Romney: Why tax cut is a bad deal

[Bfgrn]

is it your claim the middle class did not grow under reagan? and become better off?

"We're going to crush labor as a political entity"
Grover Norquist - Republican economic guru and co-author of the GOP's 'Contract with America'


Yes, Reagan was the grim reaper for the middle class.

Let's go back to the early 1980's. In 1981, Reagan signed a law that sharply reduced the income tax for the wealthiest Americans and corporations. The president asserted his program would create jobs, purge inflation and, get this, trim the budget deficit. However, following the tax cut, the deficit soared from 2.5 percent of GDP to over 6 percent, alarming financial markets, sending interest rates sky high, and culminating in the worst recession since the 1930's.

Soon the president realized he needed new revenues to trim the deficit, bring down interest rates and improve his chances for reelection. He would not rescind the income tax cut, but other taxes were acceptable. In 1982, taxes were raised on gasoline and cigarettes, but the deficit hardly budged. In 1983, the president signed the biggest tax rise on payrolls, promising to create a surplus in the Social Security system, while knowing all along that the new revenue would be used to finance the deficit.

The retirement system was looted from the first day the Social Security surplus came into being, because the legislation itself gave the president a free hand to spend the surplus in any way he liked. Thus began a massive transfer of wealth from the poor and the middle class, especially the self-employed small businessman, to the wealthy. The self-employment tax jumped as much as 66 percent.

In 1986, Reagan slashed the top tax rate further. His redistributionist obsession led to a perversity in the law. The wealthiest faced a 28 percent tax rate, while those with lower incomes faced a 33 percent rate; in addition, the bottom rate climbed from 11 percent to 15 percent. For the first time in history, the top rate fell and the bottom rate rose simultaneously. Even unemployment compensation was not spared. The jobless had to pay income tax on their benefits. A year later, the man who would not spare unemployment compensation from taxation called for a cut in the capital gains tax. Thus, Reagan was a staunch socialist, totally committed to his cause of wealth redistribution towards the affluent.

How much wealth transfer has occurred through Reagan's policies? At least $3 trillion.

ref

 

[Immanuel]

First, welcome back.

Second, we have the highest corporate tax rates in the industrialized world. They are no where near being low.

Third, you are correct in that it matters not if Congress finds ways to raise revenue if they continue to outspend it every year as they have since 1960.

Thanks for the welcome back.

I disagree with you in regards to the idea that the fair tax is so regressive. The prebate helps to alleviate that problem. Not only that, but the fact that everything and everyone (including criminals, corporations and the rich) who buys any products will pay the tax. There will be no more avoiding paying taxes by not declaring income. You pay your taxes when you spend your money. To make things so much better, it will eliminate the lobbyists ability to manipulate the tax code in their client's favor with every single bill that comes along.

The current tax code is laced with loopholes placed in our laws by lobbyists. These only benefit the politicians and the rich.

A flat tax would be even more regressive than the fair tax and extremely easy for the rich to simply not declare any income at all thus avoiding all taxes altogether.

Immie

 

[DamnYankee]

How many wives does Mitt have?

Lookie here, suddenly you're a social conservative.

 

[WinterBorn]

Except for the fact that it is regressive. The poor do not pay roughly 22% on what they buy now.



This is where the corruption would come into play. Where the lobbyists would line up with the bribes. WHO decides what is a 'necessity'???

While I think it would be an improvement initially vs our current system, the flat tax with standard deduction is the better system. It is fair, simple, progressive and there would be no room for lobbyists bribes.



I don't see that as a huge plus.... and it leads to more potential corruption.

If a dealer 'uses' a car for a few hundred miles and then sells it, is it taxed? Who defines 'used'?

The lobbyists do not get to decide anything. A determination is made as to what the poverty level is, and the tax on that amount is refunded to every citizen in the country.

Also, a consumption tax removes the taxes on businesses. Which is simply a hidden tax on consumers, since the businesses simply include that in their cost of doing business.

Who determines whether an item is used? That is easy, has it been sold and taxed prior?

 

[WinterBorn]

1) Congrats, you figured out that the flat tax was an income tax.... Kudos

2) The fair tax 'rebates' are derived from politicians deciding what goods/services are 'necessities' and what are not.

