Hometown America Must Save the Nation

[tigerwoodKhorns]

4. Counter to the sales pitch, many studies predict it would take a 50% tax to do what is claimed by the promoters, which is to make it revenue nuetral for both general funds and Social Security. 23% is probably just the nose of the camel under the tent.

It will definately take a 50% tax. What do you think that you pay right now? I 1099 myself and make quarterly payments. I have to set aside 50% of my earnings for taxes. Many forget about employer matching for social security. You have to pay about 16% up to about the first $100,000 that you earn as self employment tax to replace your employer matching. Add about 27% to 33% tax rate and you have 50% taxes on the first federal level. Does anyone really think that a 23% tax will replace this?

Lets talk about the rest of your taxes to see what you really have as "earning power." I said first federal level because we are ignoring import taxes, luxury taxes, fuel tax, "bad habit tax" (alcohol, cigarettes, etc) etc that none of us ever see. Now add in state sales tax at about 8%. Don't forget property taxes, auto registration, use tax, and other local taxes. Nevada does not have state income tax but most states do. How much are we talking about? Is is 10%. I don't know (but hey, its tax deductable!).

Anyway, add it all up and you are probably looking at about 60% to 70% tax on every dollar that you earn. Makes you feel good, doesn't it?

[bodcaw boy]

4. Counter to the sales pitch, many studies predict it would take a 50% tax to do what is claimed by the promoters, which is to make it revenue nuetral for both general funds and Social Security. 23% is probably just the nose of the camel under the tent.

It will definately take a 50% tax. What do you think that you pay right now? I 1099 myself and make quarterly payments. I have to set aside 50% of my earnings for taxes. Many forget about employer matching for social security. You have to pay about 16% up to about the first $100,000 that you earn as self employment tax to replace your employer matching. Add about 27% to 33% tax rate and you have 50% taxes on the first federal level. Does anyone really think that a 23% tax will replace this?

Lets talk about the rest of your taxes to see what you really have as "earning power." I said first federal level because we are ignoring import taxes, luxury taxes, fuel tax, "bad habit tax" (alcohol, cigarettes, etc) etc that none of us ever see. Now add in state sales tax at about 8%. Don't forget property taxes, auto registration, use tax, and other local taxes. Nevada does not have state income tax but most states do. How much are we talking about? Is is 10%. I don't know (but hey, its tax deductable!).

Anyway, add it all up and you are probably looking at about 60% to 70% tax on every dollar that you earn. Makes you feel good, doesn't it?

I agree. That's probably an accurate percentage for lower income people, but as you go way up in income level, the "actual" tax rate drops dramatically. Taxes on cigarettes, alcohol, gas and so on are totally regressive and always fall hardest on the lowest. This is why highly progressive tax systems are a method of achieving some "fairness" if you will.

Here's my challenge:

The very BEST period we have ever had in the US for the "middle classes" occurred between 1945 and 1975. During that period, the USA was THE place in the world that made what the world wanted. They came to US for the best goods. From cars to shoes to anything else. The middle classes boomed and prospered like never before or since. Now....here's my point....the tax system that made that possible was a highly progressive system where the top end rates on billionaires was in the 70% range. The rich were just as happy then as they are now. There was no shortage of investment, no shortage of capital, no shortage of inspiration, "incentive" or anything else. It was the greatest most explosive and ingenious and productive society the world had ever seen.

Fast forward to today's "trickle down" economics with exceptionally low tax rates on the wealthy. We are now consuming annually 7% more than we can produce! We are dependent on oil, on China, on borrowing. Middle class incomes have shrunk to the point where there almost is no middle class. What changed? The only thing that changed was the economic ideology of supply siders which has wrecked the middle class and ruined American productivity. Want more of this crap? Push for the FAIRTAX plan and you'll see the final collapse of the middle class.

pretty simplistic don't ya think? i mean in all that nothing else changed?

[bodcaw boy]

All of Boortz's procedes from the book went to charities. Mark, pm me with your address and I'll send you a copy. You will not have to worry about contributing money to anybody.

