Threats to Wealth Creation

[Azazello1313]

And we know the initial post was bunk (to a certain extent) because as of 2007, the US had only 70% (not 97%) of the worlds lawyers. Its still a lot, but part of that is because we're one of the largest - yet most organized - countries in the world. Want to see what happens to a large, disorganized land mass where the rule of law isn't enforced by guys in ties? Go vacation in Africa.

 

Lawyers may cost money, but for most of us it sure beats settling petty disputes with AKs.

 

c'mon, that is disingenuous. forget yer africa non sequitur, why do we have to have so many more lawyers per capita than europe, japan, etc?

[wiegie]

c'mon, that is disingenuous. forget yer africa non sequitur, why do we have to have so many more lawyers per capita than europe, japan, etc?

A likely answer is that the US has chosen to use potential litigation rather than regulation to limit the exploitation of market failures.

 

Here is a link to a research paper that I have already posted here a number of times that gets at what I am talking about:

 

http://www.doingbusiness.org/documents/new...e_economics.pdf

[yo mama]

c'mon, that is disingenuous. forget yer africa non sequitur, why do we have to have so many more lawyers per capita than europe, japan, etc?

:disingenuousrolleyes: what, you could ask an honest answer without flinging poo first? I already answered that question: we have more lawyers than other developed nations mostly because we have a more litigious society that's perfectly willing to pay them. Plus, in Japan only 3% of the people who take the bar actually pass it. Korea: 5%. In contrast, California (considered one of the hardest American bar exams) has about a 50% passage rate.

 

In reality, there's only about 1.1 million lawyers in America who are active and practicing. Considering the litany of state, local, federal, and international laws our government subjects us to, and further considering that most lawyers specialize, that's really not all that appalling considering that a lawyer licensed in one state isn't permitted to practice in the other 49 (absent additional state-by-state bar exams and independent licensing procedures).

 

And my Africa example wasn't a non sequitur: it was hyperbole.

Edited April 15, 2008 by yo mama

[wiegie]

The main reason I'd support the Fair Tax is that it would get rid of all the loop holes, get rid of the bureaucracy that is the IRS, and would limit the need for CPA's.

I call BS. Under the proposals I have seen for the Fair Tax, business investment (meaning purchases made my businesses) is not taxed. To me, this opens up a whole new set of loopholes. Will company cars still be allowed? Would you be allowed to use a hammer that you purchased for your construction firm to hang a picture in your living room? You shouldn't be, because that would be illegal under the fair tax. (Unless you figured out exactly what percentage of that hammer's use was "consumed" doing non-business work and then sent the appropriate amount of money back to the government to pay for your "Fair Tax". You would do that, right? You don't think that people would try to exploit this loophole and you don't think the new version of the IRS would investigate your business to make sure that you weren't exploiting this loophole?)

 

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Additionally, if the "Fair Tax" gets implemented, I have a plan: We set up a "huddlers buying club" that will work sort of like a Costco or Sam's. Members will pay a few thousand dollars a year to "join the club" (we would set it up somehow that the people who join the club are owners) but then be able to buy all their products at wholesale prices--hence reducing the tax you pay on each good you buy. The membership fees will cover the overhead of the operation.

 

Eventually we will be able to buy ownership in the manufacturing firms, farms, etc. themselves to further reduce prices.

 

As a business model, the initial benefit that we get is that we will pay a lot less in taxes--and as our business gets more popular, we can split the profits that we will make from new members buying into our club.

 

Who's with me?

 

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Additionally, the idea that we tax everything at, say 23%, just isn't politically reasonable.

For example, would college tuition be taxed? To me that seems like an investment expense and not a consumption expense.

How about child-care expenses? Assuming parents are working when their kids are in child-care, wouldn't that be a business expense and not a consumption expense?

Health care? OK, health care might be a consumption expense, but how long would people support a "Sick Tax"?

Etc. etc. etc.

It seems to me that what would inevitably occur is that we end up having a complicated tax code based on differences on what is considered "consumption" and what is not.

 

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Finally, somebody convince me again about how (even with the poverty-line rebate) that the "Fair Tax" won't be regressive over at least some portion of the income distribution.

Edited April 15, 2008 by wiegie

[dmarc117]

we have a more litigious society that's perfectly willing to pay them.

 

[Ursa Majoris]

we have a more litigious society that's perfectly willing to pay them.

My company has pretty much quadrupled in size over the last 10 years or so. Our attorney contingent has done exactly the same because the lawsuits have done exactly the same.

