Fair Tax?

[winnet22]

Originally Posted by Dutchman3

I don't know who does your taxes, but as an AARP tax volunteer, I believe that on a gross income of $30,000, payroll contributions and federal income tax withholdings amount to $5050, not $6398? And, you can't expect businesses to increase your pay by the amount of their FICA share. That money should go to reducing business costs.

If you are family of four the $5050 tax withheld under our current system would be $4852 more than you would pay under the FairTax. If you know enough about the FairTax, I won't need to explain my calculations.

[gsh341]

Originally Posted by Dutchman3

I don't know who does your taxes, but as an AARP tax volunteer, I believe that on a gross income of $30,000, payroll contributions and federal income tax withholdings amount to $5050, not $6398? And, you can't expect businesses to increase your pay by the amount of their FICA share. That money should go to reducing business costs.

Federal taxes are $5,050 but you forgot FICA taxes.

[Dutchman3]

Originally Posted by gsh341

Federal taxes are $5,050 but you forgot FICA taxes.

I did include FICA in the amount of $2295, which added to the income tax of $2756 comes to $5051. I should have mentioned that my calculations were based on a single filer, no kids, standard deductions and one exemption. If you disagree, please tell me how you figured it?

[deadsoul]

I'll support it if we can call it 'Patriot-Death-Tax'. Damn I hate marketing

[sewerman]

everyone pays tax according to how they spent their money.

maybe the only loop-hole would be the rich could make a way to purchase big items through their business and skeet -by.

but otherwise sounds good. i voted yes

sewerman

[Dutchman3]

Originally Posted by winnet22

If you are family of four the $5050 tax withheld under our current system would be $4852 more than you would pay under the FairTax. If you know enough about the FairTax, I won't need to explain my calculations.

My $5050 total tax was for a single individual as I should have noted. If you want to talk about a family of four, then the total income tax and payroll contributions on a gross of $30,000 net out to $358 after including the EITC. Under the Fairtax, a family of four would have $30,000 gross income plus a $6440 prebate for a total spendable income of $36440. Assuming they spent it all on taxable goods and services, the tax paid would be $8381, offset by the $6440 prebate for a net tax of $1841, about $1500 more than under the current income tax law. It's hard to make assumptions about spending and life styles because each family is different. At the $30,000 gross income level, I doubt there would be any mortgage payments, tuition payments, charity, or cash gifts, leaving only used goods and State and Local tax as untaxed spending.

The Fairtax isn't necessarily better for everyone. Consider a retired couple making $30,000 gross from two Social Security checks totaling $24,000 plus $6,000 in interest from a $200,000 "nest egg" drawing 3%. This couple pays no income tax and makes no payroll contributions under current law. Under the Fairtax, they could spend $30,000 plus the $4784 prebate for a total of $34784. Again, if all spending was on taxable consumption, the sales taxes paid would be $8,000, offset by the $4784 prebate for a net tax of $3216 versus zero under current law. How are they better off economically in view of the expected 17% rise in retail prices?

[gsh341]

Originally Posted by Dutchman3

I did include FICA in the amount of $2295, which added to the income tax of $2756 comes to $5051. I should have mentioned that my calculations were based on a single filer, no kids, standard deductions and one exemption. If you disagree, please tell me how you figured it?

The taxes for 2008 on $30K/yr single is $4,103. The employee's share of FICA is $2,295 for a total of $6,398.

http://www.irs.gov/pub/irs-pdf/i1040ez.pdf

Page 30 has the tax table you're looking for. Don't forget that the employer also contributes $2,295 on that employee's behalf as well.

Adding employer and employee contributions a $30K/yr job produces $8,693 in taxes.

Of course, my figures depend on no deductions, and no dependents.

That's part of the beauty of the Fair Tax plan. Simplified accounting that eliminates almost $11B in worthless bean counters at the IRS.

[winnet22]

Originally Posted by Dutchman3

I did include FICA in the amount of $2295, which added to the income tax of $2756 comes to $5051. I should have mentioned that my calculations were based on a single filer, no kids, standard deductions and one exemption. If you disagree, please tell me how you figured it?

If the person in your example were to spend their entire $30,000 on all new merchandise, their net tax paid under the FairTax would only be $4409; $649 less than our current system.

[Dutchman3]

[quote=gsh341;2168027]The taxes for 2008 on $30K/yr single is $4,103. The employee's share of FICA is $2,295 for a total of $6,398.

GSH341, The income taxes for a single making $30,000 are $2760. I don't know why you didn't take your standard deduction ($5450) and your single exemption ($3500) from your $30,000 gross, but your tax should have been based on $21050, not $30,000. Hope this clarifies our differences. And I certainly hope you haven't been filing without taking the deductions and exemptions? Uncle Sam might like it, but it isn't right!

[winnet22]

Originally Posted by Dutchman3

My $5050 total tax was for a single individual as I should have noted. If you want to talk about a family of four, then the total income tax and payroll contributions on a gross of $30,000 net out to $358 after including the EITC. Under the Fairtax, a family of four would have $30,000 gross income plus a $6440 prebate for a total spendable income of $36440. Assuming they spent it all on taxable goods and services, the tax paid would be $8381, offset by the $6440 prebate for a net tax of $1841, about $1500 more than under the current income tax law. It's hard to make assumptions about spending and life styles because each family is different. At the $30,000 gross income level, I doubt there would be any mortgage payments, tuition payments, charity, or cash gifts, leaving only used goods and State and Local tax as untaxed spending.

The Fairtax isn't necessarily better for everyone. Consider a retired couple making $30,000 gross from two Social Security checks totaling $24,000 plus $6,000 in interest from a $200,000 "nest egg" drawing 3%. This couple pays no income tax and makes no payroll contributions under current law. Under the Fairtax, they could spend $30,000 plus the $4784 prebate for a total of $34784. Again, if all spending was on taxable consumption, the sales taxes paid would be $8,000, offset by the $4784 prebate for a net tax of $3216 versus zero under current law. How are they better off economically in view of the expected 17% rise in retail prices?

I went to a website EITC calculator to determine if you were correct about your family of four example. After about 15-minutes of answering numerous questions, I determined you to be correct. For those reading these posts, just go to http://www.irs.gov/individuals/article/0,,id=130102,00.html and you can see just how ridiculous this is. This is one of the main problems with our current system; it is too complicated. This is just one complicated aspect of our current system. There are currently over 1300 different form that can be used depending on different circumstances. What you might save in taxes under a few scenarios you will pay in tax preparation.

I fall in your retired couple example: If I were able to accumulate $200,000 under our current tax system, it would have been approximately $270,000 under the FairTax system. I would have been able to invest with before tax dollars rather than after tax dollars as with our current system, and no mater how I invested the return would be tax deferred. For every $1.00, I was able to save under our current system, I would have been able to save $130 under the FairTax system. The FairTax may cost me a little more now, but I am more concerned about my children and grandchildren. As I mentioned before, my son’s additional take-home pay plus his prebate would make his house payment with $200 left over.