I have no confusion about the matter - it's not very complicated.

maybe that's why you need the books....

[bluesboy]

Hi Tom---

I completely agree - not everything on the Internet is true.

1. Today, a Widget sells down the street for $10 + 7% Ca. Sales Tax. When I get to the register they ask me for $10.70. They put $10 in their bank and send 70-cents to the State. Easy enough. Now we pass the FAIR TAX bill. How much do I pay? How much goes in the store bank account? How much goes to the state of California? How much goes to the Federal government?

I want to use your figures before making an actual rebuttal.

The widget that sold for $10.00 before the Fair Tax now sells for $ 10.00 because the 23% sales tax is offset by the 23% reduction in the embedded taxes that are now part of the cost of manufacturing and marketing of the widget. You may ask why would the seller of the widget drop his price on the widget? Why not just add the 23% embedded tax savings to his bottom line profit? The answer is marketplace competition. All it takes is one widget maker to drop his prices 23% in order to gain market share. One prime example of this is several years ago Congress forgot to reinstate a tax on airline tickets. The airline industry said great we can add this tax reduction to our bottom line. All it took was one airline to drop it's prices to reflect it's savings due to the lack of tax burden in order to gain market share. Within hours the rest of the airline industry was forced to drop their rates in order to stay competitive.

[tigerwoodKhorns]

Hi Tom---

I completely agree - not everything on the Internet is true.

1. Today, a Widget sells down the street for $10 + 7% Ca. Sales Tax. When I get to the register they ask me for $10.70. They put $10 in their bank and send 70-cents to the State. Easy enough. Now we pass the FAIR TAX bill. How much do I pay? How much goes in the store bank account? How much goes to the state of California? How much goes to the Federal government?

I want to use your figures before making an actual rebuttal.

The widget that sold for $10.00 before the Fair Tax now sells for $ 10.00 because the 23% sales tax is offset by the 23% reduction in the embedded taxes that are now part of the cost of manufacturing and marketing of the widget. You may ask why would the seller of the widget drop his price on the widget? Why not just add the 23% embedded tax savings to his bottom line profit? The answer is marketplace competition. All it takes is one widget maker to drop his prices 23% in order to gain market share. One prime example of this is several years ago Congress forgot to reinstate a tax on airline tickets. The airline industry said great we can add this tax reduction to our bottom line. All it took was one airline to drop it's prices to reflect it's savings due to the lack of tax burden in order to gain market share. Within hours the rest of the airline industry was forced to drop their rates in order to stay competitive.

Aw jeeze. Big huge hole in this. If the "embedded" tax is not gone how does the fed make up for it? They are not going to give up all of those embedded tax events.

You are not going to create savings or wealth here. It will not happen. The most that the "fair tax" will do is redistribute who pays the tax, but the amount collected will not be reduced. If the feds normally get $100, they will still need to get $100 at the end of the day.

Please also remeber that creating artifical wealth is why we are in the mess that we are in now.

[tigerwoodKhorns]

My last post was based on the assumption that the end price was supposed to go down (from $10.70 to $10.00) but I see how the question can be interpreted differently.

Lets face it though. This tax will never be passed because of public perception. The public is not supposed to be aware of how much they pay in taxes. it appears to be 8% plus a decent portion of your paycheck, but you just look at the amount that you are getting paid anyway. Now, if every time you buy somehting, the price has to be bumped by 35% to 50% (the tax would have to be at least that high), you will be remindd o fhte amoutn that you pay every time that you make a purchase. Buy a $50 item (sticker price) and pay $67.50 to $75 for it after taxes. This is to much in your face and too much of a reminder of what you are really paying the government.

The other major problem is that the tax encourages you not to spend, by rewarding saving and punishing spending. Then of course is the problem is deflation of your current cash assets. If you have money in the bank and now must spend and extra 23% (OK really 50%) to purchase goods or services, you just took a big hit on your assets.

[tigerwoodKhorns]

The reform we really need is budget reform. That's an area to put real time and effort and thinking into. It's an area that will payoff.

