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Thread: The "fair and resonable" tax proposal

  1. #131
    Veteran Member bonehead's Avatar
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    Quote Originally Posted by RNG View Post
    First I'm not sure the application of your proposal would be that easy. What to your mind would the actual method of collection be? A lump sum at the end of each fiscal year?

    And I do believe any consumption tax would be regressive if you don't have a "prebate" involved. Canada does that based on taxable income, but again it takes a huge bureaucracy to administer it. I still like the idea in the "FairTax" proposal of the old Libertarian Party where the government would just send out a prebate check to everyone, slum dweller and Warren Buffet included.

    The other thing that would be needed IMO for a consumption type tax to be fair(er) is to class financial transactions of all types as being consumption activities. Those things would partially compensate for the otherwise regressive nature of a straight consumption tax.
    something similar was stated in the original post#1, but based on income.

  2. #132
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    Quote Originally Posted by bonehead View Post
    something similar was stated in the original post#1, but based on income.
    But again, basing it on incomemeans using last year's data, bad news if you lose your job, plus it needs a bureaucracy to run it. Just cut everyone the same check. The poor guy buys wieners and pays tax on a little, the rich guy buys fillet and pays back his prebate pretty quickly.

  3. #133
    Veteran Member bonehead's Avatar
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    Quote Originally Posted by RNG View Post
    But again, basing it on incomemeans using last year's data, bad news if you lose your job, plus it needs a bureaucracy to run it. Just cut everyone the same check. The poor guy buys wieners and pays tax on a little, the rich guy buys fillet and pays back his prebate pretty quickly.
    or, the other way around.

  4. #134
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    Quote Originally Posted by bonehead View Post
    or, the other way around.
    Well, if it's the other way around, the poor guy is suffering a self inflicted injury so screw him.

  5. #135
    Veteran Member bonehead's Avatar
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    Quote Originally Posted by RNG View Post
    Well, if it's the other way around, the poor guy is suffering a self inflicted injury so screw him.
    and the rich guy evades the taxes he's supposed to pay. besides, there is such a thing as the black market - which such a tax has a tendency to create.

  6. #136
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    Quote Originally Posted by bonehead View Post
    and the rich guy evades the taxes he's supposed to pay. besides, there is such a thing as the black market - which such a tax has a tendency to create.
    If the rich guy wants to eat wieners, more power to him. My system would get him every time he traded a share or sent his money to that illegal offshore account.

    As far as a black market, that's what everyone said about Canada when the Goods and Services Tax, essentially a VAT was introduced. It never happened to any degree greater than was there before.

    In fact, as the developed world gets closer and closer to being a cash-free society, it is harder and harder to do any black market activities without setting off all kinds of alarms to get the gendarmerie's attention.

  7. #137
    Vexatious Correspondent Leo2's Avatar
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    Quote Originally Posted by BigLeRoy View Post
    Your last paragraph is even denying the POSSIBILITY of a progressive consumption tax. Given that, is there even any POINT in TRYING to argue with you???
    Lol, I have been on this board since before my 13th birthday, and I am 21 this year - this is the first time someone here has accused me of being so unreasonable as to preclude any discussion.

    Overlooking that slight, my last paragraph is indeed open to discussion, as it involves a point of view - which can differ from person to person. It is an opinion which indicates the complexity of implementing a consumption tax, and the inequity such a tax imposes upon those least able to cope with it. The concern with any form of taxation should not, IMO, be how 'fair' it is to the most advantaged demographic in society, but how compassionate it is towards the least advantaged (for whatever reason). I am prepared to discuss this opinion, and give my reasons for holding those views with anyone who is prepared to discuss the matter in a civilised manner. Try me.

  8. #138
    Radical Centrist BigLeRoy's Avatar
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    Quote Originally Posted by RNG View Post
    First I'm not sure the application of your proposal would be that easy. What to your mind would the actual method of collection be? A lump sum at the end of each fiscal year?

    And I do believe any consumption tax would be regressive if you don't have a "prebate" involved. Canada does that based on taxable income, but again it takes a huge bureaucracy to administer it. I still like the idea in the "FairTax" proposal of the old Libertarian Party where the government would just send out a prebate check to everyone, slum dweller and Warren Buffet included.

