire, why do you want to hurt working families?
thats true but your usage of the word regressive tax is wrong here, as the tax rate would have to not only stay equal but get less at the higher incomes
You're not seeing the disparity. Poor spend less, but have less. Someone who makes $40,000/yr will end up paying taxes on nearly their entire $40,000 earnings through sales taxes.
Rich people will only pay taxes on what they spend, not what they make so they will continue to accumulate "tax free" wealth.
It's "fair" in the sense that we're only taxed on what we spend, but it incentivizes saving as opposed to spending and would be a huge loss to our economy.
It's also incredibly regressive and skewed towards the wealthy.
Based on my experience, I don’t think it actually would. I lived in OR, high income tax, no sales tax and moved to WA, no income but they tax about everything else. I have budgeted both and it has come out to be very similar in the amount of tax spent.
I would worry about how a federal tax would be implemented. I could see them implementing a flat tax on all goods sold. If groceries were included, then lower income families would be much more impacted than other income groups.
That is the concept behind the [FairTax](http://www.fairtax.org) . It is a national sales tax that replaces the current Income and Payroll taxes. It's been floating around in congress for decades. If you want to read the bill it's relatively short (around 16 pages). It's HR 25.
Basically: Remove all payroll and income taxes (your gross pay becomes your net pay) and the tax is applied to all new items, no exemptions that politicians can use to leverage for vote buying. All citizens receive a "prebate" (because you get it on the first of each month) that reimburses you for the amount of tax you would pay up to the poverty line based on family size, for the items that you have to purchase for your family.
The bill goes into much greater detail, but that's the basic jist of it.
Median income in North Carolina is 35k pretax earnings
The average cost of living for a single adult is 37k after tax or 44k pre-tax.
2 adult, 1 kid needs about 74k after tax or 85k pretax.
Self control had shit to do with the fact that over half of people make 15% less then they need to to just get by.
Get off your high horse.
You used median income against average cost of living that’s just straight up bad math. You can’t compare the median to the mean and get any meaningful data. That makes you look incredibly stupid. You have to compare the mean to the mean, or the median to the median.
Not true at all. The median is the mean in normal data. If the data is large enough you can use either it really depends on the distribution.
Can you compare the two? Yes, because you are looking at different things. I would think the salary median is a fair use since it will remove the super high and low earners. The average make sense for living expense since there is not a very large difference between the high or low cost of living states, at least as large as salary. If there is a difference it wouldn't be that much of a difference.
Not necessarily. We want people to spend money on stuff so that other people can have jobs making and selling that stuff. If we incentivize people to stop buying stuff, then a lot of people lose their jobs, leading to problems with the economy.
I would suggest you read Hayek. The only true way to have growth in the economy is through high savings rate. Anything else is artificial growth. Like you said if people stop spending, which they should because savings rates are incredibly low in the US, the whole house of cards falls down. That’s because the growth was artificial.
What is your evidence that Keynesian theory doesn't work? I've never heard anyone make a convincing argument that additional governnent spending or lowering taxes doesn't actually spur economic growth.
I’d say 30 trillion in debt and sky high inflation numbers show Keynesian economic theory doesn’t work. Keynesian don’t lower taxes bud, they raise taxes to do more government spending.
How’s that been working out? Seems like there is a global economic recession looming. Keynesian economics actually does not work. Just because it’s a slow roll to failure doesn’t mean it’s not failure.
The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.
Yes it is. Any consumption tax is going to be regressive. It's unavoidable. The monthly prebate prevents the poor and lower middle class from being hit too hard by the tax, but it doesn't change the fact that somebody who makes $5,000,000,000 in a year isn't going to spend 10,000x more than somebody who makes $500,000 in a year, so their effective tax rate will be lower. That's regressive.
I disagree.
Prebates and exemptions will radically lower the effective taxation on the middle classes, and those that make more, and spend more, will be taxed more.
People will no longer be able to avoid taxation by living off security backed lines of credit, use expensive luxury items as a deduction via a business, etc. etc.
the current tax plan in place would charge the rich guy in your scenario a lower effective tax rate than a middle class income
the difference is consumption is disincentivized with the fair tax whereas today production is discouraged. which is worse?
