Happy Tax Day!
Partially due to tax cuts passed by President Obama and Congressional Democrats, the average federal income tax refund is up nearly 10% from a year ago.
Taxes are at their lowest levels in 60 years:
“The relation between what is said in the tax debate and what is true about tax policy is often quite tenuous. The rise of the Tea Party at at time when taxes are literally at their lowest in decades is really hard to understand.” – William Gale, co-director of the Tax Policy Center and director of the Retirement Security Project at the Brookings Institution.
According to a New York Times poll, 62% of Americans said the income tax they have to pay is fair, including about 66% of Democrats, about 60% of Republicans and independents, and even 52% of Tea Party supporters.
According to a Fox News poll, the IRS is more popular than the Tea Party movement 49%-36%.
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April 15th, 2010 at 1:20 pm
The tax REFUND is up 10% from a year ago. I don’t think this statistic makes the point you’re implying, but maybe that was your intention.
If my 2008 income tax was $10,000, but my withholding was $12,000, then my refund would be $2,000. If my 2009 income tax and withholding both increased, to $11,000 and $13,200, my refund would be $2,200, a 10% increase. But that says absolutely nothing about my income tax burden. Or maybe I was laid off halfway through the year, so my withholding was at a higher bracket than my income tax rate ended up being. The only point your statement makes is that the American people loaned the federal government 10% more money, interest-free, in 2009 versus 2008. Stunning and compelling, but a non-sequitur to the rest of your analysis.
Also, since it has been reported widely that only 53% of Americans pay any income tax, then I’m not surprised that 49% of those polled have a favorable view of the IRS. Probably some of those polled work for the IRS.
And finally, enough with the Tea Party drivel. We all realize that the original Tea Party in Boston was all about “taxation without representation”. Somehow it escapes you and William Gale that that’s not what the current Tea Parties are all about. Profligate spending, the absence of accountability, “too big to fail”, the wandering away from freedom and liberty. Most Tea Partiers are trying to effect a movement back to the uniquely American principles espoused by our Founding Fathers. Perhaps improperly named based on their agenda, but remember the Tea Parties originated right after the stimulus was passed and leading into April 15, 2009, at a time when lots of Americans decided that year’s tax dollars were being spent unwisely, improperly, and without the consent of the governed.
April 16th, 2010 at 7:20 am
Open Minded:
The fact remains that President Obama cut federal income taxes $282 billion over two years. Meanwhile, 64% of Tea Party supporters profess the false belief that the administration has raised taxes.
After passing one of the biggest tax cuts in history (without the support of a single House Republican), the IRS issued revised tax withholding tables so that taxpayers would benefit immediately. As you correctly point out, less tax withholding would normally result in less tax refund at the end of the year. However, many taxpayers also benefited from other tax credits when they filed their tax returns, resulting in an average 10% net increase in tax refunds. These tax credits included expansion of the existing Child Tax Credit and the Earned Income Tax Credit, as well as new tax credits for college expenses, home improvements to increase energy efficiency, purchases of new homes and new vehicles, and partial exclusion of Unemployment Compensation benefits.
For example, my family income remained flat between 2008 and 2009 (which we were grateful for in this economy). Due to the change in the tax withholding tables, about $1,200 less was withheld from our paychecks throughout the year. When I filed our tax return, we also benefited from the new $800 Making Work Pay tax credit and the new $1,000 American Opportunity Credit for college tuition. Even though less tax was withheld from our paychecks during the year, our tax refund still increased 14% from 2008 to 2009.
You are also correct that 47% of Americans didn’t pay any federal income taxes in 2009, but that is also misleading. As I am sure you are aware, lower and middle class working Americans pay a much higher proportion of their income on the relatively regressive federal payroll taxes (Social Security/Medicare), state income taxes, and various sales taxes.
I am still a little confused about your position:
1) Did you oppose President Obama’s tax cuts which benefited 95% of working Americans?
2) Do you support an increase in federal income taxes for the 47% of Americans who don’t currently earn enough to pay federal income taxes?
April 16th, 2010 at 9:41 am
1) $282 billion in tax cuts which benifited 95% of working Americans came as a component of the $787 billion stimulus package, which was, as a whole, a program the Federal government can’t afford. It’s not a black-and-white thing, as you’d like to paint me into a corner with your question. YES I support tax cuts and YES I was (and still am) against the stimulus bill.