3) Again, the fair tax is highly REGRESSIVE, even with rebates

The fair tax rebates are not items decided to be necessities.

The poverty level is determined, and the consumption tax rate on that much is refunded to every person.

 

[Cancel 2016.2]

Thanks for the welcome back.

I disagree with you in regards to the idea that the fair tax is so regressive. The prebate helps to alleviate that problem. Not only that, but the fact that everything and everyone (including criminals, corporations and the rich) who buys any products will pay the tax. There will be no more avoiding paying taxes by not declaring income. You pay your taxes when you spend your money. To make things so much better, it will eliminate the lobbyists ability to manipulate the tax code in their client's favor with every single bill that comes along.

The current tax code is laced with loopholes placed in our laws by lobbyists. These only benefit the politicians and the rich.

A flat tax would be even more regressive than the fair tax and extremely easy for the rich to simply not declare any income at all thus avoiding all taxes altogether.

Immie

1) The wealthy tend to derive their income from investments. Capital gains, dividends etc. They do not tend to spend a high portion of their total income relative to the low and middle class.

2) The flat tax is not regressive if you add the standard deduction as I mentioned. Also, please explain how it is you think that the wealthy could avoid declaring any source of income.

3) I agree with the problems you mention with regards to the current system. However, between the fair tax and flat tax, it is the fair tax that has the greatest likelihood of being manipulated by the wealthy/lobbyists to create loopholes/deductions.

As I asked others, who decides how much the 'rebate' should be? What are they basing that amount on? If it is to cover 'necessary' items.... who decides what is necessary?

My next post will show you more on the flat tax as I would structure it.

 

[Cancel 2016.2]

Immie....

Start with a standard deduction of $30k (adjusted for inflation annually) for each adult and then tax every dollar over that $30k at 20%. This is simple, easy to understand, fair and progressive. It protects the low-income individuals and couples from paying federal income taxes. It provides the middle-income families a lower effective tax rate than the wealthy. This plan would encompass ALL income, including earned income, capital gains and dividend income.

A person making $30k pays an effective rate of 0%.

A person making $50k pays an effective rate of 8%.

A person making $100k pays an effective rate of 14%.

A person making $200k pays en effective rate of 17%.

A person making $1mm pays an effective rate of 19.4%

Everyone has the same deduction and takes it. Which causes the effective tax rate to increase the more you make.

To reduce the national debt I would propose we add an additional temporary bracket to the flat tax. Every dollar over $1 million (again adjusted for inflation annually) would be taxed at 30% rather than 20%. The additional 10% would be mandated to pay down the debt.

It is our responsibility to pay our own way and not dump trillions of dollars of debt on future generations. We need to begin electing leaders that are fiscally responsible. The future of our nation depends upon it. We are our own worst enemy. It will be our ever-increasing debt that leads to our demise. We must act now.

 

[leaningright]

I'll take your word for that and I don't know much, if anything at all, about foreign tax structures but if I really wanted to go into the discussion I would first look at the effective rate of taxation rather than the marginal rate.

That is not to say that I would find that I was right and you were wrong, but rather that I suspect that the effective rate of corporate taxation is low enough today that lowering it more would not amount to a whole heck of a lot of beans if you know what I mean.

Immie

Hey Immie, welcome back. Good to see ya.

 

[Cancel 2016.2]

The fair tax rebates are not items decided to be necessities.

The poverty level is determined, and the consumption tax rate on that much is refunded to every person.

Ok, I stand corrected on that point, but the fair tax is still regressive in that low and middle income families spend the vast majority of their income.

The wealthy do not. So what you would end up with is a progressive rate through the lower and middle income families and then a massive regression.

It replaces federal income taxes including personal, estate, gift, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes.

 

[DamnYankee]

Immie....

Start with a standard deduction of $30k (adjusted for inflation annually) for each adult and then tax every dollar over that $30k at 20%. This is simple, easy to understand, fair and progressive. It protects the low-income individuals and couples from paying federal income taxes. It provides the middle-income families a lower effective tax rate than the wealthy. This plan would encompass ALL income, including earned income, capital gains and dividend income.

A person making $30k pays an effective rate of 0%.

A person making $50k pays an effective rate of 8%.

A person making $100k pays an effective rate of 14%.

