Jeremy Loscheider on the FairTax
I recently received this terrific letter from Jeremy Loscheider about the FairTax proposal. I'll let him take it away from here:
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Hi Mike,
Maybe I'm coming late to the game, but I couldn't resist this one. I read the rebuttal to The Only Anti-FairTax Person in North America. Wow, when FairTax supporters swallow rhetoric, they don't even chew. I show this quote:
FAIR TAX FACT: Right now, the "elderly", and everyone else, pays tax on the same money several times over! Under The Fair Tax, theoretically, one can totally opt out of the federal tax system with regards to the Fair Tax, by the way they CHOOSE to spend their money. As for those, like me, who have a ROTH IRA, and paid taxes going in, fine, I'll take my lumps and pay tax when I CHOOSE to spend that money at the RETAIL level.
My issues with this:
1) Why do the "elderly" deserve quotation marks? Does this writer doubt they exist?
2) Now, I've only been paying taxes about 10 years, but I'm pretty sure we're taxed once by the federal government, at the income level. Withholding taxes are technically liabilities of the federal government owed to taxpayers once tax liability is satisfied. Corporate profits are the only incident of double-taxation (earnings and dividends), though dividends are at a preferential rate.
At the state/local level, which FairTax would not affect, we are taxed several times:
a) Income (Missouri is 6%, St.Louis at 1% additional)
b) Property (I pay $60/year on my 8-year old Pontiac, and $140/month on my house)
c) Sales (I paid 8.25% on my new DVD-ROM)
The writer is correct that we pay multiple taxes for the same level of income; but FairTax will do nothing to remedy that.
3) The verses: "theoretically, one can totally opt out of the federal tax system with regards to the Fair Tax" makes me think that some supporters are back-to-nature survivalists.
Don't want to pay taxes under the FairTax? BUY NOTHING! Let's be realistic - we buy things because we need or want to. What's the point of money if it is not eventually spent?
4) When the writer mentions some taxes being paid on money in a Roth IRA, I think the writer is either quite young or hasn't saved a penny. A 50+ Boomer putting in the maximum allowed since the Roth's inception would have put $31,000 in after-tax income into the fund. Assuming a 21% effective tax rate, the Boomer paid $8,240.51 on $39,240.51. There's a lot of pain knowing that the money won't go nearly as far with the new tax. Indeed, a truly responsible saver who has accumulated $500,000 in cash for retirement (paying 21% effective federal rate, or $133k on the earnings) will pay an additional $115,000 (at 23% tax-exclusive rate) for the privilege of spending that $500k nest egg. Total taxes paid on the $633k in earnings? In excess of $248k, or nearly 40%. Lumps? Try malignancies.
It is ludicrous to say that this FairTax gives us any more choice than the federal income tax. The only choice involves cutting back expenditures (or else, mobbing stores and malls ahead of the imposition date to avoid as much tax as possible), which is no greater choice than we already have the ability to make. So, again, I do not see how realistically the FairTax could possibly make me better off.
I think I'll go read their book - and see the lack of logic inherent in it.
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Hi Mike,
Maybe I'm coming late to the game, but I couldn't resist this one. I read the rebuttal to The Only Anti-FairTax Person in North America. Wow, when FairTax supporters swallow rhetoric, they don't even chew. I show this quote:
FAIR TAX FACT: Right now, the "elderly", and everyone else, pays tax on the same money several times over! Under The Fair Tax, theoretically, one can totally opt out of the federal tax system with regards to the Fair Tax, by the way they CHOOSE to spend their money. As for those, like me, who have a ROTH IRA, and paid taxes going in, fine, I'll take my lumps and pay tax when I CHOOSE to spend that money at the RETAIL level.
My issues with this:
1) Why do the "elderly" deserve quotation marks? Does this writer doubt they exist?
2) Now, I've only been paying taxes about 10 years, but I'm pretty sure we're taxed once by the federal government, at the income level. Withholding taxes are technically liabilities of the federal government owed to taxpayers once tax liability is satisfied. Corporate profits are the only incident of double-taxation (earnings and dividends), though dividends are at a preferential rate.
At the state/local level, which FairTax would not affect, we are taxed several times:
a) Income (Missouri is 6%, St.Louis at 1% additional)
b) Property (I pay $60/year on my 8-year old Pontiac, and $140/month on my house)
c) Sales (I paid 8.25% on my new DVD-ROM)
The writer is correct that we pay multiple taxes for the same level of income; but FairTax will do nothing to remedy that.
3) The verses: "theoretically, one can totally opt out of the federal tax system with regards to the Fair Tax" makes me think that some supporters are back-to-nature survivalists.
Don't want to pay taxes under the FairTax? BUY NOTHING! Let's be realistic - we buy things because we need or want to. What's the point of money if it is not eventually spent?
4) When the writer mentions some taxes being paid on money in a Roth IRA, I think the writer is either quite young or hasn't saved a penny. A 50+ Boomer putting in the maximum allowed since the Roth's inception would have put $31,000 in after-tax income into the fund. Assuming a 21% effective tax rate, the Boomer paid $8,240.51 on $39,240.51. There's a lot of pain knowing that the money won't go nearly as far with the new tax. Indeed, a truly responsible saver who has accumulated $500,000 in cash for retirement (paying 21% effective federal rate, or $133k on the earnings) will pay an additional $115,000 (at 23% tax-exclusive rate) for the privilege of spending that $500k nest egg. Total taxes paid on the $633k in earnings? In excess of $248k, or nearly 40%. Lumps? Try malignancies.
It is ludicrous to say that this FairTax gives us any more choice than the federal income tax. The only choice involves cutting back expenditures (or else, mobbing stores and malls ahead of the imposition date to avoid as much tax as possible), which is no greater choice than we already have the ability to make. So, again, I do not see how realistically the FairTax could possibly make me better off.
I think I'll go read their book - and see the lack of logic inherent in it.
Source...