IS THE INCOME A FAIR TAX?
By Dogfish
I think we are all in agreement that the United States Income Tax Codes are not fair. We all can see that the tax codes are written for special interests even some you might be in. When I was younger and more naïve, I viewed the tax code as the governments way to encourage certain economic and social goals. Home ownership was encouraged by granting homeowner’s deductions for property taxes and home interest mortgage interest. No such break was provided to those that rent even though their output for housing could be just as great. Landlords are given tremendous breaks if they take the risk and own a rental unit. Capital gains treatment for those that took the risk of investment gave encouragement to that activity. You can see what other encouragements are encouraged just by looking at your own tax form.
There’s a move afoot to replace the current Income Tax Codes in favor of a new tax currently marketed under the name “Fair Tax.” The Fair Tax plan not only replaces the Income tax, but the social security tax, corporate tax and estate taxes. Now that’s a big idea. And while many think the time has come to change the tax system, we all can’t agree on the plan to do it with. So as we allow Congress to tinker with the tax code, it gets more complicated and more UNFAIR!
Many people, many corporations have figured out how to make the current tax system work for them and have found a way to pay no taxes. And of course we know, stating the obvious, that when someone doesn’t pay their “fair” share, the burden falls upon the rest of us to make up that deficit.
Your next door neighbor is a contractor; he has all the toys, a boat in the front yard, an RV in the backyard and a cabin up in Georgia. He seems to be doing very well and doesn’t always work every day. You get up every morning, Monday through Friday and work a job where you make approximately the same amount of money as your neighbor. If you make $60,000 at your job, the government is going to get $3,800 toward the Social Security System. Then cause they need your income tax money up front, they withhold another $10,000, leaving you with $46,000 take home pay.
Your contractor neighbor get his $60,000 throughout the year as he completes jobs he has worked on. Of course your neighbor owes taxes on his income also. But his income is defined differently, he is allowed to deduct many things from his income to arrive at a taxable amount. First off his vehicle expense is deductible and while you drive to work every day, all those expenses are not deductible by you. How about work clothes, you zero; him, printed t-shirts with his company name, all deductible.
So by the time he gets down to the bottom line, he may pay very little Social Security Tax and no Income tax. Of course how he gets to that bottom line is subject to interpretation. Your neighbor on the other side appears to be successful, drives a nice car and leaves the house every day for work. His work is a little different then yours, he works in the economic underground, which according to some sources equal the above ground economic world. These are sources that are not reported nor taxed. The income is not reported anywhere and the profits from these enterprises, whether Drug running or selling in the Flea Markets ends up non taxable. This money is in the underground economy and does not get taxed. If you are one of these non tax payers then bully for you, and if you’re not, well how do you feel knowing that the burden of taxes is on your shoulder and not your neighbors.
Now I am not inferring that every self employed person is a tax cheat. But who cares. It’s still unfair.
So how do we fix it? The current method of fixing it, IS NOT WORKING! My neighbor hood drug dealer pays no social security tax, no income tax and well I just don’t think that is fair! He’s got a nice BMW, I got an old beater, what’s up with that. Is this the American dream, where law breakers can live better then law abiding me, it appears so, and am I mad, YES. But like you, I am not going to do anything about it, are we?
But my neighbor hood drug dealer does not get away without paying some tax completely. He still has to pay the 7% sales tax on everything he buys. I am sure he paid it on his BMW. So if we look at the situation, while able to evade the taxes on income, he was not able to evade the sales tax. So if we shifted away from a tax on income, but rather on spending, might we also get a better and more reliable tax system.
A national sales tax would be vastly unpopular, especially if added on top of the current income tax system. But let us fantasize a moment here and let’s say we replaced the current tax system with one that was based on a sales tax, but in most cases would be entirely voluntary. In other words if you didn’t want to pay the sales tax on an item you were contemplating purchasing, you would not have to providing you met certain conditions.
