Article on CNN Money

[TomAiello 26]

I totally agree with you.

If spending is low enough, no one is going to care much how the (low) tax burden is apportioned.

When the income tax was first created (when the funding needed was very low), the top 1% of taxpayers payed 7%, the next 1% payed 6%, and so on down until the 93 percentile of earners payed 1%, and anyone at 92% or below in the income rankings payed no tax.

Then again, it was also a "temporary" measure that was only necessary because of wartime spending, and would be eliminated as soon as the threat to national security ended.

-- Tom Aiello

Tom@SnakeRiverBASE.com
SnakeRiverBASE.com

[mnealtx 0]

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Just going to paly devil's advocate:

This plan could still be perceived as unfair by some. For example, a person living in Detroit is going to have a much different base cost of living than a person living in, say San Francisco.

A tax system such as you have described would put significantly more burden on someone in San Francisco making 100K per year, both in the income tax and VAT tax, than it would on the person in Detroit with the same income.

It is virtually impossible to create a tax system that seems fair to all involved. That is one of the reason that government spending (which is the real cause of taxation) needs to be curbed. If we could curb the spending, it would be easier to come up with a tax system that was more palatable.

How do you come to that conclusion? How does it make more of a burden on the person in Cali compared to the current income tax system?

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[jerryzflies 0]

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The one I like is basically the one proposed by Jerry Brown (Governor Moonbeam) back in the 90's.

Create an income "floor" below which you pay no income tax at all--something like 25k or 30k dollars per year. Then tax all income above that floor at a flat rate. Create a national VAT (sales tax) at a very similar rate (I think Brown wanted something like 13% rates on each tax, but I can't recall his details).

This sort of tax system encourages saving over consumption, eliminates loopholes and leaves the poor (and even the not-so-poor) with either zero or near-zero income tax burden.

everybody should directly pay SOMETHING, even if it's a token gesture

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Including the unemployed, homeless, babes in arms...?

(outside the sales tax which is indirect) - direct ownership of the government is necessary for all citizens

Since you object to lifestyle choice having any influence (previous post this thread), there shouldn't be any sales tax, since what you spend depends on your lifestyle.

If you can't fix it with a hammer, the problem's electrical.

[DrewEckhardt 0]

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Just going to paly devil's advocate:

This plan could still be perceived as unfair by some. For example, a person living in Detroit is going to have a much different base cost of living than a person living in, say San Francisco.

A tax system such as you have described would put significantly more burden on someone in San Francisco making 100K per year, both in the income tax and VAT tax, than it would on the person in Detroit with the same income.

It is virtually impossible to create a tax system that seems fair to all involved. That is one of the reason that government spending (which is the real cause of taxation) needs to be curbed. If we could curb the spending, it would be easier to come up with a tax system that was more palatable.

How do you come to that conclusion? How does it make more of a burden on the person in Cali compared to the current income tax system?

I used to live in Boulder, CO which was allegedly "expensive." In hind sight I realize it was cheap, cheap, cheap!

I owned all the home I wanted within city limits (town house, 1200 square feet, basement workshop, and attached garage), walking distance to nice restraunts, cycling distance to work, etc. in an awesome school district on which I paid $1500 a year in taxes. Sold it for $266K.

Moved to Redmond, WA and bought something similar enough within a month of when I sold the first one. Paid $25K and $2800 a year in taxes although that was offset by a 0% income tax rate.

I've since moved to the Bay area. I might be able to get a comparable property + location for $900K. Property taxes would be $10K/year. On the same income I earned in Boulder I'd have $55,000 less left after housing costs so a flat tax rate would eat a far larger percentage of what I had left.

This is small town-home or 1950s 1000 square foot two-bedroom territory. Modest ranch homes on typical suburban lots have asking prices of $1.2-$1.4M.

9.55% (10.55 including SDI) versus 4.63% marginal state tax rates make it more painful.

In San Mateo County, families earning up to $150,000 a year and buying modest homes of $700,000 or less qualify for the county's moderate income loan program.

At the other end of the spectrum, median home price is $7500 in Detroit.

[mnealtx 0]

Ok, I think I see where you're coming from, now - the disagreement is with the VAT, correct? What if the VAT was not levied on purchase of a primary residence?

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[jdfreefly 1]

All of these reasons...plus factor in the fact that buying things in the bay area usually costs more since store owners are passing along the higher cost of rent and salaries to the consumer.

Higher cost of goods and services in the area leads to a larger impact from the VAT.

So...that tax plan once enacted would seem very unfair to a person living in San Francisco....cost of living is crazy here.

Methane Freefly - got stink?

[jdfreefly 1]

It's not just with the vat. Even if you remove mortgage/rent from the VAT, I'm still in a situation where the income tax is taking much more of my disposable income than the guy in Detroit.

EX: (Based just on rent/mortgage alone)
Assume we both make $150.
Incomes of $150 get a 13% income tax.
Both me and the dude in Detroit owe $19,500 at the end of the year.
A 2 bedroom apartment in Detroit will cost about $7,200 year.
A 2 bedroom apartment in the bay area can cost $36,000.
So in SF, after rent I have 114K in income left and the guy in detroit has 142,800...but we both pay the same tax.

Start factoring in the other ways in which my income gets degraded, like more expensive food, clothing and transportation costs and it could quickly look very unfair to me.

I'm not saying this plan isn't better than the one we have, I'm just pointing out that when you bring up the subject of taking money from people you are never going to succeed in making everyone happy with the way you do it. The best solution is to try and keep the price tag as low as possible.