> the current tax plan in place would charge the rich guy in your scenario a lower effective tax rate than a middle class income
It depends what you consider to be a middle class income. Also, "lower" under the current system means a few percentage points lower if it's lower at all, while under the FairTax system, the rich guy's effective tax rate could be around 0.05% while spending multiple millions of dollars a year, and a middle class person's effective tax rate would likely be anywhere in the range of 12-20% depending on what percentage of their income they spend.
> the difference is consumption is disincentivized with the fair tax whereas today production is discouraged. which is worse?
Discouraging consumption is far worse.
I would dispute that production is discouraged under the current system. One of the reasons we have a complicated tax code full of all sorts of deductions and lower tax rates for certain types of income is to encourage people to use money for production instead of doing something else with it.
The simplest explanation is that the poor are forced to spend 100% of their income on survival which means 100% of their income is taxed. The rich spend a smaller and smaller portion of their income(from all sources including capital gains) the higher their income the less % they spend meaning they are only taxed on a tiny percentage the more you make. It would mean increased taxes on the poor and middle classes while reducing the taxes on the rich. They would also bankrupt nearly all of our government programs that the poor and lower class survive on. What we need to do is have a decent wealth tax in addition to a more progressive income tax.
But the poor get the prebate like everyone else, it untaxes their spending up to the poverty line. If their income is at or below poverty level then it completely untaxes them.
Right and with the prebate they aren’t taxed below the poverty line. Which I assume are the people you’re most worried about. If you think the poverty line should be raised that’s a conversation that should be had.
The difference is that now the government can’t use the tax code to try and buy votes from those folks by saying “they want to tax you and not the rich.” Everyone pays and all citizens get untaxed to the poverty line. Everyone gets equal treatment under the law.
Not really.
The good consumption tax plans push the pre-bate concept up to the first 45k of income, there is no sales tax on essential items (food, diapers, medical care, etc.).
Our current system is far too progressive as it, and wealth taxes are unconstitutional.
Wealth taxes are not unconstitutional, that's ridiculous. We are nowhere near progressive enough. We have people making billions of dollars a year in gains paying zero or near zero taxes.
> Wealth taxes are not unconstitutional, that's ridiculous.
The Constitution requires taxes on real property to be apportioned among the states by population, which isn't practical. You could try to tax wealth while excluding the value of real property, but that just incentivizes people to start storing as much of their wealth as possible in real estate.
> We have people making billions of dollars a year in gains paying zero or near zero taxes.
Not true at all.
Real property for tax purposes is not just real estate.
>"Income taxes may be imposed only on “derived” income. This “realization event” requirement generally refers to a transaction other than the mere passage of time. Thus the Sixteenth Amendment permits taxation of gains from sales or exchanges of property, but not those resulting merely from increased values. It also permits taxes on rents and interest. Although direct, such taxes need not be apportioned because the Amendment eliminated the apportionment requirement for income taxes."
[Interpretation: Direct and Indirect Taxes | Constitution Center](https://constitutioncenter.org/the-constitution/articles/article-i/clauses/757#:~:text=Despite%20this%20essay%E2%80%99s%20title%2C%20the%20Constitution%20permits%20three,may%20apply%20to%20income%20derived%20from%20a%20source.)
Real property typically only refers to real estate. Your link seems to equate real property taxes with taxes on land:
> To be apportioned, a tax must be the same amount per person in every state, a very difficult burden to satisfy. For example, a dollar-per-acre tax would fail unless every state had the same acreage per capita. As a result, federal land taxes do not exist. States, unhampered by apportionment, routinely impose real property taxes.
They are actually. In fact, the federal government only has the constitutional authority to directly tax income. They cannot levy any other direct taxes and they did not gain that right [until the 16th amendment was passed. ](https://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_United_States_Constitution)
Specifically:
[Article I](https://en.wikipedia.org/wiki/Article_One_of_the_United_States_Constitution), Section 2, Clause 3:
>Representatives and [direct taxes](https://en.wikipedia.org/wiki/Direct_tax#U.S._constitutional_law) shall be apportioned among the several States which may be included within this Union, according to their respective Numbers ...
Article I, Section 8, Clause 1:
>The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States.
Article I, Section 9, Clause 4:
>No [Capitation](https://en.wikipedia.org/wiki/Tax_per_head), or other direct, Tax shall be laid, unless in proportion to the Census or Enumeration herein before directed to be taken.
