Thoughts on the "Fair Tax"

[tokeprep]

Ever think that maybe having a central bank isn't such a good thing? Ever think that perhaps we could get by perfectly fine without them?
The fed's only tool is the printing press. Even Keynes said that what we are doing is WRONG.

Yeah professors don't teach, they research and talk alot and get paid very well to do it.

How often was the United States economy in recession or depression when we didn't have a central bank?

 

[BigNBushy]

How often was the United States economy in recession or depression when we didn't have a central bank?

You have not studied much of 19th century economics have you? JP Morgan bailed the country out in the 1880's. The country had plenty of economic ups and downs. They were not as devastating because so few, relatively speaking gave a damn. Most of the country at the time lived on a farm and grew what they needed. Wall Street was not tied to everyone's retirement and home value.'

 

[tokeprep]

You have not studied much of 19th century economics have you? JP Morgan bailed the country out in the 1880's. The country had plenty of economic ups and downs. They were not as devastating because so few, relatively speaking gave a damn. Most of the country at the time lived on a farm and grew what they needed. Wall Street was not tied to everyone's retirement and home value.'

Your point about "most people living on farms" stopped being true in the middle of the 19th century. The fact that people had their own farms doesn't mean that they had wonderful lives and never went hungry, either. They worked 80+ hours a week every week and they barely got anything for it--the economy sucked. Most people didn't own their homes, and very few people had any such thing as "retirement."

You're remembering a golden age that never was, as humans tend to do.

 

[NoDrama]

How often was the United States economy in recession or depression when we didn't have a central bank?

Oh gosh, lets see.

Under central banking we have had 27 recessions and 3 depressions, including the greatest one depression ever.

When no central banks were present we have had a grand total of 18 recessions and 1 depression. The depression was less than 18 months in duration.

http://en.wikipedia.org/wiki/History_of_central_banking_in_the_United_States
http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States


Amazingly enough, under free banking we had no major wars with any other country other than Mexico.

Under Central Bank influence we have had the Revolutionary war, The war of 1812, WWI, WWII, Korea, Vietnam, the Gulf War, Afghanistan and the war on terror.

http://en.wikipedia.org/wiki/List_of_wars_involving_the_United_States

Its like a great big conspiracy theory!!

Central banking? They make a killing, literally.

 

[BigNBushy]

Your point about "most people living on farms" stopped being true in the middle of the 19th century. The fact that people had their own farms doesn't mean that they had wonderful lives and never went hungry, either. They worked 80+ hours a week every week and they barely got anything for it--the economy sucked. Most people didn't own their homes, and very few people had any such thing as "retirement."

You're remembering a golden age that never was, as humans tend to do.

I never called it a golden age, nor would I. I would just tend to point out that persons living in rural parts of Missouri, for instance, were impacted considerably less in the 19th century than they are today. I live in what is now sort of a rural part of the country, but in the 1930s it was a real backwater. My grandfather was born in 1908, he grew up in the 20's, lived through the great depression and went off to fight the Japs. I remember talking to him about the great depression. Folks around here hardly noticed it. It could be because they lived in a perpetual state of economic depression. Both of my grandparents were from the same county, but different classes. My fathers dad was the son of a very well to do man. He owned several large farms. My mothers father was born into a share-cropping family. Both of my grandfathers are dead now, but they both had about the same thing to say. The great depression also coincided with another horrific event, the dust bowl. The dust bowl had a much worse affect on the rural people of America than the depression did.

 

[tokeprep]

Oh gosh, lets see.

Under central banking we have had 27 recessions and 3 depressions, including the greatest one depression ever.

When no central banks were present we have had a grand total of 18 recessions and 1 depression. The depression was less than 18 months in duration.

http://en.wikipedia.org/wiki/History_of_central_banking_in_the_United_States
http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States


Amazingly enough, under free banking we had no major wars with any other country other than Mexico.

Under Central Bank influence we have had the Revolutionary war, The war of 1812, WWI, WWII, Korea, Vietnam, the Gulf War, Afghanistan and the war on terror.

http://en.wikipedia.org/wiki/List_of_wars_involving_the_United_States

Its like a great big conspiracy theory!!

Central banking? They make a killing, literally.

Pretty misleading to count absolute numbers of recessions and depressions instead of years, isn't it? Otherwise you equate single quarter recessions with ones that lasted for several years.

The First Bank of the United States wasn't a "real" central bank. Do we need to hash out why or can we just agree? I'm not going to dispute it for the Second Bank of the United States, that one is fair game. Regardless, I'll calculate the numbers both ways, because the point will stand in both:

Counting the First Bank as a central bank, up to 1913: I get 36 of 82 years in recession, or recession 44% of the time.
Excluding the First Bank as a central bank, up to 1913: I get 48 of 102 years in recession, or 47% of the time.
During the existence of the Second Bank: I get 8 of 20 years in recession, or 40% of the time.

