Top Jobs

David Nelson · Joined: 12 May 2008 12:27 pm Posts: 27

Bill wrote:

The median income of retirees is $52,000 leaving income of 30,868 . . . Their taxable income is (over 65) $41,434 - 19,600 for a taxable income of 21,834. Their tax would be 2,491.00. Their take home for the year would be 49,509 but then they would also pay 2,304 for their medicare part B. Now their spendable income is 49,509. This is 4125 per month.

I don�t dispute your numbers here at all. I admit I�ve never taken Medicare part B into consideration though and don�t know how that will affect purchasing power. According to you, couple number 2 pays $208/month tax now and has 4125 after-tax purchasing power to buy �stuff�.

Under the fair tax they would save the 208 per month income tax (2491/12) and would receive the prebate of the 339.00 you quoted in your letter. Now their money available to spend is $4,125 plus 339.00 plus 208 for a total of 4672.

If they spend the total 4672 it would break down like this:
4672.00 - 1074(23% of gross) = goods bought of 3,597. This is considerable less than the 4125.00 they had before.

My only dispute on your numbers here is the prebate is $399 for two adults not $339. They have $4732 to spend of which $1088 will be taxes. If we assume worst-case scenario�if prices don�t drop at all and they spend every dime on new goods and services�the tax for couple number two is $1088 dollars a month on their $4333 income for a 22.69% tax rate and purchasing power decline of $481.

As I did last time, I will calculate it with average price drops of 8%, 11%, and 13% (not 22% as this seems to be one of your main sticking points) in prices.

$3,644 cost of "stuff" they can buy under FairTax (4732 - 1088)

$3,352 Pretax cost if we assume 8% savings (3644 * .92)
$4,358 Adjusted price including 23% inclusive sales tax
$ -233 Additional monthly contribution to society by couple #2

$3,243 Pretax cost if we assume 11% savings (3644 * .89)
$4,216 Adjusted price including 23% inclusive sales tax
$ -91 Additional monthly contribution to society by couple #2

$3,170 Pretax cost if we assume 13% savings (3644 * .87)
$4,121 Adjusted price including 23% inclusive sales tax
$ 4 Amount this couple will save monthly under FairTax

Bill, I lean a little to the left on most issues. I believe we have a system today that steals from the poor and the young to give to the rich and the old. The fact that the latter are far more likely to go to the polls on Election Day is not lost on politicians. Couple number two has quite a tax advantage under our current system, but that doesn�t mean it is fair that it be so.

In an earlier post I wrote something to which you have not responded:

No American discontinues receiving the benefits of the government as long as they live. Somewhere along the way though, we decided that once a person stops earning or accumulating wealth, no matter how much they continue to consume, they are no longer asked to contribute. I don�t remember voting for that. Why should a retiree who can afford to take a cruise not be asked to contribute 23% to the Coast Guard who keep the ports safe? Why should a retiree who can afford a luxury sedan not pay 23% for the upkeep of the roads upon which she drives? I don�t look at the transition to the FairTax as double taxation as much as continued payment for continued services rendered.

Because this couple is living at just over two and a half times the poverty rate I do not in any way consider them to be �poor�. Can you explain why a couple consuming $1000 a week of �stuff� shouldn�t be expected to contribute to the wellbeing of society? Before you answer, consider the provisions of S1025 give them tax-free enough of a Social Security payment to cover their basic necessities of living.

DavidFL10

Bill Pelland · Joined: 25 Feb 2008 07:34 am Posts: 225

David Nelson - I'm really under a time crunch and have not had time to fully digest your comments on the fair tax but can take a moment to answer your earlier post where you said:

No American discontinues receiving the benefits of the government as long as they live. Somewhere along the way though, we decided that once a person stops earning or accumulating wealth, no matter how much they continue to consume, they are no longer asked to contribute. I don�t remember voting for that. Why should a retiree who can afford to take a cruise not be asked to contribute 23% to the Coast Guard who keep the ports safe? Why should a retiree who can afford a luxury sedan not pay 23% for the upkeep of the roads upon which she drives? I don�t look at the transition to the FairTax as double taxation as much as continued payment for continued services rendered.