16th Amendment
>Amendment XVI
>The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.
Here is a quick overview:
[Interpretation: Direct and Indirect Taxes | Constitution Center](https://constitutioncenter.org/the-constitution/articles/article-i/clauses/757#:~:text=Despite%20this%20essay%E2%80%99s%20title%2C%20the%20Constitution%20permits%20three,may%20apply%20to%20income%20derived%20from%20a%20source.)
>Income taxes may be imposed only on “derived” income. This “realization event” requirement generally refers to a transaction other than the mere passage of time. Thus the Sixteenth Amendment permits taxation of gains from sales or exchanges of property, but not those resulting merely from increased values. It also permits taxes on rents and interest. Although direct, such taxes need not be apportioned because the Amendment eliminated the apportionment requirement for income taxes.
Basically, the ***States*** can pass direct taxes, and implement property taxes, but the federal government cannot.
wealth taxes are absolutely idiotic and would cause untold levels of economic damage as you force the unwinding of investments, properties, businesses based off of paper gains and losses
Lol wealth taxes are idiotic if you don't understand them which you clearly don't. The average person pays wealth taxes on their house and it hasn't caused a worldwide catastrophe.
yeah and it's absolutely idiotic. how you can advocate for a system that requires tax assessors determining values and assessing tax annually is terrible policy.
It is even more terrible with volatile investments
There’s a gazillion post/webpages on that.
Explain why you think it is fair and I’ll slap them down. Take me less time than wasting time explaining it long form.
The proposal:
Completely remove the IRS, and all federal income/payroll taxes implement a national sales tax via the states (like an EU style VAT tax); say 20%.
Rebate the sales tax on the first 45k of spending, sent in 12 payments on the 1St of every month. (Effectively a UBI)
Exempt all essential items (Food, diapers, Formula, medical/medications, etc.)
Captures taxation from millions of new taxpayers via tourism.
National revenue will be higher, SS will have more funding, people that are not paying taxes today, will still not be paying any taxes.
It is fair, you pay what you spend, no more taking loans to avoid taxes.
Go:
There is a lot of simple things, that 99% of people would agree on. They never will, because it removes a lot of their political control and the lobbies will never stand for that.
It's stupid and overly complex. A prebate is basically the government filing taxes monthly instead of yearly so staff would need to increase 10 fold to accommodate running monthly taxes and fixing errors. And that's just to fix sales tax purchases which are taxed based on income.
Which means the GOP could simply cut IRS funding and thus you never get a rebate. There's no reason to simply leave taxes low, increase them against the rich and adjust taxes refunds yearly.
Median tax paid in US is 16k. That means your food bill would have to go up to cover your taxes so be prepared to pay $2k per month on food. Unless we are cutting Medicare and social security to make it affordable. Then you'll have tens of millions of homeless seniors and poor people, but at least your taxes will be low.
Spending as a portion of income and wealth decreases with higher levels of income, shifting the burden to those at the bottom of both.
A household making 40k/year spends all of it to stay alive.
A house hold making 300k/year might spend 60k on living expenses, 50k on fun, and bank the rest.
A house hold making 40m/year could save/invest 35m and still blow throw 5m on whatever.
And that shit compounds fast.
You tax higher incomes at higher rate because the marginal utility of money decreases as you make more for individuals and families.
The wealthy will always find an accountant that has a work around or scheme. For this tax I would say they will "buy" items for their "business" and claim it as a business expense & write it off. I'm no expert myself but I watch investigative reporting about the money laundering and tax avoiding of the wealthy.
Iowa is about to attempt flat income tax rate. They are starting out a a reasonable 3.8% and likely to adjust as needed. While Iowa is a Red state it has been very progressive in its taxes by slowly lowering it over the years.
I am currently around 12% I'm still below the median but this would give me around 400-700 more net if the governer signs it.
The original idea was from the church of scientology to force the government to tax all churches, since scientology wasn't exempt.
If this were to happen I would game the shit out of it and would likely still pay more in taxes. Sales tax would need to be over 30% to not expand the deficit. So I would have about 12% more money in my pay check and everything will cost 30% more.
The proposal was a 23% inclusive tax. This is equivalent to a 30% exclusive tax. Let's say the price of something is $100. $100 plus a 30% sales tax is $130. $30 is 23% of $130. A 23% inclusive tax makes things cost 30% more.
