Read this also. http://www.factcheck.org/taxes/unspinning_the_fairtax.html

Let me do some reading, and I will get back to you...

The FairTax would be collected by the same good folks who collect your sales taxes right now. The mechanism is already in place.

See http://www.fairtax.org/PDF/Excerpts_from_response_to_tax_panel-103006.pdf

As to savings, would Lawrence (I've never voted for a Republican) Kotlikoff of Boston U do?

http://www.fairtax.org/PDF/TheFairTaxAndEconomicGrowth.pdf

I did not say that what comes back to the economy is nearly double for every dollar EIC puts into the economy-the govt said that. So you are saying the govt cannot see what is in front of its face-and that is both sides of the aisle as the program has bi-partisan support. There is no debating this with you as you are an absolutist on this and many other issues you speak to. You know what you know and that is all there is to know. I will take stock in what you say if you can quote govt sources that say different from what I quoted. So far all I see is the usual stereotypical politically biased hyperbole.

Good to see that Len and PD are such good buddies that cannot see what is right in their face. No one can say that a dollar given through EIC comes back double into the economy. A dollar is a dollar plain and simple. EIC is a give away to people that DO NOT pay taxes. Although a lot of people on public assistance are on it for a short time, the fraud is astounding. Michigan state reports out of 1.3 billion in annual "bridge card" payments, 300 million is fraudulent. That is just one state. Fairly add up all of the ways that people utilize food stamps, public housing, free medical, EIC, free child care, free school lunches, free education (don't pay taxes) and you will find that welfare queen abuse is in the 100s of billions. Once again, welfare queens are people that are just living off of the government and have no intention of getting off of it.

1. How would one enforce the consumption tax? 2. How on earth can you place the blame for negative savings on taxes? Are you able to produce one CREDIBLE financial authority to back your claim?

Just to set the record straight from this home headed by a financial planner: there are still *lots* of middle class people contributing to IRA's and other investments this very year. I believe some, regrettably, have had to stop for a year or two, but I don't think we need to throw out the baby with the bathwater and start redefining people who contribute as "rich." It will *really* discourage growing our economy if we suddenly start overtaxing people who are only trying to fund their retirement (they have already paid taxes on that money when they earned it. Even inherited wealth, if it exists and I don't think it very commonly does, was already taxed when it was earned). Cheers, MGM

As a matter of principle, I am opposed to taxation of income and in favor of replacing all corporate and personal income taxes with a consumption tax (FairTax.)

But if income is to be taxed, your hypothetical executive should be taxed on the value of the options when he receives them and not pay capital gains taxes if he holds them for the required period before redeeming them.

BTW, the practice of using stock and options as executive compensation resulted from a Clinton executive order attempting to limit executive salaries. Just another example of the folly of using the tax code to coerce market decisions. Every distortion of the marketplace resulting from misuse of the tax code to accomplish social ends inevitably has unintended adverse consequences.

My compliments to Wm D Tabor, MD. Great response.

So you say that a corporate exec who gets paid millions in stock options should pay zero taxes on the earnings from that? Those earnings were never taxed to him, so why should he pay nothing on them? I do believe in exemptions for profits on a primary home, for investments such as I suggested (up to a certain level like $50k). If the investments are long term and the funds used to acquire the investments were previously taxed then I can agree that much lower rate should apply-even zero maybe in some circumstances. But short term investments should be at the higher rates in my book.

The proper tax rate for capital gains is zero.

First of all, it is a second taxation of income that has been invested. Once is enough. Second, much of what is taxed as capital gains, at least under the scheme that will be in place if the Bush tax cuts are not renewed, is really just inflation. If an asset with true value increases in price because the dollar's value decreases, that is not really income.

But most of all, this country has a negative savings rate, resulting in under-capitalization of our industries. Anything you tax, you discourage, and the last thing this country needs in a competitive world economy is a lack of investment capital.

If an investor finances a lathe on which a machinist earns his living, who benefits most, the investor who gets maybe 6% on his money or the machinist who supports his family?