Also, in response to Tom's post about the tax supposed to be "temporary"...yeah, how many real world examples do we have of the government giving up power/control over the populace? It is very easy to give more power to the government, but it's incredibly hard, once given, to take it back.

Methane Freefly - got stink?

[mnealtx 0]

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It's not just with the vat. Even if you remove mortgage/rent from the VAT, I'm still in a situation where the income tax is taking much more of my disposable income than the guy in Detroit.

While I understand what you're saying, you're *already* paying some 2.5% more income tax than the guy in Detroit.

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The best solution is to try and keep the price tag as low as possible.

Tom's suggestion seems like a very good way to keep the price tag as low as possible. People *WILL* end up paying less in income tax than under the current system.

VAT tax will depend on your consumption - I would presume there would be a 'prebate' for basic needs, as is built into the Fair Tax proposals.

Mike
I love you, Shannon and Jim.
POPS 9708 , SCR 14706

[TomAiello 26]

Perhaps this is just one of the costs you pay for the relative benefits of living in San Francisco instead of Detroit?

We are all willing to accept that it costs more (in real estate) to live in desirable places. Is it such a stretch to accept that it costs more (in relative taxation) as well? In fact, haven't we already accepted that fact (by accepting higher property taxes, and higher state/city tax rates in the more desirable places)?

Further, one of the big reasons that people "desire" those places (leaving aside the weather, which is the other one), is because they can earn more money by living there. Salaries for the same position are much higher in some places than others. How's that fair? Well, one of the things that makes it fair is the higher cost of living in the place with the higher salaries. Higher taxes are part of that higher cost of living (ever compared tax rates in New York City and Twin Falls, Idaho, for example?).

-- Tom Aiello

Tom@SnakeRiverBASE.com
SnakeRiverBASE.com

[rehmwa 2]

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there shouldn't be any sales tax, since what you spend depends on your lifestyle.

I've yet to see anything you've written warranting a reply.

Still true.

...
Driving is a one dimensional activity - a monkey can do it - being proud of your driving abilities is like being proud of being able to put on pants

[jdfreefly 1]

Whether or not I'm willing to accept it has little to do with it being fair. I accept things every day that I deem to be unfair (generally from my government), but since I have little control over it, I bend over and take it and nicely ask if they wouldn't mind using some lube this time around.

Also, when I relocated to SF from philly, I was given a cost of living adjustment that, at the time, seemed fantastic. A month after living here I began to realize that I had still taken a rather large pay cut to make the move.

That said, I won't go back for all the cheese steaks in south philly, so I guess your point is valid.

Methane Freefly - got stink?

[jerryzflies 0]

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there shouldn't be any sales tax, since what you spend depends on your lifestyle.

I've yet to see anything you've written warranting a reply.

Why reply, then?

If you can't fix it with a hammer, the problem's electrical.

[dreamdancer 0]

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Mr Obama has so far pushed back against strong protectionist pressures in Congress seeking to force US companies to keep jobs at home. But the business community is alarmed by plans confirmed last week to close down the tax loophole which allows American multinationals to park hundreds of billions of dollars beyond the US tax man's reach in their overseas subsidiaries.

Under one of his tax reforms, companies based in the US would be required to pay US taxes on all their overseas earnings.

Among those affected by such changes would be some of Mr Obama's most powerful supporters in the election, such as Eric Schmidt, Google's CEO, and other "Silicon Valley" executives whose profits are mostly made abroad. They were taken aback when the President blasting companies for "shirking" their responsibilities by avoiding tax.

The plan to end tax breaks for US multinational companies has also drawn the ire of Democrats . Max Baucus, the powerful Montana Democrat who chairs the Senate Finance Committee, declared that "further study" was needed within minutes of the president announcing his proposals.

New York Democratic congressman Joseph Crowley said closing the loophole would hurt Citigroup Inc., his New York district's largest employer.

It has also dawned on wealthy Americans who flocked to the Obama campaign of "Hope" and "Change" that the president opposes the "trickle down" theories that have guided US economics since President Ronald Reagan was elected with a mandate to slash taxes.

Mr Obama said last week that it was "an aberration" that profits in the financial sector had grown so large over the last decade. It was ridiculous he suggested, that "25-year-olds (were) getting million-dollar bonuses, (and) they were willing to pay $100 for a steak dinner and the waiter was getting the kinds of tips that would make a college professor envious."

He warned that by the time he was done with them, Silicon Valley and Wall Street would remain large parts of the US economy, but not "half of our economy".

Mr Obama has also focused his sights on wealthy individuals who use offshore tax havens to evade tax and is hiring 800 inspectors to track them down.

Mr Obama needs to find a way to pay for the $750 billion spending spree Congress authorised after he took office to get the stalled economy going again.

http://www.telegraph.co.uk/news/worldnews/northamerica/usa/barackobama/5301078/Barack-Obamas-rich-supporters-fear-his-tax-plans-show-hes-a-class-warrior.html

stay away from moving propellers - they bite
blue skies from thai sky adventures
good solid response-provoking keyboarding

[jerryzflies 0]

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All of these reasons...plus factor in the fact that buying things in the bay area usually costs more since store owners are passing along the higher cost of rent and salaries to the consumer.

Higher cost of goods and services in the area leads to a larger impact from the VAT.

So...that tax plan once enacted would seem very unfair to a person living in San Francisco....cost of living is crazy here.

It's a free country - why not move to somewhere the taxes are less of a burden on you? Like Gallup NM, or Bismarck ND?

Is someone forcing you to stay in SF?

If you can't fix it with a hammer, the problem's electrical.