Re: Fairtax: how does this math work out?

AllYou! wrote:
> As to your point, I answered it quite clearly, but you just don't like the
> answer. The answer is that it would appear that the wealthy would pay less than
> they do now in taxes. Also, the poor would pay less than they do now in taxes.
> Moreover, I agree that it would appear that those people who are somewhere in
> between will pay more in taxes. There's no mystery to that.

You've said it several times, but never shown it. Show me one example.
Please include the embedded taxes you claim make up the difference. You
can't just say something over and over again and think that makes it
true. Show me how a family making middle class wages will be paying
more in taxes.

> But before I get into why I say *appear*, I'll state the following:
>
> It's also my position that if we need a wealth redistribution system, and if we
> need a welfare system, that none of the aspects of either of those should be
> woven into a revenue collection system. Rather, they should stand on their own,
> right out there in the open where there's no mystery, and no place for
> politicians to hide. If politicians believe that there should be a safety net
> for those who can't provide for themselves, then let them implement such a
> system to the extent that there's public support for it, and not hide it of have
> it duplicated in the tax code. Moreover, if politicians want to take money from
> some to give to others for no other reason than that they feel it's the right
> thing to do, then again, they shouldn't hide it in the tax code, but have it
> right out there in the open for everyone to see.

I don't have any argument with the notion that the tax policy needs
reform, or pretty much anything you've said here. I just want to see
one single example of a middle wage earner paying more in taxes. I want
to see some numbers.

> Now as to appearances, what's important to remember here is that appearances are
> based upon what the politicians want to be true. IOW, just because they say
> they're taxing income, doesn't make it true. As I've said, virtually all of us
> work for our net pay, not our gross pay. As such, all income taxes are really
> embedded in the cost of all purchases, and so the poor get hit the hardest as a
> percentage of their wealth, and the rich get hit the least. All the NST does is
> bring this out into the open.

You seem to think that I'm completely opposed to some sort of NST
system. I'm not. I just want to prove that it can actually work.

>
> >> > This is almost half of the amount of tax he would have paid last
> >> > year with the income tax. Who makes up for this 5.1 million dollar
> >> > deficit? The middle class? I don't know.
> >>
> >> Yes, the middle class makes up the difference. While there's absolutely no
> >> question that replacing all current taxes with a sales tax is not only the
> >> only
> >> logical way to tax, but that it's a lie to think that there's really any
> >> other
> >> kind of tax, there's also no question that the fair tax folks have overplayed
> >> their hand in trying to imply that everyone pays less tax. But that doesn't
> >> mean that the notion of NRST isn't a great idea.
> >
> > The middle class makes up the difference? Let's see:
> >
> > Family of four making 100k per year. Using a simple income tax
> > calculator, we see that this family owes about 20.8k in income taxes.
> > Now, let's make this realistic, and assume this family saves about 5k
> > of their money (since we want all of our citizens to be smart,
> > savings-oriented individuals). This leaves them with 95k that the spend
> > on the economy. According to FairTax.org, the family would get a rebate
> > to counter the first 25.66k of spendings. This leaves them with 69.34k
> > of taxable spendings. The Fairtax revenue generated would then be
> > 15.9k. So this middle-class family is short $4,900 of what their income
> > tax would have paid. How does this show that the middle class makes up
> > the difference, as you just said they will? More importantly, can you
> > SHOW how they will make up the difference, step by step with
> > calculations, instead of simply making vague statements?
> >
> > Just for fun, let's make a vague statement and see how it still won't
> > solve the problem. Let's pretend this family somehow ends up paying 25k
> > in sales taxes instead of 21k in income taxes. This way they would help
> > solve the deficit issue, just like you said they need to. 4k extra from
> > each middle class family. It would only take 1,325 of these families to
> > cover for the 5.3 million less in taxes that Arnold pays. Let's say by
> > some miracle they actually pay 10k more in taxes. It still takes 530
> > middle income families to make up for one multi-millionare. This won't
> > add up. I don't even want to imagine how many middle income families it
> > would take to make up for the guy who made 70 million last year and
> > only spent 10 million of it. (Hint, it'll be between 4,000-6,000
> > families by my last example)
> >
> > If you think my example is flawed, don't just say so and cut out. Give
> > us a better example, and show your work so we can verify that you're
> > not just making crap up.
>
>
> See the above that shows that you're arguing against someone else, not me. Even
> if you don't buy my argument that all income taxes are embedded in the cost of
> all purchases, I'm still not disputing that it appears that the middle class
> would be the most adversely affected in terms of the revenue (tax) program, and
> that if politicians want to implement a wealth redistribution program, they
> should do so separately and honestly.
>
> And so don't try to imply that I've ever cut and run from anything. Read before
> you stick your foot in your mouth.