 

We sue here at the drop of a hat. Despite all the right wing hand wringing about tort reform blah blah, there have been posts in this forum from righties talking about suing for this that or the other real or imagined issue. Fact is, that's the remedy for most people - lawyers.

[AtomicCEO]

You're just jaded.

 

Nonsense.

 

Wow. You're comments come across as rather cynical and conspiratorial...

 

I think you're misreading me.

 

Aren't the people pushing pretty much every policy that has any chance in hell of passing the people with the most money? Name one significant public figure pushing an agenda who's not loaded. By your standards, nothing is worth voting for.

 

Absolutely. It's all a bunch of crap from people trying to rip you off. Never support anything ever, because it's all bs. The system sucks.

 

There. I hope we've laid that notion that I'm cynical to bed.

[Perchoutofwater]

And lets not forget about the gigantic black market we'd be creating.

 

As long as there is tax, there will be those who try to escape it.

 

Where is the black market in Texas where a majority of tax revenue comes from the sales tax?

[AtomicCEO]

Where is the black market in Texas where a majority of tax revenue comes from the sales tax?

 

here

[Perchoutofwater]

I call BS. Under the proposals I have seen for the Fair Tax, business investment (meaning purchases made my businesses) is not taxed. To me, this opens up a whole new set of loopholes. Will company cars still be allowed? Would you be allowed to use a hammer that you purchased for your construction firm to hang a picture in your living room? You shouldn't be, because that would be illegal under the fair tax. (Unless you figured out exactly what percentage of that hammer's use was "consumed" doing non-business work and then sent the appropriate amount of money back to the government to pay for your "Fair Tax". You would do that, right? You don't think that people would try to exploit this loophole and you don't think the new version of the IRS would investigate your business to make sure that you weren't exploiting this loophole?)

 

The way the sales tax in Texas works is that all items with the exception of food, medicine, (and I believe medical bills though not sure on that one) are taxed when sold as an end product. We would pay the sales tax on the hammer and any other tools including vehicles at the time purchased. It is an end product. Yes it is a product that is used to make another product, but it is not consumed in making that product. Even on tax free projects such as schools and churches you have to pay sales tax on any items not consumed in the project. Say you are a brick mason. You have to pay the tax on the purchase or the rental of scaffolding, the mortar mixer, trowels etc... because they are not consumed in the project, but you do not pay tax on the brick and mortar itself as it is consumed in the project. The same could easily be done with the fair tax. If an item is consumed (or ends up a permanent fixture to a larger product) then it is not taxed, until the larger product is sold, but if an item is stand alone, like a hammer, then it is taxed at the time of purchase. And yes you still have sales tax audits just like you have income tax audits, but as most people would be consumers and paying taxes on the final goods then there would be no need to audit them, you would just have to audit those in manufacturing so the size of the IRS could be drastically reduced, and the tax code could be simplified dramatically to where the average Joe Blow doesn't need a CPA, as the average Joe Blow wouldn't file anything, only companies would file.

[detlef]

Nonsense.

 

 

 

I think you're misreading me.

 

 

 

Absolutely. It's all a bunch of crap from people trying to rip you off. Never support anything ever, because it's all bs. The system sucks.

 

There. I hope we've laid that notion that I'm cynical to bed.

[Perchoutofwater]

here

 

And yet amazingly enough Texas isn't going tits up. You factor in some of that when you set the sales tax rate. Even on Amazon if you are purchasing something from inside Texas they you have to pay sales tax on it. This concern over imported goods, is easy to overcome by simply enacting tariffs.

[detlef]

And yet amazingly enough Texas isn't going tits up. You factor in some of that when you set the sales tax rate. Even on Amazon if you are purchasing something from inside Texas they you have to pay sales tax on it. This concern over imported goods, is easy to overcome by simply enacting tariffs.

xactly. Besides, interstate trade is nowhere near as regulated as international. You can't just buy stuff from Denmark and have it sent right to your door the way you can from another state. It needs to clear customs. There, your transaction would be verified and you'd pay the tax on it. After all, that's what we're talking about, people going overseas to avoid taxes.

[westvirginia]

Nonsense.

 

 

 

I think you're misreading me.

 

 

 

Absolutely. It's all a bunch of crap from people trying to rip you off. Never support anything ever, because it's all bs. The system sucks.

 

There. I hope we've laid that notion that I'm cynical to bed.

 

Atomic, you really need some anti-depressants man...

[yo mama]

Where is the black market in Texas where a majority of tax revenue comes from the sales tax?

