[P No R, Just P] Fair Tax?

[Clive]

Eliminating the IRS, filings, and associated CPA overhead is also a tremendous savings to all; more tax money to spend on SS, Med, etc.

I've never understood why people make that assumption.  There'd have to be a huge administrative agency to deal with all the prebates, and the feds still need to police collections of the sale tax at points of sale.  IRS focus would merely shift from individuals to businesses ... but there's still be a need to collect, count, assess, police and prosecute a very, very large pool of players.


One problem I have with the "marketing" is the constant assurance that it wouldn't make much difference to the average family.  If it doesn't give me appreciable tax relief, then why in the hell would I want to overhaul the entire system?  TurboTax isn't that expensive.

[stroh]

Ok.  Thanks for the explanations.  I know there is always something else.......

 

[Aske]

2 person family spends 20k$ ??   lmao. 
i guess those jokers didnt hear of rent/mortgage/utilities/etc.

[hobbit]

Eliminating the IRS, filings, and associated CPA overhead is also a tremendous savings to all; more tax money to spend on SS, Med, etc.

I've never understood why people make that assumption.  There'd have to be a huge administrative agency to deal with all the prebates, and the feds still need to police collections of the sale tax at points of sale.  IRS focus would merely shift from individuals to businesses ... but there's still be a need to collect, count, assess, police and prosecute a very, very large pool of players.


One problem I have with the "marketing" is the constant assurance that it wouldn't make much difference to the average family.  If it doesn't give me appreciable tax relief, then why in the hell would I want to overhaul the entire system?  TurboTax isn't that expensive.

Well, sure - you can't look at it as a wholesale abandonment of all services/costs.  But it is the elimination of a 13,000+ tax code, filing review, policing, CPA costs, etc., with the following two questions:  Ya married?  How many young-uns ya got?

Sure, there are checks to distribute, policing to do (counting young-uns), but it is extremely simplistic compared to what we're paying for now.  Yes, Turbo Tax is cheap - but thats only for regular folk like us; businesses spend millions/billions a year complying with the tax code, filing taxes, accounting/lawyer costs, etc.  That cost is certainly not eaten by the government, its passed on.

[hobbit]

2 person family spends 20k$ ??   lmao. 
i guess those jokers didnt hear of rent/mortgage/utilities/etc.

Its not meant to be anything more than a poverty level allotment.

[Clive]

Is the operational cost of the IRS keeping the US budget in the red?  That bitch has to be a drop in the annual federal expenditure bucket.

The average guy does not have a difficult tax return.  H&R Block is cheap.  Any tax "solution" sold to me based on how much better my life is going to be when I don't have to prepare a tax return is immediately suspect.

[Walfredo]

It is obvious that the current tax system was designed to *fudge* the "employee" in the ass.  But I doubt the Fair Tax is the answer to make it "fair". 

IMO the inequity lies here:

$15,650 $63,700 $1,565.00 plus 15% of the amount over 15,650
$63,700 $128,500 $8,772.50 plus 25% of the amount over 63,700
$128,500 $195,850 $24,972.50 plus 28% of the amount over 128,500
$195,850 $349,700 $43,830.50 plus 33% of the amount over 195,850

So if my family is in the 25% bracket like many citizens I have the same % of tax burden as a family pulling in almost twice what mine makes if I'm at the low end and they are at the high end.  Then you have families making almost 200K a year in a bracket 3% higher.  I know that the % is not the percent on all of your income but still. 

Now who makes these high salaries?  Sure we have CEO's and such but also professionals like Dr.s etc.  They are allowed to set-up S corps to lower their tax burden. 

The lowly employee can't shelter his tax burden without going to jail.  When you have many corporations including mine making millions of dollars that have a tax rate similar to lower middle income families something is seriously *fudge*ed up. 

But hey I can save money out of my ever decreasing paycheck and get hit on capital gains tax if my investments pan out, yeah.

[Clive]

Now who makes these high salaries?  Sure we have CEO's and such but also professionals like Dr.s etc.  They are allowed to set-up S corps to lower their tax burden. 

The lowly employee can't shelter his tax burden without going to jail.  When you have many corporations including mine making millions of dollars that have a tax rate similar to lower middle income families something is seriously *fudge*ed up.

I'm guessing that there are comically few doctors and lawyers who've set up corporations and let those companies provide them with "free" housing, board, etc. -- all things that currently are considered taxable income anyway.  And their S-corporations would also have to pay business income tax.  On top of that, under a FairTax scenario where businesses DO NOT PAY FairTax, there would be an even greater incentive to set up any sheltering business you could and channel expenses through it.

[Aske]

hmmmmm

[gleek]

hmmmmm

Just think. You could write off the purchase of your Samsung HDTV as necessary equipment for your NFL play-by-play transcription service.