Too good to be true, maybe it is. But let’s say you wanted to buy a car. And when it came to buying goods this new sales tax only applied to new items. So if you wanted to buy a new Chevy, there would be the sales tax to pay. But on the same lot is a one year old trade in. Not only will the used car be less expensive, but because it is not new there is no sales tax on it. Imagine saying no to paying a tax and it being perfectly legal. Let those with more income then I pay the new price and pay the tax. Then again without the burden of Social security and income tax on your income, you might like a new car and be willing to pay the tax.
Other benefits would not be so obvious, but they would be major benefits. Currently thousands of employees make up the most feared of the government’s agencies; the Internal Revenue Service. With the IRS being replaced by the already in place individual state sales tax collection agencies, the IRS would need just a few employees to collect the money. One in each state capital. A pall would be lifted from the land.
The millions of accountants, tax preparers and bookkeepers, could focus their work on better business practices rather then how to beat the IRS. Business people and even non business people would be lifted from the burden of saving thousands of pieces of paper to justify somewhere in the future an action taken. More time would be spent on activities that would benefit society and one’s own health if desired.
Of course a sales tax to replace the Income tax, the estate tax and the social security taxes will not be a small one. But since it is voluntary in most cases, a 23% tax on new goods does not seem so bad. With employers and employees not paying into the Social security system, money would be saved by business to invest or pass the savings on to the consumer. It is estimated that General Motors could lower the price by $1,500 a car. That is what each car costs them in payroll tax and accounting expenses. So when you buy a car that is $1,500 cheaper, then the total cost might be comparable to the old total cost.
Now the fair tax proposal is not unique in that it is based on a national sales tax. Making it voluntary adds to its uniqueness. Some have a concerns that this tax would unduly hurt the poor, since they can’t afford the tax as easily as the more well off. This plan says lets figure out what the taxes would be on the goods that most consider necessities, toilet paper, peanut butter, rice, veggies, and the like and figure out what the tax would be on that per person. And so that the poorest don’t suffer with a tax burden, we will send every one a check for their share of the tax on these necessities.
This monthly check would stimulate the economy as people would spend this money when the received it in most cases. Another benefit to making the tax system more efficient.
I take the summary from the web site www.fairtax.org :
The FairTax plan is a comprehensive proposal that replaces all federal income and payroll based taxes with an integrated approach including a progressive national retail sales tax, a prebate to ensure no American pays federal taxes on spending up to the poverty level, dollar-for-dollar federal revenue replacement, and, through companion legislation, the repeal of the 16th Amendment. This nonpartisan legislation (HR 25/S 1025) abolishes all federal personal and corporate income taxes, gift, estate, capital gains, alternative minimum, Social Security, Medicare, and self-employment taxes and replaces them with one simple, visible, federal retail sales tax — administered primarily by existing state sales tax authorities. The IRS is disbanded and defunded. The FairTax taxes us only on what we choose to spend on new goods or services, not on what we earn. The FairTax is a fair, efficient, transparent, and intelligent solution to the frustration and inequity of our current tax system.
While your argument is rational, it does not address the root issue of parasitic government abuse of the society it feeds upon. Though your nation recently celebrated its day of independence from the tyranny of a king, many of your fellow citizens seem not to recognize the rise of an equivalent royalty in your elected and appointed officials. Taxes seem less a means to provide necessary services than the diet of an ever increasing, insatiable, unaccountable and arrogant class of rulers.
The excesses and ineptitude of those who occupy positions of priviledge and power in American society are evident in the oil debacle which may well destroy the marine ecosystem of the Gulf of Mexico. The same experts and officials who extract money from citizens presumably to exercise oversight of critical and risky industry also extract, or willingly accept, money from any entity which might be affected by that oversight.
The problem appears to exist to some degree at every level of American government. While Americans expect government and business in other nations to be inefficient and corrupt, there is a blindness which pervades when one’s own society is assessed.
To be king, it is useful to have many powerless peasants and a group of loyalist sycophants. Throughout history, in all societies, those in power, regardless of their original intent, begin to prey on the weak. Willing sheep are best for a wolf and complacent and malleable peasants are best for a king.
