Why not a national sales tax instead?

[Pandora]

"Class warfare" is a buzzword used by anyone who doesn't want to see real tax reform.

If you think it is just a "buzzword" what do you think the real term is for the current system?

, a lot needs to be fixed and changed. The problem is, the lobbyists exist to make sure that any tax advantage that their employers might have continues, regardless of whether it is fair or not.

People need to hold congress accountable, the problem is when a large block of voters get something for nothing, why would they vote a different system in? And the way it currently works is by giving a large block of voters something for nothing

should pay at least a token, so as to have some "skin in the game" as they say. Nothing is free, and nothing should be seen as being free.

agreed! Though I would go further and say we should all pay the exact same percent of our income if we have to stay with this nasty system.

However, when the lowest 50% on the economic ladder control 2.5% of the wealth, we aren't going to balance the budget by increasing taxes on that 50%.

I am ok with raising taxes on them (and I am one of them) till they pay the same percent as everyone else.

when Warren Buffet points out that his cleaning lady pays a higher percentage than he does, the response needs to be a more balanced tax code, not "Class warfare! Class warfare! The liberals are waging class warfare!"

But, that would be logical, and logic has no place in partisan politics.

warren buffet is a snake! He is comparing our INCOME TAX to his tax he paid on dividends that are taxed at 15% and his payroll tax. The bulk of his money was already made long ago, he is mostly paying on the interest now and he left out the corporate income tax.

 

[PLC1]

If you think it is just a "buzzword" what do you think the real term is for the current system?

Hmm.. real term... "totally screwed up?" "Unfair?" "a product of lobbying power?" "illogical?" I don't know. Take your pick.

People need to hold congress accountable, the problem is when a large block of voters get something for nothing, why would they vote a different system in? And the way it currently works is by giving a large block of voters something for nothing

Which is exactly why everyone should have to pay something. That way, they don't see government as something someone else runs for their benefit. That way, they understand that there is no free lunch.

agreed! Though I would go further and say we should all pay the exact same percent of our income if we have to stay with this nasty system.



I am ok with raising taxes on them (and I am one of them) till they pay the same percent as everyone else.

Well, not necessarily the same percentage. The progressive income tax is still a good idea.

But at least a token.

warren buffet is a snake! He is comparing our INCOME TAX to his tax he paid on dividends that are taxed at 15% and his payroll tax. The bulk of his money was already made long ago, he is mostly paying on the interest now and he left out the corporate income tax.

Yes, he is paying a lot less on his interest income, taxed at the long term capital gains rate, than a middle class person would pay on earned income. There are two different rates, one for those of us who earn our money, another for those who just sit back and let the interest build. I wouldn't say that Buffet is a snake. The lawmakers who set up an unfair system are the real snakes. Why did they do it? Could it be that most of the people making the tax laws get their money from investments rather than wages?

Tax all income the same, regardless of source. That is the only fair way.

 

[Pandora]

Hmm.. real term... "totally screwed up?" "Unfair?" "a product of lobbying power?" "illogical?" I don't know. Take your pick.



Which is exactly why everyone should have to pay something. That way, they don't see government as something someone else runs for their benefit. That way, they understand that there is no free lunch.



Well, not necessarily the same percentage. The progressive income tax is still a good idea.

But at least a token.



Yes, he is paying a lot less on his interest income, taxed at the long term capital gains rate, than a middle class person would pay on earned income. There are two different rates, one for those of us who earn our money, another for those who just sit back and let the interest build. I wouldn't say that Buffet is a snake. The lawmakers who set up an unfair system are the real snakes. Why did they do it? Could it be that most of the people making the tax laws get their money from investments rather than wages?

Tax all income the same, regardless of source. That is the only fair way.

I agree with everything you said except the progressive income tax

And the issue of raising the capital gains tax and other taxes on investment is a totally different argument, he was trying to make it sound like that is what he paid in income tax and that is why he was advocating for a higher income tax.

I think people like him are the ones who would do best if income taxes were raised on the super wealthy and the higher the better. It would assure him and people like him would stay on top...since they already made the bulk of their money it would only hurt new people who are becoming super wealthy.

 

[PLC1]

I agree with everything you said except the progressive income tax

And the issue of raising the capital gains tax and other taxes on investment is a totally different argument, he was trying to make it sound like that is what he paid in income tax and that is why he was advocating for a higher income tax.

I think people like him are the ones who would do best if income taxes were raised on the super wealthy and the higher the better. It would assure him and people like him would stay on top...since they already made the bulk of their money it would only hurt new people who are becoming super wealthy.

People like Warren Buffet pay less in taxes because their income is mostly capital gains. If income was income, regardless of source, then the tax code would a lot more fair. Buffet knows this, and is saying that his tax breaks aren't fair.

Of course, he has more money than he could ever possibly spend, so it isn't going to affect his lifestyle to pay more in taxes. His cleaning lady, however, might just be able to afford a better standard of living if she were not paying more in taxes, or, perhaps, if taxes were more fair, the federal government might not be in quite as much trouble as it is currently. That's not to say that they should raise taxes and keep on spending, of course.