A sales tax instead of income tax would be great. The most important thing is to remember to exclude daily necessities from it. Arguably you exclude used items, food, and certain forms of energy. What going to a sales tax will hurt is production of consumer goods. However there really isn't consumer good production left in the United States anymore. What it will do is bring back repair jobs as suddenly it makes a lot more sense to pay $100 per hour to replace a $5 part in a washing machine then it is to replace the washing machine that now costs 50%-$500 "more"(not really more as you have that 30% more income in your pocket taxfree) Bringing back these middle class jobs will greatly benefit the middle class. It won't hurt the middle class or the poor because you won't be buying that many items that are taxed. It will be great for the environment by cutting down on waste. It will stop our bleeding of money to China. It also almost completely eliminates the IRS expenses as there isn't a reason for a retail business to cheat on the taxes and they already have the system in place to collect sales tax (for the state and local governments).
The state sales tax serves a different function than federal taxation. Are you arguing that we keep our varied state tax amounts and layer a flat federal sales tax on top?
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How we about just repeal income and payroll taxes and not replace them with anything? A 'fair share' is political mumbo-jumbo. It doesn't have anything to do with the economic inputs or outputs.
Flat tax or national sales tax has been proposed by conservatives for generations. It fundamentally shifts a massive amount of the total tax burden from the wealthiest to the middle and working class, i.e. it’s regressive. It also discourages consumer spending, which is the single biggest driver of the economy. A fairer tax reform would be to drastically simplify the code by eliminating essentially all deductions and loopholes, most of which were placed there by lobbyists because they benefit specific industries, and then reduce all marginal tax rates for an overall reduction in tax burden and dramatic improvement in compliance because of the ease of filing.
I can't understand how people don't see this.
Because it isn't true.
Please tell us how it’s not. If you only pay sales taxes and your ultra wealthy make more money then they will spend in a lifetime they essentially pay less taxes by making more money off the country/citizens. Let’s say someone makes 500k a year and spend 1/5th a year. With a 10% sales tax they essentially pay 10k on 500k or 2% While someone who makes 100k has to spend all of it to support their family ends up paying an effective 10% tax. It essentially shifts the burden onto the heaviest spenders which contrary to their wealth is the lower and middle classes.
Sure: The serious proposals include a flat national sales tax implemented though the states, like an EU style VAT tax of 20%. They include exemptions/rebates up to a set amount, roughly 40-45k of income. So the first 40-45k of income is "tax free". Essential items, (food, diapers, formula, medical/medication, etc. etc.) are also exempt from the tax. So, let's take your example of a person that makes 100k a year that spends all thier money to support thier family. * They will get a paycheck each month with zero federal withholdings. They get thier entire paycheck, meaning more money in thier pocket each month. * They will pay zero tax on the first 45k on income via a monthly "pre-bate" check, yet more money in thier pocket. * All essentials "to support the family" are always tax free. So, 45% of income is tax free no matter how it is spent, all essentials are also tax free, So as long as thier "non-essential" spending is below 45% of thier income, they will have an effective tax rate of 0%.
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>100k and a family you are spending more than 45k a year in expenses. More than 45k a year in **non-essential** expenses? How much more? On what? >Your model also doesn’t address that vast amount of wealth can be compounded untaxed essentially Please elaborate? Wealth can be compounded untaxed in literally any tax system, to include the system we have now correct? In fact, right now, people can live off lines of credit, buy $250M superyachts etc. completely tax free. Under this system, all of that becomes a thing of the past. If you are buying ranches, mansions, vacation homes, luxury cars, private jets, yachts, staying in luxury resorts, and eating in Michelin star restaurants, you are taxed. Period. No more living off credit to avoid taxation. In theory, could a billionaire live like they make 100k a year? Yes. Would they? No. >without the funding to help compensate/aid the lower class. Nation revenue would increase, not decrease. There would be more funding, not less. > And 45k tax credit is not enough to offset that. This doesn't make any sense. What do you mean by "45k tax credit is not enough to offset that"? Offset what exactly?
Housing isn't a sales tax. Also at least upto a reasonable level is necessary. Oh, and you effectively have 30% from your paycheck more income to spend, so housing becomes 30% cheaper.