We just had 8 years of "budget reform." Remember that nice big fat surplus that we had in the 1990's. I was so mad when I got that check for $300 in 2001. I remember looking at it and wondering how much that $300 was going to cost me in the long run.

I had a discussion with my mother about this. Her response, "What good would a budget surplus do for us now?" [8o|]

[merkin]

. Miltarization is bankrupting the country. It's wonderful to stay prepared, and have a powerful military, it's insane however to spend 10X to 15X more than the #2 country. 2X to 3X should be more than sufficient.

Hey Mark,

Did you get all of these facts and figures from some military academy? Which one? We might need 30 to 40 times more for adequate security. I don't know, I've never studied it. I know when I play the board game Risk I usually need 5 to 10 times all my apponents to win not just the number 2 guy on the board. Hertz didn't get to be number one by measuring against Avis. Militarization is bankrupting the country? I would say a few terrorist in planes came closer to doing that.

In your previous post you stated that between 45 to 75 the upper bracket was 70 percent and all was well and happy. We'll there was a few things going on then like a little place called Korea and another called Vietnam. Did they bankrupt the country? I accually think the top rate then also approced the 90% rate, I could be wrong I didn't fact check that. Then what happened in 1975, accually a little before that. If I remember right I think there was a big recession then until the 80's when tax rates were cut and the economy went into a long extened boom period. Tax revenues increased until greedy congress spent all of that and even more on there social engineering. That's what caused the deficits.

So in a nutshell, it is all very complicated. We can't just stand back and say hey you rich guy, that's not fair, you don't deserve that money. I think all of us middle income and poor need to take your money and spend it for the benifit of us. When anyone uses the term fair when it comes to taxes it usually isn't. Why should any class preceive that they should be able to take away from another class in either direction that is not fair. Besides who and where are these lines drawn, what is rich, what is middle class and what is poor. It is all realtive to where you are and to even what country you live in.

I don't think a sweeping simplified statement about class warfare is the answer to anything.

Govenrment needs to get out of the buisness of SOCIAL engineering. They need to build roads, provide for our safety then get the hell out of the way.

[Zen Traveler]

....Government needs to do exactly what the population WANTS it to do.

I agree and in the Information Age that we live the electorate has the potential to be more informed and not get caught up in partisan politics if they so choose. [Y]

[BigStewMan]

No, which is my entire point - we had high enough taxes to pay for it. If you are going to play, you have to pay, and we had tax rates high enough to cover these costs for the most part. Now, we start wars AND reduce taxes, which simply shifts all the costs into the future. What kind of person does that?

JFK for one. He cut taxes by 22%. Vietnam was already commanding a price, and at least JFK had the foresight to recognize that you don't make things better by increasing the tax burden. Compare his results with his fellow democrat jimmy carter's results. I'm not a JFK fan either; but, the man was spot on when he said that "a rising tide lifts all boats." Give me one example where I'm better off if my boss loses. Your boss gets screwed so does his employees. That's just the way things happen in the real world. We should want our bosses to be successfull. *#!@ isn't the only thing that rolls downhill.

[bodcaw boy]

that is absolutely right. As mr tkd stated, in the info age, one can choose not to pay attention to the facts. Just kinda gets in the way of the agenda.

I never understood those that can't fathom cause and effect. Tax business and jobs go away. How did that happen? Maybe cause the job provider needs to be the govt......

[LarryC]

JFK for one. He cut taxes by 22%. Vietnam was already commanding a price, and at least JFK had the foresight to recognize that you don't make things better by increasing the tax burden. Compare his results with his fellow democrat jimmy carter's results. I'm not a JFK fan either; but, the man was spot on when he said that "a rising tide lifts all boats."

Oops, that history is not quite right. See Herbert Stein's Why JFK Cut Taxes.

Kennedy foresaw a budget surplus and the economy didn't seem to be at "full employment," so he proposed the cut in 1961 to deal with what he thought would be a long-run drag on the economy. According to Stein, he actually wanted to expand the economy by changes in monetary policy, but was redirected to tax cuts by Congress. The Vietnam war wasn't a big burden on the economy until LBJ expanded it in earnest after JFK's death.