If we're ever to balance the federal government, then taxes have to be increased, and spending has to be cut. That's the reality that no one in Washington is willing to address, at least not until after the election.

 

[Pandora]

People like Warren Buffet pay less in taxes because their income is mostly capital gains. If income was income, regardless of source, then the tax code would a lot more fair. Buffet knows this, and is saying that his tax breaks aren't fair.

Of course, he has more money than he could ever possibly spend, so it isn't going to affect his lifestyle to pay more in taxes. His cleaning lady, however, might just be able to afford a better standard of living if she were not paying more in taxes, or, perhaps, if taxes were more fair, the federal government might not be in quite as much trouble as it is currently. That's not to say that they should raise taxes and keep on spending, of course.

If we're ever to balance the federal government, then taxes have to be increased, and spending has to be cut. That's the reality that no one in Washington is willing to address, at least not until after the election.

My problem with buffet is he tried to make it sound like his income tax was less than the help when he was talking about capital gains tax. He could have been more clear if he wanted to but he didn't and he left out his corporate income tax

Raising the tax and giving it to the housekeeper would help her and people like buffet because it would insure no one else ever reached his status and I think he likes that.

I agree we probably have to raise taxes and cut spending but they have to come together or no deal.

 

[PLC1]

My problem with buffet is he tried to make it sound like his income tax was less than the help when he was talking about capital gains tax. He could have been more clear if he wanted to but he didn't and he left out his corporate income tax

Raising the tax and giving it to the housekeeper would help her and people like buffet because it would insure no one else ever reached his status and I think he likes that.

I agree we probably have to raise taxes and cut spending but they have to come together or no deal.

They have to come together, or it won't work.

And perhaps Buffet did make it sound that way. I wonder how many people understand the difference between capital gains taxes and income taxes. It appears that they don't know the difference between income taxes and payroll taxes either, or the oft asserted phrase "poor pay no taxes" wouldn't draw fire the way it does.

Anyway, there shouldn't be a difference. If we're going to tax income, then we should tax all income the same. Of course, that won't happen because, as I said before, the people making the tax laws get most of their income from capital gains.

Or, perhaps capitol gains would be a better phrase?

 

[clarkatticus]

My problem with buffet is he tried to make it sound like his income tax was less than the help when he was talking about capital gains tax. He could have been more clear if he wanted to but he didn't and he left out his corporate income tax

Raising the tax and giving it to the housekeeper would help her and people like buffet because it would insure no one else ever reached his status and I think he likes that.

I agree we probably have to raise taxes and cut spending but they have to come together or no deal.

Buffet is probably the least assuming person on the national scene today. If you perceive some sort of deception in his statement, chalk it up to the fact it contradicts everything the GOP has been saying. The current tax code is unfair for sure, nobody disagrees on this, it is the result of years of patchwork additions altered by lobby upon lobby of special interest groups from both sides. The sales tax option is the fairest known way and is perfectly in step with the Constitution.

 

[Pandora]

Buffet is probably the least assuming person on the national scene today. If you perceive some sort of deception in his statement, chalk it up to the fact it contradicts everything the GOP has been saying. The current tax code is unfair for sure, nobody disagrees on this, it is the result of years of patchwork additions altered by lobby upon lobby of special interest groups from both sides. The sales tax option is the fairest known way and is perfectly in step with the Constitution.

I think the sales tax seems the fairest too but Pocket brought up some points that could make hardships on some... so I don't know it just doesn't sound as hopeful knowing some will be hurt so much by it.

 

[Pandora]

They have to come together, or it won't work.

And perhaps Buffet did make it sound that way. I wonder how many people understand the difference between capital gains taxes and income taxes. It appears that they don't know the difference between income taxes and payroll taxes either, or the oft asserted phrase "poor pay no taxes" wouldn't draw fire the way it does.

Anyway, there shouldn't be a difference. If we're going to tax income, then we should tax all income the same. Of course, that won't happen because, as I said before, the people making the tax laws get most of their income from capital gains.

Or, perhaps capitol gains would be a better phrase?

I think he was counting on the fact few understood the difference. I don't trust him at all.

 

[Lagboltz]

They have to come together, or it won't work.

And perhaps Buffet did make it sound that way. I wonder how many people understand the difference between capital gains taxes and income taxes. It appears that they don't know the difference between income taxes and payroll taxes either, or the oft asserted phrase "poor pay no taxes" wouldn't draw fire the way it does.

Anyway, there shouldn't be a difference. If we're going to tax income, then we should tax all income the same. Of course, that won't happen because, as I said before, the people making the tax laws get most of their income from capital gains.

Or, perhaps capitol gains would be a better phrase?