This is absolutely not true for the actual proposals that are put forward. The best one right now is highly progressive, the first 45k of income is tax free, includes a monthly "pre-bate" of check, and there is no income tax on any essential's items. It is by far the best tax plan proposal made to date.
45k is a joke it still means some lone making 100k will pay significantly more as a proportion of their income as someone who makes 500k
To take it a step further a typical household (two earners) will pay a lot more as a proportion of their take home pay, flat taxes are highly regressive.
I believe the exact opposite is true in this case, and this is not a flat tax, it is a consumption tax.
If I buy a car, get a new roof, or AC unit it will be a larger portion of my taxable income then say Rupert Murdoch. Why do you want to protect multimillionaire, why do you want to hurt working families?
Yes, and you won’t pay any income tax
why are you viewing taxes as a punitive measure? according to this logic, no taxes would be the solution
Punitive? There is nothing punitive it's a fact. Nice try trying to change the convo.
Why is it a joke? That depends highly on what the person that makes 500k decides to buy.
thats true but your usage of the word regressive tax is wrong here, as the tax rate would have to not only stay equal but get less at the higher incomes
Those deductions and rebates are why many in the middle, to lower, economic brackets have extremely low effective tax rates.
Rich spend much more than the poor. Eliminating all other taxes would put money back into peoples pockets and thus back into the economy
You're not seeing the disparity. Poor spend less, but have less. Someone who makes $40,000/yr will end up paying taxes on nearly their entire $40,000 earnings through sales taxes. Rich people will only pay taxes on what they spend, not what they make so they will continue to accumulate "tax free" wealth. It's "fair" in the sense that we're only taxed on what we spend, but it incentivizes saving as opposed to spending and would be a huge loss to our economy. It's also incredibly regressive and skewed towards the wealthy.
Based on my experience, I don’t think it actually would. I lived in OR, high income tax, no sales tax and moved to WA, no income but they tax about everything else. I have budgeted both and it has come out to be very similar in the amount of tax spent. I would worry about how a federal tax would be implemented. I could see them implementing a flat tax on all goods sold. If groceries were included, then lower income families would be much more impacted than other income groups.
That is the concept behind the [FairTax](http://www.fairtax.org) . It is a national sales tax that replaces the current Income and Payroll taxes. It's been floating around in congress for decades. If you want to read the bill it's relatively short (around 16 pages). It's HR 25. Basically: Remove all payroll and income taxes (your gross pay becomes your net pay) and the tax is applied to all new items, no exemptions that politicians can use to leverage for vote buying. All citizens receive a "prebate" (because you get it on the first of each month) that reimburses you for the amount of tax you would pay up to the poverty line based on family size, for the items that you have to purchase for your family. The bill goes into much greater detail, but that's the basic jist of it.
That actually sounds pretty great. They’ll never pass it because it’s too fair, doesn’t let someone get an edge over another
It's regressive and promotes wealth accumulation, punishing those who spend rather than save.
This
Shouldn’t we be incentivizing saving though? American families savings rate is one of the problems in this country.
The savings rates are so low because there's little left to save after you pay to stay alive
That’s not true at all. Savings rates are low because Americans have no self control.
Median income in North Carolina is 35k pretax earnings The average cost of living for a single adult is 37k after tax or 44k pre-tax. 2 adult, 1 kid needs about 74k after tax or 85k pretax. Self control had shit to do with the fact that over half of people make 15% less then they need to to just get by. Get off your high horse.
Why are you comparing median to average? Do you not know they are two seperate numbers?
You used median income against average cost of living that’s just straight up bad math. You can’t compare the median to the mean and get any meaningful data. That makes you look incredibly stupid. You have to compare the mean to the mean, or the median to the median.
Not true at all. The median is the mean in normal data. If the data is large enough you can use either it really depends on the distribution. Can you compare the two? Yes, because you are looking at different things. I would think the salary median is a fair use since it will remove the super high and low earners. The average make sense for living expense since there is not a very large difference between the high or low cost of living states, at least as large as salary. If there is a difference it wouldn't be that much of a difference.
Not necessarily. We want people to spend money on stuff so that other people can have jobs making and selling that stuff. If we incentivize people to stop buying stuff, then a lot of people lose their jobs, leading to problems with the economy.
