Taxes - better be careful about new proposed "Fair Tax", especially retired folks

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dm4goooh

New Member
Hello Everyone, I hope I don't upset anyone's apple cart with my first post here but I wanted to post something that I feel is important, especially to those of us who have been fortunate enough to retire (and if any are here that are about to retire).

I don't know if anyone has heard of a couple of bills that have been proposed (several times now) called "The Fair Tax'. In the House it is HR 25 and in the Senate it is S 155. I will tell you that before the bills were crafted and introduced as proposed legislation, I was a proponent of the concept that is behind the "Fair Tax".

For those of you that have not heard of it, it is a proposal to replace the income tax, social Security Tax and Hospital taxes with a national sales tax. The introductory rate is currently set to be 23% (and there is a formula in the legislation for how it is derived) I personally think that it will have to be increased significantly if it actually becomes law. That is another story.

The reason I wanted to post this information here is that I found that if the "Fair Tax" becomes law, my tax obligation will increase by @ 60%. And I suspect that this will be the same for almost all regular retired folks. I built a website that explains the "Fair Tax" and a google docs spreadsheet so that anyone who wants to can see for them selves in a fairly accurate estimation how moving to the "Fair Tax" will affect their personal taxes. I will post the links at the bottom of this post.

This bill is being pushed hard by a group Fair Tax Nation and a fairly large contingent of Republican Congressmen. It has 67 co-sponsors. I have written all of my representatives and have voiced my opposition to both bills (HR 25 and S 155)

If you would like to see for yourself how the "Fair Tax" would affect your taxes go to:
https://sites.google.com/site/thefairtaxtruth/
and for the spreadsheet
https://docs.google.com/spreadsheets/d/1OuXGdblhv65I1GHJLy_bi_oMtdyBqu6cCgS3VoHZOeI/edit#gid=1

I hope as this entire community forum checks this out for themselves as I truly feel this tax will be extremely onerous to the middle class and especially those of us who are retired. Just as some background to let you know my general economic status, I and my wife have modest pensions and I get social security. So we are not wealthy and we are not (currently) living hand to mouth.

I feel my wife and I have been extremely fortunate to be able to retire and live modestly but comfortably. I would hate to see that changed by a tax that will benefit those who are extremely wealthy. You can play with the spreadsheet and see how the more money you make and save the lower you tax obligation becomes, which on the surface sounds like a really good plan except that when it takes all of the money you make to live, then not so much. There is comment section on the first website link so anyone can comment with how the spreadsheet worked for them.
 

I don't think the FT would transfer wealth to the poor. The poor already pay little or no income tax so the only thing that might help them out a little may be they catch a break on the SS/Medi tax. But when you take 7.65% of $12,000 and get $918 (if you are getting the $12k by working) and you take away the other breaks they were getting, it is probably a wash. The FT benefits the wealthy. If you are living hand to mouth, you can't save any money into a savings account and you spend every dime you make. Doesn't matter if you are poor or middle class, if you spend all of your earnings just making it, then you will not benefit from this tax. The wealthy have enough money to save a large portion of their income and there is no tax on purchases of investments. If you go to the spreadsheet I built and plug in differing amounts into the fields, it will demonstrate the affects of different incomes. Retirees who pay no SS/medi tax currently immediately get hit with that tax. I hope this post gets some traction here and other places as this desperately needs to go viral so that people can understand just how bad this tax is.
 
Same thing with the FLAT TAX that so many feel is the way to simplify our tax code. It sounds really good.. however it is completely REGRESSIVE.. as it will benefit the wealthy by reducing their tax burden and shift that directly on to the poor and middle class.

The top income tax rate for the wealthiest of Americans is now at 39%... Most middle class pay a rate much less than that.. Somewhere around 15-20%. The very poor pay no income tax. Suppose the Flat Tax was put at 17%. Look at who will be paying a lot less, and who will be paying so much more.. It's easy to see that the Flat Tax is a gift to the Rich. It does NOT transfer wealth to the poor.
 

This "Fair Tax" sounds an awful lot like the VAT...Value Added Tax...that many of the European nations have imposed. The VAT essentially makes the consumer goods more expensive, and supposedly returns that increase in prices back to the government to support the various social programs. Any such tax certainly hits those in the lower income brackets the hardest...as the cost of their essentials rises accordingly.

There is no doubt that something is going to have to happen to reduce our governments growing deficit, but I'm not sure that such a move is very wise. Before I agreed to such a tax, I would have to be assured that our government is making some serious moves to reduce the massive waste in Washington. One doesn't have to look very hard to find millions and billions being flushed down the toilet by government spending that does little good to anyone other than a few special interests. My current Pet Peeve is the almost Trillion Dollars the Pentagon has wasted on the F-35 project...a fighter jet that is proving to be little other than a massive problem, and benefiting few others than the hierarchy at Lockheed.
 
IMO, the first place to start with modifying our governments revenue stream, would be the IRS Tax Codes. There are estimates of as high as 75,000 pages in our current tax codes...99% of which are tax dodges and loopholes for the corporations, the wealthy, and the special interests. I fully understand that the vast majority of our taxes are paid by the wealthy, and this is as it should be....after all, most of that wealth was gathered from the backs of those in the lower and middle income brackets. There are also many reports of between 2 and 3 trillion dollars that are being sheltered off shore by the wealthy and the corporations, so as to avoid taxes...this is something that Must be addressed.

I fully agree that our current welfare and social programs are an open invitation to the Cheats, and this too, Must be addressed. However, suddenly placing a huge financial burden on those who can least afford it is asking for trouble.
 
The world's super-rich had between $21 trillion and $32 trillion of wealth hidden in tax havens by the end of 2010, a new study says.[FONT=CNN, Helvetica Neue, Helvetica, Arial, Utkal, sans-serif]
More here.....


[FONT=CNN, Helvetica Neue, Helvetica, Arial, Utkal, sans-serif]http://www.cnn.com/2012/07/23/business/super-rich-hidden-wealth-offshore/[/FONT]

[FONT=CNN, Helvetica Neue, Helvetica, Arial, Utkal, sans-serif]
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[FONT=CNN, Helvetica Neue, Helvetica, Arial, Utkal, sans-serif]This article is several years old, I'm sure it is even more now.[/FONT]
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