This doesn't look good...

[mstailey]

Anyone catching on to this?

http://www.boatus.com/foundationsurvey/TakeSurvey.asp?SurveyID=4JJ553K329lKG

 

[Passages]

I'd be surprised if this goes too far. Remember, most DC based politicians have a primary residence in their home state and a second home near DC. Recinding the 2nd home mgt deduction would actually cost THEM something - and we know THAT will never fly.

 

[mstailey]

Passages,
Agreed. However, the majorty also thought the removal of credit card interest for a deduction would not fly for the same reasons you stated. This one might have some teeth due what they are trading for.

 

[Freestyle]

Unless they raise the trigger points for the Alternative Minimum Tax, not many yacht owners are going to get much use of an interest deduction for their second home (boat) if they are carrying any kind of home mortgage and state tax deduction.

I went ahead and paid the boat off after realizing that the interest deduction fell into a pool of other deductions that AMT wiped out.

It's a problem I hope to have every year so long as there is never a 100% tax bracket.

 

[Genesis]

This survey is a load of crap.

There is exactly ONE tax reform proposal worth a hill of beans - its HR25, and found at http://www.fairtax.org

Yes, its an actual BILL. Get off your butts and pester your reps and senators to PASS THE DAMN THING ALREADY.

It replaces ALL federal employment and income taxes with a consumption tax and offers a "prebate" that completely untaxes the poor. It is revenue neutral, completely discretionary on your part (since you pay no tax on necessities) and there is no tax on used goods.

Thus, you could buy and sell all the used boats you want with ZERO tax consequence, and you take home ALL of your paycheck (yes, including what is now held back for FICA/Medicare.)

 

[SKYCHENEY]

This survey is a load of crap.

There is exactly ONE tax reform proposal worth a hill of beans - its HR25, and found at http://www.fairtax.org

Yes, its an actual BILL. Get off your butts and pester your reps and senators to PASS THE DAMN THING ALREADY.

It replaces ALL federal employment and income taxes with a consumption tax and offers a "prebate" that completely untaxes the poor. It is revenue neutral, completely discretionary on your part (since you pay no tax on necessities) and there is no tax on used goods.

Thus, you could buy and sell all the used boats you want with ZERO tax consequence, and you take home ALL of your paycheck (yes, including what is now held back for FICA/Medicare.)

That's right. And it encourages savings and investment by only taxing those who spend. It, unfortunately, stands little chance of being passed.

 

[Genesis]

Not necessarily. It has some 30ish cosponsors at present. That's not a landslide, but its also not a small number.....

There's a LOT of chatter about this. The lobbyists on K Street of course hate it - they'd all have nothing to lobby for anymore.

But the people are catching on, and while I don't expect it to pass tomorrow, the groundswell is building. I have high hopes for this one....

 

[Avenger]

Okay, I'm sure I'm sticking my head in the buzzsaw here, but...

First, let me admit that I didn't find a lot of information on the fair tax site. Apparently I need to buy the book.

Second, I know this isn't the place and we don't have time for a long debate on this, so I hope this doesn't get out of hand. That being said...

As I understand this it's basically a national sales tax. Wouldn't this have a similar impact to the 10% luxury tax? It was certainly a discretionary tax. And the wealthy discretely avoided it by not buying big ticket items which bankrupted most "yacht" manufacturers. I'm not advocating socialist taxation but wealthy people will not spend the same percentage of their worth that the middle class does. I mean, I'd guess we spend about 70-80% of our income on food, fuel, clothing, home maintenance, automotive replacement and upkeep, mortgage etc. obviously including more important things like Hatterases too. If I had millions of dollars (let's imagine for a moment that I travel in Freestyle's social circle) I wouldn't be buying ten BMW's and a Hatteras every year. I'd probably spend more total dollars then now but certainly not 70-80% of what I have. So the idea that this taxes wealth doesn't really seem to work. Is this tax to be applied to the fuel that I commute to work or heat my house with? Those aren't discretionary items. Or did I miss something by not reading the book?

Also, regarding used items, unless this eliminates state sales tax your used boats will still be subject to tax just like they are today. I'll also bet money that most states will tax the total sale price on new items after the 23% "fair" tax. These guys stay up nights trying to figure out angles like that.

The idea brings up some excellent points about how we fund the government, and they're mostly right. But as I understand this, I doesn't seem like the answer. What am I missing here?

 

[Genesis]

A lot.

First, by getting rid of corporate income and payroll taxes you reduce the cost of complience raidcally to business. Estimates are that between 23-25% of the price of everything you buy is actually tax - before you pay sales tax - that is passed on through business transactions to you as a consumer. Its just hidden.

So, by removing those taxes and replacing them with a national sales tax the retail price of goods, including the tax, does not materially change. What changes is the cost of complience - it goes through the floor. This frees huge amounts of capital for business expansion.

Second, the "luxury tax" was on top of other taxes AND it applied only to certain purchases. This applies to everything. So a rich guy can't get around it if he wants to spend money on something new. Since the total price (with tax) is no higher than it is today, there is no reason for evasion.

Third, encouraging people to invest instead of spend is a good thing, not bad. Investment is why you have a job, and why everyone else does too. By punishing this through taxing wealth (instead of consumption) we punish those that do well. They are thus incented not to take as much risk and to avoid exposing their wealth to taxation.