A person making $200k pays en effective rate of 17%.

A person making $1mm pays an effective rate of 19.4%

Everyone has the same deduction and takes it. Which causes the effective tax rate to increase the more you make.

To reduce the national debt I would propose we add an additional temporary bracket to the flat tax. Every dollar over $1 million (again adjusted for inflation annually) would be taxed at 30% rather than 20%. The additional 10% would be mandated to pay down the debt.

It is our responsibility to pay our own way and not dump trillions of dollars of debt on future generations. We need to begin electing leaders that are fiscally responsible. The future of our nation depends upon it. We are our own worst enemy. It will be our ever-increasing debt that leads to our demise. We must act now.

I suggest that we make everyone pay 17% and no deduction, no brackets.

 

[Cancel 2016.2]

I suggest that we make everyone pay 17% and no deduction, no brackets.

I disagree. The standard deduction is to protect the low income and to a degree middle income individuals and families from getting hit hard with taxes.

A person making 20k a year can't afford paying $3400 in Federal taxes.

Since everyone would receive the same standard deduction, it is a fair system.

 

[DamnYankee]

I disagree. The standard deduction is to protect the low income and to a degree middle income individuals and families from getting hit hard with taxes.

A person making 20k a year can't afford paying $3400 in Federal taxes.

Since everyone would receive the same standard deduction, it is a fair system.

America cannot afford to have voters with no skin in the game. And its simply not fair to have some Americans paying a higher percentage than other Americans.

The loss of the interest deduction will result in the reduction of mortgage rates and a net increase in economic activity. So the deduction should be phased out over, say, 4 years so folks can adjust their lifestyles and the home mortgage market can correct itself.

 

[Dixie - In Memoriam]

Ok, I stand corrected on that point, but the fair tax is still regressive in that low and middle income families spend the vast majority of their income.

The wealthy do not. So what you would end up with is a progressive rate through the lower and middle income families and then a massive regression.

It replaces federal income taxes including personal, estate, gift, capital gains, alternative minimum, Social Security, Medicare, self-employment, and corporate taxes.

I've not seen any evidence wealthy people spend less money than poor or middle class people. The few wealthy people I know, spend an enormous amount of money on things I would never even dream of buying. I think your head is too far up your ass to see reality here. Whether the amount they spend is a higher or lower percentage of their overall income, is irrelevant! They spend considerably MORE than the average or poor person, therefore, would naturally pay more taxes. Now, the rich probably wouldn't spend 91% of their income, which is the rate most pinhead liberals would like to tax them at, but that's beside the point when discussing FAIR taxation.

You asked earlier, how could a wealthy person possibly hide all earned income? Well, they did it before, when their tax rates were extremely high. It's called 'sheltered investment' and most rich people fully understand how it works. It all goes back to a point I have made all along, the rich don't need to earn an income, they are already wealthy! You and I, we need an income, we can't survive without one, we have bills to pay and needs to meet, and so, we drag ourselves out of bed every morning and do the daily grind, where the fruits of our labor are taxed by government. But, a rich person, does not have that same need or requirement. If they don't want to earn an income, they can still live comfortably and afford the things they want and need. They simply do NOT have to earn ANY income, and they can certainly control the amount of income they earn. Consumption can't be avoided by the rich, they HAVE to spend money, and it wouldn't matter when that money was earned as income.

A wealthy friend of mine, lives near Buffalo, NY... a few months ago, he hosted a lavish party at his home, (which is a former nun convent), he spent well over $100k on the party. With the fair tax, he would have paid about $25,000 in taxes, just for that one party. I happen to know, his actual income tax liability last year, was just under $35k. So here, he has thrown one party, and paid 72% in tax, of what he would normally have paid for the year on his earned income. After the Christmas party he is currently planning, he would have paid considerably more in consumption taxes, than he would have ever paid through income taxation.

 

[Canceled.LTroll.9]

My palm isn't large enough to have written all my notes down on what this tax increase, what it will result in.

I think it's a lousy deal and we can do better for the American people.

 

[Immanuel]

Immie....