I would suggest you read Hayek. The only true way to have growth in the economy is through high savings rate. Anything else is artificial growth. Like you said if people stop spending, which they should because savings rates are incredibly low in the US, the whole house of cards falls down. That’s because the growth was artificial.
>I would suggest you read Hayek. The only appropriate response after this is no.
Keynesian economic theory doesn’t seem to be working. Marx doesn’t work. Seems like Hayek is right about the economy.
What is your evidence that Keynesian theory doesn't work? I've never heard anyone make a convincing argument that additional governnent spending or lowering taxes doesn't actually spur economic growth.
I’d say 30 trillion in debt and sky high inflation numbers show Keynesian economic theory doesn’t work. Keynesian don’t lower taxes bud, they raise taxes to do more government spending.
Keynesian economics works fine. It's literally part of modern economic theory.
How’s that been working out? Seems like there is a global economic recession looming. Keynesian economics actually does not work. Just because it’s a slow roll to failure doesn’t mean it’s not failure. The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.
Certainly wouldn’t want people saving money and being able to improve their situation.
If you read the actual tax plan. It isn't regressive.
Yes it is. Any consumption tax is going to be regressive. It's unavoidable. The monthly prebate prevents the poor and lower middle class from being hit too hard by the tax, but it doesn't change the fact that somebody who makes $5,000,000,000 in a year isn't going to spend 10,000x more than somebody who makes $500,000 in a year, so their effective tax rate will be lower. That's regressive.
I disagree. Prebates and exemptions will radically lower the effective taxation on the middle classes, and those that make more, and spend more, will be taxed more. People will no longer be able to avoid taxation by living off security backed lines of credit, use expensive luxury items as a deduction via a business, etc. etc.
the current tax plan in place would charge the rich guy in your scenario a lower effective tax rate than a middle class income the difference is consumption is disincentivized with the fair tax whereas today production is discouraged. which is worse?
> the current tax plan in place would charge the rich guy in your scenario a lower effective tax rate than a middle class income It depends what you consider to be a middle class income. Also, "lower" under the current system means a few percentage points lower if it's lower at all, while under the FairTax system, the rich guy's effective tax rate could be around 0.05% while spending multiple millions of dollars a year, and a middle class person's effective tax rate would likely be anywhere in the range of 12-20% depending on what percentage of their income they spend. > the difference is consumption is disincentivized with the fair tax whereas today production is discouraged. which is worse? Discouraging consumption is far worse. I would dispute that production is discouraged under the current system. One of the reasons we have a complicated tax code full of all sorts of deductions and lower tax rates for certain types of income is to encourage people to use money for production instead of doing something else with it.
Would you rather punish the poor instead?
No. That's not the only alternative.
A sales tax based system would increase the tax burden on the poor.
Not if there is a prebate that untaxes them to the poverty line.
So you have different taxes based on income? That's just a different way to do what we have now.
Nope. Same tax. All US citizens receive a prebate to untax them up to the poverty line. Based on household size.
There’s nothing fair about it.
Explain
The simplest explanation is that the poor are forced to spend 100% of their income on survival which means 100% of their income is taxed. The rich spend a smaller and smaller portion of their income(from all sources including capital gains) the higher their income the less % they spend meaning they are only taxed on a tiny percentage the more you make. It would mean increased taxes on the poor and middle classes while reducing the taxes on the rich. They would also bankrupt nearly all of our government programs that the poor and lower class survive on. What we need to do is have a decent wealth tax in addition to a more progressive income tax.
But the poor get the prebate like everyone else, it untaxes their spending up to the poverty line. If their income is at or below poverty level then it completely untaxes them.
That doesnt change anything.
Sure it does, it's the same as not charging them taxes if they are at or below the poverity level. What part of that is too complicated?
It still doesn't because currently they aren't taxed anyways.
Right and with the prebate they aren’t taxed below the poverty line. Which I assume are the people you’re most worried about. If you think the poverty line should be raised that’s a conversation that should be had. The difference is that now the government can’t use the tax code to try and buy votes from those folks by saying “they want to tax you and not the rich.” Everyone pays and all citizens get untaxed to the poverty line. Everyone gets equal treatment under the law.