2) As you and I have written at length just recently, I support the abolition of income taxes and I favor of the FairTax as a substitute. The FairTax would replace those insidiously regressive Social Security and Medicare taxes in addition to the income tax. I’d like to venture the thought that you and I could actually agree on the compassion there. While I admit the FairTax would be progressive (the more you buy the more you pay), it would be progressive by choice, and would probably result in a better net situation for those at the lowest end of the economic spectrum. Not to mention the mechanism and expense of collecting taxes would be reduced by about 80%.
April 16th, 2010 at 1:14 pm
Here I thought we were starting a reasonable discussion, but it only took you 94 minutes to revert to your idiot liberal talking points. Don’t tell me what I oppose or support, you ass.
April 16th, 2010 at 7:13 pm
Open Minded: You told me what you oppose and support. You painted yourself into a corner. Apparently confronting you with your own contradictions is offensive to you, so I have deleted my previous comment. I’ll let your own words speak for themselves. I don’t consider name-calling “a reasonable discussion” so I will discontinue it.
April 17th, 2010 at 4:44 pm
Open Minded,
I will forgive you if you dismiss this as only coming from a nutcase.
You were talking about being reasonable. My appraisal of you is that you are reasonably representative of the Tea Party Movement, far more reasonable then some though I sometimes I might have said most.
Just how reasonable can you be?
I think I can agree that the Fair Tax might be acceptable if some modifications are made. In fact, I think if adjustments are made to the Fair Tax, certain aspects of it might be preferable to my own plan.
Now realize, I still like my own plan, and I think it is still better then the unadulterated Fair Tax, however I am willing to compromise especially when compromise results in improvement.
I will not compromise on the Estate Tax. I am mad enough that Democrats were willing to compromise on 40% instead of 50%, but if that is the best I can get then I guess I can live with it. I believe the death tax is the most beautiful tax there is and I think 50% is more beautiful then 40%.
I also wish to disagree with your disagree with your description of how the Fair Tax is Progressive. While limited protection is provided to the lower class through the prebate, the middle class pays the same rate on purchases as the upper class. The upper class might only pay more taxes (at the same tax rate) as the middle class only because they have more money to spend. I think your idea of what qualifies as being a progressive tax code is pretty twisted.
I propose: You get some of your way and I get some of mine. The best parts of your ideas we incorporate as long as the worst aspects do not destroy the American Way. We lessen the tax burden on American businesses to make American made goods more competitive in the global economy. Some economists have argued completely against it, but I can room to dismiss these points and argue against them.
I think I am going to add one more point I insist upon. Environmental impact fees will not be forgiven. Industry must pay to clean up what they dirty. Such fees much be open to their own individual justification and are not subject to the deal I might strike with you. I remain open to special taxes/fees on carbon emissions. The debate on such fees/taxe remains open and the need for them must stand alone. Presently I do not sense broad public support for such things as this, however I do not want anyone to go into this agreement uninformed. If public support for carbon taxes shifts, I do not want anyone to claim they were lied to. I am not saying carbon taxes must be imposed, that only if the majority of us decide they are necessary they are allowed.
Global warming is a big problem. Please forgive me if I exhibit a degree of self interest in trying to come up with one small citizen’s solution, one citizen who owns one small vote’s solution to the deficit problem.
Perhaps we need to try and stop from becoming overwhelmed. If we keep chipping away at the impossible that which seemed unachievable becomes possible. Just look at what Jesus did.
April 17th, 2010 at 5:17 pm
Darn it, (I hope you forgive the folksiness, but it is not allowed to say damn it) I need an editor. My ideas, at least in my small (or disturbed) mind are sound. I just wish I had the education necessary to communicate in a manner that would please even English Teachers. You stll get my point.
But beyond that, the further aspects of what I feel acceptable in the Fair Tax must be subject to some compromise. There would still be an income tax under what I find acceptable. In a nod towards Barack Obama I will agree to incomes beyond $250K being subject to the income tax beyond the Fair Tax. No one pays tax on income below $250K, beyond that level they pay additional tax on income to keep it progressive. I like the strengths promised to the American Economy under the Fair Tax but I object to those who only put it forth as a means to protect the income of the wealthy from taxes while I pay more.
April 18th, 2010 at 9:49 am
David Campbell, you’re a coward.
April 18th, 2010 at 10:44 am
Little David, there’s no reason to apologize for grammar or syntax in the blogosphere. I think everyone gets the gist of your post.