Start with a standard deduction of $30k (adjusted for inflation annually) for each adult and then tax every dollar over that $30k at 20%. This is simple, easy to understand, fair and progressive. It protects the low-income individuals and couples from paying federal income taxes. It provides the middle-income families a lower effective tax rate than the wealthy. This plan would encompass ALL income, including earned income, capital gains and dividend income.

A person making $30k pays an effective rate of 0%.

A person making $50k pays an effective rate of 8%.

A person making $100k pays an effective rate of 14%.

A person making $200k pays en effective rate of 17%.

A person making $1mm pays an effective rate of 19.4%

Everyone has the same deduction and takes it. Which causes the effective tax rate to increase the more you make.

To reduce the national debt I would propose we add an additional temporary bracket to the flat tax. Every dollar over $1 million (again adjusted for inflation annually) would be taxed at 30% rather than 20%. The additional 10% would be mandated to pay down the debt.

It is our responsibility to pay our own way and not dump trillions of dollars of debt on future generations. We need to begin electing leaders that are fiscally responsible. The future of our nation depends upon it. We are our own worst enemy. It will be our ever-increasing debt that leads to our demise. We must act now.

I understand how the flat tax would work. I also understand that the rich can avoid taxes altogether as they could take their investments off shore and could effectively avoid all taxable income. The ones that run businesses could take payment in cash or in other manners such as having the company pay for $X expenses and never show a dime's worth of income out of a corporation or at least not more than $30,000/year.

The ultra rich would be able to write their own ticket with this plan. Some would be honest and pay their taxes, others would fudge on their income and still others would downright declare $0 income or claim to live off of their attained wealth and not have any significant amounts of income whatsoever.

This plan would also do nothing at all to capture taxes from criminals such as drug dealers or illegal aliens.

I do not believe it would be long before those who were unwilling to support the government would find ways to get around declaring income altogether and we would be in the same boat we are in now.

Immie

 

[Dixie - In Memoriam]

Start with a standard deduction of $30k (adjusted for inflation annually) for each adult and then tax every dollar over that $30k at 20%. This is simple, easy to understand, fair and progressive. It protects the low-income individuals and couples from paying federal income taxes. It provides the middle-income families a lower effective tax rate than the wealthy. This plan would encompass ALL income, including earned income, capital gains and dividend income.

A person making $30k pays an effective rate of 0%.

A person making $50k pays an effective rate of 8%.

A person making $100k pays an effective rate of 14%.

A person making $200k pays en effective rate of 17%.

A person making $1mm pays an effective rate of 19.4%

Everyone has the same deduction and takes it. Which causes the effective tax rate to increase the more you make.

To reduce the national debt I would propose we add an additional temporary bracket to the flat tax. Every dollar over $1 million (again adjusted for inflation annually) would be taxed at 30% rather than 20%. The additional 10% would be mandated to pay down the debt.

It is our responsibility to pay our own way and not dump trillions of dollars of debt on future generations. We need to begin electing leaders that are fiscally responsible. The future of our nation depends upon it. We are our own worst enemy. It will be our ever-increasing debt that leads to our demise. We must act now.

You are approaching this with the socialistic viewpoint that people who earn more, should pay a larger chunk of what they make, simply for being successful, in order to 'take care' of those who are in need. There is no sound basis for this principle and philosophy in a nation founded on freedom and made a superpower through capitalism. This is a rather isolated European Socialist way of thinking, and it has no place in our system.

It is also not any different than our current system, which keeps the IRS firmly entrenched in our lives, and the class warfare game being played. What happens in 5 years, when $30k is no longer a 'standard' living? We're going to raise your scale? Where does that end? How do we avoid a future problem of having way too many people not paying taxes? Then there is the issue of what actually happens when you implement this on the people with high incomes, will they do as they normally do, and stop earning an income? You can tax a rich person 100% on income, if he doesn't have an income, how do you collect money? I guess that's where the Estate Tax comes in?

