FairTax vs. Flat Tax? Point/Counterpoint :: RunningForums.com

sonnylax wrote:

AlaninTX wrote:

I still keep thinking that what kills this idea is when people see it would be approx. 23% on top of their state sales tax they take blanch.

Yeah, but when everyone started receiving their whole paycheck AND then saw how quickly prices dropped on goods/services (due to the elimination of all the embedded taxes).... I don't think they wouldn't blanch. It won't be easy, but educating more folks about the proposed system is key to having any chance of fixing the tax code.

No, we'll blanch. The connection is a simple one on paper. It's not a simple one if your gallon of milk is now $5 (assuming that foodstuffs will be taxed). It's not simple if the $12 cd is now $19 at Best Buy and the $19 cd is $26 at Goody. It's not simple when my $20 blue jeans are $30 or my $90 running shoes are $135.

I may have more money, but I don't want to pay that much money for some of these services and I'll blanch....and I get the theory that I have more money and I'm just switching the tax from income/payroll to consumption.

You can educate, but this is realism.

Pug wrote:

sonnylax wrote:

AlaninTX wrote:

I still keep thinking that what kills this idea is when people see it would be approx. 23% on top of their state sales tax they take blanch.

Yup - A major cultural change will need to take place.

Reform Panel Proposes Simplified Income, Hybrid Tax Systems

Quote:

The nine members of the President’s Advisory Panel on Federal Tax Reform at a meeting in Washington on October 18 agreed that their final report would contain a simplified income tax and a hybrid consumption-based tax, two plans they say would make the tax system more fair, simple, and pro-growth than the current code.

The twin recommendations will be included as part of the panel’s final report to be sent by November 1 to the Treasury secretary, who will then offer tax reform suggestions to President Bush.

The simplified income tax plan favors credits over deductions, eliminates itemizing, coordinates phaseout levels, and collapses a half-dozen existing tax breaks into two new credits. It would tax income at four rates: 15 percent, 25 percent, 30 percent, and 33 percent.

It would reduce the Form 1040 to 32 lines and would cut the form’s number of worksheets and schedules to 10.

“That’s pretty dramatic,” panel Chair Connie Mack said.

Also, shareholders would not pay tax on dividends paid by U.S. corporations, and capital gains rates would be reduced to between 3.75 percent and 8.75 percent.

Both of the panel’s plans -- as sketched out at its 12th hearing -- would eliminate depreciation in favor of immediate expensing and would also eliminate the deduction for interest.

As expected, panelists suggested repealing the alternative minimum tax, which would cost as much as $1.3 trillion over 10 years. The lost revenue would be made up through capping the benefits for mortgage interest and for healthcare. The panelists also suggested repealing the deduction for state and local taxes. John Breaux, the panel’s vice chair, stressed that the group was forced to make tough decisions necessary to pay for repealing the AMT.

Panel member and former IRS commissioner Charles O. Rossotti said that although some taxpayers in high-tax states would be losing the state and local interest tax deduction, the deduction could have been eaten by the AMT anyway. Also, the 75 percent exclusion on capital gains described by panelists would be helping many of those taxpayers, he said.

“You’ve got to look at the whole package and take a look at what your bottom line is,” Rossotti said.

The panel did not release a summary of the proposals members agreed to at the meeting but said the final report will contain the details. The panel’s press office released general discussion points.

In addition to the two plans, panelists agreed to include, but not recommend, a value added tax proposal.

http://www.taxanalysts.com/www/taxwirewww.nsf/DocNoLookup/E4C795EB2C6DC8ED8525709F00084378?OpenDocument

I'm still not clear. If we're eliminating itemizing (paragraph 3) then how do we "cap the benefit for mortgage interest"?? Why specify that we're eliminating state and local tax deduction if ALL deductions are eliminated? And how do credits simplify things over deductions?

So I guess the rich make out like bandits (dividends & cap gains) and us middle class taxpayers get screwed (wages & salary).

FairTax vs. Flat Tax? Point/Counterpoint

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