Quote:
Originally Posted by dmek25
first problem is that 9% of someones pay thats making $25000.00 a year is a helluva a chunk compared to someone making $100000.00
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Its not really 9%. Its more like 9% minus 7.65% (not exactly, but close enough). Whats so important to understand about the 999 plan (and maybe the Fair Tax) is that both employee and employer payroll taxes are eliminated and the payroll taxes the employer would otherwise pay becomes an instant bonus to the employee.
2 single people without kids currently:
Making 25k. Pays 7.65% (1,900) payroll taxes and around 12% (2,750) effective income tax rate for a total of $4,650 or about 19%
Making 100k. 7.65 (7,650) payroll and around 19% (19,000) effective income tax rate for a total of $26,650 or 26%
999 Plan:
Making 25k: Now makes 26,913 due to the 7.65% “bonus” from the elimination of employer provided payroll tax. Total taxes at 9% are now $2,422
Making 100k: The bonus pops him up to 107,650 and taxed at 9% brings his total to $9,688
The problem with the above comparison is that its completely flawed to think about these people as making different amounts but otherwise the same. There are hundreds of thousands of different tax situations that could make either person pay more or less than the other, due to credits and deductions. Plus there are family and cost of living factors to be considered. Should a person who only makes 25k but lives at home and has their parents pay for everything be taxed the same as the girl trying to make it on her own without any family support. And is someone’s financial situation the same as mine if we make the same amount but they live in NYC while im stuck in Richmond? How about the person who loves what they do and the person who hates their job, should one be taxed less if they make the same? Or manual vs. white collar or employer vs. employee. And retail vs. service vs. production vs. government? The responsible thing to do is to tax everyone the same percentage at the income level while giving support through training and temporary aid for the poor.
The only accurate comparison of the current tax vs. 999 plan is to first understand that only 53% of households actually pay income tax and those that do will automatically be better off plain and simple. The vast majority of the remaining 47% that pay no income taxes will also be better off, although 10% will not be (those who pay no income or payroll taxes due to refundable credits). My guess is that in addition to those 10 another 5% or so would also be adversely affect, although, at a greatly diminishing rate. However the entire 15% or so would only be worse off by extremely small amounts. Im thinking around 2-3% maybe less.
But there are still benefits for those techniqely worse off. Instead of forcing the poor to wait for their tax refund they will be getting 6.3% more each pay check and not have to worry about filing and being concerned how much theyre actually gonna get this year, being unprepared for the times they get significantly less then what they are used to, and being forced to wait to make certain purchases centered around tax refund time. Plus the “time value of money” alone will make up for a big part of that 2-3%. I do think you would have to coincide the 999 plan with welfare reform so some of the very poor don’t get screwed over, but the changes should be minimal and most would agree its time for reform anyway.
Basically the vast majority of people will be better off, although the rich may be “more better” off in a relative comparison. It sometimes seems like people are okay with being worse off as long as the rich are “more worse” off.