Maybe you need to reread what I wrote. I just showed that the middle
class benefits greatly from FairTax. They are not in any way adversely
affected, by the calculation I showed. If you think they are, I want to
see how. I still don't see any numbers, you're just TELLING me that it
works out the way you say it does, and I should just trust what you
say. That's cutting out.

>
> >> > Let's go back to the income tax scenario, and this time let's pretend
> >> > that Arnold has a great tax guy who ends up getting his 40% income tax
> >> > down to 15%. Not a bad job. Arnold now pays:
> >> >
> >> > 30 million * 0.15 = 4.5 million dollars in taxes, leaving him with 25.5
> >> > million.
> >> >
> >> > In order for Arnold to generate 4.5 million dollars with the FairTax
> >> > system, he would have to spend:
> >> >
> >> > 4.5 million / 0.23 = 19.6 million dollars. This crazy man would have to
> >> > spend about 20 of the 30 million dollars he made last year just to
> >> > equal the amount of tax he would have paid with an amazing tax guy.
> >>
> >> All of the money which he makes will eventually be spent, and so it'll all be
> >> taxed. In the meantime, it's in the economy making money not only for him,
> >> but
> >> providing capital to the economy.
> >
> > Sure, eventually, but you're still losing out on the income to the
> > government every year. This dodges the question by claiming "well it
> > will eventually work itself out". Show me some numbers, no insults.
> > Show me that you're not just talking crap and then running before
> > anyone makes you stand by your statements.
>
> I didn't say it would eventually work itself out, so don't put quotes around
> comment as though I said something I didn't. Don't blame me for your inability
> to comprehend. What I said was that all of the money which people derive as
> income will eventually be taxed when it's inevitably spent, and your math
> ignores that point. As to the lag time that the government will incur in
> getting that money, there's also no doubt that the transition to an income tax
> will have to account for the initial lag. But if you could understand numbers,
> and fast forward to a time after the transition is complete, you'd see that you
> numbers are faulty in that in any given year, while less than 100% of all income
> derived in that year will be spent because some will be saved, it's also true
> that in that year money that was previously saved will be spent. Your numbers
> ignore that.
>
> And while we could quibble over how much is saved vs. how much is spent in any
> given year, the fact remains that all money will eventually be spent, and so
> it'll all even out, except for the lag time for the initial transition. you may
> not like that reality, but don't tell me to ignore it simply because you don't
> like it. As you said, instead of simply rejecting it and cutting and running,
> deal with it.

Quote around the comment was to illustrate a faulty logic statement,
whether you agree that it was faulty or not. When I actually quote you,
it's with >>. But let's discuss whether or not what you're saying is
true.

Arnold makes 30 million. He spends 10 million of it each year. The
government makes 2.3 million in taxes from his spendings instead of
roughly 11 million from his income tax. That's about a $8.7 million
dollar deficit for every guy like Arnold. Hundreds of men who save
their money wisely end up creating an enormous gap in the revenue
collected. The next year he does the same thing, makes 30 million more,
maybe spends 20 of it. Maybe, if we're lucky. Still running an enormous
gap. You let this go on for a decade and the system will collapse on
itself. Not to mention that a good portion of this money you're
counting on from guys like Arnold end up going to his 10 million dollar
house in Austria. A lot of that money leaves and never comes back. If
it isn't spent in America, he doesn't get taxed anything. And it's not
just personal spendings, although they make up a lot of it. Just like
supply-side economics suggests, the mega-wealthy will use their extra
money to open new businesses. But that doesn't mean they spend it in
America. Microsoft is opening a research facility in India that costs
something like a billion dollars. That's the sort of thing that happens
when you give guys like Bill Gates extra money. They might spend it
alright, but a lot of it will go to overseas expansion and personal
use. None of that brings in taxes.