The example of the retired couple I gave you indicates that senior citizens pay income taxes. They no longer pay payroll taxes because they no longer work. They paid into the Social Security trust fund all their lives. Now because the government has raided the social security trust fund, they want to change the system and charge the seniors again.
More affluent seniors pay income tax on up to 85% of their Social Security income.

Further, Seniors still pay gasoline tax, motel tax, entertainment tax, property tax, capital gains tax, and even the Alternate Minimum tax if they are wealthy enough.

I apologize for not being able to address the other part of this post right now but I trust you'll believe me when I say I WILL.

Obama for President
Rick Noriega (afgan vet) for US Senate

Bill Pelland
Murchison, TX

Bill Pelland · Joined: 25 Feb 2008 07:34 am Posts: 225

Duane and David:

Duane Neighbors - This quote from Boortz was from his revised paperback book describing the fair tax. He is one of two authors that was instrumental in getting the FAIR TAX bill introduced into the House of Representatives.
He's your guy; not mine.

When the FairTax is implemented, and when business and personal income and payroll taxes disappear, your employer is going to have to make a decision. He will either take some or the entire amount he had been withholding for federal income and payroll taxes and add it to your weekly check, or he will readjust your pay figures so that your entire paycheck will be equal to what you used to call "take home pay" before the FairTax. The employer may also decide to do a little of both. Either way, you can see that the amount of money you actually receive as pay � the amount you can put into your bank account � will not decrease, and may actually increase

What I was trying to point out was that there is no guarantee under this bill that any of the taxes saved result in a higher paycheck. The business could decide to keep it all in order to lower prices and be competitive. Which ever way it goes, more pay for the worker or lower prices for the employer you have to realize it can't be both.

David Nelson: I meant to type 399.00 but am getting old and the bi-focals must have messed up my typing. I do not doubt your figures as I did go to a website that supports the fair tax and investigated the pretax calculations. It showed for 2007 a prebate of 23% of 10,016 for a single person and 23% of 20,031 for a married couple.

I answered your original question in another post. Basically what I pointed out was that seniors still will be paying income tax, gasoline tax, motel taxes, property taxes etc etc. As a matter a fact the wealthier they are the more they pay for part b of medicare and the more of their social security is taxed. They are also subject to the alternate minimum tax if applicable, the capital gains tax, if applicable, etc etc.

My point is the Fair Tax is asking them to pay payroll taxes when they are not an employee of anyone and have already paid when they were employed. I do not understand why you think it is ok to lower the buying power of this segment of the population.

So many times we worry about who isn't paying instead of what we're paying. You may not realize this but the effective income tax rate for a couple making 125,000 is only 22.xx% even though they are in the 33% tax bracket. That is based on taking the standard deduction of 10,700 and two personal exemptions of 3400 each.

I would suggest you download the instructions for the 1040 form and do a little research into income tax and social security. The big problem I have with the fair tax is that it makes pomises that are not written into the law such as higher pay and lower prices. Once passed there is no guarantee that either of the above two things will happen. Therefore I think the supporters are buying a pig in a poke so to speak.

I would be interested to know how old you are. I'm 64 and retired because of a heart condition. I am not on disabitlity but took early social security. I also cannot get health insurance due to the high cost for people with pre-existing conditions. What do your parents think of this tax? If you want to keep your age secret then send it to me in a PM

Vote Obama and Noriega

Bill Pelland
Murchison TX

David Nelson · Joined: 12 May 2008 12:27 pm Posts: 27

Bill wrote:

I would be interested to know how old you are.

I am 43 years old and perhaps the reason we see this differently is because I firmly believe that unless we do some things in the next 20 years to fix the direction in which our country is heading, I will never collect Social Security Retirement income while you are already collecting it.

What do your parents think of this tax?

Mom is a 63-year-old Democrat and Dad is 69 and a Republican. They both strongly support the FairTax because, like Steve Keller said in his 8:03 post, they know it is the only way their grandchildren (my nephews) will have a strong United States in which to live.

My point is the Fair Tax is asking them to pay payroll taxes when they are not an employee of anyone and have already paid when they were employed.

The distinction you make between income and payroll taxes is interesting and unusual for someone who would support Obama. Perhaps it is your age that informs you, but I have never believed the distinction to be anything other than a lie by our politicians to conceal the actual amount we pay in overall tax. The original intent of Social Security was to prevent the poorest of the poor from dying on the streets. I think the statesmen who created it would be appalled to see it used to supplement the retirement incomes of couples living decades longer and struggling to get by on $1000 a week.