I’m afraid you inappropriately flatter both me and yourself by suggesting that the two of us could sit across the table and hammer out the changes to the tax code (I’m actually confident we could), and that if we did it would mean anything to our federal decision-makers (in a pig’s eye…). But, in the spirit of collaboration…
The FairTax in addition to some remnant of the income tax is a non-starter for me, I’m afraid. Some of the most insidious components of the income tax system are (1) the mechanism necessary to collect it, (2) the ability of politicians to grant favorable or unfavorable treatment, and (3) the efforts taken to hide or exempt income from the system. All of these drawbacks would remain no matter how much of the government revenue was dependent on an income tax or how much of the population was subject to it (you and Barack Obama suggest incomes over $250k – why should you two get that power?). I’m afraid that income tax system would expand quite quickly again as 85% of the population rationalized “what’s another 3% on the high earners?” You can imagine as well if the idea was floated (as it has been) that there should be certain new items deemed necessities – food or toilet paper or prescriptions – which should be exempt from the FairTax. Then the scramble would be on for manufacturers to classify their product as a necessity, thus to be exempt from the sales tax and basically achieve a 25% discount versus their competitors. I can envision something like a “cereal bar” being identified as a necessity but a “toaster pastry” as not. Bye bye, toaster pastry industry. Taking the arbitrary regulation, oversight, and exemptions out of whichever tax collection system we agree upon will result in a more equitable and responsible system overall.
If I didn’t express it specifically in the other thread where you and I discussed at length (does “the American Way” ring a bell), I realized in reading through my own posts and yours that I don’t have a problem with the “progressive” nature of a tax; my frustration is with the current “income” tax system. I believe that those who have been blessed more by the American capitalist system should be expected to pay more for it, because quite frankly the case can be made that they use more of the public services and…I know it will be shocking to hear me admit…they can afford it. Progressive by choice is a beautiful thing to me when compared to the current, inescapable, progressive income tax system. I truly believe that the FairTax would prove to be an adequately “progressive” tax system, when you take into account the pre-bate, because I can’t imagine that Bill Gates would start shopping at thrift stores to avoid some taxes. Unfortunately we can’t tell for sure until it is implemented.
The FairTax would provide almost 100% relief to businesses, as they would only pay tax on the finished products they bought (think office supplies). With the savings in accounting costs and the employer portion of Medicare and SS taxes, they could provide raises to employees and net a better bottom line at the same time. America would become a tax haven for business and “American-made” would start showing up on a lot of things that we buy.
Reading through your proposal, I could actually start to support an estate tax as a complement to the FairTax, though I’d bite my lip and squirm the whole way through it. If the two were complementary, there would then be some avenue of choice about whether to pay the estate tax or not. Imagine Dear Old Daddy Warbucks is getting ready to kick the bucket and he is adamantly against paying an estate tax. Well then be our guest, go out and buy Bentley’s and fur coats for every one of your kids, grandkids, and neighbors, pay the sales tax on those purchases, and whittle your wealth down to the point that you don’t owe an estate tax. Or give a wad to charity. This doesn’t address your problem about handing the Paris Hilton’s of the world everything on a silver platter, but are we talking about taxes and revenues or are we talking about social responsibility and behavior modification? Neither does it address the theoretical farmer’s family who has to sell the family business to pay the death tax, but I believe that those cases are few and far between. Not that that makes it right, but we could talk about it.
I’m afraid I don’t want to touch your topic of environmental impact fees, and I think that’s a subject for a different day. I’ll let you know my thoughts on that when there’s an appropriate thread to do so.
Thanks a bunch for the thoughtful input…I was just getting a little distressed about the value of communication on this board.
April 19th, 2010 at 7:10 pm
Open Minded,
Well, I think you underestimate what we might accomplish together. After all, we have Glenn Nye as our current Rep in the House. Glenn is a Blue Dog and if enough of us could come together and get his attention, he could sponsor a bill and possibly win the backing of the Blue Dogs.
I agree with your assessment that environmental impact fees should remain separate. Cap and Trade (Cap and Tax if you prefer) should stand alone and outside what we are discussing. I just do not want anyone to confuse that issue, while related, is outside the more narrow area under discussion.
I am personally going to insist that implementation of a Fair Tax include continuation of an income tax on the wealthy. I value greatly a progressive tax system and consider it to be the American Way. While I realize I would pay more under the Fair Tax, I would be willing to take on this burden as long as Paris Hilton paid more instead of less as well.
I do not know if you realize how germane this discussion is towards what is going on up in Washington. Big proposals are being floated up in Washington including adopting a VAT (Value Added Tax) like they do in Europe. I stand against such proposals (apparently floated by Democrats) for the same reason I oppose a pure Fair Tax.