But what you're ignoring is that even if he spends every single penny
ever single year, the gap widens anyways. Pretend he spends all 30
million. That's 6.9 million in FairTax, around 4 million short of what
he'd be paying in income taxes. Let's pretend every single millionaire
spends every single dime every single year, they are still contributing
to a larger and larger revenue gap.

>
> >> > More realistically, a guy like Arnold is going to spend, what, 5-10
> >> > MILLION dollars each year? That's only 1.15-2.3 million dollars in
> >> > taxes!
> >> >
> >> > Now I'm not particularly interested in hearing about how the upper
> >> > class is overtaxed as it is. I want to see where the beef is in this
> >> > proposal. Where does the money come from? Let's look at another
> >> > example:
> >> >
> >> > Guy makes $40,000 a year. This puts him in the 15% income tax bracket,
> >> > if I'm not mistaken:
> >> >
> >> > 40,000 * 0.15 = $6,000 in taxes. In order to generate that much money
> >> > in the FairTax system, he would have to spend:
> >> >
> >> > 6,000 / 0.23 = $26,100 of the $40,000 he makes.
> >> >
> >> > But wait!!! The Fairtax system doesn't start charging taxes until you
> >> > spend ABOVE the poverty level! Since the average poverty level is
> >> > around $25,000, the man would have to spend:
> >> >
> >> > 26,100 + 25,000 = $51,100 which is more money than he earned!
> >>
> >> Exactly. You've just made the case for why this guy will pay less taxes, not
> >> more.
> >
> > I've shown that it is impossible for him to balance what he would have
> > owed in income taxes with a FairTax system. I want to know where the
> > beef is. If you agree that he pays less, great, one less thing to argue
> > about, but show me a good example of who is paying more to make up for
> > it and make it a "neutral" system that's just as good as the income
> > system.
>
> I've answerd that numerous times now, once right in this post. See the above.
>
>
> >> > Now let's pretend this same guy gets his $6,000 in income taxes cut
> >> > down to $3,000 by his tax guy:
> >>
> >>
> >> Let's say pigs fly.
> >
> > Pigs fly and hell freezes over before someone refutes my examples with
> > another family that pays enough in taxes to make up for Arnold's 5.3
> > million dollar gap. Hell, show me how MC Hammer can make it up by
> > spending retarded amounts of money (remember: he has to spend enough to
> >cover what HIS income tax would have been, plus extra to help cover for
> > the cautious spender, Arnold.)
>
> See the above.
>
> >> > 3,000 / 0.23 = $13,000 he must spend + $25,000 (poverty spending
> >> > minimum) = $38,000 of the $40,000 he earned. So much for saving your
> >> > nest egg!
> >>
> >> What? You're actually running your math by showing that in order to pay the
> >> same tax as he does now, he's got to spend more. That's one hell of a novel
> >> way
> >> at looking at saving tax dollars. who the hell says that this guy should
> >> have
> >> paying taxes up to a certain amount as a goal?
> >
> > Well, if the system is going to replace the income tax system, it has
> > to bring in at least the same amount of money. I'm showing how at every
> > level, low-income, middle-income, and high-income, EVERYONE is paying
> > less, the upper class so much so that it's creating a huge gap. Where
> > on Earth does the money come from to counter-balance this? Show me
> > numbers.
>
> See the above.
>
>
> >> > Here's the only thing I see going for this system, from the
> >> > government's perspective:
> >> >
> >> > Let's say the guy earning $40,000 per year spends $24,300 normally. How
> >> > did I get to this number? I'll assume an out-of-college guy who pays
> >> > $1,200 a month in rent, $220 a month in his car payment, spends $400
> >> > each month on food+utilities, and throws in an extra $200 a month to
> >> > buy girlfriends presents, christmas time, etc. (yes I'm basically
> >> > describing myself)
> >> >
> >> > After his $6,000 in taxes, he's left with 40 - 24.3 - 6 = $9,400 net
> >> > for the year.
> >> >
> >> > Now let's pretend FairTax is in place: $40,000 - $24,300 in spending -
> >> > zero in taxes since I didn't spend above the poverty line = $15,700 net
> >> > for the year. So because of this wonderful system, I end up with $6,300
> >> > more dollars in my pocket. Let's say I spend every penny of that extra
> >> > money I've saved:
> >> >
> >> > 6,300 * 0.23 = $1,450 taxes to the government.
> >> >
> >> > So even with all this extra money, going right back into the economy (a
> >> > good thing, I know) I still don't generate anything in taxes compared
> >> > to what I was generating before. Same thing goes for Arnold:
> >> >
> >> > 30 million - 15 million spent because he's crazy - (15 million * 0.23 =
> >> > 3.45 million in taxes) = 11.55 million dollars net, instead of:
> >> > 30 million - 15 million spent because he's crazy - (30 million *0.4
> >> > income tax = 12 million in taxes) = 3 million dollars net.
> >> >
> >> > So the fairtax system saves arnold 11.55 - 3 = 8.55 million dollars. He
> >> > pumps it all back into the economy:
> >> >
> >> > 8.55 million * 0.23 = $1.9665 taxes to the government. So Uncle Sam
> >> > really ends up with 3 + 1.9665 = roughly $5 million from Arnold. I
> >> > still don't see where the other 7 million dollars comes from, to make
> >> > up for what he would have paid in income taxes.
> >> >
> >> > Can someone a little more tax-savvy explain how this system will in
> >> > infact generate MORE tax revenue for the government, or just show how
> >> > it can break even? I DO understand how it will dramatically boost the
> >> > economy, but unless it makes us all multi-millionaires, we still won't
> >> > be spending enough, by my math.
> >>
> >> As I've said, there's no doubt that some people will pay more, and others
> >> less.
> >
> > Whose paying more? I'd love to see an example of someone paying
> > significantly more (since most people are paying significantly less).
>
>
> If you would realize the reality of embedded taxes, you'd see that all but the
> very poor would pay a little more. But I do not for one minute dispute that if
> you don't believe (yet) that the math shows that the middle class would pay seem
> to pay more. It's a zero sum game.