Look at your local leaders, your state and federal agencies and elected officials at those levels and consider what sets them apart from you and your friends. Do you believe they are gifted in some way? Are you comfortable that their decisions dictate the limits of your individual choices and your quality of life? Are they more capable than you to decide how your resources should be used?
If they can’t fix the small things you know to be broken or wrong, can you trust them to decide for you the direction in which your society will move? Would you give your life for them or commit your child to a conflict in which your leaders will themselves will never suffer?
The fair tax is a concept which appeals, though the rub is that the money still goes to the hands of the same incompetents who squander what they now remove from your pocket. Your rulers are not fair, efficient, particularly intelligent or transparent, nor do have have to be, and that is the real flaw in the system.
The real flaw in our system is the citizens themselves. They revel in the leaders of “American Idol” while idly sitting by and let the “ruling class” steal everything they have in numerous ways to pass the money up to the “ruling class”. In its endless wars so that 50% of our national budget goes to “Defense” passed up to the weapons makers and “corrupt” foreign government leaders to keep our arms business going.
The citizens are so trained to be greedy that they complain about gasoline costs while refusing to encourage “Alternative Energy”
Any body wonder why no one in this country promotes solar independence. Every one of our houses could be fitted with solar panels on the roof and supplying most of our daily energy needs. But there’s no revenue in it for the power companies and the politicians. Take a look at your power bill. Here in Gulfport, at least, in addition to our energy and fuel charges, there are three taxes added on to the bill. A gross receipts tax (which up until this year was called sales tax, why the change in language?) which goes to the state government. Then there is the Municipal Franchise fee and utility tax. All three of these charges are a percentage of your bill. So given that their revenue would decrease by encouraging conservation, in reality they have no interest in doing so.
I could go on, but the problem in this country stems from the people themselves. A basic spineless bunch that would rather sit at home and watch mindless television and drink beer and get up the next day and do it all over again. Fight for their rights, not till their world is gone and when it is barely livable and the rich have barricaded themselves inside their mansions, will the peasants march outside with pitchforks and torches.
The tax system, as it is, was not established to serve the public, but to subsidize industry. Read Manifest Subsidy
http://findarticles.com/p/articles/mi_m1554/is_n3_v21/ai_18008942/
The Trillions poured into the Pentagon is redistributed to maintain the industrial base, and Flavor-of-the-Month Wars are used to justify the expenditure. Volunteers are praised as heros but those who avoid service have more socially redeeming qualities, afterall they didn’t need the government to make them heros or give them meaning in their lives. They stay home to barrow and spend, feeding the system that takes a piece of the action no matter what they do.
Politics is just the entertainment division of this money-laundering scheme. Politicians become the vehicle that drives the sheeple to the checkout counters, winning votes from the riders and the cashers alike.
Housing is the industry of Gulfport, as Mrs. King has most recently stated, Pasadena Yacht and Country Club pays 60% of the taxes in this city. Add to that the taxes paid by Town Shores and you’ll see why the Police Department hangs around Ward 1 when the action is in Ward 4.
Why are taxes so high? Well here’s an example of our National Problem in a microcosm right here in Gulfport.
Kipp’s Colony suspects that they pay too much for flood insurance or are disqualified because of their low elevation, so they hired someone to examine the numbers at a cost of $20,000.00 dollars. The preliminary result appears to be in their favor and the Federal Government has been wrong using an old formula. The old flood plain is not assessed accurately according to the new algorithm.
Subsequently Kipp’s Colony and PYCC is now reclassified as Higher Ground and can now acquire federal flood insurance or pay less for it. Because the result was favorable some of the Council members, wanting to gain popularity from this positive outcome, feel the City should reimburse Kipp’s Colony for the $20,000.00 investment. Mrs. King’s justification for this expenditure is that it is our responsibility, how she comes to that conclusion is a mystery yet to be determined, but it’s a popular expenditure to those who are the keepers of the tax purse. Right or wrong Mrs. King wants to gain from this windfall. I wonder, would she still feel this way if the conclusion had gone the other way?