You can not hope to eliminate the IRS. Even under a pure Fair Tax, there will be cheats and somebody has to be around to try and catch them. I am self employed and incorporated. I will not have to pay the Fair Tax on business expenses. While I might try to resist the temptation to shift personal expenses over to the business side of the ledger, if everyone else is going to do it I am going to do so as well. If I risk being caught and penalized for doing so, it will make me think twice before I do it.
Please forgive me if I am unable to immediately able to continue this discussion. I am on the road and most times I go many days between access to the internet. Now that I am pretty much done putting my kids through college I might be able to afford luxuries such as constant mobile internet access (I can claim it as a business expense – grin) but I still need to worry about saving enough money so that I do not end up eating cat food once I retire.
April 20th, 2010 at 10:34 am
Open Minded: Let me try again. As one of the hosts of this blog, you are welcome as my guest. I have been more than patient with your rude behavior.
In response to my original post, you made a superficial argument about tax refunds. I explained the reported 10% average increase in refunds in 2009 with facts about tax withholding and tax credits as well as a personal example. You ignored that.
You claimed that you “support tax cuts,” yet are “against the stimulus bill” which included one of the biggest tax cuts in history: “$282 billion in tax cuts which benefited 95% of working Americans.” How do you explain that apparent inconsistency?
You disparaged the current tax system in which 47% do not pay any federal income taxes, implying that they should be paying taxes. Will 47% of Americans be exempt from the “Fair Tax,” or would they pay more in taxes than they do now? If so, wouldn’t that be a tax increase on almost half of Americans? You ignored that too.
The so-called “Fair Tax” is inevitably regressive since, as you say, “the more you buy the more you pay.” Low and middle income tax payers spend nearly all or most of their income buying necessities. Billionaires don’t spend a fraction of their assets, no matter how lavish their lifestyles may be. The “Fair Tax” would be a massive shift of the tax burden from the rich to the middle class.
Instead of taking the opportunity to provide an explanation for these glaring inconsistencies, you insulted me. Then, you accused me of failing to engage in “a reasonable discussion.” Do you consider your name-calling appropriate in a reasonable discussion? Do you think insults are persuasive? Or do any questions of your ideology just make you “a little distressed about the value of communication on this board?”
April 20th, 2010 at 8:41 pm
David Campbell,
Under the Fair Tax, everyone would receive a prebate. The amount of the prebate is supposed to be enough to cover the costs of the the tax up to the federal poverty level, so there are some protections for the lower class, they still would not pay federal taxes. The low income people that would lose out are the working poor who qualify for the EITC (Earned Income Tax Credit). The EITC would be eliminated.
I am interested in the possibilities of the Fair Tax as long as it would be molded into a still progressive tax system. There are some advantages to the Fair Tax. The tax burden would be removed from American businesses making them more competitive in the global market place. Under world trade rules, we are not allowed to provide direct subsidies to business, however there is nothing saying we must tax them at a certain level. Removing the tax burden would be a “fair” (by world trade rules) way of providing a subsidy to American businesses helping them to compete against cheap imports and perhaps spurring more exports.
Also, the Fair Tax is supposed to be revenue neutral. If it were adopted along with a remaining income tax on the wealthy as well as continuing the estate tax, it could help lessen the federal deficit. I realize I would pay significantly more, but I am willing to chip in towards balancing the budget. I am unwilling to pay more only to give a tax cut to the wealthy.
I will note that now that the economy is starting to right itself, balancing the budget is beginning to be addressed up in Washington DC. As I mentioned, some are suggesting adopting a VAT (Value Added Tax). Well, if we are going to consider that, then why not just go with a modified Fair Tax? The disadvantages of the Fair Tax are also true of a VAT. Since so many middle class members from the right are against any kind of tax increase but in favor of the Fair Tax (which will raise their taxes) why not just give them what they are demanding? By compromising with them, we might be able to accomplish something. Besides, there are some advantages to it. Making American businesses more competitive should result in more jobs and thus even greater tax revenue.
April 21st, 2010 at 11:35 am
LittleDavid:
The so-called “Fair Tax” is not designed to be “molded into a still progressive tax system” or “adopted along with a remaining income tax on the wealthy as well as continuing the estate tax” as you suggest. It is envisioned as a total replacement of the income tax, estate tax, and Social Security/Medicare taxes. If it is “revenue neutral,” it will not reduce the deficit. The middle class would lose and the wealthy would continue to gain. Like you, most Americans are “unwilling to pay more only to give a tax cut to the wealthy.”