We'll never know what JFK might have done about big war expenditures, although I've always thought he had too much wisdom to do an Asian land war. I do recall LBJ saying we could have both "guns and butter," though I don't think that turned out to be right.

I assume you don't mean that JFK cut total FG revenues by 22%.

[BigStewMan]

JFK for one. He cut taxes by 22%. Vietnam was already commanding a price, and at least JFK had the foresight to recognize that you don't make things better by increasing the tax burden. Compare his results with his fellow democrat jimmy carter's results. I'm not a JFK fan either; but, the man was spot on when he said that "a rising tide lifts all boats."

Oops, that history is not quite right. See Herbert Stein's Why JFK Cut Taxes.

Kennedy foresaw a budget surplus and the economy didn't seem to be at "full employment," so he proposed the cut in 1961 to deal with what he thought would be a long-run drag on the economy. According to Stein, he actually wanted to expand the economy by changes in monetary policy, but was redirected to tax cuts by Congress. The Vietnam war wasn't a big burden on the economy until LBJ expanded it in earnest after JFK's death.

We'll never know what JFK might have done about big war expenditures, although I've always thought he had too much wisdom to do an Asian land war. I do recall LBJ saying we could have both "guns and butter," though I don't think that turned out to be right.

I assume you don't mean that JFK cut total FG revenues by 22%.

Larry--I'll have to read that link tonight--still at work and checked the forum during lunch. I think my history is right. I wasn't meaning that JFK cut taxes to fund Vietnam--just that we were already invested there and he still cut taxes. What I referred to was that he lowered the top marginal tax rate from 90% to 70%. Same thing Reagan did, except when Reagan did it, it was called "trickle down." But, I'll take JFK's word for it (well, as best as one can take any politician's word for anything) when he said that "the soundest way to increase revenue in the long run is to cut the tax rate now."

[LarryC]

Larry--I'll have to read that link tonight--still at work and checked the forum during lunch. I think my history is right. I wasn't meaning that JFK cut taxes to fund Vietnam--just that we were already invested there and he still cut taxes. What I referred to was that he lowered the top marginal tax rate from 90% to 70%. Same thing Reagan did, except when Reagan did it, it was called "trickle down." But, I'll take JFK's word for it (well, as best as one can take any politician's word for anything) when he said that "the soundest way to increase revenue in the long run is to cut the tax rate now."

I'm not an economist and am getting a little out of my depth here, but a fuller quote of what JFK said was:

• It is increasingly clear that no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenues to balance our budget just as it will never produce enough jobs or enough profits… In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.

Based on Stein's analysis (above), he seems to have been referring to what he saw as forthcoming budget surpluses being a drag on the economy, which he thought would grow more if taxes were cut. Keep in mind that Reagan's tax cuts consciously went for big deficits (he never got nor sought serious spending cuts). The JFK tax cuts and that statement seem to have been used to justify large-scale deficit spending, and JFK never contemplated those as far as I know.

[BigStewMan]

Okay, I should be back to work…but, couldn’t resist checking back in.

Larry, I’m not an economist either. I’m not doubting what you said of JFK worrying about a budget surplus—I just haven’t heard that before. So, I will ask you what did he mean when he said this:

Address and Question and Answer Period at the Economic Club of New York.
December 14, 1962

In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now. The experience of a number of European countries and Japan have borne this out. This country's own experience with tax reduction in 1954 has borne this out. And the reason is that only full employment can balance the budget, and tax reduction can pave the way to that employment. The purpose of cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus. I repeat: our practical choice is not between a tax-cut deficit and a budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia, as the unwanted result of inadequate revenues and a restricted economy; or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve--and I believe this can be done--a budget surplus. The first type of deficit is a sign of waste and weakness; the second reflects an investment in the future.