[Walfredo]

Now who makes these high salaries?  Sure we have CEO's and such but also professionals like Dr.s etc.  They are allowed to set-up S corps to lower their tax burden. 

The lowly employee can't shelter his tax burden without going to jail.  When you have many corporations including mine making millions of dollars that have a tax rate similar to lower middle income families something is seriously *fudge*ed up.

I'm guessing that there are comically few doctors and lawyers who've set up corporations and let those companies provide them with "free" housing, board, etc. -- all things that currently are considered taxable income anyway.  And their S-corporations would also have to pay business income tax.  On top of that, under a FairTax scenario where businesses DO NOT PAY FairTax, there would be an even greater incentive to set up any sheltering business you could and channel expenses through it.

Really?  I know a few optomotrists for example they are incorporated.  Not sure which type but I can't see why any Dr/Lawyer self employed wouldn't.  Of course I'm generalizing in that many work for corporations etc.  But if they have their own practice why not?  Pay themselves just enough to pay personal expenses and stay out of the 25% tax bracket.  Reinvest profits into the corporation and let the pharmacutical companies pay for their personal vacations.   BTW I totally agree with your last sentence as I think Fair Tax is stupid too.  Maybe I'm talking out my ass completely but I can't see why a self-employed professional wouldn't incorporate if he could.  And I bet every other self-employed person be it Painter, plumber, or any type of business is incorporated.  That is all I'm saying.  We employees don't have that luxury. 

[Aske]

hmmmmm

Just think. You could write off the purchase of your Samsung HDTV as necessary equipment for your NFL play-by-play transcription service.

YES!
hail boortz!

[Uisce Beatha]

I've been that route Walfredo.

* 7.x% self employment tax.
* Dividends taxed at income rate thus bumping the bracket (leaving it all in the company is no help, it has to come home at some point... or what's the point).
* IRS looking VERY hard at shaky exemptions and business expenses.  If you write-off that home office it had better not be able to sleep guests.
* Health insurance ~$1,000 monthly.  Now that I'm an employee I have way better coverage for $171.
* Cost of a feckin' CPA to keep it all straight.
* Inconsistent income.  Those demanding customers aren't always as eager to send you their money as they are to take your time/effort.

I know these aren't all tax issues but it adds up.  I'm now working for the man, making less and I'm probably better off financially.  More net disposable income than before.

Maybe the mega-rich have ways to compartmentalize their money and reduce their tax burden but I seriously doubt it.  The IRS isn't stupid nor are they a tool of the uber-wealthy.  They get theirs one way or another.  Income taxes, corporate taxes, estate taxes, property taxes, luxury taxes, take your pick.  It's just that 50% of $10 million annually still leaves you with a few coins in your pocket.  No reason to complain... at least not one that would find sympathetic ears.

We tend to think the other side of the fence is always greener.  I did/do.  The reality is that you trade one set of issues for another.  The very poor aren't beat up because of taxes.  They're beat up because they're very poor. 

[Clive]

Really?  I know a few optomotrists for example they are incorporated.  Not sure which type but I can't see why any Dr/Lawyer self employed wouldn't.  Of course I'm generalizing in that many work for corporations etc.  But if they have their own practice why not?  Pay themselves just enough to pay personal expenses and stay out of the 25% tax bracket.  Reinvest profits into the corporation and let the pharmacutical companies pay for their personal vacations.   BTW I totally agree with your last sentence as I think Fair Tax is stupid too.  Maybe I'm talking out my ass completely but I can't see why a self-employed professional wouldn't incorporate if he could.  And I bet every other self-employed person be it Painter, plumber, or any type of business is incorporated.  That is all I'm saying.

Sorry, I misinterpreted you.  I thought you meant setting up a corporation to sugar-daddy the individual and dodge personal income taxes.  Most professional practices are set up as companies of some stripe for liability reasons more than tax reasons.  In a partnership (old-school model for medical and law practices), someone suing successfully can reach directly to the individual practitioners' personal assets in satisfaction of judgment.  With a company shield (e.g. a professional corporation or limited-liability company entity), the practitioners are protected: only the company's assets can be attacked.  (Absent the corporation being a sham, of course.)

As Whiskey said, though, at some point the money has to come from the corporation to the individual in order that individual to get its benefit.  So the sugar-daddy corps don't work out well for their hassle.

I would think an innovative employer could find all sorts of ways to channel compensation that traditionally is taxable through itself (FairTax-free!).  Lower base wage, but free dry-cleaning, accounts with grocery stores (for example, prepaid cards given to employees with the bills going directly to employer), ...  And the more prosperous individuals will always have the means and the incentive to find ways to shield themselves from taxation.  Maybe new rules, but same game, same goal.