The VAT being floated by some Democrats would be an addition to existing income taxes to reduce the deficit (more along the lines of your proposal) , but it isn’t supported by President Obama. I think they should drop that idea as a political hot potato.
I would rather allow the Bush tax cuts to expire on schedule at the end of the year for those with taxable incomes in excess of $250,000 (raising the top two income tax brackets from 33% to 36% and from 35% to 39.6%, while retaining the middle class tax cuts), raise the capital gains tax rate from 15% to 20% for married filers with incomes above $250,000, raise the tax on dividend income from 15% to 20% for married filers with incomes above $250,000, eliminate the current $106,800 income cap for Social Security taxes, and reinstate the 2009 estate tax rate of 45% with an exemption amount of $3.5 million. All of these would only affect the 2%-3% richest Americans. Ending the unwise military occupations of Iraq and Afghanistan would save a bundle (one thing I believe “Open Minded” would agree with). Once the economy improves, tax revenues will naturally increase along with incomes and budget deficits will begin to shrink.
On the other hand, the “Fair Tax” may drive a big wedge into the Republican Party.
I would like to see Republican candidates either:
a) Publicly repudiate this Tea Party priority, or
b) Try running a political campaign on a platform of increasing the cost of gas, groceries, and medicine by 30% and eliminating Social Security/Medicare and then see just how popular that is with voters.
April 24th, 2010 at 9:49 am
I know what a pure tax would do and I am against it. However there are some advantages to it such as helping with the trade deficit as well as job formation by eliminating taxes on businesses (a fair subsidy of American exports under world trade rules).
I am not against any of what you propose, although I do not think those steps would be enough to balance the budget deficit even with an improving economy. I feel it will be necessary to also get increased revenue from the middle class not just the wealthy. The Fair Tax does this and people like Glenn Beck have done such a good job of getting people from the right in favor of it that as long as there was compromise (keep it progressive to gain support from the left and center) it might stand a chance of bipartisan support and actual passage.
I also will note that under the Fair Tax costs would actually increase by 30% not 23%. Where they come up with the 23% is that the fair tax share of final cost of what is purchased would be 23% after the 30% increase is applied. It might be easier to get taxpayers to accept such an increase if it is explained to them that everything currently with-held from their gross income would go to them and they also would receive a prebate each month to help pay a portion of the increased costs.
April 25th, 2010 at 8:27 pm
I wish to point out my own error. I wrongly credited Glenn Beck in that last comment where I should have said Neil Boortz. I realized my error this evening.
Listen to this amazing coincidence… while I have pretty ample exposure to the Fair Tax proposal due to the internet, I have never “read the book”. Well that fault is soon to be corrected. This very evening I had a second hand copy of the book passed on to me. I have always been meaning to get around to reading it and amazingly to me it almost just fell out of the sky and into my lap. I even got it for free! Who says there is no God?
I’m just disappointed in how thin the book is. I was expecting some real in depth exploration of the issue, something more then what is available on the internet, but it is awful thin for how large the print is. As he handed it to me, the fella who gave it to me stated: “It won’t take more then an hour or two to read the whole thing.”
April 27th, 2010 at 12:13 pm
David –
I had to think long and hard about whether or not to go to the trouble of a response. Truth be told, I had to think twice about even reading your message to me. Your brand of divisive rhetoric is very distasteful to me, especially when you try to tell me what my opinions are. I’ll do my best to respond to your points, and I’ll try very hard to stick to the facts without adding “rude behavior” and other colorful commentary on your methods.
Your original post gave a statistic about an increase in tax refunds, and then leapt to a quote and your analysis about taxes being the lowest in decades. I pointed out that the two are not related; tax refunds could go up whether the income tax burden was high or low, based on several factors like withholding and refund credits (on which is appears you and I agree). I didn’t ignore the anecdotal evidence from your personal income tax return as you believe; you may be surprised to know that I considered it thoroughly. I chose not to write then that my own income tax went from a $6,000 refund last year to a $1,100 payment this year. Every situation is different.