There is a black market in Texas. But its not like they have a website, nor is it centrally organized. I saw a lot cheating on sales and use tax when I practiced in Houston. Its the number one tax the state would audit because its so easy to cheat on. I saw a lot of cheating with struggling gasoline wholesalers who were claiming to be selling exempt fuel "at the rack," when in reality the transaction were taxable. And it isn't that uncommon for sellers to collect sales tax, but fail to remit it all to the state. Its also very, very easy to buy product out of state, ship it in state, then cheat on the use tax. The state spend hundreds of thousands of man hours each year pouring over invoices and transaction records to ferret the cheats out. If you were to triple the sales tax (or whatever the amount would be) to institute the Fair Tax you'd certainly increase the motive to cheat on sale/use tax.

 

Oh, and if you haven't looked into it yet Perch, be sure to get yourself up to speed on Texas' new "margin tax." Its effective as of 1/1/08, and will - at a minimum - impact your tax reporting. Certain business structures that were previously exempt from Texas' franchise tax (e.g., partnerships) are now subject to the new margin tax. Texas effectively closed a significant loop hole in its franchise tax, but left several planning opportunities available that you might be able to take advantage of.

 

Which leads me to my final point: Texas doesn't rely solely on its sales tax. (Though, you did previously mention property taxes before, which they do collect). In addition, their franchise tax previously affected like 900,000 business. The new margin tax will affect even more. So while Texas does not have an income tax, and is a good example of how a significant economy can be run without one, it is not an example of an economy that is supported solely on a sales and use taxes.

[Perchoutofwater]

There is a black market in Texas. But its not like they have a website, nor is it centrally organized. I saw a lot cheating on sales and use tax when I practiced in Houston. Its the number one tax the state would audit because its so easy to cheat on. I saw a lot of cheating with struggling gasoline wholesalers who were claiming to be selling exempt fuel "at the rack," when in reality the transaction were taxable. And it isn't that uncommon for sellers to collect sales tax, but fail to remit it all to the state. Its also very, very easy to buy product out of state, ship it in state, then cheat on the use tax. The state spend hundreds of thousands of man hours each year pouring over invoices and transaction records to ferret the cheats out. If you were to triple the sales tax (or whatever the amount would be) to institute the Fair Tax you'd certainly increase the motive to cheat on sale/use tax.

 

You would still steam line the number of auditors you would need over the current income tax, as you would only be auditing businesses, not individuals. I don't care what tax system you use, there are going to be people who think they can beat the system. Some get caught, and some don't. If that is the best argument you can give for not going to a sales tax, then it is weak. Also, I wouldn't mind seeing a federal property tax to go along with the sales tax. I may be wrong, but I think that taxing someones income is counter productive.

 

Thanks for the heads up on the franchise tax. I'm sure our CPA knows about it and is keeping us in the states good graces, but I'll mention it to him anyway. The guy we use specializes in construction companies, mostly family owned companies, so hopefully he knows what he is doing.

[yo mama]

You would still steam line the number of auditors you would need over the current income tax, as you would only be auditing businesses, not individuals. I don't care what tax system you use, there are going to be people who think they can beat the system. Some get caught, and some don't. If that is the best argument you can give for not going to a sales tax, then it is weak. Also, I wouldn't mind seeing a federal property tax to go along with the sales tax. I may be wrong, but I think that taxing someones income is counter productive.

 

Thanks for the heads up on the franchise tax. I'm sure our CPA knows about it and is keeping us in the states good graces, but I'll mention it to him anyway. The guy we use specializes in construction companies, mostly family owned companies, so hopefully he knows what he is doing.

Oh, I'm not arguing for or against the Fair Tax. I'm more pointing out the fact that any system of taxation has its pros and cons, that we'll never be able to get rid of the IRS, and trying my damnedest to get people focused more on adopting a system - any system - that balances our fiscal budgets, rather than arguing over how best to redistribute the existing tax liabilities that currently have us running historically high deficits.

 

The new margin tax actually had a cool exception for family business, which the legislature recently stripped out. A lot of people are still talking about that family exception in their literature, so be wary if your CPA talks about that. The best benefits exist for real estate development-type operations. And it may or may not be worth while to convert entities from one structure to another. Anyways, talk to your guy. If he's clueless (and he might be, only because people are still trying to figure out how the damn thing is supposed to work) I'd be happy to email you some of the research I've done for my clients with Texas operations.

