Social Security Changes

[wnytaxman]

Originally Posted by Hamshog

Foghorn,

To get the "net amount" you have to deduct the "cost of doing business". Not just "Cost of Goods". That includes all overhead & materials. I know there would have to be laws/requirements for figuring that out. That's why I said the IRS would only be reduced by up to 75% instead of 95%.

But to have a book or books that have thousands of pages of law is crazy!!!! Loopholes upon loopholes for corps & the rich who can afford law/tax attorneys to squeeze every deduction from the code. I never bought houses because I would get a deduction?? I bought because I thought I'd net appreciation during my ownership and make a profit when I sold it.. Although I knew I could spend my money better than the government anyday.....

Regards, Hamshog

I agree with you that our tax code is complex beyond belief. Most of that complexity goes into just defining what is income and what is not. Added to that is to define what is an allowed expense and what isn't. In your post you mention the 'cost of doing business.' Much of the tax code is tied up in determining what is and isn't allowed under the cost of doing business. As soon as you start to come up with those definitions you no longer have a flat tax. You may have a flat tax rate, but you do not have a flat tax. You would have a flat tax with exceptions or as some like to call them loopholes.

A true flat tax would tax 100% of everyone's Social Security which I don't think would make too many folks happy. People are very upset about paying taxes on any part of their SS, let alone 100% of it. So if we make an exception for SS, then again we just defeated our flat tax.

The idea of a flat tax is fine if all someone has is a W-2 and basically nothing else. Then, just use percentages and all is well.

The difficulty comes about as soon as you add in the other parts of our society like small businesses, retirement income, and investments. If I sell a stock, what should I be paying taxes on. So a likely response would be the amount of gain. Well, how do I determine that? Do I take off what I paid for the stock? How about my commission paid to sell the stock? What about my management fee paid to the broker? It's part of the cost of that stock. How about my investment publications? I used those to find out the best stock to buy. Sadly, there isn't a simple solution to what is a very complex problem.

As difficult as it is to understand, part of the complexity of the tax law is an effort to make it fair. And before you even say it, I'll agree, IT AIN'T FAIR! I didn't write any tax laws and had no input on any of them so please don't blame me.

[Lindsay Richards]

A true flat tax would tax 100% of everyone's Social Security which I don't think would make too many folks happy. People are very upset about paying taxes on any part of their SS, let alone 100% of it.

Of course that would all be figured in the calculation of the Fair Tax % and the necessities of life would be exempted through the prebate system.

[wnytaxman]

Originally Posted by Lindsay Richards

Of course that would all be figured in the calculation of the Fair Tax % and the necessities of life would be exempted through the prebate system.

Lindsay we live on the border with Canada where they have the Goods and Services Tax. It is in essence a national sales tax which is very similar to the Fair Tax as I understand it to be. If you visit any mall in our area on the weekend you will find many of the license plates in the parking lot are Ontario plates. People shop here rather than in Canada to escape the very high consumption taxes paid in Canada. If you put such a tax on goods here the flow will just reverse. For the wealthy, overseas purchases will be very easy to justify and many will just simply opt to live overseas.

NY came up with a tax surcharge on those making over a certain amount in an effort to balance the budget. Tom Galisano, the founder of Paychex, had been living here in Upstate NY. When the tax was imposed he just simply moved to Florida where there is no income tax. He stated that he saved $13,800 a day by moving.

I think that the so called Fair Tax would be a huge burden on those that are not wealthy enough to leave and not close enough to a border to shop elsewhere. One thing I have learned over the years of being in this profession is that if there is any way to avoid a tax people will find it. Just do a search on any RV Forum for Montana LLC's as an example.

[Lindsay Richards]

You need to study the Fair Tax. It eliminates the federal income tax, capital gains tax, SS tax, Medicare/Medicaid, ETC. These taxes are all embedded in the cost of goods sold right now and would be eliminated from the base price of the goods sold. It is totally different from a national sales tax which does not. It does not charge the poor more (prebate) and promotes US manufacturing and business. You owe it to yourself to study the Fair Tax. There are some great websites available for that purpose. When you start comparing it to a national sales tax and talking about borders, I can see the head snapping back of everybody who understands the Fair Tax.

[wnytaxman]

I'll check it out Lindsay and see what it is all about. Sorry about my confusion of it with the national sales tax.

[Lindsay Richards]

FairTax | American for Fair Taxation | Tax Reform Solutions | Consumption Tax - Americans For Fair Taxation

It is a national sales tax in a way, but not only one in that it eliminates all other federal taxes. The main thing to remember is that corporate taxes are now embedded into the price of goods now and that would go away. If a worker made $20 an hour and worked 40 hours in a week, his check would be $800. Nothing removed (except in states that have state taxes).

