Re: conservation of Euros

>> >> On Fri, 14 May 2010 21:26:28 -0700, John Larkin

> > >> wrote: > >> >> > >> >>> > >> >>>> > >> >>>>John Lark> >> >>>>> > > >> >>>>>> John Lark> > >> >>>>[...] > > >> >>>>>>> I like the sales tax, as opposed to income tax, because it puts > >> >>>>>>> business on a better basis against imports, so saves jobs. And

because

>> >>>>>>> it would be enormously simpler and cheaper to comply with. No > >> >>>>>>> accountants, no tax returns, no exemptions, no deductions, no > >> >>>>>>> quarterly estimates, no loopholes... almost. > > >> >>>>>>> Tax consumption. Don't tax savings or investment or job creation.

If a

>> >>>>>>> person is rich but doesn't spend any money, nobody can reasonably be > >> >>>>>>> jealous of his wealth. > > >> >>>>>> A serious problem with that: It punishes frugal people who have saved > >> >>>>>> for their retirement and rewards those who squandered everything. The > >> >>>>>> money they saved _has_ already been taxed. > > >> >>>>> Simple fix: don't tax income. > > >> >>>>Yeah, but how do you deal with income that _has_ already been taxed but > >> >>>>not spent yet because people saved it for their retirement? A flat > >> >>>>VAT-type tax is the same as confiscating xx% percent of that. Not fair > >> >>>>at all. > > >> >>>As I suggested, exempt basics, like food, reasonable rent, generic > >> >>>medicines. If people can afford a yacht, they can afford to pay sales > >> >>>tax on it. > > >> >>The point is that that money has already been taxed. It shouldn't matter

if

>> >>it is used to buy a yacht. Taxing it again is wrong (one reason I don't

trust

>> >>Roth IRAs). > > >> >As I suggested, eliminate income taxes and go to sales tax. Then > >> >things are only taxed once. > > >> You're missing the point. Those millions of people who have saved all their > >> lives will be taxed a second time. They've *already* been taxed on that > >> money. > > >The defense the Fair Tax people offer is that it really isn't an > >increase at all--you're already paying that 2nd tax today. It's > >hidden in the price of everything you buy. > > How so? Inflation? That increases investment values, as well. > > >The price of anything always includes all the taxes--ihe income, SS, > >Medicare, and other taxes--paid by the people who made it. Take those > >out and the price of goods will fall. > > Sure, but the *INCOME* tax has been paid and the new sales tax will also have > to be paid. Without the change, there isn't a second tax on the income. Yes, > the "fair" tax will include the income tax of the people paying now, but it > will also increase the real cost of the product the same as another income tax > would on the buyer.

Now you're not getting it...maybe equations would be clearer... I'll set out the reasoning, then you can have a go at rebutting it.

a) If you buy an item today--any item--the price of that item is roughly

price = raw materials + labor cost(wages + benefits + employer matching taxes) + overhead(rent, power, office help, advertising, phones) + business taxes + profit.

b) The Fair Tax economists calculate that when you buy a $1 item, 23 cents of the price of that item goes to covering the various taxes that the people who made the item had to pay.

That is, if your laborer has to pay income tax, you have to pay him more to compensate, and you have to raise your sales prices to recover that loss from your customers.

c) So, when you buy an item, you *are* paying all the taxes of all the people and entities that made the item.

Make sense so far?

d) Under the Fair Tax, with all those embedded taxes eliminated, the manufacturer would now be able to make the same profit selling his $1 item for $0.77, which would be the new price.

e) At checkout, your (formerly) $1 item would now appear on the sales ticket as 1) price = $0.77, plus 2) $0.23 in Fair Tax, collected at point-of-sale to pay all the taxes of all the people who made the thing.

Total = $1.00, just like before. No difference.

There, I think that's basically their pitch. I'm not a Fair Tax expert, so I could've biffed something.

>The Fair Tax--now separated and out in the open for all to see--is > >simply the tax which you would've paid before anyhow, but without > >knowing it. > > No, it's not. Yo can't tell me that money that has already been taxed has the > same value as money that hasn't. Which would you rather have, $1M in an > conventional IRA (no tax yet paid), or $600K ($1M after tax) in a Roth, when > they change the tax to a consumption tax?

Depends on the tax rates. Under the Fair Tax's 23% I'd rather have the $1M, because that way I avoid the current system's higher rates.

But, the difference here is not made by getting taxed twice--per item c) you are *already* paying the 23% tax built into the price of of an purchase, and under today's system you *are* going to pay it when you buy something.