Post-Fed, to 2013: I get 22.5 of 100 years in recession, or recession 22.5% of the time.
Post-Fed and after World War II, to 2013: I get 9.25 of 68 years in recession, or recession 13.6% of the time.

 

[tokeprep]

I never called it a golden age, nor would I. I would just tend to point out that persons living in rural parts of Missouri, for instance, were impacted considerably less in the 19th century than they are today. I live in what is now sort of a rural part of the country, but in the 1930s it was a real backwater. My grandfather was born in 1908, he grew up in the 20's, lived through the great depression and went off to fight the Japs. I remember talking to him about the great depression. Folks around here hardly noticed it. It could be because they lived in a perpetual state of economic depression. Both of my grandparents were from the same county, but different classes. My fathers dad was the son of a very well to do man. He owned several large farms. My mothers father was born into a share-cropping family. Both of my grandfathers are dead now, but they both had about the same thing to say. The great depression also coincided with another horrific event, the dust bowl. The dust bowl had a much worse affect on the rural people of America than the depression did.

I think you identified the reason: people had shit to begin with. If you start with no retirement account and don't lose your retirement account in the depression, you haven't lost anything; if you start with a $100,000 retirement account and lose $50,000, you still have $50,000. Of course, if you held your assets through the financial crisis, your retirement account wouldn't show any loss at all.

 

[NoDrama]

The First Bank of the United States wasn't a "real" central bank. I'm not going to dispute it for the Second Bank of the United States, that one is fair game. Regardless, I'll calculate the numbers both ways, because the point will stand in both:

Counting the First Bank as a central bank, up to 1913: I get 36 of 82 years in recession, or recession 44% of the time.
Excluding the First Bank as a central bank, up to 1913: I get 48 of 102 years in recession, or 47% of the time.
During the existence of the Second Bank: I get 8 of 20 years in recession, or 40% of the time.

The first bank was a central bank, and it was real, whether you choose to believe that or not is up to you, but you saying it wasn't a real central bank has no veracity whatsoever. You have no evidence to contradict it. You are not an authority on anything. You have no credentials and no expertise in this matter.

Under central banking we have debt based money and wars.

Under free banking we have peace and prosperity. (for the most part)

BTW you failed to make a point with your math, don't know if you figured that out or not. According to your statements we were in recession and depression at least 35% of the time under central banking. Oh and the depressions under central banking were HORRIFYING compared to the minor inconveniences of free bank depressions.

According to your math, there is nothing noting how much time was spent in recession or depression under free banking. 32% of the time is the answer.

BTW that's a better rate than at any time under central banking. I find it curious that you failed to mention it.

 

[NoDrama]

I think you identified the reason: people had shit to begin with.

Yep, all those damned rich sharecroppers. That was the sure way to millions back then.

It was exactly the same way during feudalism, the fella renting the land from the lord was getting rich beyond all measure, and saved huge amounts of Gold.

Look!! Its a millionaire!!!

 

[NoDrama]

For future reference, if something appears in the United States Code it's because congress passed a law. That's the only way something can get there. 12 USC 461 is the codification of Section 19(b) of the Federal Reserve Act; section 201(a) of the Financial Services Regulatory Relief Act of 2006 (Public Law 109-351) amended Section 19(b) of the Federal Reserve Act to add the text that I quoted you; section 128 of the Emergency Economic Stabilization Act of 2008 (Public Law 110-343) amended section 201(a) of the Financial Services Regulatory Relief Act of 2006 to move up the start date. Federal regulations issued pursuant to an act of congress are codified in the Code of Federal Regulations, not the United States Code.

Ok, was that so hard? I appreciate you C&Ping information that would probably have been much easier to just link, but I appreciate it nonetheless. Your security measures I assume are due to using a PC at work.

I did read the bill. The Fed is still the one that decides if interest will be paid. Authorization has been given, but a directive to DO it was not part of the bill. The legal wording in the bill is:

Balances maintained at a Federal Reserve bank by or on behalf of a depository institution may receive earnings to be paid by the Federal Reserve bank at least once each calendar quarter, at a rate or rates not to exceed the general level of short-term interest rates.

If you look to Law, the word MAY means the decision is up to the Fed, not Congress. Now that the law is in effect it will take another law to undo it.
This is my whole point. Congress may have authorized it, but the decision is all the Fed. Even you or I cannot get that kind of interest bearing savings accounts. We have to charge into the bond market. Its absurd, but the ploy is to make Bonds the only asset, the only thing which can really turn the economy around. It is unfortunate that the world is becoming disillusioned with Dollar hegemony, when the faith in the dollar is finally diminished a shit storm is coming that will make the great depression look mild. Mathematically it is inevitable, everyone knows it. 2000 years from now the US will be noted as a flash in the pan country compared to the Greeks, Romans or Egyptians.