These are IRS figures from 2008, the latest I could find. The government revenue from income tax was $1.03 T. The total income of everyone in 2008 was $8.43 T. If we went to a flat tax to collect the same $1.03 T amount it would be 1.03 / 8.43 = 12.2%. A family earning a minimum wage would have to pay 12.2% x 15,000 = $1,833 extra taxes because of the flat tax. That would really be hard to take. Government assistance would have to make up for it for poor families.

On top of that would be FICA at 7.65%. That makes it roughly 20%. The FICA would bring this poor soul's payroll tax deduction to around 20%.

The FICA part of Buffet's tax would be minuscule, so Buffet would be paying only around 12.2% total, not to mention his capital gains at 15%. So rather than paying 17.7%, Buffet would probably be paying 13 or 14%. That simply is not fair. In short the "fair tax" is not fair.

 

[Lagboltz]

I think the sales tax seems the fairest too but Pocket brought up some points that could make hardships on some... so I don't know it just doesn't sound as hopeful knowing some will be hurt so much by it.

A sales tax would be too high of a percentage to replace the income tax. This conclusion comes from a simple arithmetic, but still, I may have missed something.

The total income tax revenue for 2008 was $1.03 Trillion
The total amount Americans spent was $4.4 T. (US Census Bureau)
The percent sales tax to equal the income tax would be 1.03/4.4 = 23.4%.
The total government receipts was $2.17 T, which means 1.14 T came from other revenue sources. I will assume that is the same.

So the conclusion is that if we were to replace income tax with a sales tax, the sales tax would have to be 23.4%. That's way too high. It shows what we already guessed that the poor buy a lot more stuff as a percentage of their income than the wealthy. The average household spends 78% of their income.

 

[PLC1]

A sales tax would be too high of a percentage to replace the income tax. This conclusion comes from a simple arithmetic, but still, I may have missed something.

The total income tax revenue for 2008 was $1.03 Trillion
The total amount Americans spent was $4.4 T. (US Census Bureau)
The percent sales tax to equal the income tax would be 1.03/4.4 = 23.4%.
The total government receipts was $2.17 T, which means 1.14 T came from other revenue sources. I will assume that is the same.

So the conclusion is that if we were to replace income tax with a sales tax, the sales tax would have to be 23.4%. That's way too high. It shows what we already guessed that the poor buy a lot more stuff as a percentage of their income than the wealthy. The average household spends 78% of their income.

Further, if we start exempting items from the tax, such as services, groceries, medical care, existing homes, whatever, then the tax on the remainder will have to be a lot higher.

The idea is appealing until we begin to look at the details and the likely unintended consequences.

 

[Lagboltz]

Further, if we start exempting items from the tax, such as services, groceries, medical care, existing homes, whatever, then the tax on the remainder will have to be a lot higher.

The idea is appealing until we begin to look at the details and the likely unintended consequences.

Good point. Food and medical are about 20% of the budget. The tax would then have to be 29.2% just for those exemptions alone.

 

[Openmind]

Good point. Food and medical are about 20% of the budget. The tax would then have to be 29.2% just for those exemptions alone.

What about having three level of sales taxes?

One. . .absolute necessities (basic food, medication, medical care, electricity and gas, water, etc. . .) would not be taxed.

Two:. . ..necessities of modern living (basic cars, cable TV, internet connection, clothes, shoes, toiletries, appliances, public transportation, including basic airfares, basic hotel rates, most electronics, houses up to the "jumbo loan" level, etc. . .) would be taxed at, let's say, 20%

Three: . . ."wants" and luxury items (luxury cars, luxury homes, furs, designer clothing and accessories, jewelry, perfumes, first class air fares, Luxury hotels, yachts, private planes, etc. . .) would be taxed at, let's say 30 or 35%.

ANYONE who resent paying the 30 or 35% sales tax could just abstain from purchasing the "luxury" items.

 

[Lagboltz]

What about having three level of sales taxes?

One. . .absolute necessities (basic food, medication, medical care, electricity and gas, water, etc. . .) would not be taxed.

Two:. . ..necessities of modern living (basic cars, cable TV, internet connection, clothes, shoes, toiletries, appliances, public transportation, including basic airfares, basic hotel rates, most electronics, houses up to the "jumbo loan" level, etc. . .) would be taxed at, let's say, 20%

Three: . . ."wants" and luxury items (luxury cars, luxury homes, furs, designer clothing and accessories, jewelry, perfumes, first class air fares, Luxury hotels, yachts, private planes, etc. . .) would be taxed at, let's say 30 or 35%.

ANYONE who resent paying the 30 or 35% sales tax could just abstain from purchasing the "luxury" items.

I like to use an analytic approach when trying to understand a scheme. To set the rates of a multilevel tax plan would require knowing how much is spent on the various items in each level. The top level is equivalent to a luxury tax, which was tried in the past and failed because these items have a large price elasticity -- sales dropped and industries suffered.

All the data necessary to explore a multilevel tax is available, but to compute various schemes would require a few weeks of work. It was easier to compute flat sales tax. However post #88 above shows that it would be imperative for the second level to be around 29.2%. Sales would suffer there too.