I don't have an IRA because I don't have confidence in the premise that tax rates will be lower in the future. Without that the numbers don't make sense. Bob Pease actually had a pretty good column on this a decade or so ago; he concluded the same.

Besides, I don't like having my money at the whim of Congress. They burned me ex post facto with my 401k charging me a penalty for doing something that was allowed when I did it, then changing the law retroactively months later.

-- Cheers, James Arthur

Reply to
dagmargoodboat
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Only if the product was made in the USA. If it's imported from China, it didn't generate those taxes, certainly not into the US treasury.

A sales tax would apply to all sales, US or Chinese made. That would be a boon for domestic industries and jobs.

John

Reply to
John Larkin

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Wrong.

Ahm, major bug in the calcs:

The price of a piece of merchandise does _not_ consist of lots of labor. If MLO (materials+labor+overhead) is anywhere north of 30% on a mass product then it is already doomed.

You couldn't sue?

--
Regards, Joerg

http://www.analogconsultants.com/
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Reply to
Joerg

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That's the whole point. Anyone with after-tax savings gets screwed the second time.

Again, you're missing the point. With after-tax savings you're

*already* paying that tax. If the "Fair Tax" is implemented you get to pay the "consumption tax" on the *AFTER-TAX* money.

Not that Bob Pease is one to follow in lock-step. If the government changes to the "Fair Tax" (not bloody likely) you'll get screwed. All of a sudden before-tax savings will look pretty good.

Then the only solution is to burn it, like they do. I can't print money though.

Reply to
keithw86

And a boon to federal revenue--it makes imports pay "their fair share," which should please protectionists.

James

Reply to
dagmargoodboat

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I'm not missing the point, I just think you're mathematically wrong. If the thing costs $1 today, or $0.77 plus $0.23 Fair Tax tomorrow, what have you lost? Where have I gone wrong?

-- Cheers, James Arthur

Reply to
dagmargoodboat

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Because it cost me $1.40 yesterday (when I earned it) to have the $1.00 today, and tomorrow (after I retire, take it out of the bank, and spend it) it only buys $.77 worth of stuff. If I tax-deferred the $1.40, I could buy $1.00 worth of stuff. Any after-tax savings (that is socked away before the change) gets hammered *twice*.

Reply to
keithw86

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*yesterday*. That can't be fixed-it's gone. Sorry. Me too.

$1 only buys $0.77 worth of _stuff_ today, say the Fair Tax people (AIUI). The rest goes to taxes hidden in the item's price.

If you had tax-deferred the $1.40, you'd escape the indignities of the old system. That's a windfall (assuming Congress allows it).

Going forward though, with income-taxed money, the $1 we have left still buys the same with or without the Fair Tax. $1 with embedded tax burden hidden inside it, or ($0.77 actual price + $0.23 Fair Tax) both cost you $1 at the register. No loss of purchasing power. That's the contention, AIUI.

-- Cheers, James Arthur

Reply to
dagmargoodboat

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I'm just summarizing what I gleaned skimming their site. I could be misrepresenting what they said, or they could've erred in their estimates; both are possible.

That's an average. The Fair Tax economists worked from gross averages applied across all of society; services are nearly 100% labor, mass- produced Joerg-designed items not so much.

I can't speak to their methods or calculations, but I'd sure love it if you'd read their material and report back on it! (I'm still busy marking up the mandatory health insurance purchase and regulation bill, re-reading Marx, and other nonsense. Oh, plus designing a CNC turret tool-changer.)

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Nope. You can't sue Congress. Sovereign immunity. (Impunity, really.)

-- Cheers, James Arthur

Reply to
dagmargoodboat

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No, I was playing the game by the rules yesterday. Today the government change the rules after the game was in play. The winner is the one who spent every dime he ever made, not the one who took care of his life.

Fine, if it really works, but that was not my point.

If they don't, I'll yank it all out and spend it. I may do that anyway. Property looks like the only thing worth having.

Ok, but that doesn't help the people who have saved all their lives, which was the point of this threadlet.

Reply to
krw

[...]

I'd have to see their math. Most of what we buy is not services but cars, TV set, washing machines, lumber, groceries, beer and so on. Labor is a small fraction of the cost in these products. Say it was 10%, then this whole "fair tax" of 23% would turn into a de facto 20% ripoff for all those folks in or close to retirement who have diligently saved. Because those savings are from income that has already been taxed. Nothing fair about that at all.

Even in high-tech medical devices labor wasn't a whole lot, and there I speak from experience because I ran a division including production. Health care costs would instantly shoot up if they did that extra sales tax. On top of the tax increases we just got in that domain. We have to think about those consequences.