The Fair Tax is something really worth a look, I have not heard anyone offer a reasonable criticism of how it would work, and be a better way to go. First, we would establish a 'poverty level' as you have illustrated with "$30k" in your argument, and every person below the poverty level, would get a 'pre-bate' check, for the amount of fair tax they will pay. Effectively, they will pay no tax on the basic necessities of life, up to the $30k mark, or wherever that 'basics' level is set. So now, that person who was making $25k a year, and paying $150 a month in withholding, now has the $150 in his pocket, PLUS a pre-bate check! Now... everything costs 25% more, but... not really.... things will cost what markets dictate they cost, eventually. Capitalism and competition ensure that will be the case, but you have to trust and believe in capitalism for this to work. Companies would soon absorb the cost of the fair tax built-in to their products (kind of like cigarette companies with the high tax), and things would not effectively "be" 25% higher in price to the consumer. Economists have guesstimated the effective 'inflation' of prices, would be somewhere around 10~15%

 

[Sammy Jankis]

You are approaching this with the socialistic viewpoint that people who earn more, should pay a larger chunk of what they make, simply for being successful, in order to 'take care' of those who are in need. There is no sound basis for this principle and philosophy in a nation founded on freedom and made a superpower through capitalism. This is a rather isolated European Socialist way of thinking, and it has no place in our system.

It is also not any different than our current system, which keeps the IRS firmly entrenched in our lives, and the class warfare game being played. What happens in 5 years, when $30k is no longer a 'standard' living? We're going to raise your scale? Where does that end? How do we avoid a future problem of having way too many people not paying taxes? Then there is the issue of what actually happens when you implement this on the people with high incomes, will they do as they normally do, and stop earning an income? You can tax a rich person 100% on income, if he doesn't have an income, how do you collect money? I guess that's where the Estate Tax comes in?

The Fair Tax is something really worth a look, I have not heard anyone offer a reasonable criticism of how it would work, and be a better way to go. First, we would establish a 'poverty level' as you have illustrated with "$30k" in your argument, and every person below the poverty level, would get a 'pre-bate' check, for the amount of fair tax they will pay. Effectively, they will pay no tax on the basic necessities of life, up to the $30k mark, or wherever that 'basics' level is set. So now, that person who was making $25k a year, and paying $150 a month in withholding, now has the $150 in his pocket, PLUS a pre-bate check! Now... everything costs 25% more, but... not really.... things will cost what markets dictate they cost, eventually. Capitalism and competition ensure that will be the case, but you have to trust and believe in capitalism for this to work. Companies would soon absorb the cost of the fair tax built-in to their products (kind of like cigarette companies with the high tax), and things would not effectively "be" 25% higher in price to the consumer. Economists have guesstimated the effective 'inflation' of prices, would be somewhere around 10~15%

Rich people should pay more, because society is corrupted in their favor in the first place.

 

[Good Luck]

"Fair Tax": Why can't you assholes be HONEST about it and call it for want it really is: a national sales tax? Why the fancy footwork with it name - especially a name which is patently false?

The problem with ANY sales tax is it hits the middle class hardest. So what if you "prebate" X% of some "minimum income" to the poor? The middle class, whose incomes range from just above your minimum to several times the minimum still spend a large percentage of their income. Those making, say 60K, are likely spending 80-90% of their income, so they are paying taxes on 80-90% of their income. But the average person making 120K is investing a larger portion, and thus pays taxes on only 70-75% of their income. Moving up the income scale a bit, the average person making 250K will be paying taxes on only about 60% of their income. And people whose incomes are in the 10+ megabuck region will be paying taxes on less than 10% of their income - even if the laws were written to assure they declare all sources of income.

So here I am, paying 15% national sales tax of 90% of my income, while John Kerry is paying 15% on about 5% of his income. How the fuck is that "fair"?

"Fair Tax" is a fucking farce. The only way to make a national sales tax fair would be to tax ALL transactions - including the purchase of stocks, bonds, and other investment tools. But that is impossible: an investment would have to have an ROI rate equal to the sales tax rate just to break even. Implement a sales tax on the sale of investments, and the entire structure would fall apart. How could people possibly hope to save for retirement if you tax away any ability for growth of savings?

 

[Sammy Jankis]

"Fair Tax": Why can't you assholes be HONEST about it and call it for want it really is: a national sales tax? Why the fancy footwork with it name - especially a name which is patently false?