I'd love to believe you, if you'd just show me an example of an average
family, their spendings, the embedded taxes they pay, and how it all
adds up. You can keep saying it until you're blue in the face and I
still won't just take your word for it.

>
>
> >> But the fact that you're missing is that all taxes are embedded in the price
> >> of
> >> goods and services now. When you work for an employer, do you work for the
> >> net
> >> pay, or the gross pay? If you think you work for the gross pay, then you're
> >> the
> >> lucky winner. You just won $1,000,000 in the contest I'm conducting. Send
> >> me
> >> $1,000 with a self-addressed stamped envelope, and I'll send you your
> >> winnings.
> >> The only thing is that as a newfound millionaire, I've decided that you're
> >> rich
> >> enough to contribute to a cause which is near and dear to my heart. So send
> >> me
> >> the envelope, and I'll return it with a check in the net amount of your
> >> winnings, along with a check stub which shows your gross winnings, less the
> >> deductions for the contribution you made. But don't let the net fool you.
> >> After all, it's the gross amount that matters, right?
> >
> > Explain what you mean here. Everyone is paying less. The rich would be
> > paying WAY less. If it's made up for by import taxes, then show me how!
> > Show me anything that can be verified and/or argued mathematically!
>
> Who said anything about import taxes. Why don't you spend less time on your
> high horse and more time actually reading what I post?

I put the import tax out there as a possible explaination of how the
revenue gap I'm explaining could potentially be explained. I don't know
if it's the solution, I just thought perhaps it might be, and perhaps
you'd know about it.

I'm reading what you're saying (but not proving), I'm not buying it,
and I'll keep asking for clarification until you actually do the math,
or until you stop posting. I'm not interested in throwing insults back
and forth with you.

.

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