If you're rich, what good does it do you? There are two things you can do - you can spend money, which helps others (you buy things) or you can invest (which helps others.) If we simply steal your money (through taxing it) then we remove your incentive to earn more of it, and give you an incentive to find legal ways to hide it from the tax man. It is far better for society as a whole if you invest than spend, although inevitably you will spend.

The millionaires will still buy their yachts, because they want them, and whether its a yacht, a vacation cruise, a new Bentley or a mansion they will have to pay the tax if they buy it new.

Yes, the tax is applied to the fuel you buy to drive to work.

The reason this tax system is not regressive is that every household (of legal status - illegals don't get the benefit here) receives from the federal government a check every month - in advance - for the amount of tax which would be collected on a poverty-level income for the number of persons in that home. So, if the poverty level income for you is $11,000 a year, you would recieve a check for 1/12th of the tax on $11,000 every month.

The net result is that a person who lives at the poverty level pays no tax (they can't spend more than they make)

A person who lives at twice the poverty level pays 1/2 the tax rate (the first half of their expense is tax-free, the second is not.)

As you make more money, the influence of the "prebate" drops off. This creates a progressive tax system.

What we have now is HUGELY regressive on the working poor. For those who are at or near the poverty line FICA and Medicare are tremendous burdens for which there is no recovery. The Fair Tax fixes that.

You need to read the book.... its all in there...

 

[Traveler 45C]

[The reason this tax system is not regressive is that every household (of legal status - illegals don't get the benefit here) receives from the federal government a check every month - in advance - for the amount of tax which would be collected on a poverty-level income for the number of persons in that home. So, if the poverty level income for you is $11,000 a year, you would recieve a check for 1/12th of the tax on $11,000 every month.

I’m a fan and I will get the book, but I do not understand the above. Any chance you could elaborate further???

 

[admiralty58]

What I liked about it is that it could encourage corporations to remain or relocate back to the US- before all manufacturing ceases here...

 

[Maynard Rupp]

Why can't we just get something like this done?? By the time the politicians get done adding stupid pork to the bill, it won't be worth passing.

 

[Avenger]

Thanks for the response, a lot of excellent points, but I think human nature is going to respond differently than the logical arguments would have us expect. Just my baised opinion from dealing with the public for too many years. I have a laundry list of questions and monkey wrenches for this, but in the interest of keeping it from getting out of hand I guess I'll have to get the book. Maybe it'll save Karl from some carpal tunnel syndrome.

 

[Genesis]

[The reason this tax system is not regressive is that every household (of legal status - illegals don't get the benefit here) receives from the federal government a check every month - in advance - for the amount of tax which would be collected on a poverty-level income for the number of persons in that home. So, if the poverty level income for you is $11,000 a year, you would recieve a check for 1/12th of the tax on $11,000 every month.

I’m a fan and I will get the book, but I do not understand the above. Any chance you could elaborate further???

Sure.

The intent of the prebate is to "untax" the poor. That is, we want a progressive system, which is what everyone claims we have now (but we do not, due to FICA and Medicare!)

The US Government already has (and has had for years) tables updated every quarter for the federal poverty line for any size household. There's a base for one person, and then an additional amount for each person in the household. This is the amount of money the government says you need to provide your "basic needs" (basic food, housing, clothing, etc.) It varies from region to region because its more expensive to live in, for example, Hawaii, than in Nevada.

So, under the Fair Tax, every household gets a government check for the amount of tax that would be due on the federal poverty level income - in advance. So if your poverty income for your household is $10,000 (for example), and the tax rate is 28%, you'd get a check for (10,000 * .28 / 12) or $233.33 every month.

This amount is how much tax you would pay were you to have that income, presuming you would have to spend all of it to meet your basic needs - which a person living at the poverty line is presumed to have to do. You get this check whether you need it or not, whether you make $1m a year or $1 a year. If you make LESS than the poverty level income, your household actually has a net negative tax rate (that is, the government pays you to live.) If you make the poverty level income then you effectively pay no tax - its still collected from you, but the government gave you the money before you had to spend it. They give it out, you give it back. Every month, and you get it before you spend it, so there is never an issue of you having to "carry" the balance.

If you have an income that is twice the federal poverty limit, and spend it all, you would pay out twice as much in tax. But you'd still get half of it back. So your EFFECTIVE tax rate is 1/2 of the 28%, or 14%, because half of the tax is paid for you.

As your income rises, your effective tax rate rises as well - on things you buy.

As for the monkey wrenches, get the book. Its all in there. There are a number of things I thought I could shoot holes with when I first heard about this, but after very careful study I've come to the conclusion that they're illusory, in that there are no net losses in this plan. That's not to say there aren't issues - there are with ANY tax system - just that there are no circumstances under which people are worse off than they are now in that regard, and in virtually all cases people will be amazingly better off.

Consider the difference in your life if the price of goods and services was the same after tax (that is, the price charged would go down, but the tax would make it back up) BUT you kept your entire paycheck......

 

[Traveler 45C]

Yea ok, I get it now. Thanks Boss.

The book is on the way and I’ve joined the club.

Can you imagine NOT having to deal with income taxes anymore? That alone is worth it!