[LarryC]

Check out the Herbert Stein link in my earlier post, where HS was very explicit about what JFK was concerned about. I read that last statement you quoted as consistent with that concern -- note how he was as much concerned with a budget deficit as anything. Plus, he was trying to sell the tax cut to the public and Congress.

P.S. -- What Mark said!

[BigStewMan]

Working people (I assume there are no billionaires reading theK forum) have totally lost site of their economic interests, and how to fight for them. If you think John Mack, or Hank Paulson is looking out for you with a "rising tide..." line, you are a sucker, plain and simple.

Well, I'm not a Bush fan, a Paulson fan, nor a JFK fan--so your assumption is as wrong as your long-winded argument.

And, if I'm buying a car, as a customer, I don't care if the dealer is succeeding or not. But, if I'm one his staff members, I care a great deal--my job depends on his success. And as a business owner, I should make substantially more than my employees--I'm the one that has taken the risk. Every product that they lose or damage is money directly out of my pocket. The employee may be sorry; but, it isn't money out of their pocket--it's out of mine. If I'm the one with my financial neck on the line--my reward should be greater. i'm not at all excusing the near criminal greed and corruption displayed by many of the CEO's--that is inexcusable.

by the way, i've read many of your post on a number of subjects, you really should learn to argue a point without name calling. if you so strongly believe that you right, and you are definately trying to portray yourself as an intelligent person, then you should be able to do that without using insults. It really takes the fun out of discussing stuff. I'm feeling the urge to sink to your level, so I'll take the high-road and bow out of this conversation.

[oldtimer]

Laffer's idea only works if it is executed as posited. Expenditures must remain level. When the fiscal side is ignored as it has been then no possible economic theory will work to balance anything. Revenues will rise in an expanding economy, economic expansion can be fueled with lowering taxes (see Ireland) but if expenditures rise even faster the result is obvious.

[BigStewMan]

Mdeneen--if you say it was rhetorical then i will believe you, and must offer an apology for jumping to a wrong conclusion. since the quote was one provided by me, i thought your response was directed at me. the dangers of assumptions and without being able to hear voice tone, makes things easy to misinterpret. Since I made a public statement, I owe you a public apology--and I do.

Regards.

Steve

[Tom Adams]

Wow.....I'm so darn proud of myself I almost can't stand it. I finally started a thread that's gone past 3 pages! Can you believe it?? And to think the point of the thread was to (mostly) vent about our IFG and how out of control/touch they are and wondering out loud what has to happen in the USofA before folks start saying they ain't gonna take it anymore. Sadly.....alas....(sigh)......it's evloved into a wonderful discussion about taxes frought with passion, opinion, a few facts, conjecture, and even some quotes from a dead President (no disrespect intended of JFK).

Mark - my perception of you (and I'm being sincere here) is that you are a very intelligent & insightful person who prides himself on getting your facts straight and although you "sweat the details", you don't lose sight of the bigger picture.

All of which you have posted sounds very plausible and as much as I would like to be able to rebutt, I have to concede that I can't. And to be honest, there's this part of me that says, "what if Mark is right and all that you've read and everything that the FairTax.org folks have said is wrong". But then my brain also says, "So how is it that the FairTax concept was concieved by folks from all walks of life and from all spectrums of academia and has been studied by economists from here & abroad, yet they never considered those arguments Mark has put forth??"

So at the risk of sounding combative or whatever, I will say this again......the answer to your very good question(s) will not be found here. If my perception of you is accurate, you will post your question(s) and/or arguments here: http://www.fairtax.org/site/PageServer?pagename=about_ask_expert

Additionally, you might even do some research here: http://www.fairtax.org/site/PageServer?pagename=about_research

Honestly.....the scientist in me wants proof that what you are saying is the truth just as I want to know if what the FairTax folks say is the truth. Because as compelling as your arguments are, I'm not completely sold. So my brain says, the FairTax folks need to respond and let the chips fall where they may. Would you not agree?

OTOH.....if you don't or aren't willing to ask the FairTax folks, would you mind me cutting and pasting your post comments into a query for the FairTax folks??

Tom