Oldie but Goodie: How Taxes Work

Sure they do. Someone has to figure out how much the state is owed and pay it after all.

Clearly the numbers are exaggerated to show the concept, but the principle is certainly valid.

But with a flat sales tax, people are in control of their taxation. Buy less, pay less.

Plus, with FairTax, everyone gets a prebate check, so now not only do the poorest not pay any taxes at all, they actually make a tiny profit.

So who is proposing this plan?

As tax brackets don't cover equal populations, to cite those in a case where the population is distributed equally is intellectually dishonest.

So why not tax consumer goods, and promote savings and investment? If you don't spend it, you don't pay taxes. Assuming you exempt groceries and basic necessities from taxation, explain to me how the "rich" don't pay more taxes in that scenario.

Great, put everyone on the dole. That's a surefire recipe for success.

Subtract the prebate, then.

How do you feel about a flat sales tax in that case?

I am.

First, it's regressive. Those who are poor would pay a higher percentage of their income in taxes than those who aren't.

Second, it doesn't fix the problem. Changing how we're taxed doesn't change the fact that the government needs to cover trillions of dollars in spending every year. Being taxed different is not the same as being taxed less.

Third, people will dodge the tax and the more money you have the easier it is. High ticket items will be sold outside the United States. Indian reservations will become retail meccas.

And fourth, some version of the IRS will remain to make sure the taxes are being paid.

Actually, it's pretty much spot on, according to the IRS stats.

The top 5% pay 60% of the income tax.

The bottom 50% pay 3%.

Better, but still quite intrusive - no the government doesn't get to pry into the lives of everyone, just every seller, except the sellers of labor. It really isn't that different from an income tax. Hell, looking at it like that, the income tax is MORE fair than a strictly sales tax.

There's only one fair tax: use taxes, and in the case where everyone receives the same benefits, a head tax. Basically, a progressive tax, of any variety, has exactly one purpose: piss off few enough people that they can't band together and revolt, or if they do, they'll be crushed by the envious majority. If people actually had to pay their fair share in this country, just for what goes under the catch-all "national defense", there would be open rebellion. Which is why government should be small enough that such impositions are minor enough not to piss off everyone.

Alternately, a good-neutral and nation-neutral import tariff of a very small %age, no more than %1-2. This has the added benefit of ensuring inspections of foreign goods; the government can be quite efficient when its goal is revenue extraction, and can thus ensure the goods are as-advertised (the issue of fraudulent olive oil comes to mind here). It would be best for the government to simply take the 1-2% in cargo, and sell it at market price for revenue generation.

Under the FairTax, everyone would get a prebate every month. Your regressive tax now becomes progressive.

The problem is that you said "the problem" as if there were only one. Yes, a FairTax/flat tax/sales tax/VAT might not make more or less money that the income tax it's meant to replace, but a host of problems inherent with the income tax would vanish immediately, not the least of which is a cumbersome bureaucracy and the fact that I have to report every detail of my financial life to some government suit or risk getting audited. Plus, it greatly, GREATLY simplifies the system so that no one would have to be a tax accountant just to figure out what we owe.

1. I think you overestimate the amount of retail sales that would be lost to overseas, and in any case expensive items have duties that must be paid when imported back into the country anyway, so it would probably be a wash.
2. Indian reservations do not HAVE to automatically be tax havens. They are under the current tax code, which would no longer exist.

At a vastly reduced capacity with vastly reduced powers and vastly reduced responsibilities.

No, it's not. I'll illustrate:

You have a town with five people.

One man makes $10,000 a year.
One man makes $25,000 a year.
One man makes $50,000 a year.
One man makes $250,000 a year.
And one man makes $1,000,000 a year.

They're all taxed at a flat rate of 10%. Guess which one individual accounts for 75% of the tax revenue every year?

But unless you're Amish there's a certain amount of expenditures you're going to have to have every year. The closer your income is to that amount the harder the tax is going to hit you.