[wnytaxman]

Originally Posted by Lindsay Richards

It is a national sales tax in a way, but not only one in that it eliminates all other federal taxes. The main thing to remember is that corporate taxes are now embedded into the price of goods now and that would go away. If a worker made $20 an hour and worked 40 hours in a week, his check would be $800. Nothing removed (except in states that have state taxes).

Lindsay, it is a national sales tax and I can tell you that the biggest area of tax abuse right now is in sales taxes. It is the easiest place to steal for many and particularly for cash businesses. Here on the border we would just go to Canada. Again, as I said before many would shop overseas or just simply move and keep their US citizenship. A lot of RVers spend the winter in Mexico to save money and I can see that number increasing astronomically with the Fair Tax.

Sales taxes are purported to be the most fair or all taxes. The problems come about with who is subject to it. Do you impose it on purchases by non-profits, schools, churches? What about Indian Tribes which are exempt from sales tax by treaty? How about manufacturers? Do you charge them as a value added tax so effectively that tax gets multiplied several times over? If people think income taxes are complex, wait until a Fair Tax comes into play. If you are going to charge a municipality on the sales tax then the local taxes will go up to help pay for the additional taxes the municpality is paying.

There are two other major problems with the proposition. The first of which is the blank check approach that would be given to every politician. A modest increase in the tax of say 1/8% would be pretty easy to pass but it would generate billions of dollars of additional revenue. I wonder how long it would take that tax to reach 50%. That is not unthinkable with today's political environment. Also there is the implication that this Fair Tax would eliminate much of the tax enforcement of the IRS. Sadly it would do just the opposite. Sales taxes are one of the most difficult taxes to enforce because you put all the money in someone else's hands. Most states spend the most money on sales tax enforcement. Also who determines who falls under the poverty line?

Lots of holes in this one from my perspective and that's just dealing with sales taxes on a regular basis and the myriad of auditors. In fact we have one sales tax audit right now that is in its third year. The auditors are sure the guy is stealing but they can't figure out how to prove it.

[Lindsay Richards]

Here on the border we would just go to Canada.

.

Why go to the border? Are you not getting that the price of good here would be substantially reduced by having all of the embedded taxes removed? The fair tax would be charged on all retail sales. No taxes for other sales. The Indians have no treaties for the Fair Tax and are a small part of it and certainly not deciding. factor. No value added taxes are mentioned in the Fair Tax. Talk about bringing up a red herring? All taxes are paid at the retail level by the final consumer in the US. Manufactured goods would be much cheaper for export as there would be no taxes in them. The increased number of dollars from the extra employees would be taxed as they spent them on consumption. Our exported products would be much cheaper. I was in a partially based cash business for years and understand what can happen. Penalties would have to be stiff. When you study the Fair Tax, you will see that the amount can be changed only by a 2/3 vote of each house of congress and the public would immediately know it on their first purchase. No hiding behind withholding and April 15th. The public would hold their feet to the fire. Cities and counties pay the tax on all retail sales. Remember that the goods without embedded taxes are much less.

Also who determines who falls under the poverty line?

When you say this, it is pretty obvious you haven't spent even a cursory amount of time understanding the concept. This is a useless question when you grasp the concept of the prebate. Don't want to be mean, but it is obvious. You keep thinking of it as just another sales tax. It is the only tax.

[Rubix cube]

Originally Posted by Hamshog

Foghorn,

To get the "net amount" you have to deduct the "cost of doing business". Not just "Cost of Goods". That includes all overhead & materials. I know there would have to be laws/requirements for figuring that out. That's why I said the IRS would only be reduced by up to 75% instead of 95%.

But to have a book or books that have thousands of pages of law is crazy!!!! Loopholes upon loopholes for corps & the rich who can afford law/tax attorneys to squeeze every deduction from the code. I never bought houses because I would get a deduction?? I bought because I thought I'd net appreciation during my ownership and make a profit when I sold it.. Although I knew I could spend my money better than the government anyday.....

Regards, Hamshog

I'm sorry Hamshog, I thought between what you were saying and what wnytaxman was saying there was a misunderstanding, and assumed you didn't understand the concept of net. No offense was intended.

I agree, no one buys a house for the deduction, but it does allow folks who couldn't otherwise afford one to make the purchase increasing the market.

I suspect, but don't know for sure, there are other complexities in our tax codes that emanated from the possibility that would stimulate spending rather than hording (My marginal tax rate is such that I don't need to worry about or research the complexities of such problems - DANG!)

