Redefining Rockel

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The WORD of the Week

Matthew 3:7-10

But when he saw many of the Pharisees and Sadducees coming to where he was baptizing, he said to them: "You brood of vipers! Who warned you to flee from the coming wrath?

Produce fruit in keeping with repentance.

And do not think you can say to yourselves, 'We have Abraham as our father.' I tell you that out of these stones God can raise up children for Abraham.

The ax is already at the root of the trees, and every tree that does not produce good fruit will be cut down and thrown into the fire.

Stupid Fact of the Week

There was only one civilian casualty during the three-day Battle of Gettysburg

16 April, 2005

H.R. 25

So, I've finally worked my way through this bill, put forth by Congressman John Linder, which is being "dubbed the FAIR Tax Bill." (1) I guess they gave up trying to call it the "Flat" tax when the flat line of taxation took a huge downward curve with the poverty exemptions.

But how is this bill "Fair?" Granted, the tax rate remains constant for all citizens, however, is it really fair to place this kind of burden on the tax-payers?

Let's examine how this will generate revenue for our government:

We'll examine 5 average citizens:

Frist, Willie Welfare. This guy's below the poverty line and living off the government. Under the current system he contributes nothing... under the "Fair" system, still nothing.
Change: none.

Number two, Joe Schmoe. Joe's got a college degree, a small family, and an income of about 40k a year. Under the current system he pays roughly 23% of 100% of everything he makes to the government... at his income level, that works out to be roughly $9,200.00. Under the "Fair" system he pays roughly 23% of 100% of everything he spends, which, for Mr. Schmoe, is approximately 85% of his income, as he is trying to set aside at least $6K a year... this works out to be roughly $7,800.00... even if he spent up to 100% of his income each year, he would end up paying the same or less money to the government.
Change: less money with the "Fair" system.

Third: Six-figure Stewart. This guy brings in a solid $150,000.00 each year, is still working on paying off graduate/medical/law school loans, and dabbles a bit in real estate and investments. Under the current system: Stewy pays 28% of 150K to the government... $42,000.00!
Under the fair system: He pays 23% on what he purchases (approx. 70% of his income)... $24,000.00!
Change: a lot less money with the "Fair" system.

Fourthly, Mr. Millionaire. This man owns way too much, spends too much, basically does everything in the quantity "too much." A problem I would love to help him alleviate. So let's say he rakes in $2M.
Current system: Millie pays 35% of his 2M to the government... $700,000.00!!!!!
Fair system: Although he buys really expensive things and spends an assload more than most small cities, now that he's got his full $2M, not the $1.3M under the old system, he can spend 40% of what he makes and still have half of his income with which to build the next successful boy band... $184,000.00.00!!!!!
Change: MUCH less money with the "Fair" system.

And lastly, Senior Citizen. This guy's been a smart investor and as a result has a pretty nice sized retirement account. For Mr. Citizen, we're going to look at the results of a man in his position under both the current and the "Fair" system for the duration of their lives. Under the current system, Mr. Citizen is receiving some government benefits, but also contributes some back to the government through the taxation of the "income" he has by way of some of his investments being made, over the years, into an account that allowed it to be considered tax-free at the time of investment. Under the "Fair" system, all those investments he made in his youth, gaining him 3% interest annually, can now be pulled out and spent at the sales tax rate of 23%. However, Mr. Citizen qualifies for the monthly refund for not exceeding the poverty spending limit. So...
Change: Not noticeable.

So who is left to pick up the slack? Where does the money come from?

And do we even need to get into the fact that this "Fair" system will allow all of us, equally, with no discrimination, to go through the paperwork of taxpaying every month.

To me this plan seems doomed to fail. But apparently I'm not the only one seeing it that way:

"Not less than once annually, the Secretary shall host a conference with the sales tax administrators from the various administering States to evaluate the state of the
national sales tax system, to address issues of mutual concern and to develop and consider legislative, regulatory, and administrative proposals to improve the tax system." (2)

A little council to find ways to improve the tax system. Why don't they do that now, before they restructure the whole tax code, before they switch to a system that is shaky at best?

- Rockel

ENDNOTES:
(1) - http://www.gopusa.com/commentary/fsalvato/2005/fs_04151.shtml
(2) - http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_cong_bills&docid=f:h25ih.txt.pdf

posted by Rockel @ 11:23 AM

1 Comments:

At 16/4/05 3:56 PM, The Cobra said…

see, yea, I like the concept. I really do, I think it COULD work if it was done right. But filings every month? IT's a huge cut in national revenue which means the slack will have to be picked up elsewhere and my first guess would be import tariff's. They jack those up, prices go up in response, coupled with inflation and the 27% flat tax isn't based on prices now, but much higher prices after the market readjusts. Something I really like about the whole "idea" is that anything spent for investment purposes is exempt. Which is good. America is at an all time high for individual debt so anything to help the people in this area, i'm all for. I just wonder if capital gains taxes will be altered in any way as well.