I do not understand why you think it is ok to lower the buying power of this segment of the population.

The only segment of the population for whom I think it is ok to decrease purchasing power is anyone who is heavily tax advantaged under today's system.

Tax advantage may come from legal or illegal means and most typically a combination of both.

There are hundreds of thousands of legal loopholes in the income tax code that give advantage to an individual or a demographic segment. You cite a couple making $125,000 a year and assume they are taking the standard deduction. According to The Tax Foundation 89.51% of people in that income bracket itemize deductions�ostensibly because they can lower their tax liability below what it would be using the standard deduction. They simply are not paying in taxes what you think they are. By contrast less than 18% of Americans who earn under $50K itemize deductions and therefore have no ability to mitigate their tax burden. Many types of bonds allow investors to earn interest without paying taxes on that income. Did you know 100% of the tax-free municipal bonds in this country are held by persons whose income is over $150K who therefore pay 0 tax on that portion of their income? In an earlier post I mentioned skybox season tickets to Bucs' games. The guy in the stands pays for his seats with after tax dollars while almost without exception the guys in the air conditioned skyboxes use untaxed dollars by claiming a business need for them. The current system has been so gamed by the wealthy that it is time for progressives to expose the propaganda we see in the tax tables and demand real reform.

There are millions of people in America who earn a good living (pimps, drug dealers, Harry the unlicensed handyman) and declare very little or no income and thus are tax advantaged (I've even seen them claim just enough to qualify themselves for the EITC). In 1907 (six years before the 16th amendment made the income tax a reality) Teddy Roosevelt said:

I speak diffidently about the income tax because one scheme for an income tax was declared unconstitutional by the Supreme Court; while in addition it is a difficult tax to administer in its practical working, and great care would have to be exercised to see that it was not evaded by the very men whom it was most desirable to have taxed, for if so evaded it would, of course, be worse than no tax at all; as the least desirable of all taxes is the tax which bears heavily upon the honest as compared with the dishonest man.

The income tax has become exactly what he warned us against and I support the FairTax specifically because it erases some of that disparity. If you have it to spend, you should be willing to contribute to the wellbeing of society no matter if you got it from working, from interest, as inheritance, or as retirement pay. Maybe that makes me a class warrior, but I think tax fairness should be preferred over tax advantage.

The big problem I have with the fair tax is that it makes promises that are not written into the law such as higher pay and lower prices.

Well, there we are: Your biggest problem with the FairTax is the hyperbole and conjecture used to sell it. You've done the same thing the online fact check site did�reject the proposal because of how it is sold. I doubt you throw out the idea of universal health care because Michael Moore presents only one hyperbolic side of the argument in Sicko. Why would you expect a radio personality to adjust his shtick when writing a book about the FairTax?
Every economist who has objectively studied the FairTax universally accepts that we will have lower prices and higher paychecks. How much lower and higher they will be is widely disputed. That is why I use what I believe are pretty conservative estimates when I project prices to drop around 11% and paychecks to rise to current "gross" and stay there for a while. Every economist who has studied the long term effects of the FairTax (even the critics) agree that it will be a significant boost to the US economy in a relatively short time.

Jeff Holberton · Joined: 19 May 2008 07:49 pm Posts: 19

I believe David has hit the nail on the head. I would like to point out a statement Bill made:

"The example of the retired couple I gave you indicates that senior citizens pay income taxes. They no longer pay payroll taxes because they no longer work. They paid into the Social Security trust fund all their lives. Now because the government has raided the social security trust fund, they want to change the system and charge the seniors again."

The SS fund issue is very real and I agree with seniors being upset about SS funding. I am in my mid 30's. Younger than both Bill and David. While the government did raid the SS fund, they did it while may voters sat on their hands, and actually voted for representatives that happily spent that SS fund. Many, not all, of the same seniors now expect to recieve their SS check when they benefited through government programs and projects decades ago. Basically, you can't cash a check twice... which is what it seems like some are expecting.

Local Weather Forecast
Today: Current:75	Wednesday: 93/73	Thursday: 91/73
Complete Forecast for Jul 09 2008

Top Jobs

Top Homes

ONLINE EXTRAS

SITE SERVICES

BIBLE VERSE

Frontpage