Thursday, May 7, 2009

Taxes, what is all the confusion about?????

OK, so here is a topic I have shared with many people and everyone seems to agree. Flat Tax, Fair Tax whatever you want to call it. This idea has been around for so long yet it never seems to get any traction. Why can we as a country not do anything that is common sense based? Did you know that the IRS budget for 2009 is over $12.5 BILLION???? WOW, that is rediculous. Do you know how much money is outstanding in taxes owed? I read an article that recently estimated outstanding (past due) taxes is around $3.5 Billion. WOW. So combined we are looking at $16 BILLION, and that is probably a low estimate, of money our country could be using. Hell, I bet just in Obama's cabinet there is probably a couple Million in unpaid taxes. Now how do we save this much money? Well that is where the fair tax comes into play. Starting today, we would implement a system that we take a total of $0 out of your check. That is right, no money at all. If you make $50K a year, you get $50K a year to bring home. Where you are taxed is at the time of purchase. So say currently you are losing about 26% of your income to taxes before you get it. Well, now you decide where that 26% is spent. How I mean that is everything you buy... Yes everything now has a let's just say 26% tax on it just to make it easy. Odds are the tax rate will be lower. So milk, food, clothes, airplanes, cars etc. All taxed at 26%. Now you may think this is excessive but lets really look at it. See the following example just on a simple level:

Current plan: Fair Tax:
Salary $50,000
Take-Home $37,000

Fair Tax
Salary $50,000
Take-Home $50,000

EXPENSES
Current Plan:
Groceries $3,600
Entertainment $1,500
Gas $2,600
Miscellaneous $4,000

Fair Tax:
Groceries $4,536 (3,600+26%)
Entertainment $1,890 (1,500+26%)
Gas $3,276 (2,600+26%)
Miscellaneous $5,040 (4,000+26%)

Totals
Current Plan: $11,700
Fair Tax: $14,742


Remaining Cash
Current Plan: $25,300
Fair Tax: $35,258
DIFFERENCE $9,958


Now this is just a simple example of your life and what it would be like under a fair tax. We get rid of all the crazy complicated tax codes, collection agencies etc and just pay at the time of purchase. Not only that but as long as you keep youur spending under control you end up with more money in your pocket. however the more you spend the more you are taxed. So the rich, when they buy yachts and airplanes etc will be taxed more as they are spending more. The beauty of it is you will never be taxed % wise more than anyone else. If you decide to live simply you have more cash in the bank. I am not the first nor the last to be a proponent of this but I had to at least bring it up for discussion. It absolutely makes no sense why we are not on this system now. Everyone can punch holes in anything but think of the simplicity of this? No April 15th date, no monstrous IRS it just all takes care of itself at checkout. WOW.

1 comment:

  1. but they say that it puts the burden of tax collecting on business and opens up the black market.

    ReplyDelete