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Thread: HR 25, the "fair tax" bill

  1. #21
    Veteran Member Southern Dad's Avatar
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    This bill has been proposed every congress since about 1994. It was written by my former congressmen, John Linder. While it is a great idea because everyone would be paying it, it has no hope of passage.
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  2. #22
    Master political analyst Dittohead not!'s Avatar
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    Quote Originally Posted by Rasselas View Post
    This might make sense as part of a tax system, but not as the basis of it. Here's why:

    1. It makes little sense to tax consumption unless we want to discourage consumption. Doesn't that have a negative effect on economic growth? Doesn't our economy run on consumption?

    2. People with lower incomes have a much higher marginal propensity to consume. People with very high incomes (the very people we should be taxing most) consume very small portions of their income. There's no way tax exclusions like deductions are likely to counter this fact.
    1. True. but we don't want to discourage income, either.

    2 That's a real flaw in the idea.

  3. #23
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    Quote Originally Posted by Dittohead not! View Post
    1. True. but we don't want to discourage income, either.
    I don't know about that. At some point, income isn't about economic utility, so taxing a substantial portion of it has no practical effect on the earner. It's all about numbers and comparing numbers--the substance behind those numbers becomes immaterial in any real sense.

    2 That's a real flaw in the idea.
    Many would say that's the genius of the idea. After all, if you demonize people who don't pay income tax because their incomes are too low as having no "skin in the game," then squeezing blood from a stone while letting others swell like prize watermelons makes perfect sense.
    Last edited by Rasselas; 17th July 2017 at 12:04 PM.
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  4. #24
    Master political analyst Dittohead not!'s Avatar
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    Quote Originally Posted by Rasselas View Post
    I don't know about that. At some point, income isn't about economic utility, so taxing a substantial portion of it has no practical effect on the earner. It's all about numbers and comparing numbers--the substance behind those numbers becomes immaterial in any real sense.

    Many would say that's the genius of the idea. After all, if you demonize people who don't pay income tax because their incomes are too low as having no "skin in the game," then squeezing blood from a stone while letting others swell like prize watermelons makes perfect sense.
    Nothing like a good regressive tax to make sure poor people have some skin in the game.

    As for the income tax, if the choice is between working a couple of extra hours a day for a promotion or just extra hours, and 40% of that extra income is going to Uncle Sam, is it really worth the extra effort? Of course, something has to be taxed, and therefore discouraged, so the question becomes: what?

  5. #25
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    Quote Originally Posted by Dittohead not! View Post
    Nothing like a good regressive tax to make sure poor people have some skin in the game.

    As for the income tax, if the choice is between working a couple of extra hours a day for a promotion or just extra hours, and 40% of that extra income is going to Uncle Sam, is it really worth the extra effort? Of course, something has to be taxed, and therefore discouraged, so the question becomes: what?
    How about investment income above $250K/year? Most of the income we're talking about doesn't actually come from labor, so it has little to do with working extra hours.

  6. #26
    A Blue Dog Jets Fan Jets's Avatar
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    Quote Originally Posted by splansing View Post
    You should do a very quick bit of research on exactly how a flat tax is regressive. I know you must have heard this before, so do it or don't, I suppose.
    I have done the research, It's not a flat tax. That by definition is placed on income. The Fair tax is based on consumption.

  7. #27
    Scucca Ęthelfrith's Avatar
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    Quote Originally Posted by Jets View Post
    I have done the research, It's not a flat tax. That by definition is placed on income. The Fair tax is based on consumption.
    Then you'll know of the more recent research, e.g. Kuang et al. (2011, A Distributional Analysis of the FairTax Plan: Annual and Lifetime Income Considerations, Southern Economic Journal):

    "Dissatisfaction with the current federal tax system is fostering serious interest in the FairTax Plan, which would replace most of the federal taxes with a national retail sales tax. The FairTax is promoted as being progressive, but there is considerable skepticism of this claim. We examine the distributional effects of the FairTax, as well as the current system it intends to replace, under both annual income and lifetime income approaches. Global measures of progressivity suggest that the current federal tax system is progressive while the FairTax is regressive. Our results are also robust to different assumptions used for estimation"
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  8. #28
    A Blue Dog Jets Fan Jets's Avatar
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    Quote Originally Posted by Ęthelfrith View Post
    Then you'll know of the more recent research, e.g. Kuang et al. (2011, A Distributional Analysis of the FairTax Plan: Annual and Lifetime Income Considerations, Southern Economic Journal):

    "Dissatisfaction with the current federal tax system is fostering serious interest in the FairTax Plan, which would replace most of the federal taxes with a national retail sales tax. The FairTax is promoted as being progressive, but there is considerable skepticism of this claim. We examine the distributional effects of the FairTax, as well as the current system it intends to replace, under both annual income and lifetime income approaches. Global measures of progressivity suggest that the current federal tax system is progressive while the FairTax is regressive. Our results are also robust to different assumptions used for estimation"
    Regardless of whether it's considered progressive or regressive, the end result is more take home pay.

  9. #29
    Scucca Ęthelfrith's Avatar
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    Quote Originally Posted by Jets View Post
    Regardless of whether it's considered progressive or regressive, the end result is more take home pay.
    Regardless? Feckin hell, no worries about equity at all then?

  10. #30
    Master political analyst Dittohead not!'s Avatar
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    Quote Originally Posted by Rasselas View Post
    How about investment income above $250K/year? Most of the income we're talking about doesn't actually come from labor, so it has little to do with working extra hours.
    When you get way up in the stratosphere of earnings, yes, it comes from the wealth begets wealth equation. Really, that probably doesn't discourage earning, as the earning takes little effort. It does encourage hiding assets overseas, however.

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