    The other thing that would be needed IMO for a consumption type tax to be fair(er) is to class financial transactions of all types as being consumption activities. Those things would partially compensate for the otherwise regressive nature of a straight consumption tax.
    One of the most forceful advocates of a progressive consumption tax is economist Robert Frank of Cornell University. Here are three paragraphs of his that explain how simple the idea could be:

    The amount a family consumes each year is simply the difference between what it earns and what it saves. Under a progressive consumption tax, people would report their income to the Internal Revenue Service as they do now and also their annual savings, much as they currently document contributions to 401(k) and other retirement accounts. The difference between these two amounts, less a large standard deduction -- say, $30,000 for a family of four -- would be the family's taxable consumption. Rates would start low, perhaps only at 10 percent. In this illustration, a family that earned $50,000 and saved $5,000 would have a taxable consumption of $15,000 and pay only $1,500 in tax. By comparison, it would pay about twice that amount under the current income tax.

    As taxable consumption rises, the tax rate on additional consumption would also rise. With a progressive income tax, marginal tax rates cannot rise too far without threatening incentives to save and invest. Under a progressive consumption tax, however, higher marginal tax rates actually strengthen those incentives.

    To see why, consider a family that currently spends $10 million a year and is debating whether to add a $2 million wing to its mansion. If the top marginal tax rate on consumption were 100 percent, the project's cost (including tax) would be $4 million. Alternatively, the family could scale back, building only a $1 million addition. Then it would pay $1 million in additional tax and could deposit $2 million more than before in savings. Federal revenue would rise by $1 million, and the additional savings would stimulate investment, promoting growth.

  9. #139
    Radical Centrist BigLeRoy's Avatar
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    Quote Originally Posted by Leo2 View Post
    Lol, I have been on this board since before my 13th birthday, and I am 21 this year - this is the first time someone here has accused me of being so unreasonable as to preclude any discussion.

    Overlooking that slight, my last paragraph is indeed open to discussion, as it involves a point of view - which can differ from person to person. It is an opinion which indicates the complexity of implementing a consumption tax, and the inequity such a tax imposes upon those least able to cope with it. The concern with any form of taxation should not, IMO, be how 'fair' it is to the most advantaged demographic in society, but how compassionate it is towards the least advantaged (for whatever reason). I am prepared to discuss this opinion, and give my reasons for holding those views with anyone who is prepared to discuss the matter in a civilised manner. Try me.
    See post #138.

  10. #140
    RNG
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    Quote Originally Posted by BigLeRoy View Post
    One of the most forceful advocates of a progressive consumption tax is economist Robert Frank of Cornell University. Here are three paragraphs of his that explain how simple the idea could be:

    The amount a family consumes each year is simply the difference between what it earns and what it saves. Under a progressive consumption tax, people would report their income to the Internal Revenue Service as they do now and also their annual savings, much as they currently document contributions to 401(k) and other retirement accounts. The difference between these two amounts, less a large standard deduction -- say, $30,000 for a family of four -- would be the family's taxable consumption. Rates would start low, perhaps only at 10 percent. In this illustration, a family that earned $50,000 and saved $5,000 would have a taxable consumption of $15,000 and pay only $1,500 in tax. By comparison, it would pay about twice that amount under the current income tax.

    As taxable consumption rises, the tax rate on additional consumption would also rise. With a progressive income tax, marginal tax rates cannot rise too far without threatening incentives to save and invest. Under a progressive consumption tax, however, higher marginal tax rates actually strengthen those incentives.

    To see why, consider a family that currently spends $10 million a year and is debating whether to add a $2 million wing to its mansion. If the top marginal tax rate on consumption were 100 percent, the project's cost (including tax) would be $4 million. Alternatively, the family could scale back, building only a $1 million addition. Then it would pay $1 million in additional tax and could deposit $2 million more than before in savings. Federal revenue would rise by $1 million, and the additional savings would stimulate investment, promoting growth.
    Again, I question how/when that tax would be paid. And for this to even come close to working, earnings would have to be redefined.

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