This one?

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I can only see lots of text, no hard math. The calculator produced a safety warning and the site notoriously wants to set cookies (disallowed here). I think they need a new web designer.

If a law is deemed unfair it can be challenged in court. Not Congress, but the law. Slamming people retroactively sure sounds unfair to me (and probably to a judge or jury).

--
Regards, Joerg

http://www.analogconsultants.com/
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Reply to
Joerg

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This document gives figures, but not methods:

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This is the main info page:

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There's too much, really, and kind of scattered across white papers, .PDFs, and FAQs.

About the FairTax-->Basics has some numbers:

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I haven't read thru all their papers--there are so many. I remember hitting a couple that looked well-considered, but I was really just skimming.

Yes. I set FireFox to accept cookies, but automatically delete them when the session closes.

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It *is* unfair--even unconstitutional[*]--but there's Supreme Court precedent for it.

[*] "No Bill of Attainder or ex post facto law shall be passed" --US Constitution, Art. I, Sec. 9.

I've cribbed this from an earlier post, Nov. 22, 2009:

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In United States v. Darusmont, 449 U.S. 292 (1981)

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a couple sold their house (a triplex)--to relocate for a new job-- after carefully consulting with their tax guys to sell in a way minimizing their tax. Congress changed the law later that year, and then IRS came after the couple for more tax.

The homeowners argued that tax change was a violation of their due process rights under the 5th Amendment; the justices said no, because the issue had been under discussion in Congress for a year prior, so the homeowners *should've* known. Further, the Court said changing the tax rate of an existing law was not the same as enacting a new /ex post facto/ law.

This started under Franklin Delano Obama. He's back, so beware.

Everything's fair once you stop following the Constitution.

"No man's life, liberty, or property are safe while the Legislature is in session." --Judge Gideon J. Tucker (1826-1899)

-- Cheers, James Arthur

Reply to
dagmargoodboat

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I had looked at both. No meat in there other than assumptions.

Major mistake, and that's a big one, quote: "Consumption increases by

2.4 percent more in the first year, ..."

What were they smoking?

Just a small hint: Joe Q.Public does not pay 23% income tax on _100%_ of his salary, in fact many people pay hardly anything. Those folks' consumption will drop 23%, plain and simple. Then, there will be massive layoffs.

I don't find it well-considered at all.

Some of the more serious bugs in here, for example ...

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include quote "The specific taxes repealed include ... Social Security and Medicare taxes". Now I am certainly against the extremely plum public employee pensions that are wrecking California. But on the same token it isn't fair that a teacher who used to not pay SS taxes but also doesn't get SS pays intop the system for me. Because that's what he'd do if he buys a beer.

The paper also lacks a crucial consideration, the one I mentioned: It socks it to retirees who have diligently saved every penny they could. Now that already taxed money would get taxed again the millisecond they buy something. This is not fair and I sure hope some organizations like AARP will see that unfair punishment and hold the line, and not let that happen.

I can't do that, for safety concerns. IMHO one should assume that reputable web sites don't use tricks such as cookies unless they are necessary for registration purposes and such.

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If done retroactively it is ex post facto. The constituioon does not say new. Otherwise it would also be ok to set the income tax to 110% retroactively, wouldn't it?

Lots of people are hoping that the worst will be stopped after the November elections. In fact, I have met people who said they'd make some major business decisions based on the outcome.

--
Regards, Joerg

http://www.analogconsultants.com/
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Reply to
Joerg

Many of the ones who took care of their life will then move, to some places outside the US, and escape such confiscatory "fair tax" should it ever happen. Who knows, Baja, NZ, some island ... because then the problem simply goes away. The consequences? Even more layoffs here.

It doesn't work.

Sure does. I am thinking about the same. But how do you avoid the hassles of being a landlord yet not pay humongous amounts to some property management place?

Exactly.

--
Regards, Joerg

http://www.analogconsultants.com/
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Reply to
Joerg

The other false assumption is that the price would drop instantaneously to $.77 as soon as the tax was passed. In reality, the price stays at $1.00, and the retailer uses this 'profit' to pay off his loans. Now, as time goes by, prices 'might' drop, but I wouldn't bet on it. I actually expect prices to rise. If the government stops taking out SS and IRS taxes from my paycheck, I have more to spend. I can then afford these now 'higher' prices of that $1, plus $.23 fair tax, plus the sales tax of $.09, so it is now $1.33.

As for savings, I don't sweat it as much. Yes, it makes my post-taxes savings less valuable, but it also removes a lot of taxes on my earnings and interest!

Charlie

Reply to
Charlie E.