You concluded your post with two very pointed questions which I determined were intended to paint me into a corner. I still maintain that a reasonable individual can “support tax cuts” yet “oppose the stimulus bill”. I would expect as well it can be the other way around. A similar situation just took place with the health care fix bill, and Senator Coburn’s “Viagra for pedophiles” amendment. I certainly don’t think the 57 democrat senators who voted against the amendment actually favor giving Viagra to sex offenders; rather I believe they understood the political gamesmanship and they did what they had to do to keep an amended bill from going back to the House. To overlook half-a-trillion dollars of the $787 billion stimulus package in light of “one of the largest tax cuts in history” is disingenuous. But I’m afraid this is about par for the course for you, wearing out your refrain of “if you’re not for this health care bill, then you support the status quo” a couple months ago. I can support health care reform, but oppose the president’s plan, and that doesn’t make me an irreconcilable nut case or one who believes “anyone who disagrees with me isn’t a true American” which you have attributed to me in the past.
Similarly, I think I can disparage the current income tax system as the bloated and complicated revenue collection system that it is without, as you claim, implying that the 47% of Americans who pay no federal income taxes should be doing so. Actually, you said 47% don’t earn enough to pay income taxes; I expect that’s not true, because many probably earn plenty but hide much (enough to pay no income taxes). And, to be fair, you must realize that it’s not just that those 47% “pay no taxes” but, indeed, I think many of the 47% are getting paid by the government because of refundable tax credits. In many cases, they’re getting paid for engaging in what I would call “less-than-positive activities” (without judging, mind you), like having children out of wedlock. The fact that the federal government will deliver my income tax dollars to a single mother – the more children the bigger the check – is an inappropriate allocation of revenues in my opinion. I personally would like to help the single mothers of America, and I can’t tell you how my heart aches for the children in single-parent households, but the federal government shouldn’t be providing financial incentives for people in that situation to have more kids.
I’m glad the last paragraph of your re-cap specifically addresses the FairTax, because in it is a priceless line of illogic which I believe makes my point in spades. You make the statement that the FairTax is inevitably regressive and you improperly use a quote from me (“the more you buy the more you pay”) to support your point. Then you try to reinforce your point by inexplicably shifting to the percentage of income the rich versus the poor pay for their necessities. The two topics are utterly disconnected. You can’t say that the poor spend more of their income on necessities than the rich, thus the FairTax is regressive. On the contrary, the fact that the poor spend most of their income on necessities is precisely the reason that the FairTax is progressive. You may disagree with my statement, but your reasoning doesn’t hold water.
If poverty level spending on necessities for a family of three is deemed to be $1,000 per month, and the FairTax is set at 30%, then every family of four in America would receive a check from the government every month for $300 to negate the impact of the sales tax on the necessities. If a family of three – poor or rich, doesn’t matter – decides to buy the same amount of goods at a thrift store for $400 instead of $1,000, thus escaping the tax on new items, they’ll still get the $300 prebate for that month. You can see the FairTax creates incentives to be a thrifty shopper and save what you earn – what I would call “positive activities”. For an uber-rich family of three, who goes on a spending spree one month and buys $10,000 worth of new stuff, they get the $300 prebate but still end up sending $2,700 to the Fed that month in net sales taxes. The “poor” family of three who only makes $1,500 per month, and thus spends fully two-thirds of their income on necessities, gets a 20% income bump ($300) from the FairTax prebate regardless of what they choose to buy. The “rich” family of three pays a stiff sales tax tab throughout the month, but every bit of it is by choice. The middle class, as we would all expect, fall somewhere in between. The percentage of income spent on necessities has no bearing on whether the FairTax is progressive or regressive.
I could debate the FairTax all day, and I appreciate the back-and-forth that Little David and I have had just recently. He has made me realize that the right solution may be a combination of several of the ideas we’ve discussed. What I don’t appreciate is a commenter on this board – one of the hosts, no less – purposefully distorting what I’ve written and then trying to leap to an improper conclusion to tell me what I believe.
April 27th, 2010 at 12:35 pm
Little David –
I’m glad to hear that you’re reading the FairTax book. I think you’ll find it informative, if indeed short. There’s not a whole lot of explaining to be done in a one-sided forum like a book; the volumes of information come once the discussion starts, as we’ve shown.
One thing, and I hope you don’t take offense. I utterly hate hearing the “controversy” over whether the FairTax is 23% or 30%. You’ve correctly indicated that one is a fraction of the whole, while the other is a fraction of the cost of goods, but it’s the same number. For example, if you buy something which costs $75 and pay $25 tax, what is your tax rate? $25 is 33.33% of $75, but it is also 25% of $100 (the total price). You can imagine that advocates or opponents always publish the rate that makes their point, but we’re talking about the same $25.