The problem with ANY sales tax is it hits the middle class hardest. So what if you "prebate" X% of some "minimum income" to the poor? The middle class, whose incomes range from just above your minimum to several times the minimum still spend a large percentage of their income. Those making, say 60K, are likely spending 80-90% of their income, so they are paying taxes on 80-90% of their income. But the average person making 120K is investing a larger portion, and thus pays taxes on only 70-75% of their income. Moving up the income scale a bit, the average person making 250K will be paying taxes on only about 60% of their income. And people whose incomes are in the 10+ megabuck region will be paying taxes on less than 10% of their income - even if the laws were written to assure they declare all sources of income.

So here I am, paying 15% national sales tax of 90% of my income, while John Kerry is paying 15% on about 5% of his income. How the fuck is that "fair"?

"Fair Tax" is a fucking farce. The only way to make a national sales tax fair would be to tax ALL transactions - including the purchase of stocks, bonds, and other investment tools. But that is impossible: an investment would have to have an ROI rate equal to the sales tax rate just to break even. Implement a sales tax on the sale of investments, and the entire structure would fall apart. How could people possibly hope to save for retirement if you tax away any ability for growth of savings?

Ahh. Good luck is starting to awaken.

 

[Good Luck]

I understand how the flat tax would work. I also understand that the rich can avoid taxes altogether as they could take their investments off shore and could effectively avoid all taxable income. The ones that run businesses could take payment in cash or in other manners such as having the company pay for $X expenses and never show a dime's worth of income out of a corporation or at least not more than $30,000/year.

The ultra rich would be able to write their own ticket with this plan. Some would be honest and pay their taxes, others would fudge on their income and still others would downright declare $0 income or claim to live off of their attained wealth and not have any significant amounts of income whatsoever.

This plan would also do nothing at all to capture taxes from criminals such as drug dealers or illegal aliens.

I do not believe it would be long before those who were unwilling to support the government would find ways to get around declaring income altogether and we would be in the same boat we are in now.

Immie

1: The flat tax would be applied to ALL income, regardless of source (with a few exceptions, such as inheritance of a family farm and things like that). It would also apply to all American citizens, regardless of where they choose to live. Foreign investments: if you own them, if you are an American citizen, and if they increased in value over the tax year, the increased value is taxed. Period. The only recourse for the uber rich to avoid paying taxes would be to move out and renounce their citizenship.

2: A business already balances revenues with respect to expenses, and claims the difference as profit, which is taxable. Taxing their expenses (which is what a sales tax would do) simply increases their expenses, which is then passed on to the consumer, resulting once again in the consumer - most of whom are middle class - paying the business's taxes anyway. Except they'd be paying a lot more than they pay now. The typical business has around 15% profit margin. So they pay taxes on 15% of their total revenues (which they also pass on to the consumer). A sales tax would have them paying taxes on 85% of their revenues. Not profits mind you, which is income, but revenues - total sales. This would result is an increase of around 13% in consumer prices, just to offset the increased costs of production from a 15% sales tax. Add to that the 15% sales tax paid directly by the consumer and you get a net 28% increase in the cost of consumer goods across the board. I highly doubt that would do much good for our economy.

(Frankly I think we should simply stop taxing the income of businesses altogether, since the costs are ultimately paid by the consumer anyway. Concentrate on taxing personal income. Businesses should be limited to fees directly attributable to the cost of their use of public facilities - which is still passed on to the consumer, but far lower rates than the consumer currently pays for.)

3: WTF is with this concern over taxing ILLEGAL transactions? Of all the ideas, the idea of a desire to tax illegally derived income has to be the farthest out from reality I have ever seen. First, get rid of most drug laws (they almost invariably cause more harm than good anyway), and that'll put dealers' income in the legitimate realm where it can be taxed normally.

4: No matter what tax laws are written, there will be ways around it that some people will use to avoid paying. I know a guy in CA, where sales taxes are high, who never buys new if he can avoid it. He buys used from the private market. He reads classified ads almost religiously, and is an avid eBayer. He buys his computers used, used cars (from individuals, not dealers), used TVs, refrigerators, etc. etc. etc. Claims he saves a couple thousand in sales taxes every year doing that.

How many road-side produce stands do you think claim every cent of produce they sell? And then there are the black markets on things like tobacco products, to avoid the punitive taxes placed on them. Some people will always cheat on their taxes - even sales taxes.

Bottom line is a national sales tax will do far more harm than good, will (as usual) hit middle income brackets hardest, and will have a devastating effect of business and consumer prices.