And — btw, I’m single — that 25% tax bracket stops for single people at $77K of taxable income. Then we get bumped up to the 28% tax bracket, which is where I’ll be in 2009 if not 2008.

But, I don’t think all those deductions are really all they are cracked up to be. And I think you are suffering from deduction-envy.

The idea of taxing use/sales versus income is that it would tax wealth, not income. Most “rich” people get themselves off of the payroll as soon as they can, and so are usually not affected by income taxation.

Nevertheless, I believe that the real appeal of proposed systems like the FairTax is not so much wanting the concept of completely untaxing income (which would, by definition, get the Federal government out of the business of intruding into our personal lives — after all, if it’s going to tax income, it must know what income you’ve received and whether or not your employment matches the level of your lifestyle!). Rather, it is the simplicity of it all.

Personally, I would love to see the US head towards the concept of a choice in taxation. That is, keep the current system as it is, but provide citizens with the option of going towards a flatter income tax. If you can get enough people to agree with this concept, it might be a bit easier to then convert over to a use tax.

Regarding a VAT: This is nothing more than embedded taxation, whereby each business-to-business transaction is taxed at each level of production, through to the point of final consumption.

The FairTax appeals to savers who see it as the way to wealth. Since it doesn’t tax capital, it does allow greater savings. However, it would cause the even more rapid appreciation of the assets they would buy with it, driving prices up and future returns down. Present owners, the rich, would be handsomely rewarded, but these wannabes would find themselves priced out of the market, paying more for less. In the end, they would find wealth to be a receding target.

I’m including all the tax breaks out there that most middle class people take for granted. So I’m including untaxed fringe benefits in the “income” calculation – compensation that middle class Americans enjoy without paying tax on it. I’m referring to EFFECTIVE tax rates, which requires inclusion of all income, deductions, and exemptions.

I made $15K last year, my state has a higher minimum wage. Someone earning an $11K minimum wage obviously not paying as much in taxes as I am.

It sounds like you are a victim of what I call stealth taxation – the loss or phaseout of deductions above a certain income ($100K – $150K in most cases). It is a dishonest way to tax higher incomes, transparent taxation while retaining deductions would require higher nominal rates (and invite more flak) which is what Congress is avoiding.

The tax rate is 15% on everything over that to $100,000 in earnings. It should be 26% from $100,000 to $1 million and it goes to 38% over $1 million.

A national sales tax of 3.8% on all products, no exceptions. Services would be exempt from the tax.

Finally, add a national Lottery system, that splits its money 50% with the states where the tickets were purchased.

Lower the social security tax to 5% and apply it to all income. If we are going to have a socialist program, treat it like socialism.

Add a Heath Care fund that will be taxed at 2% of all income.

None of the tax rates can ever be raised or lowered.

Automatically sign workers up for 401k’s etc. for a minimum of 3% of their income with the stipulation that it must be used to purchase anything but their own company’s stock. Anything the employee adds on top of the 3% can be used to purchase company stock.

The only deduction (other than for dependant children) allowed in any income tax is for donation to charity, and it should be a dollar for dollar deduction up to a 10% of their income. They would not get money back from the government if their donation was more than their tax burden.

Eliminate taxes on business, they don’t pay them now, so stop forcing individuals to pay them through lower salaries and higher prices. It is the quickest way to bring jobs back to this country.

Charge a 10% estate tax on estates from $3 million to $5 million and a 15% tax on estates over the $5 million mark.

That should be plenty of money to fund this government and take care of it’s people.

So take a typical family of 4 making $42,000 a year. The family would pay $2,940 in social security and health care tax. They would pay $0 in income tax. The would automatically have a minimum of $1,260 put into a retirement fund (that money would be counted toward their current taxed income now and it and all future earnings would be tax free upon retirement). So their take home assuming they don’t make a charitable donation would be $37,800.

Let’s say they spent $20,000 on products in one year. Their additional tax burden would be $760. So in total a family of four making $42,000 a year would pay $760 in federal income tax. Based on current tax law, the same family of four would pay $1386 this past year.

This plan roughly amounts to a 45% tax cut for the middle class. They would still have state and local taxes to deal with, but on a federal level this is the best way to go. It doesn’t punish people for achieving and it doesn’t put the tax burden of America on the middle class.

IF you are really working at minimum wage, I guarantee you are not paying a higher relative tax rate to others with higher paying jobs. I pay more than 25% of my income in taxes every year, and I’m blocked out of a lot of deductions that people with a lower income / are married / have children can take. The amount of TAXES I pay every year are on a par with a year’s salary for a minimum wage worker.

I’ve made minimum wage at one point in my life. I know what my taxes were like then, and my tax burden is much more significant now.

You really need to take some personal responsibility for yourself — I’ve asked you before — if you are really this bad off, how do you afford a computer on which to comment on blogs and whine about your miserable life? (and if you are computing from a library then good for you! but don’t forget I paid for your computer and your internet time with my tax dollars.)

If you are really this bad off, shouldn’t you put that energy into fixing your situation? Nobody else is going to do it for you.

1. It will reward good behavior (saving) while punishing bad. The culture in this country is to reward bad behavior and punish good.

2. The tax and waste Democrats, who own both houses of Congress, will never let it happen. They like things complicated and adding new taxes “for the children” each year.

3. With more money in the average Joe’s pocket the State Democrats will see new opportunities to raise State taxes. The Republicans will turn a blind eye to Big Corporations jacking their service fees dipping their hands into the extra cash.

4. The suits in Washington do not like change as if it fails they lose their job. Case in point the excellent idea of getting rid of the failed social security program and replacing it with a similar private plan that the fat cat politicians benefit from. It made complete logical sense and would benefit the nation but they smeared it and shot it down due to AARP pressure and Democrat special interest. They don’t like change folks and could care less about your future only their own.

So yes this would be great and would make me rich but no it will never happen.

Cheapster Bob

But one thing that does puzzle me is this — I’ve seen figures floating around that our economy is something like 60-65% based on the rates of consumption. Basically, that the largest thing keeping the economy afloat is that we all do our part as good little consumers. All those companies out there are actually counting on the little consumer to consume their goods and services.

So, if we adopt the FairTax, which is meant to discourage consumption, are we also intending to change this paradigm? Meaning, is the policy going to be that we actually expect something else to replace the overweighted emphasis on consuming that’s currently built into the system?

I know that the philosophy behind the FairTax itself is to encourage saving — that’s not my question. My question is how will we reconcile that with the greater economic environment that is dependent on our high rate of consumerism?

Better solutions would be a flat tax on all income regardless of how it is earned (capital gains, earned income, dividends, interest, etc.). Or, the Value Added Tax is fair as well. Both systems would severely limit the IRS, which is a positive in my view.

It’s ridiculous and broken.

And to say that the FairTax is more evadable than the current income tax system is really missing the boat. Are people going to all of the sudden assume legal risk by buying their goods on the black market to save a mere 20%? Not happening. And I wonder how that small amount of fraud compares to the wholesale and systematic fraud that occurs today – particularly by the people and companies that have the lobbyists on K Street to open up those loopholes.

Regressive? Absolutely not.

You need to pass the bill in congress that states a supermajority of congress can only change the % taxed….

sorry, I am a government pessimist. You simply CANNOT trust government with your $$$

I am more of a proponent of a simple flat tax on income – with the appropriate super-majority protections of course….

*NEVER* trust Government with your $$