The Father / Daughter Talk

[Lulubelle]

Originally Posted by kong

The fair/consumption tax would also hurt non-profits. If people don't get a tax break for making charitable donations, do you think they will still do it? A majority of the people probably will because it is the right thing to do, but a lot of the donations will dry up.

Also the fair/consumption tax is not really that fair. It still taxes poorer people more than the wealthy. With savings rates where they are, a middle class family of four probably consumes most of their income or even more than their income if you toss on credit cards. So they will essentially pay taxes on all of their income.

On the other hand, the wealthy don't proportionally consume as much as middle class or poorer individuals. They spend more in terms of dollars but as a percentage of income, they consume less. The majority of their income is reinvested in assets to produce even more income. So the rich will still get richer, they just will not pay taxes until they spend their money.

Good points Kong. If essential items such as gas, food, clothing, etc were excluded as most proposals I've seen suggest, do you still feel that such a tax would disadvantage the working poor? Seems to me that it would sock it to the folks who have a lot of disposable income for luxury items (Ack, like scuba gear?) You are right though, it won't pass, so I'll stop wanting income taxes to go away and just ante up my 70-90 K every year.

[georoc01]

Originally Posted by Lulubelle

Good points Kong. If essential items such as gas, food, clothing, etc were excluded as most proposals I've seen suggest, do you still feel that such a tax would disadvantage the working poor? Seems to me that it would sock it to the folks who have a lot of disposable income for luxury items (Ack, like scuba gear?) You are right though, it won't pass, so I'll stop wanting income taxes to go away and just ante up my 70-90 K every year.

If they didn't include gasoline, the price would go down signficantly. After oil, its the largest expense. However, the question then becomes..is it really essential, since there are people who don't drive? Should the cheapest gas be non taxed but that 100% octane racing fuel be taxed?

And clothes is always an interesting item. What clothing is considered essential and what frivolous? Would for example a wet suit count as clothing? How about a designer gown? Diamond belt buckle or other jewelry?

Food is always interesting because its always a question when it comes to food stamps today. Do all prepared foods count? Or only staples? How about that $50 Kobe steak?

How about services? Should medical care be taxed? How about getting a hair cut and other forms of personal grooming? How about housing? Should we tax the purchase of a home? How about rent?

When you start building in exemptions, trying to determine what is truly essential and what is basic. The other question always become if its a product or service that goes into an end product, should they be taxed or just the end product that gets sold to the consumer.

[kong]

@Lulubelle: The above poster pretty much sums up my feelings about the exemptions.

There have been some interesting estate tax cases where the courts have determined that a Lexus and country club dues are necessities and tax exempt in certain trusts because they are part of a style of life that the beneficiary of the trust became accustomed to. They said that you are able to put a dollar value on style of life accustomed to but not happiness. So happiness is taxable but style of life is not. Anyways...

There have been some proposals where middle class and lower class families would get a monthly credit equal to a certain percentage of their income to try to offset the taxes on necessary items. But then you have to decide what their income is and what is a necessary item because the items will be different for each family.

The one thing I do like about the fair/consumption tax is that people who earn income illegally (drug dealers, etc.) or other people who fail to claim income that they should claim (eBay sellers, etc.) would get taxed on their income when they spend it.

The main issue is that you can take any tax system in the world or any proposed tax system and there will always be at least one group who thinks that it is unfair to them.

[lvshell]

thats great

[reeldive]

Hey it's almost midnight and I finally read every post in this thread. WOW!

[dwatts]

Originally Posted by georoc01

If they didn't include gasoline, the price would go down signficantly. After oil, its the largest expense. However, the question then becomes..is it really essential, since there are people who don't drive? Should the cheapest gas be non taxed but that 100% octane racing fuel be taxed?

And clothes is always an interesting item. What clothing is considered essential and what frivolous? Would for example a wet suit count as clothing? How about a designer gown? Diamond belt buckle or other jewelry?

Food is always interesting because its always a question when it comes to food stamps today. Do all prepared foods count? Or only staples? How about that $50 Kobe steak?

How about services? Should medical care be taxed? How about getting a hair cut and other forms of personal grooming? How about housing? Should we tax the purchase of a home? How about rent?

When you start building in exemptions, trying to determine what is truly essential and what is basic. The other question always become if its a product or service that goes into an end product, should they be taxed or just the end product that gets sold to the consumer.

Actually, the "Fair Tax" proposal includes a prebate. The idea is that everyone deserves a tax break on the "essentials". Instead of the government deciding what constututes "the essentials", a prebate simply puts a set amount of $$$ back into EVERYONE's pockets.

The lower income people can choose to spend only on essential items in which case the prebate means they pay little to no taxes. The wealthy will always buy much more than the essentials (in terms of dollars). They will pay the most.

Read more here:
Americans For Fair Taxation: Frequently Asked Questions Answers