Edited April 15, 2008 by yo mama

[H8tank]

Additionally, if the "Fair Tax" gets implemented, I have a plan: We set up a "huddlers buying club" that will work sort of like a Costco or Sam's. Members will pay a few thousand dollars a year to "join the club" (we would set it up somehow that the people who join the club are owners) but then be able to buy all their products at wholesale prices--hence reducing the tax you pay on each good you buy. The membership fees will cover the overhead of the operation.

 

Wedgie, you always throw this out there and pat yourself on the back til you squirt a little in your pannies, but it is complete nonsense, and people laugh at you when you chime in about it.

 

Also, so you're gonna buy a $1m yacht overseas to save on the tax? Hey dumbass, you pay the taxes when you register the vessel. Oh, you're gonna register it over there? Good luck with that... but really, this is gonna happen how many times?

 

I think the 4 quadzillion clomatoes illegals will buy from the business end of a knapsack strapped to a donkey that gets taxed will overcome that.

[AtomicCEO]

Atomic, you really need some anti-depressants man...

 

The funny thing is I just stopped taking them last week.

 

[CaP'N GRuNGe]

Ok, so after sending my big check in to Uncle Sam today, that Fair Tax thing isn't looking so bad.

[millerx]

Ok, so after sending my big check in to Uncle Sam today, that Fair Tax thing isn't looking so bad.

[wiegie]

Wedgie, you always throw this out there and pat yourself on the back til you squirt a little in your pannies, but it is complete nonsense, and people laugh at you when you chime in about it.

You are the only person I have seen laugh (and I'm not sure why you do so). Please explain to me what is laughable about it? Let me give you the simplest example possible about what I am talking about. A farmer who grows his own crops could avoid paying a consumption tax on food simply by consuming what he produces instead of buying his food from a store. For a "Fair Tax" to really be "fair", this farmer should have to pay whatever taxes that normal people have to pay when they consume the same amount of food. How are we going to force the farmer to pay his "fair" share of taxes? Supposing even that the farmer does report the food that he consumed and sends in his tax payments. How can we be sure that the price he charged himself for the food that he ate was the fair market value of the food?

[wiegie]

Ok, so after sending my big check in to Uncle Sam today, that Fair Tax thing isn't looking so bad.

What makes you think that your overall tax bill will be lower with a consumption tax than with an income tax?

[millerx]

What makes you think that your overall tax bill will be lower with a consumption tax than with an income tax?

 

Have you visited the fairtax.org website? Have read or researched any of the questions you ask? The website has a BUNCH of answers to questions that people have because it IS a new concept to a lot of people. For instance, they have a "comparision" calculator to compare between the current system and with the fair tax. Simply apply some numbers of your income status and you hve your answer.

 

Oh, and part of the reason it is the "fair" tax is that if you don't want to pay more tax and you decide to grow your own food, you shouldn't have to...Although I don't see most of society rushing out to become farmers...and for those that do take the gardening approach will be minimal at best. I mean, you are talking about just the groceries. They still have to buy seed, tools, equipment, etc. to farm with. Wait... why am I even arguing this ridiculous point?

[wiegie]

Have you visited the fairtax.org website? Have read or researched any of the questions you ask? The website has a BUNCH of answers to questions that people have because it IS a new concept to a lot of people. For instance, they have a "comparision" calculator to compare between the current system and with the fair tax. Simply apply some numbers of your income status and you hve your answer.

It was my understanding that the "fair tax" was revenue neutral. If that is the case and some taxpayers pay less in taxes, then by definition, others must pay more.

 

As for looking at the information provided at the website you like, I found this important gem "Is the FairTax progressive? Do the rich pay more and the poor pay less as a percentage of their spending?" Alas, this is misleading as typically when discussing whether taxes are progressive or regressive, people calculate taxes as a % of income and not as a % of consumption. You have to wonder why they chose this alternative definition. (Although you probably don't have to wonder very hard about it.)

 

Oh, and part of the reason it is the "fair" tax is that if you don't want to pay more tax and you decide to grow your own food, you shouldn't have to...Although I don't see most of society rushing out to become farmers...and for those that do take the gardening approach will be minimal at best. I mean, you are talking about just the groceries. They still have to buy seed, tools, equipment, etc. to farm with. Wait... why am I even arguing this ridiculous point?

You are arguing a ridiculous point because you didn't get the point I was trying to make. One way for people to avoid paying a consumption tax is to own the means of production for the product and then "sell" the product to yourself for a very low price (perhaps even $0). For most people, this would not be possible, but the wealthier a person is, the more likely that they could do this. It wouldn't be hard at all for wealthy people to buy ownership into various companies that could supply many of their consumption needs.