It is even worse. Reducing capital gains tax to 15% was a boon to the wealthy whose incomes are largely derived from unearned income sources like investments. There should have been a cap on gains like the first $50,000 at 15% than all the rest in the range of 35-40%. That way middle class investors would benefit and the wealthy would pay accordingly. Most income for the middle class is earned and very little comes from investments and those are usually in 401k and other tax deferred accounts. Another reason the wealthy have gotten wealthier and the middle continues to get squeezed out. And McCain who originally was against the temporary Bush tax cuts is no not only for keeping them but expanding on them as well. And he said the cuts were unfairly lopsided in favor of the wealthy. Our govt has failed the middle class miserably in recent years on tax issues.

As you are obviously well aware, it is a time honored political tactic to get support of the working class by finding scapegoats and blaming them for all the ills. How else could you get support for eliminating the estate tax, for example, in a segment of the population who would never be at risk for any estate tax liability? "Look at those parasites eating lobster on food stamps and spitting out kids while you are working hard and paying taxes to support them". Meanwhile, hedge fund managers are lobbying to get their commissions and fees declared capital gains so they only have to pay 15%. Talk about entitlement mentality.

You are right on target here. Govt data shows that for every dollar spent on EIC one and a half to two times that is put back into the economy. The program shares bi-partisan support as it helps people from all backgrounds and regions, etc. The old "welfare queen" does not exist as it once did-and that is a good thing. But many are still carrying the banner of protest to eliminate all support using that old standard without even really knowing what the current realities are.

I don't disagree that there is abuse in the welfare system, just like abuse and waste in virtually any enterprise, government or private. But, I suspect that the amount is probably less than a couple of "bridges to nowhere", which are also draining your hard earned tax dollars for people who don't deserve (or even want) earmarks. There is a tendency to paint anybody who is poor as a slacker. EIC programs are for the working poor-you have to have income, and file, and pay your SS/Medicare tax. It helps those who are contributing to our economy. Opposed to, let's say, a military private contractor who is charging 3 times what a soldier costs for protection services in Iraq. And he is just recirculating my, and your, hard earned money.

Just to clarify, I consider a welfare queen anyone that peristently stays on public assistance and spits out kids that they cannot afford. EIC IS welfare because it gives federal tax money to people with kids that don't pay taxes and this is called a "refund"??? The not so secret to the welfare queens is they do not get married, have kids for increased food stamps, housing, EIC, etc and let numerous boyfriends live with them for extra household income that doesn't count against their "benefits". So, as far as I know, there is a cap on actual welfare payments but the queens still live off of my tax dollars and actually flaunt it to some degree.

You are right, and every rant against welfare "queens" (which were discredited in the Reagan years as being a lie) is usually by folks who feel the only reason for poverty is moral failing. They don't take into consideration the fact that there are a lot of familes with multiple jobs who get left behind in this global economy and not by lack of hard work. The cost of education, medical expenses, housing (rental) costs are outpacing both skilled and unskilled labor. Not everyone can be a business owner, someone has to actually make the stuff. And there lies part of the problem.

Did I miss something since the Clinton welfare reform years? Virginia then had a five year *lifelong* cap on welfare benefits. So it would not benefit a woman to have six or eight kids, hoping to stay home while they were babies, would it? Unless she had a husband working to pay the bills.

And, could someone pls explain to me how able-bodied *males* stay on welfare long-term? I have never understood that, as it is mainly designed as a program to help mothers with small children. Cheers, MGM

First, to correct you, I am a man. We are going to pay through the nose for it because you know, and I know that taxes are not going to be lowered, it is just going to eat our budget. And if you remember, even fiscal conservatives were against this plan, citing its cost.

Here's are questions that may seem ungrateful on the surface, particularly in this town.
Does anyone who receives money from the government as pay, pension or health care contribute to the economy of the United States?
Does any corporation or business that sells its goods or services solely to the government contribute to our economy?
Finally, should we enact a law that stipulates that every time we fight a war, for whatever reason, that a surcharge be applied to everyone's (who are not actually fighting) tax bill until the war is over, and paid for?