Right now, we are about to be bit in the butt by the Alternative Minimum Tax, which was set up to not allow the rich to get away with too many of those cuts they may get and avoid taxes altogether. The definition of rich has slid so that middle class is now 'rich'. But, I suspect you know this too. At some point, I expect people to complain that to extend this part of the Bush tax cuts (and the 'marriage penalty') is helping the rich (This comment is not directed at you).

I also agree there has GOT to be a better way than having to spend a week-end a year to figure out taxes. It is too easy to rip yourself off, and for those that would to cheat the system. (not to be confused with legal ways to save on taxes.)

I don't mind paying taxes. In fact, I've always maintained I wish I had the privilege to pay lots of them . But, I also want the stewardship of those funds to be MUCH better than it has been.

[wnytaxman]

Lindsay I'll read more tonight and see what I may have missed. Admittedly I did go through it very quickly so I will see what it has to offer. Just so that you know I didn't take your comment as being mean. I did a very brief look at the Fair Tax without reading the entire site. Your comment wasn't mean....just accurate!

[Lindsay Richards]

The Wikipedia site is very slanted to the liberal side and don't use it. They are an open source site.

[Dave Dopp]

Originally Posted by Paul R. Haller

[snip]
Mitt paid less then 15% income tax last year on 38 million income. I paid almost 30% on 80,000$ and you ask why there is a problem?!?
[snip]
-Paul R. Haller-

Excuse me? How in the world did you wind up paying 30% on $80,000? Using the IRS brackets, the maximum you would have paid , if you're single, is 20.1 percent. If married, the maximum is 15.3 percent. Your marginal tax rate, single or married, is only 25 percent at $80,000.

Aside from that, using your numbers, you paid $24,000 while Mitt paid over $5.5 million. Sounds like he paid his fair share and then some. Unless, of course, you want Mitt to pay your fair share, too!

[Lindsay Richards]

Capital gains are made with money that has already been taxed previously, then generally a corporate tax is paid again, then the profits after R&D, upgrades, ETC, is split up among shareholders is taxed again at the lower rate of 15%, How many times would you think is enough times to tax the money? Capital gains has supplied millions of jobs. It all gets back to who you think will do the most good with the money, the private sector or the government.

[Hamshog]

Originally Posted by Rubix cube

I'm sorry Hamshog, I thought between what you were saying and what wnytaxman was saying there was a misunderstanding, and assumed you didn't understand the concept of net. No offense was intended.

I agree, no one buys a house for the deduction, but it does allow folks who couldn't otherwise afford one to make the purchase increasing the market.

I suspect, but don't know for sure, there are other complexities in our tax codes that emanated from the possibility that would stimulate spending rather than hording (My marginal tax rate is such that I don't need to worry about or research the complexities of such problems - DANG!)

Right now, we are about to be bit in the butt by the Alternative Minimum Tax, which was set up to not allow the rich to get away with too many of those cuts they may get and avoid taxes altogether. The definition of rich has slid so that middle class is now 'rich'. But, I suspect you know this too. At some point, I expect people to complain that to extend this part of the Bush tax cuts (and the 'marriage penalty') is helping the rich (This comment is not directed at you).

I also agree there has GOT to be a better way than having to spend a week-end a year to figure out taxes. It is too easy to rip yourself off, and for those that would to cheat the system. (not to be confused with legal ways to save on taxes.)

I don't mind paying taxes. In fact, I've always maintained I wish I had the privilege to pay lots of them . But, I also want the stewardship of those funds to be MUCH better than it has been.

Hey Foghorn,

No offense taken... I was just clarifying net a little more for anyone not knowing and reading this thread.

Back to the main topic of SS though, I've paid in for 45 years now and have played by the governments rules to receive my benifits that are "owed" me. The SSA is not giving me anything I didn't pay for, therefore to me it's not an entitlement or give away, welfare, etc. I want my full amount owed.

When our forefathers fought the British, it was because of "Taxation without Representation". I feel this country is in the same boat with the politicians we've had at least from the mid sixties if not earlier. To allow pensions, lifetime healthcare, no term limits, etc. has taken this country to a place not planned for by the Constitution, but considered legal by the politicians of the last 50 years. We've been raped by our politicians and we're continuing to let it happen. The US Government is too large to revolt against and the population is split between those of us who want are willing to work for a living and those that want to take for their livleyhood.

If the U.S.A. isn't here in another 100 years or so, it won't be because of war, it will be because of the greed and stupidity of our Government...

Regards, Hamshog