It’s funny if you think about the current income tax in the same terms: my income is north of $68,000, so my marginal tax rate is 25%. So, for the last $100 I earn, I pay 25%, or $25 in federal income taxes. But, looking at it a different way, I can buy something which costs $75, but I’ve had to earn $100 to afford it. So why is my marginal tax rate advertised as 25%, when really it should be 33.33%, if you look at it as a percentage of the actual goods sold?
This should be a non-issue, because advocates of the FairTax say that there’s about the same amount of intermediate taxes and fees along the production line of most products which will be replaced by the sales tax. They say (and this is only a prediction) that the total cost of goods will increase minimally if at all in most cases. So if the cost of most goods will stay roughly the same, then this becomes a no-brainer. But I admit it’s tough to sign on to the idea based on a prediction like that.
April 27th, 2010 at 4:07 pm
The fact remains that President Obama and Congressional Democrats passed a bill which included $282 billion in tax cuts benefiting 95% of working Americans and taxes are at their lowest levels in 60 years.
I have already explained how tax withholding was reduced during the year and how tax credits still resulted in 10% higher average tax refunds received at the end of the year.
In your specific case, you should have benefited from a minimum of $400 Making Work Pay tax credit (if you are single) or $800 (married filing jointly), but it was probably reflected in lower tax withholding during the year instead of in your refund.
I don’t believe the reason people have babies is for the tax benefits. As a parent of two, I can attest that the financial ROI is not good.
For the so-called “Fair Tax” to be revenue neutral, either everybody would have to pay the same amount of taxes as they do now, or some would pay less and some would pay more. With any major change, there are usually winners and losers.
You are correct that the elimination of the Social Security/Medicare payroll tax and the “prebate” would more than offset the increased tax on necessities for the working poor.
Instead of being taxed on all of their income, the rich would only be taxed on the fraction of their income that they spend (and at a lower marginal rate).
According to nonpartisan independent analyses, the “Fair Tax” would reduce taxes for those earning less than $24,000 and for those earning more than $200,000. The rest of us (everyone in between) would pay more in taxes than we do now. Even advocates of the “Fair Tax” admit this, although their own analysis defines the impact more narrowly:
The political problem for proponents is persuading a large majority of voters to support a tax increase on themselves. That seems unlikely. A majority of Americans (including Republicans and Tea Party supporters) believe the current tax system is already “fair.” If the “Fair Tax” is revenue neutral, it will not reduce the deficit, but it will shift tax burden from the wealthy to the middle class. Some may agree with LittleDavid:
Personally, I favor the middle class tax cuts that have already passed and oppose the middle class tax increases of the “Fair Tax.”
May 11th, 2010 at 10:57 am
UPDATE: According to a new analysis by USA Today: Last year Americans paid their lowest taxes since the presidency of Harry S. Truman.
May 13th, 2010 at 3:00 pm
David,
I realize I am probably in a minority when it comes to being in favor of increasing my tax load, however I think someone as fortunate as me should pay more. I look at disdain on anyone who wants the government to pay for everything and then screams in the same breath that they want their taxes lowered too! I am in favor of a TRULY progressive tax code and in a TRULY progressive tax code we do not just soak the rich. Hard work should pay off and success should not be treated like it is a crime.
As for the lowest taxes since Truman, well let me state that not all of the explanation is because of the stimulus tax cuts. Virginia gave no such tax cuts yet my state income taxes fell to nearly half of what I paid in the prior year. Why? Because my income went down that drastically due to the recession. You can’t tax income that isn’t there.
I have yet to make it completely through Neil Boortz’s book. I find it less then scholarly and I am saving it for when I am completely bored with nothing else to occupy my time. More often then not when I have time on my hands I can find something else I would rather do, preferring to do the dreaded accounting paperwork necessary to keep my business going over finishing the book. While all of it could be read in a short period of time, I am finding it difficult to stomach it in more then small doses. It is completely one sided, full of distortions and no better then what Boortz offers in his radio program when he discusses the topic.
May 13th, 2010 at 5:10 pm
I don’t mind paying taxes either, but tax increases are a always tough sell politically. I would favor an increase in the state gas tax dedicated to transportation.
According to the article I linked to: “Taxes paid have fallen much faster than income in this recession. Personal income fell 2% last year. Taxes paid dropped 23%. Their analysis credits President Obama’s stimulus bill, progressive tax cuts by Presidents Bush I and Clinton, and less sales tax (partly because people aren’t spending as much during the recession).