Should the City subsidize all expenses that citizen accumulate when the decision is favorable? If that’s the case then I’m sure that Mrs. King will be more than Happy to reimburse Al & Cindy Davis for their cost in correcting the Clam Bayou assessments and the citizens will understand, why? Because the precedence was established with Kipp’s Colony.
The Council is spending money they don’t have, in a deficit year, to buy votes from the major taxpayers in this bedroom community whose major industry is housing. Or did I miss something?
How would our cost change if we used the Fairtax Plan rather than the Income Plan. How would we be restricting the politicians from spending money they do not have? Moving the chairs around on the Titanic with not keep the boat afloat. Your mileage may vary.
Dogfish …Right on!! I am as guilty as others of some of what you describe. Good food for thought!!
While the “Fair Tax” Plan would not probably affect the income received by Gulfport from the Federal Government, and I totally agree that the problem with governments is spending. The above example of a council members desire to cover some costs of voting citizens is a prime example of “catering to special interest” is just an example of the way our whole political system works.
Taxation is the bane of all societies, with even Joseph and Mary succumbing to the necessity.
But here in the good ol USA, tax avoidence is the national pastime. While some authorities state that the “underground economy” is over 50% of the “economy”. I feel that even if we consider fifty percent the correct nember, that is one half of all income being untaxed. Putting a burden on those that do pay.
Lets look at some examples of those that are not taxed. Certainly the most prominent are those that are engaged in illegal activities. Of course they do not report any income, they wouldn’t want to call attention to their activities. Drug dealers, street merchants, musicians, artists, all of who sell their wares or services in a mostly cash enviornment.
Do you think the garage sale vendors report that income? Legally they should, but of course lets get real.
A sales tax would catch a lot more revenue as everyone spends money on goods sooner or later.
This aspect would also not punish savers who put money in accounts only to see their interest dwindled by an income tax.
Why won’t the government change it. Special interests, offshore tax avoiders, multinational corporations all have an interest in not changing the system.
Having just visited the DC capital area, it is plain to see that the people of governement are enjoying those benefits from our present system. They don’t want to report their illegal contributions, which if caught by a sales tax would not escape taxation.
Numerous “underground” services are available in the Capital area and certainly those that proclaim to be our public servants are enjoying the fruits of those benefits.
They may be fooling a lot of the people, but they aren’t fooling us all. Of course as mtober relates, we are all guilty of avoiding taxes in some sort.
So the chance of “change” as our President promised, is slim, just as it is from him.
Just to be clear… I was referring to these statements….The real flaw in our system is the citizens themselves. They revel in the leaders of “American Idol” while idly sitting by and let the “ruling class” steal everything they have in numerous ways to pass the money up to the “ruling class”. In its endless wars so that 50% of our national budget goes to “Defense” passed up to the weapons makers and “corrupt” foreign government leaders to keep our arms business going.
The citizens are so trained to be greedy that they complain about gasoline costs while refusing to encourage “Alternative Energy”
When all else fails use a religious fiction to give it legs.
There was no Empire tax in Rome 2010 years ago, the story is fiction.
Argument against a salestax
http://www.lewrockwell.com/gregory/gregory48.html
A barter system would ignite, and without a full accounting of everyone’s worldly possessions there would be no way to account for consumption.
Tax breaks, incentives and subsidies is where the real money is lost in our present system. That’s the REAL underground economy. A guy selling his junk at a yard sale is hardly a tax cheat or a threat to fair tax practices. Taxes are paid on Profit, if someone sells and item for $5 that he paid $100 for 20 years ago, should he account for the loss? If normal depreciation is 2% a year and he looses 5% can he claim the unexpected loss in residual value on yard sale items?
Black markets, drug dealers, hookers, pimps and all the rest are criminals first, not tax evaders primarily. Under your criteria the homeless are tax evaders because they don’t pay tax on the charity they may receive. If I buy you a beer and you don’t claim that free income on your taxes, does that make you an evader? How about car-pooling or soccer moms driving kids for free, should those transportation dollars be added to the freeloading kids and their parents?
The system of taxing needs to be simplified. Everyone should pay if they are able.