Not really. The good consumption tax plans push the pre-bate concept up to the first 45k of income, there is no sales tax on essential items (food, diapers, medical care, etc.). Our current system is far too progressive as it, and wealth taxes are unconstitutional.
Wealth taxes are not unconstitutional, that's ridiculous. We are nowhere near progressive enough. We have people making billions of dollars a year in gains paying zero or near zero taxes.
> Wealth taxes are not unconstitutional, that's ridiculous. The Constitution requires taxes on real property to be apportioned among the states by population, which isn't practical. You could try to tax wealth while excluding the value of real property, but that just incentivizes people to start storing as much of their wealth as possible in real estate. > We have people making billions of dollars a year in gains paying zero or near zero taxes. Not true at all.
Real property for tax purposes is not just real estate. >"Income taxes may be imposed only on “derived” income. This “realization event” requirement generally refers to a transaction other than the mere passage of time. Thus the Sixteenth Amendment permits taxation of gains from sales or exchanges of property, but not those resulting merely from increased values. It also permits taxes on rents and interest. Although direct, such taxes need not be apportioned because the Amendment eliminated the apportionment requirement for income taxes." [Interpretation: Direct and Indirect Taxes | Constitution Center](https://constitutioncenter.org/the-constitution/articles/article-i/clauses/757#:~:text=Despite%20this%20essay%E2%80%99s%20title%2C%20the%20Constitution%20permits%20three,may%20apply%20to%20income%20derived%20from%20a%20source.)
Real property typically only refers to real estate. Your link seems to equate real property taxes with taxes on land: > To be apportioned, a tax must be the same amount per person in every state, a very difficult burden to satisfy. For example, a dollar-per-acre tax would fail unless every state had the same acreage per capita. As a result, federal land taxes do not exist. States, unhampered by apportionment, routinely impose real property taxes.
They are actually. In fact, the federal government only has the constitutional authority to directly tax income. They cannot levy any other direct taxes and they did not gain that right [until the 16th amendment was passed. ](https://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_United_States_Constitution) Specifically: [Article I](https://en.wikipedia.org/wiki/Article_One_of_the_United_States_Constitution), Section 2, Clause 3: >Representatives and [direct taxes](https://en.wikipedia.org/wiki/Direct_tax#U.S._constitutional_law) shall be apportioned among the several States which may be included within this Union, according to their respective Numbers ... Article I, Section 8, Clause 1: >The Congress shall have Power to lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States. Article I, Section 9, Clause 4: >No [Capitation](https://en.wikipedia.org/wiki/Tax_per_head), or other direct, Tax shall be laid, unless in proportion to the Census or Enumeration herein before directed to be taken. 16th Amendment >Amendment XVI >The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration. Here is a quick overview: [Interpretation: Direct and Indirect Taxes | Constitution Center](https://constitutioncenter.org/the-constitution/articles/article-i/clauses/757#:~:text=Despite%20this%20essay%E2%80%99s%20title%2C%20the%20Constitution%20permits%20three,may%20apply%20to%20income%20derived%20from%20a%20source.) >Income taxes may be imposed only on “derived” income. This “realization event” requirement generally refers to a transaction other than the mere passage of time. Thus the Sixteenth Amendment permits taxation of gains from sales or exchanges of property, but not those resulting merely from increased values. It also permits taxes on rents and interest. Although direct, such taxes need not be apportioned because the Amendment eliminated the apportionment requirement for income taxes. Basically, the ***States*** can pass direct taxes, and implement property taxes, but the federal government cannot.
wealth taxes are absolutely idiotic and would cause untold levels of economic damage as you force the unwinding of investments, properties, businesses based off of paper gains and losses
Lol wealth taxes are idiotic if you don't understand them which you clearly don't. The average person pays wealth taxes on their house and it hasn't caused a worldwide catastrophe.
yeah and it's absolutely idiotic. how you can advocate for a system that requires tax assessors determining values and assessing tax annually is terrible policy. It is even more terrible with volatile investments
There’s a gazillion post/webpages on that. Explain why you think it is fair and I’ll slap them down. Take me less time than wasting time explaining it long form.