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I don't assume that. =A0There are all sorts of 2nd and 3rd-order effects.

I expect prices to fall, quickly. Like with gasoline there's a delay for goods-in-transit, then market forces handle the rest.

I'm interested in saving the time and energy I waste avoiding tax land- mines. That's worth a lot--at least a couple weeks a year. More like three, methinks.

-- Cheers, James Arthur

Reply to
dagmargoodboat

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You sure give up awfully easily Joerg! There's a load of academic papers, cited in the footnotes, with 10 full .PDFs for free download. Like this one:

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(footnote #1 on
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Joe. Q. Public *does* pay at least 14% SS tax, plus others, so at the very worst it's not as bad as you say.

Further, Joe Q. will be getting a "prebate" check in the mail, further reducing his tax, and the harmful impact you project.

Those factors take most, if not nearly all the wind out of that concern's sails.

Lots of equations in the one .PDF I just linked. That's the kind of documentation I remembered seeing before.

You're trying to make SS fair? Man have you got a project!

What's fair about the worlds's biggest Ponzi scheme--giving the first investors outrageous returns, paid by later investors, with the promise that even later investors will pay even more, ad infinitum, all under force of law?

a) It doesn't tax savings any more than they'll be taxed anyhow. When Mr. Obama jacks up taxes (as he's already massively done by spending, and will soon do by hook or by crook), do you honestly think that cost to companies and workers won't be reflected in higher prices for you? That you won't, ultimately, be paying your taxes and everyone else's too every time you buy anything? You will.

b) As I laid out for Keith, once you remove all those expenses from the manufacturers' cost, prices will fall. Not instantly, but quickly. You may not think they'll fall enough, but they will fall at least some, offsetting the effect you fear.

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You Sir, are exactly right. That's the problem with a "living and breathing" Constitution. "Living and breathing" really means "it says whatever [the current regime] wants it to say", flipping it upside down if necessary..

The 2nd problem is that people don't appreciate the timelessness of the core of its design. It's a control system, a brilliant one, but even brilliant control systems quit working if you start twiddling the feedbacks and jumpering around the safeties. The salesmen are monkeying with the hardware.

I spoke at length to a business owner today. He's got a nice shop with a fun crew, and he's disgusted.(*) A fun, fine, compassionate, caring man, who's just finally gotten tired of all the Slomans heaping their mandates on him, for nothing. But he's fine, he made his money long ago, and he doesn't need the hassle. So he's quitting, closing shop. Chalk up a few more jobs created or saved, Mr. Obama.

(*But he sold me a load of 1" plate, cheap, and offered me a BIG IRON American mill for peanuts. (I'd be tempted, but I think it'd punch a hole in my slab!) :-)

James Arthur

Reply to
dagmargoodboat

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How about Clinton's retroactive tax increase? It *has* been done and will be again.

Here's to hoping.

Reply to
krw

That's fine if they don't want to take their money with them. They've already plugged that hole.

Other than ruining people's lives who have played by the rules (the life's savings part we are objecting to here), I think it might have legs.

Not rent to people? Dunno. Forty years ago land was put in "the bank" by making drive-in theaters. They paid for themselves and the taxes until the land became incredibly valuable. Twenty years ago it was golf courses. Next?

Reply to
krw

Nonsense. Give retailers a chance to raise their prics or up their profit margins, and they grasp it with both hands. I've lived through a couple of currency reforms - in Australia (the introduction of the Australian dollar) and in the Netherlands (the introduction of the euro) and was close enough to the UK to be aware of how the decimalisation of the UK pound worked out, and in every case the effect was to create a small spurt of inflation. The prices never did come back down. The introduction of your "Fair Tax" would have the same effect - prices would never fall.

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There are no socialists in power in the USA - not even of my moderate disposition. The rules and restrictions that your friend has to live with come from your own political establishment. They aren't well- thought out, in part because your legislators haven't clue about how things are done in other parts of the world, and perennially re-invent poor substitutes for the wheel, in the same way that your Fair Tax proposals ignore the advantages of VAT, because it's never been implemented in God's only country.

I somehow doubt that Obama has passed enough legislation yet to have any signifcant effect on your friend's situation. He will have been thinking about quitting for some time now, and his decision will have more to do with the idiocies already perpetuated under the recent Republican administration.

Of course, granting your bizarre Obama-phobia, he may have pandered to your prejudices by claiming to be anxious about his prospects under the new administration. He did manage to sell you some of his 1" plate, even if he wasn't able to unload the big iron mill, so the flattery worked to some extent.

-- Bill Sloman, Nijmegen

Reply to
Bill Sloman

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