 

[Red1966]

Any criticism by UB is welcome. Is it fair to poor people, well, not perfectly, but neither is our current system. The legislation thus far that has been brought to the house or senate has had a sunset provision whereby if the amendment that is necessary for the taxation of income is not repealed than the fair tax is taken down. I really feel that the poor could benefit the most from this. Lets face it, the very rich in this country don't pay a lot of income tax. There are multiple reasons for this, but mainly it is because their income is often capital gains, which is taxed at a much lower percent than regular earned income. The poor and middle class very often have a much higher actual tax rate than the wealthy. The medicare and social security taxes are flat, and I think around 7% of ones income, up to around $110,000 per year. No one pays any of those FICA taxes after the first 110k. So a person making $120k and a person making $120 mill annually pay the exact same in FICA taxes, not just rates, but actual dollars. Also, for business owners, a lot of the costs of employment, which go far beyond what they actually pay their employees is removed by the FT. This could easily mean more and better paying jobs because the cost of having an employee would decrease. For instance, the FICA taxes are actually 14%, this cost is split between employee and employer, so not only is the employee not taxed, the employer is not taxed. This is where a lot of knee jerk opposition comes to the FT. Because it removes the social security and medicare taxes a lot of people think it alters those programs. It does not, it simply eliminates the specific taxes for these programs, but the programs would continue to be funded as if nothing had changed.

You mean the money gets "borrowed" to spend on things other than Social Security and Medicare?

 

[Red1966]

Exactly JC. We can make a consumption tax as progressive as we want. You can have different rates for different levels of items price. Groceries under 10 bucks, no tax. Clothing under 20 bucks, no tax, etc.. It doesn't have to be regressive. Taxing consumption makes infinitely more sense than taxing production unless your economy is based on debt. Then it doesn't work. Presently, we need people to borrow as much as possible to keep our house of cards propped up.

I would think that food, medicine, and certain other products could just be exempted from the tax.

 

[ginwilly]

I think you would still need to tax luxury foods, designer clothes, elective medicine etc.

The biggest drawback or unintended consequences of the fair tax would be the black market that would surely form. Rich people could avoid heavy taxes on jets and yachts by buying imported which would also defeat the purpose. I'm still for replacing a production tax with a consumption tax, I believe it would be best for our long term health, but we need to be smart about it.

 

[ChesusRice]

I think you would still need to tax luxury foods, designer clothes, elective medicine etc.

The biggest drawback or unintended consequences of the fair tax would be the black market that would surely form. Rich people could avoid heavy taxes on jets and yachts by buying imported which would also defeat the purpose. I'm still for replacing a production tax with a consumption tax, I believe it would be best for our long term health, but we need to be smart about it.

Absolutly
The best tax is a consumption tax where Big money CEOs can expense all their purchases on the company credit card and pass the tax burden on to other consumers
The other Fair tax scamnario is just as incompetent as again they dont tax capital gains

You think Mitt Romney gets a paycheck?

 

[Harrekin]

I think you would still need to tax luxury foods, designer clothes, elective medicine etc.

The biggest drawback or unintended consequences of the fair tax would be the black market that would surely form. Rich people could avoid heavy taxes on jets and yachts by buying imported which would also defeat the purpose. I'm still for replacing a production tax with a consumption tax, I believe it would be best for our long term health, but we need to be smart about it.

Imported items are subject to VAT here, why would over there be any different?

And you can have a few different rate bands, to keep it fair.

Say higher tax on cars, yachts, etc but lower tax on food, etc.

 

[ChesusRice]

Imported items are subject to VAT here, why would over there be any different?

And you can have a few different rate bands, to keep it fair.

Say higher tax on cars, yachts, etc but lower tax on food, etc.

What is the VAT on items purchased overseas and not claimed?

 

[Harrekin]

What is the VAT on items purchased overseas and not claimed?

How do you mean?

Like if an item is bought and not claimed, or if customs miss it?

 

[ginwilly]

Absolutly
The best tax is a consumption tax where Big money CEOs can expense all their purchases on the company credit card and pass the tax burden on to other consumers
The other Fair tax scamnario is just as incompetent as again they dont tax capital gains

You think Mitt Romney gets a paycheck?

Because businesses don't pass on tax costs to customers under the present tax code? With a consumption tax, there would be no such deductions as "expenses". Those expenses would be taxed at the point of purchase, not at the bottom line as they are now. It's almost the opposite of what you are thinking. What you are claiming would happen under a consumption tax is actually already happening under our present system. We could fix that.

 

[ChesusRice]

Because businesses don't pass on tax costs to customers under the present tax code? With a consumption tax, there would be no such deductions as "expenses". Those expenses would be taxed at the point of purchase, not at the bottom line as they are now. It's almost the opposite of what you are thinking. What you are claiming would happen under a consumption tax is actually already happening under our present system. We could fix that.

So what are capital gains taxed at in your system?

 

[Harrekin]

So what are capital gains taxed at in your system?

Should be the same as the fair tax.

Capital gains is NOT income.