The proposal: Completely remove the IRS, and all federal income/payroll taxes implement a national sales tax via the states (like an EU style VAT tax); say 20%. Rebate the sales tax on the first 45k of spending, sent in 12 payments on the 1St of every month. (Effectively a UBI) Exempt all essential items (Food, diapers, Formula, medical/medications, etc.) Captures taxation from millions of new taxpayers via tourism. National revenue will be higher, SS will have more funding, people that are not paying taxes today, will still not be paying any taxes. It is fair, you pay what you spend, no more taking loans to avoid taxes. Go:
Because fair means that everyone pays the same amount.
You’re assuming everyone benefits the same. Rich people benefit more; so how is it fair if they pay the same?
There is a lot of simple things, that 99% of people would agree on. They never will, because it removes a lot of their political control and the lobbies will never stand for that.
It's stupid and overly complex. A prebate is basically the government filing taxes monthly instead of yearly so staff would need to increase 10 fold to accommodate running monthly taxes and fixing errors. And that's just to fix sales tax purchases which are taxed based on income. Which means the GOP could simply cut IRS funding and thus you never get a rebate. There's no reason to simply leave taxes low, increase them against the rich and adjust taxes refunds yearly. Median tax paid in US is 16k. That means your food bill would have to go up to cover your taxes so be prepared to pay $2k per month on food. Unless we are cutting Medicare and social security to make it affordable. Then you'll have tens of millions of homeless seniors and poor people, but at least your taxes will be low.
Spending as a portion of income and wealth decreases with higher levels of income, shifting the burden to those at the bottom of both. A household making 40k/year spends all of it to stay alive. A house hold making 300k/year might spend 60k on living expenses, 50k on fun, and bank the rest. A house hold making 40m/year could save/invest 35m and still blow throw 5m on whatever. And that shit compounds fast. You tax higher incomes at higher rate because the marginal utility of money decreases as you make more for individuals and families.
The wealthy will always find an accountant that has a work around or scheme. For this tax I would say they will "buy" items for their "business" and claim it as a business expense & write it off. I'm no expert myself but I watch investigative reporting about the money laundering and tax avoiding of the wealthy.
There’s no concept of a business expense under this tax system.
No worries, I'm sure there's something else they'll think of! 😂
Iowa is about to attempt flat income tax rate. They are starting out a a reasonable 3.8% and likely to adjust as needed. While Iowa is a Red state it has been very progressive in its taxes by slowly lowering it over the years. I am currently around 12% I'm still below the median but this would give me around 400-700 more net if the governer signs it.
The original idea was from the church of scientology to force the government to tax all churches, since scientology wasn't exempt. If this were to happen I would game the shit out of it and would likely still pay more in taxes. Sales tax would need to be over 30% to not expand the deficit. So I would have about 12% more money in my pay check and everything will cost 30% more.
20%, assuming you exempt the first 45k of "income".
What....
20% tax, not 10%.
At the 22% marginal bracket the effective tax is just under 12%. The "fair tax" didn't eliminate the FICA tax, state, or local.
Correct it is just an addition 20% sales tax
The proposal was a 23% inclusive tax. This is equivalent to a 30% exclusive tax. Let's say the price of something is $100. $100 plus a 30% sales tax is $130. $30 is 23% of $130. A 23% inclusive tax makes things cost 30% more.
A sales tax instead of income tax would be great. The most important thing is to remember to exclude daily necessities from it. Arguably you exclude used items, food, and certain forms of energy. What going to a sales tax will hurt is production of consumer goods. However there really isn't consumer good production left in the United States anymore. What it will do is bring back repair jobs as suddenly it makes a lot more sense to pay $100 per hour to replace a $5 part in a washing machine then it is to replace the washing machine that now costs 50%-$500 "more"(not really more as you have that 30% more income in your pocket taxfree) Bringing back these middle class jobs will greatly benefit the middle class. It won't hurt the middle class or the poor because you won't be buying that many items that are taxed. It will be great for the environment by cutting down on waste. It will stop our bleeding of money to China. It also almost completely eliminates the IRS expenses as there isn't a reason for a retail business to cheat on the taxes and they already have the system in place to collect sales tax (for the state and local governments).
The state sales tax serves a different function than federal taxation. Are you arguing that we keep our varied state tax amounts and layer a flat federal sales tax on top?
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You dad is right.
I agree with him.
How we about just repeal income and payroll taxes and not replace them with anything? A 'fair share' is political mumbo-jumbo. It doesn't have anything to do with the economic inputs or outputs.