The recession is clearly a factor. Less income obviously means less income taxes. It also means the deficit will decline as the economy improves.
May 13th, 2010 at 5:31 pm
Yes you are correct.
But I am thinking I am correct in stating that at least a portion of the right wing is in favor of the Fair Tax. It is my opinion the Fair Tax would indeed offer some advantages. If the proponents of the Fair Tax and these advantages chiefly fall to business. Business provides the jobs.
If the proponents of the Fair Tax were willing to compromise and keep it progressive in nature? Think of it, productive efforts would not be penalized, only consumption. Some economists argue this would be bad but we only have to look at China as a success story. They produce more then they consume. Why would it be wrong to do our best to structure our own economy the same way? The way we are doing it now leads to disaster. I see no real solution without real change. We can not borrow our way into prosperity.
May 20th, 2010 at 12:39 pm
UPDATE (Confirming one of my previous comments regarding Social Security): According to a new report by the Senate Special Committee on Aging, the entire $5.3 trillion shortfall over the next 75 years would be wiped out by simply eliminating the current $106,800 cap on taxable income. Works for me!
May 21st, 2010 at 10:49 am
But that would result in a large increase in taxes for the wealthy only. While I am not affected I remember how disgruntled I was when the majority raised my tobacco taxes (the tyranny of the majority). I am in favor of a progressive tax code. The lower class pays little or nothing, the middle class pays some, and the upper class pays more. I am not in favor of the upper class pays for everything. The middle class can afford to pay its own way to my way of thinking and the upper class can pay for the needs of the poor. If too many middle class citizens are driven into poverty? Well it gets very expensive for the wealthy.
By the way, the Social Security problem is the least difficult rock to crack. The real problem is the rising cost of Medicare and the recently passed health care legislation does not address this problem.
However passage of the Fair Tax along with including an income tax on wealthy individuals might solve some of these problems. While the drug dealer might escape paying taxes because none of his income is reported, he can not escape the fair tax on his purchase of the Lexus. Even the burglar who’s income comes from outright theft would have to pay his fair share of taxes on his purchases!
May 21st, 2010 at 11:28 am
Taxing all income at the same rate seems fair to me. Currently, income above $106,800 isn’t subject to the Social Security tax at all. That’s regressive. Eliminating the income cap wouldn’t solve all the other problems, but it would fix Social Security for the next 75 years.
According to the CBO, health reform will extend Medicare’s solvency by 10 years.
The so-called “Fair Tax” would decrease the tax burden on the poor and rich, shifting it onto the middle class. Proponents of the “Fair Tax” are not willing to compromise on retaining an income tax on wealthy individuals. The real winners would be the rich. (The drug dealer will buy his Lexus on the black market and still avoiding paying taxes.)
May 21st, 2010 at 12:23 pm
David,
The Social Security tax is supposed to be something like insurance, it is not regressive. You pay into the system based on your income and your receive a benefit in retirement based upon your past earnings.
Will you be willing to consider that the fair tax might rightfully tax the underground economy? If a further income tax was imposed only on the wealthy it could still be described as progressive.
May 21st, 2010 at 1:05 pm
The Social Security tax is regressive. It taxes every dollar earned by the minimum wage worker and none of the rich man’s income in excess of $106,800.
If the “Fair Tax” tries to tax the underground economy, more of the economy will be driven underground to avoid the “Fair Tax.”
The proponents of the “Fair Tax” want to replace the income tax, not supplement it. It will not be progressive.
May 22nd, 2010 at 5:06 am
It would be pretty difficult to obtain a Lexus on the black market because of all the trails left. Every vehicle has a VIN (Vehicle Identification Number) so it would be pretty easy to trace back whether the fair tax had been paid.
You seem to be in favor of completely changing the Social Security System. Right now it is something like insurance. You pay in so much based upon lifetime earnings, up to a limit, and you receive benefits based upon how much you paid in.
Are you in favor of changing it into a welfare system? You have stated you would remove the cap. Would you then also remove the cap on benefits? If Bill Gates is forced to pay Social Security taxes on all of his income would he then receive a multi-million dollar check each month back out of the system once he retired? If you are only going to remove the cap on tax payments without removing the cap on benefits then you change it from an insurance system into a welfare system and I think you then threaten the broad popular support for the system as it presently exists. I myself would not object to your proposal, but I think I would only be joining with you in a minority opinion.
May 29th, 2010 at 12:21 pm
You got to admit, there is no fast solution.