But don't worry, as usual, if you're rich enough, you play by a different set of rules and can hide your money in shell trusts and schemes and pay nothing. Disgusting - give us the FairTax already.
The rich pay less because they spend less as a proportion of their income than the middle classes.
The poor pay less because they are given exemptions, or a pay boost equivalent to the tax they pay.
The government needs the same amount of money and can you guess who gets to bear the brunt of that? That's right, the middle classes get to shoulder even more of the tax burden.
No thanks!
Yes but this is already happening right? Isn't it far easier for them to keep lobbying for new tax loopholes as older ones get closed, than it is to avoid a flat tax? Am I missing something?
> The poor pay less because they are given exemptions, or a pay boost equivalent to the tax they pay.
I've never heard about this. Can you give more details?
Not to the extent it would under "Fair Tax", no.
>> Isn't it far easier for them to keep lobbying for new tax loopholes as older ones get closed, than it is to avoid a flat tax? Am I missing something?
It makes it far easier for far more people at the higher end of the income scale to pay a lot less tax and codifies regressive taxation as the intent of law.
Make no mistake, the people who came up with the scheme would not be supporting it if they didn't stand to benefit from it, significantly. It puts their 'loophole' way out front and legitimises it.
>> I've never heard about this. Can you give more details?
Fundamental to the scheme is that the poor would get some sort of tax credit, possibly an annual payment, in order to offset the new sales tax, where previously they would have paid little to no income tax. This is not the part of the scheme I object to. The re-balancing of burden onto the middle classes, and in a way that affects those with lower incomes more than higher incomes, is why I think the scheme is a failure from its very conception.
You may have the kind of economic ethics that support a tax that declines as a percentage of income as income rises, or even argue that all people should pay the same lump sum in tax, that's up to you. Personally I can't get behind that.
Ok what percentage of their income do they pay now compared to what they would pay under Fair Tax?
What percentage of income do middle class households pay before and after a Fair Tax?
> It puts their 'loophole' way out front and legitimises it.
Yes but what happens when the government decides to increase the flat tax?
This is pretty irrelevant as we agree they're dodging now, and the Fair Tax would encode that as the law. Better to attempt to close the loopholes or imagine a third system than to move to a system that's regressive by design.
As for the general rule - the proposal requires a roughly 30% national sales tax. If I earn more then I spend less as a proportion of my earnings (this is a recorded economic phenomenon, not posturing), therefore my Fair Tax percentage is lower than people who earn less, even within similar socio-economic strata.
I'm not sure there's anything hard to understand here.
>> Yes but what happens when the government decides to increase the flat tax?
Not sure what you're driving at with this question. The obvious answer is "everyone pays more".
--edit-- If you don't think those on high incomes should pay the same or higher percentage of their income as those on lower earnings, that's a different argument entirely. I'm arguing that given the position that those on higher incomes should pay the same percentage or higher in tax as those on lower incomes Fair Tax is a bad idea. If your politics don't match to this assumption then you might as well say because we're not going to come to any sort of agreement!
I would strongly disagree. Conservative estimates say the wealthy pay an 18% tax rate. Less conservative estimates put it at around 10-11%. It does matter. It's a lot easier to lobby for new loopholes when everything is less transparent. What FairTax does is make things more transparent than they were before.
> Not sure what you're driving at with this question. The obvious answer is "everyone pays more".
Yes... including the extremely wealthy. It's very difficult to lobby for new loopholes against something is that is really easy to understand.
> If you don't think those on high incomes should pay the same or higher percentage of their income as those on lower earnings,
I agree with you. They should pay more. However I strongly disagree just going down the same path of closing loop holes. It doesn't work. The middle class isn't smart enough as a whole to organize and hire lobbyists. I'm just being realistic with what's possible before I get ancient.
The point-in-time adoption of a flat tax doesn't make it harder for them to lobby for tax loopholes after that adoption than it was before that adoption.
You can't compare flat tax to the status quo tax system on the assumption that in the former system the rich will magically lose their ability to lobby for changes to the existing tax code when nothing in the change proposed does anything to make that happen.
For sure, we aren't hurting. The only debt we have is the one-bedroom condo next to a highway and in the flight path of an airport we live in (well, and a car, but we could pay it off in cash tomorrow if need be, which would be stupid because the APR on the loan is less than 1%). But it's extremely frustrating that this condo would translate to a 5 bedroom house with an acre of land where I grew up a mere 3 hours from here.
And that's really only because, for the first 15 years of our careers we've lived within our means and have not had children. $150k is not what it's cracked up to be. If one of us lost our jobs, we would definitely have to move. Unfortunately, hers is tied to this area, so if it were me to lose the job, we'd be royally screwed.
And you have to define your terms here. What do you mean by "living"? If you mean, "able to feed themselves and live under a roof", that's not living, that's subsisting. I'm talking about being more than just a serf and actually making forward progress in life. Sure, the bartender at the insanely overpriced place a few blocks from us probably only makes $60k, but he also probably lives with a roommate in a tiny apartment, still owes money on a 7 year old car, has no assets, has no savings, has no health insurance, has no chance of retiring at ANY age.
At this point, I don't think there is anything within our current distance to her job (20 minutes) that A) we would be eligible for, and B) would be cheaper. I telecommute. If we both had to drive an hour to work, then we'd have to buy a second car and the increased transportation costs would certainly eclipse any savings in housing.
Mind you, an hour away in DC is 15 miles on a good day. There are people who work here for half of what we make, and they commute 2 hours to work every morning. I hope you're not suggesting that that is a livable scenario. "Well, it is for them." Maybe for them (I'd argue they are sending themselves to an early grave, but I digress), but not for society as a whole.
At that point, if we're living 2 hours away, we might as well be working for less where we lived. Thus my point: we can't live and work here for much less than we're already making.
Instead the gp is talking about a threshold of "rich enough" where you can roll your money into these GRATs and other investment vehicles. It requires a far greater level of wealth, because you're living on the returns from investments and financial objects entirely, and in order for those returns to be enough to live on, you need a much bigger chunk of money than 150k a year.