That sounds like a bureaucratic nightmare. And of course there's the slight problem of where the money's going to come from.

Are you a member of congress?

For a fun addendum to this thread, watch this

[action=Order2Chaos]works on a Google video hack[/action]

And under a "progressive taxation system" where his RATE is hight than everyone else's he'd account for closer to all of it the tax revenue for the year. I don't see how your example fits what I think your point is, unless I haven't gotten a fix on your position on this issue. If "flat rate = bad, progressive rate = good", your example sure doesn't prove that at all.

Unless you either give a prebate like under FairTax, or you simply make the most common household necessities tax free, in which case the rich won't pay any taxes on them either.

Either way, this is obviously not any kind of deal breaker.

How much of a bureaucratic nightmare can it be compared to the bureaucratic hell pit we have now with the income tax? All you have to do is fill out a form that says whether you are married or not and how many kids you have, and the check shows up every month.

As for where the money comes from, well, obviously the rich are once again paying for the poor. The money isn't going to come from nowhere, it's tax revenue re-distributed. I can certainly see the downside to the re-distribution angle, but it sure seems to me to beat what we have going now.

yet he makes at least 20x what the first three do... why shouldn't he pay for the privilege PROPORTIONATELY?

I dunno. There's a fine line there. If everyone is socking their money into the bank, Best Buy needs a lot less people to sell, ring up, and restock DVD players.

Some saving is good (Hell, as we speak I'm cutting checks for my stocks and mutual funds), but right now credit plays a major role in our economic model and if everyone suddenly stopped spending, things would get...interesting.

I'm still trying to figure out how you can be such a goddamn little bitch about OTHER people's money.

I'm just curious if there is anything he BELIEVES in.

He doesn't believe in God.
He doesn't believe in industry.
He doesn't believe in people.
I'm not sure where he stands on Government.

I'm just mystified by how someone can be so nihilistic.

It's because for every person save one, there's someone taxed more. Were people not so prone to envy, they'd revolt. There's a reason envy is one of the seven deadly sins. With it, it's a lot easier to accept injustice as long as someone you envy has it worse than you do.

From that point of view, we need a little bit of class warfare every day, or our country falls apart.

Yay.

The 'privilege' of what? Being smarter? Busting his ass? Making good business decisions? It may come as a shock, but the vast majority of wealthy people in this country aren't born with silver spoons in their mouths. They earn it- the old fashioned way. They may not be out digging ditches but they're working every bit as hard, and in a lot of cases much harder, than the average joe. What's more, they use the least amount of gub'mint services and freebies. It is not the job of the wealthy to subsidize the rest of us. They should pay their fair share, yes, but their FAIR share is a lot less than most people would bleed them for.

Except among the intellectually-honest-but-completely-wrong leftists (read: Marxists), it's only class warfare when the rich have the advantage. When the poor do, it's social justice.

No, it wouldn't.

It would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $7, because he has a tax advisor.
The ninth would pay $3, because his minuscle salary is paid for by his company and his company is owned by his wife, while he is "deep in debt".
The tenth man (the richest) would pay nothing, and no-one who doesn't work for the IRS can understand why.

It might also be of interest to point out that the ten men earn their money by having the first four build cars, while the fifth oversees the first four, the seventh is the same company's VP while the sixth is his secretary, the eighth is the same company's President, the ninth is their banker, and the tenth plays some inconsequential ball game while millions watch.

Actually, it's not of interest. It's totally irrelevant.

How very convenient.

Best idea I've seen so far is a flat tax with a floor. After say (pulling this out of my ass) 20K, all income is taxed at a set rate. It is still a progressive tax in that the poorest will pay a lower percentage of income and yet still quick and easy.

The more simplified the better IMO. I'm all for tearing down the IRS!

I wouldn't drink with these mooching motherfuckers but once.

No doubt the four that aren't paying will be there every time the door is open waiting for their handout.